<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HORSESHOE GAMING HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7999 88-0425131
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
4024 SOUTH INDUSTRIAL ROAD
LAS VEGAS, NEVADA 89103
(702) 650-0080
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KIRK C. SAYLOR
CHIEF FINANCIAL OFFICER
HORSESHOE GAMING HOLDING CORP.
568 COLONIAL ROAD
MEMPHIS, TENNESSEE 38117
TELEPHONE: (901) 820-2460
FACSIMILE: (901) 820-2461
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
ROBERT M. FRIEDMAN, ESQ.
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 758-9500
FACSIMILE: (212) 758-9526
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
8 5/8% Series B Senior Subordinated Notes
Due 2009............................... $600,000,000 100% $600,000,000 $166,800.00
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</TABLE>
(1) Solely for the purpose of computing the registration fee pursuant to Rule
457 under the Securities Act.
------------------------
WE HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE SHALL FILE A FURTHER AMENDMENT
WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER
BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933
OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
Subject to Completion, dated June 15, 1999
PROSPECTUS
HORSESHOE GAMING HOLDING CORP.
OFFER TO EXCHANGE ALL OUTSTANDING
8 5/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
FOR
8 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
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TERMS OF EXCHANGE OFFER
- - The exchange offer expires 5:00 p.m., New York City time, , 1999,
unless we extend it.
- - The terms of the new notes to be issued in the exchange offer are
substantially identical to the terms of the outstanding notes, except for
transfer restrictions and registration rights relating to the outstanding
original notes.
- - We will not receive any proceeds from the exchange offer.
- - We do not intend to list the new notes to be issued in the exchange offer on
any securities exchange and, therefore, we do not anticipate an active public
market for the new notes.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF MATTERS THAT
YOU SHOULD CONSIDER BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
-------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NONE OF THE MISSISSIPPI GAMING COMMISSION, THE LOUISIANA GAMING CONTROL
BOARD, THE ILLINOIS GAMING BOARD, THE INDIANA GAMING COMMISSION OR ANY OTHER
GAMING AUTHORITY HAS APPROVED OR DISAPPROVED OF THE NOTES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL AND IS A CRIMINAL OFFENSE.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The date of this prospectus is , 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION......................... ii
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS............. iii
SUMMARY..................................................... 1
RISK FACTORS................................................ 10
USE OF PROCEEDS............................................. 25
CAPITALIZATION.............................................. 26
SELECTED FINANCIAL DATA..................................... 27
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS........... 30
THE EXCHANGE OFFER.......................................... 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 50
BUSINESS.................................................... 61
REGULATORY MATTERS.......................................... 66
MANAGEMENT.................................................. 82
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 86
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 88
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS................... 89
DESCRIPTION OF NOTES........................................ 95
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 145
PLAN OF DISTRIBUTION........................................ 148
LEGAL MATTERS............................................... 149
EXPERTS..................................................... 149
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
i
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes part of an exchange offer registration
statement on Form S-4 filed by us with the SEC under the Securities Act with
respect to the new notes. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules thereto, certain portions of which have been omitted in accordance
with the rules and regulations of the SEC. You should refer to the registration
statement and the exhibits relating thereto for further information with respect
to us and the new notes. Statements made in this prospectus as to any contract,
agreement or other document are summaries of the material terms of such
contracts, agreements or other documents and are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the registration statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
We are not currently subject to the informational requirements of the
Exchange Act. As a result of the filing of the registration statement with the
SEC, however, we will become subject to the informational requirements of the
Exchange Act and in accordance with these requirements will be required to file
with, or furnish to, the SEC certain reports and other information. The
registration statement, the exhibits and schedules thereto, reports and other
information filed with or furnished to the SEC by us may be inspected and copied
at the SEC's public reference facilities at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices at
7 World Trade Center, Suite 1300, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661.
Copies of such materials also may be obtained from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities. In addition, the SEC maintains a
web site on the Internet that contains reports and other information regarding
registrants that submit electronic filings to the SEC, including us. The address
of the SEC's web site is http://www.sec.gov.
Pursuant to the indenture, we have agreed, whether or not required by the
rules and regulations of the SEC, to file with the SEC and to furnish to the
Trustee and to registered holders of the notes, such reports and other
information as it would be required to file with the SEC by Sections 13(a) or
15(d) of the Exchange Act if we were subject to the Exchange Act.
ii
<PAGE> 5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements as they are defined in
the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934,
including statements regarding our expected financial position and business and
financing plans. The occurrence of the events described, and the achievement of
the intended results, depend on many events, some or all of which are not
predictable or within our control. Actual results may differ materially from
those anticipated in any forward-looking statements. Many risks and
uncertainties are inherent in the gaming industry. Others are more specific to
our operations. Many of the significant risks related to our business are
described in this prospectus. These include, among others:
- risks associated with substantial indebtedness, leverage and debt service
and liquidity;
- risks of competition in our existing and future markets;
- difficulties in completing our integration with Empress, if the Empress
Merger is consummated;
- failure of us and our key employees to obtain or retain licenses or
regulatory approvals;
- changes in gaming laws and regulations; and
- the other factors set forth under "Risk Factors."
All future written and oral forward-looking statements made by us or on our
behalf are also subject to these factors. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this prospectus might
not occur.
Market data used throughout this prospectus including information relating
to our relative position in the casino and gaming industry is based on the good
faith estimates of management, which estimates are based upon their review of
internal surveys, independent industry publications and other publicly available
information. Although we believe that such sources are reliable, the accuracy
and completeness of such information is not guaranteed and has not been
independently verified.
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
information that is different. This prospectus does not constitute an offer to
sell, or a solicitation or an offer to buy, the securities offered hereby to any
person in any state or other jurisdiction in which such offer or solicitation is
unlawful. The delivery of this prospectus or any sale made hereunder at any time
does not imply that information contained herein is correct as of any time
subsequent to its date.
iii
<PAGE> 6
SUMMARY
The following summary may not contain all the information that may be
important to you. You should read the entire prospectus and the information that
we have referred you to carefully, including the risk factors and our
consolidated financial statements and related notes, before deciding whether to
participate in the exchange offer. As used in this prospectus the terms
"company," "we," "our" and "us" and similar terms refer to Horseshoe Gaming
Holding Corp. and all of our consolidated subsidiaries, including Horseshoe
Gaming, L.L.C., or Horseshoe Gaming, except with respect to the section entitled
"Description of Notes" and where it is clear that such terms mean only Horseshoe
Gaming Holding Corp.
Unless otherwise indicated, the "Pro Forma Transactions" refer collectively
to (1) the Ownership Transactions, (2) this offering and the other Refinancing
Transactions, (3) the Merger Transactions, and (4) the Internal Consolidation.
We define these terms in the section "Summary" under the heading "The
Refinancing and the Empress Merger."
THE COMPANY
We are a leading, multi-jurisdictional gaming company with casinos in
Bossier City, Louisiana and Tunica County, Mississippi. Bossier City/Shreveport
and Tunica County are among the largest 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. In September 1998, we signed a
definitive agreement to acquire by merger the operating subsidiaries of Empress
Entertainment, Inc., or Empress, which owns and operates two casinos in the
greater Chicago market: one in Joliet, Illinois, or Empress Joliet, and one in
Hammond, Indiana, or Empress Hammond. The Empress Merger is subject, among other
things, to receipt of various regulatory and governmental approvals.
THE REFINANCING AND THE EMPRESS MERGER
OVERVIEW
As of May 11, 1999, former members of Horseshoe Gaming have contributed to
us their membership interests in Horseshoe Gaming representing over 90% of the
aggregate ownership interests in Horseshoe Gaming. Prior to the Empress Merger,
we are required to take all necessary action such that we will own 100% of
Horseshoe Gaming. We were formed to enter into the "Refinancing Transactions,"
the "Merger Transactions" and the "Internal Consolidation" as described below.
THE REFINANCING TRANSACTIONS
We have entered into, or caused to occur, the offering of the original
notes and the following additional Refinancing Transactions:
- Horseshoe Gaming has consummated a tender offer for its 12 3/4% senior
notes due 2000, $128.6 million of which were outstanding prior to the
tender offer. Approximately $128.4 million of such senior notes were
tendered in the tender offer. Horseshoe Gaming irrevocably deposited
approximately $0.2 million into a defeasance account to redeem on
September 30, 1999, (the first date such notes may be redeemed) the
approximately $0.2 million of senior notes that failed to tender in the
tender offer.
1
<PAGE> 7
- We lent approximately $240.3 million of the net proceeds of the offering
of the original notes to Horseshoe Gaming to repay outstanding borrowings
under its existing credit facility and to consummate the tender offer and
pay related fees and expenses, including tender premiums and consent
fees. The loan was evidenced by an intercompany note secured by a
guarantee from Robinson Property Group Limited Partnership, or RPG, which
owns and operates Horseshoe Tunica, and Horseshoe Entertainment, or HE,
which owns and operates Horseshoe Bossier City.
- We assigned our interest in the intercompany note to the trustee to
secure our obligations under the notes and the indenture.
- We delivered approximately $342.3 million of the net proceeds of the
offering of the original notes to a securities intermediary. The
securities intermediary invested those funds in United States Treasury
securities which were deposited into a secured proceeds account.
- The secured proceeds account was pledged to the trustee to secure our
obligations under the notes and the indenture, including our obligation
to redeem a portion of the notes at 101% of their principal amount if:
(a) we fail to consummate the Empress Merger for any reason by December
1, 1999; (b) we determine that the Empress Merger will not be completed
by that date; (c) more than $75.0 million of the $150.0 million of
Empress' 8 1/8% senior subordinated notes due 2006, or Empress notes,
remain outstanding after we consummate a change of control offer to
purchase the Empress notes; or (d) we fail to timely consummate the
Empress change of control offer.
THE MERGER TRANSACTIONS
On September 2, 1998, we entered into an Agreement and Plan of Merger with
Empress, as amended as of March 25, 1999, to acquire the gaming business of
Empress. The acquisition will be accomplished by merging two of our wholly-owned
subsidiaries into the Empress subsidiaries that own Empress Hammond and Empress
Joliet.
The following transactions, which we refer to as the Merger Transactions,
will be consummated in connection with the Empress Merger:
- We will enter into a new committed $375.0 million senior secured credit
facility, which we refer to as the new credit facility, the terms of
which are described in the section "Description of Certain Other
Indebtedness" under the heading "New Credit Facility."
- We will use the assets in the secured proceeds account, together with
approximately $245.0 million of borrowings under the new credit facility
and cash on hand to (a) pay approximately $470.9 million in cash to
Empress, (b) fund the Empress change of control offer and (c) pay related
fees and expenses.
- Upon completion of the Empress Merger, we will cause our subsidiaries
that will own Empress Hammond and Empress Joliet to guarantee the notes.
The Merger Transactions are subject to the satisfaction or waiver of
certain conditions including, among others, receipt of governmental and
regulatory approvals. As a result, there can be no assurance that the Merger
Transactions will occur. We have agreed to redeem a portion of the notes as
described in the section "Description of Notes" under the heading "Mandatory
Redemption" if the Empress Merger does not occur by December 1, 1999. It is
expected that the new credit facility will provide us with the flexibility to
close the Empress Merger in stages, which may be necessary due to the timing of
required regulatory approvals.
2
<PAGE> 8
INTERNAL CONSOLIDATION
Upon consummation of the Empress Merger, we have agreed to cause Horseshoe
Gaming to merge with and into us. As a result, Horseshoe Gaming will no longer
exist and we will own directly or indirectly 100% of Horseshoe GP, Inc., RPG and
New Gaming Capital Partnership, referred to as NGCP. Horseshoe GP, Inc. is the
general partner of RPG and NGCP, and NGCP is the general partner of HE. Upon
completion of the foregoing consolidation, we have agreed to cause all of our
wholly-owned subsidiaries that are not then guarantors to guarantee the notes.
We refer to this transaction as the Internal Consolidation.
OWNERSHIP TRANSACTIONS
We recently have consummated, or plan to consummate, the following
transactions which we refer to as the Ownership Transactions:
- In April 1999, we exercised our option to acquire the remaining 8.08%
limited partnership interest in HE not held by NGCP for total
consideration of approximately $30.4 million, which includes payments for
a non-compete covenant, consents and a release of claims.
- In addition, we plan to pay approximately $5.7 million to repurchase an
approximate 1.07% interest in Horseshoe Gaming to facilitate our
formation as a Subchapter S corporation under the Internal Revenue Code.
- We also plan to pay approximately $17.7 million to repurchase an
approximate 3.2% interest in us as a condition of our anticipated
licensing in Illinois.
3
<PAGE> 9
THE EXCHANGE OFFER
On May 11, 1999, we privately placed $600,000,000 aggregate principal
amount of our 8 5/8% Series A Senior Subordinated Notes Due 2009, or original
notes, in a transaction exempt from registration under the Securities Act. In
connection with the private placement, we entered into a registration rights
agreement, dated May 11, 1999, with the initial purchasers of the original
notes. In the registration rights agreement, we agreed to register under the
Securities Act an offer of our new 8 5/8% Series B Senior Subordinated Notes Due
2009, or new notes, in exchange for the original notes. We also agreed to
deliver this prospectus to holders of the original notes, to file the exchange
offer registration statement within 60 days of the issuance of the original
notes, to use our best efforts to cause such registration statement to become
effective within 180 days of the issuance of the original notes and to
consummate the exchange offer within 30 business days thereafter. In this
prospectus, we refer to the original notes and the new notes together as the
notes. You should read the discussion in the section entitled "Description of
Notes" for information regarding the notes.
The Exchange Offer.............. We are offering to exchange $1,000 in
principal amount of new notes for each
$1,000 in principal amount of original
notes. The new notes are substantially
identical to the original notes, except
that:
(1) the new notes will be freely
transferable, other than as
described in this prospectus;
(2) the new notes will not contain any
legend restricting their transfer;
(3) holders of the new notes will not
be entitled to certain rights of
the holders of the original notes
under the registration rights
agreement; and
(4) the new notes will not contain any
provisions regarding the payment
of liquidated damages.
We believe that you can transfer the new
notes without complying with the
registration and prospectus delivery
provisions of the Securities Act if you:
(1) acquire the new notes in the
ordinary course of your business;
(2) are not and do not intend to
become engaged in a distribution
of the new notes;
(3) are not an affiliate of us; and
(4) are not a broker-dealer that
acquired original notes as a
result of market-making or other
trading activities.
4
<PAGE> 10
If any of these conditions is not satisfied
and you transfer any new note without
delivering a proper prospectus or without
qualifying for a registration exemption, you
may incur liability under the Securities
Act.
Each broker-dealer that receives new notes
for its own account in exchange for original
notes, which it acquired as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of those new notes. See "Plan of
Distribution."
Registration Rights............. Under the registration rights agreement, we
have agreed to use our best efforts to
consummate the exchange offer or to use our
best efforts to cause the original notes to
be registered under the Securities Act so as
to permit resales. If we are not in
compliance with our obligations under the
registration rights agreement, liquidated
damages will be payable under certain
circumstances in addition to the interest
that is otherwise due on the notes. If the
exchange offer is completed on the terms and
within the period contemplated by this
prospectus, no liquidated damages will be
payable on the notes. See the sections
entitled "The Exchange Offer -- Shelf
Registration Statement" and "Liquidated
Damages."
Minimum Condition............... The exchange offer is not conditioned on any
minimum aggregate principal amount of
original notes being tendered for exchange.
Expiration Date................. The exchange offer will expire at 5:00 p.m.,
New York City time, on , 1999,
unless we extend it.
Conditions to the Exchange
Offer........................... Our obligation to complete the exchange
offer is subject to various conditions. See
the sections entitled "The Exchange
Offer -- Conditions." We reserve the right
to terminate or amend the exchange offer at
any time before the expiration date if
various specified events occur.
Withdrawal Rights............... You may withdraw the tender of your original
notes at any time before the expiration
date. Any original notes not accepted for
any reason will be returned to you without
expense as promptly as practicable after the
expiration or termination of the exchange
offer.
5
<PAGE> 11
Procedures for Tendering
Original Notes.................. See the section entitled "The Exchange
Offer -- Procedures for Tendering."
Federal Income Tax
Consequences.................... The exchange of original notes for new notes
by U.S. holders will not be a taxable
exchange for U.S. federal income tax
purposes, and U.S. holders should not
recognize any taxable gain or loss as a
result of the exchange.
Effect on Holders of Original
Notes........................... If the exchange offer is completed on the
terms and within the period contemplated by
this prospectus, holders of the original
notes will have no further registration or
other rights under the registration rights
agreement, except under limited
circumstances. See the section entitled "The
Exchange Offer -- Shelf Registration
Statement" and "Liquidated Damages."
Holders of the original notes who do not
tender their original notes will continue to
hold those original notes. All untendered,
and tendered but unaccepted, original notes
will continue to be subject to the
restrictions on transfer provided for in the
original notes and the indenture under which
the original notes were and the new notes
will be issued. To the extent that original
notes are tendered and accepted in the
exchange offer, the trading market, if any,
for the original notes could be adversely
affected.
Use of Proceeds................. We will not receive any proceeds from the
issuance of new notes in the exchange offer.
Exchange Agent.................. U.S. Trust Company, National Association is
serving as exchange agent in connection with
the exchange offer.
6
<PAGE> 12
THE NOTES
The exchange offer applies to $600,000,000 aggregate principal amount of
original notes. The new notes are substantially identical to the original notes,
except for transfer restrictions and registration rights relating to the
original notes. The new notes will evidence the same debt as the original notes
and will be entitled to the benefits of the indenture. See the section entitled,
"Description of Notes."
Issuer.......................... Horseshoe Gaming Holding Corp.
Securities Offered.............. $600.0 million principal amount of 8 5/8%
Series B Senior Subordinated Notes Due 2009.
Maturity Date................... May 15, 2009.
<PAGE> 13
Interest Payment Dates.......... Each May 15 and November 15, beginning
November 15, 1999.
Guarantees...................... After the Empress Merger and the Internal
Consolidation, our wholly-owned subsidiaries
as well as our other subsidiaries that
guarantee any of our other debt that is pari
passu or subordinated to the notes will
guarantee the notes.
Optional Redemption............. The notes are redeemable by us on or after
May 15, 2004 at the redemption prices listed
in the section "Description of Notes" under
the heading "Optional Redemption." Prior to
May 15, 2002, we may redeem up to 35% of the
notes with the proceeds of a public equity
offering.
Mandatory Redemption............ We are required to redeem a portion of the
notes at 101% of their principal amount if:
(a) we fail to consummate the Empress Merger
for any reason by December 1, 1999; (b) we
determine that the Empress Merger will not
be completed by that date; (c) more than
$75.0 million of Empress notes remain
outstanding after the Empress change of
control offer; or (d) we fail to timely
consummate the Empress change of control
offer. See the section "Description of
Notes" under the heading "Mandatory
Redemption" for more information.
Ranking......................... Except as described in the section
"Description of Notes" under the heading
"Subordination," the notes:
- are our senior subordinated,
unsecured general obligations;
- rank junior in right of payment with
all of our existing and future senior
debt;
- rank equal in right of payment with
our other existing and future senior
subordinated debt; and
- are effectively behind all existing
and future debt of our subsidiaries
that are not guarantors, including
trade payables.
Accounting Treatment............ The new notes will be recorded at the same
carrying value as the original notes as
reflected in our accounting records on the
date of exchange.
Change of Control............... Upon the occurrence of both a change of
control and either a downgrade of our credit
rating or a decline in our interest coverage
ratio, we are required to make an offer to
purchase the notes at a purchase price equal
to 101% of their principal
7
<PAGE> 14
amount plus accrued and unpaid interest to
the purchase date.
Certain Covenants............... We issued the notes under an indenture with
U.S. Trust Company, National Association, as
trustee. The indenture restricts, among
other things and subject to certain
exceptions, our ability and the ability of
our subsidiaries to:
- incur additional debt;
- pay dividends, redeem capital stock
or make certain other restricted
payments or investments;
- enter into agreements that prohibit
our subsidiaries from paying
dividends, making loans or otherwise
transferring assets to us or to any
of our other subsidiaries;
- encumber or sell assets; or
- merge, consolidate or sell all or
substantially all of our assets.
Secured Proceeds Account........ Approximately $342.3 million of the net
proceeds of the offering of original notes
was paid to a securities intermediary who
invested those funds in United States
Treasury securities and deposited them into
a secured proceeds account. The secured
proceeds account and the intercompany note
have been pledged to the trustee to secure
our obligations under the indenture and the
notes, including our obligation to redeem
the notes under the circumstances described
in the section "Description of Notes" under
the heading "Mandatory Redemption."
Licensing....................... Ownership of the notes is subject to
Louisiana and Mississippi gaming laws and
regulations, and our certificate of
incorporation and by-laws. Following
consummation of the Empress Merger,
ownership of the notes will also be subject
to Indiana and Illinois gaming laws and
regulations. In addition, the notes are
subject to redemption for certain regulatory
reasons discussed herein.
Book Entry, Delivery and Form... Notes will be represented by one or more
permanent global securities in definitive,
fully-registered form, without interest
coupons, deposited with the trustee, as
custodian for, and registered in the name
of, a nominee of DTC.
The address of our principal executive offices is Horseshoe Gaming Holding
Corp., 4024 South Industrial Road, Las Vegas, Nevada 89103 and our telephone
number is (702) 650-0080.
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RISK FACTORS
See the section entitled "Risk Factors" beginning at page 10 for a
discussion of certain factors that you should consider in connection with your
participation in the exchange offer.
RATIO OF EARNING TO FIXED CHARGES
Our ratio of earnings to fixed charges is as follows: (a) December 31,
1994 -- 1.0x; (b) December 31, 1995 -- 3.6x; (c) December 31, 1996 -- 2.6x; (d)
December 31, 1997 -- 1.7x; (e) December 31, 1998 -- 1.6x; (f) March 31,
1998 -- 2.0x; and (g) March 31, 1999 -- 2.6x. Our pro forma ratio of earnings to
fixed charges is as follows: (a) December 31, 1998 -- 1.4x and (b) March 31,
1999 -- 2.0x. For purposes of computing the ratio of earnings to fixed charges,
earnings include net income (loss) before minority interests plus fixed charges.
Fixed charges consist of interest expense (plus amounts capitalized), a portion
of rental expense (deemed by management to be representative of the interest
factor of rental payments) and amortization of debt issuance costs. For more
information relating to our financial condition, you should read the sections
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and related notes, which are included elsewhere in this prospectus.
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RISK FACTORS
In addition to the other information in this prospectus and in the
documents we refer you to, you should carefully consider the following risk
factors before participating in this exchange offer.
OUR SUBSTANTIAL AMOUNT OF DEBT COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS
AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES
We have a substantial amount of debt, including (1) $600.0 million of notes
and (2) $160.0 million of Horseshoe Gaming's 9 3/8% Senior Subordinated Notes
due 2007. Upon completion of the Empress Merger, we will have additional
indebtedness of approximately $245.0 million under our new credit facility. At
March 31, 1999, after giving effect to the Ownership Transactions and the
Refinancing Transactions, our total consolidated debt, excluding approximately
$79.4 million of trade payables and current and long-term accrued liabilities
and $54.9 million of redeemable ownership interests, would have been
approximately $771.8 million, which includes $325.0 million of debt that is
redeemable if the Empress Merger does not occur. In addition, at March 31, 1999,
after giving effect to the Merger Transactions, our total consolidated debt,
excluding approximately $107.2 million of trade payables and current and
long-term accrued liabilities and $54.9 million of redeemable ownership
interests, would have been approximately $1,016.8 million. See the sections
entitled "Capitalization" and "Unaudited Pro Forma Combined Financial
Statements."
Subject to the terms of the notes and our other debt, we may be able to
borrow additional debt in the future which may be senior to the notes and the
guarantees. If we incur additional debt, the related risks that we now face
could increase.
Our substantial amount of debt could have important consequences for you
and for us, including:
- limiting our ability to satisfy our obligations with respect to the
notes;
- increasing our vulnerability to general and local adverse economic and
industry conditions;
- limiting our ability to obtain additional financing to fund future
working capital, capital expenditures and other general corporate
requirements;
- requiring a substantial portion of our cash flow to be used to pay
principal and interest on our debt, reducing our ability to use our cash
flow to fund working capital, capital expenditures, and general corporate
requirements;
- limiting our flexibility in planning for, or reacting to, changes in our
business and the industry; and
- disadvantaging us compared to competitors with less debt or greater
resources.
If we do not comply with the terms of our debt agreements and we fail to
generate sufficient cash flow from future operations, we may have to refinance
all or a portion of our indebtedness or obtain additional financing. We can not
assure you that we will be able to refinance any of our indebtedness or obtain
additional financing, particularly because of our anticipated high levels of
debt and the debt incurrence restrictions under our debt agreements.
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THE NOTES ARE SUBORDINATED TO OUR SENIOR DEBT
The notes are not secured by any of our assets or any assets of our
subsidiaries. The notes rank behind all of our existing and future senior debt,
including borrowings under the new credit facility. If we become insolvent or
are liquidated, or if payment under our new credit facility or other senior debt
is accelerated, our lenders will have a claim on our assets and the assets of
our subsidiaries before the holders of the notes. If there is a distribution to
our creditors because of a bankruptcy, liquidation, reorganization or similar
proceeding relating to us or our property, holders of debt that is senior to the
notes will be paid in full before any payment may be made with respect to the
notes. Similarly, in the event of a bankruptcy, liquidation, reorganization or
similar proceeding relating to any subsidiary guarantor, its assets would be
available to pay obligations under its guarantee only after all senior debt of
that guarantor is paid in full.
WE FACE INTENSE COMPETITION IN EACH MARKET WHERE WE OPERATE
The casino gaming industry is highly fragmented and characterized by
competition from a large number of participants, including riverboat casinos,
dockside casinos, land-based casinos, video lottery and poker machines in
locations other than casinos, card clubs, state-sponsored lotteries, Native
American gaming and other forms of gaming and non-gaming entertainment in the
United States.
Our existing casinos depend substantially on the Louisiana and Mississippi
gaming markets and compete directly with other riverboat and dockside gaming
operators in both states. The Mississippi gaming market is extremely competitive
and, under Mississippi law, the number of authorized gaming licenses is
unlimited. There are 30 licensed and operating dockside gaming facilities in
Mississippi, including nine dockside gaming facilities in Tunica County, and the
Mississippi Gaming Commission has granted a number of other licenses for
facilities not currently in operation. We expect that other companies will open
dockside gaming facilities in Tunica County in the future.
Current Louisiana gaming legislation authorizes a total of 15 riverboat
gaming licenses statewide. As of March 31, 1999, the Louisiana Gaming Control
Board had granted 14 of those licenses, including licenses to four riverboat
gaming facilities currently operating in the Bossier City/Shreveport market. The
Louisiana Gaming Control Board has recently granted approval to relocate the
license for a casino, which is now closed, to a new proposed facility in the
Bossier City/Shreveport market. In addition, if the remaining license is
granted, it may be located in the Bossier City/Shreveport market. There can be
no assurance that the Bossier City/Shreveport market will be large enough to
allow more than four riverboat casinos to operate profitably. In addition, there
can be no assurance as to whether the Louisiana legislature will increase the
number of gaming facilities permitted in Louisiana and what effect any such
increase would have on our Louisiana operations.
If we consummate the Empress Merger, we will be subject to competition in
Illinois and Indiana. The Empress casinos compete with seven other casinos in
the Chicago metropolitan area, four of which are located on Lake Michigan in
Indiana, the location of Empress Hammond, and three of which are located in
Illinois. In addition, the Illinois legislature in May, 1999 enacted amendments
to the Illinois Riverboat Gambling Act, which legislation is expected to be
signed by the Governor of Illinois, and which could result in one of the ten
state-authorized licenses for Illinois being relocated to the Chicago area,
which could have a material adverse effect on Empress' operations. To a lesser
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extent, Empress also competes with casino operations in nearby states including
Iowa and Missouri where riverboat and/or dockside gaming also have been
approved.
Some of our competitors have certain competitive advantages over our
casinos, including significantly greater financial and other resources and
larger gaming facilities. In addition, some of our competitors are undergoing
renovation and expansion, including one competitor that is constructing a
514-room hotel in the Bossier City/Shreveport market, and some may renovate or
expand their facilities in the future. Given these factors, it is possible that
this competition could have a material adverse effect on our financial
condition. There can be no assurance that we will not face increased competition
from these and other forms of legalized gaming, as well as competition from
jurisdictions that may legalize gaming in the future. See the section "Business"
under the heading "Competition."
WE ARE A HOLDING COMPANY; OUR ABILITY TO REPAY THE NOTES AND OTHER DEBT DEPENDS
ON CASH FLOW FROM OUR SUBSIDIARIES
We are a holding company. Our only material assets are our ownership
interests in our subsidiaries. Consequently, we depend on distributions or other
intercompany transfers of funds from our subsidiaries to meet our debt service
and other obligations, including with respect to the notes. Our subsidiaries are
not obligated to make funds available to us for payment on the notes. In
addition, distributions and intercompany transfers to us from our subsidiaries
will depend on:
- their earnings;
- covenants contained in their debt agreements, including Horseshoe
Gaming's existing credit facility and the new credit facility;
- covenants contained in other agreements to which our subsidiaries are or
may become subject;
- business and tax considerations; and
- applicable law, including regulations of gaming authorities.
We cannot assure you that the operating results of our subsidiaries at any
given time will be sufficient to make distributions or other payments to us and
that these distributions and/or payments will be adequate to pay principal and
interest on the notes when due. In addition, our rights and the rights of our
creditors, including holders of notes, to participate in the assets of any of
our subsidiaries upon their liquidation or recapitalization will generally be
subject to the prior claims of the subsidiaries' creditors.
WE MAY FACE DISRUPTION IN INTEGRATING OUR OPERATIONS WITH EMPRESS AND OTHER
FACILITIES WE MAY ACQUIRE OR DEVELOP
The integration of our operations with Empress' operations following the
Empress Merger will require the dedication of management resources which may
temporarily detract attention from our day-to-day business. The process of
combining the two organizations may also interrupt the activities of either or
both of the businesses, which could impact our revenues and operating results
negatively. We cannot assure you that we will be able to manage the combined
operations effectively or realize any of the anticipated benefits of the Empress
Merger.
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Our ability to achieve our objectives in connection with the Empress Merger
is subject to certain risks including, among others, the possible inability to
retain certain Empress executives. We recently entered into employment
agreements with the chief executive officer and the president of Empress, each
of which will become effective upon consummation of the Empress Merger. If, for
any reason, other executives do not continue to be active in management after
the Empress Merger, our operations after consummation of the Empress Merger
could be materially adversely affected.
In addition, we may pursue expansion and acquisition opportunities in the
future and would face significant challenges not only in managing and
integrating the combined operations but also in managing our expansion projects
and any other gaming operations that we might acquire in the future. Management
of such new projects will require that we increase our managerial resources. If
we fail to manage our growth effectively, it could materially adversely affect
our operating results.
EXTENSIVE GOVERNMENT REGULATION CONTINUOUSLY IMPACTS OUR OPERATIONS
General. The ownership, management and operation of gaming facilities is
subject to extensive laws, regulations and ordinances which are administered by
various federal, state and local government entities and agencies. These laws,
regulations and ordinances vary from jurisdiction to jurisdiction, but generally
concern the responsibility, financial stability and character of the owners and
managers of gaming operations as well as persons financially interested or
involved in gaming operations.
We must comply with stringent gaming laws in each state where we conduct
business. Many of these gaming laws have only recently been enacted and may be
changed at any time. In addition, state regulatory agencies have broad
rulemaking authority when interpreting the laws and developing regulations to
implement the gaming laws and may change their interpretations at any time. The
state regulatory agencies also have broad powers to request detailed financial
and other information, to suspend or revoke gaming licenses and to approve
changes in our operations. There can be no assurance that each of our gaming
licenses, or the licenses of the Empress casinos, will be renewed when they
expire. Although we know of no reason why our gaming licenses or the Empress
gaming licenses would not be renewed or maintained, a failure of our licenses,
or the licenses of the Empress casinos if the Empress Merger is consummated, to
be renewed or maintained would have a material adverse effect on us.
We are subject to many different types of federal, state and local
regulations, including regulations requiring us to:
- pay gaming fees and taxes in each state where we operate a casino;
- obtain a gaming license in each state where we operate a casino, which we
must get renewed periodically and which may be suspended or revoked if we
do not meet detailed regulatory requirements;
- receive and maintain federal and state environmental approvals;
- receive and maintain federal approvals to operate our riverboat casinos
in navigable waters; and
- receive and maintain local licenses to sell alcoholic beverages in our
casinos.
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The compliance costs associated with these laws, regulations and licenses
are significant. A change in the laws, regulations and licenses applicable to
our business or a violation of any current or future laws or regulations or our
gaming licenses could require us to make material expenditures or could
otherwise materially adversely affect our business or financial results.
Louisiana. In Louisiana, our operations are regulated by the Louisiana
Gaming Control Board. In 1993, the Louisiana State Police denied an application
made by HE, our subsidiary that owns and operates Horseshoe Bossier City, for a
gaming license to operate a casino. HE appealed the denial to the Louisiana
Riverboat Gaming Commission and that Commission overturned the denial. Our
gaming license in Louisiana is subject to annual renewals. We received renewal
of our Louisiana license in October 1998, subject to completion of a full
suitability review of HE and its key personnel.
Mississippi. In Mississippi, our operations are regulated by the
Mississippi Gaming Commission. Our gaming license in Mississippi is subject to
renewal every two years and was most recently renewed in September 1998,
effective as of October 1998.
Indiana. In Indiana, Empress Hammond's operations are regulated by the
Indiana Gaming Commission. Empress Hammond's gaming license in Indiana was
granted in June 1996 and is subject to annual renewal beginning in June 2001. In
addition, Empress Hammond is subject to various commitments to governmental
authorities and the failure to comply with such commitments would impact the
ongoing license renewal process and the approval of the Empress Merger. See
below "If the Empress Merger is Consummated, We Would be Required to Make
Substantial Payments to Governmental Authorities." Three individuals challenging
the constitutionality of the Indiana Riverboat Act filed a lawsuit on October
25, 1996 in Harrison County, Indiana. If the Indiana Riverboat Act ultimately
was held unconstitutional and if, as a result thereof, Empress Hammond was not
permitted to operate, it would, absent timely corrective legislation, have a
material adverse effect on us if the Empress Merger is consummated. See the
section "Regulatory Matters" under the heading "Indiana Gaming Regulation."
Illinois. In Illinois, Empress Joliet's operations are regulated by the
Illinois Gaming Board. Empress Joliet's gaming license in Illinois is subject to
annual renewals and was most recently renewed in July 1998.
In May 1999, the Illinois legislature enacted amendments to the Illinois
Riverboat Gambling Act which, if signed by the Governor, will change the statute
in several respects. The May 1999 amendments, among other things, provide for
the following: (1) the requirement that riverboat gambling authorized by the
Illinois Riverboat Gambling Act take place on a navigable stream is eliminated
and is replaced by a provision that such gambling may take place on any water
within the State of Illinois or any water other than Lake Michigan which
constitutes a boundary of the State of Illinois; (2) the prohibition on having
riverboat gambling in a county having a population in excess of 3,000,000 is
eliminated; (3) the requirement that riverboats conduct excursion cruises is
eliminated and the continuous ingress and egress of passengers for the purpose
of gambling is permitted; (4) the limitation on the holder of an owners license
owning more than a 10% interest in an entity having another owners' license is
eliminated; (5) for owners' licenses renewed after May 1, 1998 the renewal shall
be for a period of four years, unless the Illinois Gaming Board sets a shorter
period; (6) three of the licenses, rather than four, shall authorize riverboat
gambling on the Mississippi River; (7) an owners licensee that was not
conducting riverboat gambling on January 1, 1998 may apply to the Illinois
Gaming Board for renewal
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and approval of relocation to a new home dock and the Illinois Gaming Board
shall grant the application and approval upon receipt by the licensee of
approval from the new municipality or county, as the case may be, in which the
licensee wishes to relocate and any licensee that relocates its home dock
pursuant to this Section shall attain a level of at least 20% minority or female
ownership within a time period prescribed by the Illinois Gaming Board. It is
expected the Governor of Illinois will sign this legislation.
THERE ARE SIGNIFICANT REGULATORY APPROVALS REQUIRED FOR US TO CONSUMMATE THE
EMPRESS MERGER
In addition to the laws and regulations that regulate how we can operate
our business, obtaining the new credit facility and consummating the Empress
Merger will require us to make additional disclosure to, and receive various
approvals from, the gaming authorities in each state where we operate, and in
Indiana and Illinois. The additional disclosure could affect our ability to
renew our current licenses and to obtain new licenses to operate additional
casinos. Among the factors to be considered by the gaming authorities in
approving the sale of the notes, the new credit facility and the Empress Merger
are our financial integrity and that of Horseshoe Gaming, including adequate
capitalization. The Illinois and Indiana gaming authorities will consider the
notes and the new credit facility when they consider whether to approve the
Empress Merger. In connection with the Empress Merger, as well as all license
renewals, the gaming authorities will also be required to approve the
suitability of our officers, directors and owners. There can be no assurance
that we will be able to obtain from the gaming authorities all approvals
necessary related to the issuance of the notes, entering into the new credit
facility or consummation of the Empress Merger, or that the approvals will be
made in a timely manner. If the gaming authorities delay approval of the new
credit facility or the Empress Merger or do not approve all of the terms of the
new credit facility or the Empress Merger, our ability to complete the Empress
Merger may be adversely affected or we may be unable to complete the Empress
Merger. Failure to complete the Empress Merger will result in a portion of the
notes being redeemed by us as described in the section "Description of Notes"
under the heading "Mandatory Redemption."
RISKS ASSOCIATED WITH ENVIRONMENTAL REGULATIONS
We are subject to federal, state and local laws, regulations and
ordinances, or Environmental Laws, that: (1) 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 wastes; and
(2) impose liability for the costs of cleaning up, and certain damages resulting
from, past spills, disposals or other releases of hazardous substances. Although
we believe we are in substantial compliance with Environmental Laws, there can
be no assurance that: (1) we will be able to maintain such compliance; (2) the
Environmental Laws will not change; or (3) we will not be required to make
substantial expenditures in the future to comply with Environmental Laws. For
example, in 1990 Congress enacted the Oil Pollution Act to regulate response
actions and liability related to oil spills. In that regard, we and Empress are
required to meet certain financial responsibility requirements. We and Empress
have met these requirements either through self-insurance or third-party
insurance and do not believe that the costs of complying with these regulations
will be material. We could, however, incur material liability in the event of a
major oil spill that exceeds the uninsured amounts.
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Based on our review of certain environmental assessments, we are aware that
there may be soil and groundwater contamination present on some of the real
property used by our existing casinos or the Empress casinos due to past
industrial activities. In connection with the construction of a highway overpass
to service Empress Hammond, Empress agreed to clean up contamination discovered
on property owned by the City of Hammond during the course of construction.
Empress also agreed, subject to certain limitations, to indemnify the City of
Hammond for costs related to any other future cleanup required at the property
as a result of historical conditions. The construction of the overpass and
associated cleanup efforts were completed in 1996. Empress does not believe that
the contamination discovered during the investigations requires further
investigation or cleanup under current Environmental Laws. It is possible,
however, that such laws will become more stringent in the future or that
additional contamination on the property will be discovered and will need to be
cleaned up. Pursuant to Empress' agreement with the City of Hammond, which we
are assuming pursuant to the Empress Merger if the Empress Merger is
consummated, we could be obligated to undertake any such cleanup. Therefore, we
cannot assure you that we will not be required to make material expenditures
with respect to such matters. See the section "Regulatory Matters" under the
heading "Other Applicable Non-Gaming Regulatory Matters."
IF THE EMPRESS MERGER IS CONSUMMATED, WE WOULD BE REQUIRED TO MAKE SUBSTANTIAL
PAYMENTS TO GOVERNMENTAL AUTHORITIES
As a condition to its license in Indiana, Empress Hammond made various
financial and other commitments to the City of Hammond, Indiana and other
Indiana governmental bodies pursuant to a Hammond Riverboat Gaming Project
Development Agreement, or Development Agreement. These commitments will continue
following the Empress Merger. As of March 31, 1999, approximately $23.3 million
of such commitments remained outstanding primarily for commercial development,
residential development and the construction of a hotel. While Empress is on
track with respect to its residential commitments, they are currently in
discussions with the City of Hammond regarding plans for a hotel, construction
of which was required to commence in 1996. Empress is also in discussions with
the City of Hammond regarding their commercial commitment. In addition, under
the terms of the Development Agreement, Empress Hammond is required to make
annual payments of approximately $1.3 million for public safety services and
other uses and an annual payment based on a varying percentage of Empress
Hammond's adjusted gross receipts. In the event that Empress Hammond suffers a
decrease in revenues, the costs of satisfying the foregoing commitments if the
Empress Merger is consummated may have a material adverse effect on us. In
addition, there can be no assurance that the actual costs incurred to complete
the projects undertaken to satisfy such commitments will not exceed the original
amount of such commitments. The level of compliance by Empress with the
commitments to the City of Hammond will be considered by the Indiana Gaming
Commission in its review of the Empress Merger and compliance by us following
the Empress Merger will be considered in connection with Empress Hammond's
ongoing licensure.
Empress Hammond entered into a License Agreement, or License Agreement,
with the Hammond Port Authority on June 21, 1996, pursuant to which Empress
Hammond licenses from the Hammond Port Authority certain rights to land and
docking facilities at the Hammond marina. For the rights and privileges granted
to it under the terms of the License Agreement, Empress Hammond is required to
pay the Hammond Port Authority: (1) a $1.00 per passenger fee for each passenger
visiting the casino; and (2) an amount
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equal to the aggregate annual rental at the Hammond marina for each boat slip
that was removed or taken out of operation as a result of the construction of
the docking facilities and/or the operation of the casino. In the event Empress
Hammond suffers a decrease in revenues, the costs of satisfying the foregoing
commitments if the Empress Merger is consummated may have a material adverse
effect on us.
GAMING REFERENDA OR OTHER GAMING LAWS MAY BE ADOPTED, MODIFIED OR REPEALED
In Mississippi, a request was filed with the Secretary of State on March
22, 1999 to place on the November 2000 statewide ballot a voter initiative to
ban gaming in the state. On May 6, 1999, the local circuit court found the
wording of the initiative inadequate, and declared the initiative measure
unconstitutional. The sponsor has appealed the local circuit court's decision on
the initiative to the Mississippi Supreme Court, where the matter awaits
resolution. These events follow two unsuccessful attempts by the same sponsor in
1998 to place substantially similar initiative measures on the November 1999
statewide ballot. Even if the Supreme Court should affirm the circuit court's
ruling, it is possible that the gaming ban initiative could be re-worded and
meet the requirements for placement on the November 1999 ballot or the ballot of
a later election. 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
Mississippi. 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 our gaming operations in
Mississippi.
From time to time, various proposals have been introduced in the
Mississippi, Louisiana, Indiana and Illinois legislatures that, if enacted,
could adversely affect the taxation, regulation, operation, competitive
environment or other aspects of the gaming industry in those states. There can
be no assurance that future legislation or regulations would not have a material
adverse effect on the ability to conduct a gaming business in these states or
the profitability of such operations. An additional degree of uncertainty exists
in the Louisiana, Indiana and Illinois regulatory environment due to the limited
experience in the interpretation of the Louisiana, Indiana and Illinois gaming
legislation and regulations.
A National Gambling Impact Study Commission has been established by the
United States Congress to conduct a comprehensive study of the social and
economic impact of gaming in the United States. The National Commission is
required to issue a report containing its findings and conclusions, together
with recommendations for legislation and administrative actions, by June 20,
1999. Also, the Governor of Indiana has appointed a Gaming Impact Study
Commission to review the impact of all forms of gaming in Indiana and to issue
its report by December 31, 1999. Any recommendations which may be made by the
National Commission could result in the enactment of new laws and/or the
adoption of new regulations which could adversely impact the gaming industry in
general
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and recommendations made by the Indiana Commission ultimately may adversely
impact gaming in Indiana. We are unable at this time to determine what
recommendations, if any, the National Commission or the Indiana Commission will
make, or the ultimate disposition of any recommendations the National Commission
may make.
A LOSS OF ONE OF OUR RIVERBOATS OR DOCKSIDE FACILITIES FROM SERVICE COULD
MATERIALLY AND ADVERSELY AFFECT OUR OPERATIONS
Our profitability depends on the two riverboats and the dockside facilities
in Tunica County, Mississippi and Bossier City, Louisiana and, following
completion of the Empress Merger, three riverboats and dockside facilities in
the metropolitan Chicago area. Any of these vessels could be lost from service
due to casualty, mechanical failure, a flood or other severe weather conditions
or extended or extraordinary maintenance or inspection, including routine
inspections required by the U.S. Coast Guard. Periodically, Empress' vessels
must either be drydocked for an inspection of the hull or undergo an underwater
hull survey, which could result in a loss of service for a period of time. Any
extended period of time during which our casinos are out of service could have a
material adverse effect on our cash flow and our financial condition.
RISKS RELATING TO LITIGATION
During the normal course of operating our business, we are, from time to
time, subject to various litigation claims and legal disputes. In our opinion,
none is expected to have a material adverse impact on our operations, however,
no assurance can be given that it will not do so or, that in the future, we will
not be subject to litigation that will adversely affect our operations. In
addition, Empress is subject to certain legal proceedings that may impact our
operations if we consummate the Empress Merger.
On July 21, 1998, a lawsuit was filed against Empress Hammond and Empress
Joliet and four of their employees in the United States District Court for the
Northern District of Illinois. The lawsuit, brought by two former female
employees of Empress Joliet, alleges that Empress Hammond and Empress Joliet
committed gender discrimination and sexual harassment in violation of Title VII
of the Civil Rights Act of 1964 and permitted a hostile work environment to
exist at its facilities. The lawsuit also alleges certain tort claims and seeks
certification as a class action on behalf of similarly situated current and
former female employees of Empress Joliet and Empress Hammond, and seeks
injunctive relief and money damages. Empress denies the allegations in the
complaint and intends to vigorously contest this matter. Although Empress has
agreed to indemnify us with respect to this claim and others, there can be no
assurances that such indemnity will be adequate or available to us or that any
judgment in this matter would not have a material adverse effect on us if we
consummate the Empress Merger.
YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES
The notes are a new issue of securities for which there is currently no
established trading market. As a result, we cannot provide any assurances that a
market will develop for the notes or that you will be able to sell your notes.
We do not intend to apply for listing or quotation of the notes; however, the
notes have been designated for trading in the PORTAL market. We have been
informed by the Initial Purchasers that they intend to make a market in the
notes. However, the Initial Purchasers are not obligated to do so, and they may
cease their market-making at any time without notice. In addition, such
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market-making activity will be subject to the limitations imposed by the
Securities Act and the Exchange Act.
THERE MAY BE NEGATIVE CONSEQUENCES TO NON-TENDERING HOLDERS OF THE ORIGINAL
NOTES IN THE EXCHANGE OFFER
In the event we consummate the exchange offer, we will not be required to
register any original notes not tendered and accepted in the exchange offer. In
such event, holders of original notes seeking liquidity in their investment
would have to rely on exemptions to the registration requirements under the
Securities Act.
VOLATILITY RISKS
If a market develops for the notes, the notes might trade at prices higher
or lower than their initial offering price. The trading price would depend on
many factors, such as prevailing interest rates, the market for similar
securities, general economic conditions and our financial condition, performance
and prospects. Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial fluctuation in the prices of
these securities. In addition, securities of gaming companies have historically
been volatile and no assurance can be given that these notes will not be subject
to such volatility. The market for the notes may be subject to such disruptions,
which could have an adverse effect on you. You should be aware that you may be
required to bear the financial risk of an investment in the notes for an
indefinite period of time.
FRAUDULENT TRANSFER RISKS
Our wholly-owned and certain other subsidiaries are, upon the occurrence of
certain events, required to guarantee our obligations under the notes. Under
federal or state fraudulent transfer law, however, if any subsidiary guarantor
becomes a debtor in a case under the United States Bankruptcy Code or otherwise
encounters financial difficulty, a bankruptcy or state court could enter an
order avoiding that subsidiary's guarantee. In that event, the court could also
require that holders return any amounts received under the guarantee to the
subsidiary or to a fund for its creditors' benefit.
A court could enter an order if it found that when the subsidiary became
liable under its guarantee, or, in some states, when payments became due
thereunder, the subsidiary received less than fair consideration or reasonably
equivalent value and either: (1) was or was rendered insolvent; (2) was left
with inadequate capital with which to conduct its business as then contemplated;
or (3) believed or reasonably should have believed that it would incur debts
beyond its ability to pay as they became due. Regardless of those factors,
however, the court could avoid the guarantee if it found that the subsidiary
entered into it with actual intent to hinder, delay, or defraud creditors.
Although courts in different jurisdictions measure solvency differently, in
general, a subsidiary would be deemed insolvent if the sum of its debts,
including contingent and unliquidated debts, exceed the fair value of all its
property, or if the present fair salable value of its assets is less than the
amount that would be required to pay the expected liability on its debts,
including contingent and unliquidated debts, as they become due.
A court would likely find that a subsidiary received less than fair
consideration or reasonably equivalent value for its guarantee to the extent
that it did not receive direct or indirect benefit from the issuance of the
notes. If a court should avoid the guarantee of
19
<PAGE> 26
any subsidiary, holders would retain their rights against us and any other
subsidiary guarantors, although there is no assurance that those entities'
assets would be sufficient to pay the notes in full.
REPURCHASE OF NOTES UPON A REQUIRED REGULATORY REDEMPTION OR CHANGE OF CONTROL
Pursuant to, and in accordance with, any order of any governmental
authority with appropriate jurisdiction and authority relating to a gaming
license, which requires that a person who is a holder or the beneficial owner of
such notes be licensed, qualified or found suitable under any gaming laws, such
holder or beneficial owner, as the case may be, shall apply for a license,
qualification or finding of suitability within the required time period. If such
holder or beneficial owner fails to apply or become licensed or qualified or is
found unsuitable, we shall have the right, at our option:
- to require such holder or beneficial owner to dispose of such holder's or
beneficial owner's notes or beneficial interests therein within 30 days
of receipt of notice of our election or such earlier date as may be
ordered by such governmental authorities; or
- to redeem the notes of such holder or beneficial owner at a redemption
price equal to the lesser of:
(1) the cost at which such holder or beneficial owner acquired the
notes; and
(2) 100% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the earlier of the date of redemption or
the date of the finding of unsuitability, which may be less than 30
days following the notice of redemption if so ordered by such
governmental authorities.
We shall notify the Trustee in writing of any such redemption as soon as
practicable, which may be less than 30 days following the notice of redemption
if so requested or prescribed by the applicable governmental authorities. The
holder or beneficial owner of notes applying for a license, qualification or a
finding of suitability is obligated to pay all costs of the licensure or
investigation for such qualification or finding of suitability. We anticipate
that similar requirements will exist in other states where we may expand. If you
are required to dispose of the notes, there can be no assurance that you would
be able to do so at a time, for a price and/or on terms that are acceptable to
you. See the section "Description of Notes" under the heading "Mandatory
Disposition Pursuant to Gaming Laws."
In addition, upon the occurrence of both a change of control and either a
downgrade of our credit rating or a decline in our interest coverage ratio, or a
change of control trigger, you will have the right to require us to offer to
purchase the notes at 101% of their principal amount, plus accrued interest, if
any. The lenders under Horseshoe Gaming's existing credit facility and,
following the Empress Merger, the new credit facility and the holders of
Horseshoe Gaming's existing subordinated notes, will have a similar right upon a
change of control without regard to a downgrade of our credit rating or a
decline in our interest coverage ratio. See the section "Summary" under the
heading "The Refinancing and the Empress Merger." It is possible that if a
change of control trigger occurs, we might not have sufficient resources to
satisfy all of our repurchase obligations. In addition, the terms of some of our
debt agreements prohibit us from purchasing any notes until all debt under such
agreements is paid in full. Our future credit agreements, including the
20
<PAGE> 27
new credit facility will, or other agreements relating to debt may, contain
similar provisions preventing us from repurchasing your notes. If a change of
control trigger occurs while we are prohibited from purchasing the notes, we
could seek our lenders' consent to purchase the notes or could attempt to
refinance the borrowings that contain the prohibition. There can be no
assurance, however, as to whether and to what extent we could refinance such
borrowings on acceptable terms, or at all. If we do not obtain a consent or
repay the borrowings, we would remain prohibited from purchasing the notes. In
such case, our failure to purchase submitted notes would constitute an event of
default under the indenture, which would, in turn, constitute a further default
under certain of our existing or future debt agreements, including Horseshoe
Gaming's existing credit facility and, following the Empress Merger, the new
credit facility. Also, the change of control purchase feature of these notes may
in certain circumstances discourage or make it more difficult for us to be sold
or taken over.
INVESTIGATION OF POLITICAL CORRUPTION IN LOUISIANA
On November 6, 1998, a grand jury in the United States District Court for
the Middle District of Louisiana returned an indictment against former Louisiana
Governor Edwin W. Edwards, his son Stephen Edwards, Louisiana State Senator
Gregory Tarver, and other individuals, alleging, among other things, corruption
in the awarding of several riverboat licenses in the State of Louisiana. The
investigation by the Federal Bureau of Investigation and the U.S. Attorney's
Office into possible corruption on the part of various state legislators and
other public officials within the State of Louisiana is ongoing. The indictment
and affidavits filed by the FBI in various federal courts have specifically
identified and accused certain public officials of accepting bribes or illegal
campaign contributions or being involved in other illegal activities, and have
associated such public officials with various gaming interests, which do not
include Horseshoe Gaming, within the State of Louisiana.
Horseshoe Gaming and Jack B. Binion have received and complied in a timely
manner with subpoenas from the U.S. Attorney's Office requesting records of all
payments, fees and compensation, if any, that HE has paid to various individuals
and entities which included three of HE's former limited partners, relatives of
two of those former limited partners and a Louisiana State Senator representing
the Shreveport area and certain of his relatives. We believe that the
information we provided in response to such subpoenas is complete, and that
profit distributions, fees, compensation or other payments that HE paid to any
of such persons and entities were proper and occurred in the ordinary course of
business. The U.S. Attorney's Office and the FBI have informally interviewed
some of our employees. The U.S. Attorney's Office has advised HE that it is
neither a subject nor a target of such investigation.
We anticipate that the indictment and ongoing investigation and the adverse
publicity from the indictment and ongoing investigation will continue to cause
the gaming industry in Louisiana to receive negative publicity and a certain
amount of adverse public reaction. Publicity against the gaming industry within
Louisiana could lead to state legislation that could significantly restrict, or
eliminate, legalized gaming within the State of Louisiana. Any such legislation
would have a material adverse effect on our business.
We also anticipate that the indictment and ongoing investigation will cause
heightened scrutiny by the Louisiana Gaming Control Board in connection with the
renewal of riverboat gaming licenses in the State of Louisiana, including the
renewal of Horseshoe
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<PAGE> 28
Bossier City's riverboat gaming license which is currently proceeding through
the renewal process.
POTENTIAL CONFLICTS OF INTEREST
Mr. Jack B. Binion, who is our largest shareholder, is actively involved in
the gaming industry. Mr. Binion and his affiliates may, without restriction,
pursue investment opportunities to acquire, develop, manage, operate or
otherwise invest in businesses ancillary to any gaming business, including but
not limited to hotels and restaurants, so long as they disclose such pursuits to
us.
THE LOSS OF KEY MANAGEMENT AND OTHER PERSONNEL COULD MATERIALLY AND ADVERSELY
AFFECT OUR BUSINESS
We depend upon the efforts and skills of a few key members of our
management team. If we lose the services of any of these personnel or if they
are unable to devote sufficient attention to our casino operations, our
operations could be materially adversely affected. We recently lost the services
of six members of senior management, including our former President, Chief
Financial Officer, Senior Vice President -- Operations and General Counsel. See
the section entitled "Management." Four of such former employees have gone to
work for a competitor. The employment agreements of such former employees did
not provide for non-solicitation upon leaving us, however, we and such
competitor have executed an agreement whereby such competitor has agreed not to
solicit 50 key employees designated by us for a period of three years. We have
filled some of the vacant senior management positions and intend to fill the
remaining vacant positions as soon as practicable. We will need to integrate
these and other new employees into our business, which will take time and cost
money.
We compete with other gaming companies for qualified employees who have
significant gaming operations experience and other employees necessary to
operate our business, particularly in Louisiana and Mississippi. Because of the
recent expansion of the gaming industry in Louisiana, Mississippi and in other
states, there can be no assurance that we will be able to fill the remaining
vacant positions or hire additional experienced executives and other employees.
THE FAILURE OF OUR COMPUTER SYSTEMS AND THE COMPUTER SYSTEMS OF OUR KEY VENDORS
TO BE YEAR 2000 COMPLIANT COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS
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 our
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.
Our business operations depend on our and our suppliers' year 2000
readiness. If our systems, gaming or non-gaming, and those of our suppliers do
not function, or fail to function properly as a result of the century change, we
would have to operate under alternative procedures, some manual, until a proper
resolution of the failure can be achieved. Operating in this manner could have a
material adverse effect on our business. We have not completed our assessment of
our Year 2000 issues.
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<PAGE> 29
Two of the major internal hardware and software systems, financial
accounting software system and human resource system, utilized by us have been
identified to be not Year 2000 compliant. These systems will be required to be
upgraded to a current platform that is Year 2000 compliant. We are also
undertaking the installation of a Year 2000 compliant slot accounting software
product in Horseshoe Bossier City to replace the current system that is not Year
2000 compliant.
We presently believe that, with modifications to existing software and
converting to new software, the Year 2000 issue will not pose significant
operational problems for our 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 our
financial condition and results of operations. In addition, in the event that
any of our significant suppliers and other parties with which we have a material
relationship, including public utilities, the banking systems, the postal system
and other similar infrastructure enterprises, do not successfully and timely
achieve Year 2000 compliance, our business or operations could be materially
adversely affected. See the section "Management's Discussion and Analysis of
Financial Condition and Results of Operations" under the heading "Year 2000
Readiness Disclosure."
RISKS RELATING TO STATUS AS S CORPORATION
It is intended that we will qualify for and elect to be treated as an "S
corporation" for federal income tax purposes, although we are not contractually
bound to maintain such treatment. As an S corporation, we will not be subject to
federal income tax as an entity. Instead, each stockholder generally will be
subject to income tax on his proportionate share of our income (or take into
account his proportionate share of any loss). Pursuant to a stockholders'
agreement, we intend to make distributions to our stockholders to enable them to
pay any taxes on their share of our income. See the section entitled "Certain
Relationships and Related Transactions." While we believe that we were properly
formed and have been properly operating as an S corporation and that our
corporate subsidiaries were properly formed and have been properly operating as
Qualified Subchapter S Subsidiaries for Federal and state income tax purposes,
if our S corporation tax status or the Qualified Subchapter S Subsidiary status
of any of our corporate subsidiaries were successfully challenged, we or such
subsidiary could be required to pay Federal and certain state income taxes, plus
interest and possibly penalties, on our taxable income as far back as
commencement of our respective operations. Such payments could have a material
adverse effect on us. In addition, in such event, our ability to repay principal
or interest on the notes may be impaired. See the section "Description of Notes"
under the heading "Certain Covenants."
TRADE NAME RISKS
In connection with the sale in July 1998 by Jack Binion of his interest in
Horseshoe Club Operating Company, or Horseshoe Club, which is the owner of
Binion's Horseshoe Casino in Las Vegas, Horseshoe Club assigned various
trademarks and tradenames used by Horseshoe Gaming and Horseshoe Club to a
separate license company, Horseshoe License Company. Horseshoe License Company
issued perpetual licenses to Horseshoe Club and Horseshoe Gaming. Horseshoe
Gaming received a license to use the tradename "Horseshoe" and various other
related trademarks and tradenames in the gaming and related businesses for all
jurisdictions other than Nevada and Horseshoe Club received a
23
<PAGE> 30
license to use the tradename "Horseshoe" and various other related trademarks
and tradenames in the gaming and related businesses in Nevada.
The use of a separate license entity is intended to protect Horseshoe
Gaming's license in the event of a bankruptcy of Horseshoe Club. There can be no
assurance, however, that a party would not claim in a bankruptcy proceeding of
Horseshoe Club that the various trademarks and tradenames are valuable and
constitute a fraudulent conveyance under Title 11, United States Code or
applicable state fraudulent transfer laws. If it is determined that the various
trademarks and tradenames were a fraudulent conveyance then they may be
considered assets of Horseshoe Club in the bankruptcy proceeding and an
avoidance of the license agreement with Horseshoe Gaming may be sought. In
addition, upon a bankruptcy of Horseshoe Gaming or us as successor to Horseshoe
Gaming following the Internal Consolidation, Horseshoe Club has the right to
purchase Horseshoe Gaming's interest in the license and, upon such purchase,
Horseshoe Gaming's interest in the license automatically terminates. Failure of
Horseshoe Gaming or us as successor to Horseshoe Gaming following the Internal
Consolidation, to have use of the "Horseshoe" tradename could reasonably be
expected to have a material adverse effect on us.
THE INDENTURE CONTAINS AND OUR NEW CREDIT FACILITY WILL CONTAIN RESTRICTIVE DEBT
COVENANTS
The Indenture and Horseshoe Gaming's existing credit facility contain, and
the new credit facility will contain, a number of significant covenants that,
among other things, restrict our ability to dispose of assets, incur additional
indebtedness, incur guarantee obligations, repay other debt or amend other debt
instruments, pay dividends, create liens on assets, enter into capital leases,
make investments, loans or advances, make acquisitions, engage in mergers or
consolidations, make capital expenditures, engage in certain transactions with
subsidiaries and affiliates and otherwise restrict corporate activities. In
addition, under Horseshoe Gaming's existing credit facility we are required, and
under the new credit facility we anticipate that we will be required, to meet a
number of financial ratios and tests.
Our ability to comply with such agreements may be affected by events beyond
our control, including prevailing economic, financial and industry conditions.
The breach of any of such covenants or restrictions could result in a default
under Horseshoe Gaming's existing credit facility or the new credit facility, as
applicable, or the Indenture, which would permit certain lenders to declare all
amounts borrowed thereunder to be due and payable, together with accrued and
unpaid interest, and the commitments of the senior lenders to make further
extensions of credit under Horseshoe Gaming's existing credit facility or the
new credit facility, as applicable, could be terminated. If we were unable to
repay debt to our senior lenders, such lenders could proceed against the
collateral securing such debt.
THIS PROSPECTUS CONTAINS FORWARD LOOKING STATEMENTS
Certain of the matters discussed concerning our operations, economic
performance and financial condition, including in particular the likelihood of
our success in developing and expanding our business, include forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Statements that are predicate in nature, that depend
upon or refer to future events or conditions or that include words such as
"expects", "anticipates", "intends", "plans", "believes", "estimates"
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<PAGE> 31
and similar expressions are forward-looking statements. Although we believe that
these statements are based upon reasonable assumptions, we can give no assurance
that their goals will be achieved.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes in
the exchange offer as described in this prospectus. We will receive in exchange
original notes in like principal amount. The original notes surrendered in
exchange for the new notes will be retired and canceled and cannot be reissued.
Accordingly, the issuance of the new notes will not result in any change in our
outstanding debt.
The net proceeds received by us for the placement of the original notes was
approximately $582.9 million, after deducting expenses. The net proceeds are
being used:
1. to finance, in part, the acquisition of all of the outstanding capital
stock of Empress Casino Joliet Corporation and Empress Casino Hammond
Corporation;
2. to repurchase certain existing 8-1/8% senior subordinated notes of
Empress Entertainment, Inc.;
3. to repurchase all of the outstanding 12.75% senior notes of Horseshoe
Gaming and to pay tender premiums and accrued and unpaid interest
relating thereto;
4. to repay all of the indebtedness outstanding under the existing credit
agreement; and
5. to pay related fees and expenses.
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<PAGE> 32
CAPITALIZATION
This table sets forth our consolidated capitalization: (1) as of March 31,
1999; (2) as adjusted to give effect to the Ownership Transactions and the
Refinancing Transactions; and (3) as further adjusted to give effect to the
Merger Transactions. You should read this information in conjunction with the
section "Summary" under the heading "The Refinancing and the Empress Merger,"
and the sections "Use of Proceeds," "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes, which are included or
incorporated elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1999 (UNAUDITED)
---------------------------------------------
AS ADJUSTED FOR AS FURTHER
THE OWNERSHIP ADJUSTED FOR THE
AND REFINANCING MERGER
ACTUAL TRANSACTIONS TRANSACTIONS
------ --------------- ----------------
(IN MILLIONS)
<S> <C> <C> <C>
Cash and cash equivalents.............. $ 47.4 $ 64.4 $ 55.4
====== ====== ========
Long-term debt, including current
portion:
Existing credit facility............. $ 85.0 $ -- $ --
Notes payable to former owners....... -- 14.1 14.1
New credit facility.................. -- -- 245.0
12 3/4% senior notes due 2000(1)..... 127.8 -- --
9 3/8% senior subordinated notes due
2007.............................. 159.9 -- 159.9
Notes offered hereby................. -- 274.0(2) 597.8
------ ------ --------
Total long-term debt.............. 372.7 448.0 1,016.8
------ ------ --------
Redeemable ownership interests(3)...... 54.9 54.9 54.9
Members'/stockholders' equity(4)....... 47.0 13.7 13.7
------ ------ --------
Total capitalization.............. $474.6 $516.6 $1,085.4
====== ====== ========
</TABLE>
- -------------------------
(1) Includes an unamortized discount of $0.8 million. $0.2 million principal
amount of senior notes did not tender in the tender offer.
(2) Excludes $325.0 million principal amount of notes that are subject to
redemption if we fail to consummate the Empress Merger.
(3) Represents the aggregate fair market value of all interests subject to
put/call provisions contained in employment agreements and option agreements
of certain of our former employees as determined by an independent appraisal
obtained in November 1997. For further information on these ownership
interests, see the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(4) Members'/stockholders' equity is reduced to account for the recognition of
an extraordinary loss on early retirement of long-term debt and ownership
transactions.
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<PAGE> 33
SELECTED FINANCIAL DATA
You should read the selected consolidated financial data set forth below in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the financial statements and the notes thereto, and
the other financial information included herein. Our selected consolidated
financial data for the years ended December 31, 1998, 1997, 1996, 1995 and 1994
have been derived from our audited consolidated financial statements. Our
selected consolidated financial data for the quarters ended March 31, 1999 and
1998 have been derived from our unaudited consolidated financial statements and,
in our opinion, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of our results of operations for
such periods and financial condition as of the dates presented. Results of
interim periods are not necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------- ---------------
1994(1) 1995(2) 1996 1997 1998 1998 1999
------- ------- ------ ------ ------ ------ ------
($ IN MILLIONS EXCEPT PER UNIT DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENTS OF
OPERATIONS DATA:
Revenues
Casino.............. $59.2 $283.4 $317.5 $321.2 $429.8 $106.8 $112.7
Food and beverage... 5.9 24.3 26.9 30.0 48.3 11.1 13.0
Hotel............... 1.8 7.3 7.9 8.8 35.4 8.3 8.8
Retail and other.... 0.9 4.1 4.4 4.3 10.0 2.1 3.1
----- ------ ------ ------ ------ ------ ------
Gross revenues... 67.8 319.1 356.7 364.3 523.5 128.3 137.6
Less: Promotional
allowances....... 4.4 20.7 25.0 29.2 62.3 14.4 17.4
----- ------ ------ ------ ------ ------ ------
Total net
revenues....... 63.4 298.4 331.7 335.1 461.2 113.9 120.2
----- ------ ------ ------ ------ ------ ------
Operating expenses
Casino.............. 24.3 133.3 162.4 175.4 245.2 60.5 60.7
Food and beverage... 3.2 12.7 12.3 11.0 16.0 4.2 4.4
Hotel............... 1.1 5.7 6.8 7.9 11.8 2.9 2.6
Retail and other.... 0.7 1.7 1.4 1.4 6.9 1.6 2.5
General and
administrative... 17.8 42.9 45.4 43.6 57.2 13.5 12.6
Depreciation and
amortization..... 2.5 12.6 16.0 19.4 33.9 7.9 8.6
Preopening(3)....... 6.7 7.0 -- 3.0 0.7 0.7 --
Development......... 2.1 4.4 6.6 1.6 0.5 0.2 --
----- ------ ------ ------ ------ ------ ------
Total operating
expenses....... 58.4 220.3 250.9 263.3 372.2 91.5 91.4
----- ------ ------ ------ ------ ------ ------
</TABLE>
27
<PAGE> 34
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------- ---------------
1994(1) 1995(2) 1996 1997 1998 1998 1999
------- ------- ------ ------ ------ ------ ------
($ IN MILLIONS EXCEPT PER UNIT DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating profit
before corporate
expenses and asset
write-down.......... 5.0 78.1 80.8 71.8 89.0 22.4 28.8
Corporate
expenses......... -- 3.4 10.2 22.5 12.9 3.1 2.2
Asset
write-down(4).... -- -- -- -- 12.9 -- --
Operating income...... 5.0 74.7 70.6 49.3 63.2 19.3 26.6
Interest expense.... (6.8) (20.2) (28.1) (20.8) (39.9) (9.7) (10.3)
Interest income..... 0.6 1.5 6.1 5.0 2.2 0.5 0.6
Gain on sale of
land(5).......... 5.2 -- -- -- -- -- --
Minority interest in
(income) loss of
subsidiary(5).... (5.7) (8.9) (1.8) (0.4) 0.6 -- (0.3)
Other, net.......... -- -- 0.2 (0.4) (0.2) (0.1) --
----- ------ ------ ------ ------ ------ ------
Income (loss) before
extraordinary loss
on early retirement
of long-term debt... (1.7) 47.1 47.0 32.7 25.9 10.0 16.6
Extraordinary loss
on early
retirement of
long-term debt... -- (7.2) -- (5.3) (0.8) -- --
----- ------ ------ ------ ------ ------ ------
Net income
(loss)(6)........... $(1.7) $ 39.9 $ 47.0 $ 27.4 $ 25.1 $ 10.0 $ 16.6
===== ====== ====== ====== ====== ====== ======
OTHER DATA:
EBITDA
(unaudited)(7)... $15.7 $100.6 $ 90.9 $ 86.8 $114.9 $ 29.3 $ 35.7
EBITDA margin
(unaudited)...... 24.8% 33.7% 27.4% 25.9% 24.9% 25.7% 29.7%
Capital
expenditures........ $65.7 $ 19.0 $ 58.8 $215.6 $ 46.6 $ 25.4 $ 6.1
Ratio of earnings to
fixed charges (8)... 1.0x 3.6x 2.6x 1.7x 1.6x 2.0x 2.6x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
-------------------------------------------- ---------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------ ------ ------ ------ ------
(IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash
equivalents(9)... $ 18.6 $ 96.9 $121.4 $ 48.7 $ 84.1 $ 46.0 $ 47.4
Total assets........ 145.5 300.1 377.6 511.6 560.4 532.4 526.0
Total debt(10)...... 125.0 197.6 232.7 313.3 388.8 356.8 372.7
Members'
equity(11)....... 3.6 71.1 104.7 116.2 124.8 121.8 101.9
</TABLE>
28
<PAGE> 35
- -------------------------
(1) Horseshoe Bossier City opened on July 9, 1994.
(2) Horseshoe Tunica opened on February 13, 1995.
(3) Preopening costs incurred during the expansion and development of existing
casino properties are expensed as incurred.
(4) Horseshoe Bossier City's new casino facility replaced the Queen of the Red.
The Queen of the Red, along with related gaming equipment, is included in
assets held for sale. During the year ended December 31, 1998, we recorded
a charge of approximately $12.9 million to adjust the carrying value of the
Queen of the Red to our estimate of its net realizable value.
(5) We own less than 100% of certain subsidiaries. Minority interest represents
the share of each subsidiary's income attributable to those interests not
owned by us as well as the 1994 gain on sale of land by RPG of $5.2 million
distributed to some, but not all, of our members.
(6) Horseshoe Gaming is organized as a limited liability company under Delaware
law. Accordingly, no provision is made in its accounts for federal income
taxes, as such taxes are the liabilities of its members.
(7) EBITDA is calculated by adding to operating income: depreciation and
amortization, preopening expenses, asset write-downs and deferred
compensation (including, in millions: $1.5, $6.3, $4.3, $15.1 and $4.2 in
1994, 1995, 1996, 1997 and 1998, respectively, and $0.5 and $1.4 for the
quarters ended March 31, 1999 and 1998, respectively). We consider EBITDA
to be a widely accepted financial indicator of a company's ability to
service debt, fund capital expenditures and expand its business; however,
EBITDA is not calculated in the same way by all companies and is neither a
measure required, nor represents cash flow from operations as defined, by
generally accepted accounting principles. EBITDA should not be considered
by an investor as an alternative to net income, as an indicator of
operating performance or as an alternative to cash flow as a measure of
liquidity. The calculation of EBITDA for purposes of the financial
information presented herein is calculated differently than for purposes of
the covenants under our indentures.
(8) For purposes of computing the ratio of earnings to fixed charges, earnings
include net income (loss) before minority interests plus fixed charges.
Fixed charges consist of interest expense (plus amounts capitalized), a
portion of rental expense (deemed by management to be representative of the
interest factor of rental payments) and amortization of debt issuance
costs.
(9) Includes escrow funds, restricted for expansion of existing facilities,
development of new projects or repayment of debt, amounting to $42.2
million and $31.3 million as of December 31, 1996 and 1995, respectively.
(10) Includes deferred interest payable on notes to affiliates of $2.5 million
as of December 31, 1994.
(11) Includes redeemable ownership liability of $18.4, $24.9, $51.6 and $53.7
million as of December 31, 1995, 1996, 1997 and 1998, respectively, and
$53.0 and $54.9 million as of March 31, 1998 and 1999, respectively.
29
<PAGE> 36
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements are based
upon and should be read in conjunction with Empress' and our historical
consolidated financial statements.
The unaudited pro forma combined financial statements are being provided in
connection with our exchange offer of the original notes for the new notes. The
proceeds from the offering of the original notes are being used to facilitate
the Merger Transactions, the Refinancing Transactions and the Ownership
Transactions.
The unaudited pro forma combined statements of operations for the quarter
ended March 31, 1999 and year ended December 31, 1998 and the unaudited pro
forma combined balance sheet as of March 31, 1999 present the combined effect
for the transactions listed above. The effects on the statements of operations
are presented as if all such transactions were consummated on the first day of
the period presented. The effects on the pro forma combined balance sheet are
presented as if all such transactions occurred on March 31, 1999.
The unaudited pro forma combined statements of operations do not reflect
any adjustments for cost savings that may be realized as a result of combining
our operations with Empress' operations following the Empress Merger.
The unaudited pro forma combined financial statements have been prepared
based upon currently available information and assumptions that we have deemed
appropriate. This pro forma information may not be indicative of what actual
results would have been, nor does such data purport to represent our combined
financial results and Empress' combined financial results for future periods.
30
<PAGE> 37
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
QUARTER ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
PRO FORMA FOR THE
OWNERSHIP AND EMPRESS
HISTORICAL OWNERSHIP REFINANCING REFINANCING HISTORICAL MERGER
HORSESHOE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS EMPRESS ADJUSTMENTS
---------- ----------- ----------- ----------------- ---------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Casino...................... $112.7 $ -- $ -- $112.7 $ 98.9 $ --
Food and Beverage........... 13.0 -- -- 13.0 7.2 --
Hotel....................... 8.8 -- -- 8.8 0.4 --
Retail and Other............ 3.1 -- -- 3.1 1.4 --
------ ----- ----- ------ ------ ------
137.6 -- -- 137.6 107.9 --
Promotional Allowances...... 17.4 -- -- 17.4 3.3 --
------ ----- ----- ------ ------ ------
Total Net Revenues........ 120.2 -- -- 120.2 104.6 --
------ ----- ----- ------ ------ ------
Operating Expenses:
Casino...................... 60.7 -- -- 60.7 51.2 --
Food and Beverage........... 4.4 -- -- 4.4 6.5 --
Hotel....................... 2.6 -- -- 2.6 0.3 --
Retail and Other............ 2.5 -- -- 2.5 1.0 --
General and
Administrative............ 12.6 -- -- 12.6 15.3 --
Depreciation and
Amortization.............. 8.6 1.9(a) -- 10.5 5.5 4.1(e)
Preopening.................. -- -- -- -- -- --
Development................. -- -- -- -- -- --
Total Operating
Expenses................ 91.4 1.9 -- 93.3 79.8 4.1
------ ----- ----- ------ ------ ------
Operating Profit Before
Corporate Expenses and Asset
Write-Down.................. 28.8 (1.9) -- 26.9 24.8 (4.1)
Corporate Expenses.......... 2.2 -- -- 2.2 1.4 --
Asset Write-Down............ -- -- -- -- -- --
Operating Income............ 26.6 (1.9) -- 24.7 23.4 (4.1)
Interest Expense............ (10.3) -- 6.4(c) (3.9) (7.5) 2.3(f)
Interest Expense -- New
Subordinated Debt......... -- -- (6.1)(c) (6.1) -- (7.2)(g)
Interest Income............. 0.6 -- -- 0.6 2.3 (2.2)(j)
State Taxes................. -- -- -- -- (0.1) --
Minority Interest in Income
of Subsidiary............. (0.3) 0.3(a) -- -- -- --
Other, net.................. -- -- -- -- -- --
Income From Continuing
Operations.................. $ 16.6 $(1.6) $ 0.3 $ 15.3 $ 18.1 $(11.2)
====== ===== ===== ====== ====== ======
EBITDA........................ $ 35.7 $ 35.7 $ 28.9
<CAPTION>
PRO FORMA FOR THE
OWNERSHIP,
REFINANCING AND
EMPRESS MERGER
ADJUSTMENTS
-----------------
(IN MILLIONS)
<S> <C>
Revenue
Casino...................... $211.6
Food and Beverage........... 20.2
Hotel....................... 9.2
Retail and Other............ 4.5
------
245.5
Promotional Allowances...... 20.7
------
Total Net Revenues........ 224.8
------
Operating Expenses:
Casino...................... 111.9
Food and Beverage........... 10.9
Hotel....................... 2.9
Retail and Other............ 3.5
General and
Administrative............ 27.9
Depreciation and
Amortization.............. 20.1
Preopening.................. --
Development................. --
Total Operating
Expenses................ 177.2
------
Operating Profit Before
Corporate Expenses and Asset
Write-Down.................. 47.6
Corporate Expenses.......... 3.6
Asset Write-Down............ --
Operating Income.............. 44.0
Interest Expense............ (9.1)
Interest Expense -- New
Subordinated Debt......... (13.3)
Interest Income............. 0.7
State Taxes................. (0.1)
Minority Interest in Income
of Subsidiary............. --
Other, net.................. --
Income From Continuing
Operations.................. $ 22.2
======
EBITDA........................ $ 64.6
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
31
<PAGE> 38
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA FOR THE
OWNERSHIP AND EMPRESS
HISTORICAL OWNERSHIP REFINANCING REFINANCING HISTORICAL MERGER
HORSESHOE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS EMPRESS ADJUSTMENTS
---------- ----------- ----------- ----------------- ---------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Casino.................. $429.8 $ -- $ -- $429.8 $373.0 $ --
Food and Beverage....... 48.3 -- -- 48.3 27.9 --
Hotel................... 35.4 -- -- 35.4 1.6 --
Retail and Other........ 10.0 -- -- 10.0 5.5 --
------ ----- ------ ------ ------ ------
523.5 -- -- 523.5 408.0 --
Less: Promotional
Allowances............ 62.3 -- -- 62.3 11.3 --
------ ----- ------ ------ ------ ------
Total Net Revenues.... 461.2 -- -- 461.2 396.7 --
------ ----- ------ ------ ------ ------
Operating Expenses
Casino.................. 245.2 -- -- 245.2 194.0 --
Food and Beverage....... 16.0 -- -- 16.0 26.0 --
Hotel................... 11.8 -- -- 11.8 1.0 --
Retail and Other........ 6.9 -- -- 6.9 3.2 --
General and
Administrative........ 57.2 -- -- 57.2 70.5 --
Depreciation and
Amortization.......... 33.9 7.6(a) -- 41.5 21.1 16.3(e)
Preopening.............. 0.7 -- -- 0.7 -- --
Development............. 0.5 -- -- 0.5 -- --
------ ----- ------ ------ ------ ------
Total Operating
Expenses............ 372.2 7.6 -- 379.8 315.8 16.3
------ ----- ------ ------ ------ ------
Operating Profit Before
Corporate Expenses and
Asset Write-Down........ 89.0 (7.6) -- 81.4 80.9 (16.3)
Corporate Expenses...... 12.9 -- -- 12.9 -- --
Asset Write-Down........ 12.9 -- -- 12.9 -- --
------ ----- ------ ------ ------ ------
Operating Income........ 63.2 (7.6) -- 55.6 80.9 (16.3)
Interest Expense........ (39.9) -- 24.3(c) (15.6) (25.6) 4.8(f)
Interest Expense --
New Subordinated
Debt.................. -- -- (24.6)(c) (24.6) -- (29.0)(g)
Interest Income......... 2.2 -- -- 2.2 6.7 (4.8)(j)
State Taxes............. -- -- -- -- (0.4) --
Minority Interest in
Loss of Subsidiary.... 0.6 (0.6)(a) -- -- -- --
Other, net.............. (0.2) -- -- (0.2) -- --
------ ----- ------ ------ ------ ------
Income From Continuing
Operations.............. $ 25.9 $(8.2) $ (0.3) $ 17.4 $ 61.6 $(45.3)
====== ===== ====== ====== ====== ======
EBITDA.................... $114.9 $114.9 $102.0
<CAPTION>
PRO FORMA FOR THE
OWNERSHIP,
REFINANCING AND
EMPRESS MERGER
ADJUSTMENTS
-----------------
(IN MILLIONS)
<S> <C>
Revenues
Casino.................. $802.8
Food and Beverage....... 76.2
Hotel................... 37.0
Retail and Other........ 15.5
------
931.5
Less: Promotional
Allowances............ 73.6
------
Total Net Revenues.... 857.9
------
Operating Expenses
Casino.................. 439.2
Food and Beverage....... 42.0
Hotel................... 12.8
Retail and Other........ 10.1
General and
Administrative........ 127.7
Depreciation and
Amortization.......... 78.9
Preopening.............. 0.7
Development............. 0.5
------
Total Operating
Expenses............ 711.9
------
Operating Profit Before
Corporate Expenses and
Asset Write-Down........ 146.0
Corporate Expenses...... 12.9
Asset Write-Down........ 12.9
------
Operating Income........ 120.2
Interest Expense........ (36.4)
Interest Expense --
New Subordinated
Debt.................. (53.6)
Interest Income......... 4.1
State Taxes............. (0.4)
Minority Interest in
Loss of Subsidiary.... --
Other, net.............. (0.2)
------
Income From Continuing
Operations.............. $ 33.7
======
EBITDA.................... $216.9
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
32
<PAGE> 39
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA FOR THE
FOR THE OWNERSHIP,
OWNERSHIP REFINANCING
AND EMPRESS AND EMPRESS
HISTORICAL OWNERSHIP REFINANCING REFINANCING HISTORICAL MERGER MERGER
HORSESHOE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS EMPRESS ADJUSTMENTS ADJUSTMENTS
---------- ----------- ----------- ------------- ---------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash & Cash Equivalents...... $ 47.4 $ (2.1)(a) $ 28.7(d) $ 64.4 $ 36.9 $ (42.7)(h) $ 55.4
(9.3)(b) (0.3)(d) (0.1)(i)
(3.1)(l)
Secured Proceeds Account..... -- -- 17.3(d) 17.3 -- (17.3)(h) --
Account Receivable, Net...... 8.8 -- -- 8.8 3.3 -- 12.1
Inventories.................. 2.5 -- -- 2.5 -- -- 2.5
Prepaid Expenses and Other... 8.9 -- -- 8.9 2.7 -- 11.6
Restricted cash held for
defeasance................. -- -- -- -- 166.1 (166.1)(j) --
------ ------ ----- ------ ------ ------- --------
Total Current Assets....... 67.6 (11.4) 45.7 101.9 209.0 (229.3) 81.6
------ ------ ----- ------ ------ ------- --------
Net Property and Equipment..... 373.4 0.4(a) -- 373.8 190.5 -- 564.3
Other Assets:
Goodwill, net................ 35.9 16.0(a) -- 51.9 -- 408.4(e) 460.3
Investment in Unconsolidated
Subsidiary................. -- -- -- -- 10.7 (10.7)(i) --
Asset Held for Sale.......... 12.0 -- -- 12.0 -- -- 12.0
Other........................ 37.1 10.0(a) 5.3(d) 56.4 19.7 16.4(k) 74.4
4.0(a) (10.0)(h)
(2.1)(j)
(6.0)(l)
------ ------ ----- ------ ------ ------- --------
$ 526.0 $ 19.0 $ 51.0 $ 596.0 $ 429.9 $ 166.7 $1,192.6
====== ====== ===== ====== ====== ======= ========
Current Liabilities:
Accounts Payable............. $ 7.8 $ -- $ -- $ 7.8 $ 4.3 $ (0.1)(i) $ 12.0
Accrued Expenses............. 41.1 4.1(a) -- 45.2 24.5 (0.8)(i) 68.9
Interest Payable............. 4.7 -- (0.3)(d) 4.4 11.2 (0.1)(i) 4.3
(3.1)(l)
(8.1)(j)
Current Portion of Long-Term
Debt:...................... -- -- -- -- 150.0 (150.0)(j) --
------ ------ ----- ------ ------ ------- --------
Total Current
Liabilities.............. 53.6 4.1 (0.3) 57.4 190.0 (162.2) 85.2
Long-Term Debt (Net of Current
Portion):.................... 372.7 14.1(b) 61.2(d) 448.0 150.0 418.8(l) 1,016.8
16.5 (16.5)(i)
Long-Term Accrued Expenses..... -- 22.0(a) -- 22.0 -- -- 22.0
Redeemable Ownership
Interest..................... 54.9 -- -- 54.9 -- -- 54.9
Minority Interest.............. (2.2) 2.2 -- -- -- -- --
Members'/Stockholders'
Equity:...................... 47.0 (23.4)(b) (9.9)(d) 13.7 73.4 (70.0)(m) 13.7
(10.1)(j)
(6.7)(i)
------ ------ ----- ------ ------ ------- --------
$ 526.0 $ 19.0 $ 51.0 $ 596.0 $ 429.9 $ 166.7 $1,192.6
====== ====== ===== ====== ====== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
33
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
OWNERSHIP ADJUSTMENTS
(a) Reflects the effects of the repurchase of 8.08% of limited partnership
interests in HE for $30.4 million. The purchase price was allocated as
follows: $16.0 million to goodwill to be amortized over 25 years, $10.0
million to a non-compete agreement to be amortized over 2 years, $4.0
million to another asset for release of claims and consent to be amortized
over 2 years and $0.4 million to the write-up of the existing riverboat to
be depreciated over 15 years. Payment for the purchase was made as follows:
(i) the credit of $2.2 million to the minority interest holders' capital
account (which was a deficit), (ii) an accrued liability to be paid over
three years ($4.1 million of which is current and $22.0 million of which is
long-term) and (iii) the use of $2.1 million in cash to make the initial
payment due upon execution of the agreement to repurchase. For the year
ended December 31, 1998, and for the quarter ended March 31, 1999, the
increase in amortization expense is comprised of $0.6 million and $0.2
million, respectively, for amortization of goodwill and $7.0 million and
$1.7 million, respectively, for amortization of non-compete and release of
claims and consent. Adjustment also includes the removal of $0.3 million of
minority interest income for the three months ended March 31, 1999 and $0.6
million of minority interest expense for the year ended December 31, 1998.
(b) Records the purchase of approximately 1.07% of ownership interests in
Horseshoe Gaming for $5.7 million to facilitate our formation as a
Subchapter S corporation under the Internal Revenue Code and the purchase of
approximately 3.2% of ownership interests in us for $17.7 million as a
condition of our anticipated licensing in Illinois.
REFINANCING ADJUSTMENTS
(c) Reflects the changes in interest expense, including amortization of related
deferred financing charges and original issue discount arising from the
issuance of $275.0 million principal amount of notes (the non-redeemable
portion used to effect the Refinancing Transactions) and the use of such
proceeds to paydown Horseshoe Gaming's $130.0 million existing credit
facility (of which $85.0 million was outstanding on March 31, 1999) and to
retire the senior notes (of which $128.6 million was outstanding on March
31, 1999).
(d) Reflects the effects of the issuance of $275.0 million principal amount of
notes (the non-redeemable portion) less $1.0 million original issue discount
pursuant to this offering and the estimated use of such proceeds to retire
Horseshoe Gaming's $128.6 million of senior notes and repay its $85.0
million existing credit facility. As a result, long-term debt will increase
by $61.2 million (adjusted for $0.8 million of unamortized discount on the
retired notes). The $60.4 million of remaining proceeds will be used to pay
$7.6 million of transactions fees in connection with the refinancing; $6.8
million in tender premium and consent fees on the senior notes; $14.0
million of accrued interest and $3.3 million of redemption premium on $325.0
million principal amount of notes (the redeemable portion to be used to
effect the Merger Transactions), the latter two of which are to be deposited
into the secured proceeds account; and $28.7 million for general corporate
purposes.
The secured proceeds account, as reflected, does not include $325.0 million
principal amount of notes (the redeemable portion) which are also deposited
therein.
34
<PAGE> 41
In connection with the Refinancing Transactions, unamortized deferred
financing charges will increase by a net amount of $5.3 million due to the
$7.6 million associated with the non-redeemable portion of the notes and due
to the write-off of $1.2 million associated with the senior notes and $1.1
million associated with Horseshoe Gaming's existing credit facility.
The $0.3 million accrued interest associated with payment of the credit
facility has been reflected as paid from cash and a reduction of interest
payable.
Also in connection with the Refinancing Transactions, $6.8 million in tender
premiums and consent fees on the senior notes, $2.3 million write-off of
unamortized deferred finance charges and $0.8 million write-off of
unamortized discount on the senior notes are recorded as an extraordinary
item and reflected as a change in members'/stockholders' equity.
EMPRESS MERGER ADJUSTMENTS
(e) Reflects estimated expense for the amortization of the excess of the
purchase price paid over the fair value of the assets acquired ($16.3
million for the year ended December 31, 1998 and $4.1 million for the
quarter ended March 31, 1999, respectively). The following table sets forth
the purchase price of Empress and the preliminary allocation as of March 31,
1999:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Purchase Price:
Initial purchase price................................... $609.0
Working capital adjustment............................... 11.9
Tender premium for the Empress notes..................... 1.5
------
$622.4
======
Preliminary Allocation:
Working capital.......................................... $ 11.9
Land..................................................... 12.2
Buildings, riverboats, furniture, fixtures and
equipment........................................... 178.3
Other long-term assets................................... 11.6
------
Subtotal (fair value of net assets acquired).......... 214.0
Goodwill (excess of purchase price over fair value of
assets acquired).................................... 408.4
------
$622.4
======
</TABLE>
We are currently in the process of allocating the purchase price among the
tangible and intangible assets to be acquired and the liabilities to be
assumed. The final purchase price and its allocation will be based on
independent appraisals, discounted cash flows, quoted market prices and
estimates by management which are expected to be completed within one year
following the Empress Merger. Upon completion of the purchase price
allocation process, to the extent the purchase price exceeds the fair value
of the net identifiable tangible and intangible assets acquired, such excess
will be allocated to goodwill and amortized over approximately twenty-five
(25) years.
35
<PAGE> 42
(f) Reflects the net change in interest expense from the anticipated borrowing
of approximately $245.0 million under our new credit facility, the
repurchase of $150.0 million of Empress notes, the repayment of Empress'
$100.0 million credit facility, of which $16.5 million was outstanding on
March 31, 1999, and the elimination of interest for the $150.0 million of
10 3/4% senior notes of Empress retired on April 1, 1999 (note (j)). The pro
forma effects of such borrowings on interest expense have been computed at a
rate of 7 3/4% on our new credit facility. Each 1/8% change in the rate on
these borrowings would result in a change in interest expense of $308,000
for the year ended December 31, 1998 and $77,000 for the quarter ended March
31, 1999.
(g) Reflects the increase in interest expense, including amortization of related
deferred financing charges and original issue discount arising from the
issuance of $325.0 million principal amount of notes (the redeemable
portion) to consummate the Merger Transactions.
(h) Following is the estimated sources and uses of funds necessary to consummate
the Empress Merger:
<TABLE>
<CAPTION>
(IN
MILLIONS)
<S> <C> <C>
Sources of Funds:
Proceeds from issuance of redeemable portion of
notes........................................ $323.8
New credit facility borrowings.................. 245.0
Additional funds in secured proceeds
account.................................... 17.3
Working capital................................. 42.7
Empress Merger deposit.......................... 10.0
------
Total sources................................ $638.8
======
Uses of Funds:
Repurchase Empress notes........................ $150.0
Premium on Empress notes........................ 1.5
Financing fees.................................. 16.4
------
Subtotal..................................... $167.9
Net cash to be paid for the purchase of Empress:
Purchase price............................... $609.0
Less: Empress notes........................ (150.0)
Plus: Working capital...................... 11.9
------
Net cash to be paid to Empress.................. 470.9
------
Total uses................................... $638.8
======
</TABLE>
(i) Reflects reductions for assets and liabilities, which are not included in
our purchase of Empress.
(j) Removes from the historical combined balance sheet of Empress, the balance
of $150.0 million 10 3/4% senior notes, the related $2.1 million
unamortized deferred finance charges, $8.1 million accrued interest and
$166.1 million of trust assets set-aside for retirement. Also removes
interest income on the trust assets of $2.2 million for the three months
ended March 31, 1999 and $4.8 million for the year ended
36
<PAGE> 43
December 31, 1998. This retirement resulted in a $10.1 million charge to
members'/ stockholders' equity for net assets not acquired.
(k) Reflects the increase of $16.4 million in deferred finance charges related
to our new credit facility, of which $245.0 million has been reflected as
outstanding, and $325.0 million of notes (the redeemable portion).
(l) Reflects the net increase in long-term debt from $245.0 million to be drawn
under our new credit facility and $325.0 million principal amount of notes
(the redeemable portion) less $1.2 million of original issue discount. In
addition to providing funds for the purchase of Empress, the proceeds from
the redeemable portion of the notes will be used in part to repurchase the
$150.0 million of Empress notes. Adjustments also include the removal of
$6.0 million in unamortized deferred finance charges and $3.1 million of
accrued interest relating to the repurchase of the Empress notes.
(m) Reflects the elimination necessary for the consolidation of Empress based on
the allocation of the purchase price. The $70.0 million adjustment is
comprised of Empress' historical equity of $73.4 million, plus equity
adjustments of $6.7 million for the net liabilities not acquired (note (i))
less a $10.1 million charge to members'/ stockholders' equity for the
retirement of debt (note (j)).
37
<PAGE> 44
THE EXCHANGE OFFER
BACKGROUND
We sold the original notes on May 11, 1999, in a transaction exempt from
the registration requirements of the Securities Act. The initial purchasers of
the original notes subsequently resold the notes to qualified institutional
buyers in reliance on Rule 144A and under Regulation S under the Securities Act.
As of the date of this prospectus, $600.0 million aggregate principal amount of
original notes are outstanding.
We entered into a registration rights agreement with the initial purchasers
of the original notes under which we agreed that we would, at our own cost,
- file an exchange offer registration statement under the Securities Act
within 60 days after May 11, 1999, the original issue date of the
original notes,
- use our best efforts to cause the exchange offer registration statement
to become effective under the Securities Act at the earliest possible
time, but no later than 180 days following May 11, 1999, and
- upon the effectiveness of the exchange offer registration statement to
consummate the exchange offer within 30 business days.
The summary in this prospectus of provisions of the registration rights
agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the registration rights agreement, a copy
of which is filed as an exhibit to the registration statement of which this
prospectus is a part.
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the SEC to third parties,
we believe that a holder of original notes, but not a holder who is an affiliate
of us within the meaning of Rule 405 of the Securities Act, who exchanges
original notes for new notes in the exchange offer, generally may offer the new
notes for resale, sell the new notes and otherwise transfer the new notes
without further registration under the Securities Act and without delivery of a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
This does not apply, however, to a holder who is an affiliate of us within the
meaning of Rule 405 of the Securities Act. We also believe that a holder may
offer, sell or transfer the new notes only if the holder acquires the new notes
in the ordinary course of its business and is not participating, does not intend
to participate and has no arrangement or understanding with any person to
participate in a distribution of the new notes.
Any holder of original notes using the exchange offer to participate in a
distribution of new notes cannot rely on the no-action letters referred to
above. This includes a broker-dealer that acquired original notes directly from
us, but not as a result of market-making activities or other trading activities.
Consequently, the holder must comply with the registration and prospectus
delivery requirements of the Securities Act in the absence of an exemption from
such requirements.
Each broker-dealer that receives new notes for its own account in exchange
for original notes, where such original notes were acquired by the broker-dealer
as a result of market-making activities or other trading activities may be a
statutory underwriter and must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with the resale of
new notes received in exchange for original
38
<PAGE> 45
notes. The letter of transmittal which accompanies this prospectus states that
by so acknowledging and by delivering a prospectus, a participating
broker-dealer will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act. A participating broker-dealer may use this
prospectus, as it may be amended from time to time, in connection with resales
of new notes it receives in exchange for original notes in the exchange offer.
We will make this prospectus available to any participating broker-dealer in
connection with any resale of this kind for a period of one year after the
deadline for consummation of the exchange offer or such shorter period as will
terminate when all original notes have been sold pursuant to the exchange offer
registration statement. See "Plan of Distribution".
Each holder of the original notes who wishes to exchange original notes for
new notes in the exchange offer will be required to represent and acknowledge,
for the holder and for each beneficial owner of such original notes, whether or
not the beneficial owner is the holder, in the letter of transmittal that:
- the new notes to be acquired by the holder and each beneficial owner, if
any, are being acquired in the ordinary course of business,
- neither the holder nor any beneficial owner is an affiliate, as defined
in Rule 405 of the Securities Act, of us or any of our subsidiaries,
- any person participating in the exchange offer with the intention or
purpose of distributing new notes received in exchange for original
notes, including a broker-dealer that acquired original notes directly
from us, but not as a result of market-making activities or other trading
activities cannot rely on the no-action letters referenced above and must
comply with the registration and prospectus delivery requirements of the
Securities Act, in connection with a secondary resale of the new notes
acquired by such person,
- if the holder is not a broker-dealer, the holder and each beneficial
owner, if any, are not participating, do not intend to participate and
have no arrangement or understanding with any person to participate in
any distribution of the new notes received in exchange for original
notes, and
- if the holder is a broker-dealer that will receive new notes for the
holder's own account in exchange for original notes, the original notes
to be so exchanged were acquired by the holder as a result of
market-making or other trading activities and the holder will deliver a
prospectus meeting the requirements of the Securities Act in connection
with any resale of such new notes received in the exchange offer.
However, by so representing and acknowledging and by delivering a
prospectus, the holder will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
SHELF REGISTRATION STATEMENT
If applicable law or interpretations of the staff of the SEC are changed so
that the new notes received by holders who make all of the above representations
in the letter of transmittal are not or would not be, upon receipt,
transferrable by each such holder without restriction under the Securities Act,
we will, at our cost:
- file a shelf registration statement covering resales of the original
notes within the time period specified in the registration rights
agreement,
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- use our best efforts to cause the shelf registration statement to be
declared effective under the Securities Act on or prior to 60 days after
the filing deadline for the shelf registration statement, and
- use our best efforts to keep effective the shelf registration statement
until the earlier of three years after May 11, 1999, or the time when all
of the applicable original notes have been sold pursuant to the shelf
registration statement or otherwise cease to be a transfer restricted
security in accordance with the registration rights agreement.
We will, if and when we file the shelf registration statement, provide to
each holder of the original notes copies of the prospectus which is a part of
the shelf registration statement, notify each holder when the shelf registration
statement has become effective and take other actions as are required to permit
unrestricted resales of the original notes. A holder that sells original notes
pursuant to the shelf registration statement generally must be named as a
selling security-holder in the related prospectus and must deliver a prospectus
to purchasers, will be subject to civil liability provisions under the
Securities Act in connection with these sales and will be bound by the
provisions of the registration rights agreement which are applicable to the
holder, including certain indemnification obligations. In addition, each holder
of original notes must deliver information to be used in connection with the
shelf registration statement and provide comments on the shelf registration
statement in order to have its original notes included in the shelf registration
statement and benefit from the provisions regarding any liquidated damages
described below.
LIQUIDATED DAMAGES
If:
(a) the exchange offer registration statement or the shelf registration
statement described above is not filed with the SEC on or before the
date specified for such filing;
(b) any such registration statement is not declared effective by the SEC on
or prior to the date specified for such effectiveness, or the
Effectiveness Target Date;
(c) the exchange offer has not been consummated on or prior to the date
specified for such consummation, or the Consummation Date;
(d) any such registration statement is filed and declared effective but
thereafter ceases to be effective or fails to be usable in connection
with resales of notes during the period specified in the registration
rights agreement (each such event referred to in clauses (a) through
(d) above a "Registration Default"),
then we will pay liquidated damages, or Liquidated Damages, to each holder of
the original notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of the original notes held by such holder.
Upon a Registration Default, Liquidated Damages will accrue at the rate
specified above until such Registration Default is cured and the amount of
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of original notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.35 per week per $1,000 principal amount of original
notes, provided that we shall in no event be required to pay Liquidated Damages
for more than one Registration Default at any given time. Notwithstanding
anything to the contrary set forth herein,
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<PAGE> 47
(1) upon the filing of the exchange offer registration statement (and/or, if
applicable, the shelf registration statement), in the case of (a) above, (2)
upon the effectiveness of the exchange offer registration statement (and/or, if
applicable, the shelf registration statement), in the case of (b) above, (3)
upon consummation of the exchange offer, in the case of (c) above, or (4) upon
the filing of a post-effective amendment to the registration statement or an
additional registration statement that causes the exchange offer registration
statement (and/or, if applicable, the shelf registration statement) to again be
declared effective or made usable in the case of (d) above, the Liquidated
Damages payable with respect to the original notes as a result of such clauses
(a), (b), (c) or (d), as applicable, shall cease.
We will pay any accrued Liquidated Damages on May 15 and November 15 of
each year to the holders of original notes by wire transfer of immediately
available funds or by mailing checks to their registered addresses if no such
accounts have been specified.
TERMS OF THE EXCHANGE OFFER
Upon the exchange offer registration statement being declared effective, we
will offer the new notes in exchange for surrender of the original notes. We
will keep the exchange offer open for at least 20 business days, or longer if
required by applicable law.
Upon the terms and subject to the conditions contained in this prospectus
and in the letter of transmittal which accompanies this prospectus, we will
accept any and all original notes validly tendered and not withdrawn before 5:00
p.m., New York City time, on the expiration date of the exchange offer. We will
issue an equal principal amount of new notes in exchange for the principal
amount of original notes accepted in the exchange offer. Holders may tender some
or all of their original notes under the exchange offer. Original notes may be
tendered only in integral multiples of $1,000.
The form and terms of the new notes will be the same as the form and terms
of the original notes except that:
- the new notes will have been registered under the Securities Act and
therefore will not bear legends restricting their transfer; and
- the new notes will not contain certain terms providing for an increase in
the interest rate on the original notes under specific circumstances
which are described in the registration rights agreement.
The new notes will evidence the same debt as the original notes and will be
entitled to the benefits of the indenture governing the original notes.
In connection with the exchange offer, holders of original notes do not
have any appraisal or dissenters' rights under law or the indenture governing
the original notes. We intend to conduct the exchange offer in accordance with
the applicable requirements of the Exchange Act and the rules and regulations of
the SEC related to such offers.
We shall be deemed to have accepted validly tendered original notes when,
as and if we have given oral or written notice of acceptance to U.S. Trust
Company, National Association, exchange agent for the exchange offer. The
exchange agent will act as agent for the tendering holders for the purpose of
receiving the new notes from us.
If any tendered original notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events specified in this
prospectus or if original notes are submitted for a greater principal amount
than the holder desires to exchange, the certificates for the unaccepted
original notes will be returned without expense to the
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<PAGE> 48
tendering holder. If original notes were tendered by book-entry transfer in the
exchange agent account at The Depository Trust Company in accordance with the
book-entry transfer procedures described below, these non-exchanged original
notes will be credited to an account maintained with The Depositary Trust
Company as promptly as practicable after the expiration date of the exchange
offer.
We will pay all charges and expenses, other than transfer taxes in certain
circumstances, in connection with the exchange offer. See the heading "Fees and
Expenses." Holders who tender original notes in the exchange offer will
therefore not need to pay brokerage commissions or fees or, subject to the
instructions in the letter of transmittal, transfer taxes with respect to the
exchange of original notes in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date of the exchange offer is 5:00 p.m., New York City time,
on , 1999, unless we, in our reasonable discretion, extend the
exchange offer, in which case the expiration date shall be the latest date and
time to which the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will make a public announcement of
the extension before 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
We reserve the right, in our reasonable discretion:
- to delay accepting any original notes, to extend the exchange offer or to
terminate the exchange offer if, in our reasonable judgement, any of the
conditions described below under "Conditions" shall not have been
satisfied, by giving oral or written notice of the delay, extension or
termination to the exchange agent; or
- to amend the terms of the exchange offer in any manner.
We will promptly announce any such event making a timely release and may or
may not do so by other means as well.
PROCEDURES FOR TENDERING
You may tender your own original notes in the exchange offer. To tender in
the exchange offer, a holder must do the following:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal;
- have the signatures thereon guaranteed if required by the letter of
transmittal; and
- except as discussed under the heading "Guaranteed Delivery Procedures,"
mail or otherwise deliver the letter of transmittal, or facsimile,
together with the original notes and any other required documents, to the
exchange agent prior to 5:00 p.m., New York City time, on the expiration
date of the exchange offer.
The exchange agent must receive the original notes, a completed letter of
transmittal and all other required documents at the address listed below under
"Exchange Agent" before 5:00 p.m., New York City time, on the expiration date
for the tender to be effective. You may deliver your original notes by using the
book-entry transfer procedures
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<PAGE> 49
described below, as long as the exchange agent receives confirmation of the
book-entry transfer before the expiration date.
The Depository Trust Company has authorized its participants that hold
original notes on behalf of beneficial owners of original notes through The
Depository Trust Company to tender their original notes as if they were holders.
To effect a tender of original notes, The Depository Trust Company participants
should either:
- complete and sign the letter of transmittal, or a manually signed
facsimile of the letter, have the signature thereon guaranteed if
required by the instructions to the letter of transmittal, and mail or
deliver the letter of transmittal, or the manually signed facsimile, to
the exchange agent according to the procedure described under the heading
"Procedures for Tendering" in the letter of transmittal; or
- transmit their acceptance to The Depository Trust Company through its
automated tender offer program for which the transaction will be eligible
and follow the procedure for book-entry transfer as described under the
heading "Book-Entry Transfer."
By tendering, each holder will make the representations contained in the
fourth paragraph above under the heading "Resale of the New Notes." Each
participating broker-dealer must acknowledge that it will deliver a prospectus
in connection with any resale of such new notes. See the section entitled "Plan
of Distribution."
The tender by a holder and the acceptance of the tender by us will
constitute the agreement between the holder and us set forth in this prospectus
and in the letter of transmittal.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD ALLOW
SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES OR BOOK-ENTRY CONFIRMATION
SHOULD BE SENT TO US. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
ON THEIR BEHALF.
Any beneficial owner whose original notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the beneficial owner's behalf. See "Instructions to Registered Holder
from Beneficial Owner" included with the letter of transmittal. If the
beneficial owner wishes to tender on his own behalf, such owner must, prior to
completing and executing the letter of transmittal and delivering such
beneficial owner's original notes, either make appropriate arrangements to
register ownership of the original notes in such owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible guarantor institution (within the meaning of Rule 17A
d-5 under the Exchange Act) unless the original notes are tendered:
- by a registered holder of such original notes; or
- for the account of an eligible guarantor institution.
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If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, the guarantee must be by a member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an eligible guarantor institution.
If a letter of transmittal is signed by a person other than the registered
holder of any original notes listed in the letter of transmittal, the original
notes must be endorsed or accompanied by a properly completed bond power and
signed by the registered holder as the registered holder's name appears on the
original notes.
If a letter of transmittal or any original notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by us, evidence
satisfactory to us of their authority to so act must be submitted with the
letter of transmittal.
Promptly after the date of this prospectus, the exchange agent will
establish a new account or utilize an existing account with respect to the
original notes at the book-entry transfer facility, The Depository Trust
Company, or DTC, for the purpose of facilitating the exchange offer. Subject to
the establishment of the account, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of original notes by causing the book-entry transfer facility to
transfer the original notes into the exchange agent's account with respect to
the original notes in accordance with that facility's procedures. Although
delivery of the original notes may be effected through book-entry transfer into
the exchange agent's account at the book-entry transfer facility, an appropriate
letter of transmittal properly completed and duly executed or an agent's message
with any required signature guarantee and all other required documents must, in
any case be delivered to the exchange agent at its address listed below on or
before the expiration date of the exchange offer, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures. Delivery of documents to the book-entry transfer facility
does not constitute delivery to the exchange agent.
The term "agent's message" means a message transmitted by The Depositary
Trust Company to, and received by, the exchange agent, which states that The
Depository Trust Company has received an express acknowledgment from the
participant in The Depository Trust Company tendering the original notes
stating:
- the aggregate principal amount of original notes which have been tendered
by such participant;
- that such participant has received and agrees to be bound by the term of
the letter of transmittal; and
- that we may enforce such agreement against the participant.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered original notes and withdrawal of tendered
original notes will be determined by us in our sole discretion, which
determination will be final and binding. We reserve the absolute right to reject
any and all original notes not properly tendered or any original notes our
acceptance of which would, in the opinion of counsel for us, be unlawful. We
also reserve the right to waive any defects, irregularities or conditions of
tender as to particular original notes. Our interpretation of the terms and
conditions of the exchange
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offer, including the instructions in the letter of transmittal, will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of original notes must be cured within a period of time
that we shall determine.
Neither we, the exchange agent nor any other person shall incur any
liability for failure to give notice of any defect or irregularity with respect
to any tender of original notes. Tenders of original notes will not be deemed to
have been made until such defects or irregularities mentioned above have been
cured or waived. Any original notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the exchange agent to the tendering holders,
unless otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date of the exchange offer.
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender its original notes and:
- whose original notes are not immediately available;
- who cannot deliver the holder's original notes, the letter of transmittal
or any other required documents to the exchange agent prior to the
expiration date; or
- who cannot complete the procedures for book-entry transfer, before the
expiration date;
may effect a tender if:
- the tender is made through an eligible guarantor institution;
- before the expiration date, the exchange agent receives from the eligible
guarantor institution a properly completed and duly executed notice of
guaranteed delivery by facsimile transmission, mail or hand delivery, the
name and address of the holder, the certificate number(s) of the original
notes and the principal amount of original notes tendered, stating that
the tender is being made thereby and guaranteeing that, within three New
York Stock Exchange trading days after the expiration date, the letter of
transmittal (or facsimiles thereof) together with the certificate(s)
representing the original notes (or a confirmation of book-entry transfer
of the original notes into the exchange agent's account at the book-entry
transfer facility), and any other documents required by the letter of
transmittal will be deposited by the eligible guarantor institution with
the exchange agent; and
- the exchange agent receives, within three New York Stock Exchange trading
days after the expiration date, a properly completed and executed letter
of transmittal or facsimile, as well as the certificate(s) representing
all tendered original notes in proper form for transfer or a confirmation
of book-entry transfer of such original notes into the exchange agent's
account at the book-entry transfer facility, and all other documents
required by the letter of transmittal.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, tenders of original notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date of the exchange offer.
To withdraw a tender of original notes in the exchange offer, a letter or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address
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set forth below prior to 5:00 p.m., New York City time, on the expiration date.
Any notice of withdrawal must:
- specify the name of the person having deposited the original notes to be
withdrawn;
- identify the original notes to be withdrawn including the certificate
number(s) and principal amount of such original notes or, in the case of
original notes transferred by book-entry transfer, the name and number of
the account at the book-entry transfer facility to be credited and
otherwise comply with the procedures of the transfer agent;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the original notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee under the indenture
governing the original notes register the transfer of the original notes
into the name of the person withdrawing the tender; and
- specify the name in which any such original notes are to be registered,
if different from that of the person who deposited the notes.
If certificates for original notes have been delivered or otherwise
identified to the exchange agent, then, before the release of the certificates,
the withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible guarantor institution unless the holder is an eligible
guarantor institution.
All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by us, and such determination shall
be final and binding on all parties. Any original notes so withdrawn will be
deemed not to have been validly tendered for purposes of the exchange offer, and
no new notes will be issued, unless the original notes so withdrawn are validly
retendered. Any original notes which have been tendered but which are not
accepted for exchange will be returned to the holder without cost to the holder
as soon as practicable after withdrawal, rejection of tender or termination of
the exchange offer. Properly withdrawn original notes may be retendered by
following one of the procedures described above under the heading "Procedures
for Tendering" at any time before the expiration date.
CONDITIONS
Despite any other term of the exchange offer, we are not required to accept
for exchange, or exchange new notes for, any original notes and may terminate
the exchange offer as provided in this prospectus before the acceptance of the
original notes, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us, or any material adverse development
has occurred in any existing action or proceeding with respect to us or
any of its subsidiaries;
- any change, or any development involving a prospective change, in our
business or financial affairs or of any of our subsidiaries has occurred
which, in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us;
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- any governmental approval, including approvals of relevant gaming
authorities, has not been obtained, which approval we shall, in our
reasonable discretion, deem necessary for the consummation for the
exchange offer as contemplated by this prospectus;
- there shall have been proposed, adopted or enacted any law, statute, rule
or regulation (or an amendment to any existing law, statute, rule or
regulation) which, in our sole judgment, might materially impair our
ability to proceed with the exchange offer or have a material adverse
effect on the contemplated benefits of the exchange offer to us;
- there shall occur a change in the current interpretation by the staff of
the SEC which permits the new notes issued pursuant to the exchange offer
in exchange for original notes to be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that
is an "affiliate" of us within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such new notes
are acquired in the ordinary course of such holders' business and such
holder have no arrangement with any person to participate in the
distribution of such new notes; or
- there shall have occurred:
- any general suspension of, shortening of hours for, or limitation on
prices for, trading in securities on any national securities exchange
or in the over-the-counter market (whether or not mandatory);
- any limitation by any governmental agency or authority which may
adversely affect our ability to complete the transactions contemplated
by the exchange offer;
- a declaration of a banking moratorium or any suspension of payments in
respect of banks by Federal or state authorities in the United States
(whether or not mandatory);
- a commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States;
- any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending
institutions in the United States; or
- in the case of any of the foregoing existing at the time of the
commencement of the exchange offer, a material acceleration or
worsening thereof.
The conditions listed above are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any of these conditions. We
may waive these conditions in our reasonable discretion in whole or in part at
any time and from time to time. The failure by us at any time to exercise any of
the above rights shall not be deemed a waiver of such right and such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. If we determine in our reasonable discretion that any of the conditions
are not satisfied, we may:
- refuse to accept any original notes and return all tendered original
notes to the tendering holders;
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- extend the exchange offer and retain all original notes tendered before
the expiration of the exchange offer, subject, however, to the rights of
holders to withdraw these original notes (See the heading "Withdrawal of
Tenders" above); or
- waive unsatisfied conditions with respect to the exchange offer and
accept all properly tendered original notes which have not been
withdrawn. If this waiver constitutes a material change to the exchange
offer, we will promptly disclose the waiver by means of a prospectus
supplement that will be distributed to the registered holders. We will
also extend the exchange offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the exchange offer would
otherwise expire during such five to ten business day period.
EXCHANGE AGENT
U.S. Trust Company, National Association has been appointed as exchange
agent for the exchange offer. Questions and requests for assistance and requests
for additional copies of this prospectus or of the letter of transmittal should
be directed to U.S. Trust Company, National Association addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
U.S. Trust Company, National U.S. Trust Company, National
Association Association
c/o United States Trust Company of New c/o United States Trust Company of New
York York
P.O. Box 841 770 Broadway, 13th Floor
Peter Cooper Station New York, New York 10003
New York, New York 10276-0841 Attention: Corporate Trust Operations
By Hand: By Facsimile:
U.S. Trust Company, National (212) 420-6211
Association Attention: Customer Service
c/o United States Trust Company of New
York Confirm by telephone:
111 Broadway, Lower Level (800) 225-2398
New York, New York 10006-1906
Attention: Corporate Trust Operations
</TABLE>
U.S. Trust Company, National Association also acts as trustee under the
indenture governing the notes.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We have not retained any
dealer-manager in connection with the exchange offer and will not make any
payments to brokers, dealers or others soliciting acceptances of the exchange
offer. We, however, will pay the exchange agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection with providing its services.
The expenses to be incurred in connection with the exchange offer will be
paid by us. Such expenses include fees and expenses of U.S. Trust Company,
National Association as exchange agent and as trustee under the indenture
governing the notes, accounting and legal fees and printing costs, among others.
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ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the original
notes as reflected in our accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by us.
The expenses of the exchange offer and the unamortized expenses related to the
issuance of the original notes will be amortized over the term of the notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of original notes who are eligible to participate in the exchange
offer but who do not tender their original notes will not have any further
registration rights, and their original notes will continue to be subject to
restrictions on transfer. Accordingly, such original notes may be resold only:
- to us, upon redemption of these notes or otherwise;
- so long as the original notes are eligible for resale pursuant to Rule
144A under the Securities Act, to a person inside the United States whom
the seller reasonably believes is a qualified institutional buyer within
the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A;
- in accordance with Rule 144 under the Securities Act, or under another
exemption from the registration requirements of the Securities Act, and
based upon an opinion of counsel reasonably acceptable to us;
- outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act; or
- under to an effective registration statement under the Securities Act, in
each case in accordance with any applicable securities laws of any state
of the United States.
REGULATORY APPROVALS
We do not believe that the receipt of any material federal or state
regulatory approval will be necessary in connection with the exchange offer,
other than the effectiveness of the exchange offer registration statement under
the Securities Act.
APPRAISAL RIGHTS
Holders of original notes will not have dissenters' rights or appraisal
rights in connection with the exchange offer.
OTHER
Participation in the exchange offer is voluntary and holders of original
notes should carefully consider whether to accept the terms and condition of
this offer. Holders of the original notes are urged to consult their financial
and tax advisors in making their own decisions on what action to take with
respect to the exchange offer.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which we believe
is relevant to an assessment and understanding of our consolidated financial
condition and results of operations. We were formed in April 1999 and are a
holding company and, therefore, the historical results of operations presented
represent the operations of Horseshoe Gaming. The membership interests of
Horseshoe Gaming and the capital stock of HGI represent our only assets. You
should read the following discussion in conjunction with the consolidated
financial statements and notes thereto contained elsewhere in this prospectus.
INTRODUCTION
Entities controlled by Mr. Jack B. Binion developed and opened Horseshoe
Bossier City, which is owned by HE and which commenced operations on July 9,
1994, and developed and opened Horseshoe Tunica, 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
Horseshoe Gaming, or the Roll-up Transaction. The Roll-up Transaction resulted
in Horseshoe Gaming, 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, Horseshoe Gaming 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. As of December 31, 1995, Horseshoe Gaming acquired an additional
2.92% ownership interest in HE and, in April 1999, we exercised our option to
repurchase the remainder of the ownership interest in HE not owned by NGCP, a
wholly-owned subsidiary of Horseshoe Gaming and the general partner of HE. Our
consolidated financial statements include the assets, liabilities, revenues and
expenses for all entities included in the Roll-Up Transaction, as if such
entities were our subsidiaries for all periods presented.
RESULTS OF OPERATIONS
Horseshoe Tunica competes with eight other casinos in the competitive
Tunica County, Mississippi market. In December 1997, Horseshoe Tunica completed
a significant expansion of its facilities. Several of the other existing Tunica
casinos have also substantially expanded their gaming facilities, including
constructing additional hotel rooms. While we expect that our competitors'
expansions will negatively affect Horseshoe Tunica's revenues and operating
income in the near term, we believe these expansions also will increase the size
and scope of the overall Tunica gaming market, mitigating over the long term, at
least in part, the potential adverse impact on operating levels, which initially
may be felt. The impact on operating margins from the overall increase in supply
to this market is uncertain.
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,
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although when, and if, slot operations will actually begin at the track is
uncertain. In January 1998, Horseshoe Bossier City completed a major expansion
project. While new competition may adversely affect Horseshoe Bossier City's
revenues and operating income in the near term, we believe the expansion of
Horseshoe Bossier City and the potential addition of two riverboat casinos and
slot machines at the racetrack in the Bossier City/ Shreveport market will
increase the size and scope of the overall gaming market, mitigating over the
long term, at least in part, the potential adverse impact on operating levels
which initially may be felt. The impact on operating margins from the overall
increase in supply to this market is uncertain.
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Net revenues for the quarter ended March 31, 1999 were $120.2 million as
compared to $113.9 million for the quarter ended March 31, 1998. EBITDA for the
quarter ended March 31, 1999 was $35.7 million compared to $29.3 million for the
quarter ended March 31, 1998. The EBITDA margin increased in the quarter ended
March 31, 1999 to 29.7% of net revenues from 25.7% for the comparable 1998
period. The increase in the EBITDA margin is primarily due to a full quarter of
operations in the newly expanded facility at Horseshoe Bossier City during 1999,
whereas the 1998 period included only two months of operations in the newly
expanded facility.
Horseshoe Tunica
Horseshoe Tunica contributed net revenues and operating profit before
corporate expenses of $59.5 million and $16.2 million, respectively, for the
quarter ended March 31, 1999 and $55.6 million and $14.6 million, respectively,
for the quarter ended March 31, 1998. The increase in net revenues and operating
profit before corporate expenses is primarily due to an increase in slot volume.
Horseshoe Tunica's net revenues include casino revenues and non-casino
revenues of $57.2 million and $2.3 million, respectively, for the quarter ended
March 31, 1999 and $53.3 million and $2.3 million, respectively, for the quarter
ended March 31, 1998. Casino revenue per day increased approximately 7.3% in the
quarter ended March 31, 1999 to $635,000 from $592,000 for the comparable 1998
period.
The increase of $1.4 million in promotional allowances for the quarter
ended March 31, 1999 compared to the prior year period is primarily due to an
increase in volume of complimentary food, beverage and hotel rooms.
Horseshoe Tunica's EBITDA before corporate expenses for the quarter ended
March 31, 1999 was $20.2 million compared to $18.3 million for the quarter ended
March 31, 1998. The property EBITDA margin for the quarter ended March 31, 1999
was 33.9% compared with 32.9% for the quarter ended March 31, 1998.
Horseshoe Bossier City
Horseshoe Bossier City contributed net revenues and operating profit before
corporate expenses of $60.7 million and $11.5 million, respectively, for the
quarter ended March 31, 1999 and $58.3 million and $8.0 million, respectively,
for the quarter ended March 31, 1998. The increase in net revenues and operating
profit before corporate expenses is primarily due to a full quarter of
operations in the newly expanded facility during 1999, whereas the 1998 period
included only two months of operations in the newly expanded facility at
Horseshoe Bossier City. The 1998 period also includes additional promotional
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expenses related to the opening of the newly expanded facility as well as
increases in overall property operating costs from the expanded facility.
Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues of $55.5 million and $5.2 million, respectively, for the
quarter ended March 31, 1999 and $53.5 million and $4.7 million, respectively,
for the quarter ended March 31, 1998. The increase in net revenues was primarily
due to an increase in slot volume that was partially offset by a reduction in
win percentage in table games. Casino revenue per day increased approximately
3.7% in the quarter ended March 31, 1999 to $617,000 from $595,000 for the
comparable 1998 period.
The increase of $1.6 million in promotional allowances for the quarter
ended March 31, 1999 compared to the prior year period is primarily due to an
increase in volume of complimentary food, beverage and hotel rooms.
Horseshoe Bossier City's EBITDA before corporate expenses and preopening
expense for the quarter ended March 31, 1999 was $16.1 million compared to $12.9
million for the quarter ended March 31, 1998. The property EBITDA margin for the
quarter ended March 31, 1999 was 26.5% of net revenues, compared with 22.1% for
the quarter ended March 31, 1998.
Other Factors Affecting Earnings
Corporate expenses decreased approximately $0.9 million during 1999
primarily due to the reduction in the amount of non-cash deferred compensation
expense.
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 year ended December 31, 1997. 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 Horseshoe Tunica and Horseshoe Bossier City.
EBITDA for the year ended December 31, 1998 was $114.9 million compared to
$86.8 million for the year ended December 31, 1997. The EBITDA margin decreased
in 1998 to 24.9% of net revenues from 25.9% for the 1997 period.
Horseshoe Tunica
Horseshoe Tunica 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 the year ended December 31, 1997.
Horseshoe Tunica'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 was primarily due to increases in
slot revenue and table games revenue as a result of the recently completed
expansion partially offset 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 prior year.
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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 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 us with an opportunity to
increase the retail cost of hotel and food prices. The $15.4 million increase
was caused primarily by an increase in prices and an increase in overall volume,
primarily in hotel rooms and entertainment.
Property EBITDA was $66.5 million for the year ended December 31, 1998
compared to $55.5 million for the year ended December 31, 1997. The property
EBITDA margin was 30.0% for 1998 compared to 33.2% for 1997. The reduction in
property EBITDA margin was primarily due to the operation of our entertainment
facility during 1998 which was not open in 1997 and by an increase in bad debt
expense of $4.6 million.
Horseshoe Tunica's operating profit margin before corporate and preopening
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 margin was primarily caused
by an increase in depreciation and amortization expense due to the expansion,
the operation of our entertainment facility and an increase in bad debt expense.
Horseshoe Bossier City
Horseshoe Bossier City contributed net revenues and operating profit before
corporate expenses and asset write-down 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.
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 was primarily due to 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 prior year.
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 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 us with an opportunity to
increase the retail cost of hotel and food prices. The $17.8 million increase
was caused primarily by an increase in prices and an increase in overall volume,
primarily in hotel rooms.
Property EBITDA was $57.9 for the year ended December 31, 1998 compared to
$40.3 million for the year ended December 31, 1997. The property EBITDA margin
was 24.2% for 1998 compared to 24.0% for 1997.
Horseshoe Bossier City's operating profit margin before corporate expenses,
asset write-down and preopening expenses for the year ended December 31, 1998
was 16.4% compared with 17.7% for the year ended December 31, 1997. The
reduction in margin was primarily caused by an increase in depreciation and
amortization expense due to the expansion.
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Other Factors Affecting Earnings
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 Condensed Balance Sheets at December 31, 1998. During the year
ended December 31, 1998, we recorded a charge of $12.9 million to adjust the
carrying value of the Queen of the Red to our estimate of its net realizable
value. We are continuing to review various options for use of the Queen of the
Red, including a sale.
Corporate expenses decreased approximately $9.5 million during 1998 due to
a $10.9 million reduction in non-cash compensation expense, which was partially
offset by increases in other expenses. The non-cash compensation expense is
recorded to reflect the increased value of redeemable ownership interests in us
based on an independent appraisal. For more details, see the heading "Liquidity
and Capital Resources -- Ownership Repurchase Matters."
The increase of $21.9 million in net interest expense for the year ended
December 31, 1998 compared with the year ended December 31, 1997 is primarily
due to the increase in debt outstanding in 1998 and the capitalization of
interest in 1997. Approximately $11.2 million of construction period interest
related to the expansion programs at Horseshoe Tunica and Horseshoe Bossier City
was capitalized in the year ended December 31, 1997. Total debt outstanding
increased to $388.8 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 our subsequent purchase of outstanding
warrants which closed in January 1999. For more details, see the heading
"Liquidity and Capital Resources."
YEARS ENDED DECEMBER 31, 1997 AND 1996
Net revenues for the year ended December 31, 1997 were $335.1 million
compared to $331.7 million for the year ended December 31, 1996. The overall
increase in net revenues of $3.4 million was primarily attributable to a $3.8
million increase in casino revenues, offset by a slight decrease in non-casino
revenues. Horseshoe Bossier City reported a decrease in casino revenues of $6.8
million, whereas Horseshoe Tunica reported an increase of $10.6 million over
1996.
EBITDA for the year ended December 31, 1997 was $86.8 million compared to
$90.9 million for the year ended December 31, 1996. The EBITDA margin decreased
in 1997 to 25.9% of net revenues from 27.4% for the 1996 period.
Horseshoe Tunica
Horseshoe Tunica contributed net revenues and operating profit before
corporate expenses of $167.2 million and $45.6 million, respectively, for the
year ended December 31, 1997 and $156.9 million and $50.2 million, respectively,
for the year ended December 31, 1996.
Horseshoe Tunica's net revenues include casino revenues and non-casino
revenues of $161.3 million and $5.9 million, respectively, for the year ended
December 31, 1997 and $150.7 million and $6.2 million, respectively, for the
year ended December 31, 1996. The
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increase in net revenues for the year ended December 31, 1997 compared to the
prior year was primarily due to an increase in slot machine revenue of 10.8%.
Casino revenue per day increased approximately 7.3% for the year ended December
31, 1997 to $442,000 from $412,000 for the prior year despite disruption related
to the property's expansion project.
Property EBITDA was $55.5 million for the year ended December 31, 1997
compared to $57.3 million for the year ended December 31, 1996. The property
EBITDA margin was 33.2% for 1997 compared to 36.5% for 1996. The property EBITDA
margin decreased primarily due to increases in bad debt expenses and promotional
and direct marketing programs.
Horseshoe Tunica's operating profit margin before corporate and preopening
expenses for the year ended December 31, 1997 was 27.9% compared with 32.0% for
the year ended December 31, 1996. The reduction in margin was primarily due to
three factors: (1) an increase in bad debt expenses; (2) an increase in
depreciation and amortization expense due to the expansion of the casino
facility; and (3) increases in promotional and direct marketing programs.
Horseshoe Bossier City
Horseshoe Bossier City contributed net revenues and operating profit before
corporate expenses of $167.9 million and $27.9 million, respectively, for the
year ended December 31, 1997 and $174.8 million and $36.9 million, respectively,
for the year ended December 31, 1996.
Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues of $160.0 million and $7.9 million, respectively, for the
year ended December 31, 1997 and $166.8 million and $8.1 million, respectively,
for the year ended December 31, 1996. The decrease in net revenues for the year
ended December 31, 1997 compared to the prior year was 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 for the prior year. 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.
Property EBITDA was $40.3 million for the year ended December 31, 1997
compared to $45.7 million for the year ended December 31, 1996. The property
EBITDA margin was 24.0% for 1997 compared to 26.1% for 1996. The property EBITDA
margin decreased primarily due to lower than normal win percentages in table
games and slots.
Horseshoe Bossier City's operating profit margin before corporate and
preopening expenses for the year ended December 31, 1997 was 17.7% compared with
21.1% for year ended December 31, 1996. The reduction in margin 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, respectively, for the years ended December 31, 1997
and 1996. The 1996 period includes expenses associated with our failure to
obtain a license to conduct gaming in the State of Indiana.
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Corporate expenses increased approximately $12.2 million during 1997
primarily due to the $10.8 million increase in non-cash charge to compensation
expense to reflect the increased value of redeemable ownership interests in
Horseshoe Gaming. For more details, see the heading "Liquidity and Capital
Resources -- Ownership Repurchase Matters."
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 Horseshoe Tunica and Horseshoe Bossier City expansion projects. Total
interest capitalized for the years ended December 31, 1997 and 1996 was $11.2
and $1.3 million, respectively.
In November 1997, Horseshoe Gaming completed the exchange offering of its
$160.0 million of 9 3/8% Senior Subordinated Notes due 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 of our borrowings and fund a portion of the expansion of our 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
On May 11, 1999, we issued $600 million of our original notes. The proceeds
from such issuance were used to refinance Horseshoe Gaming's 12 3/4% senior
notes and refinance Horseshoe Gaming's $130 million credit facility (of which
$75 million was outstanding as of May 11, 1999). $342.3 million of such proceeds
was placed in a secured proceeds account. The secured proceeds account was
pledged to the trustee to secure our obligations under the notes and the
indenture, including our obligation to redeem a portion of the notes at 101% of
their principal amount if: (a) we fail to consummate the Empress Merger for any
reason by December 1, 1999; (b) we determine that the Empress Merger will not be
completed by that date; (c) more than $75.0 million of the $150.0 million of
Empress' 8 1/8% senior subordinated notes due 2006, or Empress notes, remain
outstanding after we consummate a change of control offer to purchase the
Empress notes, or Empress change of control offer; or (d) we fail to timely
consummate the Empress change of control offer.
Cash and cash equivalents totaled $47.4 million as of March 31, 1999.
Included in accrued expenses at March 31, 1999 is a tax distribution payable to
the owners of Horseshoe Gaming amounting to approximately $5.6 million, which
was paid in April 1999. We believe that our cash and cash equivalents on hand,
cash from operations and available borrowing capacity will be adequate to meet
our existing debt service obligations and capital expenditure commitments for
the next twelve months.
OWNERSHIP REPURCHASE MATTERS
On January 13, 1999, Horseshoe Gaming repurchased outstanding warrants held
by a third party which entitled such third party to purchase an approximate
6.99% ownership interest in Horseshoe Gaming from its largest shareholder, HGI,
for an exercise price of $510,000. Upon acquisition, Horseshoe Gaming 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 was recorded as a reduction in members'
equity in the first quarter of 1999.
Horseshoe Gaming has employment agreements and unit option agreements with
certain employees which contain put/call options whereby, upon termination of
employment, Horseshoe Gaming must, at the election of any such employee, and
may, at Horseshoe Gaming's election, purchase such employee's ownership interest
in Horseshoe
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Gaming for an amount equal to the fair market value of such interest as
determined by an independent appraisal or an arbitration process. As of March
31, 1999, the aggregate fair market value of all interests subject to such
put/call options, representing approximately 9.9% ownership of Horseshoe Gaming,
was $54.9 million based on an appraisal obtained by Horseshoe Gaming 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 us or in installments over a period not to exceed five years depending on the
aggregate purchase price. Five former employees of Horseshoe Gaming holding
ownership interests totaling approximately 7.2% have exercised their put/call
option and one employee, holding approximately 0.5% has agreed not to exercise
his put/call option until January 1, 2001.
In May 1999, we reached an agreement in principle with the five former
employees with aggregate ownership interests in Horseshoe Gaming of 7.2% on the
valuation of their ownership interests. The agreed-upon valuation of our company
for purposes of calculating the valuation of the five former employees'
ownership interests is $470 million if the Empress Merger is not consummated and
$500 million if the Empress Merger is consummated. In June 1999, the first
installment of approximately $11.5 million was paid to these five former
employees with the remaining amount to be paid over a period not to exceed five
years. The notes receivable from these employees were fully paid as a result of
this transaction. The effect of the change in the estimated value will be
reflected in the second quarter 1999 financial statements.
LOUISIANA REPURCHASE
In April 1999, we exercised our option to acquire the remaining 8.08%
limited partnership interest in HE not held by NGCP for total consideration of
up to $30.4 million, which included payments for a non-compete covenant,
consents and a release of claims. The consideration for the repurchase consisted
of cash, payables to the former limited partners and offsets against the
negative capital account balances of the former limited partners.
EMPRESS MERGER
On September 2, 1998, we entered into an Agreement and Plan of Merger, as
amended as of March 25, 1999, to acquire the operating subsidiaries of Empress
for an estimated $609.0 million, subject to adjustment, including assumption of
$150.0 million of Empress notes. We intend to use the funds in the secured
proceeds account and amounts available under the new credit facility in order to
consummate the Empress Merger. The transactions contemplated by the merger
agreement are subject to the approval of the Mississippi Gaming Commission, the
Louisiana Gaming Control Board, the Illinois Gaming Board and the Indiana Gaming
Commission. There can be no assurance that we
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will be successful in obtaining such approvals. In addition, the merger
agreement provides that each party has the right to terminate the agreement
under certain circumstances, which in some instances would allow Empress to
retain a $10.0 million down payment we made towards the purchase price as well
as receive other consideration not to exceed $3.0 million.
OTHER ITEMS
On October 13, 1998, we were 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.
During the second quarter of 1999, we recorded an additional $8.0 million
charge to adjust the carrying value to our revised estimate of the Queen of the
Red and equipments' net realizable value. This additional charge was made to
reflect the current market conditions for idle riverboats.
CERTAIN ACCOUNTING PRONOUNCEMENTS
During the first quarter of 1998, we adopted SFAS No. 130, Reporting
Comprehensive Income. There was no impact of such adoption on our 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 our
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 our systems (gaming or non-gaming) do not function, or fail to function
properly as a result of the century change, we would have to operate under
alternative procedures (some manual) until a proper resolution of the failure
can be achieved. We have not completed our assessment of our Year 2000 issues,
but have initiated a company-wide program to identify and address issues
associated with the ability of our hardware and software to properly recognize
the Year 2000 to avoid interruption of our operation as a result of the century
change on January 1, 2000. We have divided our Year 2000 compliance program into
three phases. As a part of the first phase of our Year 2000 compliance program,
we have conducted an internal review of our 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).
We are in the process of completing the second phase of our Year 2000
compliance program, which involves (1) the implementation of our existing
remediation plan to resolve our internal Year 2000 issues, and (2) the
identification of any potential year 2000 issues with our significant vendors
and suppliers. Material vendors and suppliers were sent questionnaires so that
their internal compliance could be outlined to us in a uniform and consistent
manner. The 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 our
compliance program is expected to be completed by July 31, 1999.
We will soon commence with the third and final phase of our Year 2000
compliance program which involves the (1) extensive testing of all systems for
any remaining Year
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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 ensure 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 us have been
identified to be not Year 2000 compliant. These systems will be required to be
upgraded to a current platform that is Year 2000 compliant. We are also
undertaking the installation of a Year 2000 compliant slot accounting software
product in Horseshoe Bossier City 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.
We presently believe that, with modifications to existing software and
converting to new software, the Year 2000 issue will not pose significant
operational problems for our 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 our
financial condition and results of operations. In addition, in the event that
any of our significant suppliers and other parties with which we have a material
relationship do not successfully and timely achieve Year 2000 compliance, our
business or operations could be adversely affected.
As of June 1, 1999, we had spent approximately $430,000 and estimate
additional costs of approximately $246,000 in connection with our Year 2000
compliance program. We plan to fund expenditures associated with Year 2000
compliance from working capital.
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QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is changes in our interest rate risk associated
with long term debt. To date, we have not held or issued derivative financial
instruments for trading purposes, and we do 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.
<TABLE>
<CAPTION>
MATURITY DATE
-------------------------------------------------------------- FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE(1)
------ -------- ---- ---- ---- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<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 our
publicly traded debt.
(2) The average interest rates were based on December 31, 1998, variable rates.
Actual rates in future periods could vary.
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BUSINESS
GENERAL
We are a leading, multi-jurisdictional gaming company with casinos in
Bossier City, Louisiana and Tunica County, Mississippi. Bossier City/Shreveport
and Tunica County are among the largest 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. In September 1998, we signed a
definitive agreement to acquire by merger the operating subsidiaries of Empress,
which owns and operates two casinos in the greater Chicago market, Empress
Joliet and Empress Hammond. The Empress Merger is subject, among other things,
to receipt of various regulatory and governmental approvals.
BOSSIER CITY OPERATIONS
MARKET
The Bossier City/Shreveport gaming market is the largest in the State of
Louisiana. Approximately 16.4 million people reside within 250 miles of
Horseshoe Bossier City, including 5.3 million within the Dallas/Fort Worth
metropolitan area, a primary market for Horseshoe Bossier City. The Louisiana
Gaming Control Board has granted 14 of the 15 statutorily authorized licenses,
including licenses to four gaming facilities currently operating in the Bossier
City/Shreveport market. Approval was recently granted to relocate a fifth
license to a new proposed facility to be operated in Shreveport. While the
Louisiana gaming regulations state that riverboat casinos must cruise, the
Bossier City/Shreveport casinos were granted a legislative exemption that allows
them to operate as dockside facilities and thereby provide 24 hour gaming.
HORSESHOE BOSSIER CITY
Horseshoe Bossier City has the largest market share of casino revenues and
gaming positions 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.
Horseshoe Bossier City is located on a new riverboat which was part of a
$204.4 million expansion completed in January 1998. This riverboat is larger,
wider and has higher ceilings than any other gaming vessel operating in this
market. The riverboat is also the only one in its market that provides an
escalator to facilitate access to each gaming floor. Before entering the gaming
areas, 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 our recent expansion, the riverboat contains all new furnishings
and equipment, including 1,343 new gaming machines, 58 table games and 11 poker
tables, representing an increase in total gaming positions of approximately 27%.
Also as part of the recent expansion, we constructed a new 25-story hotel,
making us the first casino operator in this market to open an on-site hotel. The
hotel building is the second tallest and most visible building in the area and,
with its prominent signage, serves as a beacon for approaching customers. The
hotel contains 606 deluxe rooms, meeting facilities, a health club and other
luxury hotel amenities. In addition, we have recently added a new
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entertainment facility that provides seating for 1,300 guests and have expanded
our parking structure to include 1,000 additional spaces.
TUNICA OPERATIONS
MARKET
The Tunica County, gaming 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. Mississippi gaming
regulations do not require riverboat casinos to cruise, thereby allowing them to
offer 24 hour gaming, and do not restrict the amount of space dedicated to
gaming.
HORSESHOE TUNICA
Horseshoe Tunica generates the highest casino revenue among its
competitors. The facility is in the central and we believe most desirable
location of the 70-acre, three property Casino Center complex.
As part of our $109.8 million expansion completed in December 1997, we
increased our gaming space by 50% to 45,000 square feet, increased the number of
gaming machines by 51% to 1,547, and increased the number of table games and
poker tables by 55% to 76. We also added a 14-story hotel tower with 312 deluxe
rooms, giving us a total of 507 deluxe rooms, a health club, meeting room
facilities, and a 1,100-space, four-level parking garage. In addition, we opened
a new 1,000-seat, themed entertainment facility that has hosted renowned musical
talent such as Julio Iglesias, Vince Gill, Roger Daltrey and Ringo Starr. We
also added or renovated several full-service, themed gourmet restaurants and
retail facilities.
TRADEMARK
Horseshoe License Company issued perpetual licenses to Horseshoe Club and
Horseshoe Gaming. Horseshoe Gaming received a license to use the tradename
"Horseshoe" and various other related trademarks and tradenames in the gaming
and related businesses for all jurisdictions other than Nevada and Horseshoe
Club received a license to use the tradename "Horseshoe" and various other
related trademarks and tradenames in the gaming and related businesses in
Nevada.
EMPRESS OPERATIONS
On September 2, 1998, we agreed to acquire Empress, which built the first
Chicago market casino and has established itself as a market leader during its
nearly seven years of operations. The Empress Merger will provide us with access
to the Chicago casino market, allowing us to diversify our operations beyond our
southern U.S. markets.
CHICAGO MARKET
The Chicago market, which encompasses portions of both Illinois and
Indiana, consists of approximately 11.6 million people within a radius of 100
miles from downtown Chicago. The Illinois Riverboat Act authorizes ten owner's
licenses for riverboat gaming operations, four of which, including Empress
Joliet, serve the Chicago metropolitan area. While all of the ten authorized
gaming licenses in Illinois have been issued, one has been suspended, and there
have been indications that this license may be relocated to the Chicago area,
which could have a material adverse effect on Empress' operations. Current
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Indiana gaming legislation authorizes a total of five licenses to operate
riverboat casinos in northern Indiana on Lake Michigan, all of which have been
issued to casinos that are currently operating, including Empress Hammond.
EMPRESS JOLIET
Empress Joliet is located in one of the fastest growing counties in the
Chicago market. The facility features two luxury-appointed vessels and an
approximately 150,000 square foot Egyptian-themed pavilion featuring
award-winning dining facilities and a 400-seat banquet room. Empress Joliet is
supported by a three-story hotel with 80 rooms, 17 junior suites and five
king-size suites and an 80-space recreational vehicle park. Empress Joliet
provides surface parking for 2,350 cars.
EMPRESS HAMMOND
Empress Hammond, the closest casino to downtown Chicago, was recently
expanded to add an additional floor to its casino. As a result, gaming space was
increased by 25%, or 7,500 square feet, with 335 new gaming machines and nine
additional table games. Empress Hammond includes an approximately 125,000-square
foot mythologically-themed pavilion featuring waterfalls, lounges, dining
facilities and a 150-seat banquet room. Empress Hammond provides parking for
1,000 cars in a multi-story parking structure and offers 1,300 additional
surface parking spaces.
COMPETITION
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. Some of our
competitors are undergoing renovation or expansion, including the construction
of a 514-room hotel, and others may do so in the future, which may have an
adverse effect on our operations. 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.
While new competition may adversely affect Horseshoe Bossier City's revenues and
operating income in the near term, we believe the expansion of Horseshoe Bossier
City and the potential addition of two riverboat casinos and slot machines at
the racetrack in the Bossier City/Shreveport market will increase the size and
scope of the overall gaming market, mitigating in the long term, at least in
part, the potential adverse impact on operations which initially may be felt.
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.
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We believe that the Bossier City/Shreveport riverboats have an operational
advantage over the other Louisiana riverboats because the Bossier
City/Shreveport riverboats do not have to cruise in minimum 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. Horseshoe Bossier City remains dockside,
allowing passengers to enter and exit as they please and enabling us to conduct
24-hour a day continuous gaming operations.
Horseshoe Tunica competes with eight other casinos in the competitive
Tunica County, Mississippi market; Gold Strike, Sheraton, Harrah's, Sam's Town,
Hollywood Casino, Fitzgeralds, Bally's and Grand. There are no legislative
limitations on the number of gaming licenses which may be issued in Mississippi,
including in Tunica County, and additional competition could adversely affect
Horseshoe Tunica's revenues and operating income. Competition in Tunica County
is limited by the availability of legal and accessible sites on the Mississippi
River. Some of our competitors are undergoing renovation or expansion and others
may do so in the future. Such expansion may have an adverse effect on our
operations.
Empress primarily competes with seven casinos, four of which are located on
Lake Michigan in Indiana and three of which are located in Illinois. The seven
casinos Empress competes with are: Trump Casino and Majestic Star located in
Gary, Indiana; Harrah's Casino located in East Chicago, Indiana; Blue Chip
Casino located in Michigan City, Indiana; Harrah's Casino located in Joliet,
Illinois; Hollywood Casino located in Aurora, Illinois; and Grand Victoria
Casino located in Elgin, Illinois. In addition, in May 1999, the Illinois
legislature enacted amendments to the Illinois Riverboat Gambling Act which
could result in one of the ten state-authorized licenses for Illinois being
relocated to the Chicago area, which could have a material adverse effect on
Empress' operations. This legislation is expected to be signed by the Governor
of Illinois. Certain of Empress' competitors are larger and have significantly
greater financial and other resources than Empress.
EMPLOYEES
As of June 1, 1999, we employed 5,260 persons of which 2,445 are employed
at Horseshoe Tunica, 2,790 are employed at Horseshoe Bossier City and 25 are
employed in our corporate office. At such date, none of our employees were
covered by collective bargaining agreements.
We believe that our relationship with our employees is good. We have never
experienced a work stoppage due to a labor dispute and we are not aware of any
threatened labor activity.
PROPERTIES
We own and operate casinos in Bossier City, Louisiana and Tunica County,
Mississippi. All of our real property and casinos are subject to first priority
liens securing Horseshoe Gaming's existing credit facility and, following the
Empress Merger, the new credit facility, and second priority liens securing
Horseshoe Gaming's senior notes. We also lease space in Las Vegas, Nevada and
Memphis, Tennessee where we maintain executive offices.
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HORSESHOE BOSSIER CITY
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 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 hotel tower and a 2,100-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, we recently
added a new entertainment facility that provides seating for 1,300 guests.
The entire facility has recently been renovated and expanded. The newly
expanded 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.
HORSESHOE TUNICA
Horseshoe Tunica is located in Tunica County, Mississippi at Casino Center,
a 70-acre three property complex. In December 1997, we completed the expansion
and renovation of Horseshoe Tunica and increased the overall size to
approximately 327,000 square feet from 162,000 square feet.
The 45,000 square-foot gaming area comprises approximately contains 1,547
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. Horseshoe Tunica has also added 312 deluxe hotel rooms 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 there are approximately 4,000
lighted parking spaces provided in the Casino Center complex. The facility
includes administrative space and over 30,000 square feet of entertainment
space, featuring a 1,000-seat entertainment venue connected to the casino and
hotel.
LEGAL PROCEEDINGS
We are, from time to time, during the normal course of operating our
business, subject to various litigation claims and legal disputes. In our
opinion, none is expected to have a material adverse impact on our operations;
however, no assurance can be given that an adverse determination of any claim or
dispute would not have an adverse impact on our operations during any given
period.
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REGULATORY MATTERS
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 our
existing jurisdictions, Mississippi and Louisiana, and in Empress'
jurisdictions, Indiana and Illinois, will be required with respect to some or
all of the following: (1) the Ownership Transactions; (2) the terms and issuance
of the notes and the terms of the other Refinancing Transactions; (3) the Merger
Transactions; and (4) the Internal Consolidation. There can be no assurance that
we will receive all of the necessary approvals to consummate these transactions.
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, or 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. 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.
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. Fees to the State of Louisiana
for conducting gaming activities on a riverboat include (1) $50,000 per
riverboat for the first year of operation and $100,000 per year per riverboat
thereafter plus (2) 18 1/2% of net gaming proceeds. The city of Bossier City
also imposes a 3.2% tax on gaming revenue plus an annual fee of $700,000.
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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.
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 Bossier City and the Isle of Capri Casino in
Bossier City commenced 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 Bossier City
separately settled with the Bossier Police Jury, and the lawsuit was dismissed
as it relates to Horseshoe Bossier City, but not Isle of Capri Casino, and the
Bossier Police Jury. As part of the settlement, we agreed to pay a 1% tax on our
gross casino revenues to Bossier Parish with a minimum annual payment of
$1,500,000, regardless of actual revenue. Under the terms of the settlement, we
have the right to receive a credit against gross gaming tax for the amount of
increased property taxes assessed against our property in Bossier Parish
resulting from increased assessments attributable to our major expansion
project. Such credit may be taken up to a maximum of 80% of the tax on casino
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.
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: (1) 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; (2) 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; (3) 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; (4) the applicant submits a detailed plan
of design of the riverboat in its application for a license; (5) the applicant
designates the docking facilities to be used by the riverboat; (6) the applicant
shows adequate financial ability to construct
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and maintain a riverboat; and (7) the applicant has a good faith plan to
recruit, train and upgrade minorities in all employment classifications.
Certain persons affiliated with a riverboat gaming licensee, including
directors and officers of the licensee, directors and officers of any holding
company of the licensee involved in gaming operations, persons holding 5% or
greater interests in the licensee, and persons exercising influence over a
licensee, or 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: (1)
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; (2) each roundtrip riverboat cruise may not be less than
three nor more than eight hours in duration, subject to specified exceptions;
(3) agents of the Louisiana Enforcement Division and the Louisiana Gaming
Control Board are permitted on board at any time during gaming operations; (4)
gaming machines, equipment and supplies may only be purchased or leased from
permitted suppliers; (5) gaming may only take place in the designated gaming
area while the riverboat is upon a designated river or waterway; (6) 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; (7) wagers may be
received only from a person present on a licensed riverboat; (8) persons under
21 are not permitted in designated gaming areas; (9) except for slot machine
play, wagers may be made only with tokens, chips or electronic cards purchased
from the licensee aboard a riverboat; (10) 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; (11) licensees must have
adequate protection and indemnity insurance; (12) licensees must have all
necessary Federal and state licenses, certificates and other regulatory
approvals prior to operating a riverboat; and (13) 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. In 1993, the Louisiana State Police denied an application made by
HE, our subsidiary that operates Horseshoe Bossier City, for a gaming license to
operate a casino. HE appealed the denial to the Louisiana Riverboat Gaming
Commission, which overturned the denial. HE then 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, or a Transfer, by any person
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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. We are an Affiliated Gaming Person of HE.
We and HE all required disclosures to the Louisiana Gaming Control Board and the
Louisiana Enforcement Division. Any other advances by us 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.
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, or the Mississippi Act, and our 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: (1) prevent unsavory or unsuitable
persons from having any direct or indirect involvement with gaming at any time
or in any capacity; (2) establish and maintain responsible accounting practices
and procedures; (3) 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; (4) prevent
cheating and fraudulent practices; (5) provide a source of state and local
revenues through taxation and licensing fees; and (6) 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 April 30, 1999, 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,
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Warren and Washington counties. The law permits unlimited stakes gaming on
permanently moored vessels on a 24-hour basis and does not restrict the
percentage of space which may be utilized for gaming. There are no limitations
on the number of gaming licenses which may be issued in Mississippi. The legal
age for gaming in Mississippi is 21.
Under Mississippi law, gaming vessels in Tunica County must be located on
the Mississippi River or on navigable waters emptying into the Mississippi
River. On May 29, 1993, the Mississippi Gaming Commission granted approval for
the site of Horseshoe Tunica. On October 13, 1994, Horseshoe Tunica received a
gaming operator's license from the Mississippi Gaming Commission. At the same
meeting, certain key principals of RPG 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.
We 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 us 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.
Each of 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 our activities, and each of the officers and
directors and certain employees of the general partner of RPG, must be found
suitable therefor, and may be required to be licensed, by the Mississippi Gaming
Commission. The finding of suitability is comparable to licensing, and both
require submission of detailed personal financial information followed by a
thorough investigation. In addition, any individual who is found to have a
material relationship to, or material involvement with, us or RPG may be
required to be investigated in order to be found suitable or to be licensed as a
business associate of ours or RPG. Key employees, controlling persons or others
who exercise significant influence upon our or RPG's management or affairs 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 us
or RPG, we or the general partner of RPG would have to suspend, dismiss and
sever all relationships with such person. We 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 us 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
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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 us 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. We are subject to
disciplinary action if, after we receive notice that a person is unsuitable to
be an owner of or to have any other relationship with us, we or RPG (1) pay the
unsuitable persons any dividends or interest upon any of our securities or any
payments or distribution of any kind whatsoever, (2) recognize the exercise,
directly or indirectly, of any voting rights of our securities by the unsuitable
person, or (3) pay 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 us or RPG, as applicable, and we or RPG must purchase the
securities so offered for cash at fair market value within 10 days.
We 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. We and RPG also are
required to render maximum assistance in determining the identity of the
beneficial owner. We may be required to disclose to the Mississippi Gaming
Commission, upon request, the identities of the holders of certain of our
indebtedness. In addition, the Mississippi Gaming Commission under the
Mississippi Act may, in its discretion, (1) require holders of debt securities
to file applications, (2) investigate such holders, and (3) 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 us or RPG may not occur
without the prior approval of the Mississippi Gaming Commission. Mississippi law
prohibits us from making a public offering or private placement of our
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 our or RPG's
securities 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,
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through the power to regulate licensees, has the power to impose additional
restrictions on the holders of our or RPG's securities at any time.
Neither we 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 us or RPG.
The licenses obtained by us 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 us
or RPG for any cause deemed reasonable by such agency. Substantial fines for
each violation of gaming laws or regulations may be levied against us or RPG in
Mississippi. A violation under any gaming license held by us or RPG may be
deemed a violation of all the other licenses held by us or RPG. Suspension or
revocation of any of the foregoing licenses or of the approval of us or RPG
would have a material adverse effect upon our business.
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 (1) the percentage of the gross casino
revenues received by the casino operation, (2) the number of slot machines
operated by the casino, (3) the number of table games operated by the casino or
(4) 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 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. Horseshoe Tunica 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
developments and existing casino developments that are not in operation at the
time of their acquisition or purchase, and therefore does not apply to Horseshoe
Tunica. In any event, Horseshoe Tunica would comply with such requirements.
The sale of alcoholic beverages, including beer and wine, at Horseshoe
Tunica is subject to licensing, control and regulation by the Alcoholic Beverage
Control Division, or the ABC, of the Mississippi State Tax Commission. The ABC
requires that all equity
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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 Horseshoe Tunica.
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, a request was filed with the Secretary of State on March
22, 1999 to place on the November 2000 statewide ballot a voter initiative to
ban gaming in the state. On May 6, 1999, the local circuit court found the
wording of the initiative inadequate, and declared the initiative measure
unconstitutional. The sponsor has appealed the local circuit court's decision on
the initiative to the Mississippi Supreme Court, where the matter awaits
resolution. These events follow two unsuccessful attempts by the same sponsor in
1998 to place substantially similar initiative measures on the November 1999
statewide ballot. Even if the Supreme Court should affirm the circuit court's
ruling, it is possible that the gaming ban initiative could be re-worded and
meet the requirements for placement on the November 1999 ballot or the ballot of
a later election. 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
Mississippi. 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 our gaming operations in
Mississippi.
INDIANA GAMING REGULATION
The Indiana Riverboat Act authorizes the issuance of up to 11 riverboat
gaming licenses on waterways located in Indiana counties which are contiguous to
Lake Michigan, the Ohio River or Patoka Lake. The Indiana Gaming Commission has
not considered applicants for the eleventh license since the Patoka Lake site
has been determined by the U.S. Army Corps of Engineers to be unsuitable for a
casino vessel project. The Indiana Riverboat Act strictly regulates the
facilities, persons, associations and practices related to gaming operations
pursuant to the police powers of the State of Indiana, including comprehensive
law enforcement provisions. The Indiana Riverboat Act vests the Indiana
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Gaming Commission with the power and duties of administering, regulating and
enforcing the system of riverboat gaming in the State of Indiana. The Indiana
Gaming Commission's jurisdiction extends to every person, association,
corporation, partnership and trust involved in riverboat gaming operations in
the State of Indiana.
The Indiana Riverboat Act requires the owner of a riverboat gaming
operation to hold an owner's license issued by the Indiana Gaming Commission.
Each license granted entitles the licensee to own and operate one riverboat and
gaming equipment as part of the gaming operation. A licensee may own no more
than a 10% interest in any other owner's license under the Indiana Riverboat
Act.
Each owner's license runs for a period of five years. Thereafter, the
license is subject to renewal on an annual basis upon a determination by the
Indiana Gaming Commission that the licensee continues to be eligible for an
owner's license pursuant to the Indiana Riverboat Act and the rules and
regulations adopted thereunder. A licensed owner undergoes a complete
investigation every three years. If for any reason the license is terminated,
the assets of the riverboat gambling operation must be secured and cannot be
disposed of without the approval of the Indiana Gaming Commission. A licensed
owner may apply for and may hold other licenses that are necessary for the
operation of a riverboat, including licenses to sell alcoholic beverages, a
license to prepare and serve food and any other necessary license. Furthermore,
the Indiana Riverboat Act requires that officers, directors and employees of a
gaming operation and suppliers of gaming equipment, devices, and supplies and
certain other suppliers be licensed.
Applicants for licensure must submit comprehensive application and personal
disclosure forms and undergo an exhaustive background investigation prior to the
issuance of a license. The applicant must also disclose the identity of every
shareholder or participant of the applicant and provide specific information
with respect to certain shareholders holding significant interests, 5% or
greater, in the applicant. The Indiana Gaming Commission has the authority to
request specific information on any shareholder.
A riverboat owner licensee or any other person may not lease, hypothecate,
borrow money against or loan money against an owner's riverboat gaming license.
An ownership interest in an owner's riverboat gaming license may only be
transferred in accordance with the regulations promulgated under the Indiana
Riverboat Act.
The Indiana Riverboat Act does not limit the maximum bet or per patron
loss. Minimum and maximum wagers on games are set by the licensee. Wagering may
not be conducted with money or other negotiable currency. No person under the
age of 21 is permitted to wager, and wagers may only be taken from a person
present on a licensed riverboat.
Riverboats operating in Indiana must (1) have a valid certificate of
inspection from the U.S. Coast Guard to carry at least 500 passengers; and (2)
be at least 150 feet long. Any riverboat that operates on the Ohio River must
replicate, as nearly as possible, historic Indiana steamboat passenger vessels
of the nineteenth century. Riverboats operating on Lake Michigan need not meet
this requirement.
Gaming sessions are generally required to be at least two hours and are
limited to a maximum duration of four hours. No gaming may be conducted while
the boat is docked, except (1) for 30-minute time periods at the beginning and
end of each cruise while the passengers are embarking and disembarking (total
gaming time is limited to four hours, however, including the pre- and
post-docking periods); and (2) when weather or water conditions prevent the boat
from cruising. The Indiana Gaming Commission may grant
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extended cruise hours in its discretion. If the master of the riverboat
reasonably determines and certifies in writing that specific weather conditions
or water conditions present a danger to the riverboat and the riverboat's
passengers and crew, the riverboat may remain docked and gaming may take place
until (1) the master determines that the conditions have sufficiently diminished
for the riverboat to safely proceed; or (2) the duration of the authorized
excursion has expired.
After consultation with the U.S. Army Corps of Engineers, the Indiana
Gaming Commission may determine the available navigable waterways that are
suitable for the operation of riverboats under the Indiana Riverboat Act. If the
U.S. Army Corps of Engineers rescinds an approval for the operation of
riverboats on a waterway, a license issued under the Indiana Riverboat Act is
void and the holder may not conduct or continue gaming operations under the
Indiana Riverboat Act. The Indiana Gaming Commission requires employees working
on a riverboat to have a valid merchant marine document from the U.S. Coast
Guard.
The Indiana Riverboat Act imposes a 20% wagering tax on adjusted gross
receipts from gaming. The tax imposed is to be paid by the licensed owner to the
Indiana Department of State Revenue before the close of the business day
following the day when the wagers are made. The Indiana Riverboat Act also
requires that licensees pay a $3.00 admission tax for each person admitted to a
gaming excursion. A riverboat license may be suspended for failure to pay such
tax as required pursuant to the Indiana Riverboat Act. Riverboats are assessed
for property tax purposes as real property and are taxed at rates determined by
local taxing authorities. All Indiana state excise taxes, use taxes and gross
retail taxes apply to sales on a riverboat.
The Indiana Gaming Commission may subject a licensee to fines, suspension
or revocation of its license for any act that is in violation of the Indiana
Riverboat Act, the regulations of the Indiana Gaming Commission, or for any
other fraudulent act. In addition, the Indiana Gaming Commission may revoke an
owner's license if the licensee has not begun regular riverboat excursions prior
to the end of the twelve month period following receipt of a license from the
Indiana Gaming Commission or if the Indiana Gaming Commission determines that
the revocation of the license is in the best interests of the State of Indiana.
A holder of a gaming license is required to post bond with the Indiana Gaming
Commission in an amount that the Indiana Gaming Commission determines will
adequately reflect the amount that a local community will expend for
infrastructure and other facilities associated with a riverboat operation.
The Indiana Riverboat Act places special emphasis upon minority and women's
business enterprise participation in the riverboat industry. Any person issued a
riverboat owner's license must establish goals of expending at least 10% of the
total dollar value of the licensee's contracts for goods and services with
minority business enterprises and 5% of the total dollar value of the licensee's
contracts for goods and services with women's business enterprises.
An institutional investor which acquires 5% or more of any class of voting
securities of a holding company of a licensee is required to notify the Indiana
Gaming Commission and to provide additional information, and may be subject to a
finding of suitability. A person who acquires 5% or more of any class of voting
securities of a holding company of a licensee is required to apply to the
Indiana Gaming Commission for a finding of suitability.
A riverboat owner licensee may not enter into or perform any contract or
transaction in which it transfers or receives consideration which is not
commercially reasonable or
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which does not reflect the fair market value of the goods and services rendered
or received. All contracts are subject to disapproval by the Indiana Gaming
Commission. A riverboat owner licensee or an affiliate may not enter into a debt
transaction of $1.0 million or more without the prior approval of the Indiana
Gaming Commission, including these notes and the new credit facility. The
Indiana Gaming Commission has a rule requiring the reporting of certain currency
transactions, which is similar to that required by Federal authorities. See
"Other Applicable Non-Gaming Regulatory Matters" below.
The Indiana Riverboat Act prohibits contributions to a candidate for a
state, legislative, or local office, or to a candidate's committee or to a
regular party committee by the holder of a riverboat owner's license or a
supplier's license, by an officer of a licensee or by an officer of a person
that holds at least a 1% interest in the licensee. The Indiana Gaming Commission
has promulgated a rule requiring quarterly reporting by the holder of a
riverboat owner's license or a supplier's license or officers of the licensee,
officers of persons that hold at least a 1% interest in the licensee, and of
persons who directly or indirectly own a 1% interest in the licensee.
Legislation is pending in the current session of the Indiana General Assembly
which, if enacted, would impose additional reporting requirements and
restrictions on persons with an interest in a license.
The Indiana Gaming Commission adopted a rule which prohibits a distribution
(except to allow payment of taxes) by a riverboat licensee to its partners,
shareholders, itself, or any affiliated entity, if the distribution would impair
the financial viability of the riverboat gaming operation. The Indiana Gaming
Commission has adopted a rule which requires riverboat licensees to maintain, on
a quarterly basis, a cash reserve in the amount of the actual payout for three
days, and the cash reserve would include cash in the casino cage, cash in a bank
account in Indiana, or cash equivalents not committed or obligated.
The Governor of Indiana has appointed a Gaming Impact Study Commission
chaired by the Attorney General to review the impact of all forms of gaming in
Indiana and to issue its final report by December 31, 1999.
A lawsuit was filed on October 25, 1996 in Harrison County, Indiana by
three individuals residing in counties abutting the Ohio River against the State
of Indiana, the 108th Indiana General assembly, the Indiana Gaming Commission
and individual members of the Indiana Gaming Commission. The lawsuit challenges
the constitutionality of the Indiana Riverboat Act on the grounds that (1) it
allegedly creates an unequal privilege because under the Indiana Riverboat Act
"citizens opposed to riverboat gambling must win several elections to ensure
riverboat gambling is not allowed in their county" but "citizens who support
riverboat gambling need only win once to entrench riverboat gambling
indefinitely into a county"; and (2) it was enacted as a provision attached to a
state budget bill allegedly in violation of an Indiana constitutional provision
requiring legislative acts to be confined to one subject and to matters properly
connected with the subject. The defendants have filed an answer to the complaint
generally denying the allegations. If the Indiana Riverboat Act ultimately were
held unconstitutional and if, as a result thereof, Empress Hammond were not
permitted to operate, it would, absent timely corrective legislation, have a
material adverse effect on us if the Empress Merger is consummated.
ILLINOIS GAMING REGULATION
The Illinois Riverboat Gambling Act authorizes the issuance of up to ten
riverboat gaming licenses by the five-member Illinois Gaming Board on navigable
streams within or forming a boundary of Illinois, except for Lake Michigan and
any waterway in Cook
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County, which includes the City of Chicago. The Illinois Riverboat Gambling Act
regulates the facilities, persons, associations and practices related to
riverboat gaming operations. The Illinois Riverboat Gambling Act grants the
Illinois Gaming Board specific powers and duties, and all other powers necessary
and proper to fully and effectively execute the Illinois Riverboat Gambling Act
for the purpose of administering, regulating and enforcing the system of
riverboat gaming. The Illinois Gaming Board's jurisdiction extends to every
person, association, corporation, partnership and trust involved in riverboat
gaming operations in Illinois.
The Illinois Riverboat Gambling Act requires the owner of a riverboat
gaming operation to hold an owner's license issued by the Illinois Gaming Board.
The Illinois Gaming Board is authorized to issue ten owner's licenses statewide.
Each owner's license permits up to two boats as a part of a single riverboat
gaming operation. No entity may be licensed as the owner of more than one
riverboat gaming operation in Illinois, although a licensed owner may hold up to
10% of a second riverboat gaming operation in Illinois.
The Illinois Riverboat Gambling Act restricts the granting of certain of
the ten owner's licenses by location. Four licenses are reserved for operators
docking at sites on the Mississippi River, one for an operator docking at a site
on the Illinois River south of Marshall County and one for an operator docking
at a site on the Des Plaines River in Will County. The remaining four owner's
licenses are not restricted as to location. In addition to the ten owner's
licenses which are authorized under the Illinois Riverboat Gambling Act, the
Illinois Gaming Board may issue special event licenses allowing persons who are
not otherwise licensed to conduct riverboat gaming and to conduct such gaming on
a specified date or series of dates. Riverboat gaming under such a license may
take place on a riverboat not normally used for riverboat gaming.
An owner's license is issued for an initial period of three years and must
be renewed annually thereafter. An owner's license is eligible for renewal upon
payment of the applicable fee and a determination by the Illinois Gaming Board
that the licensee continues to meet all of the requirements of the Illinois
Riverboat Gambling Act. The Illinois Gaming Board also requires that officers,
directors, shareholders and employees of a gaming operation and suppliers of
gaming equipment, devices and supplies and certain other suppliers be licensed.
Licenses issued by the Illinois Gaming Board may not be transferred to another
person or entity. All licensees must maintain their suitability for licensure
and have a continuing duty to disclose any material changes in information
provided to the Illinois Gaming Board.
Applicants for and holders of an owner's license are required to obtain
formal approval from the Illinois Gaming Board for changes in: (1) key
personnel, including officers, directors, managing agents, or holders of a 5% or
greater ownership interest in the business entity; (2) its organizational form;
(3) the equity and debt capitalization of the entity; (4) investors and/or debt
holders; (5) sources of funds; (6) the applicant's economic development plan;
(7) riverboat capacity or significant design changes; (8) the number of gaming
positions; (9) anticipated economic impact; or (10) oral or written agreements
relating to the acquisition or disposition of property of a value greater than
$1.0 million. A holder of an owner's license is allowed to make distributions to
its partners, stockholders or itself only to the extent that such distribution
would not impair the financial viability of the gaming operation. Factors to be
considered by the licensee include, but are not limited to, the following: (1)
working capital requirements, (2) debt service requirements, (3) requirements
for repairs and maintenance and (4) capital expenditure requirements.
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The Illinois Gaming Board will require a personal disclosure from any
person or entity (unless such person or entity qualifies as an institutional
investor) who or which, individually or in association with others, acquires,
directly or indirectly, beneficial ownership of more than 5% of any class of
voting securities or non-voting securities convertible into voting securities of
a publicly traded corporation which holds an ownership interest or a beneficial
interest in the holder of an owner's license. If the Illinois Gaming Board
denies an application for such an acquisition, commencing as of the date the
Illinois Gaming Board issues a notice that it denies such application, it will
be unlawful for such applicant to receive any dividends or interest on his or
its securities, to exercise, directly or indirectly, any right conferred by such
securities or to receive any remuneration in any form from any person or entity
holding any license under the Illinois Riverboat Gambling Act for services
rendered or otherwise. If the Illinois Gaming Board denies an application for
such a transfer and if no hearing is requested or if the Illinois Gaming Board
issues a final order of disqualification, the holder of the affected owner's
license shall purchase all of the disqualified person's or entity's securities
at the lesser of either the market price or the purchase price of such
securities. An ownership interest in a holder of an owner's license may be
transferred or pledged as collateral only with the consent of the Illinois
Gaming Board.
The Illinois Riverboat Gambling Act does not limit the maximum bet or per
patron loss, and licensees may set any maximum or minimum limits on wagering. No
person under the age of 21 is permitted to wager in Illinois.
Under the Illinois Riverboat Gambling Act, vessels must have the capacity
to hold a minimum of 500 persons if operating on the Mississippi River or the
Illinois River south of Marshall County, and a minimum of 400 persons on any
other waterway.
The number of gaming positions is limited to a maximum of 1,200 per
license. All riverboats must be accessible to disabled persons, must be either a
replica of a 19th century Illinois riverboat or be of a casino cruise ship
design, and must comply with applicable Federal and state laws, including, but
not limited to, U.S. Coast Guard regulations.
Gaming sessions are generally limited to a maximum duration of four hours.
No gaming may be conducted while the boat is docked, except (1) for 30-minute
time periods at the beginning and end of each cruise while the passengers are
embarking and disembarking, total gaming time, however, including such
embarkation and disembarkation, is limited to a maximum of four hours, and (2)
when weather or mechanical problems prevent the boat from cruising. If a
riverboat captain reasonably determines that it is unsafe to transport
passengers on the waterway due to inclement weather or that the riverboat has
been rendered temporarily inoperable by mechanical or structural difficulties or
river icing, the captain must either not leave the dock or immediately return to
it in which event a gaming excursion may commence or continue while the
gangplank or its equivalent is raised and remains raised. Special event extended
cruises may be authorized by the Illinois Gaming Board.
A $2.00 per person admission tax is imposed on the owner of a riverboat
operation. Prior to January 1, 1998, the Illinois Riverboat Gambling Act imposed
a 20% tax on all adjusted gross receipts on each Illinois gaming vessel.
Effective on January 1, 1998, the Illinois Riverboat Gambling Act was amended to
impose the following graduated wagering tax rates on adjusted gross receipts
from gaming: (1) 15% of the calendar year adjusted gross receipts up to and
including $25.0 million; (2) 20% of the calendar year adjusted gross receipts in
excess of $25.0 million but not exceeding $50.0 million; (3) 25% of the
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calendar year adjusted gross receipts in excess of $50.0 million but not
exceeding $75.0 million; (4) 30% of the calendar year adjusted gross receipts in
excess of $75.0 million but not exceeding $100.0 million; and (5) 35% of the
calendar year adjusted gross receipts in excess of $100.0 million. The licensee
is required to wire transfer all such gaming tax payments to the Illinois Gaming
Board.
The Illinois Gaming Board is authorized to conduct investigations into the
conduct of gaming and into alleged violations of the Illinois Riverboat Gambling
Act and to take such disciplinary and enforcement action as it may deem
necessary and proper. Employees and agents of the Illinois Gaming Board have
access to and may inspect any facilities relating to riverboat gaming operations
at all times.
A holder of any license is subject to the imposition of penalties and
fines, suspension or revocation of such licence, or other action for any act or
failure to act by such holder or his or her agents or employees, that is
injurious to the public health, safety, morals, good order and general welfare
of the people of the State of Illinois, or that would discredit or tend to
discredit the Illinois gaming industry or the State of Illinois. Any riverboat
operation not conducted in compliance with the Illinois Riverboat Gambling Act
may constitute an illegal gaming place and consequently may be subject to
criminal penalties, which penalties include possible seizure, confiscation and
destruction of illegal gaming devices and seizure and sale of riverboats and
dock facilities to pay any unsatisfied judgment that may be recovered and any
unsatisfied fine that may be levied. The Illinois Riverboat Gambling Act also
provides for civil penalties, equal to the amount of gross receipts derived from
wagering on gaming, whether unauthorized or authorized, conducted on the day of
any violation. The Illinois Gaming Board may revoke or suspend licenses, as the
Illinois Gaming Board may see fit and in compliance with applicable laws of the
State of Illinois regarding administrative procedures, and may suspend an
owner's license, without notice or hearing, upon a determination that the safety
or health of patrons or employees is jeopardized by continuing a riverboat's
operation. The suspension may remain in effect until the Illinois Gaming Board
determines that the cause for suspension has been abated and it may revoke the
owner's license upon a determination that the owner has not made satisfactory
progress toward abating the hazard.
The Illinois Gaming Board may waive any licensing requirement or procedure
provided by rule if it determines that such waiver is in the best interests of
the public and the gaming industry.
In May 1999, the Illinois legislature enacted amendments to the Illinois
Riverboat Gambling Act which, if signed by the Governor, will change the statute
in several respects. The May 1999 amendments, among other things, provide for
the following: 1) the requirement that riverboat gambling authorized by the
Illinois Riverboat Gambling Act take place on a navigable stream is eliminated
and is replaced by a provision that such gambling may take place on any water
within the State of Illinois or any water other than Lake Michigan which
constitutes a boundary of the State of Illinois; 2) the prohibition on having
riverboat gambling in a county having a population in excess of 3,000,000 is
eliminated; 3) the requirement that riverboats conduct excursion cruises is
eliminated and the continuous ingress and egress of passengers for the purpose
of gambling is permitted; 4) the limitation on the holder of an owner license
owning more than a 10% interest in an entity having another owners' license is
eliminated; 5) for owners' licenses renewed after May 1, 1998 the renewal shall
be for a period of four years, unless the Illinois Gaming Board sets a shorter
period; 6) three of the licenses, rather than four, shall authorize riverboat
gambling on the Mississippi River; 7) an owners' licensee that was not
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conducting riverboat gambling on January 1, 1998 may apply to the Illinois
Gaming Board for renewal and approval of relocation to a new home dock and the
Illinois Gaming Board shall grant the application and approval upon receipt by
the licensee of approval from the new municipality or county, as the case may
be, in which the licensee wishes to relocate and any licensee that relocates its
home dock pursuant to this Section shall attain a level of at least 20% minority
or female ownership within a time period prescribed by the Illinois Gaming
Board. It is expected the Governor of Illinois will sign this legislation.
OTHER APPLICABLE NON-GAMING REGULATORY MATTERS
We have not made, and do not anticipate making, material expenditures with
respect to Environmental Laws. However, the coverage and attendant compliance
costs associated with such laws may result in future additional costs to our
operations. For example, in 1990 Congress enacted the Oil Pollution Act to
regulate response actions and liability related to oil spills. In that regard,
we and Empress are required to meet certain financial responsibility
requirements. We and Empress have met these requirements either through
self-insurance or third-party insurance and do not believe that the costs of
complying with these regulations will be material. We could, however, incur
material liability in the event of a major oil spill that exceeds the uninsured
amounts.
We have reviewed environmental assessments, in some cases including soil
and groundwater testing, relating to certain of our and the Empress properties.
As a result, we are aware that there may be soil and groundwater contamination
present on some of these properties due to past industrial activities. In
connection with the construction of a highway overpass to service our Hammond
riverboat gaming facility, Empress agreed to clean up contamination discovered
on property owned by the City of Hammond during the course of construction.
Empress also agreed, subject to certain limitations, to indemnify the City of
Hammond for costs related to any other future cleanup required at the property
as a result of historical conditions. The construction of the overpass and
associated cleanup efforts were completed in 1996. We do not believe that the
contamination discovered during the investigations requires further
investigation or cleanup under current Environmental Laws. It is possible,
however, that such laws will become more stringent in the future or that
additional contamination on the property will be discovered and will need to be
cleaned up. Pursuant to Empress' agreement with the City of Hammond, which we
are assuming pursuant to the Empress Merger if the Empress Merger is
consummated, we could be obligated to undertake any such cleanup. Therefore, we
cannot assure you that we will not be required to make material expenditures
with respect to such matters.
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, or 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.
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As a condition to its license in Indiana, Empress Hammond made various
financial and other commitments to the City of Hammond, Indiana and other
Indiana governmental bodies pursuant to a Development Agreement. These
commitments will continue following the Empress Merger. As of December 31, 1998,
approximately $23.6 million of such commitments remained outstanding primarily
for commercial development, residential development and the construction of a
hotel. In addition, under the terms of the Development Agreement, Empress
Hammond is required to make annual payments of approximately $1.3 million for
public safety services and other uses and an annual payment based on a varying
percentage of Empress Hammond's adjusted gross receipts. In the event that we
suffer a decrease in revenues, the costs of satisfying the foregoing commitments
following the consummation of the Empress Merger may have a material adverse
effect on us.
Each of the riverboat casinos operated by us 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.
IRS REGULATIONS
The Internal Revenue Service, or 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. We are 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 casino revenues to
jurisdictions outside the United States which are exempt from the ambit of such
regulations.
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MANAGEMENT
This table sets forth information concerning our executive officers,
directors and other key personnel.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jack B. Binion 62 Chairman of the Board of Directors,
President, Chief Executive Officer and
Secretary
Peri Howard 38 Vice Chairman of the Board of Directors
Leslie Kenny 43 Director
Kirk Saylor 42 Chief Financial Officer and Treasurer
Roger Wagner 51 Senior Vice President and Chief Operating
Officer
Gary Border 48 Senior Vice President -- Marketing
David Carroll 45 Senior Vice President -- Human Resources
J. Lawrence Lepinski 52 Senior Vice President and General Manager
of Horseshoe Bossier City
Bob McQueen 46 Senior Vice President and General Manager
of Horseshoe Tunica
John Moran 35 Vice President -- Database Marketing &
Analysis
Jon Wolfe 31 Vice President -- Chief Information
Officer
</TABLE>
Mr. Binion has been our Chairman of the Board, Chief Executive Officer and
President since our formation in April 1999. Prior thereto, he served as the
Chief Executive Officer of Horseshoe Gaming, Inc., or HGI, since its inception
in December 1992 and as Chief Executive Officer of the general partner of NGCP
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 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.
Ms. Howard has been our Vice Chairman of the Board of Directors since our
formation in April 1999 and previously served as a director of HGI since January
1997. Ms. Howard has served in various capacities with Horseshoe Tunica since
1995 and Binion's Horseshoe Casino in Las Vegas from 1993 to 1995. Ms. Howard is
the daughter of Mr. Binion's wife.
Ms. Kenny has been one of our directors since our formation in April 1999
and previously served as a director of HGI since September 1998. Ms. Kenny has
been self-employed since 1983. Ms. Kenny is the daughter of Mr. Binion's wife.
Mr. Saylor has been our Chief Financial Officer and Treasurer since our
formation in April 1999. Prior thereto, he had served as Vice President and
Chief Accounting Officer of HGI since November 1998. From November 1995 to
November 1998, Mr. Saylor served as HGI's Corporate Controller. From October
1994 to November 1995, Mr. Saylor served
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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. Wagner has been our Senior Vice President and Chief Operating Officer
since our formation in April 1999. Prior thereto, he had served in the same
capacity with HGI since November 1998. 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. Border has been our Senior Vice President -- Marketing since our
formation in April 1999. Prior thereto, he had served in the same capacity with
HGI since July 1996. Since 1987, Mr. Border has served as President and founder
of Marketing Results, Inc.
Mr. Carroll has been our Senior Vice President -- Human Resources since our
formation in April 1999. Prior thereto, he had served in the same capacity with
HGI since November 1998. From August 1997 to November 1998, Mr. Carroll was Vice
President -- Human Resources of HGI. From September 1993 to August 1997, Mr.
Carroll was Director of Human Resources for Harrah's Casino in Shreveport,
Louisiana.
Mr. Lepinski has been our Senior Vice President and General Manager of
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.
Mr. McQueen has been our Senior Vice President and General Manager of
Horseshoe Tunica since July 1996 and prior to that as Vice President of Casino
Operations for Horseshoe Tunica 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 since
our formation in April 1999. Prior thereto, he had served in the same capacity
with 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
Binion's Horseshoe Casino and, from February 1987 to September 1995, was
Director of Marketing Operations for the Claridge Casino and Hotel.
Mr. Wolfe has been our Vice President and Chief Information Officer since
our formation in April 1999. Prior thereto, he had served in the same capacity
with 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 Tunica and, from October
1993 to July 1994, Mr. Wolfe was Director of Information Systems for President
Casinos.
This table sets forth all compensation awarded to, earned by or paid to our
Chief Executive Officer and our other six most highly compensated executive
officers or the Named Executive Officers for their services to us for the years
ended December 31, 1998, 1997 and 1996. We are a holding company, recently
formed by the owners of Horseshoe Gaming, therefore, the services performed and
compensation indicated are for Horseshoe Gaming. In addition, certain of the
Named Executive Officers are no longer employed by us.
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<PAGE> 90
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(3)
- --------------------------- ---- ---------- -------- ---------------
<S> <C> <C> <C> <C>
Jack B. Binion....................... 1998 $1,000,000 $ 0 $ 0
Chairman of the Board, CEO, 1997 0 0 0
President and Secretary 1996 0 0 0
Gary A. Border....................... 1998 350,000 0 3,550
Senior VP Marketing 1997 350,000 0 3,550
1996 168,996 0 1,646
J. Larry Lepinski.................... 1998 189,231 94,493 5,867
Senior VP General Manager -- 1997 180,000 120,000 5,525
Horseshoe Bossier City 1996 180,000 71,980 1,856
Bob McQueen.......................... 1998 168,476 95,000 12,594
Senior VP General Manager -- 1997 161,510 95,000 4,636
Horseshoe Tunica 1996 127,203 95,000 1,607
Kirk C. Saylor....................... 1998 132,488 75,000 4,107
Chief Financial Officer 1997 126,966 15,000 4,006
1996 122,901 15,000 1,659
Paul R. Alanis(1).................... 1998 517,308 0 12,982
Former President 1997 500,000 195,000 19,355
1996 494,636 200,000 7,351
J. Michael Allen(2).................. 1998 362,115 0 8,992
Former Senior VP -- Operations 1997 350,000 0 10,853
1996 367,713 0 1,792
</TABLE>
- -------------------------
(1) Mr. Alanis served as Horseshoe Gaming's President until September 1998.
(2) Mr. Allen served as the Horseshoe Gaming's Senior VP -- Operations until
September 1998.
(3) Premium on insurance policies.
COMPENSATION OF DIRECTORS; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Our Bylaws provide for a three-member board of 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. Jack Binion and Leslie Kenny receive no
compensation for their services on the board. Peri Howard receives $150,000 per
year for her services on the board. Ms. Howard receives other compensation from
us for her services at HGI. 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 us and our subsidiaries. A salary of $1,000,000 was accrued for
Mr. Binion
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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 us in 1999.
Gary Border is employed as our Senior Vice President -- Marketing pursuant
to an employment agreement with us dated November 23, 1998. Mr. Border's term of
employment under the employment agreement expires December 1, 2002. Mr. Border
is responsible for supervising our marketing departments, developing and
creating marketing strategies, creative strategies, planning and support for all
national local markets, assisting the general managers of various properties
owned by our subsidiaries or affiliates and coordinating and overseeing the
various department heads charged with casino and hotel marketing. Mr. Border
earns compensation of $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
$100,000 signing bonus upon execution of the employment agreement.
Larry Lepinski is employed as a Senior Vice President and General Manager
of Horseshoe Bossier City pursuant to an employment agreement dated September
18, 1998. Mr. Lepinski's term of employment expires September 18, 2002. Mr.
Lepinski is responsible for supervising the day to day operations of Horseshoe
Bossier City. Mr. Lepinski earns compensation of $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 $18,000 signing bonus upon execution of his employment
agreement.
Robert McQueen is employed as a Senior Vice President -- General Manager of
Horseshoe Tunica pursuant to an employment agreement with us dated October 15,
1998. Mr. McQueen's term of employment expires January 1, 2003. Mr. McQueen is
responsible for supervising the day to day activities of Horseshoe Tunica. Mr.
McQueen earns compensation of $200,000 per year base salary and a bonus of
$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 our Chief Financial Officer and Treasurer. Mr.
Saylor's employment agreement, dated November 15, 1998, expires January 1, 2003.
Mr. Saylor is responsible for overseeing the senior accounting operations of our
existing properties and assisting in the opening of any casino and hotel
facilities to be developed or acquired by our subsidiaries or affiliates. Mr.
Saylor earns compensation of $225,000 per year base salary and a discretionary
bonus not to exceed 50% of the base salary.
VOTING AGREEMENT
Pursuant to our stockholders' agreement, Mr. Binion has the right to
designate for nomination all three members to our board of directors. Until the
consummation of an initial public offering, each stockholder has agreed to vote
their stock in favor of such designees.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This table sets forth certain information as of June 1, 1999, regarding
beneficial ownership of our common stock, by each person who is known by us to
own beneficially more than 5% of such common stock, by each of our directors and
executive officers and by all of our directors and executive officers as a
group. We have two classes of common stock, Class A Stock, with one vote per
share, and Class B Stock, with five votes per share. Except as to the number of
votes per share, the two classes of common stock are identical. Mr. Binion is
the only shareholder that holds Class B Stock.
<TABLE>
<CAPTION>
NAME(1) AND ADDRESS NUMBER OF SHARES PERCENTAGE OF CLASS
- ------------------- ---------------- -------------------
<S> <C> <C>
Jack B. Binion(2)........................... 21,536.66 86.15%
4024 S. Industrial Road
Las Vegas, NV 89103
Peri Howard(3)(4)........................... 3,642.17 14.57
4024 S. Industrial Road
Las Vegas, NV 89103
Phyllis M. Cope(3)(5)....................... 1,915.96 7.66
4024 S. Industrial Road
Las Vegas, NV 89103
Wanda Parsons(3)(6)......................... 1,915.96 7.66
4024 S. Industrial Road
Las Vegas, NV 89103
Scott Hamilton(3)(7)........................ 1,277.32 5.11
4024 S. Industrial Road
Las Vegas, NV 89103
Leslie Kenny(3)............................. 1,199.11 4.80
J. Lawrence Lepinski(8)..................... 73.79 *
Bob McQueen(3).............................. 42.34 *
Gary Border(3).............................. 147.00 *
Directors and executive officers as a group
(11 persons)(9)........................... 21,799.79 87.20%
</TABLE>
- -------------------------
* Less than 1%.
(1) Except as set forth in the section "Management" under the heading "Voting
Agreement," the persons named in this table have sole voting power and
investment power with respect to all shares of capital stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in this table and these notes.
(2) Includes (a) the 9,823.78 shares held by Mr. Binion as an individual; (b)
the 1,915.96 shares owned by Phyllis M. Cope; (c) the 3,642.17 shares owned
by Peri Howard; (d) the 1,199.11 shares owned by Leslie Kenny; (e) the
1,915.96 shares owned by Wanda Parsons; (f) the 1,277.32 shares owned by
Scott Hamilton; and (g) 1,762.36 shares 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 11,712.88 shares
which are held of record by members of Mr. Binion's family or by trusts
established for the benefit of certain members of the
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<PAGE> 93
families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d)
and 13(g) of the Exchange Act.
(3) The beneficial owner has granted a proxy to Jack B. Binion to vote such
person's shares with respect to certain matters pursuant to our
stockholders' agreement. See the section entitled "Management" under the
heading "Voting Agreement."
(4) Represents 3,642.17 shares beneficially owned by Peri Howard, as Trustee of
various trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope for purposes of Section 13(d) and
13(g) of the Exchange Act. Peri Howard expressly disclaims beneficial
ownership of any shares beneficially owned by her as trustee of such trusts.
(5) Represents 1,915.96 shares beneficially owned by Phyllis M. Cope, as Trustee
of various trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope for purposes of Section 13(d) and
13(g) of the Exchange Act. Phyllis M. Cope expressly disclaims beneficial
ownership of such shares.
(6) Represents 1,915.96 shares beneficially owned by Wanda Parsons, as Trustee
of various trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope for purposes of Section 13(d) and
13(g) of the Exchange Act. Wanda Parsons expressly disclaims beneficial
ownership of such shares.
(7) Represents 1,277.32 shares beneficially owned by Scott Hamilton, as Trustee
of various trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope for purposes of Section 13(d) and
13(g) of the Exchange Act. Scott Hamilton expressly disclaims beneficial
ownership of such shares.
(8) Represents shares issuable upon exercise of currently exercisable options.
(9) See footnotes 2, 4, 5 and 8 above.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We conduct a portion of our marketing through an entity that is owned by
the wife of Gary Border, our Senior Vice President-Marketing. Amounts paid to
this company for fees and reimbursable expenses totaled $3,625,000 for the year
ended December 31, 1998.
We have made loans to various employees (including some who are now former
employees) who own interests in Horseshoe Gaming. The amount outstanding under
all of these loans, including accrued interest, totaled $3,223,000 as of March
31, 1999. The loans to employees, which are evidenced by notes, are secured by
their ownership interests. 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. See
the section entitled "Management Discussion and Analysis of Financial Condition
and Results of Operations" under the heading "Liquidity and Capital Resources --
Ownership Repurchase Matters" for further discussion of the purchase of
ownership interests and their related loans.
We have entered into an agreement with Walter Haybert, Horseshoe Gaming's
former Chief Financial Officer, whereby we have agreed to pay Mr. Haybert
$150,000 per year for each of 1999 and 2000 as advances against the purchase
price for his ownership interest. Mr. Haybert's ownership interest is subject to
purchase by us pursuant to the put/call provisions that were contained in his
employment agreement. See the section "Management's Discussion and Analysis of
Financial Condition and Results of Operations" under the heading "Liquidity and
Capital Resources -- Ownership Repurchase Matters."
Pursuant to our stockholders' agreement, we intend to make certain periodic
distributions to our stockholders to enable them to pay certain Federal and
state income taxes owed by such stockholders as a result of our status as an S
corporation for Federal and state income tax purposes. The Indenture will
contain certain restrictions on our ability to make such distributions. See the
section "Description of Notes" under the heading "Certain
Covenants -- Limitation on Restricted Payments."
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
The following is a summary of the new credit facility, Horseshoe Gaming's
existing credit facility, Horseshoe Gaming's 9 3/8% senior subordinated notes
and the Empress notes. This summary is qualified in its entirety by reference to
the documents governing such indebtedness, copies of which are available upon
request. See the section entitled "Where You Can Find More Information."
NEW CREDIT FACILITY
As part of the Merger Transactions, we have a commitment for a $375.0
million new credit facility. We intend to borrow approximately $245.0 million
under the new credit facility to fund, in part, the Empress Merger, to repay
and/or retire debt and to pay related fees and expenses. Following the Empress
Merger, we will have an additional approximately $130.0 million of availability
under the new credit facility. The commitment for the new credit facility is
subject to customary conditions, including among others, the execution of
satisfactory credit documentation and the absence of a material adverse change
in our business or prospects or the business or prospects of Empress or the
regulatory environment in general. It is expected that the new credit facility
will provide us with the flexibility to close the Express Merger in stages,
which may be necessary due to the timing of required regulatory approvals.
TOTAL FACILITY: $375.0 million
REVOLVING FACILITY: $250.0 million
REVOLVING FACILITY COMMITMENT
REDUCTIONS: The revolving facility commitments shall
reduce by: (1) 10% of the original
commitment amount in year 2; (2) 20% of the
original commitment amount in each of years
3 and 4; and (3) 50% of the original
commitment amount in year 5.
TERM FACILITY: $125.0 million
TERM FACILITY AMORTIZATION: The term loan will amortize each year in
quarterly installments in an aggregate
amount equal to 1% of the original principal
amount of the term loan per year for each of
the first six years and equal to 94% of the
original principal amount of the term loan
in year 7; provided, however, that if more
than $50.0 million principal amount of
Empress notes remain outstanding 60 days
after the closing of the Empress Merger, the
final maturity of the term loan will be 105
days prior to the stated maturity of the
Empress notes.
INTEREST RATE: At our option, loans will bear interest
based on the base rate or the Eurodollar
rate, plus, in either case, applicable
margins to be mutually agreed upon.
MANDATORY PREPAYMENTS AND
COMMITMENT REDUCTIONS: Customary for credit facilities of this
type, including (1) 50% of excess cash flow
proceeds subject to certain terms and
conditions; (2) 100% of proceeds from
permitted asset sales; and
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<PAGE> 96
(3) 100% of proceeds from the sale or
issuance of debt or equity securities;
provided, that such percentages may be
reduced based on our leverage. Prepayment
amounts will be applied first to our term
loan ratably against future amortization
payments and second to the revolver with
corresponding permanent commitment
reductions.
COMMITMENT REDUCTION IF EMPRESS
NOTES ARE NOT REDEEMED: If Empress notes in an aggregate amount of
at least $25 million but no more than $75
million remain outstanding 60 days after the
closing of the Empress Merger, the revolving
facility commitments will be permanently
reduced by the aggregate amount of Empress
notes outstanding on such date.
GUARANTEES: The new credit facility is guaranteed
unconditionally as to principal, premium, if
any, and interest, by all of our direct and
indirect subsidiaries.
CERTAIN COVENANTS: Customary for credit facilities of this
type, including, among others, covenants
which limit our and our subsidiaries ability
to, subject to certain exceptions, incur
additional debt, pay dividends, make
payments (other than scheduled interest) on
senior notes and subordinated debt, grant
liens, sell assets, make investments,
acquisitions or capital expenditures, enter
into transactions with affiliates and enter
into mergers and consolidations.
FINANCIAL COVENANTS: Customary for this type of transaction to be
reasonably specified by the arrangers,
including, without limitation, the financial
covenants set forth below:
- Maintenance of a minimum net worth;
- Maintenance of a maximum leverage ratio;
and
- Maintenance of a minimum fixed charge
coverage ratio.
RANKING: The new credit facility is our senior
obligation and ranks pari passu in right of
payment with all of our other senior
indebtedness.
COLLATERAL: The new credit facility will be secured by
first-priority perfected liens on all of our
and our subsidiaries ownership interests and
all of our and our subsidiaries' property
and assets, tangible and intangible,
including, without limitation, deeds of
trusts or mortgages, as applicable, on
Horseshoe Tunica, Horseshoe Bossier City,
Empress Hammond and Empress Joliet, and ship
mortgage on all vessels.
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<PAGE> 97
EXISTING CREDIT FACILITY
Horseshoe Gaming entered into a senior credit facility on October 10, 1995,
borrowing at that time an aggregate of $93.2 million out of an initial
availability of $100.0 million. The proceeds of such credit facility were used
to repay certain outstanding indebtedness and for other purposes. On November
12, 1997, Horseshoe Gaming finalized a restructuring of such credit facility.
Pursuant to the terms of its existing credit facility there was $130.0 million
of availability as of March 31, 1999 and Horseshoe Gaming had drawn
approximately $85.0 million as of such date. The commitment under the existing
credit facility has recently been reduced to $20.0 million. We intend to enter
into a new credit facility in connection with the Empress Merger which is
described above under the heading "New Credit Facility."
FACILITY: $20.0 million
MATURITY: June 15, 2000
INTEREST RATE: At Horseshoe Gaming's option, loans bear
interest based on the base rate or the
Eurodollar rate, plus, in either case,
applicable margins.
GUARANTEE: The existing credit facility is guaranteed
unconditionally as to principal, premium, if
any, and interest, on a senior secured basis
by RPG.
CHANGE OF CONTROL: Upon the occurrence of a change of control,
Horseshoe Gaming will be required to make an
offer to repay its existing credit facility
at a price equal to 101% of the principal
amount thereof, together with accrued and
unpaid interest, if any, to the date of
repurchase.
CERTAIN COVENANTS: Customary for credit facilities of this
type, including, among others, covenants
which limit our and our subsidiaries ability
to, subject to certain exceptions, incur
indebtedness, pay dividends, grant liens,
sell assets, make acquisitions or capital
expenditures and enter into mergers or
consolidations.
FINANCIAL COVENANTS: Customary for this type of transaction,
including the financial covenants set forth
below:
- Maintenance of a minimum net worth;
- Maintenance of a leverage ratio; and
- Maintenance of a fixed charge coverage
ratio.
RANKING: The existing credit facility is a senior
obligation of Horseshoe Gaming and ranks
pari passu in right of payment with all
other senior indebtedness of Horseshoe
Gaming.
COLLATERAL: The existing credit facility is secured by a
pledge of intercompany senior notes of HE
and RPG, which in turn are secured by a
first lien position on
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the casino and real property of Horseshoe
Bossier City and the Horseshoe Tunica,
respectively. Additionally, the existing
credit facility will have a first lien on
all intercompany notes received by Horseshoe
Gaming from its subsidiaries, in each case
secured by a first lien on the casino and
real property of each such subsidiary, and
is secured by a pledge of Horseshoe Gaming's
ownership interests in RPG and all present
and future subsidiaries, other than a pledge
of NGCP's interest in HE, and by a pledge of
the minority interests in all present and
future subsidiaries owned by JBB Gaming
Investments, L.L.C. The delivery and
enforcement of pledges of ownership
interests in subsidiaries will generally be
governed by laws and regulations concerning
gaming activities in the respective
jurisdictions.
HORSESHOE GAMING SUBORDINATED NOTES
Horseshoe Gaming entered into the indenture relating to its senior
subordinated notes on June 15, 1997, borrowing an aggregate of $160.0 million.
SUBORDINATED NOTES: $160.0 million aggregate principal amount of
9 3/8% Senior Subordinated Notes due June
15, 2007
MATURITY: June 15, 2007
INTEREST RATE: 9 3/8% per annum, payable semi-annually in
arrears on each June 15 and December 15.
GUARANTEE: The Subordinated Notes are guaranteed
unconditionally as to principal, premium, if
any, and interest, by RPG and other
wholly-owned subsidiaries of Horseshoe
Gaming that operate a casino or related
business.
CHANGE OF CONTROL: Upon the occurrence of a Change of Control
(as defined), Horseshoe Gaming will be
required to make an offer to repurchase the
Subordinated Notes at a price equal to 101%
of their principal amount, together with
accrued and unpaid interest, if any, to the
date of repurchase.
CERTAIN ADDITIONAL COVENANTS: The indenture contains certain customary
financial and other covenants, including
without limitation, covenants that restrict,
subject to specified exceptions, (i) the
incurrence of additional debt, (ii) the
making of dividends, distributions and other
restricted payments, (iii) the sale of all
or substantially all Horseshoe Gaming's or
its subsidiaries' assets, and (iv) the
incurrence of debt that is subordinate or
junior in right of payment to any
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<PAGE> 99
senior debt and senior in any respect in
right of payment to the existing
subordinated notes.
RANKING: The existing subordinated notes are general
unsecured obligations of Horseshoe Gaming,
subordinated in right of payment with all
other senior indebtedness of Horseshoe
Gaming.
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002......................... 104.688%
2003......................... 103.125%
2004......................... 101.563%
2005 and thereafter.......... 100.000%
</TABLE>
Prior to June 15, 2000, Horseshoe Gaming may
redeem up to 30% of the aggregate principal
amount of existing subordinated notes then
outstanding at a price equal to 110% of the
principal amount thereof, together with
accrued interest to the date of redemption
with the net cash proceeds of an
underwritten public offering by Horseshoe
Gaming of common stock pursuant to an
effective registration statement under the
Securities Act.
EMPRESS NOTES
Empress entered into the indenture relating to the Empress notes on June
18, 1998, borrowing an aggregate of $150.0 million. Upon consummation of the
Empress Merger, we will commence the Empress change of control offer. There can
be no assurance that such noteholders will tender their Empress notes pursuant
to the Empress change of control offer.
EMPRESS NOTES: $150.0 million aggregate principal amount of
8 1/8% Senior Subordinated Notes due July 1,
2006.
MATURITY: July 1, 2006
INTEREST RATE: 8 1/8% per annum, payable semi-annually in
arrears on each January 1 and July 1.
GUARANTEE: The Empress notes are guaranteed
unconditionally as to principal, premium, if
any, and interest, by each of Empress
Hammond, Empress Joliet, and all other
subsidiaries of Empress. Upon consummation
of the Empress Merger, all of our
subsidiaries will be required to guarantee
the Empress notes pursuant to the terms of
the indenture relating to the Empress notes.
CHANGE OF CONTROL: Upon the occurrence of a change of control,
Empress will be required to make an offer to
repurchase the Empress notes at a price
equal to 101% of the principal amount
thereof, together
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<PAGE> 100
with accrued and unpaid interest, if any, to
the date of repurchase.
CERTAIN ADDITIONAL COVENANTS: The indenture relating to the Empress notes
contains certain customary financial and
other covenants, including without
limitation, covenants that restrict, subject
to specified exceptions, (i) the incurrence
of additional debt, (ii) the making of
dividends, distributions and other
restricted payments, (iii) the sale of all
or substantially all of Empress' or its
subsidiaries' assets and (iv) the incurrence
of debt that is subordinate in right of
payment to any senior debt of Empress unless
it is pari passu in right of payment to the
Empress notes or subordinate in right of
payment to the Empress notes.
RANKING: The Empress notes are unsecured, senior
subordinated obligations of Empress and rank
subordinate in right of payment with all
other senior indebtedness of Empress.
OFFERS TO PURCHASE: Empress will, under certain circumstances,
be obligated to make an offer to purchase
the Empress notes in the event of an asset
sale.
OPTIONAL REDEMPTION: The Empress notes will be redeemable at the
option of Empress, in whole or in part, at
any time on or after July 1, 2002, at the
redemption prices set forth below, plus
accrued and unpaid interest thereon, if any,
to the date of redemption if redeemed during
the 12-month period beginning on July 1 of
the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002......................... 104.063%
2003......................... 102.708%
2004......................... 101.354%
2005 and thereafter.......... 100.000%
</TABLE>
In the event Empress consummates an equity
offering on or prior to July 1, 2001,
Empress may redeem up to 35% of the
originally issued aggregate principal amount
of the Empress notes at a redemption price
of 108 1/8% of the principal amount thereof,
plus accrued and unpaid interest thereon, if
any, to the date of redemption; provided
that not less than $97.5 million of the
aggregate principal amount of the Empress
notes remains outstanding immediately after
giving effect to such redemption.
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<PAGE> 101
DESCRIPTION OF NOTES
For purposes of this Description of Notes, all references to the "Company,"
"we," "us" or "our" refer to Horseshoe Gaming Holding Corp. and not to any of
our subsidiaries, except as the context requires otherwise. The new notes, like
the original notes, will be issued under the indenture (the "Indenture"), dated
as of May 11, 1999, by and between us and U.S. Trust Company, National
Association, as trustee (the "Trustee"). The terms of the Indenture will be
governed by certain provisions contained in the Trust Indenture Act of 1939, as
amended. The following summaries of certain provisions of the Indenture are
summaries only, do not purport to be complete and are qualified in their
entirety by reference to all of the provisions of the Indenture. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Indenture. Wherever particular provisions of the Indenture are
referred to in this summary, such provisions are incorporated by reference as a
part of the statements made and such statements are qualified in their entirety
by such reference. We urge you to read the Indenture because it, and not this
description, defines your rights as holders of Notes. A copy of the form of
Indenture is available from us upon request.
GENERAL
The Notes are our senior subordinated, general obligations, limited in
aggregate principal amount to $600 million. The Notes are our unsecured
obligations, subordinate in right of payment to certain other debt obligations,
except that the Notes are secured by the assets in the Secured Proceeds Account
and by the Horseshoe Note as described below under "Secured Proceeds Account;
Horseshoe Note" and "Subordination." Under certain circumstances described under
"Certain Covenants -- Guarantors" below, the Notes will be jointly and severally
irrevocably and unconditionally guaranteed (the "Guarantees") on a senior
subordinated basis by each of our Wholly Owned Subsidiaries and by any other of
our Subsidiaries that executes a guarantee of Indebtedness that is unsecured and
pari passu or subordinate to the Notes (the "Guarantors"). As a result of
restrictions contained in Horseshoe Gaming's senior subordinated notes
indenture, our subsidiaries could not guarantee the Notes as of the Issue Date.
See, however, "Certain Covenants -- Guarantors" below. There can be no assurance
as to whether and to what extent the Notes will be guaranteed in the future. Our
failure to cause the Notes to be guaranteed upon the occurrence of certain
events will result in an Event of Default. See "Events of Default and Remedies."
The Indenture limits the obligations of each Guarantor in a manner intended to
protect its Guarantee from attack as a fraudulent transfer. See "Certain
Bankruptcy Limitations" below. The Notes have been issued only in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof.
The Notes will mature on May 15, 2009. The Notes bear interest at the rate
per annum stated on the cover page hereof from the date of issuance or from the
most recent date to which interest has been paid or provided for (the "Interest
Payment Date"), payable semi-annually in arrears on May 15 and November 15 of
each year, commencing November 15, 1999, to the Persons in whose names such
Notes are registered at the close of business on the May 1 or November 1
immediately preceding such Interest Payment Date. Interest is calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Principal of, premium, if any, and interest (and Liquidated Damages, if
any) on the Notes is payable, and the Notes may be presented for registration of
transfer or exchange,
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<PAGE> 102
at our office or agency maintained for such purpose, which office or agency
shall be maintained in the Borough of Manhattan, The City of New York. Except as
set forth below, at our option, payment of interest may be made by check mailed
to the holders of the Notes (the "Holders") at the addresses set forth upon our
registry books. No service charge will be made for any registration of transfer
or exchange of Notes, but we may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. Until
otherwise designated by us, our office or agency will be the corporate trust
office of the Trustee presently located at the office of the Trustee in the
Borough of Manhattan, The City of New York.
The term "Subsidiaries" as used in this Description of Notes does not
include Unrestricted Subsidiaries. As of the date of the Indenture, none of our
subsidiaries were Unrestricted Subsidiaries, except Horseshoe Gaming, Inc.,
which has been designated an Unrestricted Subsidiary. Under certain
circumstances, we will be able to designate current or future subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to the
restrictive covenants set forth in the Indenture.
SECURED PROCEEDS ACCOUNT; HORSESHOE NOTE
SECURED PROCEEDS ACCOUNT
Approximately $342.3 million of the net proceeds of the Notes was paid in
cash directly to U.S. Trust Company, National Association, as securities
intermediary (the "Securities Intermediary"). The Securities Intermediary
invested those proceeds in United States Treasury securities (the "Pledged
Securities") and deposited the Pledged Securities into a securities account (the
"Secured Proceeds Account"). All earnings on the Pledged Securities will
accumulate in the Secured Proceeds Account. Under a Security and Control
Agreement among us, the Securities Intermediary and the Trustee (the "Security
Agreement"), the Trustee has a security interest in the Secured Proceeds Account
and the assets therein to secure our obligations under the Indenture and the
Notes.
The Indenture requires us to consummate the Empress Merger no later than
December 1, 1999 and to consummate a change of control offer to repurchase the
Empress Notes as required by the Empress Indenture (the "Empress Change of
Control Offer") no later than 35 Business Days following the Empress Merger. The
Indenture and the Security Agreement will permit us to use funds from the
Secured Proceeds Account in connection with both the Empress Merger and the
Empress Change of Control Offer. If we do not consummate the Empress Merger on
or prior to December 1, 1999, or if after the consummation of the Empress Change
of Control Offer more than $75 million in Empress Notes remain outstanding, or
if we fail to timely consummate the Empress Change of Control Offer, the
Indenture requires that we redeem a portion of the Notes, and the assets in the
Secured Proceeds Account will be available for that purpose. See "Mandatory
Redemption" below.
The Security Agreement provides that, if we deliver to the Trustee the
items described below in connection with either the Empress Merger or an Empress
Change of Control Offer, and no Default or Event of Default has occurred and is
continuing, the Trustee will direct the Securities Intermediary to liquidate
assets in the Secured Proceeds Account and deliver the net proceeds to us in an
amount equal to the Merger Release Amount or the Change of Control Release
Amount, as applicable, on the date we consummate the Empress Merger and the
Empress Change of Control Offer, respectively.
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<PAGE> 103
(1) In connection with the Empress Merger, we must deliver to the Trustee:
(a) a certificate, in form and substance reasonably satisfactory to the
Trustee, that:
(i) the Empress Merger will be consummated on the date specified therein
(which date shall be no more than five and no less than two Business
Days after the certificate's delivery and on or before December 1,
1999), substantially on the terms set forth in the Merger Agreement
and in this Offering Memorandum ("Acceptable Terms");
(ii) we will use the Merger Release Amount solely to pay a portion of
the Empress Merger Consideration and Related Costs;
(iii) we will cause the Internal Consolidation to occur substantially
concurrently with, and not more than one Business Day after, the
Empress Merger; and
(iv) as of the date of the certificate and as of the date of the Empress
Merger, we own and we will own all of the Equity Interests of
Horseshoe Gaming; and
(b) an opinion of our counsel to the effect that the consummation of the
Empress Merger and the transactions contemplated thereby will not
conflict with or result in a violation or breach of, or constitute
(with or without due notice or the passage of time or both) a default
under, any of the terms, conditions or other provisions of the
indenture governing the Empress Notes (the "Empress Indenture").
(2) In connection with an Empress Change of Control Offer, we must deliver
to the Trustee a certificate, in form and substance reasonably
satisfactory to the Trustee, that:
(a) the Empress Merger and the Internal Consolidation have been
consummated; and
(b) we will use the Change of Control Release Amount solely to fund the
Empress Change of Control Offer, which will occur on the date specified
in the certificate, which date shall be two Business Days after the
certificate's delivery and no more than 35 Business Days after the
consummation of the Empress Merger.
HORSESHOE NOTE
We also pledged the Horseshoe Note to the Trustee as collateral for the
Notes. If an Event of Default occurs, the Trustee will have all the rights that
we have under the Horseshoe Note against Horseshoe Gaming, including all of our
rights under RPG's and HE's guarantee thereof.
MANDATORY REDEMPTION
MANDATORY REDEMPTION UPON A TRIGGERING EVENT
If (i) the Empress Merger has not occurred by December 1, 1999, or (ii) we
have determined that the Empress Merger will not occur by that date on
Acceptable Terms (each, a "Triggering Event"), we will be required to redeem (a
"Triggering Event Mandatory Redemption") $325 million aggregate principal amount
of Notes, for a price equal to 101% of their principal amount, plus accrued and
unpaid interest thereon through the redemption date (the "Triggering Event
Mandatory Redemption Price"), together with Liquidated Damages, if any. The
Triggering Event Mandatory Redemption must occur on a date (the "Triggering
Event Mandatory Redemption Date") no later than the earlier of
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<PAGE> 104
(i) 5 Business Days after December 1, 1999, and (ii) 10 Business Days after the
Triggering Event.
MANDATORY REDEMPTION FOLLOWING EMPRESS CHANGE OF CONTROL OFFER
If (i) after consummation of the Empress Change of Control Offer, more than
$75 million aggregate principal amount of Empress Notes remain outstanding, or
(ii) we fail to consummate the Empress Change Control Offer on or before the
35th Business Day after the consummation of the Empress Merger, we will be
required to redeem (a "Change of Control Mandatory Redemption") Notes having an
aggregate principal amount equal to the principal amount of Empress Notes that
remain outstanding on the Change of Control Mandatory Redemption Date (as
defined below), for a price equal to 101% of their principal amount, plus
accrued and unpaid interest thereon through the redemption date (the "Change of
Control Mandatory Redemption Price"), together with Liquidated Damages, if any.
The Change of Control Mandatory Redemption Date shall be the date which is the
earlier of (1) five Business Days after we consummate the Empress Change of
Control Offer and (2) 40 Business Days after the Empress Merger.
MANDATORY REDEMPTION PROCEDURES
In the event of either a Triggering Event Date Mandatory Redemption or an
Empress Change of Control Mandatory Redemption (each, a "Mandatory Redemption"),
the Trustee will direct the Securities Intermediary to liquidate assets in the
Secured Proceeds Account in an amount to generate sufficient net proceeds (after
deducting the customary expenses of the Trustee and Securities Intermediary) to
pay, as applicable, the Triggering Event Mandatory Redemption Price or the
Change of Control Mandatory Redemption Price (each, a "Mandatory Redemption
Price") and to deliver the net proceeds to the Trustee.
In either event, notice of a Mandatory Redemption will be mailed to each
Holder of Notes to be redeemed, at its registered address, at least five
Business Days before, as applicable, the Change of Control Mandatory Redemption
Date or the Triggering Event Mandatory Redemption Date (each, a "Mandatory
Redemption Date"). On the Mandatory Redemption Date, upon payment to the Holders
of the Mandatory Redemption Price, a portion of each Holder's Notes (equal to
that Holder's pro rata share of the Notes to be redeemed) shall, automatically
and without any further action by that Holder, be deemed to be no longer
outstanding for any purpose under the Indenture.
RELEASE OF COLLATERAL
The Trustee will release its security interest in the Secured Proceeds
Account after all the assets therein have been applied by us in the following
manner, in each case as set forth above:
(1) If the Empress Merger is completed by December 1, 1999 on Acceptable
Terms:
- We will apply the Merger Release Amount to fund, in part, the Empress
Merger Consideration and Related Costs.
- We will apply the Change of Control Release Amount to consummate the
Empress Change of Control Offer.
- If the Empress Change of Control Offer is not consummated within 35
Business Days after the Empress Merger or, if after the Empress Change
of Control Offer, more than $75 million aggregate principal amount of
Empress
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<PAGE> 105
Notes remain outstanding, we will apply proceeds from assets in the
Secured Proceeds Account to effect a Change of Control Mandatory
Redemption.
(2) If the Empress Merger is not completed by December 1, 1999, or if we
determine it will not be completed by that date on Acceptable Terms, we
will apply proceeds from assets in the Secured Proceeds Account to
effect the Triggering Event Mandatory Redemption.
Any remaining amounts will be for our account and we may be required to
permanently reduce commitments under our New Credit Facility. See "Application
of Funds in Secured Proceeds Account; Internal Consolidation."
Neither the Horseshoe Note nor RPG's or HE's guarantee thereof will have
any value after the Internal Consolidation. Accordingly, after the Internal
Consolidation and the Trustee's release of its security interest in the Secured
Proceeds Account, the Notes will be our unsecured obligations.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
Each holder, by accepting a Note, shall be deemed to have agreed that if
the Gaming Authority of any jurisdiction in which we or any of our subsidiaries
conducts or proposes to conduct gaming requires that a person who is a holder or
the beneficial owner of Notes be licensed, qualified or found suitable under
applicable Gaming Laws, such holder or beneficial owner, as the case may be,
shall apply for a license, qualification or a finding of suitability within the
required time period. If such person fails to apply or become licensed or
qualified or is found unsuitable, we shall have the right, at our option:
- to require such person to dispose of its Notes or beneficial interest
therein within 30 days of receipt of notice of our election or such
earlier date as may be requested or prescribed by such Gaming Authority,
or
- to redeem such Notes (a "Regulatory Redemption") at a redemption price
equal to the lesser of (A) such person's cost or (B) 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to
the earlier of the redemption date or the date of the finding of
unsuitability, which may be less than 30 days following the notice of
redemption if so requested or prescribed by the applicable Gaming
Authority. We shall notify the Trustee in writing of any such redemption
as soon as practicable. We shall not be responsible for any costs or
expenses any such holder may incur in connection with its application for
a license, qualification or a finding of suitability.
SUBORDINATION
The Notes and the Guarantees are or will be our and the Guarantors'
general, unsecured obligations, respectively, subordinated in right of payment
to all of our and the Guarantors' Senior Debt, as applicable. On a pro forma
basis, as of March 31, 1999, after giving effect to the offering of the original
notes, the Empress Merger and the transactions contemplated hereby and thereby,
we would have had outstanding an aggregate of approximately $245.0 million of
Senior Debt that is secured, $771.8 million of Indebtedness pari passu or
subordinate to the Notes in right of payment, and our Subsidiaries would have
had no Indebtedness outstanding. See "Risk Factors."
No payment (by set-off or otherwise) may be made by or on behalf of us or a
Guarantor, as applicable, on account of any Obligation in respect of the Notes,
including the principal of, premium, if any, or interest on the Notes (including
any repurchases of
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<PAGE> 106
Notes), or (except as expressly provided by the last paragraph of this section)
on account of the redemption provisions of the Notes (or Liquidated Damages),
for cash, property or securities (other than Junior Securities):
- upon the maturity of any of our or such Guarantor's Senior Debt, as
applicable, by lapse of time, acceleration (unless waived) or otherwise,
unless and until all principal of, premium, if any, and the interest on
such Senior Debt are first paid in full in cash (or such payment is duly
provided for in cash); or
- in the event of default in the payment of any principal of, premium, if
any, or interest on our or such Guarantor's Designated Senior Debt, as
applicable, when it becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise (a "Payment
Default"), unless and until such Payment Default has been cured or waived
or otherwise has ceased to exist.
Upon (1) the happening of an Event of Default other than a Payment Default
that permits the holders of Senior Debt to declare such Senior Debt to be due
and payable and (2) written notice of such Event of Default given to the Trustee
by us or any holder of Designated Senior Debt or their representative (a
"Payment Notice"), then, unless and until such Event of Default has been cured
or waived or otherwise has ceased to exist, no payment (by set-off or otherwise)
may be made in cash, property or securities (other than Junior Securities) by or
on behalf of us or any Guarantor which is an obligor under such Designated
Senior Debt on account of any Obligation in respect of the Notes, including the
principal of, premium, if any, or interest on the Notes (including any
repurchases of any of the Notes), or on account of the redemption provisions of
the Notes (or Liquidated Damages), in any such case. Notwithstanding the
foregoing, unless the Designated Senior Debt in respect of which such Event of
Default exists has been declared due and payable in its entirety within 179 days
after the Payment Notice is delivered as set forth above (the "Payment Blockage
Period") (and such declaration has not been rescinded or waived), at the end of
the Payment Blockage Period, unless such payments are prohibited by the
immediately preceding or immediately succeeding paragraphs, we and the
Guarantors shall resume all payments as and when due on the Notes. Any number of
Payment Notices may be given; provided, however, that (1) not more than one
Payment Notice shall be given within a period of any 360 consecutive days, and
(2) no default that existed upon the date of such Payment Notice or the
commencement of such Payment Blockage Period (whether or not such event of
default is on the same issue of Designated Senior Debt) shall be made the basis
for the commencement of any other Payment Blockage Period (unless such default
shall not have been cured or waived for a period of not less than 181 days).
Except as described below, upon any distribution of our or any Guarantor's
assets upon any dissolution, winding up, total or partial liquidation or
reorganization of us or a Guarantor, whether voluntary or involuntary, in
bankruptcy, insolvency, receivership or a similar proceeding or upon assignment
for the benefit of creditors or any marshaling of assets or liabilities:
- the holders of all of our or such Guarantor's Senior Debt, as applicable,
will first be entitled to receive payment in full in cash (or have such
payment duly provided for) or otherwise to the extent holders accept
satisfaction of amounts due by settlement in other than cash before the
Holders are entitled to receive any payment on account of any Obligation
in respect of the Notes, including the principal of, premium, if any, and
interest on the Notes (or Liquidated Damages), (other than Junior
Securities); and
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<PAGE> 107
- any payment or distribution of our or such Guarantor's assets of any kind
or character from any source, whether in cash, property or securities
(other than Junior Securities) to which the Holders or the Trustee on
behalf of the Holders would be entitled (by set-off or otherwise), except
for the subordination provisions contained in the Indenture, will be paid
by the liquidating trustee or agent or other Person making such a payment
or distribution directly to the holders of such Senior Debt or their
representative to the extent necessary to make payment in full in cash
(or have such payment duly provided for in cash) on all such Senior Debt
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
In the event that, notwithstanding the foregoing, any payment or
distribution of our or any Guarantor's assets (other than Junior Securities)
shall be received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as
the case may be, to the holders of such Senior Debt remaining unpaid or
unprovided for or to their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Debt may have been issued, ratably according to the aggregate
principal amounts remaining unpaid on account of such Senior Debt held or
represented by each, for application to the payment of all such Senior Debt
remaining unpaid, to the extent necessary to pay or to provide for the payment
of all such Senior Debt in full in cash after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt.
No provision contained in the Indenture or the Notes will affect our and
the Guarantors' obligation, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest (and Liquidated Damages, if
any) on the Notes. The subordination provisions of the Indenture and the Notes
will not prevent the occurrence of any Default or Event of Default (as defined
herein) under the Indenture or limit the rights of the Trustee or any Holder to
pursue any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of our creditors or creditors of any
of the Guarantors or a marshaling of our assets or liabilities or the assets or
liabilities of any of the Guarantors, Holders of the Notes may receive ratably
less than other creditors.
We conduct our operations through our subsidiaries. Accordingly, our
ability to meet our cash obligations is dependent upon the ability of our
subsidiaries to make cash distributions to us. Furthermore, any right we have to
receive the assets of any such subsidiary upon such subsidiary's liquidation or
reorganization (and the consequent right of the Holders of the Notes to
participate in the distribution of the proceeds of those assets) effectively
will be subordinated by operation of law to the claims of such subsidiary's
creditors (including trade creditors) and holders of its preferred stock, except
to the extent that we are recognized as a creditor or preferred stockholder of
such subsidiary, in which case our claims would still be subordinate to any
indebtedness or preferred stock of such subsidiary senior in right of payment to
that held by us.
Notwithstanding the foregoing, the rights of Holders to receive any funds
in the Secured Proceeds Account or, prior to the Empress Merger or a Mandatory
Redemption, as applicable, upon any distribution of our or any Guarantor's
assets upon any dissolution,
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<PAGE> 108
winding up, total or partial liquidation or reorganization of us or any
Guarantor, will not be subject to the above subordination provisions.
CERTAIN BANKRUPTCY LIMITATIONS
Holders of Notes will be direct creditors of each Guarantor that executes
and delivers a Guarantee of the Notes. See "Guarantors." In the event of a
Guarantor's bankruptcy or other financial difficulty, however, its Guarantee may
be subject to avoidance under state or federal fraudulent transfer laws. Under
those laws, a court may avoid (cancel) a Guarantee if it concludes that when the
Guarantor entered into its Guarantee (or, in some states, when payments became
due thereunder), it received less than fair consideration or reasonably
equivalent value and was either insolvent or rendered insolvent or
undercapitalized, or believed that it would incur debts beyond its ability to
pay as they became due.
A court would likely conclude that a Guarantor did not receive fair
consideration or reasonably equivalent value for its Guarantee to the extent
that its liability thereunder exceeds the direct or indirect benefits that it
receives in connection with the Notes' issuance. The Indenture will limit each
Guarantor's liability in a manner intended to protect the Guarantees from
fraudulent transfer attack, although no assurance can be given that such
protection will be successful and that the Guarantees will not be avoided as
fraudulent transfers. See the section "Risk Factors" under the heading
"Fraudulent Transfer Risks."
If any Guarantee is avoided, in whole or in part, Holders of Notes would
have to look to our assets and any remaining Guarantors for payment. There can
be no assurance in that event that those assets would suffice to pay the
outstanding principal and interest on the Notes.
OPTIONAL REDEMPTION
We do not have the right to redeem any Notes prior to May 15, 2004 (other
than out of the Net Cash Proceeds of a Public Equity Offering of common stock,
as described in the next following paragraph, and except pursuant to a Mandatory
Redemption or a Regulatory Redemption). The Notes will be redeemable for cash at
our option, in whole or in part, at any time on or after May 15, 2004, upon not
less than 30 days nor more than 60 days notice to each Holder of Notes, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing May 15 of the years indicated
below, in each case (subject to the right of Holders of record on an interest
record date ("Record Date") to receive the corresponding interest due (and
Liquidated Damages, if any) on an Interest Payment Date corresponding to such
Record Date that is on or prior to such Redemption Date) together with accrued
and unpaid interest and Liquidated Damages, if any, thereon to the date of
redemption of the Notes ("Redemption Date"):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................ 104.313%
2005........................................ 102.875%
2006........................................ 101.438%
2007 and thereafter......................... 100.000%
</TABLE>
Until May 15, 2002, upon one or more Public Equity Offerings of our common
stock for cash, up to 35% of the aggregate principal amount of the Notes issued
pursuant to the
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Indenture may be redeemed at our option within 90 days of such Public Equity
Offering, on not less than 30 days, but not more than 60 days, notice to each
Holder of the Notes to be redeemed, with cash from the Net Cash Proceeds of such
Public Equity Offering, at a redemption price equal to 108.625% of principal
(subject to the right of Holders of record on a Record Date to receive interest
due on an Interest Payment Date that is on or prior to such Redemption Date)
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date; provided, however, that immediately following
such redemption not less than 65% of the aggregate principal amount of the Notes
originally issued pursuant to the Indenture remain outstanding. In the event
that we are required to consummate, and in fact so consummate, a Mandatory
Redemption in accordance with the terms hereof prior to a Public Equity
Offering, for purposes of the foregoing, the aggregate principal amount of Notes
originally issued pursuant to the Indenture shall be deemed to be reduced by the
aggregate principal amount of Notes subject to the Mandatory Redemption.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
OPTIONAL REDEMPTION PROCEDURES
Except in the case of a Mandatory Redemption or a Regulatory Redemption,
notice of any redemption will be sent, by first class mail, at least 30 days and
not more than 60 days prior to the date fixed for redemption to the Holder of
each Note to be redeemed to such Holder's last address as then shown upon the
registry books of our registrar. Any notice which relates to a Note to be
redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date of
redemption, upon surrender of such Note, a new Note or Notes in a principal
amount equal to the unredeemed portion thereof will be issued. On and after the
date of redemption, interest will cease to accrue on the Notes or portions
thereof called for redemption, unless we default in the payment thereof.
NO SINKING FUND
The Notes do not have the benefit of any sinking fund and we will not be
required to make any mandatory redemption payments with respect to the Notes
(other than payment of the Mandatory Redemption Price in connection with a
Mandatory Redemption).
CERTAIN COVENANTS
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
In the event that a Change of Control Triggering Event has occurred, each
Holder of Notes will have the right, at such Holder's option, pursuant to an
offer (subject only to conditions required by applicable law, if any) by us (the
"Change of Control Offer"), to require us to repurchase all or any part of such
Holder's Notes (provided, that the principal amount of such Notes must be $1,000
or an integral multiple thereof) on a date (the "Change of Control Purchase
Date") that is no later than 35 Business Days after the occurrence of such
Change of Control Triggering Event, at a cash price equal to 101% of the
principal amount thereof (the "Change of Control Purchase Price"), together with
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
Change of Control Purchase Date. The Change of Control Offer shall be made
within 10 Business Days following a Change of Control Triggering Event and shall
remain open for 20
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Business Days following its commencement (the "Change of Control Offer Period").
Upon expiration of the Change of Control Offer Period, we promptly shall
purchase all Notes properly tendered in response to the Change of Control Offer.
Prior to the commencement of a Change of Control Offer, but in any event
within 30 days following any Change of Control Triggering Event, we will (1)(a)
repay in full and terminate all commitments of Indebtedness under the Horseshoe
Credit Agreement or the New Credit Facility, as the case may be, and all other
Senior Debt the terms of which require repayment upon a Change of Control
Triggering Event or (b) offer to repay in full and terminate all commitments of
Indebtedness under the Horseshoe Credit Agreement or the New Credit Facility, as
the case may be, and all such other Senior Debt and repay the Indebtedness owed
to each lender which has accepted such offer in full or (2) obtain the requisite
consents under the Horseshoe Credit Agreement or the New Credit Facility, as the
case may be, and all such other Senior Debt to permit the repurchase of the
Notes as provided herein. Our failure to comply with the preceding sentence
shall constitute an Event of Default described in clause (3), but without giving
effect to the stated exceptions in such clause, under "Events of Default" below.
Notwithstanding the foregoing, we will not be required to make a Change of
Control Offer upon a Change of Control Triggering Event if a third party makes
the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture applicable to a
Change of Control Offer made by us, including any requirements to repay in full
all Indebtedness under the Horseshoe Credit Agreement or the New Credit
Facility, as the case may be, or obtains the consents of such lenders to such
Change of Control Offer as set forth in the previous paragraph, and purchases
all Notes validly tendered and not withdrawn under such Change of Control Offer.
On or before the Change of Control Purchase Date, we will (1) accept for
payment Notes or portions thereof properly tendered and not validly withdrawn
pursuant to the Change of Control Offer, (2) deposit with our paying agent (the
"Paying Agent") cash sufficient to pay the Change of Control Purchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any,
thereon) of all Notes so tendered and (3) deliver to the Trustee the Notes so
accepted together with an Officers' Certificate listing the Notes or portions
thereof being purchased by us. The Paying Agent promptly will pay the Holders of
Notes so accepted an amount equal to the Change of Control Purchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any,
thereon) and the Trustee promptly will authenticate and deliver to such Holders
a new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be delivered promptly by us to the
Holder thereof. We publicly will announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Purchase Date.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of us, and, thus, the removal of incumbent management.
The phrase "all or substantially all" of the our assets will likely be
interpreted under applicable state law and will be dependent upon particular
facts and circumstances. As a result, there may be a degree of uncertainty in
ascertaining whether a sale or transfer of "all or substantially all" of our
assets has occurred. In addition, no assurances can be given that we will have
sufficient cash on hand or adequate financing available to consummate the
purchase of Notes tendered upon the occurrence of a Change of Control Triggering
Event.
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Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this paragraph, compliance by us or
any of the Guarantors with such laws and regulations shall not in and of itself
cause a breach of their obligations under such covenant.
If the Change of Control Purchase Date hereunder is on or after an interest
payment Record Date and on or before the associated Interest Payment Date, then
any accrued and unpaid interest (and Liquidated Damages, if any) due on such
Interest Payment Date will be paid to the Person in whose name a Note is
registered at the close of business on such Record Date, and such interest (and
Liquidated Damages, if applicable) will not be payable to Holders (if different
than the holders on the Record Date) who tender the Notes pursuant to the Change
of Control Offer.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
We and the Guarantors will not, and will not permit any of our Subsidiaries
to, directly or indirectly, issue, assume, guaranty, incur, become directly or
indirectly liable with respect to (including as a result of an Acquisition), or
otherwise become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness
or any Disqualified Capital Stock (including Acquired Indebtedness), other than
Permitted Indebtedness. Notwithstanding the foregoing if (1) no Default or Event
of Default shall have occurred and be continuing at the time of, or would occur
after giving effect on a pro forma basis to, such incurrence of Indebtedness or
Disqualified Capital Stock and (2) on the date of such incurrence (the
"Incurrence Date"), our Consolidated Coverage Ratio for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro forma
basis to such incurrence of such Indebtedness or Disqualified Capital Stock and,
to the extent set forth in the definition of Consolidated Coverage Ratio, the
use of proceeds thereof, would be at least 2.0 to 1.0 (the "Debt Incurrence
Ratio"), then we and the Guarantors may incur such Indebtedness or Disqualified
Capital Stock; provided, however, that we may not incur such Indebtedness or
Disqualified Capital Stock prior to our Internal Consolidation.
The foregoing limitations will not apply to:
(a) the incurrence, after our Internal Consolidation by us, or at any time
by any Subsidiary, of Purchase Money Indebtedness; provided, that such
Indebtedness is either (1) Non-Recourse Indebtedness or (2) limited in
aggregate amount (including any Refinancing Indebtedness incurred to
retire, defease, refinance, replace or refund such Indebtedness)
incurred and outstanding at any time pursuant to this clause (a)(2) to
the lesser of (A) $15 million per Casino, and (B) 100% of the original
cost (determined in accordance with GAAP in good faith by our Board of
Directors) to us or such Subsidiary, as applicable, of the property so
purchased, constructed, improved or leased, on a Casino by Casino
basis;
(b) the incurrence, after our Internal Consolidation by us, or at any time
by any Guarantor, of Indebtedness in an aggregate amount incurred and
outstanding at any time pursuant to this paragraph (b) (including any
Refinancing Indebtedness
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incurred to retire, defease, refinance, replace or refund such
Indebtedness) of not more than $25 million;
(c) (1) prior to the Empress Merger, the incurrence by Horseshoe Gaming and
RPG of Indebtedness pursuant to the Horseshoe Credit Agreement and
related guarantee, respectively, in an aggregate amount incurred and
outstanding at any time pursuant to this clause (1) of this paragraph
(c) (including any Refinancing Indebtedness incurred to retire,
defease, refinance, replace or refund such Indebtedness) of not more
than $20 million, minus the amount of any such Indebtedness (i) retired
with the Net Cash Proceeds from any Asset Sale applied to permanently
reduce the outstanding amounts or the commitments with respect to such
Indebtedness pursuant to the covenant "Limitation on Sale of Assets and
Subsidiary Stock" or (ii) assumed by a transferee in an Asset Sale;
provided, that following the consummation of a Triggering Event
Mandatory Redemption, the amount of such Indebtedness permitted to be
incurred and outstanding at any time pursuant to this clause (1) shall
be not more than $100 million; and (2) from and after the Empress
Merger, the incurrence by us or any Guarantor of Indebtedness pursuant
to the New Credit Facility in an aggregate amount incurred and
outstanding at any time pursuant to this clause (2) of this paragraph
(c) (including any Refinancing Indebtedness incurred to retire,
defease, refinance, replace or refund such Indebtedness) of not more
than $375 million, minus the amount of any such Indebtedness (i)
retired with the Net Cash Proceeds from any Asset Sale applied to
permanently reduce the outstanding amounts or the commitments with
respect to such Indebtedness pursuant to the covenant "Limitation on
Sale of Assets and Subsidiary Stock" or (ii) assumed by a transferee in
an Asset Sale; provided, however, that the maximum amount permitted to
be outstanding under either clause (1) or clause (2) of this paragraph
(c) shall not be deemed to limit additional Indebtedness under the
Horseshoe Credit Agreement or the New Credit Facility, as the case may
be, to the extent the incurrence of such additional Indebtedness was
permitted and incurred pursuant to the Debt Incurrence Ratio;
(d) each of our Subsidiaries that owns a Casino may incur up to $5 million
of working capital Indebtedness at any time outstanding pursuant to
this clause (d) (including any Refinancing Indebtedness incurred to
retire, defease, refinance, replace or refund such Indebtedness);
(e) prior to consummation of the Empress Change of Control Offer and as a
result of the Empress Merger, not more than $150 million aggregate
principal amount of the Empress Notes; and
(f) in the event that the Empress Merger is consummated, the amount of the
Empress Notes not redeemed in the Empress Change of Control Offer;
provided that we complied with our obligations under "Mandatory
Redemption Following Change of Control" above and make any Credit
Facility Reduction described in "Application of Funds in Secured
Proceeds Account; Internal Consolidation" below.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes our Subsidiary (including upon
designation of any subsidiary or other Person as a Subsidiary) or is merged with
or into or consolidated with us or our Subsidiary shall be deemed to have been
incurred at the time such Person becomes our
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Subsidiary or is merged with or into or consolidated with us or our Subsidiary,
as applicable.
Notwithstanding any other provision of this covenant, but only to avoid
duplication, a guarantee of our or of another Subsidiary Guarantor's
Indebtedness incurred in accordance with the terms of the Indenture issued at
the time such Indebtedness was incurred or if later at the time the guarantor
thereof became our Subsidiary will not constitute a separate incurrence, or
amount outstanding, of Indebtedness. Upon each incurrence, we may designate
pursuant to which provision of this covenant such Indebtedness is being incurred
and such Indebtedness shall not be deemed to have been incurred under any other
provision of this covenant, except as stated otherwise in the foregoing
provisions.
LIMITATION ON RESTRICTED PAYMENTS
We and the Guarantors will not, and will not permit any of their
Subsidiaries to, directly or indirectly, make any Restricted Payment if, after
giving effect to such Restricted Payment on a pro forma basis, (1) a Default or
an Event of Default shall have occurred and be continuing, (2) we are not
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Debt Incurrence Ratio in the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," or (3) the aggregate amount of all
Restricted Payments made by us and our Subsidiaries, including after giving
effect to such proposed Restricted Payment, on and after the Issue Date, would
exceed, without duplication, the sum of:
(a) 50% of our aggregate Adjusted Consolidated Net Income for the period
(taken as one accounting period), commencing on the first day of the
first full fiscal quarter commencing after the Issue Date, to and
including the last day of the latest fiscal quarter ended immediately
prior to the date of each such calculation for which financial
statements are available (or, in the event Adjusted Consolidated Net
Income for such period is a deficit, then minus 100% of such deficit),
plus
(b) the aggregate Net Cash Proceeds received by us from the sale of our
Qualified Capital Stock (other than (i) to one of our Subsidiaries and
(ii) to the extent applied in connection with a Qualified Exchange)
after the Issue Date, plus
(c) the aggregate Net Cash Proceeds received by us from a Capital
Contribution after the Issue Date, plus
(d) the amount by which our or any Guarantor's Indebtedness (other than
Subordinated Indebtedness) is reduced on our balance sheet upon the
conversion or exchange for our Equity Interests (other than (x)
Disqualified Capital Stock and (y) an issuance or sale to a Subsidiary
of ours or an employee stock ownership plan or other trust established
by us or any of our Subsidiaries) subsequent to the end of the most
recent fiscal quarter ended immediately after the Issue Date of any
Indebtedness (other than Subordinated Indebtedness) of ours or any
Guarantor's which by its terms is convertible or exchangeable for our
Equity Interests (other than Disqualified Capital Stock) (less the
amount of any cash or other property distributed by us or any
Subsidiary upon such conversion or exchange), plus
(e) the amount (not to exceed the aggregate amount of Investments
previously made by us or any Guarantor which were treated as a
Restricted Payment and counted against the amount available under this
clause (3)) equal to the net reduction in Investments resulting from
either (1) any dividends, repayments of loans or
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advances or other transfers of assets to us or any Guarantor or the
satisfaction or reduction (other than by means of payments by us or any
Subsidiary) of obligations of other Persons which have been guaranteed
by us or any Guarantor or (2) the redesignation of an Unrestricted
Subsidiary as a Subsidiary which executes a Guarantee; provided,
however, that the amount of anything credited pursuant to this clause
(e) shall not exceed its fair market value at the time of transfer or
redesignation, as the case may be.
Notwithstanding the foregoing, except for Restricted Payments permitted
pursuant to clauses (1) and (6) below and, to the extent such Restricted Payment
is used to repurchase or redeem the Equity Interests of Horseshoe Gaming not
owned by us as of the Issue Date, clause (7) below, we shall not make any
Restricted Payments prior to the Internal Consolidation.
The foregoing clauses (2) and (3) of the first paragraph of this covenant,
however, will not prohibit:
(1) with respect to each tax year that we qualify as an "S corporation"
under the Code, or any similar provision of state or local law,
Permitted Tax Distributions in respect of the jurisdictions in which we
so qualify; provided, however, that prior to any Permitted Tax
Distributions a knowledgeable and duly authorized Horseshoe Gaming
Holding Corp. officer certifies, and counsel reasonably acceptable to
the Trustee opines, that we, and each Subsidiary in respect of which
such distributions are being made, qualify as Flow Through Entities for
Federal income tax purposes and for the states in respect of which such
distributions are being made and that at the time of such distribution,
our most recent audited financial statements, as provided to the
Trustee pursuant to the section entitled "Reports" herein, provide that
we and each such Subsidiary were treated as Flow Through Entities for
the period of such financial statements;
(2) any dividend, distribution or other payments by any of our Subsidiaries
on its Equity Interests that is paid pro rata to all holders of such
Equity Interests;
(3) a Qualified Exchange;
(4) the payment of any dividend on or redemption of Qualified Capital Stock
within 60 days after the date of its declaration or authorization if
such dividend or redemption could have been made on the date of such
declaration or authorization in compliance with the foregoing
provisions;
(5) Investments in one or more Persons in an amount not in excess of $50
million in the aggregate at any one time outstanding measured at the
time made or returned, as applicable, for all such Investments made in
any one or more Persons in reliance upon this clause (5), for the
purpose of developing, constructing or acquiring (a) a Casino or
Casinos or, if applicable, any Related Business in connection with such
Casino or Casinos, or (b) a Related Business to be used primarily in
connection with an existing Casino or Casinos; provided, that to the
extent we or any Subsidiary has received cash distributions from any
such Person, the amount thereof will be deemed to reduce the amount of
Investments (by 50% in the case of returns in excess of capital and by
100% in the case of return of capital) then outstanding under this
clause (5) (but not below zero) for the purposes of the $50 million
limit (the amount of any such reduction to be without duplication to
amounts available for Restricted Payments under clause (3) of the first
paragraph of this covenant);
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(6) the redemption or repurchase of any of our or our Subsidiaries' Equity
Interests or Indebtedness (other than any Equity Interests or
Indebtedness that is held or beneficially owned by any Excluded Person)
required by the redemption provisions described under "Mandatory
Disposition Pursuant to Gaming Laws" above (or any substantially
comparable provision governing other Indebtedness); and
(7) further Restricted Payments of any type which in the aggregate do not
exceed $50 million for all such Restricted Payments permitted by this
clause (7) taken together; provided, however, that no payment may be
made pursuant to this clause (7) unless we could then incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio
in the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock," after taking into account any funding
of such Restricted Payments; provided, further, however, that up to an
additional $50 million of Restricted Payments of any type may be made
under this clause (7) if, immediately after giving effect to such
Restricted Payment, after taking into account the funding of such
Restricted Payment, our Consolidated Coverage Ratio for the Reference
Period immediately preceding such Restricted Payment would be at least
3.0 to 1.0.
The full amount of any Restricted Payment made pursuant to the foregoing
clauses (2), (4) and (6) (but not pursuant to clause (1), (3), (5) or (7)) of
the immediately preceding sentence, however, will be counted as Restricted
Payments made for purposes of the calculation of the aggregate amount of
Restricted Payments available to be made referred to in clause (3) of the first
paragraph of this covenant.
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in the
good faith reasonable judgment of our Board of Directors.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
We, and the Guarantors will not, and will not permit any of our
Subsidiaries to, directly or indirectly, create, assume or suffer to exist any
consensual restriction on the ability of any of our Subsidiaries to pay
dividends or make other distributions to or on behalf of, or to pay any
obligation to or on behalf of, or otherwise to make any transfer of assets or
property to or on behalf of, or make or pay any loans or advances to or on
behalf of, us or any or our Subsidiaries, except:
(a) other than as provided by clause (e) below, restrictions imposed by the
Notes or the Indenture or by our other indebtedness (which may also be
guaranteed by the Guarantors) ranking senior or pari passu with the
Notes or the Guarantees, as applicable; provided, that such
restrictions are no more restrictive taken as a whole than those
imposed by the Indenture and the Notes;
(b) restrictions imposed by applicable law;
(c) existing restrictions under Indebtedness outstanding on the Issue Date;
(d) restrictions under any Acquired Indebtedness not incurred in violation
of the Indenture or any agreement relating to any property, asset, or
business acquired by us or any of our Subsidiaries, which restrictions
in each case existed at the time of acquisition, were not put in place
in connection with or in anticipation of such acquisition and are not
applicable to any Person, other than the Person
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acquired, or to any property, asset or business, other than the
property, assets and business so acquired;
(e) any such restriction or requirement imposed by Indebtedness incurred
under the Horseshoe Credit Agreement or the New Credit Facility, as the
case may be, permitted by the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock";
(f) restrictions with respect solely to any of our Subsidiaries imposed
pursuant to a binding agreement which has been entered into for the
sale or disposition of all or substantially all of the Equity Interests
or assets of such Subsidiary; provided, that such restrictions apply
solely to the Equity Interests or assets of such Subsidiary which are
being sold;
(g) restrictions on transfer contained in Purchase Money Indebtedness
incurred pursuant to paragraph (a) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock";
provided, that such restrictions relate only to the transfer of the
property acquired with the proceeds of such Purchase Money
Indebtedness; and
(h) in connection with and pursuant to permitted Refinancings, replacements
of restrictions imposed pursuant to clauses (a), (c), (d), (e), (g) or
this clause (h) of this paragraph that are not more restrictive taken
as a whole than those being replaced and do not apply to any other
Person or assets than those that would have been covered by the
restrictions in the Indebtedness so refinanced.
Notwithstanding the foregoing, (a) customary provisions restricting
subletting or assignment of any lease entered into in the ordinary course of
business, consistent with industry practice and (b) any asset subject to a Lien
which is not prohibited to exist with respect to such asset pursuant to the
terms of the Indenture may be subject to customary restrictions on the transfer
or disposition thereof pursuant to such Lien.
LIMITATIONS ON LAYERING INDEBTEDNESS
We and the Guarantors will not, and will not permit any of our Subsidiaries
to, directly or indirectly, incur, or suffer to exist any Indebtedness that is
subordinate in right of payment to any other of our or a Guarantor's
Indebtedness unless, by its terms, such Indebtedness (1) has a final stated
maturity date on or subsequent to the Stated Maturity of the Notes and an
Average Life longer than that of the Notes and (2) is subordinate in right of
payment to, or ranks pari passu with, the Notes or the Guarantee, as applicable.
LIMITATION ON LIENS
We and the Guarantors will not, and will not permit any of our Subsidiaries
to, create, incur, assume or suffer to exist any Lien of any kind, other than
Permitted Liens, upon any of our respective assets now owned or acquired on or
after the Issue Date or upon any income or profits therefrom securing any of our
or any of our Subsidiaries' Indebtedness other than Senior Debt, unless we
provide, and cause our Subsidiaries to provide, concurrently therewith, that the
Notes and the applicable Guarantees are equally and ratably so secured;
provided, that if such Indebtedness is Subordinated Indebtedness, the Lien
securing such Subordinated Indebtedness shall be subordinate and junior to the
Lien securing the Notes (and any related applicable Guarantees) with the same
relative priority as such Subordinated Indebtedness shall have with respect to
the Notes (and any related applicable Guarantees). We will not create, incur,
assume or suffer to exist any Lien of
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any kind on the Horseshoe Note or the Secured Proceeds Account, except in favor
of the Trustee for the benefit of the Holders.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
Prior to the Internal Consolidation, we and the Guarantors will not, and
will not permit any of our Subsidiaries to, in one or a series of related
transactions, consummate an Asset Sale (as defined below), other than any
transaction described in clauses (1), (3), (4) and (5) of the fourth paragraph
of this covenant.
Following the Internal Consolidation, we and the Guarantors will not, and
will not permit any of our Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of our property, business or assets, including by merger or
consolidation (in the case of one of our Subsidiaries), and including any sale
or other transfer or issuance of any Equity Interests of any of our
Subsidiaries, whether by us or any other of our Subsidiaries or through the
issuance, sale or transfer of Equity Interests by one of our Subsidiaries, and
including any sale and leaseback transaction (any of the foregoing, an "Asset
Sale"), unless:
(1) (a) the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are
applied
(i) within 270 days after the date of such Asset Sale to the optional
redemption of the Notes in accordance with the terms of the
Indenture and our other Indebtedness ranking on a parity with the
Notes and with similar provisions requiring us to redeem such
Indebtedness with the proceeds from such Asset Sale, pro rata in
proportion to the respective principal amounts (or accreted values
in the case of Indebtedness issued with an original issue discount)
of the Notes and such other Indebtedness then outstanding, or
(ii) within 300 days after the date of such Asset Sale to the repurchase
of the Notes and such other Indebtedness on a parity with the Notes
and with similar provisions requiring us to make an offer to
purchase such Indebtedness with the proceeds from such Asset Sale
pursuant to a cash offer (subject only to conditions required by
applicable law, if any) (pro rata in proportion to the respective
principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) of the Notes and such other
Indebtedness then outstanding) (the "Asset Sale Offer") at a
purchase price of 100% of principal amount (or accreted value in
the case of Indebtedness issued with an original issue discount)
(the "Asset Sale Offer Price") together with accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of
payment, made within 270 days of such Asset Sale, or
(b) within 270 days following such Asset Sale, the Asset Sale Offer
Amount is
(i) invested in assets and property (other than notes, bonds,
obligations and securities) which in the good faith reasonable
judgment of our Board of Directors will immediately constitute or
be a part of our or one of our Subsidiaries' Related Businesses
immediately following such transaction, or
(ii) used to retire Purchase Money Indebtedness secured by the asset
which was the subject of the Asset Sale, Indebtedness outstanding
under the Horseshoe Credit Agreement or the New Credit Facility, as
the case may be, or other Senior Debt the terms of which require
retirement upon such Asset Sale, on
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a pro rata basis and, to permanently reduce (in the case of Senior
Debt that is not such Purchase Money Indebtedness) the amount of
Indebtedness outstanding on the Issue Date or permitted pursuant to
paragraph (b), (c) or (d), as applicable, of the covenant
"Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock" (including that in the case of a
revolver or similar arrangement that makes credit available, such
commitment is so permanently reduced by such amount);
(2) 75% of the total consideration for such Asset Sale or series of related
Asset Sales consists of cash or Cash Equivalents;
(3) no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect, on a pro forma basis,
to, such Asset Sale, unless such Asset Sale is in consideration solely
of cash or Cash Equivalents and such consideration is applied
immediately to the permanent reduction of the amount of Indebtedness
outstanding under the New Credit Facility or other bank credit facility
debt which is incurred pursuant to clause (c)(1) or (2) of the covenant
described herein under the heading "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock"; and
(4) our Board of Directors determines in good faith that we or such
Subsidiary, as applicable, receives not less than fair market value for
such Asset Sale.
An acquisition of Notes pursuant to an Asset Sale Offer may be deferred
until the accumulated Net Cash Proceeds from Asset Sales not applied to the uses
set forth in 1(a)(i) or 1(b) above (the "Excess Proceeds") exceeds $10 million.
Each Asset Sale Offer shall remain open for 20 Business Days following its
commencement (the "Asset Sale Offer Period"). Upon expiration of the Asset Sale
Offer Period, we shall apply the Asset Sale Offer Amount plus an amount equal to
accrued and unpaid interest and Liquidated Damages, if any, to the purchase of
all Indebtedness properly tendered (on a pro rata basis if the Asset Sale Offer
Amount is insufficient to purchase all Indebtedness so tendered) at the Asset
Sale Offer Price (together with accrued interest and Liquidated Damages, if
any). To the extent that the aggregate amount of Notes and such other pari passu
Indebtedness tendered pursuant to an Asset Sale Offer is less than the Asset
Sale Offer Amount, we may use any remaining Net Cash Proceeds for general
corporate purposes as otherwise permitted by the Indenture and following each
Asset Sale Offer the Excess Proceeds amount shall be reset to zero. For purposes
of (2) above, total consideration received means the total consideration
received for such Asset Sales minus the amount of, (a) Purchase Money
Indebtedness secured solely by the assets sold and assumed by a transferee;
provided, that we and our Subsidiaries are fully released from all obligations
relating thereto and (b) property that within 30 days of such Asset Sale is
converted into cash or Cash Equivalents; provided, that such cash and Cash
Equivalents shall be treated as Net Cash Proceeds attributable to the original
Asset Sale for which such property was received).
Notwithstanding, and without complying with, the provisions of this
covenant:
(1) we and our Subsidiaries may, in the ordinary course of business, (a)
convey, sell, transfer, assign or otherwise dispose of inventory and
other assets acquired and held for resale in the ordinary course of
business and (b) liquidate Cash Equivalents;
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(2) following the Internal Consolidation, we and our Subsidiaries may
convey, sell, transfer, assign or otherwise dispose of assets pursuant
to and in accordance with the covenant "Limitation on Merger, Sale or
Consolidation";
(3) we and our Subsidiaries may sell or dispose of damaged, worn out or
other obsolete property in the ordinary course of business so long as
such property is no longer necessary for the proper conduct of our or
such Subsidiary's business, as applicable;
(4) our Subsidiaries may convey, sell, transfer, assign or otherwise
dispose of assets (including by way of Merger) to us or any other
Subsidiary and we may convey, sell, transfer, assign or otherwise
dispose of assets to any Subsidiary; and
(5) we and each of our Subsidiaries may surrender or waive contract rights
or settle, release or surrender contract, tort or other claims of any
kind or grant Liens not prohibited by the Indenture.
Upon the accumulation of $10 million of Net Cash Proceeds from an Event of
Loss (other than the proceeds of any business interruption insurance) each
dollar of Net Cash Proceeds from an Event of Loss that exceeds such amount shall
be (1) applied to the redemption or repurchase of the Notes and other of our
Indebtedness ranking on a parity with the Notes and with similar provisions
requiring us to redeem or repurchase such Indebtedness (pro rata in proportion
to the respective principal amounts or (accreted values in the case of
Indebtedness issued with an original issue discount) of the Notes and such other
Indebtedness then outstanding), (2) invested in assets and property (other than
notes, bonds, obligation and securities) which in the good faith reasonable
judgment of our Board of Directors will immediately constitute or be a part of a
Related Business of ours or one of our Subsidiaries immediately following such
Event of Loss or (3) used to retire Purchase Money Indebtedness secured by the
asset which was the subject of the Event of Loss, Indebtedness outstanding under
the Horseshoe Credit Agreement or the New Credit Facility, as the case may be,
or other Senior Debt the terms of which so require and to permanently reduce (in
the case of Senior Debt that is not such Purchase Money Indebtedness) the amount
of Indebtedness outstanding on the Issue Date or permitted pursuant to paragraph
(b), (c) or (d), as applicable, of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock" (including that in the
case of a revolver or similar arrangement that makes credit available, such
commitment is so permanently reduced by such amount), all within the time
periods and as otherwise provided above in clauses 1(a) or 1(b) of the first
paragraph of this covenant.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the Exchange
Act and the rules and regulations thereunder and all other applicable Federal
and state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this paragraph, compliance
by us or any of our subsidiaries with such laws and regulations shall not in and
of itself cause a breach of its obligations under such covenant.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages,
if any, due on such Interest Payment Date) will be paid to the Person in whose
name a Note is registered at the close of business on such Record Date, and such
interest (or Liquidated Damages, if applicable) will not be payable to Holders
who tender Notes pursuant to such Asset Sale Offer.
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LIMITATION ON TRANSACTIONS WITH AFFILIATES
Neither we nor any of our Subsidiaries will be permitted on or after the
Issue Date to enter into or suffer to exist any contract, agreement, arrangement
or transaction with any Affiliate (an "Affiliate Transaction"), or any series of
related Affiliate Transactions, (other than Exempted Affiliate Transactions),
(1) unless it is determined that the terms of such Affiliate Transaction are
fair and reasonable to us, and no less favorable to us, than could have been
obtained in an arm's length transaction with a non-Affiliate, and (2) if
involving consideration to either party in excess of $5 million, unless (a) such
Affiliate Transaction(s) is evidenced by an Officers' Certificate addressed and
delivered to the Trustee certifying that such Affiliate Transaction (or
Transactions) has been approved by a majority of the members of our Board of
Directors that are disinterested in such transaction, if any, and (b) prior to
the consummation thereof, we obtain a written favorable opinion as to the
fairness of such transaction to us from a financial point of view from an
independent investment banking firm of national reputation in the United States
or, if pertaining to a matter for which such investment banking firms do not
customarily render such opinions, an appraisal or valuation firm of national
reputation in the United States.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
Prior to the Internal Consolidation, we will not consolidate with or merge
with or into another Person or, directly or indirectly, sell, lease, convey or
transfer all or substantially all of our assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons.
Following the Internal Consolidation, we will not consolidate with or merge
with or into another Person or, directly or indirectly, sell, lease, convey or
transfer all or substantially all of our assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons, unless:
(1) either (a) we are the continuing entity or (b) the resulting, surviving
or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of our obligations in
connection with the Notes and the Indenture;
(2) no Default or Event of Default shall exist or shall occur immediately
after giving effect on a pro forma basis to such transaction;
(3) immediately after giving effect to such transaction on a pro forma
basis, the consolidated resulting, surviving or transferee entity would
immediately thereafter be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock", except in the case where such
transaction is solely between us and our Wholly Owned Subsidiaries or
solely between our Wholly Owned Subsidiaries; and
(4) such transaction will not result in the loss of any material gaming
license.
Notwithstanding the foregoing, in no event shall the Internal Consolidation
be prohibited by, or cause a default under, this covenant or any other covenant
under the Indenture.
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Upon any consolidation or merger or any transfer of all or substantially
all of our assets in accordance with the foregoing, the successor corporation
formed by such consolidation or into which we are merged or to which such
transfer is made shall succeed to and (except in the case of a lease) be
substituted for, and may exercise every right and power of, ours under the
Indenture with the same effect as if such successor corporation had been named
therein as us, and (except in the case of a lease) we shall be released from the
obligations under the Notes and the Indenture except with respect to any
obligations that arise from, or are related to, such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, our interest in which constitutes all or substantially all of
our properties and assets, shall be deemed to be the transfer of all or
substantially all of our properties and assets.
LIMITATION ON LINES OF BUSINESS
Neither we nor any of our Subsidiaries shall directly or indirectly engage
to any substantial extent in any line or lines of business activity other than
that which, in the reasonable good faith judgment of our Board of Directors, is
a Related Business.
GUARANTORS
Except as set forth in the next sentence, upon consummation of the Empress
Merger, we have agreed to cause each of our Wholly Owned Subsidiaries and any
other of our Subsidiaries that executes a guarantee of Indebtedness that is pari
passu or subordinate to the Notes jointly and severally to guaranty irrevocably
and unconditionally all principal, premium, if any, liquidated damages, if any,
and interest on the Notes on a senior subordinated basis. As a result of
restrictions contained in an indenture relating to debt of Horseshoe Gaming,
notwithstanding the foregoing, the Subsidiaries of Horseshoe Gaming will not be
required to guarantee the Notes until we consummate the Internal Consolidation.
In connection with the foregoing, we have agreed (1) until we consummate the
Internal Consolidation, to own directly at least 90% of Horseshoe Gaming, and
(2) that upon consummation of the Empress Merger, RPG, HE, Empress Indiana and
Empress Illinois will be our Wholly Owned Subsidiaries and, therefore,
Guarantors.
The obligation of any potential Guarantor to execute a Guarantee will be
subject to the receipt of any approval required by any Gaming Authority, which
we and our Subsidiaries must use their reasonable best efforts to obtain.
RELEASE OF GUARANTORS
No Guarantor shall consolidate or merge with or into (whether or not such
Guarantor is the surviving Person) another Person unless, subject to the
provisions of the following paragraph and certain other provisions of the
Indenture, (1) the Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the obligations of such
Guarantor pursuant to a supplemental indenture in form reasonably satisfactory
to the Trustee, pursuant to which such Person shall unconditionally guarantee,
on a senior subordinated basis, all of such Guarantor's obligations under such
Guarantor's Guarantee on the terms set forth in the Indenture; (2) immediately
before and immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default shall have occurred or be continuing; and
(3) immediately after such transaction, the surviving Person holds all Permits
required for operation of the business of, and such entity is controlled by a
Person or entity (or has retained a Person or entity
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which is) experienced in, operating casino hotels or otherwise holds all Permits
(including those required from Gaming Authorities) to operate its business. The
provisions of the covenant shall not apply to the merger of any Guarantors with
and into each other or with or into us.
Upon the sale or disposition (whether by merger, stock purchase, Asset Sale
or otherwise) of a Guarantor or all or substantially all of its assets to an
entity which is not a Subsidiary, or the designation of a Subsidiary to become
an Unrestricted Subsidiary, which transaction is otherwise in compliance with
the Indenture (including, without limitation, the provisions of the covenant
Limitations on Sale of Assets and Subsidiary Stock), such Guarantor will be
deemed released from its obligations under its Guarantee of the Notes; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Guarantor under all of its guarantees of, and under all of
its pledges of assets or other security interests which secure, any of our or
any other of our Subsidiary's Indebtedness shall also terminate upon such
release, sale or transfer.
LIMITATION ON STATUS AS INVESTMENT COMPANY
We and our Subsidiaries will not become required to register as an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or otherwise become subject to regulation under the
Investment Company Act.
APPLICATION OF FUNDS IN SECURED PROCEEDS ACCOUNT; INTERNAL CONSOLIDATION
We will apply the Merger Release Amount solely to pay a portion of the
Empress Merger Consideration and Related Costs simultaneously with the release
of that amount from the Secured Proceeds Account unless the Empress Merger does
not occur, in which case the Merger Release Amount will be available for the
Triggering Event Mandatory Redemption. We will apply the Change of Control
Release Amount solely to fund the Empress Change of Control Offer simultaneously
with the release of that amount from the Secured Proceeds Account, which will
occur not later than 35 Business Days after the Empress Merger. If, after
consummation of the Empress Change of Control Offer, more than $25.0 million but
equal to or less than $75.0 million aggregate principal amount of Empress Notes
remain outstanding, then, if and to the extent required by the terms of our New
Credit Facility, we will permanently reduce commitments under our New Credit
Facility (a "Credit Facility Reduction").
We will cause the Internal Consolidation to occur substantially
concurrently with and not later than one Business Day following the Empress
Merger or Triggering Event Mandatory Redemption, as applicable.
USE OF PROCEEDS OF HORSESHOE NOTE
We will cause Horseshoe Gaming to use the proceeds of the Horseshoe Note on
the Issue Date to (1) repay outstanding borrowings in full under the Horseshoe
Credit Agreement, (2) consummate a tender offer and consent solicitation (the
"Tender Offer") with respect to Horseshoe Gaming's 12 3/4% Senior Notes due
2000 (the "Senior Notes") and (3) pay related fees and expenses, including
tender premiums and consent fees; provided, however, that in the event that
either (x) on or before the closing of this offering, Horseshoe Gaming for any
reason fails to consummate the Tender Offer or (y) any Senior Notes remain
outstanding after consummation of the Tender Offer, we will cause Horseshoe
Gaming on the Issue Date to (a) irrevocably deposit a portion of the proceeds of
the Horseshoe Note into a defeasance account in an amount sufficient to repay
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the then outstanding Senior Notes on September 30, 1999, the earliest date such
notes may be redeemed ("Earliest Redemption Date"), plus accrued interest
thereon and (b) redeem the Senior Notes in full on the Earliest Redemption Date.
Any remaining proceeds of the Horseshoe Note may be used by Horseshoe Gaming for
general corporate purposes.
EMPRESS MERGER
Notwithstanding anything herein to the contrary, no provision of the
Indenture will prohibit or, with the passage of time or otherwise, be violated
by, any component of the Empress Merger pursuant to the Merger Agreement
substantially as described in the Offering Memorandum, including, without
limiting the generality of the foregoing, the incurrence of indebtedness to
finance such transactions, the granting and priority of liens to secure such
indebtedness, and the perfection of such liens.
REPORTS
Whether or not we are subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, we shall deliver to the Trustee and, to each
Holder and to prospective purchasers of Notes identified to us by an Initial
Purchaser, within 15 days after it is or would have been (if it were subject to
such reporting obligations) required to file such with the Securities and
Exchange Commission (the "Commission"), annual and quarterly financial
statements substantially equivalent to financial statements that would have been
included in reports filed with the Commission, if we were subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by our certified independent public
accountants as such would be required in such reports to the Commission, and, in
each case, together with a management's discussion and analysis of financial
condition and results of operations which would be so required and, unless the
Commission will not accept such reports, file with the Commission the annual,
quarterly and other reports which it is or would have been required to file with
the Commission.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an "Event of Default" as:
(1) our failure to pay any installment of interest (or Liquidated Damages,
if any) on the Notes as and when the same becomes due and payable and
the continuance of any such failure for 30 days;
(2) our failure to pay all or any part of the principal, or premium, if
any, on the Notes when and as the same becomes due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, payment of the Mandatory Redemption Price upon the
occurrence of an event giving rise to a Mandatory Redemption, or
payment of the Change of Control Purchase Price (except as provided in
"Repurchase of Notes at the Option of the Holders Upon a Change of
Control") or the Asset Sale Offer Price on Notes validly tendered and
not properly withdrawn pursuant to a Change of Control Offer or Asset
Sale Offer, as applicable;
(3) our or any of our Subsidiaries' failure to observe or perform any other
covenant or agreement contained in the Notes or the Indenture and,
except for the provisions under "Repurchase of Notes at the Option of
the Holder Upon a Change of Control," "Limitations on Sale of Assets
and Subsidiary Stock,"
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"Limitation on Merger, Sale or Consolidation," "Application of Funds in
Secured Proceeds Account; Internal Consolidation," and "Use of Proceeds
of Horseshoe Note" the continuance of such failure for a period of 30
days after written notice is given to us by the Trustee or to us and
the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes outstanding;
(4) certain events of bankruptcy, insolvency or reorganization in respect
of us or any of our Significant Subsidiaries;
(5) a default in our or any of our Subsidiaries' Indebtedness with an
aggregate amount outstanding in excess of $10 million (other than our
Indebtedness solely to any of our Subsidiaries) (a) resulting from the
failure to pay principal at final stated maturity or (b) as a result of
which the maturity of such Indebtedness has been accelerated prior to
its final stated maturity;
(6) final non-appealable unsatisfied judgments not covered by insurance
aggregating in excess of $10 million, at any one time rendered against
us or any of our Subsidiaries and not stayed, bonded or discharged
within 60 days;
(7) any Guarantee of a Guarantor that is a Significant Subsidiary ceases to
be in full force and effect or becomes unenforceable or invalid or is
declared null and void (other than in accordance with the terms of the
Guarantee) or any Guarantor that is a Significant Subsidiary denies or
disaffirms its Obligations under its Guarantee;
(8) the suspension or loss of our or any of our Subsidiaries' legal right
to operate the gaming establishment included within any Casino and such
suspension or loss continuing for more than 90 consecutive days or for
120 days within any consecutive 180 day period; and
(9) our failure to effect the Internal Consolidation following the
occurrence of the Empress Merger, or a Triggering Event Mandatory
Redemption, as applicable, or our failure to cause our Subsidiaries to
guarantee the Notes upon the consummation of the Empress Merger and the
Internal Consolidation as described under the covenant "Guarantors."
If a Default occurs and is continuing, the Trustee must, within 90 days
after the occurrence of such Default, give to the Holders notice of such
Default; provided, however, that except in the case of a Default in payment of
principal of or interest on any Note, the Trustee may withhold the notice if and
so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (4), above, relating to us), then in every such
case, unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to us (and
to the Trustee if given by Holders) (an "Acceleration Notice"), may declare all
principal, determined as set forth below, and accrued interest (and Liquidated
Damages, if any) thereon to be due and payable immediately; provided,
however,that if any Designated Senior Debt is outstanding pursuant to the
Horseshoe Credit Agreement or the New Credit Facility, as the case may be, or
otherwise, upon a declaration of such acceleration, such principal and interest
shall be due and payable upon the earlier of (x) the third Business Day after
the sending to us and to the agent or representative of the lenders under the
Horseshoe Credit Agreement or the New Credit
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Facility, as the case may be, or other Designated Senior Debt, of such written
notice, unless such Event of Default is cured or waived prior to such date and
(y) the date of acceleration of any Senior Debt under the Horseshoe Credit
Agreement or the New Credit Facility, as the case may be, or other Designated
Senior Debt. In the event a declaration of acceleration resulting from an Event
of Default described in clause (5) above has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if such default is
cured or waived or the holders of the Indebtedness which is the subject of such
default have rescinded their declaration of acceleration in respect of such
Indebtedness within 30 days thereof and the Trustee has received written notice
of such cure, waiver or rescission and no other Event of Default described in
clause (5) above has occurred that has not been cured or waived within 30 days
of the declaration of such acceleration in respect of such Indebtedness. If an
Event of Default specified in clause (4) above, relating to us occurs, all
principal and accrued interest (and Liquidated Damages, if any) thereon will be
immediately due and payable on all outstanding Notes without any declaration or
other act on the part of the Trustee or the Holders. The Holders of a majority
in aggregate principal amount of Notes generally are authorized to rescind any
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Notes which have become
due solely by such acceleration and except a Default with respect to any
provision requiring a supermajority approval to amend, which Default may only be
waived by such a supermajority, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any Default, except a Default
with respect to any provision requiring a supermajority approval to amend, which
Default may only be waived by such a supermajority, and except a Default in the
payment of principal of or interest on any Note not yet cured or a Default with
respect to any covenant or provision which cannot be modified or amended without
the consent of the Holder of each outstanding Note affected. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee reasonable security or indemnity. Subject to
all provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the Notes at the time outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, elect to have our obligations and
the obligations of the Guarantors discharged with respect to the outstanding
Notes ("Legal Defeasance"). Such Legal Defeasance means that we shall be deemed
to have paid and discharged the entire indebtedness represented by the Notes,
and the Indenture shall cease to be of further effect as to all outstanding
Notes and Guarantees, except as to (1) rights of Holders to receive payments in
respect of the principal of, premium, if any, and interest (and Liquidated
Damages, if any) on such Notes when such payments are due from the trust funds;
(2) our obligations with respect to such Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and
the maintenance of an office or agency for payment and money for security
payments held in trust; (3) the rights, powers, trust, duties, and immunities of
the Trustee, and our
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obligations in connection therewith; and (4) the Legal Defeasance provisions of
the Indenture. In addition, we may, at our option and at any time, elect to have
our and the Guarantors' obligations released with respect to certain covenants
under the Indenture, except as described otherwise in the Indenture ("Covenant
Defeasance"), and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) we must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, U.S. legal tender, U.S. Government
Obligations or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, Liquidated Damages, if any, and interest on such Notes on the
stated date for payment thereof or on the redemption date of such
principal or installment of principal of, premium, if any, Liquidated
Damages, if any, or interest on such Notes, and the Holders of Notes
must have a valid, perfected, exclusive security interest in such
trust;
(2) in the case of Legal Defeasance, we shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (A) we have received from, or there has been
published by the Internal Revenue Service, a ruling or (B) since the
date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of such
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(3) in the case of Covenant Defeasance, we shall have delivered to the
Trustee an opinion of counsel in the United States reasonably
acceptable to such Trustee confirming that the Holders of such Notes
will not recognize income, gain or loss for federal income tax purposes
as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the Indenture or
any other material agreement or instrument to which we or any of our
Subsidiaries is a party or by which we or any of our Subsidiaries is
bound;
(6) we shall have delivered to the Trustee an Officers' Certificate stating
that the deposit was not made by us with the intent of preferring the
Holders of such
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Notes over any other of our creditors or with the intent of defeating,
hindering, delaying or defrauding any other our creditors or others;
and
(7) we shall have delivered to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that the conditions precedent provided
for in, in the case of the Officers' Certificate, clauses (1) through
(6) and, in the case of the opinion of counsel, clauses (1) (with
respect to the validity and perfection of the security interest), (2),
(3) and (5) of this paragraph have been complied with and we shall have
delivered to the Trustee an Officers' Certificate, subject to such
qualifications and exceptions as the Trustee deems appropriate, to the
effect that, the trust funds will not be subject to the effect of any
applicable Federal bankruptcy, insolvency, reorganization or similar
laws affecting creditors' right generally.
If the funds deposited with the Trustee to effect Covenant Defeasance are
insufficient to pay the principal of, premium, if any, and interest on the Notes
when due, then our and the Guarantors' obligations under the Indenture will be
revived and no such defeasance will be deemed to have occurred.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Notes)
as to all outstanding Notes when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by us and thereafter repaid
to us or discharged from such trust) have been delivered to the Trustee for
cancellation; or (b) (i) all Notes not theretofore delivered to the Trustee for
cancellation otherwise have become due and payable or, within one year will
become due and payable or subject to redemption as set forth above under the
heading "Optional Redemption," and we have irrevocably deposited or caused to be
deposited with the Trustee as trust funds in the trust for such purpose an
amount of money sufficient to pay and discharge the entire indebtedness on the
Notes not theretofore delivered to the Trustee for cancellation, including all
principal, premium, if any, and accrued interest (and Liquidated Damages, if
any), (ii) we have paid all sums payable by it under the Indenture, (iii) we
have delivered irrevocable instructions to the Trustee to apply the deposited
money toward the payment of the Notes at maturity or the redemption date, as the
case may be, and (iv) the Holders of the Notes have a valid, perfected,
exclusive security interest in such trust. In addition, we must deliver an
Officers' Certificate and an opinion of counsel stating that all conditions
precedent to satisfaction and discharge have been complied with.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting us, the Guarantors and the
Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. With the consent of the Holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding, we, the Guarantors and the Trustee are permitted to amend or
supplement the Indenture or any supplemental indenture or modify the rights of
the Holders; provided, that no such modification may, without the consent of
Holders of at least 66 2/3% in aggregate principal amount of Notes at the time
outstanding, modify the provisions (including the defined terms used therein) of
the covenant
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"Repurchase of Notes at the Option of the Holder upon a Change of Control" in a
manner adverse to the Holders and provided, that no such modification may,
without the consent of each Holder affected thereby:
(1) change the Stated Maturity on any Note, or reduce the principal amount
thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption at our option
thereof, or change the place of payment where, or the coin or currency
in which, any Note or any premium or the interest thereon (and
Liquidated Damages, if any) is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption at our option,
on or after the Redemption Date), or
(2) reduce the Mandatory Redemption Price, or
(3) reduce the Change of Control Purchase Price or the Asset Sale Offer
Price after the corresponding Asset Sale or Change of Control has
occurred, or
(4) alter the provisions (including the defined terms used therein)
regarding any mandatory redemption provisions or our right to redeem
the Notes in a manner adverse to the Holders, or
(5) reduce the percentage in principal amount of the outstanding Notes, the
consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in the Indenture, or
(6) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Note affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that none of our, the Guarantors or any successor
entity's direct or indirect stockholder, employee, officer or director, as such,
past, present or future shall have any personal liability in respect of our or
the Guarantors' obligations under the Indenture or the Notes solely by reason of
his or its status as such stockholder, employee, officer or director, except
that this provision shall in no way limit the obligation of any Guarantor
pursuant to any guarantee of the Notes.
BOOK-ENTRY; DELIVERY AND FORM
General. Except as described below, the Notes will not be represented by
physical certificates. Instead, the Notes will be in the form of one or more
fully registered global notes. Each global note will be deposited with the
Trustee, as custodian for, and registered in the name of DTC or a nominee of
DTC. The original notes, to the extent validly tendered and accepted and
directed by their holders in their letters of transmittal, will be exchanged
through electronic transfer through DTC's Automated Tender Offer Program. Notes
that are issued as described below under the heading "Physical Notes" will be
issued as physical certificates. Upon the transfer of a Note of any series
issued as physical certificates, that Note will be exchanged for an interest in
the global note representing the principal amount of Notes being transferred,
unless the global notes for that series have previously been exchanged for
physical certificates.
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The Global Notes. We expect that in accordance with DTC's procedures: (1) upon
deposit of the global notes, DTC or its custodian will credit, on its internal
system, the principal amount of the individual beneficial interests represented
by the global notes to the respective accounts of persons who have accounts with
DTC and (2) ownership of beneficial interests in the global notes will be shown
on, and the transfer of that ownership will be effected only through: records
maintained by DTC or its nominee with respect to interests of persons who have
accounts with DTC ("participants") and the records of participants with respect
to interests of persons other than participants. So long as DTC, or its nominee,
is the registered owner or holder of the global notes, DTC or the nominee will
be considered the sole record owner or holder of the notes represented by the
global notes for all purposes under the Indenture. No beneficial owner of an
interest in the global notes will be able to transfer that interest except in
accordance with DTC's procedures and the requirements of the Indenture.
We will make payments of the principal of, or premium and interest on, the
global notes to DTC or its nominee, as the registered owner of the global notes.
Neither us, the Trustee or any paying agent under the Indenture will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global notes
or for maintaining, supervising or reviewing any records relating to those
beneficial ownership interests. We expect that DTC or its nominee, upon receipt
of any payment of the principal of, or premium and interest on, the global
notes, will credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of the global
notes as shown on the records of DTC or its nominee. We also expect that
payments by participants to owners of beneficial interests in the global notes
held through those participants will be governed by standing instructions and
customary practice as is now the case with securities held for the accounts of
customers registered in the names of nominees for those customers. Those
payments will be the responsibility of those participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures and
will be settled in immediately available funds. If a holder requires physical
delivery of the notes for any reason, including to sell notes to persons in
states which require physical delivery of the Notes, or to pledge the Notes, the
holder must transfer its interest in the global notes in accordance with DTC's
normal procedures and the procedures described in the Indenture. DTC has advised
us that it will take any action permitted to be taken by a holder of Notes only
at the direction of one or more participants to whose account interests in the
global notes are credited and only in respect of the aggregate principal amount
of Notes as to which that participant has given direction. However, if there is
an Event of Default under the indenture, DTC will exchange the global notes for
physical notes, which it will distribute to its participants. DTC has advised us
as follows: (1) DTC is a limited purpose trust company organized under the laws
of the State of New York; (2) a member of the Federal Reserve System; (3) a
"clearing corporation" within the meaning of the Uniform Commercial Code; and
(4) a "clearing agency" registered under the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic entries in its participants' accounts. This
system eliminated the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC system
is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant ("indirect
participants"). Although DTC and its participants are expected to follow these
procedures in order to facilitate transfers of interests in the global notes
among participants, they are under no obligation to
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perform these procedures, and the procedures may be discontinued at any time.
Neither we nor the Trustee will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
Physical Notes. Notes issued as physical certificates are referred to in
this prospectus as "physical notes." These physical notes will be exchangeable
or transferable for global notes if: (1) DTC notifies us that it is unwilling or
unable to continue as depositary for the global notes, or DTC ceases to be a
"clearing agency" registered under the Exchange Act, and a successor depositary
is not appointed by us within 90 days; or (2) we, in our discretion, at any time
determine not to have all of the notes represented by a global note and notify
the Trustee of our decision; or (3) an Event of Default or an event which, with
the giving of notice or lapse of time, or both, would constitute an Event of
Default relating to the Notes represented by the global security has occurred
and is continuing. Upon the occurrence of any of the above events, we will cause
the appropriate physical notes to be delivered.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
any Person existing at the time such Person becomes our Subsidiary, including by
designation, or is merged or consolidated into or with us or one of our
Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or all
or substantially all the assets of any Person by any other Person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Adjusted Consolidated EBITDA" means, with respect to us, for any period,
our Consolidated EBITDA, minus the product of (1) the Consolidated EBITDA for
such period of each Consolidated Subsidiary which is not wholly-owned by us and
(2) the percentage of the Equity Interests of such Consolidated Subsidiary
which, during such period, is not owned by us.
"Adjusted Consolidated Net Income" means, with respect to any period,
Consolidated Net Income for such period, minus (1) 100% of the amount of any
writedowns, writeoffs or negative extraordinary charges not otherwise reflected
in Consolidated Net Income during such period and minus (2) Permitted Tax
Distributions for such period.
"Affiliate" means (1) any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with us or any of our
Subsidiaries, including, without limitation, Jack Binion, Peri Cope Howard and
Phyllis Cope, (2) any spouse, immediate family member or relative of any person
described in clause (1) above, (3) any trust in which any person described in
clause (1) or (2) above has a beneficial interest, and (4) any trust established
by any person described in clause (1) or (2) above, whether or not such person
has a beneficial interest in such trust. For purposes of this definition, the
term "control" means (a) the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise or (b) the beneficial
ownership of 10% or more of any class of Voting Equity Interests of a person.
"Applicable Capital Gain Tax Rate" in respect of each of us or any of our
Subsidiaries shall mean for each such entity calculated separately an amount
equal to the sum of (i) the highest marginal Federal capital gain tax rate
applicable to any of our Equity Holders plus (ii) an amount equal to the sum of
the highest marginal state and
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local capital gain tax rates applicable to any of our Equity Holders, multiplied
by a factor equal to 1 minus such highest marginal Federal capital gain tax
rate.
"Applicable Income Tax Rate" in respect of each of us or any of our
Subsidiaries shall mean for each such entity calculated separately, an amount
equal to the sum of (i) the highest marginal Federal income tax rate applicable
to any our Equity Holders plus (ii) an amount equal to the sum of the highest
marginal state and local income tax rates applicable to any of our Equity
Holders, multiplied by a factor equal to 1 minus such highest marginal Federal
income tax rate.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (1) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (2) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Contribution" means any contribution to our equity from our direct
or indirect parent for which no consideration other than the issuance of common
stock with no redemption rights and no special preferences, privileges or voting
rights is given.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Cash Equivalent" means:
(1) securities issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof
(provided, that the full faith and credit of the United States of
America is pledged in support thereof) or
(2) time deposits and certificates of deposit and commercial paper issued
by the parent corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million or
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(3) commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc., and in the case
of each of (1), (2), and (3) maturing within one year after the date of
acquisition,
(4) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clause (1) above
entered into with any bank meeting the qualifications specified in
clause (2) above,
(5) marketable obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing, or payable at the demand of the
holder thereof, within one year from the date of acquisition thereof
and, at the time of acquisition, having one of the three highest
ratings obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc., and
(6) investments in money market funds substantially all of whose assets
comprise securities of the types described in clauses (1) through (5)
above.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant, hotel, theater, parking facilities, retail shops, land,
golf courses and other recreation and entertainment facilities, marina, vessel,
barge, ship and equipment.
"Change of Control" means:
(1) prior to the completion of an Initial Public Offering by us, the
failure at any time of Excluded Persons as a group to own and control
at least 40% of our issued and outstanding Equity Interests;
(2) after the completion of an Initial Public Offering by us, the
acquisition, in one or more transactions, of beneficial ownership by
(A) any person or entity (other than an Excluded Person) or (B) any
group of persons or entities (excluding any group in which Excluded
Persons beneficially own in the aggregate at least 75% of the equity
and voting interests beneficially owned by the group) who constitute a
group (within the meaning of Section 13(d)(3) of the Exchange Act), in
either case, of our Equity Interests such that, as a result of such
acquisition, such person, entity or group beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly,
30% or more of the voting power of our Equity Interests entitled to
vote in the election of our directors then outstanding; provided,
however, that no Change of Control shall be deemed to have occurred if
(A) Excluded Persons beneficially own, in the aggregate, at such time,
a greater percentage of the total voting power of our Equity Interests
entitled to vote in the election of our directors than such other
person, entity or group or (B) at the time of such acquisition,
Excluded Persons (or any of them) possess the ability (by contract or
otherwise) to elect, or cause the election of, a majority of the
members of our Board of Directors;
(3) any merger or consolidation of us with or into any Person or any sale,
transfer or other conveyance, whether direct or indirect, of all or
substantially all of our assets, on a consolidated basis, in one
transaction or a series of related transactions, if immediately after
giving effect to such transaction or transactions, any person or group
(excluding any group in which Excluded Persons beneficially own in the
aggregate at least 75% of the equity and voting interests beneficially
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owned by the group) is or becomes the beneficial owner, directly or
indirectly, of 30% or more of the total voting power of Equity
Interests of the surviving or transferee Person; provided, however,
that no Change of Control shall be deemed to have occurred if (a)
Excluded Persons beneficially own, in the aggregate, at such time, (x)
40% or more of the total voting power of Equity Interests of the
surviving or transferee Person and (y) a greater percentage of the
total voting power of Equity Interests of the surviving or transferee
Person than such other person or group or (b) after giving effect to
such transaction, Excluded Persons (or any of them) possess the ability
(by contract or otherwise) to elect, or cause the election of, a
majority of the members of our Board of Directors;
(4) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period
constituted our Board of Directors (together with any new directors
whose election by such Board of Directors or whose nomination for
election by our shareholders was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved, including new directors designated in or
provided for in an agreement regarding the merger, consolidation or
sale, transfer or other conveyance, of all or substantially all of our
assets, if such agreement was approved by a vote of such majority of
directors), cease for any reason to constitute a majority of our Board
of Directors then in office; or
(5) we adopt a plan of liquidation.
"Change of Control Release Amount" means the amount, determined by us, in
good faith and as set forth in a certificate to be delivered to the Securities
Intermediary and the Trustee, necessary to consummate the Empress Change of
Control Offer on the terms set forth in the Empress Indenture.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and either (x) a Rating Decline or (y) a decline in our Consolidated
Coverage Ratio.
"Code" means the internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" of any Person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such Person (in the case of us,
Adjusted Consolidated EBITDA) attributable to continuing operations and
businesses (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of) for the Reference Period to (b) the
aggregate Consolidated Fixed Charges of such Person (exclusive of amounts
attributable to operations and businesses permanently discontinued or disposed
of, but only to the extent that the obligations giving rise to such Consolidated
Fixed Charges would no longer be obligations contributing to such Person's
Consolidated Fixed Charges subsequent to the Transaction Date) during the
Reference Period; provided, that for purposes of such calculation;
(i) Acquisitions which occurred during the Reference Period or subsequent
to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period,
(ii) transactions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day of
the Reference Period,
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(iii) the incurrence of any Indebtedness or issuance of any Disqualified
Capital Stock during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date (and the
application of the proceeds therefrom to the extent used to refinance
or retire other Indebtedness) shall be assumed to have occurred on
the first day of the Reference Period, and
(iv) the Consolidated Fixed Charges of such Person attributable to interest
on any Indebtedness or dividends on any Disqualified Capital Stock
bearing a floating interest (or dividend) rate shall be computed on a
pro forma basis as if the average rate in effect from the beginning of
the Reference Period to the Transaction Date had been the applicable
rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap and Hedging Obligation
(which shall remain in effect for the 12-month period immediately
following the Transaction Date) that has the effect of fixing the
interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the Consolidated Net Income of such Person for such period adjusted to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of:
(1) Consolidated income tax expense,
(2) Consolidated depreciation and amortization expense,
(3) Consolidated Fixed Charges,
(4) Consolidated Preopening Expenses,
(5) minority interests in income of Consolidated Subsidiaries as adjusted
to deduct therefrom minority interests in the losses of Consolidated
Subsidiaries; provided that, for purposes of this clause (5) there
shall be excluded from the definition of income and loss (only to the
extent included in computing such net income (or loss) and without
duplication) the items described in clauses (a), (b), (c), (d) and (e)
of the definition of Consolidated Net Income and
(6) all other non-cash charges attributable to the grant, exercise or
repurchase of options for or shares of Qualified Capital Stock to or
from employees of such Person and its Consolidated Subsidiaries.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed whether capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations) of such Person
and its Consolidated Subsidiaries for such period, including, to the extent such
expense was deducted in computing Consolidated Net Income during such period (1)
amortization of original issue discount and non-cash interest payments or
accruals on any Indebtedness, (2) the interest portion of all deferred payment
obligations that constitute Indebtedness, and (3) all commissions, discounts and
other fees and charges owed with respect to bankers' acceptances and letters of
credit financings and currency and Interest Swap and Hedging Obligations, in
each case to the extent attributable to such period, and (b) the amount of
dividends accrued or payable (or guaranteed) by such Person or any of its
Consolidated Subsidiaries in respect of Disqualified Capital Stock (other than
by Subsidiaries of such Person to such Person or
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such Person's Wholly Owned Subsidiaries). For purposes of this definition, (x)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined in good faith by us to be the rate of
interest implicit in such Capitalized Lease Obligation in accordance with GAAP
and (y) interest expense attributable to any Indebtedness represented by the
guaranty by such Person or a Subsidiary of such Person of an obligation of
another Person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication):
(a) all gains and losses which are either extraordinary (as determined in
accordance with GAAP) or are either unusual or nonrecurring (including,
without limitation, from the sale or other disposition of assets
outside the ordinary course of business or from the issuance or sale of
any capital stock or from the repayment, cancellation, repurchase or
redemption of Indebtedness),
(b) the net income, if positive, of any Person, other than a Consolidated
Subsidiary, in which such Person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
Consolidated Subsidiary of such Person during such period, but in any
case not in excess of such Person's pro ratashare of such Person's net
income for such period,
(c) the net income or loss of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition,
(d) the net income, if positive, of any of such Person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends
or similar distributions is not at the time permitted by operation of
the terms of its charter or bylaws or any other Agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Consolidated Subsidiary (other than any Gaming Law
that is generally applicable to all Persons operating Casinos through
Subsidiaries in any jurisdiction in which we or such Subsidiary are
conducting business so long as there is in effect no specific order,
decree or other prohibition pursuant to such Gaming Law in such
jurisdiction limiting the payment of a dividend or similar distribution
by such a Consolidated Subsidiary) and
(e) the cumulative effect of a change in accounting principles.
"Consolidated Preopening Expenses" means those costs incurred prior to the
commencement of a new operation, including payroll, consulting fees, legal
expenses, licensing, supplies, travel, printing, relocation expense, temporary
housing and other similar expenses, that are not required, in accordance with
GAAP, to be capitalized or expensed when incurred but are acceptable in
accordance with GAAP to be deferred until the new operation commences.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such Person in accordance with GAAP.
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"Consolidation" means, with respect to us, the consolidation of the
accounts of our Subsidiaries, all in accordance with GAAP; provided, that
"consolidation" will not include consolidation of the accounts of any
Unrestricted Subsidiary with our accounts. The term "consolidated" has a
correlative meaning to the foregoing.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (a) any Indebtedness under the Horseshoe
Credit Agreement or the New Credit Facility, as the case may be, and (b) any
other Senior Debt permitted to be incurred by the Indenture the principal amount
of which is $25 million or more and that has been designated by the Board of
Directors as "Designated Senior Debt."
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any Person, Equity Interests of such Person that, by its terms or by
the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or in
part, on or prior to the Stated Maturity of the Notes and (b) with respect to
any Subsidiary of such Person (including with respect to any of our
Subsidiaries), any Preferred Stock; provided, that a provision providing for a
change of control redemption at the option of the holder that is expressly
subordinated to the prior payment of the Notes shall not cause such Equity
Interests to be treated as Disqualified Capital Stock.
"Empress" means Empress Entertainment, Inc., a Delaware corporation.
"Empress Illinois" means Empress Casino Joliet Corporation, an Illinois
corporation.
"Empress Indiana" means Empress Casino Hammond Corporation, an Indiana
corporation.
"Empress Merger" means the acquisition, directly or indirectly, by us of
all of the Equity Interests of Empress Indiana and Empress Illinois in
accordance with the Merger Agreement.
"Empress Merger Consideration and Related Costs" means:
(1) the cash consideration for the Empress Merger payable by us to Empress
pursuant to the Merger Agreement; and
(2) all fees and expenses related to the foregoing;
"Equity Holder" means (a) with respect to a corporation, each shareholder
of such corporation, (b) with respect to a limited liability company or similar
entity, each member of such limited liability company or similar entity, (c)
with respect to a partnership, each partner of such partnership and (d) with
respect to any disregarded entity, the owner of such entity.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership, participation or
membership interests in, such Person.
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by
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exercise of the power of eminent domain or otherwise, of such property or asset,
or confiscation or requisition of the use of such property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Excluded Person" means:
(a) Jack Binion,
(b) Phyllis Cope,
(c) Peri Cope Howard, or
(d) any Affiliate (where the determination of Affiliate is made without
reference to clause (b) of the definition of such term) of the persons
described in clause (a), (b) or (c) above.
"Exempted Affiliate Transaction" means:
(a) payments of reasonable and customary compensation, managers' and
directors' fees and indemnities of managers, directors, officers and
employees,
(b) any employment agreement entered into by us or any of our Subsidiaries
in the ordinary course of business and consistent with the usual and
customary practice of the gaming industry in the United States,
(c) Restricted Payments permitted under the terms of the covenant discussed
above under "Limitation on Restricted Payments" (including transactions
which are permitted because they are excluded from the definition of
the term "Restricted Payment"),
(d) transactions solely between us and any Guarantor or solely among
Guarantors,
(e) transactions permitted pursuant to paragraph (d) of the definition of
Permitted Indebtedness, and
(f) the execution, delivery and performance of the Horseshoe Note.
"Flow Through Entity" means an entity which (x) for Federal income tax
purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of
the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section
1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of Section
7701(a)(2) of the Code) other than an "publicly traded partnership" (as defined
in Section 7704 of the Code), or (iv) a business entity which is disregarded as
an entity separate from its owner under the Code, the Treasury Regulations or
any published administrative guidance of the Internal Revenue Service and (y)
for state and local jurisdictions in respect of which Permitted Tax
Distributions are being made, is subject to substantially similar "flow through"
treatment under the applicable state or local income tax law.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States applied on a consistent basis as in
effect on the Issue Date.
"Gaming Authority" means any Governmental Authority with the power to
regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental
Authorities with
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the responsibility to interpret and enforce the laws and regulations applicable
to gaming in any Gaming Jurisdiction.
"Gaming Jurisdiction" means any Federal, state or local jurisdiction in
which any entity in which we have a direct or indirect beneficial, legal or
voting interest conducts gaming, now or in the future.
"Gaming Law" means any law, rule, regulation or ordinance governing gaming
activities, any administrative rules or regulations promulgated thereunder, and
any of the corresponding statutes, rules and regulations in each Gaming
Jurisdiction.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"HE" means Horseshoe Entertainment, a Louisiana limited partnership.
"Horseshoe Credit Agreement" means the Credit Agreement, dated as of
October 10, 1995, among Horseshoe Gaming, Robinson Property Group, as guarantor,
and certain financial institutions identified therein, as lenders, that provides
for no greater than an aggregate of $20 million in Indebtedness, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as such Credit Agreement and/or related
documents may be amended, restated, supplemented, renewed, replaced or otherwise
modified from time to time whether or not with the same agent, trustee,
representative lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Horseshoe
Credit Agreement" shall include agreements in respect of Interest Swap and
Hedging Obligations with lenders party to the Horseshoe Credit Agreement and
shall also include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Horseshoe Credit Agreement and
all refundings, refinancings and replacements of any Horseshoe Credit Agreement,
including any agreement (1) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (2) adding or deleting borrowers or
guarantors thereunder, so long as borrowers and issuers include one or more of
us and our Subsidiaries and their respective successors and assigns, (3)
increasing the amount of Indebtedness incurred thereunder or available to be
borrowed thereunder; provided, that on the date such Indebtedness is incurred it
would not be prohibited by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" or (4) otherwise altering the terms
and conditions thereof in a manner not prohibited by the terms of the Indenture.
"Horseshoe Gaming" means Horseshoe Gaming, L.L.C., a Delaware limited
liability company.
"Horseshoe Note" means a promissory note, dated as of the Issue Date, in
the principal amount of approximately $240.3 million made by Horseshoe Gaming in
our favor evidencing a loan by us to Horseshoe Gaming, the proceeds of which
shall be used by Horseshoe Gaming as required under the covenant "Use of
Proceeds of Horseshoe Note." Repayment of the Horseshoe Note will be guaranteed
by RPG and HE.
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"Indebtedness" of any Person means, without duplication:
(a) all liabilities and obligations, contingent or otherwise, of such
Person to the extent such liabilities and obligations would appear as a
liability upon the consolidated balance sheet of such Person in
accordance with GAAP
(1) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a
portion thereof),
(2) evidenced by bonds, notes, debentures or similar instruments, or
(3) representing the balance deferred and unpaid of the purchase price
of any property or services, except (other than accounts payable or
other obligations to trade creditors which have remained unpaid for
greater than 90 days past their original due date, except to the
extent any such obligation is being contested in good faith and for
which adequate reserves are maintained in accordance with GAAP)
those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors;
(b) all liabilities, contingent or otherwise, of such Person
(1) evidenced by bankers' acceptances or similar instruments issued or
accepted by banks,
(2) relating to any Capitalized Lease Obligation, or
(3) evidenced by a letter of credit or a reimbursement obligation of
such Person with respect to any letter of credit;
(c) all net obligations of such Person under Interest Swap and Hedging
Obligations;
(d) all liabilities and obligations of others of the kind described in the
preceding clause (a), or (b) or (c) that such Person has guaranteed or
provided credit support or that is otherwise its legal liability (but
only to the extent of the amount actually guaranteed) or which are
secured by any assets or property of such Person and all obligations to
purchase, redeem or acquire any third party Equity Interests;
(e) any and all deferrals, renewals, extensions, refinancing and refundings
(whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the
preceding clauses (a), (b), (c), or (d) or this clause (e), whether or
not between or among the same parties; and
(f) all Disqualified Capital Stock of such Person (measured at the greater
of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends);
provided, that any indebtedness which has been defeased in accordance with GAAP
or defeased pursuant to the deposit of cash or Government Securities (in an
amount sufficient to satisfy all such indebtedness obligations at maturity or
redemption, as applicable, and all payments of interest and premium, if any) in
a trust or account created or pledged for the sole benefit of the holders of
such indebtedness, and subject to no other Liens, and the other applicable terms
of the instrument governing such indebtedness, shall not constitute
"Indebtedness."
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified
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Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to the Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Capital Stock, such Fair
Market Value to be determined in good faith by the board of directors of the
issuer (or managing general partner of the issuer) of such Disqualified Capital
Stock. The amount of any Indebtedness outstanding as of any date shall be (i)
the accreted value thereof, in the case of any Indebtedness issued with original
issue discount, but the accretion of original issue discount in accordance with
the original terms of Indebtedness issued with an original issue discount will
not be deemed to be an incurrence and (ii) the principal amount thereof, in the
case of any other Indebtedness.
"Initial Public Offering" means a bona fide underwritten initial public
offering of our common stock for cash pursuant to an effective registration
under the Securities Act.
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Internal Consolidation" means the merger of Horseshoe Gaming with and into
us such that, after the Internal Consolidation, Horseshoe Gaming will cease to
exist, and Horseshoe GP, Inc. and New Gaming Capital Partnership ("NGCP"), the
general partners of RPG and NGCP, and of HE, respectively, will be our direct
Wholly Owned Subsidiaries, all substantially as described in the Offering
Memorandum.
"Investment" by any Person in any other Person means (without duplication):
(a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services,
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities, including
any options or warrants, of such other Person or any agreement to make
any such acquisition;
(b) the making by such Person of any deposit with, or advance, loan or
other extension of credit to, such other Person (including the purchase
of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such
other Person) or any commitment to make any such advance, loan or
extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business);
(c) other than guarantees of our or any Guarantor's Indebtedness or to the
extent permitted by the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," the entering
into by such Person of any guarantee of, or other credit support or
contingent obligation with respect to, Indebtedness or other liability
of such other Person;
(d) the making of any capital contribution by such Person to such other
Person; and
(e) the designation by our Board of Directors of any Person to be an
Unrestricted Subsidiary in accordance with the definition of
"Unrestricted Subsidiary."
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We shall be deemed to make an Investment in an amount equal to the fair
market value of the net assets of any subsidiary (or, if neither we nor any of
our Subsidiaries has theretofore made an Investment in such subsidiary, in an
amount equal to the Investments being made), at the time that such subsidiary is
designated an Unrestricted Subsidiary, and any property transferred to an
Unrestricted Subsidiary from us or our Subsidiary shall be deemed an Investment
valued at its fair market value at the time of such transfer determined in good
faith by our Board of Directors.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Junior Security" means any Qualified Capital Stock and any of our or a
Guarantor's Indebtedness, as applicable, that is subordinated in right of
payment to Senior Debt (and any Indebtedness issued in exchange for Senior Debt)
at least to the same extent as the Notes or the Guarantee, as applicable, and
has no scheduled installment of principal due, by redemption, sinking fund
payment or otherwise, on or prior to the Stated Maturity of the Notes.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger, dated
as of September 2, 1998, relating to the Empress Merger, as in effect on the
Issue Date, without regard to any amendment, supplement or waiver after the
Issue Date which alters the terms of the Empress Merger in any material respect.
"Merger Release Amount" means the amount by which the value of the assets
in the Secured Proceeds Account exceeds the sum of (x) $151.5 million plus (y)
seven-months of interest on $150 million aggregate principal amount of the
Notes.
"Moody's" means Moody's Investors Services, Inc. and its successors.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by us, in the case of a sale of Qualified Capital Stock, and by us and
our Subsidiaries in respect of an Asset Sale plus, in the case of an issuance of
Qualified Capital Stock upon any exercise, exchange or conversion of our
securities (including options, warrants, rights and convertible or exchangeable
debt) that were issued for cash on or after the Issue Date, the amount of cash
originally received by us upon the issuance of such securities (including
options, warrants, rights and convertible or exchangeable debt) less, in each
case, the sum of all payments, fees, commissions and expenses (including,
without limitation, the fees and expenses of legal counsel and investment
banking fees and expenses) incurred in connection with such Asset Sale or sale
of Qualified Capital Stock, and, in the case of an Asset Sale only, less (1) the
amount (estimated reasonably and in good faith by us) of income, franchise,
sales and other applicable taxes required to be paid by us or any of our
respective Subsidiaries in connection with such Asset Sale in the taxable year
that such sale is consummated or in the immediately succeeding taxable year, the
computation of which shall take into account the reduction in tax liability
resulting from any available operating losses and net operating loss carryovers,
tax credits and tax credit carryforwards, and similar tax attributes, (2) the
amount of any liabilities relating to the assets sold or transferred that are
retained by us or our Subsidiaries, and (3) an amount (estimated reasonably and
in good faith by us or
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required by the terms of such Asset Sale agreement) of a reserve for
indemnifications and warranties or representations made in connection with such
Asset Sale.
"New Credit Facility" means a credit agreement to be entered into by and
among us, certain of our Subsidiaries, certain financial institutions as lenders
and an agreed upon financial institution, as agent, providing for (1) an
aggregate $125 million term loan facility, and (2) an aggregate $250 million
revolving credit facility, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, as such
credit agreement and/or related documents may be amended, restated,
supplemented, renewed, replaced or otherwise modified from time to time whether
or not with the same agent, trustee, representative lenders or holders, and,
subject to the proviso to the next succeeding sentence, irrespective of any
changes in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "New Credit Facility" shall include agreements in
respect of Interest Swap and Hedging Obligations with lenders party to the New
Credit Facility and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any New Credit
Facility and all refundings, refinancings and replacements of any New Credit
Facility, including any agreement (1) extending the maturity of any Indebtedness
incurred thereunder or contemplated thereby, (2) adding or deleting borrowers or
guarantors thereunder, so long as borrowers and issuers include one or more of
us and our Subsidiaries and their respective successors and assigns, (3)
increasing the amount of Indebtedness incurred thereunder or available to be
borrowed thereunder; provided, that on the date such Indebtedness is incurred it
would not be prohibited by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" or (4) otherwise altering the terms
and conditions thereof in a manner not prohibited by the terms of the Indenture.
"Non-Recourse Indebtedness" means Indebtedness of a Person to the extent
that under the terms thereof (including any related instruments, documents or
filings) no personal recourse shall be had against such person for the payment
of the principal of or interest or premium on such Indebtedness or the
Indebtedness refinanced by such Indebtedness and as to which neither we nor any
Subsidiary provides any guarantee, collateral or other credit support of any
kind whatsoever.
"Obligation" means any principal, premium or interest payment, or monetary
penalty, or damages, due by us or any Guarantor under the terms of the Notes or
the Indenture, including any Liquidated Damages due pursuant to the terms of the
Registration Rights Agreement, in each case as such documents may be amended
from time to time.
"Offering" means the offering of the Notes by us.
"Offering Memorandum" means the final offering memorandum dated May 6, 1999
relating to our offering of the Notes.
"Officers' Certificate" means the officers' certificate to be delivered
upon the occurrence of certain events as set forth in the Indenture.
"Permitted Indebtedness" means that:
(a) we and the Guarantors may incur Indebtedness evidenced by the Notes and
represented by the Indenture and the Guarantees thereof up to the
amounts being issued on the Issue Date;
(b) we and the Guarantors, as applicable, may incur Refinancing
Indebtedness with respect to any Indebtedness or Disqualified Capital
Stock, as applicable,
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described in clause (a) or this clause (b) of this definition or
incurred under the Debt Incurrence Ratio test or clause (1) of
paragraph (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," or which is outstanding
on the Issue Date (less the amount of any of our or our Subsidiaries'
Indebtedness (other than under the Horseshoe Credit Agreement) in
existence on the Issue Date repaid on or after the Issue Date);
(c) we and our Subsidiaries may incur Indebtedness solely in respect of
bankers acceptances, letters of credit and performance bonds (to the
extent that such incurrence does not result in the incurrence of any
obligation to repay any obligation relating to borrowed money of
others), all in the ordinary course of business in accordance with
customary industry practices, in amounts and for the purposes customary
in our industry or pursuant to self-insurance obligations; provided,
that the aggregate amount outstanding of such Indebtedness (including
any Refinancing Indebtedness and any other Indebtedness issued to
retire, refinance, refund, defease or replace such Indebtedness) shall
at no time exceed $5 million;
(d) we may incur Indebtedness or issue Disqualified Capital Stock to any
Subsidiary, and any Subsidiary may incur Indebtedness or issue
Disqualified Capital Stock to any other Subsidiary or to us; provided,
however, that such obligations shall be evidenced by an intercompany
note and, in any case where we or a Guarantor is the obligor, shall be
subordinated in all respects to our Obligations pursuant to the Notes
and the Horseshoe Credit Agreement or the New Credit Facility, as the
case may be, and the Guarantor's Obligations pursuant to the Guarantee
of our Obligations under the Notes and the Horseshoe Credit Agreement
or the New Credit Facility, as the case may be;
(e) we and any Subsidiary may post a bond or surety obligation (or incur an
indemnity or similar obligation) to or in favor of any Governmental
Authority in order to prevent the impairment or loss by us or any
Subsidiary of or to obtain for us or any Subsidiary a Gaming License,
to the extent required by applicable law and consistent in character
and amount with customary industry practice; and
(f) we and any Subsidiary may incur Interest Swap and Hedging Obligations
that are incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate Indebtedness that is permitted
by the Indenture to be outstanding; provided, that the notional amount
of any such Interest Swap and Hedging Obligation does not exceed the
principal amount of Indebtedness to which such Interest Swap and
Hedging Obligation relates.
"Permitted Liens" means:
(a) Liens existing on the Issue Date;
(b) Liens imposed by governmental authorities for taxes, assessments or
other charges not yet subject to penalty or which are being contested
in good faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on our books in accordance with GAAP;
(c) statutory liens of carriers, warehousemen, mechanics, material men,
landlords, repairmen or other like Liens arising by operation of law in
the ordinary course of business provided that (i) the underlying
obligations are not overdue for a period of more than 60 days, or (ii)
such Liens are being contested in good faith and by
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appropriate proceedings and adequate reserves with respect thereto are
maintained on our books in accordance with GAAP;
(d) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other
similar encumbrances or title defects which, singly or in the
aggregate, do not in any case materially detract from the value of the
property, subject thereto (as such property is used by us or any of our
Subsidiaries) or interfere with the ordinary conduct of our business or
any of our Subsidiaries; provided, however, that any such liens are not
incurred in connection with any borrowing of money or any commitment to
loan any money or extend any credit;
(f) Liens arising by operation of law in connection with judgments, only to
the extent, for an amount and for a period not resulting in an Event of
Default with respect thereto;
(g) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security legislation;
(h) Liens securing the Indenture and the Notes;
(i) Liens securing Indebtedness of a Person existing at the time such
Person becomes a Subsidiary or is merged with or into us or a
Subsidiary or Liens securing Indebtedness incurred in connection with
an Acquisition, provided, that such Liens were in existence prior to
the date of such acquisition, merger or consolidation, were not
incurred in anticipation thereof, and do not extend to any other
assets;
(j) Liens arising from Purchase Money Indebtedness permitted to be incurred
pursuant to clause (a) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock" provided such
Liens relate solely to the property which is subject to such Purchase
Money Indebtedness;
(k) leases or subleases granted to other Persons in the ordinary course of
business not materially interfering with the conduct of our business or
any of our Subsidiaries or materially detracting from the value of the
relative assets of ours or any Subsidiary;
(l) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by us or any
of our Subsidiaries in the ordinary course of business;
(m) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse
to the Holders than the terms of the Liens securing such refinanced
Indebtedness, and provided that the Indebtedness secured is not
increased and the Lien is not extended to any additional assets or
property that would not have been security for the Indebtedness
refinanced;
(n) Liens securing Indebtedness incurred under the Horseshoe Credit
Agreement or the New Credit Facility, as the case may be, in accordance
with the terms of the
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covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock;"
(o) any (x) interest or title of a lessor or sublessor under any lease,
including under any Capitalized Lease Obligation, (y) restriction or
encumbrance that the interest or title of such lessor or sublessor may
be subject to, or (z) subordination of the interest of the lessee or
sublessee under such lease to any restriction or encumbrance referred
to in subclause (y); and
(p) Liens in favor of us or any of our Subsidiaries.
"Permitted Tax Distributions" in respect of us, and each of our
Subsidiaries that qualify as a Flow Through Entity shall mean, with respect to
any taxable year, the sum of: (I) the product of (A) the excess of (i) all items
of taxable income or gain (other than capital gain) allocated by us and each
such Subsidiary to their respective Equity Holders for that year over (ii) all
items of taxable deduction or loss (other than capital loss) allocated to such
Equity Holders by us and each such Subsidiary, respectively, for such year and
(B) the Applicable Income Tax Rate, plus (II) the product of (A) the net capital
gain (i.e., net long-term capital gain over net short-term capital loss), if
any, allocated by us and each such Subsidiary to their respective Equity Holders
for such year and (B) the Applicable Capital Gain Tax Rate, plus (III) taking
into account our and each such Subsidiary's capital gain and loss, respectively,
the product of (A) the net short-term capital gain (i.e., net short-term capital
gain in excess of net long-term capital loss), if any, allocated by us and each
such Subsidiary to their respective Equity Holders for such year and (B) the
Applicable Income Tax Rate, minus (IV) the aggregate Tax Loss Benefit Amounts
for us and each such Subsidiary, respectively, for such year. For purposes of
calculating the amount of our Permitted Tax Distributions, the proportionate
part of the items of taxable income, gain, deduction or loss (including capital
gain or loss) of any Subsidiary which is a Flow Through Entity shall be included
in determining our taxable income, gain, deduction or loss (including capital
gain or loss).
Estimated tax distributions shall be made within fifteen days following
March 31, May 31, August 31, and December 31 based upon an estimate of the
excess of (x) the tax distributions that would be payable for the period
beginning on January 1 of such year and ending on March 31, May 31, August 31,
and December 31 if such period were a taxable year (computed as provided above)
over (y) distributions attributable to all prior periods during such taxable
year. Promptly after filing by us and each such Subsidiary of their respective
annual tax return, each Equity Holder shall reimburse us or the applicable
Subsidiary, as the case may be, to the extent such estimated tax distributions
made to such Equity Holder exceeded the actual Permitted Tax Distributions, as
determined on the basis of such tax returns filed in respect of such taxable
year for that Equity Holder and us or the applicable Subsidiary, as the case may
be, shall make a further payment to its respective Equity Holders to the extent
such estimated tax distributions were less than the tax distributions actually
payable to such Equity Holders with respect to such taxable year. If the
appropriate Federal or state taxing authority finally determines that the amount
of the items of our or any Subsidiary's taxable income, gain, deduction or loss
(including capital gain or loss) for any taxable year or the aggregate Tax Loss
Benefit Amounts carried forward to such taxable year should be changed or
adjusted, then each Equity Holder shall reimburse us or the applicable
Subsidiary, as the case may be, to the extent the Permitted Tax Distributions
previously made to such Equity Holder in respect of that taxable year exceeded
the Permitted Tax Distributions with respect to such taxable year taking into
account such change or adjustment for that Equity Holder, or as the case may
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be, we shall make a further payment to its respective Equity Holders to the
extent the Permitted Tax Distributions previously paid to such Equity Holder
were less than the Permitted Tax Distributions payable to such Equity Holders
with respect to such taxable year taking into account such change or adjustment.
To the extent that any tax distribution would otherwise be made to any
Equity Holder at a time when an obligation of such Equity Holder to make a
payment to us or the applicable Subsidiary pursuant to the two previous
sentences remains outstanding, the amount of any tax distribution to be made
shall be reduced by the amounts such Equity Holder is obligated to pay us or the
applicable Subsidiary.
"Person" or "person" means any corporation, individual, limited liability
company, joint stock company, joint venture, partnership, limited liability
partnership, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality or other
entity.
"Preferred Stock" means any Equity Interest of any class or classes of a
Person (however designated) which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
"Pro Forma" or "pro forma" shall have the meaning set forth in Regulation
S-X of the Securities Act of 1933, as amended, unless otherwise specifically
stated herein.
"Public Equity Offering" means an underwritten offering of our common stock
for cash pursuant to an effective registration statement under the Securities
Act.
"Purchase Money Indebtedness" of any Person means any Indebtedness of such
Person to any seller or other Person incurred solely to finance the acquisition
(including in the case of a Capitalized Lease Obligation, the lease),
construction or improvement of any after acquired real or personal tangible
property which, in the reasonable good faith judgment of our Board of Directors,
is related to our Related Business and which is incurred concurrently with (or
within 270 days following) such acquisition and is secured only by the assets so
financed.
"Qualified Capital Stock" means any of our Capital Stock that is not
Disqualified Capital Stock.
"Qualified Exchange" means any defeasance, redemption, repurchase, or other
acquisition of our Capital Stock or Subordinated Indebtedness with the Net Cash
Proceeds received by us from the substantially concurrent sale of our Qualified
Capital Stock or in exchange for our Qualified Capital Stock.
"Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or Moody's
or both shall not make a rating of the Notes publicly available, a nationally
recognized securities rating agency or agencies, as the case may be, selected by
us, which shall be substituted for S&P or Moody's or both, as the case may be.
"Rating Category" means currently:
(1) with respect to S&P, any of the following categories: BB, B, CCC, CC, C
and D (or equivalent successor categories);
(2) with respect to Moody's, any of the following categories: Ba, B, Caa,
Ca, C and D (or equivalent successor categories); and
(3) the equivalent of any such category of S&P or Moody's used by another
Rating Agency.
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In determining whether the rating of the Notes has decreased by one or more
gradations, gradations within Rating Categories (currently + and - for S&P, 1, 2
and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall
be taken into account (e.g., with respect to S&P, a decline in a rating from BB+
to BB, as well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Decline" means the occurrence, on or within 90 days after the
earliest to occur of:
(1) a Change of Control; and
(2) the date of the first public notice of the occurrence of a Change of
Control or of the intention by any Person to effect a Change of Control
(which period shall be extended so long as the rating of the notes is
under publicly announced consideration for possible downgrade by any of
the Rating Agencies), of a decrease in the rating of the Notes by
either Rating Agency by one or more gradations (including gradations
within Rating Categories as well as between Rating Categories).
"Reference Period" with regard to any Person means the four full fiscal
quarters (or such lesser period during which such Person has been in existence)
ended for which financial information is available immediately preceding any
date upon which any determination is to be made pursuant to the terms of the
Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing plus the amount of any premium paid in connection with such
Refinancing in accordance with the terms of the documents governing the
Indebtedness refinanced without giving effect to any modification thereof made
in connection with or in contemplation of such refinancing) the lesser of (i)
the principal amount or, in the case of Disqualified Capital Stock, liquidation
preference, of the Indebtedness or Disqualified Capital Stock so Refinanced and
(ii) if such Indebtedness being Refinanced was issued with an original issue
discount, the accreted value thereof (as determined in accordance with GAAP) at
the time of such Refinancing; provided, that (A) such Refinancing Indebtedness
shall only be used to refinance outstanding Indebtedness or Disqualified Capital
Stock of such Person issuing such Refinancing Indebtedness, (B) such Refinancing
Indebtedness shall (x) not have an Average Life shorter than the Indebtedness or
Disqualified Capital Stock to be so refinanced at the time of such Refinancing
and (y) in all respects, be no less subordinated or junior, if applicable, to
the rights of Holders of the Notes than was the Indebtedness or Disqualified
Capital Stock to be refinanced, (C) such Refinancing Indebtedness shall have a
final stated maturity or redemption date, as applicable, no earlier than the
final stated maturity or redemption date, as applicable, of the Indebtedness or
Disqualified Capital Stock to be so refinanced, and (D) such Refinancing
Indebtedness shall be secured (if secured) in a manner no more adverse to the
Holders of the Notes than the terms of the Liens (if any) securing such
refinanced Indebtedness, including, without limitation, the amount of
Indebtedness secured shall not be increased.
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"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, by and among us and the other parties named on the
signature pages thereof, as such agreement may be amended, modified or
supplemented from time to time.
"Related Business" means the gaming (including pari-mutual betting)
business and any and all reasonably related businesses (including the ownership
and/or operation of entertainment facilities and hotels) necessary for, in
support or anticipation of and ancillary to or in preparation for, the gaming
business including, without limitation, the development, expansion or operation
of any Casino (including any land-based, dockside, river boat or other type of
Casino), owned, or to be owned, by us or one of our Subsidiaries.
"Restricted Investment" means, in one or a series of related transactions,
any Investment other than (1) in Cash Equivalents and in Investments of the type
set forth in clause (5) of the definition of Cash Equivalents that have a
maturity longer than one year so long as the Average Life of all such
Investments does not exceed 15 months, (2) extensions of credit to customers of
Casinos consistent with industry practice in the ordinary course of business,
(3) Investments in a Person engaged in a Related Business if as a result of such
Investment such Person immediately becomes a Subsidiary or such Person is
immediately merged with or into us or a Subsidiary and (4) Investments by us in
any Subsidiary or by a Subsidiary in any other Subsidiary, or any loan or
advance by any of our Subsidiaries to us to the extent permitted by clause (d)
of the definition of "Permitted Indebtedness."
"Restricted Payment" means, with respect to any Person,
(a) the declaration or payment of any dividend or other distribution in
respect of Equity Interests of such Person or any parent or Subsidiary
of such Person,
(b) any payment on account of the purchase, redemption or other acquisition
or retirement for value of Equity Interests of such Person or any
Subsidiary or parent of such Person,
(c) other than with the proceeds from the substantially concurrent sale of,
or in exchange for, Refinancing Indebtedness any purchase, redemption,
or other acquisition or retirement for value of, any payment in respect
of any amendment of the terms of or any defeasance of, any Subordinated
Indebtedness, directly or indirectly, by such Person or a parent or
Subsidiary of such Person prior to the scheduled maturity, any
scheduled repayment of principal, or scheduled sinking fund payment, as
the case may be, of such Indebtedness, and
(d) any Restricted Investment (including, in any case, the designation of
such Person as an Unrestricted Subsidiary) by such Person; provided,
however, that the term "Restricted Payment" does not include:
(1) (A) any dividend, distribution or other payment on or with respect
to Equity Interests of an issuer or (B) the acquisition by the
issuer or a Wholly Owned Subsidiary of such issuer of Equity
Interests of another Subsidiary or an Unrestricted Subsidiary of
such issuer, in the case of each of (A) and (B) of this clause (1),
to the extent payable solely in shares of Qualified Capital Stock of
such issuer;
(2) any dividend, distribution or other payment to us, or to any of our
Subsidiaries, by any of our Subsidiaries;
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(3) loans or advances to officers or employees of ours or any of our
Subsidiaries (other than Mr. Binion, Phyllis Cope and members of the
families of the foregoing persons) (a) to pay business related
expenses or relocation costs of such officers or employees in
connection with their employment by us or any of our Subsidiaries in
an aggregate amount outstanding at any time not exceeding $5 million
for all such officers and employees or (b) for the purchase price of
our or any Subsidiary's Equity Interests (provided that the Equity
Interests purchased with the proceeds of such loan or advance shall
be pledged to us or the Subsidiary, as applicable, as security for
the repayment of such loan or advance);
(4) any Investment received as consideration for any Asset Sale to the
extent that we or any of our Subsidiaries is permitted to receive
such Investment without violating the provisions of the covenant
"Limitation on Sale of Assets and Subsidiary Stock";
(5) Investments received as part of the settlement of litigation or in
satisfaction of extensions of credit to any Person otherwise
permitted under the Indenture pursuant to the reorganization,
bankruptcy or liquidation of such person; and
(6) the liquidating distributions and related transactions contemplated
by the Internal Consolidation.
"S&P" means Standard & Poor's Ratings Services and its successors.
"Senior Debt" of ours or any Guarantor means our or such Guarantor's
Indebtedness arising under the Horseshoe Credit Agreement or the New Credit
Facility, as the case may be, or any other Indebtedness permitted to be incurred
under the Indenture unless the instrument under which such Indebtedness is
incurred expressly provides that it is subordinated in right of payment to any
of our or such Guarantor's Senior Debt; provided, that in no event shall Senior
Debt include (a) Indebtedness of ours to any of our Affiliates, (b) Indebtedness
incurred in violation of the terms of the Indenture, (c) Indebtedness to trade
creditors, and (d) any liability for taxes owed or owing by us or such
Guarantor.
"Significant Subsidiary" shall have the meaning provided under Regulation
S-X of the Securities Act, as in effect on the Issue Date.
"Stated Maturity," when used with respect to any Note, means May 15, 2009.
"Subordinated Indebtedness" means our or a Guarantor's Indebtedness that is
subordinated in right of payment by its terms or the terms of any document or
instrument relating thereto to the Notes or such Guarantee, as applicable.
"Subsidiary," with respect to any Person, means:
(1) a corporation a majority of whose Voting Equity Interests is at the
time, directly or indirectly, owned by such Person, by such Person and
one or more Subsidiaries of such Person or by one or more Subsidiaries
of such Person,
(2) any other Person (other than a corporation) in which such Person, one
or more Subsidiaries of such Person, or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has at least majority ownership interest, or
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(3) a partnership in which such Person or a Subsidiary of such Person is,
at the time, a general partner and in which such Person, directly or
indirectly, at the date of determination thereof has at least a
majority ownership interest.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be our
Subsidiary or a Subsidiary of our Subsidiaries. Unless the context requires
otherwise, Subsidiary means each of our direct and indirect Subsidiaries.
"Tax Loss Benefit Amount" as to any of our or any of our Subsidiaries'
taxable years shall mean the amount by which the Permitted Tax Distributions
would be reduced were a net operating loss or net capital loss from a prior
taxable year of such entity ending subsequent to the date hereof carried forward
to the applicable taxable year; provided, that for such purpose the amount of
any such net operating loss or net capital loss shall be utilized only once and
in each case shall be carried forward to the next succeeding taxable year until
so utilized.
"Unrestricted Subsidiary" means any Person that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by our Board
of Directors) provided that such subsidiary shall not engage, to any substantial
extent, in any line or lines of business activity other than a Related Business.
Our Board of Directors may designate any Person (including any newly acquired or
newly formed Subsidiary at or prior to the time it is so formed or acquired, but
excluding RPG, HE, Empress Indiana and Empress Illinois) to be an Unrestricted
Subsidiary if (a) such Restricted Payment is not prohibited by the terms of the
covenant "Limitation on Restricted Payments;" (b) such Person does not, at the
time of designation, own any Equity Interests of, or own or hold any Lien on any
property of, or hold any debt of, us or a Subsidiary; and (c) such Person does
not, at the time of designation, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness
(other than Non-Recourse Indebtedness). Any such designation constitutes a
Restricted Payment for purposes of the covenant "Limitation on Restricted
Payments." Our Board of Directors may designate any Unrestricted Subsidiary to
be a Subsidiary, provided, that (i) no Default or Event of Default is existing
or will occur as a consequence thereof and (ii) immediately after giving effect
to such designation, on a pro forma basis, we could incur at least $1.00 of
Indebtedness pursuant to the Debt Incurrence Ratio of the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock." Each
such designation shall be evidenced by filing with the Trustee a certified copy
of the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"Voting Equity Interests" means Equity Interests which at the time are
entitled to vote in the election of directors, members or partners generally.
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by us and/or one or more of our Wholly Owned Subsidiaries.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences, under the Internal Revenue Code of 1986, as amended, or the Code,
of exchanging original notes for new notes in the exchange offer and, to
original purchasers of original notes, holding notes. The summary is based upon
laws, regulations, rulings and pronouncements released by the Internal Revenue
Service and judicial decisions now in effect, all of which are subject to
change, possibly on a retroactive basis. This summary assumes that investors
will hold their notes as "capital assets" within the meaning of Section 1221 of
the Code (i.e., generally property held for investment). This summary does not
discuss all aspects of United States federal income taxation that may be
relevant to investors in light of their personal investment circumstances or to
certain types of holders of notes subject to special treatment under the United
States federal income tax laws, for example, dealers in securities, financial
institutions, tax-exempt organizations, insurance companies, banks, purchasers
that hold notes as part of a hedge, straddle, or "synthetic security" or other
integrated investment, taxpayers subject to the alternative minimum tax, foreign
persons or purchasers that have a "functional currency" other than the U.S.
dollar, and does not discuss the consequences to a holder of notes under state,
local or foreign tax laws. We have not and will not seek any rulings from the
Internal Revenue Service with respect to the matters discussed below. There can
be no assurance that the Internal Revenue Service will not take positions
concerning the tax consequences of the purchase, ownership or disposition of the
notes which are different from those discussed herein.
EACH PERSON CONSIDERING EXCHANGING ORIGINAL NOTES FOR NEW NOTES IS URGED TO
CONSULT HIS OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES TO HIM OF
EXCHANGING ORIGINAL NOTES FOR NEW NOTES, AND OWNING AND DISPOSING OF THE NOTES,
INCLUDING THE APPLICATION OF UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of a
note that is (1) an individual who is a citizen or resident of the United
States, (2) a corporation, partnership, or other entity created or organized
under the laws of the United States or any state or political subdivision
thereof, (3) an estate that is subject to United States federal income taxation
without regard to the source of its income, or (4) a trust the administration of
which is subject to the primary supervision of a United States court and which
has one or more United States persons who have the authority to control all
substantial decisions of the trust. A "Non-U.S. Holder" is a beneficial owner of
a note that is not a U.S. Holder.
U.S. HOLDERS AND NON-U.S. HOLDERS
EXCHANGE OFFER
The exchange of original notes for new notes pursuant to the exchange offer
will not constitute a taxable exchange. As a result (1) a U.S. Holder or a
Non-U.S. Holder should not recognize taxable gain or loss as a result of
exchanging original notes for new notes pursuant to the exchange offer, (2) the
holding period of the new notes should include the holding period of the
original notes exchanged therefor and (3) the adjusted tax basis of the new
notes should be the same as the adjusted tax basis of the original notes
exchanged therefor immediately before the exchange.
If the Company becomes required to pay additional cash interest on the
notes upon a failure to comply with certain of its obligations under the
Registration Rights Agreement,
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the additional interest should be taxable to a U.S. Holder when the payment of
such interest is made.
U.S. HOLDERS
STATED INTEREST
In general, interest on a note will be taxable to a U.S. Holder as ordinary
interest income at the time it accrues or is received, in accordance with such
Holder's regular method of tax accounting.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange, retirement or other disposition of a note, a U.S.
Holder generally will recognize capital gain or loss in an amount equal to the
difference between (1) the amount realized upon such sale, other than amounts
paid in respect of accrued but unpaid interest on the note and (2) the U.S.
Holder's adjusted tax basis in the note. Net capital gain (i.e., generally,
capital gain in excess of capital losses) recognized by an individual upon the
sale of a note that has been held for more than 12 months will generally be
subject to tax at a rate not to exceed 20%. Capital gain recognized from the
sale of a note that has been held for 12 months or less will be subject to tax
at ordinary income tax rates. In addition, capital gain recognized upon the sale
of a note by a corporate taxpayer will be subject to tax at the ordinary income
tax rates applicable to corporations.
NON-U.S. HOLDERS
STATED INTEREST
Subject to the discussion of backup withholding below, interest received on
a note by a Non-U.S. Holder will generally not be subject to United States
federal income or withholding tax, provided that (1) the Non-U.S. Holder is not
(i) an actual or constructive owner of 10% or more of the total voting power of
all voting capital of us, (ii) a controlled foreign corporation related to us
through stock ownership, (iii) a foreign tax-exempt organization treated as a
foreign private foundation for United States federal income tax purposes or (iv)
a bank whose receipt of interest on a note is described in Section 881(c)(3)(A)
of the Code, (2) such interest payments are not effectively connected with the
conduct by the Non-U.S. Holder of a trade or business within the United States
and (3) the requirements of section 871(h) or 881(c) of the Code are satisfied
as described below under "Owner Statement Requirement".
A Non-U.S. Holder that does not qualify for exemption from withholding
under the preceding paragraph generally will be subject to withholding of United
States federal income tax at the rate of 30%, or lower applicable treaty rate,
on payments of interest on the notes. Non-U.S. Holders should consult any
applicable income tax treaties, which may provide for a lower rate of
withholding tax, exemption from or reduction of branch profits tax, or other
rules different from those described above.
If the payments of interest on a note are effectively connected with the
conduct by a Non-U.S. Holder of a trade or business in the United States, such
payments will be subject to United States federal income tax on a net income
basis at the rates applicable to United States persons generally and, with
respect to corporate holders, may also be subject to a 30% branch profits tax.
If payments are subject to United States federal income tax on a net income
basis in accordance with the rules described in the preceding sentence, such
payments will not be subject to United States withholding tax as long as
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the holder provides us or our paying agent with a properly executed Form 4224,
or successor form.
OWNER STATEMENT REQUIREMENT
Current United States federal income tax law requires that either the
beneficial owner of a note or a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business and that holds a note on behalf of such owner file a
statement with us or our agent to the effect that the beneficial owner is not a
United States person in order to avoid withholding of United States federal
income tax (an "Owner's Statement").
SALE, EXCHANGE OR REDEMPTION OF NOTES
Except as described below and subject to the discussion concerning backup
withholding set forth below, any gain realized by a Non-U.S. Holder on the sale,
exchange, retirement or other disposition of a note generally will not be
subject to United States federal income tax, unless (1) such gain is effectively
connected with the conduct by such Non-U.S. Holder of a trade or business within
the United States or (2) the Non-U.S. Holder is an individual and is present in
the United States for 183 days or more in the taxable year of the disposition
and certain other conditions are satisfied.
UNITED STATES FEDERAL ESTATE TAX
Notes held, or treated as held, by an individual who is a Non-U.S. Holder
at the time of his death will not be subject to United States federal estate tax
provided that (1) the individual does not actually or constructively own 10% or
more of the total voting power of all of our capital stock and (2) income on the
notes was not effectively connected with the conduct by such Non-U.S. Holder of
a trade or business within the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Internal Revenue Service and to
each Non-U.S. Holder any interest that is subject to withholding or that is
exempt from United States withholding tax. Copies of such reports may also be
made available, under the provisions of a specific treaty or agreement, to the
tax authorities of the country in which the Non-U.S. Holder resides.
The regulations provide that the 31% backup withholding tax and information
reporting will not apply to payments made in respect of the notes by us to a
Non-U.S. Holder, if an Owner's Statement has been received or an exemption has
otherwise been established (provided that neither us nor our paying agent has
actual knowledge that such Non-U.S. Holder is a United States person or that the
conditions of any other exemption are not, in fact, satisfied).
Under current Treasury Regulations, payments of the proceeds of the sale of
a note to or through a foreign office of a "broker" will not be subject to
backup withholding but will be subject to information reporting if the broker is
a United States person, a controlled foreign corporation for United States
federal income tax purposes, or a foreign person 50% or more of whose gross
income is from a United States trade or business for a specified three-year
period, unless the broker has in its records documentary evidence that the
holder is not a United States person and certain conditions are met or the
holder otherwise establishes an exemption. Payment of the proceeds of a sale to
or through the United States office of a broker is subject to backup withholding
and information reporting unless
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the holder certifies as to its Non-United States status under penalties of
perjury or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. Federal income tax liability, provided that the requisite
procedures are followed.
The U.S. Treasury Department has promulgated final regulations (the "Final
Regulations") regarding the withholding and information reporting rules
discussed above. In general, the Final Regulations do not significantly alter
the substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards. The
Final Regulations are generally effective for payments made after December 31,
2000, subject to certain transition rules.
PLAN OF DISTRIBUTION
Except as described below (1) a broker-dealer may not participate in the
exchange offer in connection with a distribution of the new notes, (2) such
broker-dealer would be deemed an underwriter in connection with such
distribution and (3) such broker-dealer would be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions. A broker-dealer may, however,
receive new notes for its own account pursuant to the exchange offer in exchange
for original notes (so long as not acquired directly from us or an affiliate of
us) when such original notes were acquired as a result of market-making
activities or other trading activities. Each such broker-dealer must acknowledge
that it will deliver a prospectus in connection with any resale of such new
notes. This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer (other than an affiliate of us) in connection
with resales of such new notes. We have agreed that for a period of one year
after the consummation deadline for the exchange offer as set forth in the
registration rights agreement, or Consummation Deadline, we will make this
prospectus, as amended or supplemented, available to any such broker-dealer for
use in connection with any such resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such new notes. Any broker-dealer
that resells new notes that were received by it for its own account pursuant to
the exchange offer may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of new notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
For a period of one year after the Consummation Deadline, we will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any broker-dealer that requests such documents in a letter of
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transmittal. We have agreed to pay all expenses incident to the exchange offer
other than commissions or concessions of any brokers or dealers and transfer
taxes and will indemnify the holders of the original notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
With respect to resales of new notes, based on interpretations by the SEC
staff set forth in no-action letters issued to third parties, we believe that a
holder or other person who receives new notes, whether or not such person is the
holder, (other than a person that is an "affiliate" of us within the meaning of
Rule 405 under the Securities Act) who receives new notes in exchange
for notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement or understanding with person
to participate, in the distribution of the new notes, will be allowed to resell
the new notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the new notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires new notes in the exchange offer for the purpose of distribution
or participating in a distribution of the new notes, such holder cannot rely on
the position of the staff enunciated in such no-action letters or any similar
interpretative letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction and such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K under
the Securities Act, unless an exemption from registration is otherwise
available.
LEGAL MATTERS
The validity of the new notes will be passed upon for us by Swidler Berlin
Shereff Friedman, LLP, New York, New York.
EXPERTS
Our audited consolidated financial statements included in this prospectus
and elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
Ernst & Young LLP, independent auditors, have audited the Empress
Entertainment, Inc. consolidated financial statements at December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998, as
set forth in their report. We have included Empress' consolidated financial
statements in the prospectus and elsewhere in the Registration Statement in
reliance on Ernst & Young LLP's report, given their authority as experts in
accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Horseshoe Gaming Holding Corp. and Subsidiaries
Consolidated Condensed Financial Statements:
Balance sheets as of March 31, 1999 (unaudited) and
December 31, 1998..................................... F-2
Statements of operations for the three months ended
March 31, 1999 and 1998 (unaudited)................... F-3
Statements of cash flows for the three months ended
March 31, 1999 and 1998 (unaudited)................... F-4
Notes to consolidated condensed financial statements
(unaudited)........................................... F-5
Report of Independent Public Accountants.................. F-8
Consolidated Financial Statements:
Balance sheets as of December 31, 1998 and 1997........ F-9
Statements of operations for the years ended December
31, 1998, 1997 and 1996............................... F-10
Statements of members' equity for the years ended
December 31, 1998, 1997 and 1996...................... F-11
Statements of cash flows for the years ended December
31, 1998, 1997 and 1996............................... F-12
Notes to consolidated financial statements............. F-13
Empress Entertainment, Inc.
Consolidated Condensed Financial Statements:
Balance sheets as of March 31, 1999 (unaudited) and
December 31, 1998..................................... F-26
Statements of income for the three months ended March
31, 1999 and 1998 (unaudited)......................... F-27
Statements of cash flows for the three months ended
March 31, 1999 and 1998 (unaudited)................... F-28
Notes to consolidated condensed financial statements
(unaudited)........................................... F-29
Report of Independent Auditors............................ F-31
Consolidated Financial Statements:
Balance sheets as of December 31, 1998 and 1997........ F-32
Statements of income for the years ended December 31,
1998, 1997 and 1996................................... F-33
Statements of stockholders' equity for the years ended
December 31, 1998, 1997 and 1996...................... F-34
Statements of cash flows for the years ended December
31, 1998, 1997 and 1996............................... F-35
Notes to consolidated financial statements............. F-36
</TABLE>
F-1
<PAGE> 157
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 47,437 $ 84,151
Accounts receivable, net........................... 8,839 9,653
Inventories........................................ 2,437 3,548
Prepaid expenses and other......................... 8,899 4,484
-------- --------
Total current assets............................ 67,612 101,836
-------- --------
Property and Equipment:
Land............................................... 16,174 16,093
Buildings, boat, barge and improvements............ 340,791 333,071
Furniture, fixtures and equipment.................. 85,731 83,360
Less: accumulated depreciation..................... (69,305) (61,330)
-------- --------
373,391 371,194
Construction in progress........................... 33 4,113
-------- --------
Net property and equipment...................... 373,424 375,307
-------- --------
Other Assets:
Goodwill, net...................................... 35,938 36,124
Assets held for resale............................. 12,000 12,000
Other.............................................. 37,016 35,181
-------- --------
$525,990 $560,448
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt............... $ -- $ 1,174
Accounts payable................................... 7,683 8,252
Accrued expenses and other......................... 45,896 40,599
-------- --------
Total current liabilities....................... 53,579 50,025
Long-term Debt, less current maturities.............. 372,678 387,544
Minority Interest.................................... (2,253) (1,965)
Commitments and Contingencies
Redeemable Ownership Interests....................... 54,941 53,693
Members' Equity (Note 5)............................. 47,045 71,151
-------- --------
$525,990 $560,448
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
F-2
<PAGE> 158
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Casino................................................. $112,698 $106,840
Food and beverage...................................... 12,995 11,082
Hotel.................................................. 8,762 8,283
Retail and other....................................... 3,135 2,091
-------- --------
Gross revenues...................................... 137,590 128,296
Promotional allowances................................. (17,398) (14,390)
-------- --------
Net revenues........................................ 120,192 113,906
-------- --------
Expenses:
Casino................................................. 60,651 60,548
Food and beverage...................................... 4,403 4,179
Hotel.................................................. 2,570 2,884
Retail and other....................................... 2,515 1,584
General and administrative............................. 12,613 13,505
Development............................................ 64 181
Preopening............................................. -- 653
Depreciation and amortization.......................... 8,585 7,947
-------- --------
Total expenses...................................... 91,401 91,481
-------- --------
Operating Profit Before Corporate Expenses............... 28,791 22,425
Corporate expenses..................................... 2,213 3,114
-------- --------
Operating Income......................................... 26,578 19,311
Other Income (Expense):
Interest expense....................................... (10,260) (9,729)
Interest income........................................ 572 477
Other, net............................................. (9) (110)
Minority interest in loss (income) of subsidiaries..... (312) 24
-------- --------
Net Income............................................. $ 16,569 $ 9,973
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
F-3
<PAGE> 159
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income............................................. $ 16,569 $ 9,973
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 8,585 7,947
Amortization of debt discount, deferred finance
charges and other................................. 676 670
Provision for doubtful accounts..................... 810 2,500
Minority interest in income (loss) of subsidiary.... 312 (24)
Increase in redeemable ownership interests.......... 575 1,345
Net change in assets and liabilities................ 335 (16,965)
-------- --------
Net cash provided by operating activities......... 27,862 5,446
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................... (6,090) (25,448)
Proceeds from sale of property and equipment........... -- 194
Increase (decrease) in construction payables........... 763 (19,202)
Increase in other long-term assets..................... (3,072) (2,684)
-------- --------
Net cash used in investing activities............. (8,399) (47,140)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt........................... -- 45,000
Payments on long-term debt............................. (16,175) (1,675)
Capital distributions.................................. (5,576) (4,383)
Warrant repurchase..................................... (34,426) --
-------- --------
Net cash used in financing activities............. (56,177) 38,942
-------- --------
Net change in cash and cash equivalents.................. (36,714) (2,752)
Cash and cash equivalents, beginning of period........... 84,151 48,710
-------- --------
Cash and cash equivalents, end of period................. $ 47,437 $ 45,958
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
F-4
<PAGE> 160
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTRODUCTION:
The accompanying unaudited Consolidated Condensed Financial Statements of
Horseshoe Gaming Holding Corp., a Delaware corporation (the "Company") and its
subsidiaries (including Horseshoe Gaming, L.L.C. ("Horseshoe Gaming"); see Note
5) have been prepared without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto contained elsewhere in this prospectus. The results
for the periods indicated are unaudited, but reflect all adjustments (consisting
only of normal recurring adjustments) which management considers necessary for a
fair presentation of operating results. Results of operations for interim
periods are not necessarily indicative of a full year of operations.
2. CONTINGENCIES:
The Company and its subsidiaries, during the normal course of operating its
business, become engaged in various litigation and other legal disputes. In the
opinion of the Company's management, the ultimate disposition of such disputes
will not have a material impact on the Company's operations.
On September 2, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") to acquire the operating subsidiaries of Empress
Entertainment, Inc. ("Empress") for an estimated $609 million, including
assumption of a portion of Empress' existing debt of approximately $150 million.
Empress owns two riverboat gaming operations: one in Hammond, Indiana and one in
Joliet, Illinois. The Company intends to fund the acquisition through new
borrowings (see Subsequent Events below). The transactions contemplated by the
Merger Agreement are subject to the approval of the Mississippi Gaming
Commission, the Louisiana Gaming Control Board, the Illinois Gaming Board and
the Indiana Gaming Commission. There can be no assurance that the Company will
be successful in obtaining such approvals or consummating the Notes Offering (as
defined below) or other financing to complete the Empress Merger. In addition,
the Merger Agreement, including the amendment dated March 25, 1999, provides
that each party has the right to terminate the agreement under certain
circumstances, which in some instances would allow Empress to retain a $10
million down payment made by the Company towards the purchase price as well as
receive other consideration from the Company not to exceed $3 million.
3. OWNERSHIP TRANSACTION:
On January 13, 1999, Horseshoe Gaming repurchased outstanding warrants held
by a third party which entitled such third party to purchase approximately 6.99%
ownership in Horseshoe Gaming from its largest shareholder, Horseshoe Gaming,
Inc. ("HGI"), for an exercise price of $510,000. Upon acquisition, Horseshoe
Gaming exercised the warrants and retired the membership units acquired from
HGI. The total cost of the warrants, including
F-5
<PAGE> 161
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
fees, expenses and the exercise price paid to HGI was approximately $34.4
million, which was recorded as a reduction in members' equity.
4. SUBSEQUENT EVENTS:
On April 15, 1999, the Company was formed to facilitate the issuance of
senior subordinated debt and the purchase of Empress (see Note 2). The Company
intends to qualify and to elect to be treated as an "S corporation" for federal
income tax purposes. Horseshoe Gaming's owners have exchanged substantially all
of their membership interests for stock in the Company. Prior to the Empress
Merger, any remaining membership interests not exchanged for stock in the
Company will be purchased by the Company.
To finance the Empress Merger, in April 1999, the Company received a
commitment for a new $375 million senior credit facility and completed an
offering of $600 million of senior subordinated notes (the "Notes") in a private
placement (the "Notes Offering"). The proceeds from the Notes Offering were used
to repay debt of Horseshoe Gaming and pay related fees and expenses. The Notes
were not registered under the Securities Act of 1933, as amended.
In May 1999, Horseshoe Gaming consummated a tender offer for its 12 3/4%
senior notes due 2000, $128.6 million of which were outstanding prior to the
tender offer. Approximately $128.4 million of such senior notes were tendered in
the tender offer. Horseshoe Gaming irrevocably deposited approximately $0.2
million into a defeasance account to redeem on September 30, 1999 (the first
date such notes may be redeemed) the approximately $0.2 million of senior notes
that failed to tender in the tender offer.
On April 21, 1999, Horseshoe Gaming exercised an option, subject to
regulatory approval, to purchase an 8.08% limited partnership interest in
Horseshoe Entertainment (the remaining interest not held by New Gaming Capital
Partnership, L.P., a wholly owned subsidiary of the Company) for total
consideration of up to $30.4 million, which includes payments for a non-compete
covenant, consents and the release of claims. The consideration for the
repurchase consisted of cash, payables to the former limited partners, and
offsets against the negative capital account balances of the former limited
partners and notes receivable from the former limited partners.
In May 1999, the Company reached an agreement in principle with five former
employees with aggregate redeemable ownership interests in Horseshoe Gaming of
7.2% on the valuation of their ownership interests. The agreed-upon valuation of
the Company for purposes of calculating the valuation of the five former
employees' ownership interests is $470 million if the Empress Merger is not
consummated and $500 million if the Empress Merger is consummated. In June 1999,
the first installment of approximately $11.5 million was paid to these five
former employees with the remaining amount to be paid over a period not to
F-6
<PAGE> 162
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
exceed five years. The notes receivable from these employees was fully paid as a
result of this transaction. The effect of the change in the estimated value
will be reflected in the second quarter 1999 financial statements.
During the second quarter of 1999, the Company recorded an additional $8.0
million charge to adjust the carrying value of the Queen of the Red to its
estimated net realizable value. This additional charge was made to reflect the
current market conditions for idle riverboats.
F-7
<PAGE> 163
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Horseshoe Gaming Holding Corp.:
We have audited the accompanying consolidated balance sheets of Horseshoe
Gaming Holding Corp. (a Delaware corporation) 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 Holding
Corp. 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 (except with respect
to the matter discussed in Note 10,
as to which the date is May 31, 1999).
F-8
<PAGE> 164
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS)
<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 (Note 10)................................ 71,151 64,595
-------- --------
$560,448 $511,556
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-9
<PAGE> 165
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<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
-------- -------- --------
Gross Revenues........................... 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-10
<PAGE> 166
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
MEMBERS' CONTRIBUTIONS
EQUITY RECEIVABLE TOTAL
-------- ------------- -------
(IN THOUSANDS)
<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 (Note 10)........ $71,151 $ -- $71,151
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-11
<PAGE> 167
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
-------- --------- --------
(IN THOUSANDS)
<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-12
<PAGE> 168
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Horseshoe Gaming, L.L.C. ("Horseshoe Gaming") 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. Subsequent to year-end, Horseshoe Gaming
Holding Corp. (the "Company") was formed (see Note 11). 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:
- New Gaming Capital Partnership ("NGCP") is a Nevada limited partnership
which was formed on February 4, 1993. NGCP is 100% owned by Horseshoe
Gaming 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).
- 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 Horseshoe Gaming and its subsidiary Horseshoe GP, Inc.
- 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 Horseshoe Gaming. 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-13
<PAGE> 169
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The costs of normal repairs and
maintenance are expensed as incurred while major expenditures that extend the
useful lives of assets are capitalized.
Depreciation is provided on the straight-line basis over the estimated
useful lives as follows:
<TABLE>
<S> <C>
Buildings, boat, barge and improvements................. 15 to 30 years
Furniture, fixtures and equipment....................... 3 to 10 years
</TABLE>
CAPITALIZED INTEREST
The Company capitalizes interest for associated borrowing costs of major
construction projects. Capitalization of interest ceases when the asset is
substantially complete and ready for its intended use. Interest capitalized
during the years ended December 31, 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
Horseshoe Gaming 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 Notes
8 and 11).
F-14
<PAGE> 170
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, certain individuals obtained ownership interests in Horseshoe
Gaming or its subsidiaries prior to becoming employees of Horseshoe Gaming. 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 Horseshoe Gaming
between October 1, 1995, and January 1, 1996, and held ownership interests in
Horseshoe Gaming 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.
CAPITAL DISTRIBUTIONS
Horseshoe Gaming'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.
F-15
<PAGE> 171
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
Horseshoe Gaming 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.
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
Horseshoe Gaming 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 (see Note 10).
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
F-16
<PAGE> 172
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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>
F-17
<PAGE> 173
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 (see Note 11).
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-18
<PAGE> 174
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Horseshoe Gaming
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
Horseshoe Gaming'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 Horseshoe Gaming from its
subsidiaries, in each case secured by a second lien on the casino and real
property of each subsidiary; and (iii) a second pledge of the minority 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, Horseshoe Gaming 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 Horseshoe Gaming's existing facilities.
F-19
<PAGE> 175
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 12, 1997, Horseshoe Gaming 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").
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 Horseshoe Gaming
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
Horseshoe Gaming can pay to its members; (ii) limit the amount of additional
indebtedness which may be incurred by Horseshoe Gaming and its subsidiaries;
(iii) prohibit any consolidation or merger of Horseshoe Gaming or its
subsidiaries with an affiliate or third party, any sale of substantially all of
Horseshoe Gaming or its subsidiaries' assets, or any payment of subordinated
indebtedness prior to its scheduled maturity; and (iv) require Horseshoe Gaming
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, Horseshoe Gaming 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
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.
F-20
<PAGE> 176
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Horseshoe Gaming as developer for the Horseshoe Bossier City and the
Horseshoe Casino Center and has provided consulting services to Horseshoe Gaming
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.
The principals of the placement agent referred to above own approximately
3.9% of Horseshoe Gaming. 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 Horseshoe Gaming 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 Horseshoe Gaming, 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 Horseshoe Gaming 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 Horseshoe Gaming, 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, Horseshoe Gaming is required
to reimburse HGI for all expenses incurred related to the operations of
Horseshoe Gaming and would be required to fund any repurchase of HGI employees'
ownership interests in Horseshoe Gaming, pursuant to these employment
F-21
<PAGE> 177
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Horseshoe Gaming 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 Horseshoe Gaming
expired or were terminated. These officers hold ownership interests in Horseshoe
Gaming 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. (See
Note 10)
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 Horseshoe Gaming's 1997 Unit Option Plan which
provides for certain employees to be granted options to purchase membership
units in Horseshoe Gaming 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 Horseshoe Gaming, 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 Horseshoe Gaming at fair market value. The employee and
Horseshoe Gaming have agreed that the
F-22
<PAGE> 178
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Horseshoe Gaming 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 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.
F-23
<PAGE> 179
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WARRANT REPURCHASE
On January 13, 1999, Horseshoe Gaming repurchased outstanding warrants held
by a third party which entitled such third party to purchase an approximate
6.99% ownership interest in Horseshoe Gaming from HGI, for an exercise price of
$510,000. Upon acquisition, Horseshoe Gaming exercised the warrants and retired
the membership units acquired from HGI. The total amount Horseshoe Gaming 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.
PROPOSED ACQUISITION
On September 2, 1998, Horseshoe 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. Horseshoe Gaming intends to finance the acquisition through new
borrowings. Under the terms of the agreement relating to the Empress acquisition
(the "Merger Agreement"), Horseshoe 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 Gaming Control Board, the Illinois Gaming Board and the Indiana Gaming
Commission. The Merger Agreement provides that each party has the right to
terminate the agreement under 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. FORMATION OF HORSESHOE GAMING HOLDING CORP.
On April 15, 1999, the Company was formed to facilitate the issuance of
senior subordinated debt and the purchase of Empress (see Note 9). The Company
intends to qualify and to elect to be treated as an "S corporation" for federal
income tax purposes. Horseshoe Gaming's owners have exchanged substantially all
of their membership interests for stock of the Company. Prior to the Empress
Merger, any remaining membership interests not exchanged for stock in the
Company will be purchased by the Company.
11. SUBSEQUENT EVENTS (UNAUDITED)
REDEEMABLE OWNERSHIP INTERESTS
In May 1999, the Company reached an agreement in principle with five former
employees with aggregate redeemable ownership interests in Horseshoe Gaming of
7.2% on the valuation of their ownership interests. The agreed-upon valuation of
the Company for purposes of calculating the valuation of the five former
employees' ownership interests is $470 if the Empress Merger is not consummated
and $500 million if the Empress Merger is consummated. In June 1999, the first
installment of approximately $11.5 million was paid to these five former
employees with the remaining amount to be paid over a period not to
F-24
<PAGE> 180
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exceed five years. The notes receivable from these employees were fully paid as
a result of this transaction. The effect of the change in the estimated value
will be reflected in the second quarter 1999 financial statements.
ASSET WRITE-DOWN
During the second quarter of 1999, the Company recorded an additional $8.0
million charge to adjust the carrying value of the Queen of the Red to its
estimated net realizable value. This additional charge was made to reflect the
current market conditions for idle riverboats.
F-25
<PAGE> 181
EMPRESS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
--------------- ------------------
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 36,892 $ 33,555
Restricted cash held for defeasance............ 166,133 --
Accounts receivable, less allowance for
doubtful accounts of $1,808 and $2,235,
respectively................................ 3,249 2,908
Other current assets........................... 2,744 3,099
US Treasuries held for defeasance including
accrued interest and unamortized premium.... -- 163,933
-------- --------
Total current assets........................ 209,018 203,495
Property and equipment, net...................... 190,482 193,809
Other assets, net................................ 30,410 29,509
-------- --------
Total assets................................ $429,910 $426,813
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................... $ 4,311 $ 4,289
Accrued payroll and related expenses........... 7,355 6,802
Interest payable............................... 11,184 10,799
Other accrued liabilities...................... 17,134 11,573
Current portion of long-term debt.............. 150,000 150,000
-------- --------
Total current liabilities................... 189,984 183,463
Long-term debt................................... 166,500 176,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value; 6,000 shares
authorized; 1,909.365 shares issued and
outstanding................................. -- --
Treasury stock; 17.381 shares, held at cost.... (4,667) (4,667)
Additional paid-in capital..................... 16,548 16,548
Retained earnings.............................. 61,545 55,469
-------- --------
Total stockholders' equity.................. 73,426 67,350
-------- --------
Total liabilities and stockholders'
equity.................................... $429,910 $426,813
======== ========
</TABLE>
The accompanying footnotes are an integral part
of these financial statements.
F-26
<PAGE> 182
EMPRESS ENTERTAINMENT, INC
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
REVENUES:
Casino................................................... $98,893 $91,337
Food and beverage........................................ 7,195 6,392
Hotel, parking, retail and other......................... 1,832 1,603
------- -------
Gross revenues........................................... 107,920 99,332
Less: promotional allowances............................. (3,326) (2,470)
------- -------
Net Revenues.......................................... 104,594 96,862
OPERATING EXPENSES:
Casino................................................... 51,199 47,007
Food and beverage........................................ 6,541 6,344
Hotel, parking and retail................................ 1,290 1,111
Sales, general and administrative........................ 10,040 10,549
Other operating.......................................... 5,184 4,790
Corporate................................................ 1,430 1,282
Depreciation and amortization............................ 5,471 4,868
------- -------
81,155 75,951
------- -------
Income from operations..................................... 23,439 20,911
OTHER INCOME (EXPENSE):
Interest income.......................................... 2,294 982
Interest expense......................................... (7,511) (5,301)
------- -------
Income before state income taxes........................... 18,222 16,592
Provision for state income taxes........................... 139 83
------- -------
Net income............................................ $18,083 $16,509
======= =======
</TABLE>
The accompanying footnotes are an integral part
of these financial statements.
F-27
<PAGE> 183
EMPRESS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
--------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 18,083 $ 16,509
Adjustments to reconcile net income to cash provided by
operating activities
Depreciation and amortization.......................... 5,471 4,868
Other.................................................. 336 --
Change in operating assets and liabilities:
Accounts receivable.................................... (341) 892
Other current assets................................... 355 907
Accounts payable....................................... 22 (332)
Accrued payroll and related expenses................... 553 (385)
Interest payable....................................... 385 4,043
Other accrued liabilities.............................. 5,561 3,399
--------- --------
Net cash provided by operating activities.............. 30,425 29,901
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments.................................. (1,200) (16,083)
Proceeds from sale of investments........................ 161,099 10,010
Decrease in interest receivable on investment............ 2,538 --
Purchase of property and equipment....................... (1,743) (7,242)
Increase in restricted cash.............................. (166,133) --
Increase in other assets................................. (142) --
--------- --------
Net cash used in investing activities.................. (5,581) (13,315)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings................................... (9,500) (5,091)
Stockholder distributions................................ (12,007) (7,239)
--------- --------
Net cash used in financing activities.................. (21,507) (12,330)
--------- --------
Net increase in cash and cash equivalents.............. 3,337 4,256
Cash and cash equivalents, beginning of period........... 33,555 73,257
--------- --------
Cash and cash equivalents, end of period................. $ 36,892 $ 77,513
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid............................................ $ 7,126 $ 1,081
Income taxes paid........................................ $ 400 $ 250
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
F-28
<PAGE> 184
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of Empress Entertainment, Inc. ("the
Company") include the accounts of its wholly owned subsidiaries, Empress Casino
Hammond Corporation ("Empress Hammond") incorporated on November 25, 1992,
Empress Casino Joliet Corporation ("Empress Joliet") incorporated on December
26, 1990, Empress River Casino Finance Corporation ("Empress Finance")
incorporated on January 7, 1994, and Empress Opportunities, Inc. ("Empress
Opportunities") incorporated on July 14, 1998. All significant intercompany
transactions have been eliminated.
The Company is engaged in the business of providing riverboat gaming and
related entertainment to the public. Empress Joliet was granted a three year
operating license from the Illinois Gaming Board on July 9, 1992, which was
renewed in July 1998 and must be renewed each year thereafter, to operate the
Empress I and Empress II riverboat casinos located on the Des Plaines River in
Joliet, Illinois. Empress Hammond was granted a five-year operating license,
with annual renewals thereafter, from the Indiana Gaming Commission on June 21,
1996 to operate the Empress III riverboat casino located on Lake Michigan in
Hammond, Indiana. Empress III commenced operations on June 28, 1996. The
majority of the Company's customers reside in the Chicago metropolitan area.
Empress Opportunities was formed as an unrestricted subsidiary to serve as
a holding company, under which the Company is pursuing certain business
opportunities other than the Company's gaming operations in Joliet, Illinois and
Hammond, Indiana. Empress Racing, Inc. ("Empress Racing") was formed as an
unrestricted subsidiary of Empress Opportunities to hold a 50% ownership
interest in Kansas Racing, LLC, which has acquired certain indebtedness of
Sunflower Racing, Inc., then the owner of the Woodlands Racetrack in Kansas
City, Kansas. Kansas Racing subsequently acquired the Woodlands Racetrack with a
bid in an auction pursuant to a proceeding under Chapter 7 of the U.S.
Bankruptcy Code.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results may not necessarily be indicative of
results, which may be expected for any other interim period, or for the year as
a whole. These consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
accompanying unaudited consolidated financial statements contain adjustments
which are, in the opinion of management, necessary to present fairly the
financial position and results of operations for the periods indicated. Such
adjustments include only normal recurring accruals.
RECLASSIFICATIONS
Certain amounts in prior years' financial statements have been reclassified
to conform to the current year presentation.
F-29
<PAGE> 185
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. PLAN OF MERGER
On September 2, 1998, and as amended on March 25, 1999, the Company entered
into an Agreement and Plan of Merger (the "Merger Agreement") with Horseshoe
Gaming (Midwest), Inc. and certain of its affiliates ("Horseshoe Midwest")
which, if consummated, would result in the acquisition by Horseshoe Midwest of
all of the outstanding stock of Empress Hammond and Empress Joliet via two
simultaneous merger transactions (the "Proposed Mergers").
Consummation of the Merger Agreement constitutes a "Change of Control"
under the Indenture and will trigger Horseshoe Midwest's obligation to make an
irrevocable offer to purchase the Notes (the "Change of Control Offer") at a
cash price equal to 101% of the principal amount plus accrued and unpaid
interest. Holders of the Notes will have the option of tendering all or any
portion of their Notes for redemption, or they may retain the Notes. The Company
and/or Horseshoe Midwest intend to comply with the provisions of the Indenture.
The Change of Control Offer must commence within 10 business days following the
consummation of the transactions contemplated by the Plan of Merger and must
remain open for at least 20 business days. Horseshoe Midwest must complete the
repurchase of any Notes tendered in response to the Change of Control Offer no
more than 30 business days after the consummation of the transactions as
contemplated in the Plan of Merger.
3. SUBSEQUENT EVENT
In June 1998, the Company irrevocably deposited $167.2 million (the
"Covenant Defeasance") for the purpose of effecting the redemption of all of the
Company's 10 3/4% Senior Notes due 2002 (the "Senior Notes"). On February 10,
1999, the Trustee sent out a Notice of Redemption to the holders of the Senior
Notes announcing the redemption of such Notes. On April 1, 1999, the Company
redeemed all of its $150 million of 10 3/4% Senior Notes, thus fulfilling all of
its obligations related to the Senior Notes. The Company will recognize an
extraordinary loss of $10.2 million in the second quarter of fiscal 1999 due to
this early retirement of debt.
F-30
<PAGE> 186
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Empress Entertainment, Inc.
We have audited the accompanying consolidated balance sheets of Empress
Entertainment, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' 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 consolidated financial position of Empress
Entertainment, Inc. at December 31, 1998 and 1997, and the consolidated results
of its operations and its cash for each of the years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois,
March 26, 1999.
F-31
<PAGE> 187
EMPRESS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 33,555 $ 73,257
Marketable securities, at fair value which approximates
cost................................................ -- 10,010
Accounts receivable, less allowance for doubtful
accounts of $2,235 and $1,762, respectively......... 2,908 3,789
Other current assets................................... 3,099 3,393
US Treasuries held for defeasance including accrued
interest and unamortized premium.................... 163,933 --
-------- --------
Total current assets................................ 203,495 90,449
Property and equipment, net............................ 193,809 185,911
Other assets, net........................................ 29,509 15,182
-------- --------
Total assets........................................ $426,813 $291,542
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 4,289 $ 3,535
Accrued payroll and related expenses................... 6,802 7,356
Interest payable....................................... 10,799 4,074
Other accrued liabilities.............................. 11,573 12,194
Current portion of long-term debt...................... 150,000 18,524
-------- --------
Total current liabilities........................... 183,463 45,683
Long-term debt........................................... 176,000 190,000
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Common stock; $.01 par value; 6,000 shares authorized;
1,909.365 and 1,926.746 shares issued and
outstanding, respectively........................... -- --
Treasury stock; 17.381 shares, held at cost............ (4,667) --
Additional paid-in capital............................. 16,548 16,548
Retained earnings...................................... 55,469 39,311
-------- --------
Total stockholders' equity.......................... 67,350 55,859
-------- --------
Total liabilities and stockholders' equity.......... $426,813 $291,542
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE> 188
EMPRESS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Casino........................................ $373,038 $346,049 $263,040
Food and beverage............................. 27,889 27,344 17,991
Hotel, parking, retail and other.............. 7,070 7,554 4,836
-------- -------- --------
Gross revenues................................ 407,997 380,947 285,867
Less: promotional allowances.................. (11,331) (11,303) (7,205)
-------- -------- --------
Net revenues............................... 396,666 369,644 278,662
OPERATING EXPENSES:
Casino........................................ 193,950 180,253 126,846
Food and beverage............................. 25,986 26,903 18,205
Hotel, parking and retail..................... 4,210 5,523 6,153
Sales, general and administrative............. 50,229 52,284 31,569
Other operating............................... 20,267 21,184 16,167
Pre-opening................................... -- -- 5,672
Depreciation and amortization................. 21,124 18,849 13,896
-------- -------- --------
315,766 304,996 218,508
Income from operations.......................... 80,900 64,648 60,154
OTHER INCOME (EXPENSE):
Interest income............................... 6,710 3,324 3,487
Interest expense.............................. (25,559) (21,154) (18,274)
-------- -------- --------
Income before state income taxes................ 62,051 46,818 45,367
Provision for state income taxes................ 433 514 447
-------- -------- --------
Income before extraordinary item................ 61,618 46,304 44,920
Extraordinary loss on early extinguishment of
debt.......................................... 292 -- --
-------- -------- --------
Net income................................. $ 61,326 $ 46,304 $ 44,920
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE> 189
EMPRESS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON TREASURY PAID-IN RETAINED STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS EQUITY
------ -------- ---------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995........... $ -- $ -- $16,430 $20,417 $36,847
Net income.......................... -- -- -- 44,920 44,920
Sale and issuance of common stock... -- -- 118 -- 118
Cash distributions to
stockholders...................... -- -- -- (32,273) (32,273)
---- ------- ------- ------- -------
Balance December 31, 1996........... -- -- 16,548 33,064 49,612
Net income.......................... -- -- -- 46,304 46,304
Cash distributions to
stockholders...................... -- -- -- (40,057) (40,057)
---- ------- ------- ------- -------
Balance December 31, 1997........... -- -- 16,548 39,311 55,859
Net income.......................... -- -- -- 61,326 61,326
Purchase of stock for treasury...... -- (4,667) -- -- (4,667)
Cash distributions to
stockholders...................... -- -- -- (45,168) (45,168)
---- ------- ------- ------- -------
Balance December 31, 1998........... $ -- $(4,667) $16,548 $55,469 $67,350
==== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-34
<PAGE> 190
EMPRESS ENTERTAINMENT, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $ 61,326 $46,304 $ 44,920
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization............................ 21,124 18,849 13,896
Other.................................................... 696 833 983
Write off of unamortized loan costs...................... 292 -- --
Change in operating assets and liabilities:
Accounts receivable...................................... 881 (643) (1,770)
Other current assets..................................... 294 2,297 (320)
Accounts payable......................................... 754 591 (109)
Accrued payroll and related expenses..................... (556) 982 3,315
Interest payable......................................... 6,725 (152) 194
Other accrued liabilities................................ (621) 1,263 3,192
--------- ------- ---------
Net cash provided by operating activities................ 90,915 70,324 64,301
--------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments.................................... (185,948) (62,847) (61,495)
Proceeds from sale of investments.......................... 33,910 83,079 57,539
Increase in interest receivable on investments............. (2,538) -- --
Purchase of property and equipment......................... (26,476) (16,137) (105,988)
Decrease in restricted cash................................ -- -- 23,611
Increase in other assets................................... (10,532) (480) (4,850)
--------- ------- ---------
Net cash provided by (used in) investing activities... (191,584) 3,615 (91,183)
--------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings................................... 187,500 28,965 66,681
Payments on borrowings..................................... (70,024) (34,765) (2,991)
Payment of financing costs................................. (6,674) (290) --
Sale of common stock....................................... -- -- 118
Purchase of treasury stock................................. (4,667) -- --
Stockholder distributions.................................. (45,168) (40,057) (32,273)
--------- ------- ---------
Net cash provided by (used in) financing activities... 60,967 (46,147) 31,535
--------- ------- ---------
Net increase (decrease) in cash and cash
equivalents......................................... (39,702) 27,792 4,653
Cash and cash equivalents, beginning of year............... 73,257 45,465 40,812
--------- ------- ---------
Cash and cash equivalents, end of year..................... $ 33,555 $73,257 $ 45,465
========= ======= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid.............................................. $ 18,957 $20,636 $ 18,950
Income taxes paid.......................................... $ 798 $ 475 $ 825
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-35
<PAGE> 191
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of Empress Entertainment, Inc. (the
"Company") include the accounts of its wholly owned subsidiaries, Empress Casino
Hammond Corporation ("Empress Hammond") incorporated on November 25, 1992,
Empress Casino Joliet Corporation ("Empress Joliet") incorporated on December
26, 1990, Empress River Casino Finance Corporation ("Empress Finance")
incorporated on January 7, 1994, and Empress Opportunities, Inc. ("Empress
Opportunities") incorporated on July 14, 1998. All significant intercompany
transactions have been eliminated.
The Company is engaged in the business of providing riverboat gaming and
related entertainment to the public. Empress Joliet was granted a three year
operating license from the Illinois Gaming Board on July 9, 1992, which was
renewed in July 1998 and must be renewed each year thereafter, to operate the
Empress I and Empress II riverboat casinos located on the Des Plaines River in
Joliet, Illinois. Empress Hammond was granted a five-year operating license,
with annual renewals thereafter, from the Indiana Gaming Commission on June 21,
1996 to operate the Empress III riverboat casino located on Lake Michigan in
Hammond, Indiana. Empress III commenced operations on June 28, 1996. The
majority of the Company's customers reside in the Chicago metropolitan area.
Empress Opportunities was formed as an unrestricted subsidiary to serve as
a holding company, under which the Company is pursuing certain business
opportunities other than the Company's gaming operations in Hammond, Indiana and
Joliet, Illinois. Empress Racing, Inc. ("Empress Racing") was formed as an
unrestricted subsidiary of Empress Opportunities to hold a 50% ownership
interest in Kansas Racing, LLC, which acquired certain indebtedness of Sunflower
Racing, Inc., then the owner of the Woodlands Racetrack in Kansas City, Kansas.
Kansas Racing subsequently acquired the Woodlands Racetrack with a bid in an
auction pursuant to a proceeding under Chapter 7 of the U.S. Bankruptcy Code.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as revenues and expenses during the reporting period. Actual
amounts when ultimately realized could differ from those estimates.
CASH EQUIVALENTS AND CONCENTRATIONS OF CASH
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents are
placed primarily with high-credit-quality financial institutions and are
invested in short-term corporate and U.S. Government obligations.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of
F-36
<PAGE> 192
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the assets. Costs for major improvements are capitalized while the cost of
normal repairs and maintenance are expensed as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS
When events or circumstances indicate that the carrying amount of
long-lived assets to be held and used might not be recoverable, the expected
future undiscounted cash flows from the assets are estimated and compared with
the carrying amount of the assets. If the sum of the estimated undiscounted cash
flows is less than the carrying amount of the assets, impairment is recorded.
The impairment loss is measured by comparing the fair value of the assets with
their carrying amount. Long-lived assets that are held for disposal are reported
at the lower of the assets' carrying amount or fair value less costs related to
the assets' disposition. The Company performs an annual evaluation to identify
potential impairment of long-lived assets.
DEBT ISSUANCE COSTS
Debt issuance costs incurred in connection with the issuance of long-term
debt or acquiring credit facilities are capitalized and amortized over the terms
of the related debt or credit agreements.
NONCOMPETE AGREEMENT
A noncompete agreement for $3.75 million was entered into in July 1995 and
was fully amortized as of December 31, 1998.
REVENUE AND PROMOTIONAL ALLOWANCES
In accordance with industry practice, the Company recognizes as casino
revenue the net win from gaming activities, which is the difference between
gaming wins and losses.
The retail value of food, beverage, and other services, which are provided
to customers without charge, has been included in the respective revenue
classifications and then deducted as a promotional allowance. The estimated
direct costs of providing such complimentary services are included as an
operating expense of the casino department which totaled $3.3 million, $3.4
million, and $2.7 million in 1998, 1997 and 1996, respectively.
ADVERTISING COSTS
All advertising costs are expensed as incurred. Advertising expense was
$7.1 million, $7.2 million and $7.9 million for the years ended December 31,
1998, 1997 and 1996, respectively.
PRE-OPENING EXPENSES
Pre-opening expenses, which are principally of lease payments and
professional fees, are expensed as incurred.
F-37
<PAGE> 193
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The stockholders of the Company have elected, under Subchapter S of the
Internal Revenue Code, to include the Company's income in their individual
income tax returns. Accordingly, the Company is not subject to federal income
taxes. The Company continues to be subject to certain state income taxes.
RECLASSIFICATIONS
Certain amounts in prior years' financial statements have been reclassified
to conform to the current year presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
ESTIMATED LIFE 1998 1997
-------------- -------- --------
(YEARS) (IN THOUSANDS)
<S> <C> <C> <C>
Land.............................. -- $ 12,155 $ 9,139
Building and improvements......... 20-31 71,270 69,408
Riverboats, docks and
improvements.................... 20 61,296 53,768
Leasehold improvements............ 20 47,218 45,416
Furniture, fixtures and
equipment....................... 5 63,640 49,857
Construction in progress.......... -- 1,121 2,709
-------- --------
Total........................ 256,700 230,297
Accumulated depreciation.......... (62,891) (44,386)
-------- --------
Property and equipment, net....... $193,809 $185,911
======== ========
</TABLE>
Interest totaling $123,000, $144,000, and $1,645,000 was capitalized during
the years ended December 31, 1998, 1997 and 1996, respectively.
F-38
<PAGE> 194
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
10 3/4% Senior Notes............................. $150,000 $150,000
8 1/8% Senior Subordinated Notes................. 150,000 --
Revolving Credit Facility........................ 26,000 56,000
Other............................................ -- 2,524
-------- --------
326,000 208,524
Current portion of long-term debt................ 150,000 18,524
-------- --------
$176,000 $190,000
======== ========
</TABLE>
The Company issued $150 million 10 3/4% Senior Notes (the "Senior Notes")
due 2002 pursuant to a public offering on April 7, 1994. The Senior Notes are
irrevocably and unconditionally guaranteed on a senior unsecured basis by the
Company and its existing and future Restricted Subsidiaries. In 1998, the
Company entered into a refinancing, the components of which included a covenant
defeasance of the Senior Notes and the issuance of $150 million 8 1/8% Senior
Subordinated Notes (the "Notes"). The Notes are jointly, severally and
unconditionally guaranteed on an unsecured senior subordinated basis by all
existing and future Restricted Subsidiaries. Audited financial information of
those guarantor subsidiaries has been omitted because the Notes are guaranteed
by all direct and indirect subsidiaries of the parent and the parent company has
no significant operations or assets separate from its investments in its
subsidiaries. All unrestricted non-guarantor subsidiaries of the parent are not
significant.
Interest on the Notes is payable January 1 and July 1 of each year. The
Notes are due and payable on July 1, 2006. The Company and all of its future
subsidiaries may be required to repay all or a portion of the Notes upon the
occurrence of certain repurchase events.
Under the covenant defeasance in connection with the issuance of the Notes,
the Senior Notes will be paid off on April 1, 1999 and the Company will
recognize a $10.2 million extraordinary loss related to the early extinguishment
of debt in 1999. At December 31, 1998, the Company held U.S. Treasury Securities
in an amount sufficient to settle all obligations related to the defeased Senior
Notes, including the premium due to the early extinguishment. These securities
are restricted solely for the purpose of settling all such obligations.
In June 1998, the Company entered into a $100 million reducing revolving
credit facility (the "Credit Agreement") which will expire June 18, 2003. Under
the terms of the Credit Agreement, the Company is required to meet certain
financial and other covenants. Interest shall accrue on the entire outstanding
principal balance of the Credit Agreement at a rate per annum equal to the
higher of (a) the Prime Rate in effect on such date or (b) the Federal Funds
Rate in effect on such date plus one-half of one percent. As of
F-39
<PAGE> 195
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1998, $26 million was outstanding at a blended rate of 6.55%. On
December 31, 1999, 2000, 2001 and 2002 the availability under the Credit
Agreement will be reduced by $5 million, $7.5 million, $7.5 million and $15
million, respectively, leaving the total availability at $65 million from
December 31, 2002 until maturity. The Company incurs a commitment fee on the
unused portion of the credit facility, which ranges from .225% to .375% per
annum depending upon the level of a certain predefined ratio. The credit
facility is collateralized by substantially all the real and personal property
of the Company and its Restricted Subsidiaries.
Prior to the Credit Agreement, the Company had a $60 million credit
facility which was paid off in full as part of the refinancing. The Company
recognized an extraordinary loss of $292,000 for the write-off of unamortized
loan costs related to the credit facility.
As of December 31, 1998 the carrying amount of all of the Company's debt
instruments approximates their fair value. Fair value was determined based on
the quoted market price for the Notes.
Aggregate maturities of long-term debt (in thousands) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------
<S> <C>
1999......................................... $150,000
2000......................................... --
2001......................................... --
2002......................................... --
2003......................................... 26,000
Thereafter................................... 150,000
--------
$326,000
========
</TABLE>
4. LEASE COMMITMENTS
The Company entered into a lease providing for the right to use the site of
the development and the parking structure which was conveyed to the City of
Hammond upon completion. The lease expires on the fifth anniversary of the
Company's procurement of its operating license from the Indiana Gaming
Commission (see Note 1). The term of the lease will be automatically extended
for periods equal to each renewal period of the operating license provided that
the total term will not exceed seventy-five (75) years. The Company has paid in
full the rent for the amount of $1.00 per year for the term of the lease
($75.00).
The Company pays to the Hammond Port Authority (HPA) an amount equal to the
aggregate of the annual rental being charged by the HPA for each boat slip that
is removed or taken out of operation as a result of the operation of Empress
III. These rental amounts will be the same as the rental amounts charged to
other users of similar boat slips. The annual amount paid in 1998, 1997 and 1996
was approximately $345,000, $345,000, and $421,000, respectively.
Rent expense for the years ended December 31, 1998, 1997 and 1996 was
$1,500,000, $800,000, and $750,000, respectively.
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<PAGE> 196
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. RELATED PARTY TRANSACTIONS
The Company engages businesses owned by certain stockholders of the Company
to provide certain services. The amounts paid for these services were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Insurance brokerage......................... $ 130 $2,669 $2,704
Construction services....................... 355 633 408
Fuel services and related transportation.... 498 501 635
Other services.............................. 235 51 51
------ ------ ------
$1,218 $3,854 $3,798
====== ====== ======
</TABLE>
6. 401(k) PLAN
In 1993, the Company adopted a 401(k) plan covering substantially all of
its employees. The Company's contribution to the plan is based on a
discretionary percentage of employee contributions and may include an additional
discretionary amount. The Company incurred approximately $628,000, $446,000 and
$339,000 of contribution expense related to the plan years ended December 31,
1998, 1997 and 1996, respectively.
7. COMMITMENTS AND CONTINGENT LIABILITY
In June 1996, the Company executed a number of agreements which secure its
rights to operate in the City of Hammond at the Hammond Marina. Significant
among the commitments as of December 31, 1998, are the financial obligations of
the Company which include, but are not limited to the following:
- An annual payment to the City of Hammond of the greater of $3 million or
certain percentages of adjusted gross receipts as follows:
4.0% up to $125 million;
6.0% over $125 million and up to $200 million; and
4.0% in excess of $200 million
- A passenger payment to the Hammond Port Authority in the sum of $1.00 per
passenger.
- An annual payment to the City of Hammond for police and fire purposes of
$1 million.
- Contribution to the City of Whiting and civic organizations in Whiting
for public safety and to promote economic development in the total sum of
$1.25 million. Payments to be made in equal installments over five years
commenced June 1996.
- Construction of a hotel and conference center with an estimated cost of
$10 million.
F-41
<PAGE> 197
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- Commercial development within the greater Hammond area with an estimated
cost of $10 million to be completed by July 1, 2001. No amounts have been
expended as of December 31, 1998.
- Renovation of existing housing and construction of new market rate
housing in the greater Hammond area with estimated expenditures and loans
of $5 million to be completed by July 1, 2001.
Residential housing investments which will comprise $3.5 million of the
$5.0 million will be made in accordance with the following schedule:
<TABLE>
<CAPTION>
INVESTMENT DATE AMOUNT
- --------------- ----------
<S> <C>
By July 1, 1998............................ $ 500,000
By July 1, 1999............................ 1,500,000
By July 1, 2000............................ 500,000
By July 1, 2001............................ 1,000,000
----------
$3,500,000
==========
</TABLE>
To fulfill the remaining $1,500,000 of the commitment, the Company has
entered into an agreement to loan $1,400,000 and donate $100,000 to Hammond
Enterprise Development Corporation. The $100,000 donation was made in 1998 along
with a loan of $400,000. The remaining $1,000,000 will be loaned in $500,000
increments on May 1, 1999 and May 1, 2000. As of December 31, 1998,
approximately $1.4 million has been expended.
The City of Hammond is a plaintiff in a condemnation proceeding filed in
September 1995 in Lake Superior Court in Lake County, Indiana, in which the City
of Hammond condemned a small parcel of land for the construction of the overpass
located near Empress Hammond. This case was transferred on a change of venue in
the summer of 1998 to Newton County, Indiana. On September 28, 1998, the jury
returned a $5.2 million award, which bears prejudgment interest at 8% since
1995. Under terms of the Development Agreement between Empress Hammond and the
City, Empress Hammond is responsible for reimbursing the City of Hammond for its
costs, fees and any judgments. The City of Hammond appealed this decision to the
Indiana appellate court. As a result, it is not yet clear how much, or when, the
condemnation award will be paid.
8. PLAN OF MERGER
On September 2, 1998, and as amended on March 25, 1999, the Company entered
into an Agreement and Plan of Merger with Horseshoe Gaming (Midwest), Inc. and
certain of its affiliates ("Horseshoe Midwest") which, if consummated, would
result in the acquisition by Horseshoe Midwest of all of the outstanding stock
of Empress Joliet and Empress Hammond via two simultaneous merger transactions
(the "Proposed Mergers").
Consummation of the Plan of Merger constitutes a "Change of Control" under
the Indenture and will trigger Horseshoe Midwest's obligation to make an
irrevocable offer to purchase the Notes (the "Change of Control Offer") at a
cash price equal to 101% of the principal amount plus accrued and unpaid
interest. Holders of the Notes will have the
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<PAGE> 198
EMPRESS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
option of tendering all or any portion of their Notes for redemption, or they
may retain the Notes. The Company and/or Horseshoe Midwest intend to comply with
the provisions of the Indenture. The Change of Control Offer must commence
within 10 business days following the consummation of the transactions
contemplated by the Plan of Merger and must remain open for at least 20 business
days. Horseshoe Midwest must complete the repurchase of any Notes tendered in
response to the Change of Control Offer no more than 30 business days after the
consummation of the transactions as contemplated in the Plan of Merger.
F-43
<PAGE> 199
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware (the "Delaware Law")
permits indemnification of directors, employees and agents of corporations under
certain conditions and subject to certain limitations. Pursuant to the Delaware
Law, we have included in our Certificate of Incorporation and bylaws a provision
to eliminate the personal liability of our directors for monetary damages for
breach or alleged breach of their duty of care to the fullest extent permitted
by the Delaware Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a complete list of Exhibits filed as a part of this
Registration Statement, which are incorporated herein:
<TABLE>
<S> <C>
1.1### Purchase Agreement, dated May 6, 1999, by and among
Horseshoe Gaming Holding Corp. and the initial purchasers.
2.1## First Amendment to Deposit Escrow Agreement, by and among
Horseshoe Gaming, L.L.C. and Empress Entertainment, Inc.,
dated March 25, 1999.
2.2## First Amendment to Agreement and Plan of Merger, dated as of
March 25, 1999, to the Agreement and Plan of Merger, dated
as of September 22, 1998, by and among Horseshoe Gaming,
L.L.C., Horseshoe Gaming (Midwest), Inc., Empress
Acquisition Illinois, Inc., Empress Acquisition Indiana,
Inc., Empress Casino Joliet Corporation, Empress Casino
Hammond Corporation and Empress Entertainment, Inc.
2.3# Agreement and Plan of Merger, dated as of September 2, 1998,
by and among Horseshoe Gaming, L.L.C., Horseshoe Gaming
(Midwest), Inc., Empress Acquisition Illinois, Inc., Empress
Acquisition Indiana, Inc., Empress Casino Joliet
Corporation, Empress Casino Hammond Corporation and Empress
Entertainment, Inc.
2.4### Subscription and Reorganization Agreement, dated as of April
23, 1999, by and among Horseshoe Gaming Holding Corp,
Horseshoe Gaming, L.L.C., Robinson Property Group, Inc., and
others listed therein.
3.1### Certificate of Incorporation of Horseshoe Gaming Holding
Corp.
3.2### By-laws of Horseshoe Gaming Holding Corp.
4.1### Indenture, dated as of May 11, 1999, by and between
Horseshoe Gaming Holding Corp. and U.S. Trust Company,
National Association.
4.2### Second Supplemental Indenture, dated as of May 11, 1999, to
Indenture, dated as of October 10, 1995, by and between
Horseshoe Gaming, L.L.C., Robinson Property Group Limited
Partnership and U.S. Trust Company, National Association.
4.3* 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.
4.4* 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.
</TABLE>
II-1
<PAGE> 200
<TABLE>
<S> <C>
4.5* Bossier City Security Agreement and Assignment thereof.
4.6* 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.
4.7* 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.
4.8* Tunica County Security Agreement and Assignment thereof.
4.9* Intercompany Senior Secured Note due September 30, 2000,
executed by Horseshoe Entertainment in favor of Horseshoe
Gaming, L.L.C.
4.10* Intercompany Senior Secured Note due September 30, 2000,
executed by Robinson Property Group Limited Partnership in
favor of Horseshoe Gaming, L.L.C.
4.11* Form of Senior Note of Horseshoe Gaming, L.L.C. 12.75%
Senior Notes due 2000.
4.12* Indenture, dated as of October 10, 1995, by and among
Horseshoe Gaming, L.L.C., U.S. Trust Company of California,
N.A., as Trustee, and Robinson Property Group Limited
Partnership, as Guarantor, with respect to the 12.75% Senior
Notes due 2000.
4.13* 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.
4.14* 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, 2000 issued
by Horseshoe Gaming, L.L.C.
4.15### Amendment No. 1 to Second Pledge Agreement, from Jack
Binion, B&O Development Limited Partnership, JBB Gaming
Investments, L.L.C. in favor of United States Trust Company
of New York for the benefit of the Holders of 12.75% Senior
Notes due September 30, 2000.
4.16* 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.
4.17### Amendment No. 1 to Second Pledge Agreement, 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.
</TABLE>
II-2
<PAGE> 201
<TABLE>
<S> <C>
4.18* 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.
4.19### Amendment No. 1 to Second Ship Mortgage on the Whole of the
Queen of the Red by Horseshoe Entertainment in favor of
Horseshoe Gaming, L.L.C.
4.20* Bossier City Second Security Agreement and Assignment
thereof.
4.21* 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 Holder, as
beneficiaries.
4.22### Amendment No. 1 to Second Deed of Trust, Security Agreement
and Assignment of Leases and Rents from Robinson Property
Group, Limited Partnership to Rowan H. Taylor, Jr. for the
benefit of Horseshoe Gaming, L.L.C. and United States Trust
Company of New York for the ratable benefit of the Holders
of 12.75% Senior Notes due September 30, 2000.
4.23* Second Ship Mortgage on the Whole of the Horseshoe Casino &
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.
4.24### Amendment No. 1 to Second Ship Mortgage on the Whole of the
Horseshoe Casino & Hotel, Tunica executed by Robinson
Property Group Limited Partnership, as Owner and Mortgagor,
in favor of Horseshoe Gaming, L.L.C. and United Trust
Company of New York.
4.25*** 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.
4.26+ Intercompany Senior Secured Note due September 30, 2000
executed by Robinson Property Group Limited Partnership in
favor of Horseshoe Gaming, L.L.C.
4.27+ Intercompany Senior Secured Note due September 30, 2000
executed by Horseshoe Entertainment in favor of Horseshoe
Gaming, L.L.C.
4.28++ 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.
4.29++ Form of 9 3/8% Senior Subordinated Note due 2007 of
Horseshoe Gaming, L.L.C.
4.30++ 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.
4.31++ 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.
</TABLE>
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<PAGE> 202
<TABLE>
<S> <C>
4.32++ Intercompany Senior Secured Note due June 15, 2007 executed
by Robinson Property Group Limited Partnership in favor of
Horseshoe Gaming, L.L.C.
4.33++ Intercompany Senior Secured Note due June 15, 2007 executed
by Horseshoe Entertainment in favor of Horseshoe Gaming,
L.L.C.
4.34+++ Intercompany Senior Secured Note due June 15, 2000 executed
by Robinson Property Group Limited Partnership in favor of
Horseshoe Gaming, L.L.C.
4.35+++ Intercompany Senior Secured Note due June 15, 2000 executed
by Horseshoe Entertainment in favor of Horseshoe Gaming,
L.L.C.
4.36+++ 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.
4.37### Amendment No. 1 to the Amended and Restated Note Assignment,
dated as of May 11, 1999, from Horseshoe Gaming, L.L.C. in
favor of the Holders of Senior Secured Credit Facility Notes
due September 30, 2000.
4.38+++ Form of Revolving Note between Horseshoe Gaming, L.L.C. and
Lender pursuant to the Amended and Restated Credit Facility
Agreement.
4.39+++ 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.
4.40+++ Security Agreement made as of November 12, 1997 by the
Company in favor of Canadian Imperial Bank of Commerce (the
"Bank").
4.41+++ Guarantee and Security Agreement made by Horseshoe Gaming,
Inc. as of November 12, 1997 in favor of the Bank
4.42+++ Guarantee and Security Agreement made by Horseshoe GP, Inc.
as of November 12, 1997 in favor of the Bank
4.43+++ Amended and Restated Guarantee and Security Agreement made
by Robinson Property Group LP as of November 12, 1997 in
favor of the Bank.
4.44+++ Guarantee and Security Agreement made by New Gaming Capital
Partnership as of November 12, 1997 in favor of the Bank.
4.45+++ Guarantee and Security Agreement made by Horseshoe Ventures
as of November 12, 1997 in favor of the Bank.
4.46+++ Amended and Restated Note Assignment made by Horseshoe
Gaming, L.L.C. 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.
4.47+++ Amended and Restated Pledge Agreement of the Company as of
November 12, 1997 in favor of the Bank.
4.48+++ Amended and Restated Pledge Agreement of JBB Gaming
Investments as of November 12, 1997 in favor of the Bank.
4.49+++ 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.
4.50@ Dealer Manager Agreement, dated as of April 20, 1999, by and
between Horseshoe Gaming, L.L.C. and Donaldson, Lufkin &
Jenrette Securities Corporation.
</TABLE>
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<PAGE> 203
<TABLE>
<S> <C>
4.51@@ Credit Facility for Acquisition of Empress Casino Hammond
Corporation and Empress Casino Joliet Corporation Commitment
Letter, dated April 23, 1999, by DLJ Capital Funding, Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, Canadian
Imperial Bank of Commerce and CIBC Oppenheimer Corp. agreed to
and accepted by Horseshoe Gaming Holding Corp.
5.1@@ Opinion of Swidler Berlin Shereff Friedman, LLP.
10.1### Settlement Term Sheet, dated as of May 19, 1999, by and
among Jack B. Binion, Horseshoe Gaming, Inc., Horseshoe
Gaming, L.L.C., Paul R. Alanis, Loren Ostrow, John Schreiber
and Cliff Kortman.
10.2### Horseshoe Note Pledge and Security Agreement, dated as of
and on May 11, 1999, by and among Horseshoe Gaming Holding
Corp., Horseshoe Gaming, L.L.C. and U.S. Trust Company,
National Association.
10.3### Promissory Note, dated May 11, 1999, from Horseshoe Gaming,
L.L.C. to Horseshoe Gaming Holding Corp. for
$240,349,125.00.
10.4### Registration Rights Agreement, dated May 11, 1999, by and
among Horseshoe Gaming Holding Corp. and the initial
purchasers.
10.5### Security and Control Agreement, dated as of and on May 11,
1999, by and among Horseshoe Gaming Holding Corp. and U.S.
Trust Company, National Association.
10.6### Guarantee, dated as of May 11, 1999, by Robinson Property
Group, Limited Partnership for the benefit of Horseshoe
Gaming Holding Corp.
10.7### Guarantee, dated as of May 11, 1999, by Horseshoe
Entertainment for the benefit of Horseshoe Gaming Holding
Corp.
10.8### Stockholders' Agreement for Horseshoe Gaming Holding Corp.,
dated as of April 29 1999, by and among Horseshoe Gaming
Holding Corp. and parties listed therein.
10.9* 401(k) Plan of Robinson Property Group Limited Partnership.
10.10** 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.
10.11++ Second Amended and Restated Employment Agreement, dated as
of October 1, 1995, by and between Horseshoe Gaming, Inc.
and Walter J. Haybert.
10.12* Employment Agreement, dated January 1, 1996, by and between
Horseshoe Gaming, Inc. and Paul Alanis.
10.13* Employment Agreement, dated January 1, 1996, by and between
Horseshoe Gaming, L.L.C. and Loren S. Ostrow.
10.14++ Second Amended and Restated Employment Agreement, dated as
of October 1, 1995, by and between Horseshoe Gaming, Inc.
and John Michael Allen.
10.15++ Second Amended and Restated Employment Agreement, dated as
of October 1, 1995, by and between Horseshoe Gaming, Inc.
and John J. Schreiber.
10.16++ 1997 Unit Option Plan of Horseshoe Gaming, L.L.C.
</TABLE>
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<PAGE> 204
<TABLE>
<S> <C>
10.17## Unit Option Agreement, dated as of February 1, 1997, by and
between Horseshoe Gaming, L.L.C. and Larry Lepinski.
10.18## Unit Option Agreement, dated as of February 1, 1997, by and
between Horseshoe Gaming, L.L.C. and Cliff Kortman.
10.19## Warrant Purchase Agreement, dated as of December 21, 1998,
by and between Hanwa Co., Ltd. and Horseshoe Gaming, L.L.C.
10.20## Settlement Agreement, dated as of December 31, 1998, by and
among Horseshoe Gaming, Inc., Horseshoe Gaming, L.L.C. and
Hollywood Park, Inc.
10.21## Settlement Agreement, dated as of February 3, 1999, by and
among Horseshoe Gaming, Inc., Horseshoe Gaming, L.L.C. and
Mike Allen.
10.22## Letter Agreement, dated October 19, 1998, by Horseshoe
Gaming, Inc. and Horseshoe Gaming, L.L.C. and accepted by
Walter Haybert.
10.23## Letter Agreement, dated January 4, 1999, by Horseshoe
Gaming, Inc. and Horseshoe Gaming, L.L.C. and accepted by
Walter Haybert.
10.24## 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, and Nobutaka Mutaguchi.
10.25## Exclusive License Agreement, dated July 2, 1998, by and
between Horseshoe Gaming, L.L.C. and Horseshoe License
Company.
10.26## Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and Gary
Border.
10.27## Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and Larry
Lepinski.
10.28## Amended and Restated Employment Agreement, dated October 15,
1998, by and between Horseshoe Gaming, Inc. and Robert
McQueen.
10.29## Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and Kirk
Saylor.
10.30### Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and David
Carroll.
10.31### Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and John
Moran.
10.32### Employment Agreement, dated as of November 3, 1998, by and
between Horseshoe Gaming, Inc. and Roger Wagner.
10.33## Unit Option Agreement, dated as of February 1, 1997, by and
between Horseshoe Gaming, L.L.C. and Urs Vogel.
10.34## Unit Option Agreement, dated as of February 1, 1997, by and
between Horseshoe Gaming, L.L.C. and Glen Buxton.
10.35@ Agreement dated as of April 21, 1999 by and among Horseshoe Gaming,
L.L.C., Horseshoe Gaming, Inc., Horseshoe Entertainment, LP, and New
Gaming Capital Partnership; Jack B. Binion; The Robin Group, Inc. and
August Robin.
10.36@ Agreement dated as of April 21, 1999 by and among Horseshoe Gaming,
L.L.C., Horseshoe Gaming, Inc., Horseshoe Entertainment, LP, and New
Gaming Capital Partnership; Jack B. Binion; Wendell Piper; Cassandra
Piper; and Robert E. Piper, Jr.
12.1### Statements re Computations of Ratios
20.1# 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 Holding Corp.
23.1### Consent of Arthur Andersen LLP.
</TABLE>
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<TABLE>
<S> <C>
23.2### Consent of Ernst & Young LLP.
23.3@ Consent of Swidler Berlin Shereff Friedman, LLP (included in
Exhibit 5.1 to this Registration Statement).
24.1### Power of Attorney (included on signature page hereto).
25.1### Statement of Eligibility of Trustee.
27.1### Financial Data Schedule
99.1### Form of Letter of Transmittal for Tender of all Outstanding
8 5/8% Series A Senior Subordinated Notes Due 2009 in
exchange for 8 5/8% Series B Senior Subordinated Notes Due
2009 of Horseshoe Gaming Holding Corp.
99.2### Form of Tender for all Outstanding 8 5/8% Series A Senior
Subordinated Notes Due 2009 in exchange for 8 5/8% Series B
Senior Subordinated Notes Due 2009 of Horseshoe Gaming
Holding Corp.
99.3### Form of Instruction to Registered Holder from Beneficial
Owner of 8 5/8% Series A Senior Subordinated Notes Due 2009
of Horseshoe Gaming Holding Corp.
99.4### Form of Notice of Guaranteed Delivery for Outstanding 8 5/8%
Series A Senior Subordinated Notes Due 2009 in exchange for
8 5/8% Series B Senior Subordinated Notes Due 2009 of
Horseshoe Gaming Holding Corp.
</TABLE>
- -------------------------
* Filed as an Exhibit to Horseshoe Gaming, L.L.C. Registration Statement on
Form S-4 (No. 333-0214) (the "1996 Form S-4") filed on January 8, 1996.
** Filed as an Exhibit to Horseshoe Gaming, L.L.C. Amendment No. 1 to
the 1996 Form S-4 filed on April 26, 1996.
*** Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q for the Quarter
Ended June 30, 1996.
+ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q for the Quarter
Ended March 31, 1997.
++ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Registration Statement on
Form S-4 (No. 333-33145) filed on August 7, 1997.
+++ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the Year
Ended December 31, 1997.
# Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 8-K filed on
September 12, 1998.
## Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the fiscal
year ended December 31, 1998.
@ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q for the Quarter
Ended March 31, 1999.
### Filed herewith.
@@ To be filed by amendment.
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ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415 under the Securities Act, will be filed as a part
of an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrants
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
enforceable. In the event that a claim for indemnification against
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<PAGE> 207
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceedings) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of Form S-4 promulgated by the SEC, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrants' annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 208
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Horseshoe Gaming Holding Corp. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Las Vegas, State of Nevada, on June 14,1999.
HORSESHOE GAMING HOLDING CORP.
By: /s/ Jack B. Binion
-----------------------------------
Jack B. Binion
Chairman of the Board, President
and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 14, 1999. Each of the undersigned officers and
directors of Horseshoe Gaming Holding Corp. hereby constitutes and appoints Jack
B. Binion and Kirk C. Saylor and each of them singly, as true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him in his name in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any
related registration statement filed pursuant to Rule 462(b) of the Securities
Act of 1933, as amended and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and to prepare any and all exhibits thereto, and other documents in connection
therewith, and to make any applicable state securities law or blue sky filings
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite or necessary to be done to
enable Horseshoe Gaming Holding Corp. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<C> <S>
/s/ Jack B. Binion Chairman of the Board, President and
- --------------------------------------------------- Chief Executive Officer (Principal
Jack B. Binion Executive Officer) and Director
/s/ Kirk C. Saylor Chief Financial Officer (Principal
- --------------------------------------------------- Financial Officer)
Kirk C. Saylor
Director
- ---------------------------------------------------
Peri Cope Howard
/s/ Leslie Kenny Director
- ---------------------------------------------------
Leslie Kenny
</TABLE>
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<PAGE> 209
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1### Purchase Agreement, dated May 6, 1999, by and among
Horseshoe Gaming Holding Corp. and the initial purchasers.
2.1## First Amendment to Deposit Escrow Agreement, by and among
Horseshoe Gaming, L.L.C. and Empress Entertainment, Inc.,
dated March 25, 1999.
2.2## First Amendment to Agreement and Plan of Merger, dated as of
March 25, 1999, to the Agreement and Plan of Merger, dated
as of September 22, 1998, by and among Horseshoe Gaming,
L.L.C., Horseshoe Gaming (Midwest), Inc., Empress
Acquisition Illinois, Inc., Empress Acquisition Indiana,
Inc., Empress Casino Joliet Corporation, Empress Casino
Hammond Corporation and Empress Entertainment, Inc.
2.3# Agreement and Plan of Merger, dated as of September 2, 1998,
by and among Horseshoe Gaming, L.L.C., Horseshoe Gaming
(Midwest), Inc., Empress Acquisition Illinois, Inc., Empress
Acquisition Indiana, Inc., Empress Casino Joliet
Corporation, Empress Casino Hammond Corporation and Empress
Entertainment, Inc.
2.4### Subscription and Reorganization Agreement, dated as of April
23, 1999, by and among Horseshoe Gaming Holding Corp,
Horseshoe Gaming, L.L.C., Robinson Property Group, Inc., and
others listed therein.
3.1### Certificate of Incorporation of Horseshoe Gaming Holding
Corp.
3.2### By-laws of Horseshoe Gaming Holding Corp.
4.1### Indenture, dated as of May 11, 1999, by and between
Horseshoe Gaming Holding Corp. and U.S. Trust Company,
National Association.
4.2### Second Supplemental Indenture, dated as of May 11, 1999, to
Indenture, dated as of October 10, 1995, by and between
Horseshoe Gaming, L.L.C., Robinson Property Group Limited
Partnership and U.S. Trust Company, National Association.
4.3* 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.
4.4* 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.
4.5* Bossier City Security Agreement and Assignment thereof.
4.6* 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.
4.7* 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.
4.8* Tunica County Security Agreement and Assignment thereof.
4.9* Intercompany Senior Secured Note due September 30, 2000,
executed by Horseshoe Entertainment in favor of Horseshoe
Gaming, L.L.C.
</TABLE>
<PAGE> 210
<TABLE>
<S> <C>
4.10* Intercompany Senior Secured Note due September 30, 2000,
executed by Robinson Property Group Limited Partnership in
favor of Horseshoe Gaming, L.L.C.
4.11* Form of Senior Note of Horseshoe Gaming, L.L.C. 12.75%
Senior Notes due 2000.
4.12* Indenture, dated as of October 10, 1995, by and among
Horseshoe Gaming, L.L.C., U.S. Trust Company of California,
N.A., as Trustee, and Robinson Property Group Limited
Partnership, as Guarantor, with respect to the 12.75% Senior
Notes due 2000.
4.13* 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.
4.14* 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, 2000 issued
by Horseshoe Gaming, L.L.C.
4.15### Amendment No. 1 to Second Pledge Agreement, from Jack
Binion, B&O Development Limited Partnership, JBB Gaming
Investments, L.L.C. in favor of United States Trust Company
of New York for the benefit of the Holders of 12.75% Senior
Notes due September 30, 2000.
4.16* 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.
4.17### Amendment No. 1 to Second Pledge Agreement, 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.
4.18* 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.
4.19### Amendment No. 1 to Second Ship Mortgage on the Whole of the
Queen of the Red by Horseshoe Entertainment in favor of
Horseshoe Gaming, L.L.C.
4.20* Bossier City Second Security Agreement and Assignment
thereof.
4.21* 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 Holder, as
beneficiaries.
</TABLE>
<PAGE> 211
<TABLE>
<S> <C>
4.22### Amendment No. 1 to Second Deed of Trust, Security Agreement
and Assignment of Leases and Rents from Robinson Property
Group, Limited Partnership to Rowan H. Taylor, Jr. for the
benefit of Horseshoe Gaming, L.L.C. and United States Trust
Company of New York for the ratable benefit of the Holders
of 12.75% Senior Notes due September 30, 2000.
4.23* Second Ship Mortgage on the Whole of the Horseshoe Casino &
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.
4.24### Amendment No. 1 to Second Ship Mortgage on the Whole of the
Horseshoe Casino & Hotel, Tunica executed by Robinson
Property Group Limited Partnership, as Owner and Mortgagor,
in favor of Horseshoe Gaming, L.L.C. and United Trust
Company of New York.
4.25*** 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.
4.26+ Intercompany Senior Secured Note due September 30, 2000
executed by Robinson Property Group Limited Partnership in
favor of Horseshoe Gaming, L.L.C.
4.27+ Intercompany Senior Secured Note due September 30, 2000
executed by Horseshoe Entertainment in favor of Horseshoe
Gaming, L.L.C.
4.28++ 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.
4.29++ Form of 9 3/8% Senior Subordinated Note due 2007 of
Horseshoe Gaming, L.L.C.
4.30++ 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.
4.31++ 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.
4.32++ Intercompany Senior Secured Note due June 15, 2007 executed
by Robinson Property Group Limited Partnership in favor of
Horseshoe Gaming, L.L.C.
4.33++ Intercompany Senior Secured Note due June 15, 2007 executed
by Horseshoe Entertainment in favor of Horseshoe Gaming,
L.L.C.
4.34+++ Intercompany Senior Secured Note due June 15, 2000 executed
by Robinson Property Group Limited Partnership in favor of
Horseshoe Gaming, L.L.C.
4.35+++ Intercompany Senior Secured Note due June 15, 2000 executed
by Horseshoe Entertainment in favor of Horseshoe Gaming,
L.L.C.
4.36+++ 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.
</TABLE>
<PAGE> 212
<TABLE>
<S> <C>
4.37### Amendment No. 1 to the Amended and Restated Note Assignment,
dated as of May 11, 1999, from Horseshoe Gaming, L.L.C. in
favor of the Holders of Senior Secured Credit Facility Notes
due September 30, 2000.
4.38+++ Form of Revolving Note between Horseshoe Gaming, L.L.C. and
Lender pursuant to the Amended and Restated Credit Facility
Agreement.
4.39+++ 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.
4.40+++ Security Agreement made as of November 12, 1997 by the
Company in favor of Canadian Imperial Bank of Commerce (the
"Bank").
4.41+++ Guarantee and Security Agreement made by Horseshoe Gaming,
Inc. as of November 12, 1997 in favor of the Bank
4.42+++ Guarantee and Security Agreement made by Horseshoe GP, Inc.
as of November 12, 1997 in favor of the Bank
4.43+++ Amended and Restated Guarantee and Security Agreement made
by Robinson Property Group LP as of November 12, 1997 in
favor of the Bank.
4.44+++ Guarantee and Security Agreement made by New Gaming Capital
Partnership as of November 12, 1997 in favor of the Bank.
4.45+++ Guarantee and Security Agreement made by Horseshoe Ventures
as of November 12, 1997 in favor of the Bank.
4.46+++ Amended and Restated Note Assignment made by Horseshoe
Gaming, L.L.C. 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.
4.47+++ Amended and Restated Pledge Agreement of the Company as of
November 12, 1997 in favor of the Bank.
4.48+++ Amended and Restated Pledge Agreement of JBB Gaming
Investments as of November 12, 1997 in favor of the Bank.
4.49+++ 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.
4.50@ Dealer Manager Agreement, dated as of April 20, 1999, by and
between Horseshoe Gaming, L.L.C. and Donaldson, Lufkin &
Jenrette Securities Corporation.
4.51@@ Credit Facility for Acquisition of Empress Casino Hammond
Corporation and Empress Casino Joliet Corporation Commitment
Letter, dated April 23, 1999, by DLJ Capital Funding, Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, Canadian
Imperial Bank of Commerce and CIBC Oppenheimer Corp. agreed to
and accepted by Horseshoe Gaming Holding Corp.
5.1@ Opinion of Swidler Berlin Shereff Friedman, LLP.
10.1### Settlement Term Sheet, dated as of May 19, 1999, by and
among Jack B. Binion, Horseshoe Gaming, Inc., Horseshoe
Gaming, L.L.C., Paul R. Alanis, Loren Ostrow, John Schreiber
and Cliff Kortman.
10.2### Horseshoe Note Pledge and Security Agreement, dated as of
and on May 11, 1999, by and among Horseshoe Gaming Holding
Corp., Horseshoe Gaming, L.L.C. and U.S. Trust Company,
National Association.
</TABLE>
<PAGE> 213
<TABLE>
<S> <C>
10.3### Promissory Note, dated May 11, 1999, from Horseshoe Gaming,
L.L.C. to Horseshoe Gaming Holding Corp. for
$240,349,125.00.
10.4### Registration Rights Agreement, dated May 11, 1999, by and
among Horseshoe Gaming Holding Corp. and the initial
purchasers.
10.5### Security and Control Agreement, dated as of and on May 11,
1999, by and among Horseshoe Gaming Holding Corp. and U.S.
Trust Company, National Association.
10.6### Guarantee, dated as of May 11, 1999, by Robinson Property
Group, Limited Partnership for the benefit of Horseshoe
Gaming Holding Corp.
10.7### Guarantee, dated as of May 11, 1999, by Horseshoe
Entertainment for the benefit of Horseshoe Gaming Holding
Corp.
10.8### Stockholders' Agreement for Horseshoe Gaming Holding Corp.,
dated as of April 29, 1999, by and among Horseshoe Gaming
Holding Corp. and parties listed therein.
10.9* 401(k) Plan of Robinson Property Group Limited Partnership.
10.10** 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.
10.11++ Second Amended and Restated Employment Agreement, dated as
of October, 1, 1995, by and between Horseshoe Gaming, Inc.
and Walter J. Haybert.
10.12* Employment Agreement, dated January 1, 1996, by and between
Horseshoe Gaming, Inc. and Paul Alanis.
10.13* Employment Agreement, dated January 1, 1996, by and between
Horseshoe Gaming, L.L.C. and Loren S. Ostrow.
10.14++ Second Amended and Restated Employment Agreement, dated as
of October 1, 1995, by and between Horseshoe Gaming, Inc.
and John Michael Allen.
10.15++ Second Amended and Restated Employment Agreement, dated as
of October 1, 1995, by and between Horseshoe Gaming, Inc.
and John J. Schreiber.
10.16++ 1997 Unit Option Plan of Horseshoe Gaming, L.L.C.
10.17## Unit Option Agreement, dated as of February 1, 1997, by and
between Horseshoe Gaming, L.L.C. and Larry Lepinski.
10.18## Unit Option Agreement, dated as of February 1, 1997 by and
between Horseshoe Gaming, L.L.C. and Cliff Kortman.
10.19## Warrant Purchase Agreement, dated as of December 21, 1998,
by and between Hanwa Co., Ltd. and Horseshoe Gaming, L.L.C.
10.20## Settlement Agreement, dated as of December 31, 1998, by and
among Horseshoe Gaming, Inc., Horseshoe Gaming, L.L.C. and
Hollywood Park, Inc.
10.21## Settlement Agreement, dated as of February 3, 1999, by and
among Horseshoe Gaming, Inc., Horseshoe Gaming, L.L.C. and
Mike Allen.
</TABLE>
<PAGE> 214
<TABLE>
<S> <C>
10.22## Letter Agreement, dated October 19, 1998, by Horseshoe
Gaming, Inc. and Horseshoe Gaming, L.L.C. and accepted by
Walter Haybert.
10.23## Letter Agreement, dated January 4, 1999, by Horseshoe
Gaming, Inc. and Horseshoe Gaming, L.L.C. and accepted by
Walter Haybert.
10.24## 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, and Nobutaka Mutaguchi.
10.25## Exclusive License Agreement, dated July 2, 1998, by and
between Horseshoe Gaming, L.L.C. and Horseshoe License
Company.
10.26## Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and Gary
Border.
10.27## Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and Larry
Lepinski.
10.28## Amended and Restated Employment Agreement, dated October 15,
1998, by and between Horseshoe Gaming, Inc. and Robert
McQueen.
10.29## Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and Kirk
Saylor.
10.30### Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and David
Carroll.
10.31### Amended and Restated Employment Agreement, dated November
23, 1998, by and between Horseshoe Gaming, Inc. and John
Moran.
10.32### Employment Agreement, dated as of November 3, 1998, by and
between Horseshoe Gaming, Inc. and Roger Wagner.
10.33## Unit Option Agreement, dated as of February 1, 1997, by and
between Horseshoe Gaming, L.L.C. and Urs Vogel.
10.34## Unit Option Agreement, dated as of February 1, 1997, by and
between Horseshoe Gaming, L.L.C. and Glen Buxton.
10.35@ Agreement dated as of April 21, 1999 by and among Horseshoe Gaming,
L.L.C., Horseshoe Gaming, Inc., Horseshoe Entertainment, LP, and New
Gaming Capital Partnership; Jack B. Binion; The Robin Group, Inc. and
August Robin.
10.36@ Agreement dated as of April 21, 1999 by and among Horseshoe Gaming,
L.L.C., Horseshoe Gaming, Inc., Horseshoe Entertainment, LP, and New
Gaming Capital Partnership; Jack B. Binion; Wendell Piper; Cassandra
Piper; and Robert E. Piper, Jr.
12.1### Statements re Computations of Ratios
20.1# 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 Holding Corp.
23.1### Consent of Arthur Andersen LLP.
23.2### Consent of Ernst & Young LLP.
23.3@ Consent of Swidler Berlin Shereff Friedman, LLP (included in
Exhibit 5.1 to this Registration Statement).
24.1### Power of Attorney (included on signature page hereto).
25.1### Statement of Eligibility of Trustee.
27.1### Financial Data Schedule
</TABLE>
<PAGE> 215
<TABLE>
<S> <C>
99.1### Form of Letter of Transmittal for Tender of all Outstanding
8 5/8% Series A Senior Subordinated Notes Due 2009 in
exchange for 8 5/8% Series B Senior Subordinated Notes Due
2009 of Horseshoe Gaming Holding Corp.
99.2### Form of Tender for all Outstanding 8 5/8% Series A Senior
Subordinated Notes Due 2009 in exchange for 8 5/8% Series B
Senior Subordinated Notes Due 2009 of Horseshoe Gaming
Holding Corp.
99.3### Form of Instruction to Registered Holder from Beneficial
Owner of 8 5/8% Series A Senior Subordinated Notes Due 2009
of Horseshoe Gaming Holding Corp.
99.4### Form of Notice of Guaranteed Delivery for Outstanding 8 5/8%
Series A Senior Subordinated Notes Due 2009 in exchange for
8 5/8% Series B Senior Subordinated Notes Due 2009 of
Horseshoe Gaming Holding Corp.
</TABLE>
- -------------------------
* Filed as an Exhibit to Horseshoe Gaming, L.L.C. Registration Statement on
Form S-4 (No. 333-0214) (the "1996 Form S-4") filed on January 8, 1996.
** Filed as an Exhibit to Horseshoe Gaming, L.L.C. Amendment No. 1 to
the 1996 Form S-4 filed on April 26, 1996.
*** Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q for the Quarter
Ended June 30, 1996.
+ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q for the Quarter
Ended March 31, 1997.
++ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Registration Statement on
Form S-4 (No. 333-33145) filed on August 7, 1997.
+++ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the Year
Ended December 31, 1997.
# Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 8-K filed on
September 12, 1998.
## Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the fiscal
year ended December 31, 1998.
@ Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q for the Quarter
Ended March 31, 1999.
### Filed herewith.
@@ To be filed by amendment.
<PAGE> 1
Exhibit 1.1
HORSESHOE GAMING HOLDING CORP.
$600,000,000
8 5/8% Series A Senior Subordinated Notes
Purchase Agreement
May 6, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC INC.
UTENDAHL CAPITAL PARTNERS, LP
WASSERSTEIN PERELLA SECURITIES, INC.
<PAGE> 2
$600,000,000
8 5/8% Series A Senior Subordinated Notes due 2009
of Horseshoe Gaming Holding Corp.
PURCHASE AGREEMENT
May 6, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC INC.
UTENDAHL CAPITAL PARTNERS, LP
WASSERSTEIN PERELLA SECURITIES, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Horseshoe Gaming Holding Corp., a Delaware corporation (the "Company"),
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), CIBC Inc., Utendahl Capital Partners, LP and Wasserstein
Perella Securities, Inc. (each an "Initial Purchaser"and, collectively, the
"Initial Purchasers") an aggregate of $600 million in principal amount of its
8 5/8% Series A Senior Subordinated Notes due 2009 (the "Series A Notes"),
subject to the terms and conditions set forth herein. The Series A Notes are to
be issued pursuant to the provisions of an indenture (the "Indenture"), to be
dated as of the Closing Date (as defined below), between the Company and U.S.
Trust Company, National Association, as trustee (the "Trustee"). The Series A
Notes and the Series B Notes (as defined below) issuable in exchange therefor
are collectively referred to herein as the "Notes." Capitalized terms used but
not defined herein shall have the meanings given to such terms in the Indenture.
<PAGE> 3
1. Offering Memorandum. The Series A Notes will be offered and sold to the
Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Company has prepared a preliminary offering memorandum, dated April 23, 1999
(the "Preliminary Offering Memorandum") and a final offering memorandum, dated
May 6, 1999 (the "Offering Memorandum"), relating to the Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor or in substitution thereof) shall bear
the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT, IN CONNECTION WITH EXEMPT RESALES OF THE NOTES
BY DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, CIBC INC.,
UTENDAHL CAPITAL PARTNERS, L.P. AND WASSERSTEIN PERELLA SECURITIES, INC.
(THE "INITIAL PURCHASERS"), (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT, IN CONNECTION WITH RESALES AND TRANSFERS OF THE
NOTES OTHER THAN EXEMPT RESALES OF THE NOTES BY THE INITIAL PURCHASERS, IT
WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER
OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS
2
<PAGE> 4
OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT,
(D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501 (A)(l), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER
OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS
THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER), OR (G)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR
AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION
S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING
THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING."
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and each Initial Purchaser agrees,
severally and not jointly, to
3
<PAGE> 5
purchase from the Company, the principal amounts of Series A Notes set forth
opposite the name of such Initial Purchaser on Schedule A hereto at a purchase
price equal to 97.50% of the principal amount thereof (the "Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs"), and (ii) to persons permitted to purchase
the Series A Notes in offshore transactions in reliance upon Regulation S under
the Act (each, a "Regulation S Purchaser") (such persons specified in clauses
(i) and (ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 99.635% of the principal amount thereof. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement"), to be dated the Closing Date (as defined
below), in substantially the form of Exhibit A hereto, for so long as such
Series A Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the Company's 8 5/8% Series B Senior Subordinated Notes due 2009 (the "Series
B Notes"), to be offered in exchange for the Series A Notes (such offer to
exchange being referred to as the "Exchange Offer") and (ii) under certain
circumstances as set forth in the Registration Rights Agreement, a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Series A Notes and to use its best efforts to cause such
Registration Statements to be declared and remain effective and usable for the
periods specified in the Registration Rights Agreement and to consummate the
Exchange Offer.
On the Closing Date (as defined below), the Company will enter into
a Security and Control Agreement (the "Security Agreement") with the Trustee, as
trustee and as securities intermediary (in such latter capacity, the "Securities
4
<PAGE> 6
Intermediary"), pursuant to which the Company will cause $342.1 million of the
net proceeds of the Notes (the "Pledged Funds") to be deposited with the
Securities Intermediary for investment in United States Treasury securities into
a secured proceeds account (the "Secured Proceeds Account"). In addition, on the
Closing Date, the Company will lend $241.2 million of the net proceeds of the
Notes to Horseshoe Gaming, L.L.C. ("Horseshoe Gaming") to permit Horseshoe
Gaming to (1) repay in full outstanding indebtedness and accrued interest under
its existing senior credit facility, (2) consummate a tender offer and consent
solicitation (the "Tender Offer") to purchase any and all of its 12 3/4% Senior
Notes due 2000 ("Senior Notes") pursuant to an Offer to Purchase and Consent
Solicitation Statement, dated April 20, 1999 (the "Statement") and (3) pay
related fees and expenses, including tender premiums and consent fees. If and to
the extent any Senior Notes remain outstanding following the Tender Offer, the
Company shall cause Horseshoe Gaming to irrevocably deposit into a defeasance
account, pursuant to and in accordance with the defeasance provisions of the
indenture governing the Senior Notes, an amount of the proceeds of the loan
sufficient to defease the remaining outstanding Senior Notes to their earliest
redemption on September 30, 1999. The loan will be evidenced by an intercompany
note (the "Horseshoe Note") secured by a guarantee (the "Horseshoe Note
Guarantees") from Horseshoe Entertainment, L.P. ("HE") and Robinson Property
Group, L.P. ("RPG"). The Trustee will have a first priority perfected security
interest in the Secured Proceeds Account pursuant to the Security Agreement and
in the Horseshoe Note pursuant to a Note Pledge Agreement (the "Note Pledge
Agreement") to be entered into on the Closing Date between the Company and the
Trustee.
The net proceeds of the assets in the Secured Proceeds Account, together
with a new $375 million senior credit facility for which the Company has a
commitment (the "New Credit Facility"), will be used to fund the acquisition
(the "Acquisition") of the operating subsidiaries of Empress Entertainment, Inc.
("Empress"), pursuant to a Merger Agreement, dated as of September 2, 1998, as
amended to the Issue Date (the "Merger Agreement"), among Empress and certain of
its subsidiaries (the "Empress Parties") and various affiliates of the Company
(the "Horseshoe Affiliates"). Upon consummation of the Acquisition, Empress
Hammond Casino Corporation ("Empress Hammond") and Empress Joliet Casino
Corporation ("Empress Joliet") will become wholly owned subsidiaries of the
Company and will be required to guarantee the Notes under the terms of the
Indenture. Immediately following consummation of the Acquisition, Horseshoe
Gaming will merge with and into the Company and, immediately thereafter, the
Company will cause its direct and indirect wholly owned subsidiaries to
guarantee the Notes.
5
<PAGE> 7
This Agreement, the Indenture, the Notes, the Registration Rights Agreement, the
Security Agreement and the Note Pledge Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents."
Except as otherwise expressly provided herein, the term "subsidiaries" as
it relates to the Company shall be deemed to include all subsidiaries of the
Company after giving effect to consummation of the Acquisition.
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A Notes
shall be made at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York 10022-3897 or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on May 11, 1999 or at such other time on the same date or such
other date as shall be agreed upon by the Initial Purchasers and the Company in
writing. The time and date of such delivery and the payment for the Series A
Notes are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of The Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Series A Notes (collectively, the "Global Note"), shall
be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct) in each case with any transfer taxes thereon duly paid by the
Company against payment by the Initial Purchasers of the Purchase Price thereof
by wire transfer in same day funds to the order of the Company. The Global Note
shall be made available to the Initial Purchasers for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
5. Agreements of the Company. The Company hereby agrees with the Initial
Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any federal or state securities
commission or any other federal
6
<PAGE> 8
or state regulatory authority for such purpose and (ii) of the happening of any
event during the period referred to in Section 5(c) below that makes any
statement of a material fact made in the Offering Memorandum untrue or that
requires any additions to or changes in the Offering Memorandum in order to make
the statements therein not misleading. The Company shall use its best efforts to
prevent the issuance of any stop order or order suspending the qualification or
exemption of any Series A Notes under any federal or state securities or Blue
Sky laws and, if at any time any federal or state securities commission or other
federal or state regulatory authority shall issue an order suspending the
qualification or exemption of any Series A Notes under any state securities or
Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by the
Initial Purchasers to the Company as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or supplements
thereto, as the Initial Purchasers may reasonably request for the time period
specified in Section 5(c). Subject to the Initial Purchasers' compliance with
its representations and warranties and agreements set forth in Section 7 hereof,
the Company consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers, (i) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object after being so advised and (ii) to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if in the opinion of counsel to the Initial
Purchasers, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to
7
<PAGE> 9
such Offering Memorandum so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Offering Memorandum will comply with
applicable law, and to furnish to the Initial Purchasers and such other persons
as the Initial Purchasers may designate such number of copies thereof as the
Initial Purchaser may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the registration or qualification of the
Series A Notes for offer and sale to the Initial Purchasers and pursuant to
Exempt Resales under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchasers may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that the
Company shall not be required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation, other than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make generally
available as soon as practicable after the end of each fiscal year to the record
holders of the Notes a financial report of the Company and its subsidiaries on a
consolidated basis (and a similar financial report of all unconsolidated
subsidiaries, if any), all such financial reports to include a consolidated
balance sheet, a consolidated statement of operations, a consolidated statement
of cash flows and a consolidated statement of shareholders' equity as of the end
of and for such fiscal year, together with comparable information as of the end
of and for the preceding year, certified by the Company's independent public
accountants and (ii) to mail and make generally available as soon as practicable
after the end of each quarterly period (except for the last quarterly period of
each fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and similar
financial reports of all unconsolidated subsidiaries, if any) as of the end of
and for such period, and for the period from the beginning of such year to the
close of such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
8
<PAGE> 10
(g) So long as the Notes are outstanding, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
furnished by the Company or any of its subsidiaries to their respective security
holders of any class (other than reports or other communications in the ordinary
course from the Company's wholly-owned subsidiaries to the Company) or furnished
to or filed with the Commission or any national securities exchange on which any
class of securities of the Company or any subsidiary of the Company is listed
and such other publicly available information concerning the Company and/or its
subsidiaries as the Initial Purchasers may reasonably request.
(h) So long as any of the Series A Notes remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Company and accountants of the Company in connection with the sale and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the foregoing
(including financial statements), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, including any transfer or other taxes payable thereon, (iii) all costs
of printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and reasonable charges and
disbursements of counsel for the Initial Purchasers in connection with such
registration or qualification and memoranda relating thereto), (v) the cost of
printing
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<PAGE> 11
certificates representing the Series A Notes, (vi) all expenses and listing fees
in connection with the application for quotation of the Series A Notes in the
National Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System -PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee, the
Securities Intermediary and their respective counsel in connection with the
Indenture, the Security Agreement, the Note Pledge Agreement and the Notes,
(viii) the costs and charges of any transfer agent, registrar and/or depositary
(including DTC), (ix) any fees charged by rating agencies for the rating of the
Notes, (x) all costs and expenses of the Exchange Offer and any Registration
Statement, as set forth in the Registration Rights Agreement, (xi) fees, costs
and expenses relating to establishing, maintaining and/or administering the
Secured Proceeds Account, and (xii) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for which provision is
not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of the Series A Notes
in PORTAL and use its best efforts to maintain the listing of the Series A Notes
on PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the Notes,
and to comply with all of its agreements set forth in the representation letters
of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(l) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
transfer or dispose of any debt securities of the Company or any warrants,
rights or options to purchase or otherwise acquire debt securities of the
Company substantially similar to the Notes (other than (i) the Notes and (ii)
commercial paper issued in the ordinary course of business) and to cause
Horseshoe Gaming not to do any of the foregoing (other than the repurchase of
the Senior Notes pursuant to the Tender Offer), without the prior written
consent of the Initial Purchasers, which shall not be unreasonably withheld.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
10
<PAGE> 12
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes and any
related guarantees.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes and any guarantees thereof registered pursuant to the Act
to be offered in exchange for the Series A Notes and any related guarantees to
comply with all applicable federal and state securities laws in connection with
the Exchange Offer.
(p) To comply with all of its agreements set forth in the Registration
Rights Agreement.
(q) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes.
6. Representations, Warranties and Agreements of the Company. As of the
date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do
not, and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. The parties hereto
acknowledge that for purposes of this Agreement, including this Section 6(a) and
Section 8 hereof, the only information furnished to the Company in writing by
the Initial Purchasers expressly for use in the Offering Memorandum is the
information set forth in the third, eighth, ninth, tenth and twelfth paragraphs
under the caption "Plan of Distribution" concerning offering the Notes for
resale by the Initial Purchasers, market-making by the Initial Purchasers,
stabilization by the Initial Purchasers, and the affiliation of the Initial
Purchasers and their affiliates with the Company and its affiliates and certain
other matters. To
11
<PAGE> 13
the knowledge of the Company, no stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act, has been issued.
(b) Each of the Company and its subsidiaries has been duly incorporated or
organized, is validly existing as a corporation or other business organization
in good standing under the laws of its jurisdiction of incorporation or
organization and has the power and authority (corporate or otherwise) to carry
on its business as described in the Preliminary Offering Memorandum and the
Offering Memorandum and to own, lease and operate its properties, and each is
duly qualified and is in good standing as a foreign corporation or other
business organization authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries (excluding Empress
Hammond and Empress Joliet solely for purposes of determining the existence of a
material adverse effect), taken as a whole (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights.
(d) All of the outstanding shares of capital stock or other ownership
interests of each of the Company's subsidiaries have been duly authorized and,
in the case of corporate subsidiaries, are validly issued and are fully paid and
non-assessable, and, except in the case of Empress Hammond and Empress Joliet or
as otherwise provided in the Offering Memorandum, are owned by the Company,
directly or indirectly, through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any nature
(each, a "Lien").
(e) This Agreement has been duly authorized, executed and delivered by the
Company.
(f) The Indenture has been duly authorized by the Company and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Indenture has been duly executed and delivered by the Company and the
Trustee, the Indenture will be a valid and binding agreement of the Company,
12
<PAGE> 14
enforceable against the Company in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability (regardless of whether such enforcement may be sought in a
proceeding in equity or at law). On the Closing Date, the Indenture will conform
in all material respects to the requirements of the Trust Indenture Act of 1939,
as amended (the "TIA" or "Trust Indenture Act"), and the rules and regulations
of the Commission applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the Closing Date,
will have been validly executed and delivered by the Company. When the Series A
Notes have been issued, executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability (regardless of whether such
enforcement may be sought in a proceeding in equity or at law). On the Closing
Date, the Series A Notes will conform as to legal matters to the description
thereof contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly authorized
by the Company. When the Series B Notes are issued, executed and authenticated
in accordance with the terms of the Exchange Offer and the Indenture, the Series
B Notes will be entitled to the benefits of the Indenture and will be the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether such enforcement may be sought in a proceeding in equity
or at law).
(i) The Registration Rights Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company. When the Registration Rights Agreement has been duly executed and
delivered by the Company, assuming the Registration Rights Agree-
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<PAGE> 15
ment has been duly authorized, executed and delivered by the Initial Purchasers,
the Registration Rights Agreement will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability (regardless of whether such
enforcement may be sought in a proceeding in equity or at law), and any rights
to indemnity or contribution may be limited by federal and state securities laws
and public policy considerations. On the Closing Date, the Registration Rights
Agreement will conform as to legal matters to the description thereof in the
Offering Memorandum.
(j) The Merger Agreement has been duly authorized, executed and delivered
by the Empress Parties and the Horseshoe Affiliates and is a valid and binding
agreement of the Empress Parties and the Horseshoe Affiliates, enforceable
against the Empress Parties and the Horseshoe Affiliates in accordance with its
terms, except as the enforceability thereof may be limited by (i) bankruptcy,
fraudulent transfer, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and (ii) equitable principles of general
applicability (regardless of whether enforceability is considered at equity or
in law), and any rights to indemnity or contribution thereunder may be limited
by federal and state securities laws and public policy considerations. The
Company has delivered to the Initial Purchasers true and correct copies of the
Merger Agreement and all documents and agreements related thereto, including all
amendments, alterations, modifications or waivers thereto and all exhibits and
schedules thereto. The Offering Memorandum contains a summary of the
Acquisition, which summary is accurate in all material respects.
(k) The Security Agreement has been duly authorized by the Company and, on
the Closing Date, will have been duly executed and delivered by the Company.
When the Security Agreement has been duly executed and delivered by the Company
and the Securities Intermediary, the Security Agreement will be a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability (regardless of whether
such enforcement may be sought in a proceeding in equity or at law). On the
Closing Date, the
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<PAGE> 16
Security Agreement will conform as to legal matters to the description thereof
in the Offering Memorandum.
(1) Upon execution and delivery by the Company of the Security Agreement
and deposit of the Pledged Funds in the Secured Proceeds Account, the Security
Agreement is sufficient to create in favor of the Trustee for the benefit of the
holders of the Notes a valid, first priority perfected security interest in the
Secured Proceeds Account free of any adverse claims.
(m) The Note Pledge Agreement has been duly authorized by the Company and,
on the Closing Date, will have been duly executed and delivered by the Company.
When the Note Pledge Agreement has been duly executed and delivered, the Note
Pledge Agreement will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability (regardless of whether such enforcement may be sought in a
proceeding in equity or at law).
(n) Upon execution and delivery by the Company of the Note Pledge
Agreement and delivery of the Horseshoe Note to the Trustee as required
thereunder, the Note Pledge Agreement is sufficient to create in favor of the
Trustee for the benefit of the holders of the Notes a valid, first priority
perfected security interest in the Horseshoe Note free of any adverse claim.
(o) Neither the Company nor any of its subsidiaries is (i) in violation of
its respective charter or by-laws or other organizational documents or (ii) in
default in the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and its subsidiaries (excluding
Empress Hammond and Empress Joliet solely for purposes of determining
materiality), taken as a whole, to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or their
respective property is bound, which default in the case of clause (ii) would,
singly or in the aggregate, have a Material Adverse Effect.
(p) The execution, delivery and performance of this Agreement and the
other Operative Documents by the Company, the execution, delivery and
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<PAGE> 17
performance of the Merger Agreement by the Empress Parties and the Horseshoe
Affiliates, compliance by the relevant parties with all provisions hereof and
thereof and the consummation of the transactions contemplated herein and in the
Offering Memorandum (including the Acquisition and the issuance and sale of the
Series A Notes and the use of proceeds thereof as described in the Offering
Memorandum under the caption "Use of Proceeds") will not (i) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
(x) the charter or by-laws of the Company or any of its subsidiaries or (y) any
indenture, loan agreement, mortgage, lease or other agreement or instrument
that is material to the Company and its subsidiaries (excluding Empress Hammond
and Empress Joliet solely for purposes of determining materiality), taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound,
(ii) (assuming compliance with all applicable Blue Sky laws) violate or
conflict with any (A) applicable law, rule or regulation or (B) judgment, order
or decree of any court or any governmental body or agency having jurisdiction
over the Company, any of its subsidiaries or their respective property, or
(iii) except for the Liens created by the New Credit Facility, the Security
Agreement and the Note Pledge Agreement, result in the imposition or creation
of (or the obligation to create or impose) a Lien under, any agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or their respective property is
bound, which violation, conflict, breach, default or Lien, in the case of
clause (i)(y), (ii)(B) or (iii) above would, singly or in the aggregate, have a
Material Adverse Effect.
(q) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is or could be a party or to which any of their respective property is or could
be subject, which might result, singly or in the aggregate, in a Material
Adverse Effect.
(r) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
provisions of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect.
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<PAGE> 18
(s) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) to which the Company or any of its subsidiaries is
subject which would, singly or in the aggregate, have a Material Adverse Effect.
(t) Except as disclosed in the Offering Memorandum, the execution,
delivery and performance of this Agreement, the Merger Agreement and the other
Operative Documents, the compliance by the Company and the other relevant
parties with all the provisions thereof and the consummation of the transactions
contemplated thereby, will not require the authorization, approval or consent or
order of, or filing with, any court or governmental body, agency or official,
including, without limitation, the Mississippi Gaming Commission (the "MGC"),
the Mississippi State Tax Commission (the "MTC"), the Louisiana Gaming Control
Board ("LGCB"), the Illinois Gaming Board (the "IGB") and the Indiana Gaming
Commission ("IGC") (the MGC, MTC, LGCB, IGB and IGC are hereinafter collectively
referred to as the "Gaming Authorities"), except (i) such as may be required by
any state securities or Blue Sky laws or regulations, (ii) for the filing of
registration statements under the Act or the Exchange Act applicable in
connection with the transactions contemplated by the Registration Rights
Agreement, and qualification of the Indenture under the TIA in connection with
the Registration Rights Agreement, (iii) such as may have been obtained (or in
the case of the Acquisition, such as will be obtained prior to the date legally
required thereunder) under the Mississippi Gaming Control Act, the Mississippi
Gaming Law, the Louisiana Riverboat Economic Development and Gaming Control Act,
the Illinois Riverboat Act, the Indiana Riverboat Act and the respective
regulations promulgated under the foregoing (collectively, the "Gaming Laws"),
and (iv) in the case of the Acquisition where the failure to obtain the
authorization, approval, consent or order of, or filing with any court or
governmental body, agency or official, does not result in a failure to
consummate the Acquisition.
(u) Each of the Company and its subsidiaries and each of the officers,
directors and key employees of the Company and its subsidiaries (each a
"Manager"), as of the date hereof and as of the Closing Date, has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") and has made all filings with and notices to, all
governmental or regulatory authorities (including, without limitation,
Authorizations with respect to engaging in gaming operations in the States of
Mississippi, Louisiana, Illinois and
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<PAGE> 19
Indiana), and self regulatory organizations and all courts and other tribunals,
including without limitation, under any applicable Environmental Laws, as are
necessary to own, lease, license and operate its respective properties and to
carry on its business as presently conducted and as contemplated by the Offering
Memorandum, except, (i) in the case of the Acquisition, such Authorizations,
filings and notices as will be made or obtained prior to the date legally
required thereunder or (ii) where the failure to have any such Authorization or
to make any such filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. Each such Authorization is valid and in full force and
effect and each of the Company, its subsidiaries and, to the Company's
knowledge, each Manager is in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both, would
allow, revocation, suspension or termination of any such Authorization or
results in or, after notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such Authorization; and such
Authorizations contain no restrictions that are materially burdensome to the
Company, any of its subsidiaries or any Manager; except where such failure to be
valid and in full force and effect or to be in compliance, the occurrence of any
such event or the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect.
(v) The accountants, Arthur Andersen LLP, that have audited the Company's
financial statements as of and for the years ended December 31, 1998, 1997,
1996, 1995 and 1994 and that have provided comfort on certain amounts and
schedules included in the Offering Memorandum, are independent public
accountants with respect to the Company as required by the Act and the Exchange
Act. The accountants, Ernst & Young LLP that have audited Empress Entertainment,
Inc.'s financial statements as of December 31, 1997, 1996 and 1995 and for the
years ended December 31, 1998, 1997 1996, 1995 and 1994 and that have provided
comfort on certain amounts and schedules included in the Offering Memorandum,
are independent public accountants with respect to Empress as required by the
Act and the Exchange Act. The historical financial statements, together with
related schedules and notes, set forth in the Preliminary Offering Memorandum
and the Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-l under the Act.
(w) The historical financial statements of the Company, together with
related schedules and notes forming part of the Offering Memorandum (and any
18
<PAGE> 20
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries (excluding for this purpose Empress Hammond and Empress
Joliet) on the basis stated in the Offering Memorandum at the respective dates
or for the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; and the other financial and statistical information
and data set forth in the Offering Memorandum (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company. The historical financial statements of Empress, together with related
schedules and notes forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of Empress and its
subsidiaries on the basis stated in the Offering Memorandum at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of Empress.
(x) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Company and its
subsidiaries and give effect to assumptions used in the preparation thereof on a
basis believed by the Company to be reasonable at the times made, and in good
faith, and present fairly the historical and proposed transactions contemplated
by the Preliminary Offering Memorandum and the Offering Memorandum; and such pro
forma financial statements comply as to form in all material respects with the
requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Act, except that Regulation S-X of
the Act does not require presentation of the financial statements for the last
twelve months ended March 31, 1999. The other pro forma financial and
statistical information and data included in the Offering Memorandum are, in all
material respects, accurately presented and prepared on a basis consistent with
the pro forma financial statements.
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<PAGE> 21
(y) None of the Company or any of its subsidiaries (including, to the
knowledge of the Company, Empress Hammond and Empress Joliet) is and, after
giving effect to the offering and sale of the Series A Notes and the application
of the net proceeds thereof as described in the Offering Memorandum, will be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(z) Except for the Registration Rights Agreement, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company or to require the Company
to include such securities with the Notes registered pursuant to any
Registration Statement.
(aa) Neither the Company nor any of its subsidiaries nor any agent thereof
acting on the behalf of them has taken and, except with respect to Empress
Hammond and Empress Joliet, to which the following is limited to the Company's
knowledge, none of them will take, any action that might cause this Agreement or
the issuance or sale of the Series A Notes to violate Regulation T (12 C.F.R.
Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part
224) of the Board of Governors of the Federal Reserve System.
(bb) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or
has informed the Company or Horseshoe Gaming that it is considering imposing)
any condition (financial or otherwise) on the Company's or Horseshoe Gaming's
retaining any rating assigned to the Company or Horseshoe Gaming or any
securities of the Company or Horseshoe Gaming or (ii) has indicated to the
Company or Horseshoe Gaming that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so assigned or (b)
any change in the outlook for any rating of the Company or Horseshoe Gaming or
any securities of the Company or Horseshoe Gaming.
(cc) Since the respective dates as of which information is given in the
Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto), (i) there has not occurred
any material adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or the earnings,
business,
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<PAGE> 22
management or operations of the Company and its subsidiaries (excluding for this
purpose Empress Hammond and Empress Joliet), taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries (excluding for this purpose Empress Hammond
and Empress Joliet) and (iii) neither the Company nor any of its subsidiaries
(excluding for this purpose Empress Hammond and Empress Joliet) has incurred any
material liability or obligation, direct or contingent. Since the respective
dates as of which information is given in the Offering Memorandum other than as
set forth in the Offering Memorandum (exclusive of any amendments or supplements
thereto), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
Empress and its subsidiaries, taken as a whole, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of Empress or any
of its subsidiaries and (iii) neither Empress nor any of its subsidiaries has
incurred any material liability or obligation, direct or contingent.
(dd) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(ee) When the Series A Notes are issued and delivered pursuant to this
Agreement, the Series A Notes will not be of the same class (within the meaning
of Rule 144A under the Act) as any security of the Company that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated inter-dealer quotation system.
(ff) No form of general solicitation or general advertising (as defined in
Regulation D under the Act) was used by the Company, Empress or any of their
representatives (other than the Initial Purchasers and their representatives, as
to whom the Company makes no representation) in connection with the offer and
sale of the Series A Notes contemplated hereby, including, but not limited to,
articles, notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes have been
issued and sold by the Company within the six-month period immediately prior to
the date hereof.
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(gg) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(hh) Neither the Company, Empress nor any of their affiliates or any
person acting on its or their behalf (other than the Initial Purchasers and
their representatives, as to whom the Company makes no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act ("Regulation S") with respect to the Series A Notes.
(ii) Subject to the accuracy of the representations and warranties of the
Initial Purchasers in Section 7 hereof, the Series A Notes offered and sold in
reliance on Regulation S have been and will be offered and sold only in offshore
transactions.
(jj) Subject to the accuracy of the representations and warranties of the
Initial Purchasers in Section 7 hereof, the sale of the Series A Notes pursuant
to Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.
(kk) The Company and its affiliates and all persons acting on their behalf
(other than the Initial Purchasers and their representatives, as to whom the
Company makes no representation) have complied with and will comply with the
offering restriction requirements of Regulation S in connection with the
offering of the Series A Notes outside the United States and, in connection
therewith, the Offering Memorandum will contain the disclosure required in Rule
902(h).
(ll) The Series A Notes sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
restricted period referred to in Rule 903(c)(3) of the Act and only upon
certification of beneficial ownership of such Series A Notes by non-U.S. persons
or U.S. persons who purchased such Series A Notes in transactions that were
exempt from the registration requirements of the Act.
(mm) No registration under the Act of the Series A Notes is required for
the sale of the Series A Notes to the Initial Purchasers as contemplated hereby
or for the Exempt Resales assuming the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7 hereof.
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<PAGE> 24
(nn) Each certificate signed by any officer of the Company and delivered
to the Initial Purchasers or counsel for the Initial Purchasers shall be deemed
to be a representation and warranty by the Company to the Initial Purchasers as
to the matters covered thereby.
(oo) There is no claim, cause of action, investigation or notice by any
person or entity alleging potential liability (including, without limitation,
liability or investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries or penalties), of
the Company or any of its subsidiaries arising out of, based on or resulting
from (A) the presence or release into the environment of any Hazardous Material
(as defined) at any location, whether or not owned by the Company or such
subsidiary, as the case may be, or (B) any violation or alleged violation of any
Environmental Law, other than as disclosed in the Preliminary Offering
Memorandum and the Offering Memorandum, or which could not reasonably be
expected to have a Material Adverse Effect. The term "Hazardous Material" means
(i) any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, (ii) any
"hazardous waste" as defined by the Resource Conservation and Recovery Act, as
amended, (iii) any petroleum or petroleum product, (iv) any polychlorinated
biphenyl, and (v) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material, waste or substance regulated under or within the meaning of
any other law relating to protection of human health or the environment or
imposing liability or standards of conduct concerning any such chemical
material, waste or substance.
(pp) Immediately before and after giving effect to the issuance of the
Series A Notes, the Company, individually and together with its subsidiaries
(excluding Empress Hammond and Empress Joliet for this purpose), will be
Solvent. Immediately before and after giving effect to the Acquisition, assuming
the Acquisition occurred as of the date hereof and as of the Closing Date, as
applicable, the Company individually, and together with its subsidiaries
(including Empress Hammond and Empress Joliet) will be Solvent. As used herein,
"Solvent" shall mean, with respect to any person on a particular date, that on
such date (i) the fair value of the property of such person is greater than the
total amount of liabilities, including, without limitation, contingent or
unliquidated liabilities, of such person, (ii) the present fair salable value of
the assets of such person is not less than the amount that will be required to
pay the probable liability of such person on its debts as they become absolute
and matured, (iii) such person does not intend to, and does
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<PAGE> 25
not believe that it will, incur debts or liabilities beyond such person's
ability to pay such debts and liabilities as they mature, and (iv) such person
is not engaged in a business or transaction, and is not about to engage in a
business or a transaction, for which such person's property would constitute an
unreasonably small capital. The amount of contingent or unliquidated liabilities
at any time shall be computed as the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
(qq) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries (excluding Empress Hammond and Empress Joliet solely for purposes
of determining materiality), in each case, free and clear of all Liens and
defects, except (i) such as are described in the Offering Memorandum, (ii)
pursuant to the indenture and related security documents relating to the Senior
Notes, (iii) pursuant to Horseshoe Gaming's existing credit facility, or (iv)
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries, in each case except as described in the Offering
Memorandum.
(rr) The Company and its subsidiaries own or possess or license, or can
acquire on reasonable terms, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names ("intellectual property") currently
employed by them in connection with the business now operated by them except
where the failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a Material
Adverse Effect; and neither the Company nor any of its subsidiaries has received
any notice of infringement of or conflict with asserted rights of others with
respect to any of such intellectual property which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
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(ss) The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and neither the Company nor any of its subsidiaries (i) has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other material expenditures will have to be made in order to
continue such insurance or (ii) has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers at a cost that would not
have a Material Adverse Effect.
(tt) Except as disclosed in the Offering Memorandum, no relationship,
direct or indirect, exists between or among the Company or any of its
subsidiaries (excluding for this purpose Empress Hammond and Empress Joliet) on
the one hand, and the directors, officers, stockholders, customers or suppliers
of the Company or any of its subsidiaries (excluding for this purpose Empress
Hammond and Empress Joliet) on the other hand, which would be required by the
Act to be described in the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1 filed with the
Commission.
(uu) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the Company or
any of its subsidiaries before the National Labor Relations Board or any state
or local labor relations board, (ii) strike, labor dispute, slowdown or stoppage
pending or, to the Company's knowledge, threatened against the Company or any of
its subsidiaries or (iii) union representation question existing with respect to
the employees of the Company or any of its subsidiaries, except in the case of
clauses (i), (ii) and (iii) for such actions which, singly or in the aggregate,
would not have a Material Adverse Effect. To the best knowledge of the Company,
no collective bargaining organizing activities are taking place with respect to
the Company or any of its subsidiaries.
(vv) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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(ww) All material tax returns required to be filed by the Company and each
of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided,
provided, that Empress Hammond and Empress Joliet shall be excluded solely for
purposes of determining materiality.
(xx) The Horseshoe Note has been duly authorized, executed and delivered
by Horseshoe Gaming and is a valid and binding agreement of Horseshoe Gaming,
enforceable against Horseshoe Gaming in accordance with its terms, except as (x)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (y) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability (regardless of whether such enforcement may be sought in a
proceeding in equity or at law).
(yy) The Horseshoe Note Guarantees have been duly authorized, executed and
delivered by RPG and HE and are valid and binding agreements of RPG and HE,
enforceable against RPG and HE in accordance with their terms, except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability (regardless of whether such enforcement may be sought in a
proceeding in equity or at law).
The Company acknowledges that the Initial Purchasers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to the Company,
and agrees that:
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<PAGE> 28
(a) Such Initial Purchaser is either a QIB or an Accredited Investor, in
either case, with such knowledge and experience in financial and business
matters as is necessary in order to evaluate the merits and risks of an
investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes with a
view to any distribution thereof or with any present intention of offering or
selling any of the Series A Notes in a transaction that would violate the Act or
the securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Series A Notes only to
(x) QIBs in reliance on the exemption from the registration requirements of the
Act provided by Rule 144A, and (y) in offshore transactions in reliance upon
Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation or
general advertising (within the meaning of Regulation D under the Act) has been
or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the Series A Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt Resales,
such Initial Purchaser will solicit offers to buy the Series A Notes only from,
and will offer to sell the Series A Notes only to, Eligible Purchasers. Each
Initial Purchaser further agrees that it will offer to sell the Series A Notes
only to, and will solicit offers to buy the Series A Notes only from (A)
Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs and
(B) Regulation S Purchasers, in each case, that agree that (x) the Series A
Notes purchased by them may be resold, pledged or otherwise transferred within
the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act, as in
effect on the date of the transfer of such Series A Notes, only (I) to the
Company or any of its subsidiaries, (II) to a person whom the seller reasonably
believes is a QIB purchasing for its own account or for the account of a QIB in
a transaction meeting the requirements of Rule 144A under the Act, (III) in an
offshore transaction (as defined in Rule 902 under the Act) meeting the
requirements of Rule 904 of the Act, (IV) in a transaction meeting the
requirements of Rule 144 under the Act, (V) to an Accredited Institution that,
prior to such transfer,
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<PAGE> 29
furnishes the Trustee a signed letter containing certain representations and
agreements relating to the registration of transfer of such Series A Note and,
if such transfer is in respect of an aggregate principal amount of Series A
Notes less than $250,000, an opinion of counsel acceptable to the Company that
such transfer is in compliance with the Act, (VI) in accordance with another
exemption from the registration requirements of the Act (and based upon an
opinion of counsel acceptable to the Company) or (VII) pursuant to an effective
registration statement and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction and (y) they will deliver to each person to whom such Series A
Notes or an interest therein is transferred a notice substantially to the effect
of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on its
or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A Notes.
(f) The Series A Notes offered and sold by such Initial Purchaser pursuant
hereto in reliance on Regulation S have been and will be offered and sold only
in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or sold and will
not offer or sell the Series A Notes in the United States or to, or for the
benefit or account of, a U.S. Person (other than a distributor), in each case,
as defined in Rule 902 under the Act (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering of the Series A Notes pursuant hereto and the Closing Date, other than
in accordance with Regulation S of the Act or another exemption from the
registration requirements of the Act. Such Initial Purchaser agrees that, during
such 40-day restricted period, it will not cause any advertisement with respect
to the Series A Notes (including any "tombstone" advertisement) to be published
in any newspaper or periodical or posted in any public place and will not issue
any circular relating to the Series A Notes, except such advertisements as
permitted by and include the statements required by Regulation S.
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<PAGE> 30
(i) Such Initial Purchaser agrees that, at or prior to confirmation of a
sale of Series A Notes by it to any distributor, dealer or person receiving a
selling concession, fee or other remuneration during the 40-day restricted
period referred to in Rule 903(c)(3) under the Act, it will send to such
distributor, dealer or person receiving a selling concession, fee or other
remuneration a confirmation or notice to substantially the following effect:
"The Series A Notes covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the Offering and the
Closing Date, except in either case in accordance with Regulation S under the
Securities Act (or Rule 144A or to Accredited Institutions in transactions that
are exempt from the registration requirements of the Securities Act), and in
connection with any subsequent sale by you of the Series A Notes covered hereby
in reliance on Regulation S during the period referred to above to any
distributor, dealer or person receiving a selling concession, fee or other
remuneration, you must deliver a notice to substantially the foregoing effect.
Terms used above have the meanings assigned to them in Regulation S."
(j) Such Initial Purchaser agrees that the Series A Notes offered and sold
in reliance on Regulation S will be represented upon issuance by a global
security that may not be exchanged for definitive securities until the
expiration of the 40-day restricted period referred to in Rule 903(c)(3) of the
Act and only upon certification of beneficial ownership of such Series A Notes
by non-U.S. persons or U.S. persons who purchased such Series A Notes in
transactions that were exempt from the registration requirements of the Act.
Each Initial Purchaser acknowledges that the Company and, for purposes of
the opinions to be delivered to each Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and such Initial
Purchaser hereby consents to such reliance.
8. Indemnification.
(a) The Company and its subsidiaries (excluding, prior to the Acquisition,
Empress Hammond and Empress Joliet) agree to indemnify and hold harmless each
Initial Purchaser, its directors, its officers and each person, if any, who
29
<PAGE> 31
controls, or who is an affiliate (as defined in Rule 144 of the Act) of, such
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information provided by the Company to any holder or prospective
purchaser of Series A Notes pursuant to Section 5(h) or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon and made in conformity with information relating to such Initial
Purchaser furnished in writing to the Company by such Initial Purchaser;
provided, however, that the foregoing indemnity agreement with respect to any
Preliminary Offering Memorandum shall not inure to the benefit of any Initial
Purchaser who failed to deliver a Final Offering Memorandum (as then amended or
supplemented, provided by the Company to the several Initial Purchasers in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgements caused by any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Final Offering Memorandum.
(b) Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company and its directors and officers and each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) the Company to the same extent as the foregoing indemnity from
the Company to the Initial Purchasers set forth in (a) above but only with
reference to such untrue statements or omissions or alleged untrue statements or
omissions based upon and made in conformity with information relating to such
Initial Purchaser furnished in writing to the Company by such Initial Purchaser
expressly for use in the Preliminary Offering Memorandum or the Offering
Memorandum.
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<PAGE> 32
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
(provided that the failure to give such notice shall not relive the indemnifying
party of its obligations pursuant to this Section 8, except to the extent that
such failure materially prejudices the position of such indemnifying party as
determined by a court of competent jurisdiction) and the indemnifying party
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all fees and
expenses of such counsel, as incurred (except that in the case of any action in
respect of which indemnity may be sought pursuant to both Sections 8(a) and
8(b), the Initial Purchasers shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such counsel,
except as provided below, shall be at the expense of the Initial Purchasers).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by DLJ, in the case
of the parties indemnified pursuant to Section 8(a), and by the Company, in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the
31
<PAGE> 33
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other hand, from
the offering of the Series A Notes or (ii) if the allocation provided by clause
8(d)(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company, on the one hand, and
the Initial Purchasers, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand and the Initial Purchasers, on
the other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Series A Notes (after underwriting discounts
and commissions, but before deducting expenses) received by the Company, and the
total discounts and commissions received by the Initial Purchasers, bear to the
total price to investors of the Series A Notes. The relative fault of the
Company, on the one hand, and the Initial Purchasers, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or the Initial Purchasers, on the other hand, and the
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<PAGE> 34
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total discounts and commissions received by such Initial Purchaser
exceeds the amount of any damages which such Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute pursuant to
this Section 8(d) are several in proportion to the respective principal amount
of Series A Notes purchased by each of the Initial Purchasers hereunder and not
joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
9. Conditions of Initial Purchaser's Obligations. The obligations of the
Initial Purchasers to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct (or, with respect to those
representations and warranties that are not qualified as to materiality, shall
be true and correct in all material respects) on the date hereof and on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
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<PAGE> 35
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that does
not indicate the direction of the possible change in, any rating of the Company
or Horseshoe Gaming or any securities of the Company or Horseshoe Gaming
(including, without limitation, the placing of any of the foregoing ratings on
credit watch with negative or developing implications or under review with an
uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act, (ii) there shall not have occurred any change, nor shall any notice have
been given of any potential or intended change, in the outlook for any rating of
the Company or Horseshoe Gaming or any securities of the Company or Horseshoe
Gaming by any such rating organization and (iii) no such rating organization
shall have given notice that it has assigned (or is considering assigning) a
lower rating to the Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto), (i) there shall not have
occurred any change or any development involving a prospective change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries (excluding for this purpose
Empress Hammond and Empress Joliet), taken as a whole, (ii) there shall not have
been any change or any development involving a prospective change in the capital
stock or in the long-term debt of the Company or any of its subsidiaries
(excluding for this purpose Empress Hammond and Empress Joliet) and (iii)
neither the Company nor any of its subsidiaries (excluding for this purpose
Empress Hammond and Empress Joliet) shall have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum. Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto), (i) there shall not have
occurred any change or any development involving a prospective change in the
condition, financial or otherwise, or the earnings, business, management or
operations of Empress and its subsidiaries, taken as a whole, (ii) there shall
not have been any change or any development involving a prospective change in
the capital stock
34
<PAGE> 36
or in the long-term debt of Empress or any of its subsidiaries and (iii) neither
Empress nor any of its subsidiaries shall have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(d) The Initial Purchasers shall have received on the Closing Date a
certificate dated the Closing Date, signed by the President and the Chief
Financial Officer of the Company, (i) confirming the matters set forth in
Sections 6(cc), 9(a) and 9(b) and stating that the Company has complied with all
the agreements and satisfied all of the conditions herein contained and required
to be complied with or satisfied on or prior to the Closing Date and (ii)
stating that the industry, statistical and market-related data included in the
Offering Memorandum has been reviewed by such persons and, to the best knowledge
of such persons, is true and accurate in all material respects and is based on
or derived from sources which the Company believes to be reliable and accurate,
which certificate shall be in form and substance satisfactory to counsel for the
Initial Purchasers.
(e) The Initial Purchasers shall have received on the Closing Date an
opinion (satisfactory the Initial Purchasers and counsel for the Initial
Purchasers), dated the Closing Date, of Swidler Berlin Shereff Friedman, LLP,
special counsel for the Company, to the effect that:
(i) each of the Company and its subsidiaries has been duly
incorporated or organized, is validly existing as a corporation or other
business organization in good standing under the laws of its jurisdiction
of incorporation or organization and has the power and authority
(corporate or otherwise) to carry on its business as described in the
Offering Memorandum and to own, lease and operate its properties;
(ii) each of the Company and its subsidiaries is duly qualified and
is in good standing as a foreign corporation or other business
organization authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not
have a Material Adverse Effect;
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<PAGE> 37
(iii) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights;
(iv) the entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding
shares of capital stock or other ownership interests of each of the
Company's subsidiaries have been duly authorized and, in the case of
corporate subsidiaries, are validly issued and are fully paid and
non-assessable, and, except in the case of Empress Hammond and Empress
Joliet or as otherwise provided in the Offering Memorandum, are owned by
the Company, free and clear of any Lien;
(v) the Series A Notes have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company, enforceable in
accordance with their terms except as (x) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration, and the availability of
equitable remedies may be limited by equitable principles of general
applicability (regardless of whether such enforcement may be sought in a
proceeding in equity or at law). The Series A Notes conform in all
material respects as to legal matters to the description thereof contained
in the Offering Memorandum;
(vi) the Indenture has been duly authorized, executed and delivered
by the Company and, assuming due authorization, execution and delivery by
the Trustee, is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insol-
36
<PAGE> 38
vency or similar laws affecting creditors' rights generally and (y) rights
of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability (regardless of whether
such enforcement may be sought in a proceeding in equity or at law). The
Indenture conforms in all material respects as to legal matters to the
description thereof contained in the Offering Memorandum;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Initial Purchasers, is a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether such enforcement may be sought in a proceeding in
equity or at law), and any rights to indemnification or contribution may
be limited by federal and state securities laws and public policy
considerations. The Registration Rights Agreement conforms in all material
respects as to legal matters to the description thereof contained in the
Offering Memorandum;
(ix) The Security Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery by the Trustee and Securities Intermediary is a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether such enforcement may be sought in a proceeding in
equity or at
37
<PAGE> 39
law). The Security Agreement conforms in all material respects as to legal
matters to the description thereof contained in the Offering Memorandum;
(x) The Note Pledge Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as (x) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (y)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability (regardless of
whether such enforcement may be sought in a proceeding in equity or at
law);
(xi) The Horseshoe Note has been duly authorized, executed and
delivered by Horseshoe Gaming and is a valid and binding agreement of
Horseshoe Gaming, enforceable against Horseshoe Gaming in accordance with
its terms, except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether such enforcement may be sought in a proceeding in
equity or at law);
(xii) The Horseshoe Note Guarantees have been duly authorized,
executed and delivered by RPG and HE and are valid and binding agreements
of RPG and HE, enforceable against RPG and HE in accordance with their
terms, except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability
(regardless of whether such enforcement may be sought in a proceeding in
equity or at law);
(xiii) The Merger Agreement has been duly authorized, executed and
delivered by the Empress Parties and the
38
<PAGE> 40
Horseshoe Affiliates and is a valid and binding agreement of the Empress
Parties and the Horseshoe Affiliates, enforceable against the Empress
Parties and the Horseshoe Affiliates in accordance with its terms, except
as (x) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability;
(xiv) the Series B Senior Notes have been duly authorized;
(xv) the statements under the captions "Summary--The Refinancing and
the Empress Merger," "Description of Certain Other Indebtedness,"
"Description of Notes," "Certain Federal Income Tax Consequences" and
"Plan of Distribution" in the Offering Memorandum, insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present in all material respects
the matters referred to therein;
(xvi) to the best of such counsel's knowledge after due inquiry,
neither the Company nor any of its subsidiaries is in violation of its
respective charter or by-laws or other organizational documents, and
neither the Company nor any of its subsidiaries is in default in the
performance of any obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries (excluding
Empress Hammond and Empress Joliet solely for purposes of determining
materiality), taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound;
(xvii) the execution, delivery and performance of this Agreement and
the other Operative Documents by the Company, the execution, delivery and
performance of the Merger Agreement by the Empress Parties and the
Horseshoe Affili-
39
<PAGE> 41
ates, the compliance by the relevant parties with all provisions hereof
and thereof and the consummation of the transactions contemplated hereby
and thereby (including the Acquisition and the issuance and sale of the
Series A Notes and the use of proceeds thereof as described in the
Offering Memorandum under the caption "Use of Proceeds") will not (i)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various
states, or that have been obtained or, in the case of the Acquisition,
such as will be obtained prior to the date legally required thereunder),
(ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, (x) the charter or by-laws or other
organizational documents of the Company or any of its subsidiaries or (y)
any material contract to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or their
respective property is bound which are to be listed on a schedule to such
counsel's opinion, (iii) violate or conflict with (a) Applicable Laws (as
defined below), or (b) to such counsel's knowledge, any judgment, order or
decree of any federal or New York State authority, regulatory body,
administrative agency, court or other governmental body, having
jurisdiction over the Company, any of its subsidiaries or their respective
property except in the case of clause (iii)(b) where such violation or
conflict would not, single or in the aggregate, have a Material Adverse
Effect, (iv) result in the imposition or creation of (or the obligation to
create or impose) a Lien (other than Liens created by the Security
Agreement, the Note Pledge Agreement and the New Credit Facility) under,
any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound except where such imposition or
creation would not, singly or in the aggregate, have a Material Adverse
Effect, or (v) result in the termination, suspension or revocation of any
Authorization that is material to the Company and its subsidiaries
(excluding Empress Hammond and Empress Joliet solely for purposes for
determining materiality), taken as a whole, or result in any other
40
<PAGE> 42
impairment of any material rights of the holder of any such Authorization.
Such counsel need express no opinion, however, as to whether execution,
delivery or performance by the Company and its subsidiaries of their
obligations under each of this Agreement, the other Operative Documents
and the Merger Agreement in accordance with their terms will constitute a
violation of or a default under any covenant, restriction or provision
with respect to financial ratios or tests or any aspect of the financial
condition or results of operations of the Company and its subsidiaries.
"Applicable Laws" shall mean those laws, rules and regulations of the
State of New York, the Delaware General Corporation Law and of the United
States of America which, in such counsel's experience, are normally
applicable to transactions of the type contemplated by the Operative
Documents and the Merger Agreement.
(xviii) after due inquiry, other than as described in the Offering
Memorandum, such counsel is not aware of any legal or governmental
proceedings pending or, to such counsel's knowledge, threatened to which
the Company or any of its subsidiaries is or could be a party or to which
any of their respective property is or could be subject, which might
result, singly or in the aggregate, in a Material Adverse Effect;
(xix) none of the Company or any of its subsidiaries is and, after
giving effect to the offering and sale of the Series A Notes and the
application of the net proceeds thereof as described in the Offering
Memorandum, will be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended;
(xx) Upon execution and delivery by the Company of the Security
Agreement and deposit by the Company of the Pledged Funds with the
Securities Intermediary in accordance with the terms thereof, the Security
Agreement is sufficient to create in favor of the Trustee, for the benefit
of the holders of the Notes, a valid and perfected security interest in
all right, title and interest of the Company in and to all "security
entitlements" arising from the Secured Proceeds Account.
41
<PAGE> 43
(xxi) Upon execution and delivery by the Company of the Note Pledge
Agreement and delivery by the Company to the Trustee of the Horseshoe Note
in accordance with the terms thereof, the Note Pledge Agreement is
sufficient to create in favor of the Trustee, for the benefit of the
holders of the Notes, a valid and perfected security interest in all
right, title and interest of the Company in and to the Horseshoe Note.
(xxii) the Indenture complies as to form in all material respects
with the requirements of the TIA, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
Assuming the accuracy of the representations and warranties of the Company
set forth in Sections 6(ff), (hh), (ii), (jj) and (kk) of this Agreement
and of the Initial Purchasers representations and agreements in Section 7
of this Agreement, it is not necessary in connection with the offer, sale
and delivery of the Series A Notes to the Initial Purchasers in the manner
contemplated by this Agreement or in connection with the Exempt Resales to
qualify the Indenture under the TIA.
(xxiii) Assuming (i) the accuracy of the representations and
warranties of the Company set forth in Sections 6(ff), (hh), (ii), (jj)
and (kk) of this Agreement and of the Initial Purchasers representations
and agreements in Section 7 of this Agreement, (ii) compliance by the
Initial Purchasers with the offering and transfer procedures and
restrictions described in the Offering Memorandum, (iii) the accuracy of
the representations and warranties made in accordance with this Agreement
and the Offering Memorandum by purchasers to whom the Initial Purchasers
initially resell Series A Notes and (iv) that purchasers to whom the
Initial Purchasers initially resell Series A Notes receive a copy of the
Offering Memorandum prior to such sale, the offer, sale and delivery of
the Series A Notes to the Initial Purchasers in the manner contemplated by
this Agreement and the Offering Memorandum and the initial resale of the
Series A Notes by the Initial
42
<PAGE> 44
Purchasers in the manner contemplated in the Offering Memorandum and this
Agreement, do not require registration under the Securities Act of 1933,
as amended, it being understood that such counsel need express no opinion
as to any subsequent resale of any Series A Note.
(xxiv) The documents of Horseshoe Gaming and Empress incorporated by
reference in the Offering Memorandum (except for the financial statements
and other financial data included therein, as to which such counsel need
not expresses any opinion), when they became effective or were filed with
the Commission, as the case may be, complied as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Company,
representatives of the independent accountants of the Company, and the Initial
Purchasers and the Initial Purchasers' counsel at which the contents of the
Offering Memorandum and related matters were discussed and, although such
counsel need not pass upon, and shall not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the Offering
Memorandum and need make no independent check or verification thereof, on the
basis of the foregoing, no facts have come to such counsel's attention that have
led such counsel to believe that the Offering Memorandum, as of its date and as
of the Closing Date, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that such counsel need express no opinion or belief with
respect to the financial statements and other financial and statistical data
included therein or excluded therefrom; provided, however, that statistical data
shall not be deemed to include market and industry data.
In giving such opinion with respect to the matters covered by Section
9(e)(xxiii), such counsel may state that their opinion and belief are based upon
their participation in the preparation of the Offering Memorandum and any
amendments or supplements thereto and review and discussion of the contents
thereof, but are without independent check or verification except as specified.
43
<PAGE> 45
With respect to the matters covered by paragraphs (i) through (xxiv) above
relating to Empress and its subsidiaries, such counsel may either (i) in the
case of paragraphs (xiii), (xv) through (xix) and (xxiv), qualify such opinions
as to knowledge, (ii) rely on opinions of other counsel to the Company or to
Empress (including in-house counsel) reasonably satisfactory to counsel to the
Initial Purchasers or (iii) arrange for such matters to be covered in an opinion
of counsel (including in-house counsel) reasonably satisfactory to counsel to
the Initial Purchasers.
(f) The Initial Purchasers shall have received on the Closing Date
opinions (satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers), dated the Closing Date, of Mississippi, Louisiana, Illinois and
Indiana counsel for the Company, to the effect set forth on Schedule C hereto,
and to such further effect as counsel to the Initial Purchasers may reasonably
request.
(g) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP,
counsel for the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
(h) The Initial Purchasers shall have received, at the time this Agreement
is executed and at the Closing Date, letters dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers from Arthur Andersen LLP and Ernst & Young LLP, independent
public accountants for the Company and Empress, respectively, containing the
information and statements of the type ordinarily included in accountants'
"comfort letters" to the Initial Purchasers with respect to the financial
statements and certain financial information contained in the Offering
Memorandum.
(i) The Series A Notes shall have been approved by the NASD for trading
and duly listed in PORTAL.
(j) The Company shall have executed the Indenture and the Initial
Purchasers shall have received an original copy thereof, duly executed by the
Company.
(k) The Company shall have executed the Registration Rights Agreement and
the Initial Purchasers shall have received an original copy thereof, duly
executed by the Company.
44
<PAGE> 46
(l) The Company shall have executed the Security Agreement and the Initial
Purchasers shall have received an original copy thereof, duly executed by the
Company.
(m) The Company shall have executed the Note Pledge Agreement and the
Initial Purchasers shall have received an original copy thereof, duly executed
by the Company.
(n) Horseshoe Gaming shall have executed the Horseshoe Note and the
Company shall have received an original copy thereof, for delivery to the
Trustee under clause (r) below.
(o) RPG and HE shall have each executed a Horseshoe Note Guarantee and the
Initial Purchasers shall have received an original copy thereof, duly executed
by HE and RPG.
(p) The Merger Agreement shall be in full force and effect.
(q) No statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any United States
court or any Federal, state, local or foreign court or governmental,
administrative or regulatory authority or agency of competent jurisdiction which
prohibits the consummation of the Acquisition substantially as described in the
Offering Memorandum.
(r) Concurrently with the Closing, (i) in accordance with the Security
Agreement, the Pledged Funds will be deposited with the Securities Intermediary
for investment in United States Treasury securities and deposited into the
Secured Proceeds Account and (ii) the Company will pledge, assign and deliver to
the Trustee the Horseshoe Note. The Company agrees to take such further action
as from time to time may be required to perfect and protect the Liens created by
the Security Agreement and the pledge of the Horseshoe Note.
(s) The Company shall have caused Horseshoe Gaming to use the proceeds of
the Horseshoe Note to (1) repay in full outstanding principal and accrued
interest under its existing senior secured credit facility, (2) accept tendered
Senior Notes for payment pursuant to the Tender Offer and (3) pay related fees
and expenses, including tender premiums and consent fees. If and to the extent
any Senior Notes remain outstanding after consummation of the Tender Offer, the
Company shall cause Horseshoe Gaming to irrevocably deposit any remaining
proceeds of the
45
<PAGE> 47
Horseshoe Note into a defeasance account pursuant to and in accordance with the
defeasance provisions of the indenture governing the Senior Notes. In addition,
the Company shall have caused Horseshoe Gaming to take all necessary action to
ensure that the Supplemental Indenture and Security Document Amendments
described in the Statement are operative.
(t) The Company's $375 million commitment for the New Credit Facility
shall be in full force and effect.
(u) The Initial Purchasers shall have received a solvency opinion, dated
as of the Closing Date, form Duff & Phelps relating to the Company and its
subsidiaries and containing the information and statements customarily included
in such opinion letters. In addition, the Initial Purchasers shall have received
satisfactory evidence that the trustee under the indenture governing the Senior
Notes shall have received a fairness opinion relating to the Horseshoe Note.
(v) The Company shall not have failed at or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company at or prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchasers by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, or the Nasdaq National Market
or limitation on prices for securities or other instruments on any such exchange
or the Nasdaq National Market, (iii) the suspension of trading of any securities
of the Company or Horseshoe Gaming on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your opinion
46
<PAGE> 48
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse effect
on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers shall
fail or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase is not more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased on such
date by all Initial Purchasers, each non-defaulting Initial Purchaser shall be
obligated severally, in the proportion which the principal amount of the Series
A Notes set forth opposite its name in Schedule A bears to the aggregate
principal amount of the Series A Notes which all the non-defaulting Initial
Purchasers, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Series A Notes which such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the aggregate principal amount of the Series A Notes which any Initial Purchaser
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 10 by an amount in excess of one-ninth of such principal amount of
the Series A Notes without the written consent of such Initial Purchaser. If on
the Closing Date any Initial Purchaser or Initial Purchasers shall fail or
refuse to purchase the Series A Notes and the aggregate principal amount of the
Series A Notes with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased by all
Initial Purchasers and arrangements satisfactory to the Initial Purchasers and
the Company for purchase of such the Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Offering
Memorandum or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Initial Purchaser
from liability in respect of any default of any such Initial Purchaser under
this Agreement.
47
<PAGE> 49
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company to Horseshoe
Gaming Holding Corp., 4024 S. Industrial Road, Las Vegas, Nevada 89103, with a
copy to Swidler Berlin Shereff Friedman, LLP, 919 Third Avenue, 20th Floor, New
York, New York 10022, Attention: Robert M. Friedman, Esq. and (ii) if to the
Initial Purchasers, c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park Avenue, New York, New York 10172, Attention: Syndicate Department, with a
copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los
Angeles, California 90071, Attention: Nicholas P. Saggese, Esq., or in any case
to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Initial Purchasers set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Series A
Notes, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchasers, the officers or
directors of the Initial Purchasers, any person controlling the Initial
Purchasers, the Company, the officers or directors of the Company, or any person
controlling the Company, (ii) acceptance of the Series A Notes and payment for
them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchasers for all out-of-pocket expenses (including the reasonable fees
and charges and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Company also
agrees to reimburse the Initial Purchasers and their respective officers,
directors and each person, if any, who controls such Initial Purchasers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act for any
and all fees and expenses (including without limitation the reasonable fees and
charges and expenses of counsel) incurred by them in connection with enforcing
their rights under this Agreement (including without limitation its rights under
Section 8).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Initial
Purchasers, the Initial Purchasers' directors and officers, any controlling
persons referred to herein, the directors of the Company and their respective
successors and assigns, all
48
<PAGE> 50
as and to the extent provided in this Agreement, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include a purchaser of any of the Series A
Notes from the Initial Purchasers merely because of such purchase.
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, including, without limitation, New York General
Obligations Law ss. 5-1401.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
49
<PAGE> 51
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchasers.
Very truly yours,
HORSESHOE GAMING HOLDING CORP.
By: /s/ Jack B. Binion
-------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC INC.
UTENDAHL CAPITAL PARTNERS, LP
WASSERSTEIN PERELLA SECURITIES, INC.
By: Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ Omar Karame
--------------------------------
Name: Omar Karame
Title: Vice President
50
<PAGE> 52
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
----------------- --------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation .................................. $365,598,000
Wasserstein Perella Securities, Inc. ...................... 132,942,000
CIBC, Inc. ................................................ 66,474,000
Utendahl Capital Partners, LP ............................. 34,986,000
Total .................................................. $600,000,000
============
</TABLE>
1
<PAGE> 53
SCHEDULE B
Subsidiaries
1. Horseshoe Gaming, Inc.
2. Horseshoe Gaming, L.L.C.
3. Horseshoe GP, Inc.
4. Robinson Property Group, L.P.
5. New Gaming Capital Partnership, L.P.
6. Horseshoe Entertainment, L.P.
7. Bossier City Land Corp.
8. Horseshoe Ventures, L.L.C.
9. Red Oak Insurance Co., Ltd.
10. Empress Acquisition Illinois, Inc.
11. Empress Acquisition Indiana, Inc.
12. Horseshoe Gaming (Midwest), Inc.
<PAGE> 54
SCHEDULE C
1. The statements in the Offering Memorandum under the captions "Risk
Factors--Extensive Government Regulation Continuously Impacts Our
Operations-There Are Significant Regulatory Approvals Required for
us to Consummate the Empress Merger-Gaming Referenda or Other Gaming
Laws May Be Adopted, Modified or Repealed-Investigation of Political
Corruption in Louisiana" and "Regulatory Matters--Gaming Regulatory
Matters" insofar as such statements constitute a summary of certain
provisions of the laws and regulations governing gaming in [insert
applicable jurisdiction] have been reviewed by such counsel and are
accurate in all material respects.
2. The execution, delivery and performance of this Agreement and the
other Operative Documents by the Company, the execution, delivery
and performance of the Merger Agreement by the Empress Parties and
the Horseshoe Affiliates, the compliance by the relevant parties
with all provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby (including the
Acquisition and the issuance and sale of the Series A Notes and the
use of proceeds thereof as described in the Offering Memorandum
under the caption "Use of Proceeds") will not (i) require any
consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws of the various
states, or that have been obtained or, in the case of the
Acquisition, such as will be obtained prior to the date legally
required thereunder), (ii) violate or conflict with any applicable
law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property or
(iii) result in the termination, suspension or revocation of any
Authorization of the Company or any of its subsidiaries or result in
any other impairment of the rights of the holder of any such
Authorization.
3
<PAGE> 55
EXHIBIT A
Form of Registration Rights Agreement
[see Exhibit 10.4]
<PAGE> 1
EXHIBIT 2.4
SUBSCRIPTION AND REORGANIZATION AGREEMENT
This SUBSCRIPTION AND REORGANIZATION AGREEMENT (this "Agreement") is made
as of April 29, 1999, by and among (i) Horseshoe Gaming Holding Corp., a
Delaware corporation (the "Corporation"), (ii) Horseshoe Gaming, L.L.C., a
Delaware limited liability company ("HG L.L.C."), (iii) Robinson Property Group,
Inc., a Nevada corporation ("RPGI"), (iv) each of the individuals and trusts
listed on Annex A hereto, which are all of the members of HG L.L.C. that are
eligible to be stockholders of a corporation that elects to be treated as an "S
corporation" for federal income tax purposes (each, a "Subscriber" and
collectively, the "Subscribers"), (v) each of the individuals listed on Annex B
hereto, who are all of the stockholders of Horseshoe Gaming, Inc. (the "HGI
Stockholders"), (vi) Peri Cope Howard, in her capacity as the sole stockholder
of RPGI (in such capacity, the "RPGI Stockholder"), (vii) Horseshoe Gaming,
Inc., a Nevada corporation ("HGI"), and (viii) each successor or assignee of a
member of HG L.L.C. that is not currently eligible to be a stockholder of an S
corporation but who subsequently becomes eligible to be a stockholder of an S
corporation.
R E C I T A L S :
A. The authorized capital stock of the Corporation consists of 50,000
shares of common stock, par value $0.01 per share (the "Common
Stock"), which is divided into two classes as follows: (a) 40,000
shares of Common Stock designated as Class A Common (the "Class A
Common"); and (b) 10,000 shares of Common Stock designated as Class
B Common (the "Class B Common").
B. Except with respect to matters provided for in that certain
Stockholders Agreement for Horseshoe Gaming Holding Corp. dated as
of even date herewith by and among the Corporation and the
signatories thereto, a copy of which is attached as Exhibit 3C
hereto (the "Stockholders Agreement") (as to which matters holders
of Class A Common and Class B Common shall each be entitled to one
vote per share), holders of Class A Common shall be entitled to one
vote per share on all matters to be voted on by the stockholders of
the Corporation, and holders of Class B Common shall be entitled to
five (5) votes per share on all matters to be voted on by the
stockholders of the Corporation. The rights of holders of Class A
Common and Class B Common are set forth in the Corporation's
Certificate of Incorporation, a copy of which is attached hereto as
Exhibit A (the "Certificate of Incorporation"). A copy of the Bylaws
of the Corporation is attached hereto as Exhibit B (the "Bylaws").
C. HG L.L.C. is governed by that certain Limited Liability Company
Agreement of Horseshoe Gaming, L.L.C. dated as of October 1, 1995,
as amended, among the Members thereof (the "LLC Agreement").
Capitalized terms used herein without definition shall have the
respective meanings given to such terms in the LLC Agreement.
<PAGE> 2
D. Each Subscriber owns the number of Units of HG L.L.C. set forth next
to its name on Annex A attached hereto (with respect to each
Subscriber, such Subscriber's "Contribution Units").
E. Each Subscriber desires to contribute all of its Contribution Units
to the Corporation, and the Corporation desires to accept the
contribution of all such Contribution Units from each such
Subscriber, solely in consideration of the issuance to such
Subscriber of the number and class of shares of Common Stock set
forth next to its name on Annex A attached hereto (with respect to
each Subscriber, such Subscriber's "Subscribed Shares") and on the
terms and subject to the conditions set forth herein.
F. Each HGI Stockholder owns, beneficially and of record, the number of
shares of common stock of HGI ("HGI Stock") set forth next to its
name on Annex B attached hereto (with respect to each HGI
Stockholder, such HGI Stockholder's "HGI Shares").
G. Each HGI Stockholder desires to transfer all of its HGI Shares to
the Corporation, and the Corporation desires to acquire all such HGI
Shares from each such HGI Stockholder, solely in consideration of
the number and class of shares of Common Stock set forth next to its
name on Annex B attached hereto (with respect to each HGI
Stockholder, such HGI Stockholder's "Subscribed Shares") and on the
terms and subject to the conditions set forth herein.
H. The Corporation intends to elect to be treated as an "S corporation"
for federal income tax purposes and requires the consent of all of
its stockholders to make such election.
I. RPGI and the Corporation have deemed it advisable and in the best
interests of each of them and their respective stockholders to
effect the tax-free merger of RPGI with and into the Corporation
pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware and the State of Nevada (the "Merger"), and
in furtherance thereof, have approved the Merger;
J. At the effective time of the Merger, the RPGI Stockholder will
deliver to the Corporation all of her shares of RPGI common stock
("RPGI Stock") solely in exchange for the number and class of shares
of Common Stock set forth next to the RPGI Stockholder's name on
Annex A attached hereto (RPGI's "Subscribed Shares"), on the terms
and subject to the conditions set forth herein.
2
<PAGE> 3
NOW, THEREFORE, in consideration of the mutual promises made herein and
intending to be legally bound, and for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto hereby
agree as follows:
1. Recitals. The Recitals set forth above are hereby incorporated herein.
2. Authorization and Closing of Contribution of Contribution Units;
Transfer of Common Stock; Amendment of Limited Liability Company Agreement of HG
L.L.C.; Effect of Merger.
2A. Authorization of the Issuance of the Common Stock. The
Corporation has authorized the issuance and transfer to each Subscriber of the
number of Subscribed Shares set forth opposite the name of such Subscriber on
Annex A (including the Subscribed Shares issuable to the RPGI Stockholder
pursuant to the Merger), and to each HGI Stockholder of the number of Subscribed
Shares set forth opposite the name of such HGI Stockholder on Annex B. Such
Subscribed Shares shall have the rights and preferences set forth in the
Certificate of Incorporation.
2B. The Merger.
(a) Constituent Corporations. The name, address and jurisdiction of
organization of each of the corporations that are a party to the Merger are as
follows:
<TABLE>
<CAPTION>
Name Address Jurisdiction
- ---- ------- ------------
<S> <C> <C>
Horseshoe Gaming Holding Corp. 4024 South Industrial Road Delaware
Las Vegas, NV 89103
Robinson Property Group, Inc. 4024 South Industrial Road Nevada
Las Vegas, NV 89103
</TABLE>
(b) Delivery and Filing of Certificate of Merger and Articles of
Merger. RPGI and the Corporation will cause a Certificate of Merger to be
signed, verified and filed with the Secretary of State of the State of Delaware
and will cause Articles of Merger to be signed, verified and filed with the
Secretary of State of the State of Nevada (collectively with the Certificate of
Merger to be filed with the Secretary of State of the State of Delaware, the
"Certificates of Merger") and stamped receipt copies of each such filing to be
delivered to the Corporation on the Closing Date (as defined herein).
(c) Effective Time of the Merger. At the time as of which the Merger
becomes effective, which RPGI and the Corporation contemplate shall occur on the
Closing Date (the "Effective Time of the Merger"), and subject to the terms and
conditions of this Agreement and the
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applicable provisions of the Delaware General Corporation Law (the "DGCL") and
the laws of the State of Nevada, RPGI shall be merged with and into the
Corporation in accordance with the Certificates of Merger, the separate
existence of RPGI shall cease and the Corporation shall be the surviving party
in the Merger (the "Surviving Corporation"). At the Effective Time of the
Merger, the effect of the Merger otherwise shall be as provided in the
applicable provisions of the DGCL and the laws of the State of Nevada. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time of the Merger, all the property, rights, privileges, powers and franchises
of RPGI shall vest in the Surviving Corporation, and all debts, liabilities and
duties of RPGI shall become the debts, liabilities and duties of the Surviving
Corporation. The Merger will be effected in a single transaction.
(d) Certificate of Incorporation, Bylaws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the Corporation then in
effect shall be the Certificate of Incorporation of the
Surviving Corporation until amended as provided by law;
(ii) the Bylaws of the Corporation then in effect shall be the
Bylaws of the Surviving Corporation until amended as provided
by law;
(iii) the directors of the Corporation shall be the directors of the
Surviving Corporation until their respective successors are
elected or appointed and qualified in accordance with the
terms of the Certificate of Incorporation and Bylaws of the
Surviving Corporation; and
(iv) the officers of the Corporation immediately prior to the
Effective Time of the Merger shall continue as the officers of
the Surviving Corporation in the same capacity or capacities
until their respective successors are appointed and qualified
in accordance with the terms of the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
(e) Manner of Conversion. The manner of converting the shares of
RPGI Stock, issued and outstanding immediately prior to the Effective Time of
the Merger, into shares of Common Stock of the Surviving Corporation shall be as
follows:
As of the Effective Time of the Merger:
(i) all of the shares of RPGI Stock issued and outstanding
immediately prior to the Effective Time of the Merger will be
canceled and extinguished and, by virtue of the Merger and
without any action on the part of the RPGI Stockholder,
automatically shall be deemed to represent, with respect to
the RPGI Stockholder, the right to receive solely the number
of Subscribed
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Shares set forth opposite the name of the RPGI Stockholder on
Annex A; and
(ii) all shares of RPGI Stock that are held by RPGI as treasury
stock shall be canceled and retired and no shares of Common
Stock or other consideration shall be delivered or paid in
exchange therefor.
(f) Delivery of Certificates Evidencing Shares of RPGI Stock. The
RPGI Stockholder shall deliver to the Corporation at the Closing the
certificates representing RPGI Stock, duly endorsed in blank by the RPGI
Stockholder, or accompanied by stock powers duly endorsed in blank, with
signatures notarized, and with all necessary transfer tax and other revenue
stamps, acquired at the RPGI Stockholder's expense, affixed and canceled. The
RPGI Stockholder agrees promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such RPGI Stock or with respect to the stock powers accompanying any
RPGI Stock.
2C. Contribution of Contribution Units and HGI Shares and Transfer
of Common Stock. At the Closing (as defined below), subject to the terms and
conditions set forth herein, the Corporation shall issue to each of the
Subscribers such Subscriber's Subscribed Shares solely in exchange for the
contribution to the Corporation by the Subscriber of the number of Contribution
Units set forth opposite the name of the Subscriber on Annex A. At the Closing,
subject to the terms and conditions set forth herein, the Corporation shall
issue to each of the HGI Stockholders such HGI Stockholder's Subscribed Shares
solely in exchange for the contribution to the Corporation by the HGI
Stockholder of the number of HGI Shares set forth opposite the name of the HGI
Stockholder on Annex B.
2D. The Closing. The closing of the Merger pursuant to Section 2B,
and the issuance of the Common Stock and the contribution and transfer of the
Contribution Units and the HGI Shares pursuant to Section 2C (the "Closing"),
shall take place at the offices of Swidler Berlin Shereff Friedman, LLP, 919
Third Avenue, 20th Floor, New York, New York, on the date hereof, or at such
other place or on such other date as may be mutually agreeable to the
Corporation, the Subscribers, the RPGI Stockholder and the HGI Stockholders;
provided the following actions have occurred or occur as of such date: (i) the
Certificates of Merger shall have been filed with the appropriate state
authorities and certificates shall have been issued by such authorities
certifying as to the effectiveness of the Merger and (ii) all transactions
contemplated by this Agreement, including the exchange of the Contribution Units
and HGI Shares for Subscribed Shares, shall be completed. The exchange of the
Contribution Units and HGI Shares, respectively, for Subscribed Shares shall be
deemed to be effective upon delivery by the Corporation to each Subscriber and
to each HGI Stockholder, respectively, of stock certificates evidencing the
Subscribed Shares to be issued at the Closing to such Subscriber or to such HGI
Stockholder, as the case may be, and registered in the name of such Subscriber
or HGI Stockholder. The date on which the actions described in the preceding
clauses (i) and (ii) occur shall be referred to as the "Closing Date." Time is
of the essence.
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2E. Waivers of LLC Agreement; Amendment of LLC Agreement.
(a) HGI, in its capacity as Manager of HG L.L.C., (i) waives
compliance by the Corporation with the obligations and conditions to Transfer
set forth in Section 11.5 of the LLC Agreement for purposes of the transactions
contemplated by this Agreement, (ii) acknowledges that the Corporation's
execution of this Agreement shall be of the same force and effect as if the
Corporation (as Assignee) had executed a copy of the LLC Agreement and (iii)
waives its right of first refusal pursuant to Section 12.1 of the LLC Agreement
for purposes of the transactions contemplated by this Agreement.
(b) Each of Jack B. Binion, Peri Cope Howard, Leslie Kenney and
RPGI, in their capacities as Affiliates of HGI, waives its right of first
refusal pursuant to Section 12.1 of the LLC Agreement for purposes of the
transactions contemplated by this Agreement.
(c) Effective as of the Closing, (i) HGI shall cease to be the
Manager of HG L.L.C., (ii) the Corporation shall be admitted to HG L.L.C. as a
Member (and by its execution of this Agreement the Corporation agrees to be
bound by the terms and conditions of the LLC Agreement), (iii) the Corporation
shall be elected, pursuant to Section 6.1 of the LLC Agreement, as the successor
Manager to replace HGI as the Manager of HG L.L.C. and (iv) the Corporation
shall be the holder of all of the Contribution Units for all purposes of the LLC
Agreement.
(d) Effective as of immediately prior to the Closing, pursuant to
Section 7.1 of the LLC Agreement, the LLC Agreement shall be amended as follows:
(i) by deleting Section 11.2 of the LLC Agreement in its entirety and inserting
in its place the words "INTENTIONALLY OMITTED", and such Section 11.2 shall be
of no force and effect with respect to the transfer by the HGI Stockholders of
all of their HGI Shares pursuant to this Agreement; (ii) by changing each
reference to "HGI" in Section 6.9(a) and Section 15.1 of the LLC Agreement to
"Horseshoe Gaming Holding Corp.", and such Section 6.9(a) shall be of no force
and effect with respect to the transfer by the HGI Stockholders of all of their
HGI Shares pursuant to this Agreement; (iii) by changing the Tax Matters Member,
as designated in Section 10.1 of the LLC Agreement, from HGI to Horseshoe Gaming
Holding Corp.; and (iv) by changing each reference to "HGI" in Section 14 of the
LLC Agreement to "the Manager".
(e) Each of Section 11.1 and Section 11.3 of the LLC Agreement shall
be of no force and effect with respect to the transactions contemplated by this
Agreement, and each party hereto consents to any and all Transfers of Membership
Interests or Units pursuant to this Agreement, including without limitation (i)
the contribution by the Subscribers of their Contribution Units to the
Corporation in exchange for Subscribed Shares, (ii) the contribution by the HGI
Stockholders of their HGI Shares to the Corporation in exchange for Subscribed
Shares and (iii) the merger of RPGI with and into the Corporation (and the
cancellation of all shares of RPGI Stock in consideration for Subscribed
Shares).
(f) Except as expressly provided herein, the terms and conditions of
the LLC
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Agreement shall remain in full force and effect.
2F. Further Action. Each Subscriber agrees to take any additional
action and to execute any additional documents that the Corporation determines
are necessary or appropriate to assign and transfer to the Corporation all
right, title and interest of such Subscriber as of the Closing in and to all of
such Subscriber's Contribution Units. Each HGI Stockholder agrees to take any
additional action and to execute any additional documents that the Corporation
determines are necessary or appropriate to assign and transfer to the
Corporation all right, title and interest of such HGI Stockholder as of the
Closing in and to all of such HGI Stockholder's HGI Shares. Each of RPGI and the
RPGI Stockholder agrees to take any additional action and to execute any
additional documents that the Corporation determines are necessary or
appropriate to consummate the Merger.
2G. Tax Status of Contribution and Merger. Each of the parties to
this Agreement intends that:
(a) the transfer of the Contribution Units and the HGI Shares to the
Corporation solely in exchange for Subscribed Shares is a transaction described
in Section 351(a) of the Internal Revenue Code of 1986, as amended ("Code"), and
(b) the Merger constitutes a "reorganization" within the meaning of
Section 368(a)(1)(A) of the Code.
Each of the parties hereto agrees to take such actions and prepare and file all
of his, her or its income tax returns on a basis consistent with the foregoing
intent.
3. Conditions to each Subscriber's Obligation at the Closing. The
obligation of each Subscriber to effect the Closing is subject to the
satisfaction (or written waiver by each such Subscriber) as of the Closing of
the following conditions:
3A. Representations and Warranties; Covenants. The representations
and warranties contained in Section 7 hereof shall be true and correct at and as
of the Closing, and the Corporation shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
or at the Closing.
3B. Compliance with Applicable Laws. The contribution of the
Contribution Units by such Subscriber and the transfer of the Common Stock to
such Subscriber hereunder shall not be prohibited by any applicable law or
governmental regulation and shall not subject such Subscriber to any penalty or
liability under or pursuant to any applicable law or governmental regulation.
3C. Execution of Stockholders Agreement. The Stockholders Agreement,
substantially in the form attached hereto as Exhibit 3C, shall have been
executed by the Corporation, each HGI Stockholder, the RPGI Stockholder and each
other Subscriber.
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4. Conditions to each HGI Stockholder's Obligation at the Closing. The
obligation of each HGI Stockholder to effect the Closing is subject to the
satisfaction (or written waiver by each such HGI Stockholder) as of the Closing
of the following conditions:
4A. Representations and Warranties; Covenants. The representations
and warranties contained in Section 7 hereof shall be true and correct at and as
of the Closing, and the Corporation shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
or at the Closing.
4B. Compliance with Applicable Laws. The contribution of the HGI
Shares by such HGI Stockholder and the transfer of the Common Stock to such HGI
Stockholder hereunder shall not be prohibited by any applicable law or
governmental regulation and shall not subject such HGI Stockholder to any
penalty or liability under or pursuant to any applicable law or governmental
regulation.
4C. Execution of Stockholders Agreement. The Stockholders Agreement
shall have been executed by the Corporation, each other HGI Stockholder, the
RPGI Stockholder and each Subscriber.
5. Conditions of the Corporation's Obligation at the Closing. The
obligation of the Corporation to effect the Closing is subject to the
satisfaction (or written waiver by the Corporation) as of the Closing of the
following conditions:
5A. Representations and Warranties; Covenants. The representations
and warranties contained in Sections 8, 9 and 10 hereof shall be true and
correct at and as of the Closing, and each Subscriber, each HGI Stockholder,
RPGI and the RPGI Stockholder shall have performed in all material respects all
of the covenants required to be performed by it hereunder prior to or at the
Closing.
5B. Compliance with Applicable Laws. The issuance and transfer of
the Common Stock by the Corporation shall (i) not be prohibited by any
applicable law or governmental regulation, (ii) not subject the Corporation to
any penalty or liability under or pursuant to any applicable law or governmental
regulation and (iii) not preclude the Corporation from being a "small business
corporation" as described in Section 1361(b) of the Code.
5C. Execution of Stockholders Agreement. The Stockholders Agreement
shall have been executed by each Subscriber, the RPGI Stockholder and each HGI
Stockholder.
5D. Certificates of Merger. RPGI shall have filed with the
appropriate state authorities the Certificates of Merger and all documents
necessary to effect the Merger certificates shall have been issued by such
authorities certifying as to the effectiveness of the Merger.
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5E. S Corporation Elections. In consideration of the Corporation's
agreement to make the Permitted Tax Distributions (as defined in the
Stockholders Agreement) at the times and in the amounts provided in the
Stockholders Agreement:
(a) The RPGI Stockholder, each Subscriber and each HGI Stockholder
(and the spouse of any Subscriber, RPGI Stockholder or HGI Stockholder having a
community property interest in the Common Stock or in the income therefrom)
shall have executed and delivered to the Corporation for filing with the
Internal Revenue Service IRS Form 2553 and such other documents and other
certificates as the Corporation shall have requested.
(b) There shall have been delivered to the Corporation for filing
with the Internal Revenue Service a Qualified Subchapter S Trust Election
satisfying the requirements of Section 1361(d)(2) of the Code and Treasury
Regulation Section 1.1361-1(j)(6)(ii) signed by the current income beneficiary
of each Subscriber, the RPGI Stockholder and each HGI Stockholder that is a
qualified subchapter S trust ("QSST") (and, if the spouse of the current income
beneficiary is also a current income beneficiary satisfying the requirements of
Treas. Reg. Section 1.1361-1(j)(2)(i), then jointly signed by such spouse).
(c) The Corporation shall have received from each Subscriber, the
RPGI Stockholder or each HGI Stockholder that is a QSST, an opinion of counsel,
which counsel and such opinion is satisfactory to the Corporation, that under
applicable state law and the terms of such trust, the trust as of the Closing
Date satisfies all of the requirements of Section 1361(d) of the Code and Treas.
Reg. Section 1.1361-1(j).
(d) In the case of any Subscriber, RPGI Stockholder or HGI
Stockholder that is a QSST and which has any potential successive income
beneficiary, an agreement (in form and substance satisfactory to the
Corporation) of each such potential successive income beneficiary agreeing that
if such person becomes a current income beneficiary of the QSST, such person
shall not make the affirmative refusal to consent permitted to be made by Treas.
Reg. Section 1.1361- 1(j)(10).
(e) In the case of each Subscriber, the RPGI Stockholder and each
HGI Stockholder that is an electing small business trust ("ESBT"), the trustee
of such ESBT shall have executed and delivered to the Corporation for filing
with the Internal Revenue Service the election described in Section 1361(e)(3)
of the Code, satisfying the requirements set forth in IRS Notice 97- 12 (or any
successor requirements established by the Internal Revenue Service).
5F. Further Assurances. The Corporation shall have received and been
satisfied with such other certificates and documents as shall have been
requested by the Corporation in order for the Corporation to confirm the
satisfaction of the conditions set forth in this Agreement.
6. Conditions to RPGI's and the RPGI Stockholder's Obligation at the
Closing. The obligation of RPGI and the RPGI Stockholder to effect the Closing
is subject to the satisfaction (or
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written waiver by RPGI and the RPGI Stockholder) as of the Closing of the
following conditions:
6A. Representations and Warranties; Covenants. The representations
and warranties contained in Section 7 hereof shall be true and correct at and as
of the Closing, and the Corporation shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
or at the Closing.
6B. Compliance with Applicable Laws. The Merger of RPGI with and
into the Corporation shall not be prohibited by any applicable law or
governmental regulation and shall not subject RPGI or the RPGI Stockholder to
any penalty or liability under or pursuant to any applicable law or governmental
regulation and shall not subject the RPGI Stockholder or RPGI to any penalty or
liability under or pursuant to any applicable law or governmental regulation.
6C. Execution of Stockholders Agreement. The Stockholders Agreement
shall have been executed by the Corporation, each HGI Stockholder and each
Subscriber.
7. Representations and Warranties of the Corporation. As a material
inducement to each Subscriber, each HGI Stockholder, RPGI and the RPGI
Stockholder to enter into this Agreement and consummate the transactions
contemplated hereby, the Corporation hereby represents and warrants to each
Subscriber, each HGI Stockholder, RPGI and the RPGI Stockholder as follows:
7A. Organization and Corporate Power. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Corporation has all requisite corporate power and
authority and all material licenses, permits and authorizations necessary to own
and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement.
7B. Authorization; No Breach. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which the Corporation is a party have been duly authorized by all necessary
action on the part of the Corporation. This Agreement and all other agreements
contemplated hereby to which the Corporation is a party each constitutes a valid
and binding obligation of the Corporation, enforceable against the Corporation
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, moratorium or
assignment for the benefit of creditors laws and other laws affecting the rights
and remedies of creditors generally, including without limitation laws regarding
fraudulent transfers, fraudulent conveyances, preferences, avoidance and
automatic stay.
7C. Investment Representations.
(a) The Corporation understands that neither the Units nor the HGI
Shares have been registered under the Securities Act of 1933, as amended
("Securities Act"), or the securities or similar laws of any state or other
jurisdiction, and are offered in reliance on exemptions therefrom.
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The Corporation understands that neither the U.S. Securities and Exchange
Commission nor any other federal or state agency or governmental or regulatory
authority of any other foreign jurisdiction has recommended, approved or
endorsed the contribution of the Units or the HGI Shares provided for herein.
(b) The Corporation is accepting the contribution of the Units and
HGI Shares hereunder or accepted pursuant hereto for the Corporation's own
account with the present intention of holding such securities for purposes of
investment only, and has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws.
8. Representations and Warranties of the Subscribers. As a material
inducement to the Corporation, each other Subscriber, each HGI Stockholder, RPGI
and the RPGI Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, each Subscriber hereby represents and
warrants, severally as to itself only, to the Corporation (with the
understanding that the Corporation and its agents and attorneys are relying on
the accuracy and completeness of such representations and warranties) and to
each other Subscriber, each HGI Stockholder, RPGI and the RPGI Stockholder as
follows:
8A. Organization and Power. Such Subscriber has all requisite power
and authority to execute this Agreement and to carry out the transactions
contemplated hereby. For any Subscriber that is a corporation or a limited
partnership, such Subscriber is duly organized, validly existing and in good
standing under the laws of the state of its formation, and such Subscriber is
duly authorized and qualified to do business and is in good standing under the
laws of each jurisdiction where such qualification is required.
8B. Authorization; No Breach. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which such Subscriber is a party have been duly authorized by all necessary
action on the part of such Subscriber. Each of this Agreement and each other
agreement contemplated hereby to which such Subscriber is a party constitutes a
valid and binding obligation of such Subscriber, enforceable against such
Subscriber in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium or assignment for the benefit of creditors laws and other laws
affecting the rights and remedies of creditors generally, including without
limitation laws regarding fraudulent transfers, fraudulent conveyances,
preferences, avoidance and automatic stay. The execution, delivery and
performance by such Subscriber of this Agreement and any other document or
instrument executed by such Subscriber in connection herewith, and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the requirements hereof and thereof, will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on such
Subscriber, or the provisions of any indenture, instrument or agreement to which
such Subscriber is a party or is subject, or by which such Subscriber or any of
its assets is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any lien pursuant to the terms of any
such indenture, instrument or agreement, or constitute a breach
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of any fiduciary duty owed by such Subscriber to any third party, or require the
approval of any third-party (which has not been obtained) pursuant to any
contract, agreement, instrument, relationship or legal obligation to which such
Subscriber is subject or to which any of its assets, operations or management
may be subject.
8C. Ownership of Contribution Units. Such Subscriber owns,
beneficially and of record, the Contribution Units set forth opposite its name
on Annex A hereto, free and clear of all liens, charges and encumbrances and no
other person has any interests in any such Contribution Units other than the
beneficiaries for any Subscribers which are trusts.
8D. Investment Representations.
(a) Such Subscriber understands that the Common Stock has not been
registered under the Securities Act, or the securities or similar laws of any
state or other jurisdiction, and are offered in reliance on exemptions from the
applicable registration requirements thereof.
(b) Such Subscriber confirms that: (i) it is receiving the Common
Stock to be issued to such Subscriber hereunder or pursuant hereto for such
Subscriber's own account with the present intention of holding such securities
for purposes of investment only; (ii) it has no intention of selling such
securities in a public distribution in violation of the federal securities laws
or any applicable state securities laws; (iii) the Common Stock must be held
indefinitely and such Subscriber must bear the economic risk of the investment
in the Common Stock unless the offer and sale of such Common Stock is
subsequently registered under the Securities Act and all applicable state
securities laws or an exemption from such registration is available; (iv) there
is no established market for the Common Stock and it is not anticipated that
there will be any public market for the Common Stock in the foreseeable future;
and (v) a restrictive legend will be placed on the certificates representing the
Common Stock in the form set forth in Section 12B.
8E. Tax Representations.
(a) Such Subscriber (and the spouse of any such Subscriber having a
community interest in the Subscribed Shares or Contribution Units or in the
income therefrom) is described in Section 1361(b)(1)(B) of the Code because such
Subscriber (and such spouse) is either:
(i) an individual who is not a nonresident alien (within the
meaning of Section 7701(b)(1)(B) of the Code);
(ii) a grantor trust described in Section 1361(c)(2)(A)(i) of the
Code (other than by virtue of Section 1361(d) of the Code);
(iii) an ESBT which is described in Sections 1361(c)(2)(A)(v) and
1361(e) of the Code; or
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(iv) a QSST treated as a trust described in Section
1361(c)(2)(A)(i) of the Code by reason of Section 1361(d) of
the Code and, except as permitted by Treas. Reg. Section
1.1361-1(j)(2)(i), there is currently only one income
beneficiary and such beneficiary is a citizen or resident of
the United States.
(b) Upon the issuance of the Subscribed Shares at the Closing:
(i) such Subscriber will be the owner of the entire interest in
such Subscribed Shares to be received by such Subscriber;
(ii) such Subscriber will not hold such Subscribed Shares as agent
for any other person (whether an individual, partnership,
corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture or other
entity);
(iii) no person other than such Subscriber will have a claim in or
to such Subscribed Shares; and
(iv) except as identified on Exhibit 8E(b) hereto, such Subscriber
is not a resident, or subject to the laws, of any state or
other jurisdiction having laws governing community property.
(c) In the case of a Subscriber which is an ESBT, Exhibit 8E(c)
hereto sets forth each of the potential current beneficiaries (within the
meaning of Section 1361(e)(2) of the Code) of the ESBT.
9. Representations and Warranties of the HGI Stockholders. As a material
inducement to the Corporation, each Subscriber, each other HGI Stockholder, RPGI
and the RPGI Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, each HGI Stockholder hereby represents and
warrants, severally as to itself only, to the Corporation (with the
understanding that the Corporation and its agents and attorneys are relying on
the accuracy and completeness of such representations and warranties) and to
each Subscriber, each other HGI Stockholder, RPGI and the RPGI Stockholder that:
9A. Power. Such HGI Stockholder has all requisite power and
authority to execute this Agreement and to carry out the transactions
contemplated hereby.
9B. Authorization; No Breach. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which such HGI Stockholder is a party have been duly authorized by such HGI
Stockholder. Each of this Agreement and each other agreement contemplated hereby
to which such HGI Stockholder is a party constitutes a valid and binding
obligation of such HGI Stockholder, enforceable against such HGI Stockholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy,
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insolvency, reorganization, receivership, moratorium or assignment for the
benefit of creditors laws and other laws affecting the rights and remedies of
creditors generally, including without limitation laws regarding fraudulent
transfers, fraudulent conveyances, preferences, avoidance and automatic stay.
The execution, delivery and performance by such HGI Stockholder of this
Agreement and any other document or instrument executed by such HGI Stockholder
in connection herewith, and the consummation of the transactions contemplated
hereby and thereby, and compliance with the requirements hereof and thereof,
will not violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on such HGI Stockholder, or the provisions of any
indenture, instrument or agreement to which such HGI Stockholder is a party or
is subject, or by which such HGI Stockholder or any of its assets is bound, or
conflict with or constitute a default thereunder, or result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by such HGI
Stockholder to any third party, or require the approval of any third-party
(which has not been obtained) pursuant to any contract, agreement, instrument,
relationship or legal obligation to which such HGI Stockholder is subject or to
which any of its assets, operations or management may be subject.
9C. Ownership of Contribution Units. Such HGI Stockholder owns,
beneficially and of record, the HGI Shares set forth opposite its name on Annex
B hereto, free and clear of all liens, charges and encumbrances and no other
person has any interests in any such HGI Shares. No HGI Stockholder will retain
any right after the Closing in any HGI Stock but, to the extent that such right
may exist upon the consummation of the Closing, such right shall be deemed to
have been released and extinguished.
9D. Investment Representations.
(a) Such HGI Stockholder understands that the Common Stock has not
been registered under the Securities Act, or the securities or similar laws of
any state or other jurisdiction, and are offered in reliance on exemptions from
the applicable registration requirements thereof.
(b) Such HGI Stockholder confirms that: (i) it is an "accredited
investor" within the meaning of Rule 501 of Regulation D of the Securities Act,
and that such HGI Stockholder has made such inquiry and has had access to and
has received and considered such information as such HGI Stockholder has deemed
appropriate in making the decision to exchange the HGI Shares for the Common
Stock to be issued hereunder; (ii) it is receiving the Common Stock to be
received by it hereunder or pursuant hereto for such HGI Stockholder's own
account with the present intention of holding such securities for purposes of
investment only; (iii) it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws; (iv) the Common Stock must be held
indefinitely and such HGI Stockholder must bear the economic risk of the
investment in the Common Stock unless the offer and sale of such Common Stock is
subsequently registered under the Securities Act and all applicable state
securities laws or an exemption from such registration is available; (v) there
is no established market for the Common Stock and it is not anticipated that
there will be any public market for the Common Stock in the foreseeable future;
and (vi) a restrictive legend will be placed on the certificates representing
14
<PAGE> 15
the Common Stock in the form set forth in Section 12B.
9E. Tax Representations.
(a) Such HGI Stockholder (and the spouse of any such HGI Stockholder
having a community interest in the Subscribed Shares or HGI Shares or in the
income therefrom) is described in Section 1361(b)(1)(B) of the Code because such
HGI Stockholder (and such spouse) is either:
(i) an individual who is not a nonresident alien (within the
meaning of Section 7701(b)(1)(B) of the Code);
(ii) a grantor trust described in Section 1361(c)(2)(A)(i) of the
Code (other than by virtue of Section 1361(d) of the Code);
(iii) an ESBT which is described in Sections 1361(c)(2)(A)(v) and
1361(e) of the Code; or
(iv) a QSST treated as a trust described in Section
1361(c)(2)(A)(i) of the Code by reason of Section 1361(d) of
the Code and, except as permitted by Treas. Reg. Section
1.1361-1(j)(2)(i), there is currently only one income
beneficiary and such beneficiary is a citizen or resident of
the United States.
(b) Upon the issuance of the Subscribed Shares:
(i) such HGI Stockholder will be the owner of the entire interest
in such Subscribed Shares to be received by such HGI
Stockholder;
(ii) such HGI Stockholder will not hold such Subscribed Shares as
agent for any other person (whether an individual,
partnership, corporation (including a business trust), joint
stock company, trust, unincorporated association, joint
venture, or other entity);
(iii) no person other than such HGI Stockholder will have a claim in
or to such Subscribed Shares; and
(iv) except as identified on Exhibit 9E(b) hereto, such HGI
Stockholder is not a resident or subject to the laws of any
state or other jurisdiction having laws governing community
property.
(c) In the case of a HGI Stockholder that is an ESBT, Exhibit 9E(c)
hereto sets forth each of the potential current beneficiaries (within the
meaning of Section 1361(e)(2) of the Code) of the ESBT.
15
<PAGE> 16
9F. Preemptive Rights. Each HGI Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of HGI Stock that such
HGI Stockholder has or may have had. No HGI Stockholder will retain any right
after the Closing in any shares of HGI Stock but, to the extent that such right
may exist upon the consummation of the Closing, such right shall be deemed to
have been released and extinguished.
9G. Representations Relating to HGI.
(a) HGI is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and is duly
authorized and qualified to do business and is in good standing under the laws
of each jurisdiction where such qualification is required.
(b) The authorized capital stock of HGI is as set forth on Exhibit
9G. All of the issued and outstanding shares of the capital stock of HGI are
owned by the HGI Stockholders in the amounts set forth on Annex B. All of the
issued and outstanding shares of the capital stock of HGI (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable, (iii) are
owned of record and beneficially by the HGI Stockholders and (iv) were offered,
issued, sold and delivered by HGI in compliance with all applicable state and
federal laws concerning the issuance of securities. Further, none of such shares
were issued in violation of the preemptive rights of any past or present
stockholder of HGI.
(c) (i) No option, warrant, call, conversion right or commitment of
any kind exists which obligates HGI to issue or sell any of its capital stock or
other securities, (ii) HGI has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its securities or any interests
therein or to pay any dividend or make any distribution in respect thereof, and
(iii) neither the voting stock structure of HGI nor the relative ownership of
shares among any of its respective stockholders has been altered or changed in
contemplation of the transactions contemplated by this Agreement.
(d) Since its organization, HGI has been, and until Closing will
remain, an S corporation, as such term is defined in Section 1361(a) of the
Code.
(e) HGI owns, beneficially and of record, 23,697,909 Contribution
Units free and clear of all liens, charges and encumbrances and no other person
has any interests in any such Contribution Units other than the HGI
Stockholders.
10. Representations and Warranties of the RPGI Stockholder. As a material
inducement to the Corporation, each Subscriber, RPGI and each HGI Stockholder to
enter into this Agreement and consummate the transactions contemplated hereby,
the RPGI Stockholder hereby represents and warrants to the Corporation (with the
understanding that the Corporation and its agents and attorneys are relying on
the accuracy and completeness of such representations and warranties) and to
each Subscriber and each HGI Stockholder as follows:
16
<PAGE> 17
10A. Organization and Power. The RPGI Stockholder has all requisite
power and authority to execute this Agreement and to carry out the transactions
contemplated hereby.
10B. Authorization; No Breach. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which the RPGI Stockholder is a party have been duly authorized by the RPGI
Stockholder. Each of this Agreement and each other agreement contemplated hereby
to which the RPGI Stockholder is a party constitutes a valid and binding
obligation of the RPGI Stockholder, enforceable against the RPGI Stockholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, moratorium or
assignment for the benefit of creditors laws and other laws affecting the rights
and remedies of creditors generally, including without limitation laws regarding
fraudulent transfers, fraudulent conveyances, preferences, avoidance and
automatic stay. The execution, delivery and performance by the RPGI Stockholder
of this Agreement and any other document or instrument executed by the RPGI
Stockholder in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof, will not violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the RPGI Stockholder, or the provisions
of any indenture, instrument or agreement to which the RPGI Stockholder is a
party or is subject, or by which the RPGI Stockholder or any of its assets is
bound, or conflict with or constitute a default thereunder, or result in the
creation or imposition of any lien pursuant to the terms of any such indenture,
instrument or agreement, or constitute a breach of any fiduciary duty owed by
the RPGI Stockholder to any third party, or require the approval of any
third-party (which has not been obtained) pursuant to any contract, agreement,
instrument, relationship or legal obligation to which the RPGI Stockholder is
subject or to which any of its assets, operations or management may be subject.
10C. Ownership of Shares of RPGI Capital Stock. The RPGI Stockholder
owns, beneficially and of record, all issued and outstanding shares of capital
stock of RPGI, free and clear of all liens, charges and encumbrances and no
other person has any interests in any such shares of capital stock. The RPGI
Stockholder will not retain any right after the Closing in any RPGI Stock but,
to the extent that such right may exist upon the consummation of the Closing,
such right shall be deemed to have been released and extinguished.
10D. Investment Representations.
(a) The RPGI Stockholder understands that the Common Stock has not
been registered under the Securities Act, or the securities or similar laws of
any state or other jurisdiction, and are offered in reliance on exemptions from
the applicable registration requirements thereof.
(b) The RPGI Stockholder confirms that: (i) she is an "accredited
investor" within the meaning of Rule 501 of Regulation D of the Securities Act,
and that she has made such inquiry and has had access to and has received and
considered such information as she has deemed appropriate in making the decision
to exchange her shares of RPGI Stock for the Subscribed Shares
17
<PAGE> 18
to be issued hereunder; (ii) she is receiving the Common Stock to be issued to
her hereunder or pursuant hereto for the RPGI Stockholder's own account with the
present intention of holding such securities for purposes of investment only;
(iii) she has no intention of selling such securities in a public distribution
in violation of the federal securities laws or any applicable state securities
laws; (iv) the Common Stock must be held indefinitely and the RPGI Stockholder
must bear the economic risk of the investment in the Common Stock unless the
offer and sale of such Common Stock is subsequently registered under the
Securities Act and all applicable state securities laws or an exemption from
such registration is available; (v) there is no established market for the
Common Stock and it is not anticipated that there will be any public market for
the Common Stock in the foreseeable future; and (vi) a restrictive legend will
be placed on the certificates representing the Common Stock in the form set
forth in Section 12B.
10E. Tax Representations.
(a) The RPGI Stockholder is described in Section 1361(b)(1)(B) of
the Code because she is an individual who is not a nonresident alien (within the
meaning of Section 7701(b)(1)(B) of the Code).
(b) Upon the issuance of the Subscribed Shares to the RPGI
Stockholder:
(i) the RPGI Stockholder will be the owner of the entire interest
in such Subscribed Shares to be received by her;
(ii) the RPGI Stockholder will not hold such Subscribed Shares as
agent for any other person (whether an individual,
partnership, corporation (including a business trust), joint
stock company, trust, unincorporated association, joint
venture, or other entity);
(iii) no person other than the RPGI Stockholder will have a claim in
or to such Subscribed Shares; and
(iv) is not married.
10F. Representations Relating to RPGI.
(a) RPGI is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and is duly
authorized and qualified to do business and is in good standing under the laws
of each jurisdiction where such qualification is required. RPGI has all
requisite corporate power and authority to execute this Agreement and to perform
its obligations hereunder.
(b) The execution, delivery and performance of this Agreement and
all other agreements contemplated hereby to which RPGI is a party have been duly
authorized by RPGI.
18
<PAGE> 19
Each of this Agreement and each other agreement contemplated hereby to which
RPGI is a party constitutes a valid and binding obligation of RPGI, enforceable
against RPGI in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium or assignment for the benefit of creditors laws and other laws
affecting the rights and remedies of creditors generally, including without
limitation laws regarding fraudulent transfers, fraudulent conveyances,
preferences, avoidance and automatic stay. The execution, delivery and
performance by RPGI of this Agreement and any other document or instrument
executed by RPGI in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, and compliance with the
requirements hereof and thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on RPGI, or the
provisions of any indenture, instrument or agreement to which RPGI is a party or
is subject, or by which RPGI or any of its assets is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by RPGI to any third party, or
require the approval of any third-party (which has not been obtained) pursuant
to any contract, agreement, instrument, relationship or legal obligation to
which RPGI is subject or to which any of its assets, operations or management
may be subject.
(c) The authorized capital stock of RPGI is as set forth on Exhibit
10F. All of the issued and outstanding shares of the capital stock of RPGI are
owned by the RPGI Stockholder free and clear of all mortgages, liens, security
interests, pledges, voting trusts, restrictions, encumbrances and claims of
every kind. All of the issued and outstanding shares of the capital stock of
RPGI (i) have been duly authorized and validly issued, (ii) are fully paid and
nonassessable, (iii) are owned of record and beneficially by the RPGI
Stockholder and (iv) were offered, issued, sold and delivered by RPGI in
compliance with all applicable state and federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of the
preemptive rights of any past stockholder of RPGI.
(d) (i) No option, warrant, call, conversion right or commitment of
any kind exists which obligates RPGI to issue or sell any of its capital stock
or other securities, (ii) RPGI has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its securities or any interests
therein or to pay any dividend or make any distribution in respect thereof, and
(iii) neither the voting stock structure of RPGI or the relative ownership of
shares among any of its respective stockholders has been altered or changed in
contemplation of the transactions contemplated by this Agreement.
(e) Since its organization, RPGI has been, and until Closing will
remain, an S corporation, as such term is defined in Section 1361(a) of the
Code.
(f) RPGI owns, beneficially and of record, 2,500 shares of RPGI
Stock free and clear of all liens, charges and encumbrances and no other person
has any interests in any such RPGI Stock other than the RPGI Stockholder.
19
<PAGE> 20
11. Other Covenants.
11A. Further Assurances. At or prior to the Closing, each
Subscriber, each HGI Stockholder, RPGI and the RPGI Stockholder, agrees and
covenants that it will execute all consents, waivers, acknowledgments,
agreements or other documents that the Corporation deems necessary or
appropriate to effect the transactions contemplated by this Agreement.
11B. Approval of Merger Agreement. The RPGI Stockholder agrees to
vote all of its shares of RPGI Stock in favor of the Merger and all other
transactions contemplated by this Agreement.
12. Miscellaneous.
12A. Remedies. Any person or entity having any rights under any
provision of this Agreement shall be entitled to recover damages by reason of
any breach of any representation, warranty or covenant contained in this
Agreement, to exercise all other rights granted by law and to enforce such
rights specifically (without posting a bond or other security).
12B. Legend. Each certificate for Common Stock received hereunder
shall be imprinted with a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR
SOLD UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE (AND, IN
SUCH CASE, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY SHALL HAVE BEEN DELIVERED TO THE COMPANY TO THE EFFECT THAT
SUCH OFFER OR SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE
SECURITIES ACT)."
The Corporation shall imprint such legend on certificates evidencing a share or
shares of the Common Stock. The legend set forth above shall, at the request of
the holder of such certificate, be removed from the certificates evidencing any
shares which have become registered under the Securities Act or which have been
sold to the public through a broker, dealer or market maker pursuant to the
provisions of Rule 144 adopted under the Securities Act.
12C. Consent to Amendments. Except as otherwise expressly provided
herein, no amendment, modification or waiver of any of the provisions of this
Agreement shall be effective against (i) a Subscriber unless Subscribers holding
at least a majority of the Contribution Units have consented to such amendment,
modification or waiver in writing, (ii) a HGI Stockholder unless HGI
Stockholders holding at least a majority of the HGI Shares have consented to
such amendment, modification or waiver in writing and (iii) against the
Corporation, RPGI or the RPGI Stockholder
20
<PAGE> 21
unless the Corporation, RPGI or the RPGI Stockholder, respectively, has
consented to such amendment, modification or waiver in writing. No other course
of dealing among the parties or any delay in exercising any rights hereunder
shall operate as a waiver of any rights.
12D. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by or on behalf of any other party hereto.
12E. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties hereto; provided that
each of HGI and RPGI, respectively, may assign any of its respective rights
under this Agreement to any stockholder of HGI or RPGI, respectively, without
the prior written consent of the Corporation or any other party; and, provided
further, that nothing contained in this Section 12E shall limit or otherwise
alter the ability of a Subscriber to transfer its Common Stock in accordance
with the Stockholders Agreement.
12F. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to 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 this Agreement.
12G. Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
12H. Descriptive Headings; Interpretation. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation. As used in this Agreement, the
singular shall include the plural, the plural shall include the singular and the
use of any gender shall include the other gender or be neutral. No provision of
this Agreement will be interpreted in favor of, or against, any of the parties
hereto by reason of the extent to which such party or its counsel participated
in the drafting thereof or by reason of the extent to which any such provision
is inconsistent with any prior draft hereof.
12I. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal, substantive laws of the
State of New York without giving effect to the conflict of laws rules thereof.
12J. Integration. This Agreement and the Stockholders Agreement
contain the full understanding of the parties with respect to the subject matter
hereof and thereof and supersede all
21
<PAGE> 22
prior understandings and writings relating hereto and thereto.
12K. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be made as set forth in the Stockholders Agreement.
[END OF PAGE]
[SIGNATURE PAGES FOLLOW]
22
<PAGE> 23
IN WITNESS WHEREOF, the parties hereunto have caused this
Subscription and Reorganization Agreement to be executed personally or by their
duly authorized officers on the day and year first above written.
HORSESHOE GAMING HOLDING CORP.
By: /s/ Jack B. Binion
----------------------------------
Name:
Title:
Horseshoe Gaming, L.L.C.
By its Manager, Horseshoe Gaming, Inc.
By: /s/ Jack B. Binion
----------------------------------
Name:
Title:
Robinson Property Group, Inc.
By: /s/ Jack B. Binion
----------------------------------
Name:
Title:
Horseshoe Gaming, Inc.
By: /s/ Jack B. Binion
----------------------------------
Name:
Title:
/s/ Jack B. Binion
- ------------------------------
Jack B. Binion, in his capacity as a member of Horseshoe Gaming, L.L.C. and as a
stockholder of Horseshoe Gaming, Inc.
23
<PAGE> 24
/s/ Wanda Parsons
- ------------------------------
Wanda Parsons,
as Trustee of the Katie O'Neill Trust
/s/ Wanda Parsons
- ------------------------------
Wanda Parsons,
as Trustee of the Kellie O'Neill Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard, in her capacity as a stockholder of Horseshoe Gaming, Inc., as
a member of Horseshoe Gaming, L.L.C. and as a stockholder of Robinson Property
Group, Inc.
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Ted J. Fechser Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Fancy Ann Fechser Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the James Christopher Fechser Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Robert Daniel Fechser Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Katie O'Neill Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Kellie O'Neill Trust
24
<PAGE> 25
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
is Trustee of the Ben Evan Johnson Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Rachel Fechser Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Bonnie Binion Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Benny Behnen Trust
/s/ Peri Cope Howard
- ------------------------------
Peri Cope Howard,
as Trustee of the Jack Behnen Trust
/s/ Key Fechser
- ------------------------------
Key Fechser
/s/ Bobby Fechser
- ------------------------------
Bobby Fechser
/s/ Mindy Johnson
- ------------------------------
Mindy Johnson
/s/ Leslie Kenny
- ------------------------------
Leslie Kenny, in her capacity as a member of Horseshoe Gaming, L.L.C. and as a
stockholder of Horseshoe Gaming, Inc.
25
<PAGE> 26
/s/ Phyllis Cope
- ------------------------------
Phyllis Cope,
as Trustee of the Ted J. Fechser Trust
/s/ Phyllis Cope
- ------------------------------
Phyllis Cope,
as Trustee of the Fancy Fechser Trust
/s/ Scott Hamilton
- ------------------------------
Scott Hamilton,
as Trustee of the James C. Fechser Trust
/s/ Deborah Hamilton
- ------------------------------
Deborah Hamilton,
as Trustee of the Robert D. Fechser Trust
/s/ Scott Hamilton
- ------------------------------
Scott Hamilton,
as Trustee of the Rachel Fechser Trust
/s/ Greg Stuart
- ------------------------------
Greg Stuart,
as Trustee of the Ben E. Johnson Trust
/s/ Greg Stuart
- ------------------------------
Greg Stuart,
as Trustee of the Jamie Lyn Johnson Trust
/s/ Doyle Brunson
- ------------------------------
Doyle Brunson
/s/ Louis Brunson
- ------------------------------
Louise Brunson
26
<PAGE> 27
/s/ Todd Brunson
- ------------------------------
Todd Brunson
/s/ Pam Brunson
- ------------------------------
Pam Brunson
/s/ David Reese
- ------------------------------
David Reese
/s/ Kathleen Rose
- ------------------------------
Kathleen Rose
/s/ Gary Anderson
- ------------------------------
Gary Anderson
/s/ Rick Cook
- ------------------------------
Rick Cook
/s/ Jerry Howard
- ------------------------------
Jerry Howard
/s/ Robert McQueen
- ------------------------------
Robert McQueen
/s/ G.A. Robinson, III
- ------------------------------
G.A. Robinson, III
/s/ Daniel Engel
- ------------------------------
Daniel Engel
/s/ David A.. Sachs
- ------------------------------
David A Sachs
27
<PAGE> 28
/s/ Eileen Holz
- ------------------------------
Eileen Holz
/s/ Cathy Hunter
- ------------------------------
Cathy Hunter
/s/ Silvia Rodriguez
- ------------------------------
Silvia Rodriguez
/s/ Anrew Astrachan
- ------------------------------
Andrew Astrachan
/s/ Donald Schupak
- ------------------------------
Donald Schupak
/s/ Walter J. Haybert
- ------------------------------
Walter J. Haybert
/s/ Gary Border
- ------------------------------
Gary Border
/s/ Patrick Savin
- ------------------------------
Patrick Savin
Jack B. Binion, the duly elected Secretary of Horseshoe Gaming Holding
Corp., hereby certifies that this Subscription and Reorganization Agreement has
been adopted by Horseshoe Gaming Holding Corp. pursuant to subsection (f) of
Section 251 of the Delaware General Corporation Law and that no shares of stock
of Horseshoe Gaming Holding Corp. were issued prior to the adoption by the Board
of Directors of Horseshoe Gaming Holding Corp. of the resolution approving this
Subscription and Reorganization Agreement.
Date: Jack B. Binion
------------------------- -----------------------------
Name:
Title: Secretary
28
<PAGE> 29
Annex A
I. Class A Shares
<TABLE>
<CAPTION>
Subscribers Contribution Units Subscribed Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Peri Cope Howard, as the sole
stockholder of Robinson
Property Group, Inc. 231,779.0 67.737818
Peri Cope Howard 378,025.0 110.478467
Wanda Parsons, as Trustee
of the Katie O'Neill Trust 3,277,941.0 957.98
Wanda Parsons, as Trustee
of the Kellie O'Neill Trust 3,277,941.0 957.98
Peri Cope Howard,
as Trustee of the Ted J. Fechser
Trust 945,059.0 276.20
Peri Cope Howard,
as Trustee of the Fancy Ann Fechser
Trust 945,059.0 276.20
Peri Cope Howard,
as Trustee of the
James Christopher Fechser Trust 945,059.0 276.20
Peri Cope Howard,
as Trustee of the
Robert Daniel Fechser Trust 945,059.0 276.20
Peri Cope Howard,
as Trustee of the Katie O'Neill Trust 945,059.0 276.20
Peri Cope Howard,
as Trustee of the Kellie O'Neill Trust 945,059.0 276.20
Peri Cope Howard,
as Trustee of the Ben Evan Johnson Trust 945,059.0 276.20
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C> <C>
Peri Cope Howard,
as Trustee of the Rachel Fechser Trust 945,059 276.20
Peri Cope Howard,
as Trustee of the Bonnie Binion Trust 189,013.0 55.24
Peri Cope Howard,
as Trustee of the Benny Behnen Trust 189,013.0 55.24
Peri Cope Howard,
as Trustee of the Jack Behnen Trust 189,013.0 55.24
Key Fechser 189,013.0 55.24
Bobby Fechser 189,013.0 55.24
Mindy Johnson 189,013.0 55.24
Leslie Kenny 378,025.0 110.48
Phyllis Cope,
as Trustee of the Ted J. Fechser Trust 3,277,941.0 957.98
Phyllis Cope,
as Trustee of the Fancy Fechser Trust 3,277,941.0 957.98
Scott Hamilton,
as Trustee of the James C. Fechser Trust 2,185,294.0 638.66
Deborah Hamilton,
as Trustee of the Robert D. Fechser Trust 2,185,294.0 638.66
Scott Hamilton,
as Trustee of the Rachel Fechser Trust 2,185,294.0 638.66
Greg Stuart,
as Trustee of the Ben E. Johnson Trust 1,638,970.5 478.99
Greg Stuart,
as Trustee of the Jamie Lyn Johnson Trust 1,638,970.5 478.99
Doyle Brunson 525,989.0 153.72
</TABLE>
30
<PAGE> 31
<TABLE>
<S> <C> <C>
Louise Brunson 525,989.0 153.72
Todd Brunson 525,989.0 153.72
Pam Brunson 525,989.0 153.72
David Reese 2,103,957.0 614.89
Kathleen Rose 631,986.0 184.70
Gary Anderson 434,586.0 127.01
Rick Cook 131,497.0 38.43
Jerry Howard 289,724.0 84.67
Robert McQueen 144,862.0 42.34
G.A. Robinson, III 1,158,897.0 338.69
Daniel Engel 19,492.20 5.70
David A. Sachs 19,492.20 5.70
Eileen Holz 2,923.83 0.85
Cathy Hunter 2,923.83 0.85
Silvia Rodriguez 2,923.83 0.85
Andrew Astrachan 2,514,067.61 734.74
Donald Schupak 1,285,784.0 375.77
Walter J. Haybert 500,489.0 146.27
Gary Border 503,004.0 147.00
Patrick Savin 389,846.0 113.93
</TABLE>
31
<PAGE> 32
II. Class B Shares
<TABLE>
<CAPTION>
Subscribers Contribution Units Subscribed Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Jack B. Binion 17,366,247.0 5,075.32
</TABLE>
32
<PAGE> 33
Annex B
I. Class A Shares
<TABLE>
<CAPTION>
HGI Stockholders HGI Shares Contribution Units Subscribed Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Peri Cope Howard 200 3,725,007 1,088.64
Leslie Kenny 200 3,725,007 1,088.64
</TABLE>
II. Class B Shares
<TABLE>
<CAPTION>
HGI Stockholder HGI Shares Contribution Units Subscribed Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Jack B. Binion 872.38856 16,247,895 4,748.475724
</TABLE>
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Exhibit A
CERTIFICATE OF INCORPORATION
OF HORSESHOE GAMING HOLDING CORP.
<PAGE> 35
Exhibit B
BYLAWS OF HORSESHOE GAMING HOLDING CORP.
Bylaws of
HORSESHOE GAMING HOLDING CORP.
(A Delaware Corporation)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be located at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors of the Corporation (the "Board") may from time to time determine or
the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be held
at such time and on such day, other than a legal holiday, as the Board in each
such year shall determine, at which meeting the stockholders entitled to vote
for the election of directors shall elect, by a plurality vote, a Board of
Directors and transact such other business as may properly be brought before the
meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. When a meeting is adjourned to
another place, date or time, written notice need not be given of the adjourned
meeting if the place, date and time thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the date of any
adjourned meeting is more than thirty days after the date for which the meeting
was originally noticed, or if a new record date is fixed for the adjourned
meeting, written notice of the place, date, and time of the adjourned meeting,
shall be given in
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conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
Section 4. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by the General Corporation Law
of the State of Delaware or by the Certificate of Incorporation, may be called
by the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board, or at the request in writing of
stockholders holding shares of stock that represent more than fifty percent of
the votes entitled to be cast at a meeting of the stockholders of the
Corporation. Such request shall state the purpose or purposes of the proposed
meeting.
Section 5. Notice of Special Meetings. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten nor more than sixty
days before the date of the meeting, to each stockholder entitled to vote at
such meeting. When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting, shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6. Quorum. Stockholders holding shares of stock that represent
more than fifty percent of the votes entitled to be cast at a meeting of the
stockholders of the Corporation, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by the General Corporation
Law of the State of Delaware or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time to another place, date or time. If a notice of any adjourned special
meeting of stockholders is sent to all stockholders entitled to vote thereat,
stating that it will be held with those present constituting a quorum, then
except as otherwise required by the General Corporation Law of the State of
Delaware, those present at such adjourned meeting shall constitute a quorum, and
all matters shall be determined by a majority of the votes cast at such meeting.
Section 7. Organization. Such person as the Board may have designated or,
such person as may be chosen by the holders of a majority of the votes entitled
to be cast who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman of the meeting appoints.
Section 8. Action by Stockholders. When a quorum is present at any
meeting, a majority of the votes cast at such meeting, whether by stockholders
who are present in person or represented
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by proxy, shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the General Corporation Law
of the State of Delaware or of the Certificate of Incorporation, a different
vote is required in which case such express provision shall govern and control
the decision of such question.
Section 9. Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting. Except as otherwise provided in the Certificate of Incorporation of the
Corporation or in these Bylaws, or except as otherwise required by the General
Corporation Law of the State of Delaware, each stockholder shall have one vote
for every share of stock entitled to vote which is registered in his or her name
on the record date for the meeting. All voting, including on the election of
directors but excepting where otherwise required by the General Corporation Law
of the State of Delaware, may be by a voice vote.
Section 10. Stock List. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified,
or at the place where the meeting is to be held. The stock list shall also be
kept at the place of the meeting during the whole time thereof and shall be open
to the examination of any such stockholder who is present. This list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
Section 11. Written Action. Any action required to be taken at any annual
or special meeting of stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
ARTICLE III
DIRECTORS
Section 1. Number and Term. The Board shall consist of three or more
members. The first Board shall consist of three directors. Thereafter, within
the limits above specified, the number of directors shall be determined in
accordance with the Certificate of Incorporation, by resolution of the Board or
by the stockholders at the annual meeting or a special meeting. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his or her successor is elected and qualified.
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Directors need not be stockholders. Whenever the authorized number of directors
is increased between annual meetings of the stockholders, a majority of the
directors then in office shall have the power to elect such new directors for
the balance of a term and until their successors are elected and qualified. Any
decrease in the authorized number of directors shall not become effective until
the expiration of the term of the directors then in office unless, at the time
of such decrease there shall be vacancies on the Board that are being eliminated
by the decrease.
Section 2. Resignation and Removal. Any director may resign at any time
upon notice of resignation to the Corporation. Any director may be removed at
any time by vote of the stockholders then entitled to vote for the election of
directors at a special meeting called for that purpose, either with or without
cause.
Section 3. Vacancies. If the office of any director becomes vacant by
reason of death, resignation, disqualification, removal or other cause, a
majority of the directors remaining in office, although less than a quorum, may
elect a successor for the unexpired term and until his or her successor is
elected and qualified.
Section 4. Powers and Duties. Subject to the applicable provisions of law,
these ByLaws or the Certificate of Incorporation, but in furtherance and not in
limitation of any rights therein conferred, the Board shall have the control and
management of the business and affairs of the Corporation and shall exercise all
such powers of the Corporation and do all such lawful acts and things as may be
exercised by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
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(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs.
Section 4. Compensation of Directors. Directors, as such, may receive,
pursuant to resolution of the Board, fixed fees and other compensation for their
services as directors, including, fees for attendance at meetings of the Board.
Section 5. Place of Meetings. The Board of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 6. Regular Meetings. Regular meetings of the Board may be held
upon such notice or without notice at such time and at such place as shall from
time to time be determined by the Board.
Section 7. Special Meetings. Special meetings of the Board may be called
by the President or Secretary on one day's notice to each director, either
personally or by mail or by telegram; special meetings of the Board shall be
called by the President or Secretary in like manner and on like notice on the
written request of a majority of the Board.
Section 8. Quorum. At all meetings of the Board, a majority of the
directors then in office shall constitute a quorum for transaction of business,
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board, except as may be otherwise
specifically provided by the General Corporation Law of the State of Delaware or
by the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Written Action. Unless otherwise restricted by the Certificate
of Incorporation or these By-laws, any action required or permitted to be taken
at any meeting of the Board or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes or
proceedings of the Board or committee.
Section 10. Participation in Meetings by Conference Telephone. Unless
otherwise restricted by the Certificate of Incorporation or these By-laws,
members of the Board, or any committee designated by the Board, may participate
in a meeting of the Board, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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ARTICLE IV
COMMITTEES
Section 1. Generally. The Board may designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. Any
such committee shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution, or amending the By-laws of the Corporation;
and unless the resolution or By-laws expressly so provide, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
Section 2. Committee Procedure. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third of the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall constitute a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE V
NOTICES
Section 1. Generally. Whenever, under the provisions of the General
Corporation Law of the State of Delaware or of the Certificate of Incorporation
or of these By-laws, notice is required to be given to any director,
stockholder, employee or agent, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her last known address as the same appears on
the books of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram or
telephone.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of
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the General Corporation Law of the State of Delaware or of the Certificate of
Incorporation or of these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein shall be deemed equivalent thereto.
ARTICLE VI
OFFICERS
Section 1. Number and Designation. The officers of the Corporation shall
be a Chief Executive Officer, a President, a Secretary and such other officers
(e.g., one or more Vice Presidents, a Chief Financial Officer, a Treasurer and
one or more Assistant Secretaries or Assistant Treasurers) as the Board from
time to time considers necessary for the proper conduct of the business of the
Corporation. Any two or more offices may be held by the same person. Vacancies
may be filled or new offices created and filled at any meeting of the Board.
Each officer shall hold office until his or her successor shall have been duly
elected and shall have qualified or until his or her earlier death, resignation,
or removal.
Section 2. Chief Executive Officer. The Chief Executive Officer ("CEO") of
the Corporation shall generally supervise and control all of the business and
affairs of the Corporation. The CEO may sign, alone or with the Secretary or any
other proper officer of the Corporation thereunto authorized by the Board of
Directors, any deeds, mortgages, bonds, contracts, or other instruments that the
Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed, and in general
he shall perform all duties incident to the office of the chief executive
officer and such other duties as from time to time may be prescribed by the
Board of Directors. When present, he shall preside at all meetings of the
stockholders and of the Board of Directors.
Section 3. President. The President shall be the principal operating
officer of the Corporation. In the event the office of the CEO is vacant or in
the event of the inability of the CEO to act as such or upon the refusal by the
CEO to perform the duties of the CEO, the President shall perform the duties and
exercise the authority of the CEO and, when so acting, shall have all the powers
of, and be subject to all the restrictions placed upon the CEO. He may sign,
alone or with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts or other instruments that the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-Laws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed, and in general he shall perform all duties incident to the
office of President and such other duties as from time to time may be prescribed
by the Board of Directors or the CEO, subject, however, to the control of the
Board and the CEO.
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Section 4. The Secretary. The Secretary shall (a) keep the minutes of the
stockholders' and of the Board meetings and committees of the Board in one or
more books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records; (d) keep a register of the post office
address of each stockholder, director or committee member, which shall be
furnished to the Secretary by such stockholder, director or member; (e) have
general charge of the stock transfer books of the Corporation; and (f) in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the CEO or the Board.
Section 5. The Treasurer. The Treasurer or such other officer of the
Corporation as may be named by the Board or appointed by the CEO of the
Corporation to perform such function, shall have charge and custody of and be
responsible for all funds and securities of the Corporation, receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever, deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
or the CEO of the Corporation, disburse the funds of the Corporation as ordered
by the Board or the CEO of the Corporation or as otherwise required in the
conduct of the business of the Corporation, and render to the CEO of the
Corporation or the Board, upon request, an account of all his transactions as
Treasurer and on the financial condition of the Corporation. The Treasurer,
unless another officer of the Corporation is named by the Board to perform such
functions, shall have the duties and responsibilities and shall exercise the
authority and powers of the chief financial officer of the Corporation, and
shall in general perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the President
or by the Board. If required by the Board, the Treasurer shall give a bond
(which shall be renewed regularly), in such sum and with such surety or sureties
as the Board shall determine for the faithful discharge of his duties and for
the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 6. Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries shall perform such duties as shall be
assigned to them by the Treasurer or by the Secretary, respectively, or by the
Board or the President. The Assistant Treasurers shall, respectively, if
required by the Board, give bonds (which shall be renewed regularly) for the
faithful discharge of their duties in such sums and with such sureties as the
Board shall determine.
Section 7. Compensation. The salaries of the officers shall be fixed from
time to time by the Board or such officer as the Board shall designate for such
purpose or as it shall otherwise direct. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
Section 8. Tenure and Removal. The officers of the Corporation shall be
elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board, and any officer elected or appointed may be removed at any
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time, with or without cause, by the Board.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Certificates. Each stockholder shall be entitled to a
certificate signed by, or in the name of the Corporation by, the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer, certifying the number of shares owned by him or her.
Any or all of the signatures on the certificate may be facsimile.
Section 2. Uncertificated Shares. Subject to any conditions imposed by the
General Corporation Law of the State of Delaware or by the Certificate of
Incorporation, the Board may provide by resolution or resolutions that some or
all of any or all classes or series of the stock of the corporation shall be
uncertificated shares. Within a reasonable time after the issuance or transfer
of any uncertificated shares, the corporation shall send to the registered owner
thereof any written notice prescribed by the General Corporation Law.
Section 3. Lost Certificates. The corporation may issue a new certificate
of stock or uncertificated shares in place of any certificate theretofore issued
by it, alleged to have been lost, stolen, or destroyed, upon the satisfaction of
such conditions as the Board may require including, but not limited to,
requiring the owner of the lost, stolen, or destroyed certificate, or his legal
representative to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares, and the Board may delegate to
an officer of the corporation the power to determine whether such conditions
have been satisfied and to cause such replacement certificates or uncertificated
shares to be issued.
Section 4. Stock Transfers. The Board shall have the power and authority
to make all such rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates of stock. The Board may appoint
transfer agents and registrars thereof.
Section 5. Record Date. The Board may fix in advance a date as a record
date for the determination of the stockholders entitled to notice of or to vote
at any meeting of stockholders or to express consent (or dissent) to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on
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which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board is necessary, shall be the day on which the first
written consent is expressed. The record date for determining stockholders for
any other purpose shall be at the close of business on the day on which the
Board adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
6. Fractional Shares. The corporation may issue fractional shares, and
holders of fractional shares shall be entitled to all of the rights of a
stockholder thereof.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall protect and indemnify, and advance related expenses
to, directors and officers and former directors and officers of the Corporation
and their heirs, executors and administrators, to the full extent that the
Corporation shall have power to do so under the General Corporation Law of the
State of Delaware as it exists on the effective date of the Certificate of
Incorporation and as it may thereafter be amended or supplemented by law.
Employees and agents of the Corporation other than such directors or officers
shall be so indemnified to the extent required by the General Corporation Law of
the State of Delaware and to such further extent permitted by any other laws, if
any, and as shall be provided pursuant to resolution of the Board. Whether or
not and to what extent the Corporation shall purchase and maintain insurance on
behalf of any such directors, officers, employees or agents, to the extent it
shall have power to do so under the General Corporation Law of the State of
Delaware as so existing or as it may hereafter be amended or supplemented, shall
be in the full discretion of the Board.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose
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as the directors shall think conducive to the interest of the Corporation, and
the directors may modify or abolish any such reserve in the manner in which it
was created.
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate.
Section 4. The fiscal year of the Corporation shall be fixed by resolution
of the Board.
Section 5. The Board may adopt a corporate seal and use the same by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 6. The Corporation shall keep correct and complete books and
records of its accounts and transactions and minutes of the proceedings of its
stockholders and Board. The books of the Corporation may be kept (subject to any
provisions contained in the General Corporation Law of the State of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board.
Section 7. In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these By-laws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board or a committee thereof
ARTICLE X
ADOPTION AND AMENDMENTS
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the Board; provided, however, that these By-Laws and any other
By-laws amended or adopted by the Board may be amended, may be repealed, and new
By-laws may be adopted, by the stockholders of the Corporation entitled to vote
at the time for the election of directors.
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Exhibit 3C
FORM OF STOCKHOLDERS AGREEMENT
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Exhibit 8E(b)
LIST OF JURISDICTIONS
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Exhibit 8E(c)
CURRENT BENEFICIARIES
The people in the parenthesis are the potential income beneficiaries:
(1) Phyllis Cope, as Trustee for Trust Agreement between Key B. Fechser and
Phyllis Mae Cope- (Ted J. Fechser, Beneficiary);
(2) Phyllis Cope, as Trustee for Trust Agreement between Key B. Fechser and
Phyllis Mae Cope- (Fancy Ann Fechser, Beneficiary);
(3) Deborah Hamilton, as Trustee for Trust Agreement between Robert C. Fechser
and Phyllis Mae Cope- (Robert D Fechser, Beneficiary);
(4) Scott Hamilton, as Trustee for Trust Agreement between Robert C. Fechser
and Scott Hamilton- (K. Rachel Fechser, Beneficiary);
(5) Scott Hamilton, as Trustee for Trust Agreement between Robert C. Fechser
and Phyllis Mae Cope- (James C. Fechser, Beneficiary);
(6) Wanda Parsons, as Trustee for Trust Agreement between Leslie L. Kenny and
Renie Katherine Gorsuch- (Katie O'Neill, Beneficiary);
(7) Wanda Parsons, as Trustee for Trust Agreement between Leslie L. Kenny and
Renie Katherine Gorsuch- (Kellie O'Neill, Beneficiary);
(8) Greg Stuart, as Trustee for Trust Agreement between Mindy M. Johnson and
Phyllis Mae Cope- (Janie Lynn Johnson, Beneficiary);
(9) Greg Stuart, as Trustee for Trust Agreement between Mindy M. Johnson and
Phyllis Mae Cope- (Ben E. Johnson, Beneficiary).
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Exhibit 9E(b)
LIST OF JURISDICTIONS
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Exhibit 9E(c)
CURRENT BENEFICIARIES
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Exhibit 9G
CAPITAL STOCK OF HGI
<TABLE>
<CAPTION>
Stockholders Shares Owned
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<S> <C>
Jack B. Binion 872.389
Peri Cope Howard 200.000
Leslie Kenny 200.000
</TABLE>
<PAGE> 52
Exhibit 10F
CAPITAL STOCK OF RPGI
<TABLE>
<CAPTION>
Shareholder Shares Owned
- ----------- ------------
<S> <C>
Peri Cope Howard 2,500
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HORSESHOE GAMING HOLDING CORP.
FIRST:The name of the corporation is "Horseshoe Gaming Holding Corp." (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: A. AUTHORIZED SHARES. The total number of shares of all classes of
capital stock that the Corporation shall have authority to issue is 50,000
shares of common stock, par value $0.01 per share (the "Common Stock"), which
shall be divided into two classes as follows:
(a) 40,000 shares of Common Stock designated as Class A (the "Class A
Common"); and
(b) 10,000 shares of Common Stock designated as Class B (the "Class B
Common").
B. COMMON STOCK
Except as otherwise provided in this Part B or as otherwise required
by applicable law, all shares of Class A Common and Class B Common shall be
identical in all respects and shall entitle the holders thereof to the same
rights, preferences and privileges, subject to the same qualifications,
limitations and restrictions, as set forth herein.
Section 1. Voting Rights.
The holders of Class A Common shall be entitled to one vote per
share on all matters to be voted on by the stockholders of the Corporation, and
the holders of Class B Common shall be entitled to five votes per share on all
matters to be voted on by the stockholders of the Corporation. Except as
otherwise required by applicable law, the Class A Common and the Class B Common
shall vote together as one class on all matters to be voted on by the
stockholders of the Corporation.
Section 2. Dividends.
As and when dividends are declared or paid with respect to shares of
Common Stock, whether in cash, property or securities of the Corporation, the
holders of Class A Common and the holders of Class B Common shall be entitled to
receive such dividends pro rata at the same rate per
<PAGE> 2
share for each class of Common Stock; provided, however, that if dividends are
declared or paid in shares of Common Stock, the dividends payable to holders of
Class A Common shall be payable in shares of Class A Common and the dividends
payable to the holders of Class B Common shall be payable in shares of Class B
Common.
Section 3. Liquidation.
The holders of the Class A Common and the holders of the Class B
Common shall be entitled to participate pro rata at the same rate per share for
each class of Common Stock in all distributions to the holders of Common Stock
in any liquidation, dissolution or winding up of the Corporation.
Section 4. Conversion.
(A) Conversion of Class B Common. Each holder of Class B Common shall be
entitled at any time to convert any or all of the shares of such holder's Class
B Common into an equal number of shares of Class A Common.
(B) Conversion Procedure.
(i) Each conversion of shares of Class B Common into shares of Class A
Common shall be effected by the surrender of the certificate or certificates
representing the shares to be converted at the principal office of the
Corporation at any time during normal business hours, together with a written
notice by the holder of such Class B Common stating that such holder desires to
convert the shares, or a stated number of the shares, of Class B Common
represented by such certificate or certificates into shares of Class A Common.
The conversion of Class B Common may be conditioned by the holder thereof upon
the occurrence of a specific event or transaction (or series of events or
transactions) in the written notice delivered to the Corporation. Unless
otherwise provided in the notice of conversion (in which case the conversion
shall be deemed to be effected at the time specified in such notice), each
conversion shall be deemed to have been effected as of the close of business on
the date on which such certificate or certificates have been surrendered and
such notice has been received, and at such time the rights of the holder of the
converted Class B Common as such holder shall cease and the person or persons in
whose name or names the certificate or certificates for shares of Class A Common
are to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Class A Common represented thereby.
(ii) Promptly after the surrender of certificates and the receipt of
written notice, the Corporation shall issue and deliver in accordance with the
surrendering holder's instructions (a) the certificate or certificates for the
shares of Class A Common issuable upon such conversion and (b) a certificate
representing any shares of Class B Common which were represented by the
certificate or certificates delivered to the Corporation in connection with such
conversion but which were not converted.
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<PAGE> 3
(iii) The issuance of certificates for shares of Class A Common upon
conversion of shares of Class B Common shall be made without charge to the
holders of such shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Class A Common.
(iv) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class A Common, solely for the purpose of
issuance upon the conversion of shares of Class B Common, such number of shares
of Class A Common issuable upon the conversion of all outstanding shares of
Class B Common. All shares of Class A Common which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Corporation shall take all such actions as may
be necessary to assure that all such shares of Class A Common may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Class A
Common may be listed (except for official notice of issuance which shall be
immediately transmitted by the Corporation upon issuance).
(v) The Corporation shall not close its books against the transfer of
shares of Common Stock in any manner which would interfere with the timely
conversion of any shares of Class B Common.
Section 5. Stock Splits.
If the Corporation in any manner subdivides or combines the
outstanding shares of one class of Common Stock, the outstanding shares of the
other class of Common Stock shall be proportionately subdivided or combined in a
similar manner.
Section 6. Registration of Transfer.
The Corporation shall keep at its principal office (or such other
place as the Corporation reasonably designates) a register for the registration
of shares of Common Stock. Upon the surrender of any certificate representing
shares of any class of Common Stock at such place, the Corporation shall, at the
request of the registered holder of such certificate, execute and deliver a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of such class represented by the surrendered certificate,
and the Corporation forthwith shall cancel such surrendered certificate. Each
such new certificate shall be registered in such name and shall represent such
number of shares of such class as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made without charge to
the holders of the surrendered certificates for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
issuance.
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<PAGE> 4
Section 7. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing one
or more shares of any class of Common Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 8. Notices.
All notices referred to herein shall be in writing, shall be either
delivered personally, delivered via reputable overnight courier, charges
prepaid, or sent by first class mail, postage prepaid, return receipt requested,
and in each case shall be deemed to have been given when so delivered or three
days after so sent to the Corporation at its principal executive offices and to
any stockholder at such holder's address as it appears in the stock records of
the Corporation (unless otherwise specified in a written notice to the
Corporation by such holder).
Section 9. Amendment and Waiver.
No amendment or waiver of any provision of this Part B shall be
effective without the prior approval of the holders of a majority of the votes
represented by the then outstanding shares of Class A Common and the then
outstanding shares of Class B Common, voting together as one class.
Section 10. Restrictions on Transfer.
(A) No holder of Common Stock may transfer, sell, exchange, gift, bequest,
hypothecate, pledge, grant any security interest in or otherwise dispose of or
encumber any share of Common Stock, or enter into any agreement to do so
(including any agreement that creates or grants an option, warrant, or right to
obtain an interest), whether voluntarily or by operation of law, which in any
case would change or transfer the legal or beneficial ownership of, or any legal
or beneficial interest in, any share of Common Stock (including, without
limitation, any transaction that creates a form of joint ownership in any share
of Common Stock between the transferor and one or more persons) (each a
"Transfer") to any person that (i) is not a Qualifying S Corporation Shareholder
or (ii) would cause the Corporation to have more than the maximum permitted
number of holders of Common Stock under the Internal Revenue Code of 1986, as
amended (the "Code"), as then in effect.
(B) No Transfer or purported Transfer to any person satisfying the
requirements of paragraph (A) of this Section 10 shall be effective or
recognized by the Corporation unless and until the Corporation has received (at
the expense of such person) an opinion of counsel, which counsel
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<PAGE> 5
and such opinion is satisfactory to the Corporation in its sole judgment, that
the transferee is a Qualifying S Corporation Shareholder and that the Transfer
will not adversely affect the Corporation's status as an S corporation under
Section 1361 of the Code and as to such other matters relating thereto as the
Corporation shall request. Any purported Transfer or acquisition of any share of
Common Stock in violation of this Section 10 shall be null and void, and the
purported transferee shall have no interest in any share of Common Stock
purported to be transferred, and the holder of Common Stock making the purported
transfer will continue to be recognized as the owner (both legally and
beneficially) of the shares of Common Stock.
(C) If by reason of, or in connection with the Transfer the Corporation's
status as an S corporation is terminated inadvertently and the Corporation, in
its sole judgment, elects to seek a private letter ruling from the Internal
Revenue Service under Section 1362(f) of the Code, the transferring holder of
Common Stock agrees to make any adjustments for the period specified in Section
1362(f) of the Code required by the Internal Revenue Service and approved by the
Corporation's board of directors, as is required for the Corporation to obtain
such a favorable private letter ruling from the Internal Revenue Service. Each
transferring holder's agreement and obligation to make such adjustments shall
continue indefinitely, notwithstanding any Transfer of shares of Common Stock by
the transferring holder and regardless of whether the Corporation consented
thereto.
(D) For purposes of this Article FOURTH, Section 10, a "Qualifying S
Corporation Shareholder" shall mean an individual, corporation, limited
liability company, partnership, joint venture, joint stock company, association,
trust, business trust, unincorporated organization or other entity (and if an
individual and the individual has a spouse who has a community property interest
in the Common Stock or in the income therefrom, then such individual together
with such individual's spouse) (each a "Person") who is described in Section
1361(b)(1)(B) of the Code because such Person (and if an individual, such
spouse) at the time of reference is:
(a) an individual who is not a nonresident alien (as defined in Section
7701(b)(1)(B) of the Code);
(b) a grantor trust described in Section 1361(c)(2)(A)(i) of the Code
(other than by virtue of Section 1361(d) of the Code);
(c) an electing small business trust which is described in Sections
1361(c)(2)(A)(v) and 1361(e) of the Code; or
(d) a qualified subchapter S trust treated as a trust described in
Section 1361(c)(2)(A)(i) of the Code by reason of Section 1361(d) of
the Code and of which, except as permitted by Treasury Regulation
Section 1.1361(j)(2)(i), there is currently only one income
beneficiary and such beneficiary is a citizen or resident of the
United States.
FIFTH: The name and mailing address of the incorporator of the Corporation
are as
-5-
<PAGE> 6
follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Mikel D. Buckmaster 3000 K Street, N.W.
Suite 300
Washington, D.C. 20007
</TABLE>
SIXTH:In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation in such manner and subject to such
limitations, if any, as shall be set forth in the By-Laws.
SEVENTH: Elections of directors need not be by written ballot unless the
By-Laws of the Corporation so provide.
EIGHTH: The Corporation is to have perpetual existence.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
TENTH: A. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, or any other laws of the State of Delaware,
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. If the General
Corporation Law of the State of Delaware is hereafter amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended. Any repeal or modification of this
Section A by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
B. Each person who was or is made a party or is threatened to
be made a party to or is or was involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative is or was a director, officer or employee of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or
-6-
<PAGE> 7
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as provided in
Section C of this Article Tenth with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors. The right to indemnification conferred in
this Section B shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that if the General
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of any
undertaking by or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this Section B or otherwise.
C. If a claim under Section B of this Article Tenth is not
paid in full by the Corporation within thirty days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct that make it permissible under the
General Corporation Law of the State of Delaware for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or stockholders)
that the claimant has not met such applicable standard of conduct, shall be
-7-
<PAGE> 8
a defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
D. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article Tenth shall not be exclusive of any other right that any person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise. Such rights shall continue as to any person who has
ceased to be a director, officer or employee and shall inure to the benefit of
his heirs, executors and administrators, and shall be applied to proceedings
commenced after the adoption hereof, whether arising from acts or omissions
occurring before or after the adoption hereof.
E. The Corporation may purchase and maintain insurance or
furnish similar protection, including, but not limited to, providing a trust
fund, letter of credit or self-insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
F. The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and rights to
be paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any agent of the Corporation to the fullest
extent of the provisions of this Article Tenth with respect to the
indemnification and advancement of expenses of directors, officers and employees
of the Corporation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, makes this Certificate, hereby declaring and certifying that
the facts herein stated are true, and accordingly has hereunto set her hand this
15th day of April, 1999.
/s/ Mikel D. Buckmaster
-----------------------------------
Mikel D. Buckmaster
Incorporator
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<PAGE> 1
EXHIBIT 3.2
Bylaws of
HORSESHOE GAMING HOLDING CORP.
(A Delaware Corporation)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be located at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors of the Corporation (the "Board") may from time to time determine or
the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be held
at such time and on such day, other than a legal holiday, as the Board in each
such year shall determine, at which meeting the stockholders entitled to vote
for the election of directors shall elect, by a plurality vote, a Board of
Directors and transact such other business as may properly be brought before the
meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. When a meeting is adjourned to
another place, date or time, written notice need not be given of the adjourned
meeting if the place, date and time thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the date of any
adjourned meeting is more than thirty days after the date for which the meeting
was originally noticed, or if a new record date is fixed for the adjourned
meeting, written notice of the place, date, and time of the adjourned meeting,
shall be given in conformity herewith. At any adjourned meeting, any business
may be transacted which might have been transacted at the original meeting.
<PAGE> 2
Section 4. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by the General Corporation Law
of the State of Delaware or by the Certificate of Incorporation, may be called
by the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board, or at the request in writing of
stockholders holding shares of stock that represent more than fifty percent of
the votes entitled to be cast at a meeting of the stockholders of the
Corporation. Such request shall state the purpose or purposes of the proposed
meeting.
Section 5. Notice of Special Meetings. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten nor more than sixty
days before the date of the meeting, to each stockholder entitled to vote at
such meeting. When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting, shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6. Quorum. Stockholders holding shares of stock that represent
more than fifty percent of the votes entitled to be cast at a meeting of the
stockholders of the Corporation, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by the General Corporation
Law of the State of Delaware or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time to another place, date or time. If a notice of any adjourned special
meeting of stockholders is sent to all stockholders entitled to vote thereat,
stating that it will be held with those present constituting a quorum, then
except as otherwise required by the General Corporation Law of the State of
Delaware, those present at such adjourned meeting shall constitute a quorum, and
all matters shall be determined by a majority of the votes cast at such meeting.
Section 7. Organization. Such person as the Board may have designated or,
such person as may be chosen by the holders of a majority of the votes entitled
to be cast who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman of the meeting appoints.
Section 8. Action by Stockholders. When a quorum is present at any
meeting, a majority of the votes cast at such meeting, whether by stockholders
who are present in person or represented by proxy, shall decide any question
brought before such meeting, unless the question
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<PAGE> 3
is one upon which, by express provision of the General Corporation Law of the
State of Delaware or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 9. Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting. Except as otherwise provided in the Certificate of Incorporation of the
Corporation or in these Bylaws, or except as otherwise required by the General
Corporation Law of the State of Delaware, each stockholder shall have one vote
for every share of stock entitled to vote which is registered in his or her name
on the record date for the meeting. All voting, including on the election of
directors but excepting where otherwise required by the General Corporation Law
of the State of Delaware, may be by a voice vote.
Section 10. Stock List. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified,
or at the place where the meeting is to be held. The stock list shall also be
kept at the place of the meeting during the whole time thereof and shall be open
to the examination of any such stockholder who is present. This list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
Section 11. Written Action. Any action required to be taken at any annual
or special meeting of stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
ARTICLE III
DIRECTORS
Section 1. Number and Term. The Board shall consist of three or more
members. The first Board shall consist of three directors. Thereafter, within
the limits above specified, the number of directors shall be determined in
accordance with the Certificate of Incorporation, by resolution of the Board or
by the stockholders at the annual meeting or a special meeting. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his or her successor is elected
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<PAGE> 4
and qualified. Directors need not be stockholders. Whenever the authorized
number of directors is increased between annual meetings of the stockholders, a
majority of the directors then in office shall have the power to elect such new
directors for the balance of a term and until their successors are elected and
qualified. Any decrease in the authorized number of directors shall not become
effective until the expiration of the term of the directors then in office
unless, at the time of such decrease there shall be vacancies on the Board that
are being eliminated by the decrease.
Section 2. Resignation and Removal. Any director may resign at any time
upon notice of resignation to the Corporation. Any director may be removed at
any time by vote of the stockholders then entitled to vote for the election of
directors at a special meeting called for that purpose, either with or without
cause.
Section 3. Vacancies. If the office of any director becomes vacant by
reason of death, resignation, disqualification, removal or other cause, a
majority of the directors remaining in office, although less than a quorum, may
elect a successor for the unexpired term and until his or her successor is
elected and qualified.
Section 4. Powers and Duties. Subject to the applicable provisions of law,
these ByLaws or the Certificate of Incorporation, but in furtherance and not in
limitation of any rights therein conferred, the Board shall have the control and
management of the business and affairs of the Corporation and shall exercise all
such powers of the Corporation and do all such lawful acts and things as may be
exercised by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
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<PAGE> 5
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these By laws, for the management of the Corporation's business and affairs.
Section 4. Compensation of Directors. Directors, as such, may receive,
pursuant to resolution of the Board, fixed fees and other compensation for their
services as directors, including, fees for attendance at meetings of the Board.
Section 5. Place of Meetings. The Board of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 6. Regular Meetings. Regular meetings of the Board may be held
upon such notice or without notice at such time and at such place as shall from
time to time be determined by the Board.
Section 7. Special Meetings. Special meetings of the Board may be called
by the President or Secretary on one day's notice to each director, either
personally or by mail or by telegram; special meetings of the Board shall be
called by the President or Secretary in like manner and on like notice on the
written request of a majority of the Board.
Section 8. Quorum. At all meetings of the Board, a majority of the
directors then in office shall constitute a quorum for transaction of business,
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board, except as may be otherwise
specifically provided by the General Corporation Law of the State of Delaware or
by the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Written Action. Unless otherwise restricted by the Certificate
of Incorporation or these By-laws, any action required or permitted to be taken
at any meeting of the Board or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes or
proceedings of the Board or committee.
Section 10. Participation in Meetings by Conference Telephone. Unless
otherwise restricted by the Certificate of Incorporation or these By-laws,
members of the Board, or any
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<PAGE> 6
committee designated by the Board, may participate in a meeting of the Board, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
ARTICLE IV
COMMITTEES
Section 1. Generally. The Board may designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. Any
such committee shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution, or amending the By-laws of the Corporation;
and unless the resolution or By-laws expressly so provide, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
Section 2. Committee Procedure. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third of the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall constitute a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE V
NOTICES
Section 1. Generally. Whenever, under the provisions of the General
Corporation Law of the State of Delaware or of the Certificate of Incorporation
or of these By-laws, notice is required to be given to any director,
stockholder, employee or agent, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her last known address as the same appears on
the books of the
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<PAGE> 7
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram or telephone.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of the General Corporation Law of the State of Delaware or of the
Certificate of Incorporation or of these By-laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein shall be deemed equivalent thereto.
ARTICLE VI
OFFICERS
Section 1. Number and Designation. The officers of the Corporation shall
be a Chief Executive Officer, a President, a Secretary and such other officers
(e.g., one or more Vice Presidents, a Chief Financial Officer, a Treasurer and
one or more Assistant Secretaries or Assistant Treasurers) as the Board from
time to time considers necessary for the proper conduct of the business of the
Corporation. Any two or more offices may be held by the same person. Vacancies
may be filled or new offices created and filled at any meeting of the Board.
Each officer shall hold office until his or her successor shall have been duly
elected and shall have qualified or until his or her earlier death, resignation,
or removal.
Section 2. Chief Executive Officer. The Chief Executive Officer ("CEO") of
the Corporation shall generally supervise and control all of the business and
affairs of the Corporation. The CEO may sign, alone or with the Secretary or any
other proper officer of the Corporation thereunto authorized by the Board of
Directors, any deeds, mortgages, bonds, contracts, or other instruments that the
Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed, and in general
he shall perform all duties incident to the office of the chief executive
officer and such other duties as from time to time may be prescribed by the
Board of Directors. When present, he shall preside at all meetings of the
stockholders and of the Board of Directors.
Section 3. President. The President shall be the principal operating
officer of the Corporation. In the event the office of the CEO is vacant or in
the event of the inability of the CEO to act as such or upon the refusal by the
CEO to perform the duties of the CEO, the President shall perform the duties and
exercise the authority of the CEO and, when so acting, shall have all the powers
of, and be subject to all the restrictions placed upon the CEO. He may sign,
alone or with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts or other instruments that the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these
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<PAGE> 8
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed, and in general he shall perform all
duties incident to the office of President and such other duties as from time to
time may be prescribed by the Board of Directors or the CEO, subject, however,
to the control of the Board and the CEO.
Section 4. The Secretary. The Secretary shall (a) keep the minutes of the
stockholders' and of the Board meetings and committees of the Board in one or
more books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records; (d) keep a register of the post office
address of each stockholder, director or committee member, which shall be
furnished to the Secretary by such stockholder, director or member; (e) have
general charge of the stock transfer books of the Corporation; and (f) in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the CEO or the Board.
Section 5. The Treasurer. The Treasurer or such other officer of the
Corporation as may be named by the Board or appointed by the CEO of the
Corporation to perform such function, shall have charge and custody of and be
responsible for all funds and securities of the Corporation, receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever, deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
or the CEO of the Corporation, disburse the funds of the Corporation as ordered
by the Board or the CEO of the Corporation or as otherwise required in the
conduct of the business of the Corporation, and render to the CEO of the
Corporation or the Board, upon request, an account of all his transactions as
Treasurer and on the financial condition of the Corporation. The Treasurer,
unless another officer of the Corporation is named by the Board to perform such
functions, shall have the duties and responsibilities and shall exercise the
authority and powers of the chief financial officer of the Corporation, and
shall in general perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the President
or by the Board. If required by the Board, the Treasurer shall give a bond
(which shall be renewed regularly), in such sum and with such surety or sureties
as the Board shall determine for the faithful discharge of his duties and for
the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 6. Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries shall perform such duties as shall be
assigned to them by the Treasurer or by the Secretary, respectively, or by the
Board or the President. The Assistant Treasurers shall, respectively, if
required by the Board, give bonds (which shall be renewed regularly) for the
faithful discharge of their duties in such sums and with such sureties as the
Board shall determine.
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<PAGE> 9
Section 7. Compensation. The salaries of the officers shall be fixed from
time to time by the Board or such officer as the Board shall designate for such
purpose or as it shall otherwise direct. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
Section 8. Tenure and Removal. The officers of the Corporation shall be
elected or appointed to hold office until their respective successors are
elected or appointed. All officers shall hold office at the pleasure of the
Board, and any officer elected or appointed may be removed at any time, with or
without cause, by the Board.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Certificates. Each stockholder shall be entitled to a
certificate signed by, or in the name of the Corporation by, the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer, certifying the number of shares owned by him or her.
Any or all of the signatures on the certificate may be facsimile.
Section 2. Uncertificated Shares. Subject to any conditions imposed by the
General Corporation Law of the State of Delaware or by the Certificate of
Incorporation, the Board may provide by resolution or resolutions that some or
all of any or all classes or series of the stock of the corporation shall be
uncertificated shares. Within a reasonable time after the issuance or transfer
of any uncertificated shares, the corporation shall send to the registered owner
thereof any written notice prescribed by the General Corporation Law.
Section 3. Lost Certificates. The corporation may issue a new certificate
of stock or uncertificated shares in place of any certificate theretofore issued
by it, alleged to have been lost, stolen, or destroyed, upon the satisfaction of
such conditions as the Board may require including, but not limited to,
requiring the owner of the lost, stolen, or destroyed certificate, or his legal
representative to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares, and the Board may delegate to
an officer of the corporation the power to determine whether such conditions
have been satisfied and to cause such replacement certificates or uncertificated
shares to be issued.
Section 4. Stock Transfers. The Board shall have the power and authority
to make all such rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates of stock. The Board may appoint
transfer agents and registrars thereof.
Section 5. Record Date. The Board may fix in advance a date as a record
date for the determination of the stockholders entitled to notice of or to vote
at any meeting of stockholders or to express consent (or dissent) to corporate
action in writing without a meeting, or entitled to
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<PAGE> 10
receive payment of any dividend or other distribution or allotment of any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action. Such record date shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board is necessary, shall be the day on which the first written
consent is expressed. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
6. Fractional Shares. The corporation may issue fractional shares, and
holders of fractional shares shall be entitled to all of the rights of a
stockholder thereof.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall protect and indemnify, and advance related expenses
to, directors and officers and former directors and officers of the Corporation
and their heirs, executors and administrators, to the full extent that the
Corporation shall have power to do so under the General Corporation Law of the
State of Delaware as it exists on the effective date of the Certificate of
Incorporation and as it may thereafter be amended or supplemented by law.
Employees and agents of the Corporation other than such directors or officers
shall be so indemnified to the extent required by the General Corporation Law of
the State of Delaware and to such further extent permitted by any other laws, if
any, and as shall be provided pursuant to resolution of the Board. Whether or
not and to what extent the Corporation shall purchase and maintain insurance on
behalf of any such directors, officers, employees or agents, to the extent it
shall have power to do so under the General Corporation Law of the State of
Delaware as so existing or as it may hereafter be amended or supplemented, shall
be in the full discretion of the Board.
ARTICLE IX
GENERAL PROVISIONS
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<PAGE> 11
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate.
Section 4. The fiscal year of the Corporation shall be fixed by resolution
of the Board.
Section 5. The Board may adopt a corporate seal and use the same by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 6. The Corporation shall keep correct and complete books and
records of its accounts and transactions and minutes of the proceedings of its
stockholders and Board. The books of the Corporation may be kept (subject to any
provisions contained in the General Corporation Law of the State of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board.
Section 7. In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these By-laws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board or a committee thereof
ARTICLE X
ADOPTION AND AMENDMENTS
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the Board; provided, however, that these By-Laws and any other
By-laws amended or adopted by the Board may be amended, may be repealed, and new
By-laws may be adopted, by the stockholders of the Corporation entitled to vote
at the time for the election of directors.
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<PAGE> 1
HORSESHOE GAMING HOLDING CORP.
(as Issuer)
8 5/8% Senior Subordinated Notes due 2009
-------------
INDENTURE
Dated as of May 11, 1999
-------------
U.S. Trust Company, National Association
(as Trustee)
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE......................................................1
SECTION 1.1 DEFINITIONS..........................................1
SECTION 1.2 OTHER DEFINITIONS...................................34
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT...35
SECTION 1.4 RULES OF CONSTRUCTION...............................36
ARTICLE II
THE NOTES........................................................37
SECTION 2.1 FORM AND DATING.....................................37
SECTION 2.2 EXECUTION AND AUTHENTICATION........................38
SECTION 2.3 REGISTRAR, PAYING AGENT AND DEPOSITARY..............39
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.................39
SECTION 2.5 HOLDER LISTS........................................40
SECTION 2.6 TRANSFER AND EXCHANGE...............................40
SECTION 2.7 REPLACEMENT NOTES...................................58
SECTION 2.8 OUTSTANDING NOTES...................................58
SECTION 2.9 TREASURY NOTES......................................58
SECTION 2.10 TEMPORARY NOTES.....................................59
SECTION 2.11 CANCELLATION........................................59
SECTION 2.12 DEFAULTED INTEREST..................................59
SECTION 2.13 CUSIP NUMBERS.......................................61
ARTICLE III
REDEMPTION.......................................................61
SECTION 3.1 NOTICES TO TRUSTEE..................................61
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED...................61
SECTION 3.3 NOTICE OF REDEMPTION................................62
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION......................63
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.........................63
SECTION 3.6 NOTES REDEEMED IN PART..............................64
SECTION 3.7 OPTIONAL REDEMPTION.................................64
SECTION 3.8 MANDATORY REDEMPTION................................65
ARTICLE IV
COVENANTS........................................................67
SECTION 4.1 PAYMENT OF NOTES....................................67
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<PAGE> 3
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.....................68
SECTION 4.3 SEC REPORTS AND REPORTS TO HOLDERS..................69
SECTION 4.4 COMPLIANCE CERTIFICATE..............................69
SECTION 4.5 TAXES...............................................70
SECTION 4.6 STAY, EXTENSION AND USURY LAWS......................70
SECTION 4.7 LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK.........71
SECTION 4.8 LIMITATION ON LIENS SECURING INDEBTEDNESS...........73
SECTION 4.9 LIMITATIONS ON RESTRICTED PAYMENTS..................74
SECTION 4.10 LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.................77
SECTION 4.11 LIMITATION ON LINES OF BUSINESS.....................78
SECTION 4.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES..........78
SECTION 4.13 LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK...78
SECTION 4.14 REPURCHASE OF NOTES AT THE OPTION OF
THE HOLDER UPON A CHANGE OF CONTROL.................82
SECTION 4.15 LIMITATION ON LAYERING INDEBTEDNESS.................84
SECTION 4.16 GUARANTORS..........................................85
SECTION 4.17 LIMITATION ON STATUS AS INVESTMENT COMPANY..........85
SECTION 4.18 MAINTENANCE OF INSURANCE............................86
SECTION 4.19 CORPORATE EXISTENCE.................................86
SECTION 4.20 INTERNAL CONSOLIDATION; APPLICATION AND
RELEASE OF FUNDS IN SECURED PROCEEDS ACCOUNT........86
SECTION 4.21 USE OF PROCEEDS OF HORSESHOE NOTE...................88
SECTION 4.22 EMPRESS MERGER......................................89
ARTICLE V
SUCCESSORS.......................................................89
SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS.............89
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED...................90
ARTICLE VI
DEFAULTS AND REMEDIES ...........................................91
SECTION 6.1 EVENTS OF DEFAULT...................................91
SECTION 6.2 ACCELERATION........................................93
SECTION 6.3 OTHER REMEDIES......................................95
SECTION 6.4 WAIVER OF PAST DEFAULTS.............................95
SECTION 6.5 CONTROL BY MAJORITY.................................96
SECTION 6.6 LIMITATION ON SUITS.................................96
SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.......97
SECTION 6.8 COLLECTION SUIT BY TRUSTEE..........................97
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<PAGE> 4
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM....................97
SECTION 6.10 PRIORITIES..........................................98
SECTION 6.11 UNDERTAKING FOR COSTS...............................99
ARTICLE VII
TRUSTEE...........................................................99
SECTION 7.1 DUTIES OF TRUSTEE...................................99
SECTION 7.2 RIGHTS OF TRUSTEE..................................100
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.......................102
SECTION 7.4 TRUSTEE'S DISCLAIMER...............................102
SECTION 7.5 NOTICE OF DEFAULTS.................................102
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.........102
SECTION 7.7 COMPENSATION AND INDEMNITY.........................103
SECTION 7.8 REPLACEMENT OF TRUSTEE.............................104
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC...................105
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION......................106
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..106
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................106
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR
COVENANT DEFEASANCE................................106
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE.....................106
SECTION 8.3 COVENANT DEFEASANCE................................107
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.........108
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS......110
SECTION 8.6 REPAYMENT TO COMPANY...............................110
SECTION 8.7 REINSTATEMENT......................................111
SECTION 8.8 SATISFACTION AND DISCHARGE.........................111
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER.................................112
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES................112
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES...................113
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT................115
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS..................115
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES...................116
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC....................116
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<PAGE> 5
ARTICLE X
GUARANTEES.......................................................117
SECTION 10.1 GUARANTEES.........................................117
SECTION 10.2 EXECUTION AND DELIVERY OF GUARANTEES...............119
SECTION 10.3 GUARANTORS MAY CONSOLIDATE, ETC.,
ON CERTAIN TERMS...................................119
SECTION 10.4 RELEASE OF GUARANTORS..............................120
SECTION 10.5 LIMITATION OF GUARANTOR'S LIABILITY;
CERTAIN BANKRUPTCY EVENTS..........................121
SECTION 10.6 APPLICATION OF CERTAIN TERMS AND PROVISIONS
TO THE GUARANTORS..................................122
SECTION 10.7 SUBORDINATION OF GUARANTEES........................123
ARTICLE XI
SUBORDINATION....................................................123
SECTION 11.1 NOTES SUBORDINATE TO SENIOR DEBT...................123
SECTION 11.2 NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.......124
SECTION 11.3 NOTES SUBORDINATE TO PRIOR PAYMENT OF
ALL SENIOR DEBT ON DISSOLUTION, LIQUIDATION
OR REORGANIZATION..................................125
SECTION 11.4 HOLDERS TO BE SUBROGATED TO RIGHTS OF
HOLDERS OF SENIOR DEBT.............................126
SECTION 11.5 OBLIGATIONS OF THE COMPANY AND THE
GUARANTORS UNCONDITIONAL...........................127
SECTION 11.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS
NOT PROHIBITED IN ABSENCE OF NOTICE................127
SECTION 11.7 APPLICATION BY TRUSTEE OF ASSETS DEPOSITED
WITH IT............................................128
SECTION 11.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS
OR OMISSIONS OF THE COMPANY, THE GUARANTORS
OR HOLDERS OF SENIOR DEBT..........................128
SECTION 11.9 HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF NOTES.............................129
SECTION 11.10 RIGHTS OF TRUSTEE TO HOLD SENIOR DEBT..............130
SECTION 11.11 ARTICLE XI NOT TO PREVENT EVENTS OF DEFAULT........130
SECTION 11.12 NO FIDUCIARY DUTY OF TRUSTEE TO
HOLDERS OF SENIOR DEBT.............................130
SECTION 11.13 NOTICE BY COMPANY..................................131
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<PAGE> 6
ARTICLE XII
MISCELLANEOUS....................................................131
SECTION 12.1 TRUST INDENTURE ACT CONTROLS.......................131
SECTION 12.2 NOTICES............................................131
SECTION 12.3 COMMUNICATION BY HOLDERS OF NOTES WITH
OTHER HOLDERS OF NOTES.............................133
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.133
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION......134
SECTION 12.6 RULES BY TRUSTEE AND AGENTS........................134
SECTION 12.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS.........................134
SECTION 12.8 GOVERNING LAW......................................135
SECTION 12.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS......135
SECTION 12.10 SUCCESSORS.........................................135
SECTION 12.11 SEVERABILITY.......................................135
SECTION 12.12 COUNTERPART ORIGINALS..............................135
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC...................136
v
<PAGE> 7
CROSS-REFERENCE TABLE*
TIA Section Indenture Section
310(a)(1).................................................................7.10
(a)(2)................................................................7.10
(a)(3)................................................................N.A.
(a)(4)................................................................N.A.
(a)(5)...........................................................7.8; 7.10
(b)........................................................7.8; 7.10; 12.2
(c)...................................................................N.A.
311(a)....................................................................7.11
(b)...................................................................7.11
(c)...................................................................N.A.
312(a).....................................................................2.5
(b)...................................................................12.3
(c)...................................................................12.3
313(a).....................................................................7.6
(b)(1)................................................................N.A.
(b)(2).................................................................7.6
(c)..............................................................7.6; 12.2
(d)....................................................................7.6
314(a)..........................................................4.3; 4.4; 12.2
(b)...................................................................N.A.
(c)(1)................................................................12.4
(c)(2)................................................................12.4
(c)(3)................................................................N.A.
(d)...................................................................N.A.
(e)...................................................................12.5
(f)...................................................................N.A.
315(a)..................................................................7.1(b)
(b)..............................................................7.5; 12.2
(c).................................................................7.1(a)
(d).................................................................7.1(c)
(e)...................................................................6.11
316(a)(last sentence)......................................................2.9
(a)(1)(A)..............................................................6.5
(a)(1)(B)..............................................................6.4
(a)(2)................................................................N.A.
(b)....................................................................6.7
317(a)(1)..................................................................6.8
(a)(2).................................................................6.9
vi
<PAGE> 8
(b)....................................................................2.4
318(a)....................................................................12.1
(c)...................................................................12.1
- ----------
N.A. means not applicable
*This Cross-Reference table shall not, for any purpose, be deemed to be part of
the Indenture.
vii
<PAGE> 9
INDENTURE, dated as of May 11, 1999, between Horseshoe Gaming
Holding Corp., a Delaware corporation (the "Company"), and U.S. Trust Company,
National Association, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 8 5/8% Series
A Senior Subordinated Notes due 2009 (the "Series A Notes") and the 8 5/8%
Series B Senior Subordinated Notes due 2009 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 DEFINITIONS
"144A Global Note" means one or more Global Notes bearing the Private
Placement Legend, that will be issued in an aggregate amount of denominations
equal in total to the outstanding principal amount of the Notes sold in reliance
on Rule 144A.
"Accrued Bankruptcy Interest" means, with respect to any Indebtedness, all
interest accruing thereon after the filing of a petition by or against the
Company or any of its Subsidiaries under any Bankruptcy Law, in accordance with
and at the rate (including any rate applicable upon any default or event of
default, to the extent lawful) specified in the documents evidencing or
governing such Indebtedness, whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under such Bankruptcy
Law.
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock
of any Person existing at the time such Person becomes a Subsidiary of the
Company, including by designation, or is merged or consolidated into or with the
Company or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or all
or substantially all the assets of any Person by any other Person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
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<PAGE> 10
"Adjusted Consolidated EBITDA" means, with respect to the Company, for any
period, the Consolidated EBITDA of the Company, minus the product of (i) the
Consolidated EBITDA for such period of each Consolidated Subsidiary which is not
wholly-owned by the Company and (ii) the percentage of the Equity Interests of
such Consolidated Subsidiary which, during such period, is not owned by the
Company.
"Adjusted Consolidated Net Income" means, with respect to any period,
Consolidated Net Income for such period, minus (i) 100% of the amount of any
writedowns, writeoffs or negative extraordinary charges not otherwise reflected
in Consolidated Net Income during such period and minus (ii) Permitted Tax
Distributions for such period.
"Affiliate" means (i) any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
of its Subsidiaries, including, without limitation, Jack Binion, Peri Cope
Howard and Phyllis Cope, (ii) any spouse, immediate family member or relative of
any person described in clause (i) above, (iii) any trust in which any person
described in clause (i) or (ii) above has a beneficial interest, and (iv) any
trust established by any person described in clause (i) or (ii) above, whether
or not such person has a beneficial interest in such trust. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise or (b) the
beneficial ownership of 10% or more of any class of Voting Equity Interests of a
person.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Capital Gain Tax Rate" in respect of each of the Company or
any of its Subsidiaries shall mean for each such entity calculated separately an
amount equal to the sum of (i) the highest marginal Federal capital gain tax
rate applicable to any Equity Holder of the Company plus (ii) an amount equal to
the sum of the highest marginal state and local capital gain tax rates
applicable to any Equity Holder of the Company, multiplied by a factor equal to
1 minus such highest marginal Federal capital gain tax rate.
"Applicable Income Tax Rate" in respect of each of the Company or any of
its Subsidiaries shall mean for each such entity calculated separately, an
amount equal to the sum of (i) the highest marginal Federal income tax rate
applicable to any Equity Holder of the Company plus (ii) an amount equal to the
sum of the highest marginal
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<PAGE> 11
state and local income tax rates applicable to any Equity Holder of the Company,
multiplied by a factor equal to 1 minus such highest marginal Federal income tax
rate.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange at the
relevant time.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"Bankruptcy Code" means the United States Bankruptcy Code, codified at 11
U.S.C. ss.101-1330, as amended.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
"Broker-Dealer" means any broker-dealer that receives Exchange Notes for
its own account in the Exchange Offer in exchange for Notes that were acquired
by such broker-dealer as a result of market-making or other trading activities.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by law or executive order to
close.
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<PAGE> 12
"Capital Contribution" means any contribution to the equity of the Company
from a direct or indirect parent of the Company for which no consideration other
than the issuance of common stock with no redemption rights and no special
preferences, privileges or voting rights is given.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided, that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500 million, (iii) commercial paper issued by others rated at
least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent
thereof by Moody's, and in the case of each of (i), (ii), and (iii) maturing
within one year after the date of acquisition, (iv) repurchase obligations with
a term of not more than ten days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (v) marketable obligations issued
by any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing, or payable at the
demand of the holder thereof, within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the three highest ratings
obtainable from either S&P or Moody's, and (vi) investments in money market
funds substantially all of whose assets comprise securities of the types
described in clauses (i) through (v) above.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant,
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<PAGE> 13
hotel, theater, parking facilities, retail shops, land, golf courses and other
recreation and entertainment facilities, marina, vessel, barge, ship and
equipment.
"Cedel" means Cedel Bank, S.A., or its successors.
"Change of Control" means:
(a) prior to the completion of an Initial Public Offering by the Company,
the failure at any time of Excluded Persons as a group to own and control at
least 40% of issued and outstanding Equity Interests of the Company,
(b) after the completion of an Initial Public Offering by the Company, the
acquisition, in one or more transactions, of beneficial ownership by (i) any
person or entity (other than an Excluded Person) or (ii) any group of persons or
entities (excluding any group in which Excluded Persons beneficially own in the
aggregate at least 75% of the equity and voting interests beneficially owned by
the group) who constitute a group (within the meaning of Section 13(d)(3) of the
Exchange Act), in either case, of Equity Interests of the Company such that, as
a result of such acquisition, such person, entity or group beneficially owns
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, 30% or more of the voting power of Equity Interests of the Company
entitled to vote in the election of directors of the Company then outstanding;
provided, however, that no Change of Control shall be deemed to have occurred if
(x) Excluded Persons beneficially own, in the aggregate, at such time, a greater
percentage of the total voting power of Equity Interests of the Company entitled
to vote in the election of directors of the Company than such other person,
entity or group or (y) at the time of such acquisition, Excluded Persons (or any
of them) possess the ability (by contract or otherwise) to elect, or cause the
election of, a majority of the members of the Board of Directors of the Company,
(c) any merger or consolidation of the Company with or into any Person or
any sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all assets of the Company, on a consolidated basis, in one
transaction or a series of related transactions, if immediately after giving
effect to such transaction or transactions, any person or group (excluding any
group in which Excluded Persons beneficially own in the aggregate at least 75%
of the equity and voting interests beneficially owned by the group) is or
becomes the beneficial owner, directly or indirectly, of 30% or more of the
total voting power of Equity Interests of the surviving or transferee Person;
provided, however, that no Change of Control shall be deemed to have occurred if
(A) Excluded
5
<PAGE> 14
Persons beneficially own, in the aggregate, at such time, (x) 40% or more of the
total voting power of Equity Interests of the surviving or transferee Person and
(y) a greater percentage of the total voting power of Equity Interests of the
surviving or transferee Person than such other person or group or (B) after
giving effect to such transaction, Excluded Persons (or any of them) possess the
ability (by contract or otherwise) to elect, or cause the election of, a
majority of the members of the Board of Directors of the Company,
(d) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by
shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved, including new directors designated in or provided for in an agreement
regarding the merger, consolidation or sale, transfer or other conveyance, of
all or substantially all of the assets of the Company, if such agreement was
approved by a vote of such majority of directors), cease for any reason to
constitute a majority of the Board of Directors of the Company then in office,
or
(e) the Company adopts a plan of liquidation.
"Change of Control Release Amount" means the amount, determined by the
Company in good faith and as set forth in a certificate to be delivered to the
Securities Intermediary and the Trustee, necessary to consummate the Empress
Change of Control Offer on the terms set forth in the Empress Indenture.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and either (x) a Rating Decline or (y) a decline in the Company's
Consolidated Coverage Ratio.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" of any Person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such Person (in the case of the
Company, Adjusted Consolidated EBITDA) attributable to continuing operations and
businesses (exclusive of amounts attributable to operations and businesses
permanently discontinued or
6
<PAGE> 15
disposed of) for the Reference Period to (b) the aggregate Consolidated Fixed
Charges of such Person (exclusive of amounts attributable to operations and
businesses permanently discontinued or disposed of, but only to the extent that
the obligations giving rise to such Consolidated Fixed Charges would no longer
be obligations contributing to such Person's Consolidated Fixed Charges
subsequent to the Transaction Date) during the Reference Period; provided, that
for purposes of such calculation, (i) Acquisitions which occurred during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the first day of the
Reference Period, (ii) transactions giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period, (iii) the incurrence of any Indebtedness or issuance of
any Disqualified Capital Stock during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date (and the application of
the proceeds therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the first day of the
Reference Period, and (iv) the Consolidated Fixed Charges of such Person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate shall be computed
on a pro forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to an
Interest Swap and Hedging Obligation (which shall remain in effect for the
12-month period immediately following the Transaction Date) that has the effect
of fixing the interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the Consolidated Net Income of such Person for such period adjusted to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of (a) Consolidated income tax
expense, (b) Consolidated depreciation and amortization expense, (c)
Consolidated Fixed Charges, (d) Consolidated Preopening Expenses, (e) minority
interests in income of Consolidated Subsidiaries as adjusted to deduct therefrom
minority interests in the losses of Consolidated Subsidiaries; provided that,
for purposes of this clause (e) there shall be excluded from the definition of
income and loss (only to the extent included in computing such net income (or
loss) and without duplication) the items described in clauses (a), (b), (c), (d)
and (e) of the definition of Consolidated Net Income, and (f) all other non-cash
charges attributable to the grant, exercise or repurchase of options for or
shares of Qualified Capital Stock to or from employees of such Person and its
Consolidated Subsidiaries.
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<PAGE> 16
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed whether capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to Capitalized Lease Obligations) of such Person
and its Consolidated Subsidiaries for such period, including, to the extent such
expense was deducted in computing Consolidated Net Income during such period (i)
amortization of original issue discount and non-cash interest payments or
accruals on any Indebtedness, (ii) the interest portion of all deferred payment
obligations that constitute Indebtedness, and (iii) all commissions, discounts
and other fees and charges owed with respect to bankers' acceptances and letters
of credit financings and currency and Interest Swap and Hedging Obligations, in
each case to the extent attributable to such period, and (b) the amount of
dividends accrued or payable (or guaranteed) by such Person or any of its
Consolidated Subsidiaries in respect of Disqualified Capital Stock (other than
by Subsidiaries of such Person to such Person or such Person's Wholly Owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined in good faith by the Company to be the rate of interest implicit in
such Capitalized Lease Obligation in accordance with GAAP and (y) interest
expense attributable to any Indebtedness represented by the guaranty by such
Person or a Subsidiary of such Person of an obligation of another Person shall
be deemed to be the interest expense attributable to the Indebtedness
guaranteed.
"Consolidated Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication): (a) all gains and losses which
are either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including, without limitation, from the sale or other
disposition of assets outside the ordinary course of business or from the
issuance or sale of any capital stock or from the repayment, cancellation,
repurchase or redemption of Indebtedness), (b) the net income, if positive, of
any Person, other than a Consolidated Subsidiary, in which such Person or any of
its Consolidated Subsidiaries has an interest, except to the extent of the
amount of any dividends or distributions actually paid in cash to such Person or
a Consolidated Subsidiary of such Person during such period, but in any case not
in excess of such Person's pro rata share of such Person's net income for such
period, (c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, (d)
the net income, if positive, of any of such Person's Consolidated Subsidiaries
to the
8
<PAGE> 17
extent that the declaration or payment of dividends or similar distributions is
not at the time permitted by operation of the terms of its charter or bylaws or
any other Agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary (other than
any Gaming Law that is generally applicable to all Persons operating Casinos
through Subsidiaries in any jurisdiction in which the Company or such Subsidiary
are conducting business so long as there is in effect no specific order, decree
or other prohibition pursuant to such Gaming Law in such jurisdiction limiting
the payment of a dividend or similar distribution by such Consolidated
Subsidiary), and (e) the cumulative effect of a change in accounting principles.
"Consolidated Preopening Expenses" means those costs incurred prior to the
commencement of a new operation, including payroll, consulting fees, legal
expenses, licensing, supplies, travel, printing, relocation expense, temporary
housing and other similar expenses, that are not required, in accordance with
GAAP, to be capitalized or expensed when incurred but are acceptable in
accordance with GAAP to be deferred until the new operation commences.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such Person in accordance with GAAP.
"Consolidation" means, with respect to the Company, the consolidation of
the accounts of the Subsidiaries of the Company with those of the Company, all
in accordance with GAAP; provided, that "consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary with the accounts
of the Company. The term "consolidated" has a correlative meaning to the
foregoing.
"Corporate Trust Office" shall be at the address of the Trustee specified
in Section 12.2 hereof or such other address as to which the Trustee may give
notice to the Company; provided that for purposes of complying with Section 2.3
such address shall initially be c/o United States Trust Company of New York, 770
Broadway, Corporate Trust Operations, New York, New York 10003. All notices by
the Company sent to the Trustee at its Corporate Trust Office in the Borough of
Manhattan, The City of New York shall also be sent to the Trustee at the address
set forth in Section 12.2.
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<PAGE> 18
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means one or more certificated Notes registered in the
name of the Holder thereof and issued in accordance with Section 2.6 hereof, in
the form of Exhibit A hereto except that such Note shall not include the
information called for by footnotes 3, 4 and 8 thereof.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.3 hereof as the
Depositary with respect to the Notes, until a successor will have been appointed
and become such pursuant to the applicable provisions of this Indenture, and
thereafter "Depositary" will mean or include such successor.
"Designated Senior Debt" means (a) any Indebtedness under the Horseshoe
Credit Agreement or the New Credit Facility, as the case may be, and (b) any
other Senior Debt permitted to be incurred by this Indenture the principal
amount of which is $25 million or more and that has been designated by the Board
of Directors as "Designated Senior Debt."
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any Person, Equity Interests of such Person that, by its terms or by
the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both, would be required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or in
part, on or prior to the Stated Maturity of the Notes and (b) with respect to
any Subsidiary of such Person (including with respect to any Subsidiary of the
Company), any Preferred Stock; provided, that a provision providing for a change
of control redemption at the option of the holder that is expressly subordinated
to the prior payment of the Notes shall not cause such Equity Interests to be
treated as Disqualified Capital Stock.
"Distribution Compliance Period" means the 40-day restricted period as
defined in Regulation S.
"Empress" means Empress Entertainment, Inc., a Delaware corporation.
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<PAGE> 19
"Empress Change of Control Offer" means an offer to purchase the Empress
Notes following consummation of the Empress Merger as required by the terms of
the Empress Indenture.
"Empress Illinois" means Empress Casino Joliet Corporation, an Illinois
corporation.
"Empress Indenture" means the Indenture, dated as of June 18, 1998, among
Empress, the Guarantors named therein and U.S. Bank Trust National Association,
as trustee.
"Empress Indiana" means Empress Casino Hammond Corporation, an Indiana
corporation.
"Empress Merger" means the acquisition, directly or indirectly, by the
Company of all of the Equity Interests of Empress Indiana and Empress Illinois
in accordance with the Merger Agreement.
"Empress Merger Consideration and Related Costs" means (a) the cash
consideration for the Empress Merger payable by the Company to Empress pursuant
to the Merger Agreement, and (b) all fees and expenses related to the foregoing.
"Empress Notes" means Empress' 8 1/8% Senior Subordinated Notes due 2006,
of which $150 million aggregate principal amount are outstanding as of the Issue
Date.
"Equity Holder" means (a) with respect to a corporation, each shareholder
of such corporation, (b) with respect to a limited liability company or similar
entity, each member of such limited liability company or similar entity, (c)
with respect to a partnership, each partner of such partnership and (d) with
respect to any disregarded entity, the owner of such entity.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership, participation or membership interests in, such Person.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, or its successor, as operator of the Euroclear system.
11
<PAGE> 20
"Event of Loss" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Exchange Notes" means Series B Notes issued pursuant to an Exchange
Offer.
"Exchange Offer" means an offer that may be made by the Company pursuant
to the Registration Rights Agreement to exchange Notes for Series A Notes.
"Exchange Offer Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.
"Excluded Person" means (a) Jack Binion, (b) Phyllis Cope, (c) Peri Cope
Howard, or (d) any Affiliate (where the determination of Affiliate is made
without reference to clause (b) of the definition of such term) of the persons
described in clause (a), (b) or (c) above.
"Exempted Affiliate Transaction" means (a) payments of reasonable and
customary compensation, managers' and directors' fees and indemnities of
managers, directors, officers and employees, (b) any employment agreement
entered into by the Company or any of its Subsidiaries in the ordinary course of
business and consistent with the usual and customary practice of the gaming
industry in the United States, (c) Restricted Payments permitted under the terms
of Section 4.9 (including transactions which are permitted because they are
excluded from the definition of the term "Restricted Payment"), (d) transactions
solely between the Company and any Guarantor or solely among Guarantors, (e)
transactions permitted pursuant to paragraph (d) of the definition of Permitted
Indebtedness, and (f) the execution, delivery and performance of the Horseshoe
Note.
"Flow Through Entity" means an entity which (x) for Federal income tax
purposes constitutes (i) an "S corporation" (as defined in Section 1361(a) of
the Code), (ii) a "qualified subchapter S subsidiary" (as defined in Section
1361(b)(3)(B) of the Code), (iii) a "partnership" (within the meaning of Section
7701(a)(2) of the Code) other than an "publicly traded partnership" (as defined
in Section 7704 of the Code), or (iv) a
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<PAGE> 21
business entity which is disregarded as an entity separate from its owner under
the Code, the Treasury Regulations or any published administrative guidance of
the Internal Revenue Service and (y) for state and local jurisdictions in
respect of which Permitted Tax Distributions are being made, is subject to
substantially similar "flow through" treatment under the applicable state or
local income tax law.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States applied on a consistent basis and as
in effect on the Issue Date.
"Gaming Authority" means any Governmental Authority with the power to
regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental
Authorities with the responsibility to interpret and enforce the laws and
regulations applicable to gaming in any Gaming Jurisdiction.
"Gaming Jurisdiction" means any Federal, state or local jurisdiction in
which any entity in which the Company has a direct or indirect beneficial, legal
or voting interest conducts gaming, now or in the future.
"Gaming Law" means any law, rule, regulation or ordinance governing gaming
activities, any administrative rules or regulations promulgated thereunder, and
any of the corresponding statutes, rules and regulations in each Gaming
Jurisdiction.
"Global Notes" means one or more Notes in the form of Exhibit A hereto
that includes the information referred to in footnotes 3, 4 and 8 to the form of
Note, attached hereto as Exhibit A, issued under this Indenture, that is
deposited with or on behalf of and registered in the name of the Depositary or
its nominee.
"Global Note Legend" means the legend set forth in Section 2.6(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or
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otherwise and whether now or hereafter in existence, or any officer or official
thereof, and any maritime authority.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness. When used with respect to the Notes, a "Guarantee" means a
guarantee by the Guarantors of all or any part of the Notes, in accordance with
Article X hereof.
"Guarantors" means any Subsidiary that executes a Guarantee in accordance
with the provisions of this Indenture, and their respective successors and
assigns, until such Subsidiary is released from its obligations as a Guarantor
in accordance with the terms of this Indenture.
"HE" means Horseshoe Entertainment, L.P., a Louisiana limited partnership.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Horseshoe Credit Agreement" means the Credit Agreement, dated as of
October 10, 1995, among Horseshoe Gaming, RPG, as guarantor, and certain
financial institutions identified therein, as lenders, that provides for no
greater than an aggregate of $20 million in Indebtedness, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such Credit Agreement and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Horseshoe Credit Agreement"
shall include agreements in respect of Interest Swap and Hedging Obligations
with lenders party to the Horseshoe Credit Agreement and shall also include any
amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any Horseshoe Credit Agreement and all refundings,
refinancings and replacements of any Horseshoe Credit Agreement, including any
agreement (a) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (b) adding or deleting borrowers or guarantors thereunder,
so long as borrowers and issuers include one or more of the Company and its
Subsidiaries and their respective
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successors and assigns, (c) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder; provided, that on the date
such Indebtedness is incurred it would not be prohibited by Section 4.7 hereof
or (4) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms of this Indenture.
"Horseshoe Gaming" means Horseshoe Gaming, L.L.C., a Delaware limited
liability company.
"Horseshoe Note" means a promissory note, dated as of the Issue Date, in
the principal amount of $240,349,125 made by Horseshoe Gaming in favor of the
Company evidencing a loan by the Company to Horseshoe Gaming, the proceeds of
which shall be used by Horseshoe Gaming as required under Section 4.21 hereof.
Repayment of the Horseshoe Note will be guaranteed by RPG and HE.
"Indebtedness" of any Person means, without duplication
(a) all liabilities and obligations, contingent or otherwise, of such
Person to the extent such liabilities and obligations would appear as a
liability upon the consolidated balance sheet of such Person in accordance with
GAAP (i) in respect of borrowed money (whether or not the recourse of the lender
is to the whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, or (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except (other than accounts payable or other obligations
to trade creditors which have remained unpaid for greater than 90 days past
their original due date, except to the extent any such obligation is being
contested in good faith and for which adequate reserves are maintained in
accordance with GAAP) those incurred in the ordinary course of its business that
would constitute ordinarily a trade payable to trade creditors; (b) all
liabilities, contingent or otherwise, of such Person (i) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (ii) relating to
any Capitalized Lease Obligation, or (iii) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(c) all net obligations of such Person under Interest Swap and Hedging
Obligations; (d) all liabilities and obligations of others of the kind described
in the preceding clause (a), or (b) or (c) that such Person has guaranteed or
provided credit support or that is otherwise its legal liability (but only to
the extent of the amount actually guaranteed) or which are secured by any assets
or property of such Person and all obligations to purchase, redeem or acquire
any third party Equity Interests; (e) any and all deferrals, renewals,
extensions, refinancing and refundings (whether direct or indirect) of, or
amendments,
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modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b), (c), or (d) or this clause (e), whether or not
between or among the same parties; and (f) all Disqualified Capital Stock of
such Person (measured at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends); provided, that any
indebtedness which has been defeased in accordance with GAAP or defeased
pursuant to the deposit of cash or Government Securities (in an amount
sufficient to satisfy all such indebtedness obligations at maturity or
redemption, as applicable, and all payments of interest and premium, if any) in
a trust or account created or pledged for the sole benefit of the holders of
such indebtedness, and subject to no other Liens, and the other applicable terms
of the instrument governing such indebtedness, shall not constitute
"Indebtedness."
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value to be determined in good faith by the
board of directors of the issuer (or managing general partner of the issuer) of
such Disqualified Capital Stock. The amount of any Indebtedness outstanding as
of any date shall be (i) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, but the accretion of original
issue discount in accordance with the original terms of Indebtedness issued with
an original issue discount will not be deemed to be an incurrence and (ii) the
principal amount thereof, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Indirect Participant" means an entity that, with respect to DTC, clears
through or maintains a direct or indirect, custodial relationship with a
Participant.
"Initial Public Offering" means a bona fide underwritten initial public
offering of common stock of the Company for cash pursuant to an effective
registration under the Securities Act.
"Initial Purchasers" mean the initial purchasers of the Series A Notes
under the Purchase Agreement, dated May 6, 1999, with respect to the Series A
Notes.
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"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who is not also a QIB.
"Interest Payment Date" means the stated due date of an installment of
interest on the Notes.
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Internal Consolidation" means the merger of Horseshoe Gaming with and
into the Company such that, after the Internal Consolidation, Horseshoe Gaming
will cease to exist, and Horseshoe GP, Inc. and New Gaming Capital Partnership
("NGCP"), the general partners of RPG and NGCP, and of HE, respectively, will be
direct Wholly Owned Subsidiaries of the Company.
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such Person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
Person or any agreement to make any such acquisition, (b) the making by such
Person of any deposit with, or advance, loan or other extension of credit to,
such other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other Person) or any commitment to make any such advance,
loan or extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business), (c) other
than guarantees of Indebtedness of the Company or any Guarantor or to the extent
permitted by Section 4.7 hereof, the entering into by such Person of any
guarantee of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other Person, (d) the making of any
capital contribution by such Person to such
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other Person, and (e) the designation by the Board of Directors of the Company
of any Person to be an Unrestricted Subsidiary. The Company shall be deemed to
make an Investment in an amount equal to the fair market value of the net assets
of any subsidiary (or, if neither the Company nor any of its Subsidiaries has
theretofore made an Investment in such subsidiary, in an amount equal to the
Investments being made), at the time that such subsidiary is designated an
Unrestricted Subsidiary, and any property transferred to an Unrestricted
Subsidiary from the Company or a Subsidiary of the Company shall be deemed an
Investment valued at its fair market value at the time of such transfer
determined in good faith by the Board of Directors of the Company.
"Issue Date" means the date of first issuance of the Notes under this
Indenture.
"Junior Security" means any Qualified Capital Stock and any Indebtedness
of the Company or a Guarantor, as applicable, that is subordinated in right of
payment to Senior Debt (and any Indebtedness issued in exchange for Senior Debt)
at least to the same extent as the Notes or the Guarantees, as applicable, and
has no scheduled installment of principal due, by redemption, sinking fund
payment or otherwise, on or prior to the Stated Maturity of the Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, or the city in which the Corporate Trust
Office of the Trustee is located, or at a place of payment, are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday, payment may be made at that place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
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"Merger Agreement" means that certain Agreement and Plan of Merger, dated
as of September 2, 1998, relating to the Empress Merger, as in effect on the
Issue Date, without regard to any amendment, supplement or waiver after the
Issue Date which alters the terms of the Empress Merger in any material respect.
"Merger Release Amount" means the amount by which the value of the assets
in the Secured Proceeds Account exceeds $159 million.
"Moody's" means Moody's Investors Services, Inc. and its successors.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by the Company, in the case of a sale of Qualified Capital Stock, and
by the Company and its Subsidiaries in respect of an Asset Sale plus, in the
case of an issuance of Qualified Capital Stock upon any exercise, exchange or
conversion of securities of the Company (including options, warrants, rights and
convertible or exchangeable debt) that were issued for cash on or after the
Issue Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and convertible
or exchangeable debt) less, in each case, the sum of all payments, fees,
commissions and expenses (including, without limitation, the fees and expenses
of legal counsel and investment banking fees and expenses) incurred in
connection with such Asset Sale or sale of Qualified Capital Stock, and, in the
case of an Asset Sale only, less (1) the amount (estimated reasonably and in
good faith by the Company) of income, franchise, sales and other applicable
taxes required to be paid by the Company or any of its respective Subsidiaries
in connection with such Asset Sale in the taxable year that such sale is
consummated or in the immediately succeeding taxable year, the computation of
which shall take into account the reduction in tax liability resulting from any
available operating losses and net operating loss carryovers, tax credits and
tax credit carryforwards, and similar tax attributes, (2) the amount of any
liabilities relating to the assets sold or transferred that are retained by the
Company or its Subsidiaries, and (3) an amount (estimated reasonably and in good
faith by the Company or required by the terms of such Asset Sale agreement) of a
reserve for indemnifications and warranties or representations made in
connection with such Asset Sale.
"New Credit Facility" means a credit agreement to be entered into by and
among the Company, certain of its Subsidiaries, certain financial institutions
as lenders and an agreed upon financial institution, as agent, providing for (1)
an aggregate $125 million term loan facility, and (2) an aggregate $250 million
revolving credit facility, including
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any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as such credit agreement and/or related
documents may be amended, restated, supplemented, renewed, replaced or otherwise
modified from time to time whether or not with the same agent, trustee,
representative lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "New Credit
Facility" shall include agreements in respect of Interest Swap and Hedging
Obligations with lenders party to the New Credit Facility and shall also include
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any New Credit Facility and all refundings,
refinancings and replacements of any New Credit Facility, including any
agreement (1) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder,
so long as borrowers and issuers include one or more of the Company and its
Subsidiaries and their respective successors and assigns, (3) increasing the
amount of Indebtedness incurred thereunder or available to be borrowed
thereunder; provided, that on the date such Indebtedness is incurred it would
not be prohibited by Section 4.7 hereof or (4) otherwise altering the terms and
conditions thereof in a manner not prohibited by the terms of this Indenture.
"Non-Recourse Indebtedness" means Indebtedness of a Person to the extent
that under the terms thereof (including any related instruments, documents or
filings) no personal recourse shall be had against such person for the payment
of the principal of or interest or premium on such Indebtedness or the
Indebtedness refinanced by such Indebtedness and as to which neither the Company
nor any Subsidiary provides any guarantee, collateral or other credit support of
any kind whatsoever.
"Notes Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Obligation" means any principal, premium or interest payment, or monetary
penalty, or damages, due by the Company or any Guarantor under the terms of the
Notes or the Guarantees or this Indenture, including any Liquidated Damages due
pursuant to the terms of the Registration Rights Agreement, in each case as such
documents may be amended from time to time.
"Offering Memorandum" means the final offering memorandum, dated May 6,
1999, relating to the offer and sale of the Series A Notes.
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"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary, any Assistant Secretary or any Vice President of such Person.
"Officers' Certificate" means an officers' certificate executed by two
Officers of the Company that meets the requirements of Section 12.4 and 12.5
hereof to be delivered upon the occurrence of certain events as set forth in
this Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Sections 12.4 and 12.5
hereof. The counsel may be an employee of or counsel to the Company or any
Subsidiary of the Company.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to The Depository Trust Company, shall include Euroclear and
Cedel).
"Permitted Indebtedness" means that:
(a) the Company and the Guarantors may incur Indebtedness
evidenced by the Notes and represented by this Indenture and the
Guarantees thereof up to the amounts being issued on the Issue Date;
(b) the Company and the Guarantors, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or Disqualified
Capital Stock, as applicable, described in clause (a) or this clause (b)
of this definition or incurred under the Debt Incurrence Ratio test or
clause (1) of paragraph (c) of Section 4.7 hereof, or which is outstanding
on the Issue Date (less the amount of any of Indebtedness of the Company
or its Subsidiary (other than under the Horseshoe Credit Agreement) in
existence on the Issue Date repaid on or after the Issue Date);
(c) the Company and its Subsidiaries may incur Indebtedness
solely in respect of bankers acceptances, letters of credit and
performance bonds (to the extent that such incurrence does not result in
the incurrence of any obligation to repay any obligation relating to
borrowed money of others), all in the ordinary course of business in
accordance with customary industry practices, in amounts and for the
purposes customary in the Company's industry or pursuant to self-insurance
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obligations; provided, that the aggregate amount outstanding of such
Indebtedness (including any Refinancing Indebtedness and any other
Indebtedness issued to retire, refinance, refund, defease or replace such
Indebtedness) shall at no time exceed $5 million;
(d) the Company may incur Indebtedness or issue Disqualified
Capital Stock to any Subsidiary, and any Subsidiary may incur Indebtedness
or issue Disqualified Capital Stock to any other Subsidiary or to the
Company; provided, however, that such obligations shall be evidenced by an
intercompany note and, in any case where the Company or a Guarantor is the
obligor, shall be subordinated in all respects to the Company's
Obligations pursuant to the Notes and the Horseshoe Credit Agreement or
the New Credit Facility, as the case may be, and the Guarantor's
Obligations pursuant to the Guarantee of Obligations of the Company under
the Notes and the Horseshoe Credit Agreement or the New Credit Facility,
as the case may be;
(e) the Company and any Subsidiary may post a bond or surety
obligation (or incur an indemnity or similar obligation) to or in favor of
any Governmental Authority in order to prevent the impairment or loss by
the Company or any Subsidiary of or to obtain for the Company or any
Subsidiary a Gaming License, to the extent required by applicable law and
consistent in character and amount with customary industry practice; and
(f) the Company and any Subsidiary may incur Interest Swap and
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by this Indenture to be outstanding, provided, that the notional
amount of any such Interest Swap and Hedging Obligation does not exceed
the principal amount of Indebtedness to which such Interest Swap and
Hedging Obligation relates.
"Permitted Liens" means (a) Liens existing on the Issue Date, (b) Liens
imposed by Governmental Authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, (c) statutory
liens of carriers, warehousemen, mechanics, material men, landlords, repairmen
or other like Liens arising by operation of law in the ordinary course of
business provided that (i) the underlying obligations are not overdue for a
period of more than 60 days, or (ii) such Liens are being contested in good
faith
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and by appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP, (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business,
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property, subject thereto (as such
property is used by the Company or any of its Subsidiaries) or interfere with
the ordinary conduct of the business of the Company or any of its Subsidiaries;
provided, however, that any such liens are not incurred in connection with any
borrowing of money or any commitment to loan any money or extend any credit, (f)
Liens arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in an Event of Default with
respect thereto, (g) pledges or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security legislation, (h) Liens securing this Indenture and the Notes,
(i) Liens securing Indebtedness of a Person existing at the time such Person
becomes a Subsidiary or is merged with or into the Company or a Subsidiary or
Liens securing Indebtedness incurred in connection with an Acquisition,
provided, that such Liens were in existence prior to the date of such
acquisition, merger or consolidation, were not incurred in anticipation thereof,
and do not extend to any other assets, (j) Liens arising from Purchase Money
Indebtedness permitted to be incurred pursuant to clause (a) of Section 4.7
hereof, provided such Liens relate solely to the property which is subject to
such Purchase Money Indebtedness, (k) leases or subleases granted to other
Persons in the ordinary course of business not materially interfering with the
conduct of the business of the Company or any of its Subsidiaries or materially
detracting from the value of the relative assets of the Company or any
Subsidiary, (l) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by the
Company or any of its Subsidiaries in the ordinary course of business, (m) Liens
securing Refinancing Indebtedness incurred to refinance any Indebtedness that
was previously so secured in a manner no more adverse to the Holders than the
terms of the Liens securing such refinanced Indebtedness, and provided that the
Indebtedness secured is not increased and the Lien is not extended to any
additional assets or property that would not have been security for the
Indebtedness refinanced, (n) Liens securing Indebtedness incurred under the
Horseshoe Credit Agreement or the New Credit Facility, as the case may be, in
accordance with Section 4.7 hereof, (o) any (x) interest or title of a lessor or
sublessor under any lease, including under any Capitalized Lease Obligation, (y)
restriction or encumbrance that the interest or title of
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such lessor or sublessor may be subject to, or (z) subordination of the interest
of the lessee or sublessee under such lease to any restriction or encumbrance
referred to in subclause (y), and (p) Liens in favor of the Company or any of
its Subsidiaries.
"Permitted Tax Distributions" in respect of the Company, and each of its
Subsidiaries that qualify as a Flow Through Entity shall mean, with respect to
any taxable year, the sum of: (I) the product of (A) the excess of (i) all items
of taxable income or gain (other than capital gain) allocated by the Company and
each such Subsidiary to their respective Equity Holders for that year over (ii)
all items of taxable deduction or loss (other than capital loss) allocated to
such Equity Holders by the Company and each such Subsidiary, respectively, for
such year and (B) the Applicable Income Tax Rate, plus (II) the product of (A)
the net capital gain (i.e., net long-term capital gain over net short-term
capital loss), if any, allocated by us and each such Subsidiary to their
respective Equity Holders for such year and (B) the Applicable Capital Gain Tax
Rate, plus (III) taking into account the capital gain and loss of the Company
and each such Subsidiary, respectively, the product of (A) the net short-term
capital gain (i.e., net short-term capital gain in excess of net long-term
capital loss), if any, allocated by the Company and each such Subsidiary to
their respective Equity Holders for such year and (B) the Applicable Income Tax
Rate, minus (IV) the aggregate Tax Loss Benefit Amounts for the Company and each
such Subsidiary, respectively, for such year. For purposes of calculating the
amount of Permitted Tax Distributions of the Company, the proportionate part of
the items of taxable income, gain, deduction or loss (including capital gain or
loss) of any Subsidiary which is a Flow Through Entity shall be included in
determining taxable income, gain, deduction or loss (including capital gain or
loss) of the Company.
Estimated tax distributions shall be made within fifteen days following
March 31, May 31, August 31, and December 31 based upon an estimate of the
excess of (x) the tax distributions that would be payable for the period
beginning on January 1 of such year and ending on March 31, May 31, August 31,
and December 31 if such period were a taxable year (computed as provided above)
over (y) distributions attributable to all prior periods during such taxable
year. Promptly after filing by the Company and each such Subsidiary of their
respective annual tax return, each Equity Holder shall reimburse the Company or
the applicable Subsidiary, as the case may be, to the extent such estimated tax
distributions made to such Equity Holder exceeded the actual Permitted Tax
Distributions, as determined on the basis of such tax returns filed in respect
of such taxable year for that Equity Holder and the Company or the applicable
Subsidiary, as the case may be, shall make a further payment to its respective
Equity Holders to the
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extent such estimated tax distributions were less than the tax distributions
actually payable to such Equity Holders with respect to such taxable year. If
the appropriate Federal or state taxing authority finally determines that the
amount of the items of the Company or any Subsidiary's taxable income, gain,
deduction or loss (including capital gain or loss) for any taxable year or the
aggregate Tax Loss Benefit Amounts carried forward to such taxable year should
be changed or adjusted, then each Equity Holder shall reimburse the Company or
the applicable Subsidiary, as the case may be, to the extent the Permitted Tax
Distributions previously made to such Equity Holder in respect of that taxable
year exceeded the Permitted Tax Distributions with respect to such taxable year
taking into account such change or adjustment for that Equity Holder, or as the
case may be, the Company shall make a further payment to its respective Equity
Holders to the extent the Permitted Tax Distributions previously paid to such
Equity Holder were less than the Permitted Tax Distributions payable to such
Equity Holders with respect to such taxable year taking into account such change
or adjustment.
To the extent that any tax distribution would otherwise be made to any
Equity Holder at a time when an obligation of such Equity Holder to make a
payment to us or the applicable Subsidiary pursuant to the two previous
sentences remains outstanding, the amount of any tax distribution to be made
shall be reduced by the amounts such Equity Holder is obligated to pay the
Company or the applicable Subsidiary.
"Person" or "person" means any corporation, individual, limited liability
company, joint stock company, joint venture, partnership, limited liability
partnership, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality or other
entity.
"Pledged Securities" means "Pledged Securities" as defined in the Security
Agreement to be purchased by the Securities Intermediary with $342,265,625 of
the net proceeds from the Notes, which the Securities Intermediary will deposit
in the Secured Proceeds Account as provided in the Security Agreement.
"Preferred Stock" means any Equity Interest of any class or classes of a
Person (however designated) which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
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"Private Placement Legend" means the legend set forth in Section 2.6(g)(i)
to be placed on all Notes issued under this Indenture except where specifically
stated otherwise by the provisions of this Indenture.
"Pro Forma" or "pro forma" shall have the meaning set forth in Regulation
S-X of the Securities Act of 1933, as amended, unless otherwise specifically
stated herein.
"Public Equity Offering" means an underwritten offering of common stock of
the Company for cash pursuant to an effective registration statement under the
Securities Act.
"Purchase Money Indebtedness" of any Person means any Indebtedness of such
Person to any seller or other Person incurred solely to finance the acquisition
(including in the case of a Capitalized Lease Obligation, the lease),
construction or improvement of any after acquired real or personal tangible
property which, in the reasonable good faith judgment of the Board of Directors
of the Company, is related to a Related Business of the Company and which is
incurred concurrently with (or within 270 days following) such acquisition and
is secured only by the assets so financed.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock of the Company that is
not Disqualified Capital Stock.
"Qualified Exchange" means any defeasance, redemption, repurchase, or
other acquisition of Capital Stock or Subordinated Indebtedness of the Company
with the Net Cash Proceeds received by the Company from the substantially
concurrent sale of Qualified Capital Stock of the Company or in exchange for
Qualified Capital Stock of the Company.
"Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or
Moody's or both shall not make a rating of the Notes publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by the Company, which shall be substituted for S&P or Moody's or both,
as the case may be.
"Rating Category" means currently (1) with respect to S&P, any of the
following categories: BB, B, CCC, CC, C and D (or equivalent successor
categories), (2) with respect to Moody's, any of the following categories: Ba,
B, Caa, Ca, C and D (or
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equivalent successor categories), and (3) the equivalent of any such category of
S&P or Moody's used by another Rating Agency.
In determining whether the rating of the Notes has decreased by one or
more gradations, gradations within Rating Categories (currently + and - for S&P,
1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency)
shall be taken into account (e.g., with respect to S&P, a decline in a rating
from BB+ to BB, as well as from BB - to B+, will constitute a decrease of one
gradation).
"Rating Decline" means the occurrence, on or within 90 days after the
earliest to occur of (1) a Change of Control, and (2) the date of the first
public notice of the occurrence of a Change of Control or of the intention by
any Person to effect a Change of Control (which period shall be extended so long
as the rating of the notes is under publicly announced consideration for
possible downgrade by any of the Rating Agencies), of a decrease in the rating
of the Notes by either Rating Agency by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"Record Date" means a Record Date specified in the Notes, whether or not
such date is a Business Day.
"Reference Period" with regard to any Person means the four full fiscal
quarters (or such lesser period during which such Person has been in existence)
ended for which financial information is available immediately preceding any
date upon which any determination is to be made pursuant to the terms of the
Notes or this Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing plus the amount of any premium paid in connection with such
Refinancing in accordance with the terms of the documents governing the
Indebtedness refinanced without giving effect to any modification thereof made
in connection with or in contemplation of such refinancing) the lesser of (i)
the principal
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amount or, in the case of Disqualified Capital Stock, liquidation preference, of
the Indebtedness or Disqualified Capital Stock so Refinanced and (ii) if such
Indebtedness being Refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided, that (A) such Refinancing Indebtedness shall only be
used to refinance outstanding Indebtedness or Disqualified Capital Stock of such
Person issuing such Refinancing Indebtedness, (B) such Refinancing Indebtedness
shall (x) not have an Average Life shorter than the Indebtedness or Disqualified
Capital Stock to be so refinanced at the time of such Refinancing and (y) in all
respects, be no less subordinated or junior, if applicable, to the rights of
Holders of the Notes than was the Indebtedness or Disqualified Capital Stock to
be refinanced, (C) such Refinancing Indebtedness shall have a final stated
maturity or redemption date, as applicable, no earlier than the final stated
maturity or redemption date, as applicable, of the Indebtedness or Disqualified
Capital Stock to be so refinanced, and (D) such Refinancing Indebtedness shall
be secured (if secured) in a manner no more adverse to the Holders of the Notes
than the terms of the Liens (if any) securing such refinanced Indebtedness,
including, without limitation, the amount of Indebtedness secured shall not be
increased.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, by and among the Company and the other parties named
on the signature pages thereof, as such agreement may be amended, modified or
supplemented from time to time.
"Reg S Permanent Global Note" means one or more permanent Global Notes
bearing the Private Placement Legend, that will be issued in an aggregate amount
of denominations equal in total to the outstanding principal amount of the Reg
S Temporary Global Note upon expiration of the Distribution Compliance Period.
"Reg S Temporary Global Note" means one or more temporary Global Notes
bearing the Private Placement Legend and the Reg S Temporary Global Note Legend,
issued in an aggregate amount of denominations equal in total to the outstanding
principal amount of the Notes initially sold in reliance on Rule 903 of
Regulation S.
"Reg S Temporary Global Note Legend" means the legend set forth in Section
2.6(g)(iii), which is required to be placed on all Reg S Temporary Global Notes
issued under this Indenture.
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"Regulation S" means Regulation S promulgated under the Securities Act, as
it may be amended from time to time, and any successor provision thereto.
"Regulation S Global Note" means a Reg S Temporary Global Note or a Reg S
Permanent Global Note, as the case may be.
"Related Business" means the gaming (including pari-mutuel betting)
business and any and all reasonably related businesses (including the ownership
and/or operation of entertainment facilities and hotels) necessary for, in
support or anticipation of and ancillary to or in preparation for, the gaming
business including, without limitation, the development, expansion or operation
of any Casino (including any land-based, dockside, river boat or other type of
Casino), owned, or to be owned, by the Company or one of its Subsidiaries.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Restricted Definitive Note" means one or more Definitive Notes bearing
the Private Placement Legend, issued under this Indenture.
"Restricted Global Note" means one or more Global Notes bearing the
Private Placement Legend, issued under this Indenture; provided, that in no case
shall an Exchange Note issued in accordance with this Indenture and the terms of
the Registration Rights Agreement be a Restricted Global Note.
"Restricted Investment" means, in one or a series of related transactions,
any Investment other than (i) in Cash Equivalents and in Investments of the type
set forth in clause (v) of the definition of Cash Equivalents that have a
maturity longer than one year so long as the Average Life of all such
Investments does not exceed 15 months, (ii) extensions of credit to customers of
Casinos consistent with industry practice in the ordinary course of business,
(iii) Investments in a Person engaged in a Related Business if as a result of
such Investment such Person immediately becomes a Subsidiary or such Person is
immediately merged with or into the Company or a Subsidiary and (iv) Investments
by the Company in any Subsidiary or by a Subsidiary in any other Subsidiary, or
any loan or advance by any Subsidiary to the Company to the extent permitted by
clause (d) of the definition of "Permitted Indebtedness."
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"Restricted Payment" means, with respect to any Person, (a) the
declaration or payment of any dividend or other distribution in respect of
Equity Interests of such Person or any parent or Subsidiary of such Person, (b)
any payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such Person or any Subsidiary or
parent of such Person, (c) other than with the proceeds from the substantially
concurrent sale of, or in exchange for, Refinancing Indebtedness any purchase,
redemption, or other acquisition or retirement for value of, any payment in
respect of any amendment of the terms of or any defeasance of, any Subordinated
Indebtedness, directly or indirectly, by such Person or a parent or Subsidiary
of such Person prior to the scheduled maturity, any scheduled repayment of
principal, or scheduled sinking fund payment, as the case may be, of such
Indebtedness, and (d) any Restricted Investment (including, in any case, the
designation of such Person as an Unrestricted Subsidiary) by such Person;
provided, however, that the term "Restricted Payment" does not include (i) (A)
any dividend, distribution or other payment on or with respect to Equity
Interests of an issuer or (B) the acquisition by the issuer or a Wholly Owned
Subsidiary of such issuer of Equity Interests of another Subsidiary or an
Unrestricted Subsidiary of such issuer, in the case of each of (A) and (B) of
this clause (i), to the extent payable solely in shares of Qualified Capital
Stock of such issuer, (ii) any dividend, distribution or other payment to the
Company, or to any of its Subsidiaries, by any of its Subsidiaries, (iii) loans
or advances to officers or employees of the Company or any of its Subsidiaries
(other than Mr. Binion, Phyllis Cope and members of the families of the
foregoing persons) (a) to pay business related expenses or relocation costs of
such officers or employees in connection with their employment by the Company or
any of its Subsidiaries in an aggregate amount outstanding at any time not
exceeding $5 million for all such officers and employees or (b) for the purchase
price of Equity Interests of the Company or any Subsidiary (provided that the
Equity Interests purchased with the proceeds of such loan or advance shall be
pledged to the Company or the Subsidiary, as applicable, as security for the
repayment of such loan or advance), (iv) any Investment received as
consideration for any Asset Sale to the extent that the Company or any of its
Subsidiaries is permitted to receive such Investment without violating the
provisions of Section 4.13 hereof, (v) Investments received as part of the
settlement of litigation or in satisfaction of extensions of credit to any
Person otherwise permitted under this Indenture pursuant to the reorganization,
bankruptcy or liquidation of such person, and (6) the liquidating distributions
and related transactions contemplated by the Internal Consolidation.
"RPG" means Robinson Property Group, Limited Partnership, a Mississippi
limited partnership.
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"Rule 144A" means Rule 144A promulgated under the Securities Act, as it
may be amended from time to time, and any successor provision thereto.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, and its successors.
"SEC" means the United States Securities and Exchange Commission, or any
successor agency.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securities Intermediary" means U.S. Trust Company, National Association,
as securities intermediary under the Security Agreement.
"Security Agreement" means the Security and Control Agreement, dated as of
the Issue Date, among the Company, the Trustee and the Securities Intermediary.
"Senior Debt" of the Company or any Guarantor means Indebtedness of the
Company or such Guarantor arising under the Horseshoe Credit Agreement or the
New Credit Facility, as the case may be, or any other Indebtedness permitted to
be incurred under this Indenture unless the instrument under which such
Indebtedness is incurred expressly provides that it is subordinated in right of
payment to any Senior Debt of the Company or such Guarantor, provided, that in
no event shall Senior Debt include (a) Indebtedness of the Company to any of its
Affiliates, (b) Indebtedness incurred in violation of the terms of this
Indenture, (c) Indebtedness to trade creditors, and (d) any liability for taxes
owed or owing by us or such Guarantor.
"Shelf Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Significant Subsidiary" shall have the meaning provided under Regulation
S-X of the Securities Act as in effect on the Issue Date.
"Special Record Date" means, for payment of any Defaulted Interest, a date
fixed by the Paying Agent pursuant to Section 2.12.
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"Stated Maturity" or "stated maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable
(which shall mean May 15, 2009 with respect to the Notes) and (ii) with respect
to any scheduled installment of principal of or interest on any debt security,
the date specified in such debt security as the fixed date on which such
installment is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor that is subordinated in right of payment by its terms or the terms of
any document or instrument relating thereto to the Notes or such Guarantee, as
applicable.
"Subsidiary," with respect to any Person, means (a) a corporation a
majority of whose Voting Equity Interests is at the time, directly or
indirectly, owned by such Person, by such Person and one or more Subsidiaries of
such Person or by one or more Subsidiaries of such Person, (b) any other Person
(other than a corporation) in which such Person, one or more Subsidiaries of
such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has at least
majority ownership interest, or (c) a partnership in which such Person or a
Subsidiary of such Person is, at the time, a general partner and in which such
Person, directly or indirectly, at the date of determination thereof has at
least a majority ownership interest. Notwithstanding the foregoing, an
Unrestricted Subsidiary shall not be a Subsidiary of the Company or a Subsidiary
of a Subsidiary of the Company. Unless the context requires otherwise,
Subsidiary means each direct and indirect Subsidiary of the Company.
"Tax Loss Benefit Amount" as to any taxable year of the Company or any of
its Subsidiaries shall mean the amount by which the Permitted Tax Distributions
would be reduced were a net operating loss or net capital loss from a prior
taxable year of such entity ending subsequent to the Issue Date carried forward
to the applicable taxable year; provided, that for such purpose the amount of
any such net operating loss or net capital loss shall be utilized only once and
in each case shall be carried forward to the next succeeding taxable year until
so utilized.
"Transfer Restricted Notes" means Global Notes and Definitive Notes that
bear or are required to bear the Private Placement Legend, issued under this
Indenture.
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"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means such successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend, issued under
this Indenture.
"Unrestricted Global Note" means one or more permanent Global Notes
representing a series of Notes that does not bear and is not required to bear
the Private Placement Legend, issued under this Indenture.
"Unrestricted Subsidiary" means any Person that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company) provided that such Subsidiary shall not engage, to
any substantial extent, in any line or lines of business activity other than a
Related Business. The Board of Directors of the Company may designate any Person
(including any newly acquired or newly formed Subsidiary at or prior to the time
it is so formed or acquired, but excluding RPG, HE, Empress Indiana and Empress
Illinois) to be an Unrestricted Subsidiary if (a) such Restricted Payment is not
prohibited by Section 4.9 hereof, (b) such Person does not, at the time of
designation, own any Equity Interests of, or own or hold any Lien on any
property of, or hold any debt of, the Company or a Subsidiary, and (c) such
Person does not, at the time of designation, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness (other than Non-Recourse Indebtedness). Any such designation
constitutes a Restricted Payment for purposes of Section 4.9 hereof. The Board
of Directors of the Company may designate any Unrestricted Subsidiary to be a
Subsidiary, provided, that (i) no Default or Event of Default is existing or
will occur as a consequence thereof and (ii) immediately after giving effect to
such designation, on a pro forma basis, the Company could incur at least $1.00
of Indebtedness pursuant to the Debt Incurrence Ratio under Section 4.7 hereof.
Each such designation shall be evidenced by filing with the Trustee a certified
copy of the resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"U.S. Government Obligations" means direct non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
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"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Equity Interests" means Equity Interests which at the time are
entitled to vote in the election of directors, members or partners generally.
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by the Company and/or one or more Wholly Owned Subsidiaries of
the Company.
SECTION 1.2 OTHER DEFINITIONS
Term Defined in Section
---- ------------------
"Acceptable Terms" 4.20
"Affiliate Transaction" 4.12
"Asset Sale" 4.13
"Asset Sale Offer" 4.13
"Asset Sale Offer Amount" 4.13
"Asset Sale Offer Period" 4.13
"Asset Sale Offer Price" 4.13
"Authentication Order" 2.2
"Bankruptcy Law" 6.1
"Benefitted Party" 10.1
"Change of Control Mandatory Redemption" 3.8
"Change of Control Mandatory
Redemption Date" 3.8
"Change of Control Mandatory
Redemption Price" 3.8
"Change of Control Offer" 4.14
"Change of Control Offer Period" 4.14
"Change of Control Purchase Date" 4.14
"Change of Control Purchase Price" 4.14
"Covenant Defeasance" 8.3
"Custodian" 6.1
"Debt Incurrence Ratio" 4.7
"Defaulted Interest" 2.12
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"DTC" 2.3
"Earliest Redemption Date" 4.21
"Empress Change of Control Disbursement
Request" 4.20
"Empress Merger Disbursement Request" 4.20
"Excess Proceeds" 4.13
"Guarantee Obligations" 10.1
"incur" or "incurrence" 4.7
"Incurrence Date" 4.7
"Investment Company Act" 4.17
"Legal Defeasance" 8.2
"Mandatory Redemption" 3.8
"Mandatory Redemption Date" 3.8
"Mandatory Redemption Price" 3.8
"Paying Agent" 2.3
"Payment Blockage Period" 11.2
"Payment Default" 11.2
"Payment Notice" 11.2
"Registrar" 2.3
"Secured Proceeds Account" 3.8
"Senior Notes" 4.21
"Tender Offer" 4.21
"Triggering Event" 3.8
"Triggering Event Mandatory Redemption" 3.8
"Triggering Event Mandatory Redemption
Date" 3.8
"Triggering Event Mandatory Redemption
Price" 3.8
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
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"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, each Guarantor and any
successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.4 RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision; and
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(7) references to sections of or rules under the Securities Act and
the Exchange Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE II
THE NOTES
SECTION 2.1 FORM AND DATING
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Company, any
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibit A attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Notes
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.6 hereof.
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(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank in effect at the relevant time shall be
applicable to transfers of beneficial interests in the Regulation S Global Notes
that are held by Participants through Euroclear or Cedel Bank.
SECTION 2.2 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid. A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture. The Trustee shall, upon a written order of
the Company signed by an Officer (an "Authentication Order"), authenticate Notes
for issuance up to the aggregate principal amount stated in such Authentication
Order; provided that Notes authenticated for issuance on the Issue Date shall
not exceed $600,000,000 in aggregate principal amount. The aggregate principal
amount of Notes outstanding at any time may not exceed $600,000,000, except in
accordance with Section 2.8. The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Notes. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Company.
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SECTION 2.3 REGISTRAR, PAYING AGENT AND DEPOSITARY
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Notes may be presented for registration
of transfer or for exchange ("Registrar") and an office or agency where Notes
may be presented for payment ("Paying Agent"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents. The
term "Registrar" includes any co-registrar and the term "Paying Agent" includes
any additional paying agent. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company shall notify the Trustee in
writing of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may
act as Paying Agent or Registrar. The Company initially appoints The Depository
Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The
Company initially appoints the Trustee to act as the Registrar and Paying Agent
and to act as Notes Custodian with respect to the Global Notes.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee in writing of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent and in such event any such Paying Agent shall have the obligation to pay
all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for such money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to the Company, the Trustee shall serve
as Paying Agent for the Notes.
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SECTION 2.5 HOLDER LISTS
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish, or shall cause the Registrar (if
other than the Company) to furnish, to the Trustee at least seven Business Days
before each Interest Payment Date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Notes and the
Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.6 TRANSFER AND EXCHANGE
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that (x) the Depositary is unwilling or unable to
continue to act as Depositary for the Global Notes and the Company thereupon
fails to appoint a successor Depositary within 90 days or (y) the Depositary is
no longer a clearing agency registered under the Exchange Act, (ii) the Company
in its sole discretion determines that the Global Notes (in whole but not in
part) should be exchanged for Definitive Notes and delivers a written notice to
such effect to the Trustee or (iii) upon request of the Trustee or Holders of a
majority of the aggregate principal amount of outstanding Notes if there shall
have occurred and be continuing a Default or Event of Default with respect to
the Notes; provided that in no event shall the Reg S Temporary Global Note be
exchanged by the Company for Definitive Notes prior to (x) the expiration of the
Distribution Compliance Period and (y) the receipt by the Registrar of any
certificate identified by the Company and its counsel to be required pursuant to
Rule 903 or Rule 904 under the Securities Act. Upon the occurrence of any of the
preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued
in such names as the Depositary shall instruct the Trustee. Global Notes also
may be exchanged or replaced, in whole or in part, as provided in Sections 2.7
and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in
lieu of, a Global Note or any portion thereof, pursuant to this Section 2.6 or
Section 2.7 or 2.10 hereof, shall be authenticated and delivered in the form of,
and shall be, a Global Note. A Global Note may not be exchanged for another Note
other than as provided in
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this Section 2.6(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.6(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set forth in
the Private Placement Legend; provided, however, that prior to the expiration of
the Distribution Compliance Period, transfers of beneficial interests in the Reg
S Temporary Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests
in any Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note. No
written orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section 2.6(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.6(b)(i) above, the transferor of
such beneficial interest must deliver to the Registrar either (A) (1) an order
from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to credit or
cause to be credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such increase
or (B) (1) an order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the Depositary
to cause to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be
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registered to effect the transfer or exchange referred to in (B)(1) above;
provided, that in no event shall Definitive Notes be issued upon the transfer or
exchange of beneficial interests in the Reg S Temporary Global Note prior to (x)
the expiration of the Distribution Compliance Period and (y) the receipt by the
Registrar of any certificates identified by the Company or its counsel to be
required pursuant to Rule 903 and Rule 904 under the Securities Act. Upon
consummation of an Exchange Offer by the Company in accordance with Section
2.6(f) hereof, the requirements of this Section 2.6(b)(ii) shall be deemed to
have been satisfied upon receipt by the Registrar of the instructions contained
in the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under the
Securities Act, the Trustee shall adjust the principal amount of the relevant
Global Note(s) pursuant to Section 2.6(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a beneficial
interest in another Restricted Global Note if the transfer complies with the
requirements of Section 2.6(b)(ii) above and the Registrar receives the
following:
(A) if the transferee will take delivery in the form of
a beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of
a beneficial interest in the Reg S Temporary Global Note or the Reg S
Permanent Global Note, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in item (2)
thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted Global Note.
A beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange or transfer complies
with the requirements of Section 2.6(b)(ii) above and:
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<PAGE> 51
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and Section 2.6(f) hereof, and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a Broker-Dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following: (1) if the
holder of such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global Note
proposes to transfer such beneficial interest to a Person who shall take
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof; and, in each
such case set forth in this subparagraph (D), an Opinion of Counsel in
form, and from legal counsel, reasonably acceptable to the Registrar and
the Company to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above. Beneficial interests in
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<PAGE> 52
an Unrestricted Global Note cannot be exchanged for, or transferred to Persons
who take delivery thereof in the form of, a beneficial interest in a Restricted
Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to
an Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in
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Exhibit B hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Note to be reduced accordingly pursuant to Section 2.6(h)
hereof, and the Company shall execute and, upon receipt of an Authentication
Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to the
Person designated in the instructions a Restricted Definitive Note in the
appropriate principal amount. Any Restricted Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this Section
2.6(c) shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such Restricted
Definitive Notes to the Persons in whose names such Notes are so registered. Any
Restricted Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.6(c)(i) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer contained
therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted
Global Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and Section 2.6(f) hereof, and the holder of such beneficial interest, in
the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
Broker-Dealer, (2) a Person participating
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<PAGE> 54
in the distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following: (1) if the
holder of such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (1)(b) thereof;
or (2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), an Opinion of
Counsel in form, and from legal counsel, reasonably acceptable to the
Registrar and the Company to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for an
Unrestricted Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note, then,
upon satisfaction of the conditions set forth in Section 2.6(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable
Unrestricted Global Note to be reduced accordingly pursuant to Section 2.6(h)
hereof, and the Company shall execute and, upon receipt of an Authentication
Order pursuant to Section 2.2, the Trustee shall authenticate and deliver to the
Person designated in the instructions an Unrestricted Definitive Note in the
appropriate principal amount. Any Unrestricted Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.6(c)(iii) shall be
registered in such name
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or names and in such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Unrestricted Definitive Notes to the Persons in whose names such
Notes are so registered. Any Unrestricted Definitive Note issued in exchange for
a beneficial interest pursuant to this Section 2.6(c)(iii) shall not bear the
Private Placement Legend.
(iv) Transfer or Exchange of Reg S Temporary Global Notes.
Notwithstanding the other provisions of this Section 2.6, a beneficial interest
in the Reg S Temporary Global Note may not be (A) exchanged for a Definitive
Note prior to (x) the expiration of the Distribution Compliance Period (unless
such exchange is effected by the Company, does not require an investment
decision on the part of the holder thereof and does not violate the provisions
of Regulation S) and (y) the receipt by the Registrar of any certificates
identified by the Company or its counsel to be required pursuant to Rule
903(b)(3)(B) under the Securities Act or (B) transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to the events set forth
in clause (A) above or unless the transfer is pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 903 or Rule 904.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof; or
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<PAGE> 56
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(2) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above,
the appropriate Restricted Global Note, in the case of clause (B) above, the
144A Global Note, and in the case of clause (C) above, the Regulation S Global
Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange
such Note for a beneficial interest in an Unrestricted Global Note or transfer
such Restricted Definitive Note to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and Section 2.6(f) hereof, and the Holder, in the case of an exchange, or
the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following: (1) if the
Holder of such Restricted Definitive Notes proposes to exchange such Notes
for a beneficial interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or (2) if the Holder of such
Restricted Definitive Notes proposes to transfer such Notes to a Person
who shall take delivery thereof in the form of a
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beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof; and, in each such case set forth in this subparagraph
(D), an Opinion of Counsel, and from legal counsel, in form reasonably
acceptable to the Registrar and the Company to the effect that such
exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act. Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.6(d)(ii), the Trustee shall cancel the
Restricted Definitive Notes so transferred or exchanged and increase or
cause to be increased the aggregate principal amount of the Unrestricted
Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time. Upon
receipt of a request for such an exchange or transfer, the Trustee shall cancel
the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes. If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) of this
Section 2.6(d) at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.6(e), the Registrar shall register the transfer
or exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.6(e).
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(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and registered in
the name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act, then
the transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights Agreement
and Section 2.6(f) hereof, and the Holder, in the case of an exchange, or
the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
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(D) the Registrar receives the following: (1) if the
Holder of such Restricted Definitive Notes proposes to exchange such Notes
for an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item (1)(d)
thereof; or (2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in the
form of an Unrestricted Definitive Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in item (4)
thereof; and, in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form, and from legal counsel, reasonably acceptable
to the Registrar and the Company to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.2, and an
Opinion of Counsel for the Company as to certain matters discussed in this
Section 2.6(f) the Trustee shall authenticate (i) one or more Unrestricted
Global Notes in an aggregate principal amount equal to the sum of (A) the
principal amount of the beneficial interests in the Restricted Global Notes
tendered for acceptance by Persons that certify in the applicable Letters of
Transmittal that (x) they are not Broker-Dealers, (y) they are not participating
in a distribution of the Exchange Notes and (z) they are not affiliates (as
defined in Rule 144) of the Company, and accepted for exchange in the Exchange
Offer and (B) the principal amount of Definitive Notes exchanged or transferred
for beneficial interests in Unrestricted Global Notes in connection with the
Exchange Offer pursuant to Section 2.6(d)(ii) and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer (other than
Definitive Notes described in clause (i)(B) immediately above). Concurrently
with the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced
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<PAGE> 60
accordingly, and the Company shall execute and, upon receipt of an
Authentication Order pursuant to Section 2.2, the Trustee shall authenticate and
deliver to the Persons designated by the Holders of Definitive Notes so accepted
Definitive Notes in the appropriate principal amount.
The Opinion of Counsel for the Company referenced above shall state
that:
(1) the issuance and sale of the Exchange Notes by the Company have
been duly authorized and, when executed and authenticated in accordance
with the provisions of this Indenture and delivered in exchange for Series
A Notes in accordance with this Indenture and the Exchange Offer, will be
entitled to the benefits of this Indenture and will be valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms except as the enforceability thereof may be limited by
(x) bankruptcy, fraudulent transfer, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and (y)
equitable principles of general applicability (regardless of whether
enforceability is considered at equity or in law); and
(2) if applicable, when the Exchange Notes are executed and
authenticated in accordance with the provisions of this Indenture and
delivered in exchange for Series A Notes in accordance with this Indenture
and the Exchange Offer, the Guarantees by the Guarantors endorsed thereon
will be entitled to the benefits of this Indenture and will be valid and
binding obligations of the Guarantors, enforceable against the Guarantors
in accordance with their terms except as the enforceability thereof may be
limited by (x) bankruptcy, fraudulent transfer, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and (y) equitable principles of general applicability
(regardless of whether enforceability is considered at equity or in law).
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
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(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in substantially
the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT, IN CONNECTION WITH EXEMPT RESALES OF THE NOTES BY
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, CIBC INC., UTENDAHL
CAPITAL PARTNERS, L.P. AND WASSERSTEIN PERELLA SECURITIES, INC. (THE
"INITIAL PURCHASERS"), (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT, IN CONNECTION WITH RESALES AND TRANSFERS OF THE NOTES
OTHER THAN EXEMPT RESALES OF THE NOTES BY THE INITIAL PURCHASERS, IT WILL
NOT RESELL OR OTHER WISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR
ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF
REGULATION S UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANS-
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FER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANS FER OF THIS NOTE (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000,
AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER), OR (G)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION
S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING
THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.6
(and all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Note Legend. To the extent required by the
Depositary, each Global Note shall bear legends in substantially the following
forms:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH
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NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE
INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN."
(iii) Reg S Temporary Global Note Legend. To the extent
required by the Depositary, each Reg S Temporary Global Note shall bear a legend
in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR
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THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH
HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT
INTEREST FROM ACCRUING ON THIS NOTE."
(h) Cancellation and/or Adjustment of Global Notes. At such time
as all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon receipt of an Authentication Order.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections 2.10,
3.6, 4.13 and 4.14 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
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(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes shall
be the valid obligations of the Company, evidencing the same Indebtedness, and
entitled to the same benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period beginning at
the opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.2 hereof and ending at the close of business on the
day of selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part or (C) to register the transfer of or to
exchange a Note between a Record Date and the next succeeding Interest Payment
Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on such
Notes and for all other purposes, and none of the Trustee, any Agent or the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.2 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this Section 2.6
to effect a registration of transfer or exchange may be submitted by facsimile.
Notwithstanding anything herein to the contrary, as to any
certifications and certificates delivered to the Registrar pursuant to this
Section 2.6, the Registrar's duties shall be limited to confirming that any such
certifications and certificates delivered to it are in the form of Exhibits A,
B, C and D attached hereto. The Registrar shall not be responsible for
confirming the truth or accuracy of representations made in any such
certifications or certificates.
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SECTION 2.7 REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in both the judgment of
the Trustee and the Company to protect the Company, the Trustee, any Agent and
any authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note. Every
replacement Note is an additional obligation of the Company and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.8 OUTSTANDING NOTES
The Notes outstanding at any time are all the Notes authenticated by
the Trustee (including any Note represented by a Global Note) except for those
cancelled by it, those delivered to it for cancellation, those reductions in the
interest in a Global Note effected by the Trustee in accordance with the
provisions hereof, and those described in this Section as not outstanding.
Except as set forth in Section 2.9 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.7 hereof, such Note, together with
the Guarantee of that particular Note endorsed thereon, ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a bona fide purchaser. If the principal amount of any Note is considered
paid under Section 4.1 hereof, it ceases to be outstanding and interest on it
ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or the maturity date,
money sufficient to pay Notes payable on that date, then on and after that date
such Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.9 TREASURY NOTES
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not
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outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of Definitive Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate Definitive Notes in exchange for temporary Notes. Holders of
temporary Notes shall be entitled to all of the benefits of this Indenture.
SECTION 2.11 CANCELLATION
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee, and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. Subject to Section 2.7 hereof, the Company may not issue new
Notes to replace Notes that it has paid or that have been delivered to the
Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest at the rate and in the
manner provided in Section 4.1 hereof and in the Note (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
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(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee and the Paying Agent in writing of the amount of
Defaulted Interest proposed to be paid on each Note and the date of the
proposed payment, and at the same time the Company shall deposit with the
Paying Agent an amount of cash equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make arrangements
reasonably satisfactory to the Paying Agent for such deposit prior to the
date of the proposed payment, such cash when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as
provided in this clause (1). Thereupon the Paying Agent shall fix a
"Special Record Date" for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the date
of the proposed payment and not less than 10 days after the receipt by the
Paying Agent of the notice of the proposed payment. The Paying Agent shall
promptly notify the Company and the Trustee of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first-class postage prepaid, to each Holder at
its address as it appears in the Note register maintained by the Registrar
not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the persons in whose names the Notes (or their respective
predecessor Notes) are registered on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee and the Paying Agent of the proposed payment pursuant to
this clause, such manner shall be deemed practicable by the Trustee and
the Paying Agent.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
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SECTION 2.13 CUSIP NUMBERS
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE III
REDEMPTION
SECTION 3.1 NOTICES TO TRUSTEE
If the Company elects to redeem Notes pursuant to the redemption
provisions of Sections 3.7 and 3.9 hereof, it shall furnish to the Trustee, at
least 45 days (unless a shorter period is acceptable to the Trustee or if a
shorter period is requested or prescribed by order of any Gaming Authority as
set forth in Section 3.9 hereof) but not more than 60 days (unless a longer
period is acceptable to the Trustee) before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes
(other than as provided in Section 3.9 hereof) in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. Any such determination shall be conclusive. In the event of partial
redemption by lot, the particular Notes to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
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The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes in denominations of larger than $1,000 selected shall be in amounts of
$1,000 or integral multiples of $1,000; except that if all of the Notes of a
Holder are to be redeemed, the entire outstanding amount of Notes held by such
Holder, even if not an integral multiple of $1,000, shall be redeemed. Except as
provided in the preceding sentence, provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.3 NOTICE OF REDEMPTION
Subject to the provisions of Sections 3.7 and 3.9 hereof, at least
30 days but not more than 60 days before a redemption date, the Company shall
mail or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed (unless a shorter notice provision is
requested or prescribed by order of any Gaming Authority) at its registered
address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
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(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's written request, the Trustee shall give the notice
of redemption in the Company's name and at its expense.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE
On or prior to the redemption date, the Company shall deposit with
the Trustee or with the Paying Agent immediately available funds sufficient to
pay the redemption price of and accrued and unpaid interest (and Liquidated
Damages, if any) on all Notes to be redeemed on that date. The Trustee or the
Paying Agent shall promptly return to the Company any money deposited with the
Trustee or the Paying Agent by the Company in excess of the amounts necessary to
pay the redemption price of, and accrued and unpaid interest (and Liquidated
Damages, if any) on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest Record Date but on or prior to the related Interest
Payment Date, then any accrued and unpaid interest (and Liquidated Damages, if
any) shall be paid to the Person in whose name such Note was registered at the
close of business on such Record Date. If any Note called for redemption shall
not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest shall be paid on the
unpaid principal, from the redemption date until such principal is paid, and to
the extent lawful on any interest not paid on such unpaid principal, in each
case at the rate provided in the Notes and in Section 4.1 hereof.
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SECTION 3.6 NOTES REDEEMED IN PART
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon receipt of an Authentication Order, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.7 OPTIONAL REDEMPTION
(a) Except as set forth in clause (b) of this Section 3.7, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.7 prior to May 15, 2004. The Notes will be redeemable for cash at the option
of the Company, in whole or in part, at any time on or after May 15, 2004, upon
not less than 30 days nor more than 60 days prior notice mailed by first class
mail to each Holder at its last registered address, at the following redemption
prices (expressed as percentages of the principal amount) if redeemed during the
12-month period commencing May 15 of the years indicated below, in each case
(subject to the right of Holders of record on a Record Date to receive the
corresponding interest due (and the corresponding Liquidated Damages, if any) on
the corresponding Interest Payment Date that is on or prior to such redemption
date) together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004................................................104.313%
2005................................................102.875%
2006................................................101.438%
2007 and thereafter..................................100.00%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.7, at any time or from time to time until May 15, 2002, up to 35% of the
aggregate principal amount of the Notes originally issued under this Indenture
may be redeemed at the option of the Company within 90 days of a Public Equity
Offering, on not less than 30 days, but not more than 60 days, prior notice to
each Holder of the Notes to be redeemed, with cash from the Net Cash Proceeds of
such Public Equity Offering, at a redemption price equal to 108.625% of the
principal amount thereof (subject to the right of Holders of record on a Record
Date to receive the corresponding interest (and the
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corresponding Liquidated Damages, if any) due on the Interest Payment Date\ that
is on or prior to such redemption date) together with accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date;
provided that immediately following such redemption not less than 65% of the
aggregate principal amount of the Notes originally issued pursuant to this
Indenture remain outstanding. In the event the Company is required to
consummate, and does so consummate, a Mandatory Redemption in accordance with
the terms hereof, the aggregate principal amount of Notes originally issued
pursuant to this Indenture shall be deemed to be reduced by the aggregate
principal amount of Notes subject to the Mandatory Redemption.
(c) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Sections 3.1 through 3.6 hereof.
SECTION 3.8 MANDATORY REDEMPTION
Upon issuance of the Series A Notes, the Company shall deliver
$342.3 million of the net proceeds from the sale of the Series A Notes to the
Securities Intermediary. The Securities Intermediary shall invest such net
proceeds in Pledged Securities and will deposit the Pledged Securities into a
securities account (the "Secured Proceeds Account") maintained by the Securities
Intermediary in accordance with the Security Agreement. In accordance with the
procedures set forth in the Security Agreement, the Securities Intermediary
shall liquidate the assets in the Secured Proceeds Account and deliver the
proceeds thereof (after deducting the customary expenses of the Trustee and
Securities Intermediary), as applicable, to (1) the Company to be used as set
forth in Section 4.20 hereof and/or (2) the Trustee to redeem Notes as set forth
in clauses (a) through (c) below.
(a) If (i) the Empress Merger has not occurred by December 1, 1999,
or (ii) the Company has determined that the Empress Merger will not occur by
that date on substantially the terms set forth in the Merger Agreement and the
Offering Memorandum (each, a "Triggering Event"), the Company shall, in
accordance with the procedures set forth in clause (c) below and in the Security
Agreement, redeem (a "Triggering Event Mandatory Redemption") $325 million
aggregate principal amount of Notes, for a price equal to 101% of their
principal amount, plus accrued and unpaid interest thereon through the
redemption date (the "Triggering Event Mandatory Redemption Price"), together
with Liquidated Damages, if any. The Triggering Event Mandatory Redemption must
occur on a date (the "Triggering Event Mandatory
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Redemption Date"), which is no later than the earlier of (i) December 8, 1999,
and (ii) 10 Business Days after the Triggering Event.
(b) If (i) after consummation of the Empress Change of Control
Offer, more than $75 million aggregate principal amount of Empress Notes remain
outstanding, or (ii) the Company fails to consummate the Empress Change of
Control Offer on or before the 35th Business Day after consummation of the
Empress Merger, the Company shall, in accordance with the procedures set forth
in clause (c) below and in the Security Agreement, redeem (a "Change of Control
Mandatory Redemption") Notes having an aggregate principal amount equal to the
principal amount of Empress Notes that remain outstanding on the Change of
Control Mandatory Redemption Date (as defined below), for a price equal to 101%
of their principal amount, plus accrued and unpaid interest thereon through the
Change of Control Mandatory Redemption Date (the "Change of Control Mandatory
Redemption Price") together with Liquidated Damages, if any. The "Change of
Control Mandatory Redemption Date" shall be the date which is the earlier of (1)
five Business Days after consummation of the Empress Change of Control Offer and
(2) 40 Business Days after the Empress Merger.
(c) In the event of either a Triggering Event Mandatory Redemption
or an Empress Change of Control Mandatory Redemption (each, a "Mandatory
Redemption"), the Trustee will direct the Securities Intermediary to liquidate
assets in the Secured Proceeds Account in an amount to generate sufficient net
proceeds (after deducting the customary expenses of the Trustee and Securities
Intermediary) to pay, as applicable, the Triggering Event Mandatory Redemption
Price or the Change of Control Mandatory Redemption Price (each, a "Mandatory
Redemption Price") and to deliver the net proceeds to the Trustee. In either
event, notice of a Mandatory Redemption will be mailed to each Holder of Notes
to be redeemed, at its registered address, at least five Business Days before,
as applicable, the Change of Control Mandatory Redemption Date or the Triggering
Event Mandatory Redemption Date (each, a "Mandatory Redemption Date"). On the
Mandatory Redemption Date, upon payment to the Holders of the Mandatory
Redemption Price, a portion of each Holder's Notes (equal to that Holder's pro
rata share of the Notes to be redeemed) shall, automatically and without any
further action by that Holder, be deemed to be no longer outstanding for any
purpose under this Indenture.
(d) Except as set forth above and in Section 3.9 below, the Company
shall not be required to make mandatory redemption payments with respect to the
Notes (however, the Company is required to offer to repurchase Notes in
accordance with the
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provisions of Sections 4.13 and 4.14 below) and the Notes shall not have the
benefit of any sinking fund.
SECTION 3.9 MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
Each Holder, by accepting a Note, shall be deemed to have agreed
that if the Gaming Authority of any jurisdiction in which the Company or any of
its subsidiaries conducts or proposes to conduct gaming requires that a Person
who is a Holder or the beneficial owner of Notes be licensed, qualified or found
suitable under applicable Gaming Laws, such Holder or beneficial owner, as the
case may be, shall apply for a license, qualification or a finding of
suitability within the required time period. If such Person fails to apply or
become licensed or qualified or is found unsuitable, the Company shall have the
right, at its option (a) to require such Person to dispose of its Notes or
beneficial interest therein within 30 days of receipt of notice of the Company's
election or such earlier date as may be requested or prescribed by such Gaming
Authority, or (b) to redeem such Notes at a redemption price equal to the lesser
of (i) such Person's cost or (ii) 100% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the earlier of the redemption
date or the date of the finding of unsuitability, which may be less than 30 days
following the notice of redemption if so requested or prescribed by the
applicable Gaming Authority.
The Company shall notify the Trustee in writing of any such
redemption as soon as practicable, which may be less than 30 days following the
notice of redemption if so requested or prescribed by the applicable Gaming
Authority. The Company shall not be responsible for any costs or expenses any
Holder or beneficial owner may incur in connection with its application for a
license, qualification or a finding or suitability.
ARTICLE IV
COVENANTS
SECTION 4.1 PAYMENT OF NOTES
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 12:00 noon Eastern time on the due date money deposited by the
Company in immediately available
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funds and designated for and sufficient to pay all principal, premium, if any,
and interest then due. The Company shall pay all Liquidated Damages, if any, in
the same manner on the dates and in the amounts set forth in the Registration
Rights Agreement and herein.
The Company shall pay interest (including Accrued Bankruptcy
Interest in any proceeding under any Bankruptcy Law) on overdue principal at the
then applicable interest rate on the Notes to the extent lawful; it shall pay
interest (including Accrued Bankruptcy Interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any, (without regard to any applicable grace period) at the same rate to the
extent lawful.
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY
The Company and any Guarantors shall maintain in the Borough of
Manhattan, The City of New York, an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be surrendered for registration of transfer or for exchange and where
notices and demands to or upon the Company and the Guarantors in respect of the
Notes and this Indenture may be served. The Company and the Guarantors shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company and the
Guarantors shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office.
The Company and the Guarantors may also from time to time designate
one or more other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
additional designations; provided that no such designation or recission shall in
any manner relieve the Company and the Guarantors of their obligation to
maintain an office or agency in the Borough of Manhattan, The City of New York.
The Company and the Guarantors shall give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency.
The Company hereby designates the Corporate Trust Office as one such
office or agency of the Company in accordance with Section 2.3 hereof.
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SECTION 4.3 SEC REPORTS AND REPORTS TO HOLDERS
(a) Whether or not the Company or any direct or indirect parent of
the Company is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company shall deliver to the Trustee and to each Holder
and to prospective purchasers of Notes identified to the Company by an Initial
Purchaser, within 15 days after it is or would have been (if it were subject to
such reporting obligations) required to file such documents with the Commission,
annual and quarterly financial statements substantially equivalent to financial
statements that would have been included in reports filed with the Commission if
the Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the Commission, and, in each case, together with
a management's discussion and analysis of financial condition and results of
operations which would be so required and, unless the Commission will not accept
such reports, file with the Commission the annual, quarterly and other reports
which it is or would have been required to file with the Commission. In lieu of
filing and providing reports as set forth above, the Company may, so long as any
direct or indirect parent of the Company owns 100% of the Capital Stock of the
Company and if permitted by the Commission, include in the reports filed and
provided by such direct or indirect parent of the Company such financial
information and narrative disclosure regarding the Company and any Guarantors as
required by the Commission in lieu of filing such reports by the Company.
(b) For so long as any Transfer Restricted Notes remain outstanding,
the Company shall make available (which shall include filings by EDGAR) to all
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
SECTION 4.4 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company and its Subsidiaries have kept, observed,
performed and fulfilled their obligations under this Indenture, and further
stating, as to each such Officer signing such
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certificate, that to the best of his or her knowledge the Company and its
Subsidiaries are not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred and be continuing, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action the
Company is taking or proposes to take with respect thereto) and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the event
and what action the Company is taking or proposes to take with respect thereto.
The Company shall provide the Trustee with timely written notice of any change
in its fiscal year end, which is currently December 31.
(b) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, promptly upon becoming aware of any Default or Event of
Default, an Officers' Certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
SECTION 4.5 TAXES
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment would not have a material adverse
effect on the ability of the Company and any Guarantors to satisfy their
obligations under the Notes, any Guarantees and this Indenture.
SECTION 4.6 STAY, EXTENSION AND USURY LAWS
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
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SECTION 4.7 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED
CAPITAL STOCK
Except as set forth in this Section 4.7, the Company and any
Guarantors shall not, and shall not permit any of their Subsidiaries to,
directly or indirectly, issue, assume, guaranty, incur, become directly or
indirectly liable with respect to (including as a result of an Acquisition), or
otherwise become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness
or any Disqualified Capital Stock (including Acquired Indebtedness), other than
Permitted Indebtedness. Notwithstanding the foregoing if (1) no Default or Event
of Default shall have occurred and be continuing at the time of, or would occur
after giving effect on a pro forma basis to, such incurrence of Indebtedness or
Disqualified Capital Stock and (2) on the date of such incurrence (the
"Incurrence Date"), the Consolidated Coverage Ratio of the Company for the
Reference Period immediately preceding the Incurrence Date, after giving effect
on a pro forma basis to such incurrence of such Indebtedness or Disqualified
Capital Stock and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be at least 2.0 to 1.0 (the
"Debt Incurrence Ratio"), then the Company and any Guarantors may incur such
Indebtedness or Disqualified Capital Stock; provided, however, that the Company
may not incur such Indebtedness or Disqualified Capital Stock prior to the
Internal Consolidation.
The foregoing limitations will not apply to:
(a) the incurrence, after the Internal Consolidation by the Company,
or at any time by any Subsidiary, of Purchase Money Indebtedness;
provided, that such Indebtedness is either (1) Non-Recourse Indebtedness
or (2) limited in aggregate amount (including any Refinancing Indebtedness
incurred to retire, defease, refinance, replace or refund such
Indebtedness) incurred and outstanding at any time pursuant to this
clause (a)(2) to the lesser of (A) $15 million per Casino, and (B) 100% of
the original cost (determined in accordance with GAAP in good faith by the
Board of Directors of the Company) to the Company or such Subsidiary, as
applicable, of the property so purchased, constructed, improved or leased,
on a Casino by Casino basis;
(b) the incurrence, after the Internal Consolidation by the Company,
or at any time by any Guarantor, of Indebtedness in an aggregate amount
incurred and outstanding at any time pursuant to this paragraph (b)
(including any
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Refinancing Indebtedness incurred to retire, defease, refinance, replace
or refund such Indebtedness) of not more than $25 million;
(c) (1) prior to the Empress Merger, the incurrence by Horseshoe
Gaming and RPG of Indebtedness pursuant to the Horseshoe Credit Agreement
and related guarantee, respectively, in an aggregate amount incurred and
outstanding at any time pursuant to this clause (1) of this paragraph (c)
(including any Refinancing Indebtedness incurred to retire, defease,
refinance, replace or refund such Indebtedness) of not more than $20
million, minus the amount of any such Indebtedness (i) retired with the
Net Cash Proceeds from any Asset Sale applied to permanently reduce the
outstanding amounts or the commitments with respect to such Indebtedness
pursuant to Section 4.13 hereof or (ii) assumed by a transferee in an
Asset Sale; provided, that following the consummation of a Triggering
Event Mandatory Redemption, the amount of such Indebtedness permitted to
be incurred and outstanding at any time pursuant to this clause (1) shall
be not more than $100 million; and (2) from and after the Empress Merger,
the incurrence by the Company or any Guarantor of Indebtedness pursuant
to the New Credit Facility in an aggregate amount incurred and outstanding
at any time pursuant to this clause (2) of this paragraph (c) (including
any Refinancing Indebtedness incurred to retire, defease, refinance,
replace or refund such Indebtedness) of not more than $375 million, minus
the amount of any such Indebtedness (i) retired with the Net Cash Proceeds
from any Asset Sale applied to permanently reduce the outstanding amounts
or the commitments with respect to such Indebtedness pursuant to Section
4.13 hereof or (ii) assumed by a transferee in an Asset Sale; provided,
however, that the maximum amount permitted to be outstanding under either
clause (1) or clause (2) of this paragraph (c) shall not be deemed to
limit additional Indebtedness under the Horseshoe Credit Agreement or the
New Credit Facility, as the case may be, to the extent the incurrence of
such additional Indebtedness was permitted and incurred pursuant to the
Debt Incurrence Ratio;
(d) each of the Company's Subsidiaries that owns a Casino may incur
up to $5 million of working capital Indebtedness at any time outstanding
pursuant to this clause (d) (including any Refinancing Indebtedness
incurred to retire, defease, refinance, replace or refund such
Indebtedness);
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(e) prior to consummation of the Empress Change of Control Offer and
as a result of the Empress Merger, not more than $150 million aggregate
principal amount of the Empress Notes; and
(f) in the event that the Empress Merger is consummated, the amount
of the Empress Notes not redeemed in the Empress Change of Control Offer;
provided, that the Company complied with its obligations under Section 3.8
hereof and make any Credit Facility Reduction described in Section 4.20
hereof.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other Person as a Subsidiary)
or is merged with or into or consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes a Subsidiary of the Company or is merged with or into or consolidated
with the Company or a Subsidiary of the Company, as applicable.
Notwithstanding any other provision of this Section 4.7, and to
avoid duplication only, a guarantee of Indebtedness of the Company or a
Guarantor incurred in accordance with the terms of this Indenture issued at the
time such Indebtedness was incurred or if later at the time the guarantor
thereof became a Subsidiary of the Company will not constitute a separate
incurrence, or amount outstanding, of Indebtedness. Upon each incurrence, the
Company may designate the provision of this Section 4.7 pursuant to which such
Indebtedness is being incurred and such Indebtedness shall not be deemed to
have been incurred or outstanding under any other provision of this Section 4.7,
except as stated otherwise in the foregoing provisions.
SECTION 4.8 LIMITATION ON LIENS SECURING INDEBTEDNESS
The Company and any Guarantors shall not, and shall not permit any
of their Subsidiaries to, create, incur, assume or suffer to exist any Lien of
any kind, other than Permitted Liens, upon any of their respective assets now
owned or acquired on or after the Issue Date or upon any income or profits
therefrom securing any Indebtedness of the Company or any Subsidiary other than
Senior Debt, unless the Company provides, and causes their Subsidiaries to
provide, concurrently therewith, that the Notes and the applicable Guarantees
are equally and ratably so secured; provided, that if such Indebtedness is
Subordinated Indebtedness, the Lien securing such Subordinated Indebtedness
shall be subordinate and junior to the Lien securing the Notes (and any
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related applicable Guarantees) with the same relative priority as such
Subordinated Indebtedness shall have with respect to the Notes (and any related
applicable Guarantees). The Company shall not create, incur, assume or suffer to
exist any Lien of any kind on the Horseshoe Note or the Secured Proceeds
Account, except in favor of the Trustee for the benefit of the Holders.
SECTION 4.9 LIMITATIONS ON RESTRICTED PAYMENTS
The Company and the Guarantors shall not, and shall not permit any
of their Subsidiaries to, directly or indirectly, make any Restricted Payment
if, after giving effect to such Restricted Payment on a pro forma basis, (1) a
Default or an Event of Default shall have occurred and be continuing, (2) the
Company is not permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio in Section 4.7 hereof, or (3) the
aggregate amount of all Restricted Payments made by the Company and its
Subsidiaries, including after giving effect to such proposed Restricted Payment,
on and after the Issue Date, would exceed, without duplication, the sum of (a)
50% of the aggregate Adjusted Consolidated Net Income of the Company for the
period (taken as one accounting period), commencing on the first day of the
first full fiscal quarter commencing after the Issue Date, to and including the
last day of the latest fiscal quarter ended immediately prior to the date of
each such calculation for which financial statements are available (or, in the
event Adjusted Consolidated Net Income for such period is a deficit, then minus
100% of such deficit), plus (b) the aggregate Net Cash Proceeds received by the
Company from the sale of Qualified Capital Stock (other than (i) to a Subsidiary
of the Company and (ii) to the extent applied in connection with a Qualified
Exchange) after the Issue Date, plus (c) the aggregate Net Cash Proceeds
received by the Company from a Capital Contribution after the Issue Date, plus
(d) the amount by which the Company's or any Guarantor's Indebtedness (other
than Subordinated Indebtedness) is reduced on the Company's balance sheet upon
the conversion or exchange for Equity Interests of the Company (other than (x)
Disqualified Capital Stock and (y) an issuance or sale to a Subsidiary of the
Company or an employee stock ownership plan or other trust established by the
Company or any Subsidiary of the Company) subsequent to the end of the most
recent fiscal quarter ended immediately after the Issue Date of any Indebtedness
(other than Subordinated Indebtedness) of the Company or any Guarantor which by
its terms is convertible or exchangeable for Equity Interests (other than
Disqualified Capital Stock) of the Company (less the amount of any cash or other
property distributed by the Company or any Subsidiary upon such conversion or
exchange), plus (e) the amount (not to exceed the aggregate amount of
Investments previously made by the Company or any
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Guarantor which were treated as a Restricted Payment and counted against the
amount available under this clause (3)) equal to the net reduction in
Investments resulting from either (1) any dividends, repayments of loans or
advances or other transfers of assets to the Company or any Guarantor or the
satisfaction or reduction (other than by means of payments by the Company or any
Subsidiary) of obligations of other Persons which have been guaranteed by the
Company or any Guarantor or (2) the redesignation of an Unrestricted Subsidiary
as a Subsidiary which executes a Guarantee; provided, however, that the amount
of anything credited pursuant to this clause (e) shall not exceed its fair
market value at the time of transfer or redesignation, as the case may be.
Notwithstanding the foregoing, except for Restricted Payments
permitted pursuant to clauses (1) and (6) below and, to the extent such
Restricted Payment is used to repurchase or redeem the Equity Interests of
Horseshoe Gaming not owned by the Company as of the Issue Date, clause (7)
below, the Company shall not make any Restricted Payments prior to the Internal
Consolidation.
The foregoing clauses (2) and (3) of the first paragraph of this
covenant, however, will not prohibit (1) with respect to each tax year that the
Company qualifies as an "S corporation" under the Code, or any similar provision
of state or local law, Permitted Tax Distributions in respect of the
jurisdictions in which the Company so qualifies; provided, however, that prior
to any Permitted Tax Distributions a knowledge able and duly authorized Officer
of the Company certifies, and counsel reasonably acceptable to the Trustee
opines, that the Company, and each Subsidiary in respect of which such
distributions are being made, qualifies as a Flow Through Entity for Federal
income tax purposes and for the states in respect of which such distributions
are being made and that at the time of such distribution, the Company's most
recent audited financial statements, as provided to the Trustee pursuant to
Section 4.3 hereof, provided that the Company and each such Subsidiary were
treated as Flow Through Entities for the period of such financial statements,
(2) any dividend, distribution or other payments by any Subsidiary of the
Company on its Equity Interests that is paid pro rata to all holders of such
Equity Interests, (3) a Qualified Exchange, (4) the payment of any dividend on
or redemption of Qualified Capital Stock within 60 days after the date of its
declaration or authorization if such dividend or redemption could have been made
on the date of such declaration or authorization in compliance with the
foregoing provisions, (5) Investments in one or more Persons in an amount not in
excess of $50 million in the aggregate at any one time outstanding measured at
the time made or returned, as applicable, for all such Investments made in any
one or more Persons in reliance upon this clause (5), for the purpose of
developing, constructing or acquiring
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(a) a Casino or Casinos or, if applicable, any Related Business in connection
with such Casino or Casinos, or (b) a Related Business to be used primarily in
connection with an existing Casino or Casinos; provided, that to the extent the
Company or any Subsidiary has received cash distributions from any such Person,
the amount thereof will be deemed to reduce the amount of Investments (by 50% in
the case of returns in excess of capital and by 100% in the case of return of
capital) then outstanding under this clause (5) (but not below zero) for the
purposes of the $50 million limit (the amount of any such reduction to be
without duplication to amounts available for Restricted Payments under clause
(3) of the first paragraph of this covenant), (6) the redemption or repurchase
of any Equity Interests or Indebtedness of the Company or any of its
Subsidiaries (other than any Equity Interests or Indebtedness that is held or
beneficially owned by any Excluded Person) required by the redemption provisions
described in Section 3.9 hereof (or any substantially comparable provision
governing other Indebtedness), and (7) further Restricted Payments of any type
which in the aggregate do not exceed $50 million for all such Restricted
Payments permitted by this clause (7) taken together; provided, however, that no
payment may be made pursuant to this clause (7) unless the Company could then
incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence
Ratio in Section 4.7 hereof, after taking into account any funding of such
Restricted Payments; provided, further, however, that up to an additional $50
million of Restricted Payments of any type may be made under this clause (7) if,
immediately after giving effect to such Restricted Payment, after taking into
account the funding of such Restricted Payment, the Consolidated Coverage Ratio
for the Reference Period immediately preceding such Restricted Payment would be
at least 3.0 to 1.0.
The full amount of any Restricted Payment made pursuant to the
foregoing clauses (2), (4) and (6) (but not pursuant to clause (1), (3), (5) or
(7)) of the immediately preceding sentence, however, will be counted as
Restricted Payments made for purposes of the calculation of the aggregate amount
of Restricted Payments available to be made referred to in clause (3) of the
first paragraph of this Section 4.9.
For purposes of this Section 4.9, the amount of any Restricted
Payment, if other than in cash, shall be the fair market value thereof, as
determined in the good faith reasonable judgment of the Board of Directors of
the Company.
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SECTION 4.10 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
The Company and the Guarantors shall not, and shall not permit any
of their Subsidiaries to, directly or indirectly, create, assume or suffer to
exist any consensual restriction on the ability of any Subsidiary of the Company
to pay dividends or make other distributions to or on behalf of, or to pay any
obligation to or on behalf of, or otherwise to make any transfer of assets or
property to or on behalf of, or make or pay any loans or advances to or on
behalf of, the Company or any Subsidiary, except (a) other than as provided by
clause (e) below, restrictions imposed by the Notes or this Indenture or by
other Indebtedness of the Company (which may also be guaranteed by the
Guarantors) ranking senior or pari passu with the Notes or the Guarantees, as
applicable; provided, that such restrictions are no more restrictive taken as a
whole than those imposed by this Indenture and the Notes, (b) restrictions
imposed by applicable law, (c) existing restrictions under Indebtedness
outstanding on the Issue Date, (d) restrictions under any Acquired Indebtedness
not incurred in violation of this Indenture or any agreement relating to any
property, asset, or business acquired by the Company or any of its Subsidiaries,
which restrictions in each case existed at the time of Acquisition, were not put
in place in connection with or in anticipation of such Acquisition and are not
applicable to any Person, other than the Person acquired, or to any property,
asset or business, other than the property, assets and business so acquired, (e)
any such restriction or requirement imposed by Indebtedness incurred under the
Horseshoe Credit Agreement or the New Credit Facility, as the case may be,
permitted by Section 4.7 hereof, (f) restrictions with respect solely to a
Subsidiary of the Company imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Equity Interests or assets of such Subsidiary; provided, that such restrictions
apply solely to the Equity Interests or assets of such Subsidiary which are
being sold, (g) restrictions on transfer contained in Purchase Money
Indebtedness incurred pursuant to paragraph (a) of Section 4.7; provided, that
such restrictions relate only to the transfer of the property acquired with the
proceeds of such Purchase Money Indebtedness, and (h) in connection with and
pursuant to permitted Refinancings, replacements of restrictions imposed
pursuant to clauses (a), (c), (d), (e), (g) or this clause (h) of this Section
4.10 that are not more restrictive taken as a whole than those being replaced
and do not apply to any other Person or assets than those that would have been
covered by the restrictions in the Indebtedness so refinanced.
Notwithstanding the foregoing, (a) customary provisions restricting
subletting or assignment of any lease entered into in the ordinary course of
business,
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consistent with industry practice and (b) any asset subject to a Lien which is
not prohibited to exist with respect to such asset pursuant to the terms of this
Indenture may be subject to customary restrictions on the transfer or
disposition thereof pursuant to such Lien.
SECTION 4.11 LIMITATION ON LINES OF BUSINESS
Neither the Company nor any of its Subsidiaries shall directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than that which, in the reasonable good faith judgment of the
Board of Directors of the Company, is a Related Business.
SECTION 4.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES
Neither the Company nor any of its Subsidiaries will be permitted on
or after the Issue Date to enter into or suffer to exist any contract,
agreement, arrangement or transaction with any Affiliate (an "Affiliate
Transaction"), or any series of related Affiliate Transactions, (other than
Exempted Affiliate Transactions), (1) unless it is determined that the terms of
such Affiliate Transaction are fair and reasonable to the Company, and no less
favorable to the Company, than could have been obtained in an arm's length
transaction with a non-Affiliate, and (2) if involving consideration to either
party in excess of $5 million, unless (a) such Affiliate Transaction(s) is
evidenced by an Officers' Certificate addressed and delivered to the Trustee
certifying that such Affiliate Transaction (or Transactions) has been approved
by a majority of the members of the Board of Directors that are disinterested in
such transaction, if any, and (b) prior to the consummation thereof, the Company
obtains a written favorable opinion as to the fairness of such transaction to
the Company from a financial point of view from an independent investment
banking firm of national reputation in the United States or, if pertaining to a
matter for which such investment banking firms do not customarily render such
opinions, an appraisal or valuation firm of national reputation in the United
States.
SECTION 4.13 LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
Prior to the Internal Consolidation, the Company and any Guarantors
will not, and will not permit any of their Subsidiaries to, in one or a series
of related transactions, consummate an Asset Sale (as defined below), other than
any transaction described in clauses (1), (3), (4) and (5) of the fourth
paragraph of this Section 4.13.
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Following the Internal Consolidation, the Company and the Guarantors
shall not, and shall not permit any of their Subsidiaries to, in one or a series
of related transactions, convey, sell, transfer, assign or otherwise dispose of,
directly or indirectly, any of their property, business or assets, including by
merger or consolidation (in the case of a Subsidiary of the Company), and
including any sale or other transfer or issuance of any Equity Interests of any
Subsidiary of the Company, whether by the Company or any Subsidiary of the
Company or through the issuance, sale or transfer of Equity Interests by a
Subsidiary of the Company, and including any sale and leaseback transaction (any
of the foregoing, an "Asset Sale"), unless:
(l) (a) the Net Cash Proceeds therefrom (the "Asset Sale Offer
Amount") are applied (i) within 270 days after the date of such Asset Sale
to the optional redemption of the Notes in accordance with the terms of
this Indenture and other Indebtedness of the Company ranking on a parity
with the Notes and with similar provisions requiring the Company to redeem
such Indebtedness with the proceeds from such Asset Sale, pro rata in
proportion to the respective principal amounts (or accreted values in the
case of Indebtedness issued with an original issue discount) of the Notes
and such other Indebtedness then outstanding, or (ii) within 300 days
after the date of such Asset Sale to the repurchase of the Notes and such
other Indebtedness on a parity with the Notes and with similar provisions
requiring the Company to make an offer to purchase such Indebtedness with
the proceeds from such Asset Sale pursuant to a cash offer (subject only
to conditions required by applicable law, if any) (pro rata in proportion
to the respective principal amounts (or accreted values in the case of
Indebtedness issued with an original issue discount) of the Notes and such
other Indebtedness then outstanding) (the "Asset Sale Offer") at a
purchase price of 100% of principal amount (or accreted value in the case
of Indebtedness issued with an original issue discount) (the "Asset Sale
Offer Price") together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of payment, made within 270 days of
such Asset Sale, or
(b) within 270 days following such Asset Sale, the Asset Sale Offer
Amount is (i) invested in assets and property (other than notes, bonds,
obligations and securities) which in the good faith reasonable judgment of
the Board of Directors of the Company will immediately constitute or be a
part of a Related Businesses of the Company or one of its Subsidiaries
immediately following such transaction, or (ii) used to retire Purchase
Money Indebtedness secured by the asset which was the subject of the Asset
Sale, Indebtedness
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outstanding under the Horseshoe Credit Agreement or the New Credit
Facility, as the case may be, or other Senior Debt the terms of which
require retirement upon such Asset Sale, on a pro rata basis and, to
permanently reduce (in the case of Senior Debt that is not such Purchase
Money Indebtedness) the amount of Indebtedness outstanding on the Issue
Date or permitted pursuant to paragraph (b), (c) or (d), as applicable, of
Section 4.7 hereof (including that in the case of a revolver or similar
arrangement that makes credit available, such commitment is so permanently
reduced by such amount);
(2) 75% of the total consideration for such Asset Sale or series of
related Asset Sales consists of cash or Cash Equivalents;
(3) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro
forma basis, to, such Asset Sale, unless such Asset Sale is in
consideration solely of cash or Cash Equivalents and such consideration is
applied immediately to the permanent reduction of the amount of
Indebtedness outstanding under the New Credit Facility or other bank
credit facility debt which is incurred pursuant to clause (c)(1) or (2) of
Section 4.7 hereof; and
(4) the Board of Directors of the Company determines in good faith
that the Company or such Subsidiary, as applicable, receives not less than
fair market value for such Asset Sale.
An acquisition of Notes pursuant to an Asset Sale Offer may be
deferred until the accumulated Net Cash Proceeds from Asset Sales not applied to
the uses set forth in 1(a)(i) or 1(b) above (the "Excess Proceeds") exceeds $10
million. Each Asset Sale Offer shall remain open for 20 Business Days following
its commencement (the "Asset Sale Offer Period"). Upon expiration of the Asset
Sale Offer Period, the Company shall apply the Asset Sale Offer Amount plus an
amount equal to accrued and unpaid interest and Liquidated Damages, if any, to
the purchase of all Indebtedness properly tendered (on a pro rata basis if the
Asset Sale Offer Amount is insufficient to purchase all Indebtedness so
tendered) at the Asset Sale Offer Price (together with accrued interest and
Liquidated Damages, if any). To the extent that the aggregate amount of Notes
and such other pari passu Indebtedness tendered pursuant to an Asset Sale Offer
is less than the Asset Sale Offer Amount, the Company may use any remaining Net
Cash Proceeds for general corporate purposes as otherwise permitted by this
Indenture and following each Asset Sale Offer the Excess Proceeds amount shall
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be reset to zero. For purposes of (2) above, total consideration received means
the total consideration received for such Asset Sales minus the amount of, (a)
Purchase Money Indebtedness secured solely by the assets sold and assumed by a
transferee; provided, that the Company and the Subsidiaries are fully released
from all obligations relating thereto and (b) property that within 30 days of
such Asset Sale is converted into cash or Cash Equivalents; provided, that such
cash and Cash Equivalents shall be treated as Net Cash Proceeds attributable to
the original Asset Sale for which such property was received).
Notwithstanding, and without complying with, the provisions of this
Section 4.13, (1) the Company and its Subsidiaries may, in the ordinary course
of business, (a) convey, sell, transfer, assign or otherwise dispose of
inventory and other assets acquired and held for resale in the ordinary course
of business and (b) liquidate Cash Equivalents, (2) following the Internal
Consolidation, the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of assets pursuant to and in accordance with Article
V hereof, (3) the Company and its Subsidiaries may sell or dispose of damaged,
worn out or other obsolete property in the ordinary course of business so long
as such property is no longer necessary for the proper conduct of the business
of the Company or such Subsidiary, as applicable, (4) the Company's Subsidiaries
may convey, sell, transfer, assign or otherwise dispose of assets (including by
way of Merger) to the Company or any other Subsidiary and the Company may
convey, sell, transfer, assign or otherwise dispose of assets to any Subsidiary,
and (5) the Company and each of its Subsidiaries may surrender or waive contract
rights or settle, release or surrender contract, tort or other claims of any
kind or grant Liens not prohibited by this Indenture.
Upon the accumulation of $10 million of Net Cash Proceeds from an
Event of Loss (other than the proceeds of any business interruption insurance)
each dollar of Net Cash Proceeds from an Event of Loss that exceeds such amount
shall be (1) applied to the redemption or repurchase of the Notes and other of
Indebtedness of the Company ranking on a parity with the Notes and with similar
provisions requiring the Company to redeem or repurchase such Indebtedness (pro
rata in proportion to the respective principal amounts or (accreted values in
the case of Indebtedness issued with an original issue discount) of the Notes
and such other Indebtedness then outstanding), (2) invested in assets and
property (other than notes, bonds, obligation and securities) which in the good
faith reasonable judgment of the Board of Directors of the Company will
immediately constitute or be a part of a Related Business of the Company or one
of its Subsidiaries immediately following such Event of Loss or (3) used to
retire
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Purchase Money Indebtedness secured by the asset which was the subject of the
Event of Loss, Indebtedness outstanding under the Horseshoe Credit Agreement or
the New Credit Facility, as the case may be, or other Senior Debt the terms of
which so require and to permanently reduce (in the case of Senior Debt that is
not such Purchase Money Indebtedness) the amount of Indebtedness outstanding on
the Issue Date or permitted pursuant to paragraph (b), (c) or (d), as
applicable, of Section 4.7 hereof (including that in the case of a revolver or
similar arrangement that makes credit available, such commitment is so
permanently reduced by such amount), all within the time periods and as
otherwise provided above in clauses 1(a) or 1(b) of the first paragraph of this
Section 4.13.
Any Asset Sale Offer shall be made in compliance with all applicable
laws, rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section
4.13, compliance by the Company or any of its Subsidiaries with such laws and
regulations shall not in and of itself cause a breach of its obligations under
this Section 4.13.
If the payment date in connection with an Asset Sale Offer hereunder
is on or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages,
if any, due on such Interest Payment Date) will be paid to the Person in whose
name a Note is registered at the close of business on such Record Date, and such
interest (or Liquidated Damages, if applicable) will not be payable to Holders
who tender Notes pursuant to such Asset Sale Offer.
SECTION 4.14 REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL
In the event that a Change of Control Triggering Event has occurred,
each Holder of Notes will have the right, at such Holder's option, pursuant to
an offer (subject only to conditions required by applicable law, if any) by the
Company (the "Change of Control Offer"), to require the Company to repurchase
all or any part of such Holder's Notes (provided, that the principal amount of
such Notes must be $1,000 or an integral multiple thereof) on a date (the
"Change of Control Purchase Date") that is no later than 35 Business Days after
the occurrence of such Change of Control Triggering Event, at a cash price equal
to 101% of the principal amount thereof (the "Change of
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Control Purchase Price"), together with accrued and unpaid interest and
Liquidated Damages, if any, thereon to the Change of Control Purchase Date. The
Change of Control Offer shall be made within 10 Business Days following a Change
of Control Triggering Event and shall remain open for 20 Business Days following
its commencement (the "Change of Control Offer Period"). Upon expiration of the
Change of Control Offer Period, the Company promptly shall purchase all Notes
properly tendered in response to the Change of Control Offer.
Prior to the commencement of a Change of Control Offer, but in any
event within 30 days following any Change of Control Triggering Event, the
Company will (1)(a) repay in full and terminate all commitments of Indebtedness
under the Horseshoe Credit Agreement or the New Credit Facility, as the case may
be, and all other Senior Debt the terms of which require repayment upon a Change
of Control Triggering Event or (b) offer to repay in full and terminate all
commitments of Indebtedness under the Horseshoe Credit Agreement or the New
Credit Facility, as the case may be, and all such other Senior Debt and repay
the Indebtedness owed to each lender which has accepted such offer in full or
(2) obtain the requisite consents under the Horseshoe Credit Agreement or the
New Credit Facility, as the case may be, and all such other Senior Debt to
permit the repurchase of the Notes as provided herein. The failure of the
Company to comply with the preceding sentence shall constitute an Event of
Default described in clause (3), but without giving effect to the stated
exceptions in such clause, of Section 6.1 hereof.
Notwithstanding the foregoing, the Company will not be required to
make a Change of Control Offer upon a Change of Control Triggering Event if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Indenture
applicable to a Change of Control Offer made by the Company, including any
requirements to repay in full all Indebtedness under the Horseshoe Credit
Agreement or the New Credit Facility, as the case may be, or obtain the consents
of such lenders to such Change of Control Offer as set forth in the previous
paragraph, and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
On or before the Change of Control Purchase Date, the Company shall
(1) accept for payment Notes or portions thereof properly tendered and not
validly withdrawn pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent cash sufficient to pay the Change of Control Purchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any,
thereon) of all Notes so tendered and
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(3) deliver to the Trustee the Notes so accepted together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent promptly will pay the Holders of Notes so accepted an
amount equal to the Change of Control Purchase Price (together with accrued and
unpaid interest and Liquidated Damages, if any, thereon) and the Trustee
promptly will authenticate and deliver to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered. Any Notes
not so accepted will be delivered promptly by the Company to the Holder thereof.
The Company publicly will announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Purchase Date.
Any Change of Control Offer shall be made in compliance with all
applicable laws, rules and regulations, including, if applicable, Regulation 14E
under the Exchange Act and the rules thereunder and all other applicable Federal
and state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this Section 4.14,
compliance by the Company or any of the Guarantors with such laws and
regulations shall not in and of itself cause a breach of their obligations
hereunder.
If the Change of Control Purchase Date hereunder is on or after an
interest payment Record Date and on or before the associated Interest Payment
Date, then any accrued and unpaid interest (and Liquidated Damages, if any) due
on such Interest Payment Date will be paid to the Person in whose name a Note is
registered at the close of business on such Record Date, and such interest (and
Liquidated Damages, if applicable) will not be payable to Holders (if different
than the holders on the Record Date) who tender the Notes pursuant to the Change
of Control Offer.
SECTION 4.15 LIMITATION ON LAYERING INDEBTEDNESS
The Company and any Guarantors shall not, and shall not permit any
of their Subsidiaries to, directly or indirectly, incur, or suffer to exist any
Indebtedness that is subordinate in right of payment to any other Indebtedness
of the Company or any Guarantor unless, by its terms, such Indebtedness (1) has
a final stated maturity date on or subsequent to the Stated Maturity of the
Notes and an Average Life longer than that of the Notes and (2) is subordinate
in right of payment to, or ranks pari passu with, the Notes or the Guarantee, as
applicable.
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SECTION 4.16 GUARANTORS
Upon consummation of the Empress Merger, all then present and future
Wholly Owned Subsidiaries of the Company shall jointly and severally guaranty
irrevocably and unconditionally all principal, premium, if any, Liquidated
Damages, if any, and interest on the Notes on a senior subordinated basis and
shall execute a Guarantee substantially in the form of Exhibit E hereto and
deliver an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee regarding the due authorization, execution and delivery of the
Guarantee. In addition, if any Subsidiary of the Company that is not a Guarantor
guarantees any other Indebtedness of the Company or any Subsidiary that is pari
passu or subordinate to the Notes, then such Subsidiary must become a Guarantor
and shall execute a Guarantee substantially in the form of Exhibit E hereto and
deliver an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee regarding the due authorization, execution and delivery of the
Guarantee. Notwithstanding the foregoing, the Subsidiaries of Horseshoe Gaming
will not be required to guarantee the Notes until the Company consummates the
Internal Consolidation. In connection with the foregoing, the Company has agreed
(1) until the Company consummates the Internal Consolidation, to own directly at
least 90% of Horseshoe Gaming, and (2) that upon consummation of the Empress
Merger, RPG, HE, Empress Indiana and Empress Illinois will be Wholly Owned
Subsidiaries of the Company and, therefore, Guarantors.
The obligation of any potential Guarantor to execute a Guarantee
will be subject to the receipt of any approval required by any Gaming Authority,
which the Company shall and shall cause its Subsidiaries to use their reasonable
best efforts to obtain.
SECTION 4.17 LIMITATION ON STATUS AS INVESTMENT COMPANY
The Company and its Subsidiaries will not become required to
register as an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act")), or otherwise
become subject to regulation under the Investment Company Act.
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SECTION 4.18 MAINTENANCE OF INSURANCE
From and at all times after the Issue Date, the Company and its
Subsidiaries shall have in effect customary property and comprehensive general
liability insurance coverage on terms and in an amount reasonably sufficient
(taking into account, among other factors, the creditworthiness of the insurer)
to avoid a material adverse change in the financial condition or results of
operation of the Company and its Subsidiaries, taken as a whole.
SECTION 4.19 CORPORATE EXISTENCE
Subject to Article V hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof would not have a material adverse
effect on the ability of the Company and the Guarantors to satisfy their
obligations under the Notes, the Guarantees and this Indenture.
SECTION 4.20 INTERNAL CONSOLIDATION; APPLICATION AND RELEASE OF FUNDS IN SECURED
PROCEEDS ACCOUNT
(a) The Company shall consummate the Internal Consolidation
substantially concurrently with and no later than one Business Day after the
occurrence of either the consummation of the Empress Merger or a Triggering
Event Mandatory Redemption.
(b) If the Company delivers to the Trustee a request for a
disbursement of funds from the Secured Proceeds Account to fund, in part, the
Empress Merger (an "Empress Merger Disbursement Request") that (1) contains a
certificate, in form and substance reasonably satisfactory to the Trustee, that:
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(A) the Empress Merger will be consummated on the disburse-
ment date specified therein (which date shall be no more than five
and no less than two Business Days after the Empress Merger
Disbursement Request's delivery and on or before December 1, 1999),
substantially on the terms set forth in the Merger Agreement and the
Offering Memorandum ("Acceptable Terms");
(B) the Company will use the Merger Release Amount solely to
pay a portion of the Empress Merger Consideration and Related Costs;
(C) the Company will cause the Internal Consolidation to occur
substantially concurrently with (and not before), and not more than
one Business Day after, the Empress Merger; and
(D) as of the date of the Empress Merger Disbursement Request
and as of the date of the Empress Merger, the Company owns and will
own all of the Equity Interests of Horseshoe Gaming;
and that otherwise complies with the Security Agreement, together with (2) an
opinion of the Company's counsel to the effect that the consummation of the
Empress Merger and the transactions contemplated thereby will not conflict with
or result in a violation or breach of, or constitute (with or without due notice
or the passage of time or both) a default under, any of the terms, conditions or
other provisions of the Empress Indenture, then the Trustee will direct the
Securities Intermediary to liquidate sufficient assets in the Secured Proceeds
Account to generate net proceeds in an amount equal to the Merger Release
Amount, and to deliver the Merger Release Amount to the Company on the
disbursement date specified in the Empress Merger Disbursement Request.
(c) If the Company delivers to the Trustee a request for a
disbursement of funds from the Secured Proceeds Account to fund, in part, the
Empress Change of Control Offer (an "Empress Change of Control Disbursement
Request") that contains a certificate, reasonably satisfactory to the Trustee,
that:
(A) the Empress Merger and the Internal Consolidation have
been consummated; and
(B) the Company will use the Change of Control Release Amount
solely to fund the Empress Change of Control Offer, which will
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occur on the disbursement date specified in the Empress Change of
Control Disbursement Request, which date shall be two Business Days
after the certificate's delivery and no more than 35 Business Days
after the consummation of the Empress Merger;
and that otherwise complies with the Security Agreement, then the Trustee will
direct the Securities Intermediary to liquidate sufficient assets in the Secured
Proceeds Account to generate net proceeds in an amount equal to the Change of
Control Release Amount, and to deliver the Change of Control Release Amount to
the Company on the disbursement date specified in the Change of Control
Disbursement Request.
(d) If the Empress Merger and the Empress Change of Control Offer
have both occurred, then as soon as practicable after the Empress Change of
Control Offer, the Trustee shall instruct the Securities Intermediary to
liquidate all assets remaining in the Securities Account (if any) and to pay the
net liquidation proceeds (after deducting any applicable Securities Intermediary
and trustee fees and charges) to or as instructed by the Company, except that
(i) the Securities Intermediary shall not make any payment under this paragraph
(d) if on the date of the payment an Event of Default has occurred and is
continuing, and (ii) if the Company is required to make an Empress Change of
Control Mandatory Redemption, then the provisions of paragraph (e) below shall
apply.
(e) If either a Triggering Event Mandatory Redemption or a Change of
Control Mandatory Redemption has occurred, then as soon as practicable after the
consummation thereof, the Trustee shall instruct the Securities Intermediary to
liquidate assets in the Securities Account to generate proceeds in an amount
equal to the Triggering Event Mandatory Redemption Price or the Change of
Control Mandatory Redemption Price, as applicable, and to deliver the net
liquidation proceeds (after deducting any applicable Securities Intermediary and
trustee fees and charges) to the Trustee to consummate the applicable Mandatory
Redemption in accordance with Section 3.8 hereof.
SECTION 4.21 USE OF PROCEEDS OF HORSESHOE NOTE
The Company shall cause Horseshoe Gaming to use the proceeds of the
Horseshoe Note on the Issue Date to (1) repay outstanding borrowings in full
under the Horseshoe Credit Agreement, (2) consummate a tender offer and consent
solicitation (the "Tender Offer") with respect to Horseshoe Gaming's 12 3/4%
Senior Notes due
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2000 (the "Senior Notes"), (3) irrevocably deposit into a defeasance account an
amount sufficient to repay any Senior Notes that remain outstanding on the Issue
Date in full on September 30, 1999, the earliest date such notes may be redeemed
(the "Earliest Redemption Date"), plus accrued interest thereon to the Earliest
Redemption Date and (4) pay related fees and expenses, including tender premiums
and consent fees. Any remaining proceeds of the Horseshoe Note may be used by
Horseshoe Gaming for general corporate purposes. The Company shall cause
Horseshoe Gaming to redeem the Senior Notes in full on the Earliest Redemption
Date.
SECTION 4.22 EMPRESS MERGER
Notwithstanding anything herein to the contrary, no provision of
this Indenture will prohibit or, with the passage of time or otherwise, be
violated by, any component of the Empress Merger pursuant to the Merger
Agreement, including, without limiting the generality of the foregoing, the
incurrence of Indebtedness to finance such transactions, the granting and
priority of liens to secure such Indebtedness, and the perfection of such liens,
all substantially as described in the Offering Memorandum.
ARTICLE V
SUCCESSORS
SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS
Prior to the Internal Consolidation, the Company shall not
consolidate with or merge with or into another Person or, directly or
indirectly, sell, lease, convey or transfer all or substantially all of the
assets of the Company (computed on a consolidated basis), whether in a single
transaction or a series of related transactions, to another Person or group of
affiliated Persons.
Following the Internal Consolidation, the Company shall not
consolidate with or merge with or into another Person or, directly or
indirectly, sell, lease, convey or transfer all or substantially all of the
assets of the Company (computed on a consolidated basis), whether in a single
transaction or a series of related transactions, to another Person or group of
affiliated Persons, unless:
(1) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity is a corporation organized under
the laws of the
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United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of
the Company in connection with the Notes and this Indenture;
(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such
transaction;
(3) immediately after giving effect to such transaction on a pro
forma basis, the consolidated resulting, surviving or transferee entity
would immediately thereafter be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in Section
4.7 hereof, except in the case where such transaction is solely between
the Company and a Wholly Owned Subsidiary or solely between Wholly Owned
Subsidiaries of the Company; and
(4) such transaction will not result in the loss of any material
gaming license.
Notwithstanding the foregoing, in no event shall the Internal
Consolidation be prohibited by, or cause a default under, this covenant or any
other covenant under the Indenture.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and assets of
one or more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the Company's properties and
assets.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1
hereof, the successor corporation formed by such consolidation or into which the
Company is merged or to which such transfer is made shall (except in the case of
a lease) succeed to and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named therein as the Company, and (except in the
case of a lease) the Company shall be released from the obligations under the
Notes and this Indenture except with respect to any obligations that arise from,
or are related to, such transaction.
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ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT
"Event of Default," wherever used herein, means any one of the
following events;
(1) the failure by the Company to pay any installment of interest (or
Liquidated Damages, if any) on the Notes as and when the same becomes due and
payable and the continuance of any such failure for 30 days;
(2) the failure by the Company to pay all or any part of the principal, or
premium, if any, on the Notes when and as the same becomes due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, payment of the Mandatory Redemption Price upon the occurrence of an
event giving rise to a Mandatory Redemption, or payment of the Change of Control
Purchase Price (except as provided in Section 4.14 hereof), or the Asset Sale
Offer Price on Notes validly tendered and not properly withdrawn pursuant to a
Change of Control Offer or Asset Sale Offer, as applicable (as set forth in
Sections 4.14 and 4.13 hereof);
(3) the failure by the Company or any Subsidiary of the Company to observe
or perform any other covenant or agreement contained in the Notes or this
Indenture and, except for the provisions under Sections 4.13, 4.14, 4.20 and
4.21 and Article V hereof, the continuance of such failure for a period of 30
days after written notice is given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes outstanding;
(4) a default in Indebtedness of the Company with an aggregate amount
outstanding in excess of $10 million (other than Indebtedness of the Company
solely to any of its Subsidiaries) (a) resulting from the failure to pay
principal at final stated maturity or (b) as a result of which the maturity of
such Indebtedness has been accelerated prior to its final stated maturity;
(5) final non-appealable unsatisfied judgments not covered by insurance
aggregating in excess of $10 million, at any one time rendered against the
Company or any of its Subsidiaries and not stayed, bonded or discharged within
60 days;
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(6) any Guarantee of a Guarantor that is a Significant Subsidiary ceases
to be in full force and effect or becomes unenforceable or invalid or is
declared null and void (other than in accordance with the terms of the
Guarantee) or any Guarantor that is a Significant Subsidiary denies or
disaffirms its Obligations under its Guarantee;
(7) the suspension or loss of the legal right of the Company or any of its
Subsidiaries to operate the gaming establishment included within any Casino and
such suspension or loss continuing for more than 90 consecutive days or for 120
days within any consecutive 180 day period;
(8) the failure of the Company to effect the Internal Consolidation
following the occurrence of the Empress Merger, or a Triggering Event Mandatory
Redemption, as applicable, or the failure of the Company to cause its
Subsidiaries to guarantee the Notes upon the consummation of the Empress Merger
and the Internal Consolidation as described in Section 4.16 above;
(9) a court having jurisdiction in the premises enters a decree or order
for (A) relief in respect of the Company or any Significant Subsidiary in an
involuntary case under any applicable Bankruptcy Law now or hereafter in effect,
(B) appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or
(10) the Company or any Significant Subsidiary (A) commences a voluntary
case under any applicable Bankruptcy Law now or hereafter in effect, or consents
to the entry of an order for relief in an involuntary case under any such law,
(B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (C) effects
any general assignment for the benefit of creditors.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
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SECTION 6.2 ACCELERATION
If an Event of Default (other than an Event of Default specified in
clause (9) or (10) of Section 6.1 that occurs with respect to the Company)
occurs and is continuing under this Indenture, then in every such case, unless
the principal of all of the Notes shall have already become due and payable,
either the Trustee or the Holders of at least 25% in aggregate principal amount
of the Notes, then outstanding, by written notice to the Company (and to the
Trustee if such notice is given by the Holders), may, and the Trustee at the
request of such Holders shall, declare the principal of, premium, if any, and
accrued interest (and Liquidated Damages, if any) on the Notes to be immediately
due and payable. Upon a declaration of acceleration, such principal of, premium,
if any, and accrued interest (and Liquidated Damages, if any) shall be
immediately due and payable; provided, however, that if any Designated Senior
Debt is outstanding pursuant to the Horseshoe Credit Agreement or the New Credit
Facility, as the case may be, or otherwise, upon a declaration of such
acceleration, such principal and interest shall be due and payable upon the
earlier of (x) the third Business Day after the sending to the Company and to
the Representative under the Horseshoe Credit Agreement or the New Credit
Facility, as the case may be, or other Designated Senior Debt, of such written
notice, unless such Event of Default is cured or waived prior to such date and
(y) the date of acceleration of any Senior Debt under the Horseshoe Credit
Agreement or the New Credit Facility, as the case may be, or such other
Designated Senior Debt. In the event a declaration of acceleration resulting
solely from an Event of Default described in clause (4) above has occurred and
is continuing, such declaration of acceleration shall be automatically annulled
if such default is cured or waived or the holders of the Indebtedness which is
the subject of such default have rescinded their declaration of acceleration in
respect of such Indebtedness within five days thereof and the Trustee has
received written notice of such cure, waiver or rescission and no other Event of
Default described in clause (4) above has occurred that has not been cured or
waived within five days of the declaration of such acceleration in respect of
such Indebtedness. If an Event of Default specified in clauses (9) or (10)
above, relating to the Company, occurs, all principal and accrued interest (and
Liquidated Damages, if any) thereon will be immediately due and payable on all
outstanding Notes without any declaration or other act on the part of the
Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of not less
than a majority in aggregate principal amount of then outstanding Notes, by
written notice to the
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Company and the Trustee, may rescind, on behalf of all Holders, any such
declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee cash
sufficient to pay: (a) all overdue interest and Liquidated Dam
ages, if any, on all Notes; (b) the principal of (and premium,
if any, applicable to) any Notes which would become due other
than by reason of such declaration of acceleration, and
interest thereon at the rate borne by the Notes; (c) to the
extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes; (d) all sums
paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel, and all other amounts due
the Trustee under Section 7.7; and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest (and Liquidated
Damages, if any) on the Notes which have become due solely by
such declaration of acceleration, have been cured or waived as
provided in Section 6.4.
Notwithstanding the previous sentence of this Section 6.2, no waiver
shall be effective against any Holder for any Event of Default or event which
with notice or lapse of time or both would be an Event of Default with respect
to (i) any covenant or provision which cannot be modified or amended without the
consent of the Holder of each outstanding Note affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event and (ii) any provision or covenant requiring supermajority approval to
amend, unless such default has been waived by such a supermajority. No such
waiver shall cure or waive any subsequent default or impair any right consequent
thereon.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify each Representative of Senior Debt of
the acceleration.
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SECTION 6.3 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULTS
Subject to Section 6.7, the Holders of at least a majority in
principal amount of the outstanding Notes by written notice to the Company and
to the Trustee, may, on behalf of all Holders, waive any existing or past
Default or Event of Default hereunder and its consequences under this Indenture,
except a default:
(1) in the payment of principal of, premium, if any, or interest
on any Note not yet cured as specified in clauses (a) and (b)
of Section 6.1 hereof;
(2) in respect of a covenant or provision hereof which, under
Article IX, cannot be modified or amended without the consent
of the Holder of each outstanding Note affected, unless all
such affected Holders agree, in writing, to waive such
default;
(3) any provision or covenant requiring supermajority approval to
amend, unless such default has been waived by such a
supermajority; or
(4) the rescission of which would conflict with any judgment or
decree of a court of competent jurisdiction.
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Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right arising therefrom.
SECTION 6.5 CONTROL BY MAJORITY
Holders of at least a majority in aggregate principal amount of the
then outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that the Trustee determines
in good faith may be unduly prejudicial to the rights of other Holders of Notes
not joining in the giving of such direction or that may involve the Trustee in
personal liability and the Trustee may take any other action it deems proper
that is not inconsistent with any such direction received from Holders of the
Notes.
SECTION 6.6 LIMITATION ON SUITS
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any costs, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, except as
permitted by Section 9.2, the right of any Holder of a Note to receive payment
of the principal of, premium and Liquidated Damages, if any, and interest on the
Note, on or after the respective due dates expressed in the Note (including in
connection with an offer to purchase) or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.1 occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and
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advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.7 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise; provided that
nothing stated herein shall modify the rights as between the Holders of the
Notes and the holders of Senior Debt or Senior Debt of the Guarantors, as
applicable, as set forth in Article XI. Nothing herein contained shall be deemed
to authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding, provided,
however that the Trustee may, on behalf of the Holders, vote for the election of
a trustee in bankruptcy or similar official and may be a member of the
creditor's committee.
SECTION 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal and Liquidated Damages, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal, premium and Liquidated Damages, if any, and interest,
respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a Record Date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
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SECTION 6.11 UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE VII
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of its
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
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(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph
(b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by an Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to Sections 7.1
and 7.2.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE
(a) In connection with the Trustee's rights and duties under this
Indenture, the Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document;
provided, however, that should the Trustee perform any investigation, such
action shall not, under any circumstances be deemed to constitute an expansion
of its duties hereunder.
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(b) Before the Trustee acts or refrains from acting under this
Indenture, it may require an Officers' Certificate or an Opinion of Counsel or
both. The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel and the written advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
from liability in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.1 hereof, the Trustee shall
have no duty to inquire as to the performance of the Company's covenants in
Article IV hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.1(a), 6.1(b) and 4.1 or (ii) any Default or
Event of Default of which the Trustee shall have received written notification,
or an officer in the corporate trust administration of the Trustee shall have
obtained actual knowledge.
(h) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence
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of indebtedness or other paper or document, but the Trustee may, in its
discretion, make such further inquiry or investigation into such facts or
matters as it may see fit.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as defined in the TIA) it must eliminate such conflict within 90 days,
apply to the SEC for permission to continue as trustee or resign. Any Agent may
do the same with like rights and duties. The Trustee is also subject to Sections
7.10 and 7.11 hereof.
SECTION 7.4 TRUSTEE'S DISCLAIMER
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.5 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice in
the manner and to the extent provided by Section 313(c) of the TIA of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Officers in good faith determines that withholding the notice
is in the interests of the Holders of the Notes.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall
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mail to the Holders of the Notes a brief report dated as of such reporting date
that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a)
has occurred within the 12 months preceding the reporting date, no report need
be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.7 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses (including reasonable attorneys' fees) incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company (including this Section 7.7) and defending itself
against any claim (whether asserted by the Company or any Holder or any other
Person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence, bad faith or willful misconduct.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel,
provided, however, that the Company will not be required to pay such fees and
expenses if it assumes the Trustee's defense and there is no conflict of
interest between the Company and the Trustee in connection with such defense.
The Company need not reimburse any expense or pay for any loss or liability
incurred by the Trustee as a result of its willful
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misconduct, gross negligence or bad faith, or for any settlement made without
its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes, provided that nothing stated herein shall modify
the rights as between the Holders of the Notes and the holders of the Senior
Debt or Senior Debt of the Guarantors, as applicable, as set forth in Article XI
hereof. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Sections 6.1(9) or 6.1(10) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.8 REPLACEMENT OF TRUSTEE
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
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(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee; provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.8, the Company's obligations under Section 7.7 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor
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corporation without any further act shall be the successor Trustee, provided
such successor corporation meets the eligibility criteria set forth in Section
7.10 below.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder that is a
corporation or trust company (or a member of a bank holding company) organized
and doing business under the laws of the United States of America or of any
state thereof that is authorized under such laws to exercise corporate trustee
power, that is subject to supervision or examination by federal or state
authorities and that has (or the bank holding company of which it is a member
has) a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.2 or 8.3 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, each of the Company and the Guarantors, as
applicable, shall, subject to the satisfaction of the applicable conditions set
forth in Section 8.4 hereof, be deemed to have been discharged from its
obligations with respect to all
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outstanding Notes and Guarantees, as applicable, on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Notes and the
Guarantors shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Guarantees, which shall thereafter be deemed to
be "outstanding" only for the purposes of Section 8.5 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes, such Guarantees and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.4 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due, (b) the Company's obligations with respect to such Notes under
Article II and Section 4.2 hereof, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith and (d) this Article VIII. Subject to compliance with this Article
VIII, the Company may exercise its option under this Section 8.2 notwithstanding
the prior exercise of its option under Section 8.3 hereof.
SECTION 8.3 COVENANT DEFEASANCE
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, subject to the satisfaction of the applicable
conditions set forth in Section 8.04 hereof, the Company and the Guarantors
shall be released from their respective obligations under Sections 4.3, 4.4,
4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 4.18 hereof and
the Guarantors shall be released from their obligations under Section 10.3(b)
hereof, in each case on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Guarantees
shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference
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elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.1 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.1 hereof of the option applicable to this
Section 8.3 hereof, subject to the satisfaction of the applicable conditions set
forth in Section 8.4 hereof, (x) Sections 6.1(3) through 6.1(8) hereof shall not
constitute Events of Default and (y) Sections 6.1(9) and 6.1(10) shall not
constitute Events of Default as of the 91st day following the occurrence of the
Company's exercise of Covenant Defeasance; provided, however that for all other
purposes as set forth herein, such Covenant Defeasance provisions shall be
effective.
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit or cause to be deposited with the
Trustee, in trust, for the benefit of the Holders of the Notes, U.S. legal
tender, U.S. Government Obligations or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
Liquidated Damages, if any, and interest on such Notes on the stated date for
payment thereof or on the redemption date of such principal or installment of
principal of, premium, if any, Liquidated Damages, if any, or interest on such
Notes, and the Holders of Notes must have a valid, perfected, exclusive security
interest in such trust;
(2) in the case of an election under Section 8.2 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by the Internal Revenue Service, a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of such Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax
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on the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of an election under Section 8.3 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to such Trustee confirming that the Holders of such Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default under Section 6.1(9)
or (10) are concerned, at any time in the period ending on the 91st day after
the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(6) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and
(7) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that the conditions
precedent provided for in, in the case of the Officers' Certificate, clauses (1)
through (6) and, in the case of the Opinion of Counsel, clauses (1) (with
respect to the validity and perfection of the security interest), (2), (3) and
(5) of this paragraph have been complied with and the Company shall have
delivered to the Trustee an Officers' Certificate, subject to such
qualifications and exceptions as the Trustee deems appropriate, to the effect
that, the trust funds will not be subject to the effect of any applicable
Federal bankruptcy, insolvency, reorganization or similar laws affecting
creditors' right generally.
If the funds deposited with the Trustee to effect Covenant Defeasance are
insufficient to pay the principal of, premium, if any, and interest on the Notes
when due,
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then the obligations of the Company and the Guarantors under this Indenture will
be revived and no such defeasance shall be deemed to have occurred.
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS
Subject to Section 8.6 hereof, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest (and
Liquidated Damages, if any), but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 8.4 hereof or the principal and
interest received in respect thereof, other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or U.S. Government Obligations held by it as provided
in Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6 REPAYMENT TO COMPANY
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, Liquidated Damages, if any, or interest on any Note and remaining unclaimed
for two years after such principal, and premium, if any, Liquidated Damages, if
any, or interest
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has become due and payable shall be paid to the Company on its written request
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Note shall thereafter, as a creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 8.7 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any United States
legal tender or U.S. Government Obligations in accordance with Section 8.2 or
8.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof,
as the case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
SECTION 8.8 SATISFACTION AND DISCHARGE
In addition to the Company's rights under Sections 8.2 and 8.3, the
Company and the Guarantors may terminate all of their obligations under this
Indenture (subject to Section 8.7) when:
(1) either (a) all such outstanding Notes theretofore authenticated
and delivered (other than Notes that have been destroyed, lost or stolen and
that have been replaced or paid as provided in Section 2.7) have been delivered
to the Trustee for cancellation, or (b) all such Notes not theretofore delivered
to the Trustee for cancellation have become due and payable or, within one year
will become due and
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payable or subject to redemption under Section 3.7 hereof, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest to the Stated Maturity of the Notes;
(2) the Company has paid all sums payable hereunder; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the satisfaction and discharge of this
Indenture have been complied with, and that such satisfaction and discharge will
not result in a breach or violation of, or constitute a Default under, this
Indenture or any other instrument to which the Company, any Guarantors or any of
their Subsidiaries is a party or by which it or their property is bound.
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES
Notwithstanding Section 9.2 of this Indenture, the Company, any
Guarantors and the Trustee may amend or supplement this Indenture, the Notes or
any Guarantee, without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of the Company's obligations to
the Holders of the Notes in the case of a merger or consolidation pursuant to
Article V hereof;
(d) to provide for additional Guarantors as set forth in Section
4.16 or for the release or assumption of a Guarantee in compliance with this
Indenture;
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(e) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
rights hereunder of any Holder;
(f) to comply with the provisions of the Depositary, Euroclear or
Cedel or the Trustee with respect to the provisions of this Indenture or the
Notes relating to transfers and exchanges of Notes or beneficial interests
therein; or
(g) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
9.6 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES
Except as expressly stated otherwise in this Section 9.2, and
subject to Sections 6.4 and 6.7 hereof, the Company, any Guarantors and the
Trustee may amend or supplement this Indenture, the Notes and the Guarantees,
with the consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, the
Notes), and, subject to Sections 6.4 and 6.7 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Notes may be waived with the consent
of the Holders of a majority in aggregate principal amount of the then
outstanding Notes (including consents obtained in connection with a purchase of,
or tender offer or exchange offer for, the Notes); provided, that no such
modification may, without the consent of Holders of at least 66 2/3% in
aggregate principal amount of Notes at the time outstanding, modify the
provisions (including the defined terms used therein)
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of Section 4.14 in a manner adverse to the Holders; and provided, further,
however, that no such modification may, without the consent of each Holder
affected:
(a) change the final Stated Maturity on any Note, or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof pursuant to
Article III hereof, or change the place of payment where, or the coin or
currency in which, any Note or any premium or the interest thereon (and
Liquidated Damages, if any) is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity thereof
(or in the case of redemption pursuant to Article III hereof, on or after the
redemption date), or, after the applicable Change of Control or Asset Sale
occurs, reduce the corresponding Change of Control Purchase Price or the Asset
Sale Offer Price or alter the provisions (including the defined terms used
herein) of Article III of this Indenture in a manner adverse to the Holders; or
(b) reduce the percentage in principal amount of the outstanding
Notes, the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in this Indenture; or
(c) modify any of the waiver provisions, except to increase any
required percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
outstanding Note affected thereby.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.6 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture adversely affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental indenture.
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It shall not be necessary for the consent of the Holders of Notes
under this Section 9.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment or supplement to this Indenture or the Notes shall
be set forth in an amended or supplemental Indenture that complies with the TIA
as then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS
Until an amendment, supplement or waiver becomes effective (as
determined by the Company and which may be prior to any such amendment,
supplement or waiver becoming operative), a consent to it by a Holder of a Note
is a continuing consent by the Holder of a Note and every subsequent Holder of a
Note or portion of a Note that evidences the same Indebtedness as the consenting
Holder's Note, even if notation of the consent is not made on any Note. However,
any such Holder of a Note or subsequent Holder of a Note may revoke the consent
as to its Note if the Trustee receives written notice of revocation before the
date the waiver, supplement or amendment becomes effective (as determined by the
Company).
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date.
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After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it makes a change described in any of clauses (a)
through (c) of Section 9.2 hereof, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; provided, that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal and premium of
and interest (and Liquidated Damages, if any) on a Note, on or after the
respective dates set for such amounts to become due and payable expressed in
such Note, or to bring suit for the enforcement of any such payment on or after
such respective dates.
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article IX if the amendment, supplement or waiver
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. In executing any amendment, supplement or waiver, the Trustee shall be
entitled to receive indemnity reasonably satisfactory to it and to receive and
(subject to Section 7.1) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of such
amendment, supplement or waiver is authorized or permitted by this Indenture.
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ARTICLE X
GUARANTEES
SECTION 10.1 GUARANTEES
Subject to the provisions of this Article X, and in consideration of good
and valuable consideration, the receipt of and sufficiency of which are hereby
acknowledged, each Guarantor that from time to time shall be required to
execute a Guarantee in accordance with Section 4.16 hereof, jointly and
severally, hereby unconditionally guarantees, as to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, that: (a) the principal of, and premium and interest and Liquidated
Damages, if any, on the Notes shall be duly and punctually paid in full when
due, whether at maturity, by acceleration, call for redemption, upon a Change of
Control Offer, upon an Asset Sale Offer or otherwise, and interest on overdue
principal, and premium, if any, and (to the extent permitted by law) interest on
any interest, if any, on the Notes and all other obligations of the Company to
the Holders or the Trustee hereunder or under the Notes (including fees,
expenses or other) shall be promptly paid in full or performed, all in
accordance with the terms hereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, the same shall
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration, call for
redemption, upon a Change of Control, upon an Asset Sale Offer, upon a Mandatory
Redemption or otherwise (collectively, the "Guarantee Obligations"). Failing
payment when due of any Guarantee Obligation or failing performance of any other
obligation of the Company to the Holders, for whatever reason, each Guarantor
shall be obligated to pay, or to perform or to cause the performance of, the
same immediately and before the failure to so pay becomes an Event of Default.
An Event of Default under this Indenture or the Notes shall constitute an event
of default under this Guarantee, and shall entitle the Trustee or the Holders of
Notes to accelerate the Guarantee Obligations of each Guarantor hereunder in the
same manner and to the same extent as the Obligations of the Company.
Each Guarantor hereby agrees that its Guarantee Obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any thereof, the entry of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a
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Guarantor. Each Guarantor hereby waives and relinquishes, (a) any right to
require the Trustee, the Holders or the Company (each, a "Benefitted Party") to
proceed against the Company, the Subsidiaries or any other Person or to proceed
against or exhaust any security held by a Benefitted Party at any time or to
pursue any other remedy in any secured party's power before proceeding against
the Guarantors; (b) any defense that may arise by reason of the incapacity, lack
of authority, death or disability of any other Person or Persons or the failure
of a Benefitted Party to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any other Person or
Persons; (c) demand, protest and notice of any kind (except as expressly
required by this Indenture), including but not limited to notice of the
existence, creation or incurring of any new or additional Indebtedness or
obligation or of any action or non-action on the part of the Guarantors, the
Company, the Subsidiaries, any Benefitted Party, any creditor of the Guarantors,
the Company or the Subsidiaries or on the part of any other Person whomsoever in
connection with any obligations the performance of which are hereby guaranteed;
(d) any defense based upon an election of remedies by a Benefitted Party,
including but not limited to an election to proceed against the Guarantors for
reimbursement; (e) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal; (f) any defense
arising because of a Benefitted Party's election, in any proceeding instituted
under the Bankruptcy Law, of the application of Section 1111(b)(2) of the
Bankruptcy Code; and (g) any defense based on any borrowing or grant of a
security interest under Section 364 of the Bankruptcy Code. The Guarantors
hereby covenant that, except as otherwise provided therein, the Guarantees shall
not be discharged except by payment in full of all Guarantee Obligations,
including the principal, premium, if any, and interest on the Notes and all
other costs provided for under this Indenture or as provided in Section 8.1.
If any Holder or the Trustee is required by any court or otherwise
to return to either the Company or the Guarantors, or any trustee or similar
official acting in relation to either the Company or the Guarantors, any amount
paid by the Company or the Guarantors to the Trustee or such Holder, the
Guarantees, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each of the Guarantors agrees that it shall not be entitled to
any right of subrogation in relation to the Holders in respect of any Guarantee
Obligations hereby until payment in full of all such obligations guaranteed
hereby. Each Guarantor agrees that, as between it, on the one hand, and the
Holders of Notes and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article VI
hereof for the purposes hereof, notwithstanding any stay, injunction or other
prohibition preventing such
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acceleration in respect of the Guarantee Obligations, and (y) in the event of
any acceleration of such obligations as provided in Article VI hereof, such
Guarantee Obligations (whether or not due and payable), shall forthwith become
due and payable by such Guarantor for the purpose of the Guarantee.
SECTION 10.2 EXECUTION AND DELIVERY OF GUARANTEES
To evidence the Guarantees set forth in Section 10.1 hereof, each of
the Guarantors agrees that a notation of the Guarantees substantially in the
form included in Exhibit A hereto shall be endorsed on each Note authenticated
and delivered by the Trustee and that this Indenture shall be executed on behalf
of each of the Guarantors by an Officer of each of the Guarantors.
Each of the Guarantors agree that the Guarantees set forth in this
Article X shall remain in full force and effect and apply to all the Notes
notwithstanding any failure to endorse on each Note a notation of the
Guarantees.
If an Officer whose facsimile signature is on a Note or a notation
of Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which the Guarantees are endorsed, the Guarantees shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantees set forth in
this Indenture on behalf of the Guarantors.
SECTION 10.3 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
(a) Nothing contained in this Indenture or in the Notes shall
prevent any consolidation or merger of any Guarantor with or into each other or
with or into the Company. Upon any such consolidation or merger, the Subsidiary
Guarantee of the Subsidiary Guarantor that does not survive the consolidation or
merger shall no longer be of any force or effect.
(b) Except as set forth in Article IV and for a merger or
consolidation in which a Guarantor is sold and its Guarantee is released in
compliance with the provisions of Section 10.4, no Guarantor shall consolidate
or merge with or into (whether or not such Guarantor is the surviving Person)
another Person unless, subject to the provisions of the following paragraph and
certain other provisions of this
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Indenture, (i) the Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the obligations of such
Guarantor pursuant to a supplemental indenture in form reasonably satisfactory
to the Trustee, pursuant to which such person shall unconditionally guarantee,
on a senior subordinated basis, all of such Guarantor's obligations under such
Guarantor's Guarantee and this Indenture on the terms set forth in this
Indenture; (ii) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred or be continuing; and (iii) immediately after such transaction, the
surviving Person holds all permits required for operation of the business of,
and such entity is controlled by a Person or entity (or has retained a Person or
entity which is) experienced in, operating casino hotels or otherwise holds all
permits (including those required from Gaming Authorities) to operate its
business. In case of any such consolidation or merger and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and reasonably satisfactory in form to the Trustee, of the
Guarantees endorsed upon the Notes and the due and punctual performance of all
of the covenants and conditions of this Indenture to be performed by such
Guarantor, such successor corporation shall succeed to and be substituted for
such Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed any or
all of the Guarantees to be endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Guarantees so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Guarantees theretofore and
thereafter issued in accordance with the terms of this Indenture as though all
of such Guarantees had been issued at the date of the execution hereof.
(c) The Trustee, subject to the provisions of Section 12.4 hereof,
shall be entitled to receive an Officers' Certificate as conclusive evidence
that any such consolidation or merger, and any such assumption of Guarantee
Obligations, comply with the provisions of this Section 10.3. Such Officers'
Certificate shall comply with the provisions of Section 12.5.
SECTION 10.4 RELEASE OF GUARANTORS
Notwithstanding Section 10.3(b), upon the sale or disposition
(whether by merger, stock purchase, asset sale or otherwise) of a Guarantor (or
all or substantially all of its assets) to an entity which is not a Subsidiary,
or the designation of a Subsidiary to become an Unrestricted Subsidiary, which
transaction is otherwise in compliance
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with this Indenture (including, without limitation, the provisions of Section
4.13), such Guarantor shall be deemed released from its obligations under its
Guarantee of the Notes; provided that any such termination shall occur only to
the extent that all obligations of such Guarantor under all of its guarantees
of, and under all of its pledges of assets or other security interests which
secure, any Indebtedness of the Company or any other Subsidiary of the Company
shall terminate upon such release, sale or transfer.
Upon delivery by the Company to the Trustee of an Officer's
Certificate, to the effect that such sale or other disposition or that such
designation was made by the Company in accordance with the provisions of this
Indenture, the Trustee shall execute any documents reasonably required in order
to evidence the release of any such Guarantor from its Guarantee Obligations
under its Guarantee. Except as provided in Section 10.3(a), any Guarantor not
released from its Guarantee Obligations under its Guarantee shall remain liable
for the full amount of principal of and interest on the Notes and for the other
obligations of any Guarantor under this Indenture as provided in this Article X.
Notwithstanding the foregoing provisions of this Article X, (i) any
Guarantor whose Guarantee would otherwise be released pursuant to the provisions
of this Section 10.4 may elect, at its sole discretion, by written notice to the
Trustee, to maintain such Guarantee in effect notwithstanding the event or
events that otherwise would cause the release of such Guarantee (which election
to maintain such Guarantee in effect may be conditional or for a limited period
of time), and (ii) any Subsidiary of the Company which is not a Guarantor may
elect, at its sole discretion, by written notice to the Trustee, to become a
Guarantor (which election may be conditional or for a limited period of time).
SECTION 10.5 LIMITATION OF GUARANTOR'S LIABILITY; CERTAIN BANKRUPTCY EVENTS
(a) Each Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the Guarantee
Obligation of such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, the Holders
and such Guarantor hereby irrevocably agree that the Guarantee Obligations of
such Guarantor under this Article X shall be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by
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or on behalf of any other Guarantor in respect of the Guarantee Obligations of
such other Guarantor under this Article X, result in the Guarantee Obligations
of such Guarantor under the Guarantee of such Guarantor not constituting a
fraudulent transfer or conveyance.
(b) Each Guarantor hereby covenants and agrees, to the fullest
extent that it may do so under applicable law, that in the event of the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, such Guarantor shall not file (or join in any filing of), or otherwise
seek to participate in the filing of, any motion or request seeking to stay or
to prohibit (even temporarily) execution on the Guarantee and hereby waives and
agrees not to take the benefit of any such stay of execution, whether under
Section 362 or 105 of the Bankruptcy Law or otherwise.
SECTION 10.6 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE GUARANTORS
(a) For purposes of any provision of this Indenture which provides
for the delivery by any Guarantor of an Officers' Certificate and/or an Opinion
of Counsel, the definitions of such terms in Section 1.1 shall apply to such
Guarantor as if references therein to the Company were references to such
Guarantor.
(b) Any request, direction, order or demand which by any provision
of this Indenture is to be made by any Guarantor, shall be sufficient if
evidenced as described in Section 12.2 as if references therein to the Company
were references to such Guarantor.
(c) Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Notes to or on any Guarantor may be given or served as described in Section 12.2
as if references therein to the Company were references to such Guarantor.
(d) Upon any demand, request or application by any Guarantor to the
Trustee to take any action under this Indenture, such Guarantor shall furnish to
the Trustee such certificates and opinions as are required in Section 12.4
hereof as if all references therein to the Company were references to such
Guarantor.
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SECTION 10.7 SUBORDINATION OF GUARANTEES
The obligations of each Guarantor under its Guarantee pursuant to
this Article X is subordinated in right of payment to the prior payment in full
in cash of all Senior Debt of such Guarantor on the same basis as the Notes are
subordinated to Senior Debt of the Company. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Guarantors only at such times as they may receive
and/or retain payments in respect of Notes pursuant to this Indenture, including
Article XI hereof. In the event that the Trustee receives any Guarantor payment
at a time when an officer of the corporate trust administration of the Trustee
has actual knowledge that such payment is prohibited by the foregoing sentence,
such Guarantor payment shall be paid over and delivered to the holders of the
Senior Debt of such Guarantor remaining unpaid, to the extent necessary to pay
in full all such Senior Debt. In the event that a Holder receives any Guarantor
payment at a time when such payment is prohibited by the foregoing sentence,
such Guarantor payment shall be paid over and delivered to the holders of the
Senior Debt of such Guarantor remaining unpaid, to the extent necessary to pay
in full all such Senior Debt.
Each Holder of a Note by its acceptance thereof (a) acknowledge that
as of the Issue Date there are no Guarantors, (b) agrees to and shall be bound
by the provisions of this Section 10.7, (c) authorizes and directs the Trustee
on the Holder's behalf to take such action as may be necessary and appropriate
to effectuate the subordination so provided, and (d) appoints the Trustee as the
Holder's attorney-in-fact for any and all such purposes.
ARTICLE XI
SUBORDINATION
SECTION 11.1 NOTES SUBORDINATE TO SENIOR DEBT.
The Company, the Guarantors and each Holder, by its acceptance of
the Notes, agree that (a) the payment of the principal of and interest on the
Notes and (b) except as set forth in Section 11.14 hereof, any other payment in
respect of the Notes, including on account of the acquisition or redemption of
the Notes by the Company and the Guarantors (including, without limitation,
pursuant to Sections 3.8, 3.9, 4.13 and 4.14 and Article X), as applicable, is
subordinated, to the extent and in the manner
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provided in this Article XI, to the prior payment in full in cash of all Senior
Debt of the Company and the Guarantors and that these subordination provisions
are for the benefit of the holders of Senior Debt.
This Article XI shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Debt, and such provisions are made for the benefit of the holders of
Senior Debt and such holders are made obligees hereunder and any one or more of
them may enforce such provisions.
SECTION 11.2 NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
No payment (by set-off or otherwise) shall be made by or on behalf
of the Company or the Guarantors, as applicable, on account of the principal of,
premium, if any, or interest or Liquidated Damages, if any, on the Notes
(including any repurchases of Notes), or on account of any other obligation for
the payment of money due in respect of the Notes, or on account of the
redemption provisions of the Notes, for cash or property (other than Junior
Securities), (i) upon the maturity of any Senior Debt of the Company or such
Guarantor by lapse of time, acceleration (unless waived) or otherwise, unless
and until all principal of, premium, if any, and the interest on or other
amounts owing in respect of such Senior Debt are first paid in full in cash (or
such payment is duly provided for in cash), or (ii) in the event of a default in
the payment of any principal of, premium, if any, or interest on, Designated
Senior Debt of the Company or such Guarantor when it becomes due and payable,
whether at maturity, or at a date fixed for prepayment or by declaration of
acceleration or otherwise (a "Payment Default"), unless and until such Payment
Default has been cured or waived or otherwise has ceased to exist.
Upon (i) the happening of an event of default other than a Payment
Default that permits the holders of Senior Debt or any representative thereof to
declare such Senior Debt to be due and payable and (ii) written notice of such
event of default given to the Trustee by the Company or any holder of Designated
Senior Debt or their representative (a "Payment Notice"), then, unless and until
such event of default has been cured or waived or otherwise has ceased to exist,
no payment (by set-off or otherwise) may be made in cash, property or securities
(other than Junior Securities) by or on behalf of the Company or any Guarantor,
as applicable, which is an obligor under such Designated Senior Debt on account
of any Obligation in respect of the Notes, including the principal of, premium,
if any, or interest on the Notes (including any repurchases of any of the
Notes), or on account of the redemption provisions of the
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Notes (or Liquidated Damages), in any such case. Notwithstanding the foregoing,
unless the Designated Senior Debt in respect of which such event of default
exists has been declared due and payable in its entirety within 179 days after
the Payment Notice is delivered as set forth above (the "Payment Blockage
Period") (and such declaration has not been rescinded or waived), at the end of
the Payment Blockage Period, unless such payments are prohibited by the
immediately preceding or immediately succeeding paragraphs, the Company and the
Guarantors shall resume all payments as and when due on the Notes. Any number of
Payment Notices may be given; provided, however, that (i) not more than one
Payment Notice shall be given within a period of any 360 consecutive days, and
(ii) no default that existed upon the date of such Payment Notice or the
commencement of such Payment Blockage Period (whether or not such event of
default is on the same issue of Designated Senior Debt) shall be made the basis
for the commencement of any other Payment Blockage Period (unless such default
shall have been cured or waived for a period of not less than 181 days).
In furtherance of the provisions of Section 11.1, in the event that,
notwithstanding the foregoing provisions of this Section 11.2, any payment or
distribution of assets of the Company or any Guarantor (other than Junior
Securities) shall be received by the Trustee or the Holders at a time when the
Trustee or such Holder, as applicable, has actual knowledge that such payment or
distribution is prohibited by the foregoing provisions of this Section 11.2,
such payment or distribution shall be held in trust for the benefit of the
holders of such Senior Debt, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of such Senior Debt remaining
unpaid or unprovided for or to their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Debt may have been issued, ratably according to
the aggregate principal amounts remaining unpaid on account of such Senior Debt
held or represented by each, for application to the payment of all such Senior
Debt remaining unpaid, to the extent necessary to pay or to provide for the
payment of all such Senior Debt in full in cash after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt.
SECTION 11.3 NOTES SUBORDINATE TO PRIOR PAYMENT OF ALL SENIOR DEBT ON
DISSOLUTION, LIQUIDATION OR REORGANIZATION.
Except as described in Section 11.14 hereof, upon any distribution
of the assets of the Company or any Guarantor upon any dissolution, winding up,
total or partial liquidation or reorganization of the Company or a Guarantor,
whether voluntary
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or involuntary, in bankruptcy, insolvency, receivership or a similar proceeding
or upon assignment for the benefit of creditors or any marshalling of assets or
liabilities:
(i) the holders of all Senior Debt of the Company or such
Guarantor, as applicable, shall first be entitled to receive payment in full in
cash (or have such payment duly provided for) or otherwise to the extent holders
accept satisfaction of amounts due by settlement in other than cash before the
Holders are entitled to receive any payment on account of any Obligation in
respect of the Notes, including the principal of, premium, if any, and interest
on the Notes or Liquidated Damages, if any, pursuant to the Registration Rights
Agreement (other than Junior Securities); and
(ii) any payment or distribution of assets of the Company or
such Guarantor of any kind or character from any source, whether in cash,
property or securities (other than Junior Securities) to which the Holders or
the Trustee on behalf of the Holders would be entitled (by set-off or
otherwise), except for the subordination provisions contained in this Indenture,
shall be paid by the liquidating trustee or agent or other person making such a
payment or distribution directly to the holders of such Senior Debt or their
representative to the extent necessary to make payment in full in cash (or have
such payment duly provided for in cash) on all such Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
SECTION 11.4 HOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full in cash of all Senior Debt of the
Company or any Guarantor as provided herein, the Holders of Notes shall be
subrogated to the rights of the holders of such Senior Debt to receive payments
or distributions of assets of the Company and any Guarantor applicable to the
Senior Debt until all amounts owing on the Notes shall be paid in full, and for
the purpose of such subrogation no such payments or distributions to the holders
of such Senior Debt by or on behalf of the Company or any Guarantor, or by or on
behalf of the Holders by virtue of this Article XI, which otherwise would have
been made to the Holders shall, as between the Company or any Guarantor and the
Holders, be deemed to be payment by the Company or any Guarantor or on account
of such Senior Debt, it being understood that the provisions of this Article XI
are and are intended solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of such Senior Debt, on the other
hand.
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SECTION 11.5 OBLIGATIONS OF THE COMPANY AND THE GUARANTORS UNCONDITIONAL.
Nothing contained in this Article XI or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as between the Company
and any Guarantors and the Holders, the obligation of each such Person, which is
absolute and unconditional, to pay to the Holders the principal of, premium, if
any, and interest on (or, if applicable, Liquidated Damages, if any) the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders and
creditors of the Company and the Guarantors other than the holders of the Senior
Debt, nor shall anything herein or therein prevent the Trustee or any Holder
from exercising all remedies otherwise permitted by applicable law upon any
default under this Indenture, subject to the rights, if any, under this Article
XI, of the holders of Senior Debt, including, without limitation, their right to
receive any cash, property or Notes of the Company and the Guarantors received
upon the exercise of any such remedy. Notwithstanding anything to the contrary
in this Article XI or elsewhere in this Indenture or in the Notes, upon any
distribution of assets of the Company and the Guarantors referred to in this
Article XI, the Trustee, subject to the provisions of Sections 7.1 and 7.2, and
the Holders shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other Person making any distribution to the Trustee or to
the Holders for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Debt and other Indebtedness of
the Company or any Guarantor, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article XI so long as such court has been apprised of the provisions of,
or the order, decree or certificate makes reference to, the provisions of this
Article XI. Nothing in this Article XI shall apply to the claims of, or payments
to, the Trustee under or pursuant to Section 7.7.
SECTION 11.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN ABSENCE OF
NOTICE
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior Debt
(or a representative on behalf of such holder) to establish that such notice has
been given by a holder of Senior Debt or a representative on behalf of such
holder. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any
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Person who is a holder of Senior Debt to participate in any payment or
distribution pursuant to this Article XI, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Debt held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article XI, and if such evidence is not
furnished the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment or until
such time as the Trustee shall be otherwise satisfied as to the right of such
Person to receive such payment.
SECTION 11.7 APPLICATION BY TRUSTEE OF ASSETS DEPOSITED WITH IT.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of Holders and, to
the extent (i) the making of such deposit by the Company shall not be in
contravention of any term or provisions of the Horseshoe Credit Agreement or the
New Credit Facility, as applicable, or other Senior Debt and (ii) allocated for
the payment of Notes, shall not be subject to the subordination provisions of
this Article XI. Otherwise, any deposit of assets with the Trustee or the Paying
Agent (whether or not in trust) for the payment of principal of or interest on
any Notes shall be subject to the provisions of Sections 11.1, 11.2, 11.3 and
11.4; provided that, if prior to one Business Day preceding the date on which by
the terms of this Indenture any such assets may become distributable for any
purpose (including without limitation, the payment of either principal of or
interest on any Security) the Trustee or such Paying Agent shall not have
received with respect to such assets the written notice provided for in Section
11.6, then the Trustee or such Paying Agent shall have full power and authority
to receive such assets and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such date.
SECTION 11.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE
COMPANY, THE GUARANTORS OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt to
enforce subordination provisions contained in this Article XI shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or any Guarantor or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company or any Guarantor with
the terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or be otherwise
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charged with. The holders of Senior Debt may extend, renew, modify or amend the
terms of the Senior Debt or any security therefor and release, sell or exchange
such security and otherwise deal freely with the Company and the Guarantors, all
without affecting the liabilities and obligations of the parties to this
Indenture or the Holders. The subordination provisions contained in this
Indenture are for the benefit of the holders from time to time of Senior Debt
and may not be rescinded, cancelled, amended or modified in any way other than
any amendment or modification that would not adversely affect the rights of any
holder of Senior Debt or any amendment or modification that is consented to by
each holder of Senior Debt that would be adversely affected thereby. The
subordination provisions hereof shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Senior Debt is
rescinded or must otherwise be returned by any holder of the Senior Debt upon
the insolvency, bankruptcy, or reorganization of the Company or any Guarantor,
or otherwise, all as though such payment has not been made.
SECTION 11.9 HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF NOTES.
Each Holder of the Notes by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article XI and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company or any Guarantor (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or any other marshalling of assets and liabilities of the Company or
any Guarantor), the immediate filing of a claim for the unpaid balance of his
Notes in the form required in said proceedings and cause said claim to be
approved. In the event of any liquidation or reorganization of the Company or
any Guarantor in bankruptcy, insolvency, receivership or similar proceeding, if
the Holders of the Notes (or the Trustee on their behalf) have not filed any
claim, proof of claim, or other instrument of similar character necessary to
enforce the obligations of the Company or any Guarantor in respect of the Notes
at least thirty (30) days before the expiration of the time to file the same,
then in such event, but only in such event, the Representatives under the
Horseshoe Credit Agreement or the New Credit Facility or the holders of an
aggregate of at least $5,000,000 principal amount outstanding of any other
Senior Debt or a representative on their behalf may, as an attorney-in-fact for
such Holders, file any claim, proof of claim, or other instrument of similar
character on behalf of such Holders.
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Nothing herein contained shall be deemed to authorize the Trustee or the holders
of Senior Debt or their representative to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Debt or their
representative to vote in respect of the claim of any Holder in any such
proceeding. As a condition to taking any action by the Trustee pursuant to this
Section 11.9, the Holders shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
thereby.
SECTION 11.10 RIGHTS OF TRUSTEE TO HOLD SENIOR DEBT.
The Trustee shall be entitled to all of the rights set forth in this
Article XI in respect of any Senior Debt at any time held by it to the same
extent as any other holder of Senior Debt, and nothing in this Indenture shall
be construed to deprive the Trustee of any of its rights as such holder.
SECTION 11.11 ARTICLE XI NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium,
if any, or interest (or Liquidated Damages, if any) on the Notes by reason of
any provision of this Article XI shall not be construed as preventing the
occurrence of a Default or an Event of Default under Section 6.1 or in any way
limit the rights of the Trustee or any Holder to pursue any other rights or
remedies with respect to the Notes.
SECTION 11.12 NO FIDUCIARY DUTY OF TRUSTEE TO HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders (other than
for its willful misconduct or negligence) if it shall in good faith mistakenly
pay over or distribute to the Holders of Notes or the Company, any Guarantor or
any other Person, cash, property or Notes to which any holders of Senior Debt
shall be entitled by virtue of this Article XI or otherwise. Nothing in this
Section 11.12 shall affect the obligation of any other such Person to hold such
payment for the benefit of, and to pay such payment over to, the holders of
Senior Debt or their representative. In the event of any conflict between the
fiduciary duty of the Trustee to the Holders of Notes and any duty to the
holders of Senior Debt, the Trustee is expressly authorized to resolve such
conflict in favor of the Holders.
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SECTION 11.13 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article XI, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article XI.
SECTION 11.14 HOLDERS' RIGHTS TO RECEIVE FUNDS IN SECURED PROCEEDS ACCOUNT NOT
IMPAIRED BY SUBORDINATION PROVISIONS
Notwithstanding the foregoing provisions of this Article XI, the
rights of Holders to receive any funds in the Secured Proceeds Account or, prior
to the Empress Merger or a Mandatory Redemption, as applicable, upon any
distribution of assets of the Company or any Guarantor upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company or any
Guarantor, will not be subject to the above subordination provisions.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by the TIA, the imposed duties shall control.
SECTION 12.2 NOTICES
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
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If to the Company:
Horseshoe Gaming Holding Corp.
4024 S. Industrial Road
Las Vegas, NV 89103
Telephone No.: (702) 650-0080
Telecopier No.: (702) 650-0081
Attention: Chief Financial Officer
With a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue, 20th Floor
New York, NY 10022
Attention: Robert M. Friedman, Esq.
Telecopier: (212) 758-9500
If to the Trustee:
U.S. Trust Company, National Association
515 South Flower Street
Suite 2700
Los Angeles, CA 90022
Attention: Larry Gerquest
Assistant Vice President
Corporate Trust Department
Telecopier: (213) 488-1370
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications;
provided, that until such time, all notices under this Indenture to the Trustee
shall be sent to both of the Trustee's addresses set forth above.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.3 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, any Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee,
if required by the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants, if any, have been satisfied.
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SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and (d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied; provided, however, that
with respect to matters of fact, an Opinion of Counsel may rely on an Officers'
Certificate or certificate of public officials.
SECTION 12.6 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No past, present or future director, officer, employee, incorporator
or stockholder (direct or indirect) of the Company or the Guarantors (or any
such successor entity), as such, shall have any liability for any Obligations of
the Company or the Guarantors under the Notes, the Guarantees or this Indenture
or for any claim based on, in respect of, or by reason of, such Obligations or
their creation, except in their capacity as an obligor or Guarantor of the Notes
in accordance with this Indenture. Each Holder
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by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
SECTION 12.8 GOVERNING LAW
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
SECTION 12.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
SECTION 12.10 SUCCESSORS
All agreements of the Company and the Guarantors in this Indenture
and the Notes shall bind their successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 12.11 SEVERABILITY
In case any one or more of the provisions of this Indenture or in
the Notes or in the Guarantees shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 12.12 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed this Indenture as of
the date first written above.
THE COMPANY:
HORSESHOE GAMING HOLDING CORP.
By: /s/ Jack B. Binion
----------------------------------
Name: Jack B. Binion
Title: Chairman of the Board,
President,
Chief Executive Officer and
Secretary
By: /s/ Kirk C. Saylor
----------------------------------
Name: Kirk C. Saylor
Title: Chief Financial Officer
THE TRUSTEE:
U.S. TRUST COMPANY, NATIONAL
ASSOCIATION
By: /s/ Sandra H. Leess
----------------------------------
Name: Sandra H. Leess
Title: Senior Vice President
<PAGE> 146
Exhibit A
[FORM OF NOTE]
HORSESHOE GAMING HOLDING CORP.
8 5/8% [SERIES A] [SERIES B](1) SENIOR SUBORDINATED NOTE
DUE 2009
No. CUSIP: __________
$_____________
Horseshoe Gaming Holding Corp., a Delaware corporation (hereinafter called
the "Company" which term includes any successors under this Indenture
hereinafter referred to), for value received, hereby promises to pay to, or
registered assigns, the principal sum of Dollars, on May 15, 2009.
Interest Payment Dates: May 15 and November 15; commencing November 15,
1999.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Note on the reverse
side, which will, for all purposes, have the same effect as if set forth at this
place.
- ----------
(1)Series A should be replaced with Series B in the Exchange Notes.
A-1
<PAGE> 147
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
HORSESHOE GAMING HOLDING CORP.,
a Delaware corporation
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-mentioned Indenture.
U.S. TRUST COMPANY,
NATIONAL ASSOCIATION
By: ___________________________________
Authorized Signatory
Dated: May , 1999
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<PAGE> 148
(Back of Note)
8 5/8% [Series A] [Series B](2) Senior Subordinated Notes due 2009
[THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.](3)
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON
- --------
(2)Series A should be replaced with Series B in the Exchange Notes.
(3)To be included only on Global Notes deposited with DTC as Depositary.
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<PAGE> 149
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.](4)
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS
THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM
ACCRUING ON THIS NOTE.](5)
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT, IN CONNECTION WITH EXEMPT RESALES OF THE NOTES BY
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, CIBC INC., UTENDAHL CAPITAL
PARTNERS, LP AND WASSERSTEIN PERELLA SECURITIES, INC. (THE "INITIAL
PURCHASERS"), (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT, IN CONNECTION WITH RESALES AND TRANSFERS OF THE NOTES OTHER
THAN EXEMPT RESALES OF THE NOTES BY THE INITIAL PURCHASERS, IT WILL NOT RESELL
OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
- --------
(4)To be included only on Global Notes deposited with DTC as Depositary.
(5)To be included only on Reg S Temporary Global Notes.
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<PAGE> 150
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT,
(D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR
TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM
OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER), OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "U.S. PERSON" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.](6)
- --------
(6)To be included only on Transfer Restricted Notes.
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Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. Horseshoe Gaming Holding Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
8 5/8% per annum from May 11, 1999 until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on May 15 and November 15 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on this Note will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
Issue Date; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a Record Date (defined
below) referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be November 15,
1999. The Company shall pay interest (including Accrued Bankruptcy Interest in
any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at the rate then in effect; it shall pay
interest (including Accrued Bankruptcy Interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any, (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on this Note (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the May 1 or November 1
next preceding the Interest Payment Date (each a "Record Date"), even if such
Notes are cancelled after such Record Date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture (as defined
below) with respect to defaulted interest. This Note will be payable as to
principal, premium, interest and Liquidated Damages, if any, at the office or
agency of the Company maintained within the City and State of New York for such
purpose, or, at the option of the Company, payment of interest and Liquidated
Damages, if any, may be made by check mailed to the Holders at their addresses
set forth in the register of Holders, and provided that payment by wire transfer
of immediately available funds to an account within the United States will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on all Global Notes. Such payment shall be in such coin or
currency of the United States
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of America as at the time of payment is legal tender for payment of public and
private debts.
3. Paying Agent and Registrar. Initially, U.S. Trust Company, National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued this Note under an Indenture dated as of
May 11, 1999 ("Indenture") between the Company and the Trustee. The terms of
this Note include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code ss.ss. 77aaa-77bbbb). This Note is subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. The
Notes will be limited in aggregate principal amount to $600,000,000.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this Section, the Company
shall not have the option to redeem this Note pursuant to this Section 5 prior
to May 15, 2004. This Note will be redeemable for cash at the option of the
Company, in whole or in part, at any time on or after May 15, 2004, upon not
less than 30 days nor more than 60 days prior notice mailed by first class mail
to each Holder at its last registered address, at the following redemption
prices (expressed as percentages of the principal amount) if redeemed during the
12-month period commencing May 15 of the years indicated below, in each case
(subject to the right of Holders of record on a Record Date to receive the
corresponding interest due (and the corresponding Liquidated Damages, if any) on
the corresponding Interest Payment Date that is on or prior to such redemption
date) together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004................................................104.313%
2005................................................102.875%
2006................................................101.438%
2007 and thereafter.................................100.000%
</TABLE>
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(b) Notwithstanding the provisions of clause (a) of this Section, at
any time or from time to time until May 15, 2002, up to 35% of the aggregate
principal amount of the Notes originally issued under the Indenture may be
redeemed at the option of the Company within 90 days of a Public Equity
Offering, on not less than 30 days, but not more than 60 days, prior notice to
each Holder of the Notes to be redeemed, with cash from the Net Cash Proceeds of
such Public Equity Offering, at a redemption price equal to 108.625% of the
principal amount thereof (subject to the right of Holders of record on a Record
Date to receive the corresponding interest (and the corresponding Liquidated
Damages, if any) due on the Interest Payment Date that is on or prior to such
redemption date) together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date; provided that immediately
following such redemption not less than 65% of the aggregate principal amount of
the Notes originally issued pursuant to the Indenture remain outstanding. In the
event the Company is required to consummate, and does so consummate, a Mandatory
Redemption in accordance with the terms of the Indenture, the aggregate
principal amount of Notes originally issued pursuant to the Indenture shall be
deemed to be reduced by the aggregate principal amount of Notes subject to the
Mandatory Redemption.
(c) Notice of redemption will be mailed by first class mail at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in integral multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption unless the Company defaults in such payments due on the
redemption date.
6. Mandatory Redemption.
(a) If (i) the Empress Merger has not occurred by December 1, 1999,
or (ii) the Company has determined that the Empress Merger will not occur by
that date on substantially the terms set forth in the Merger Agreement and the
Offering Memorandum (each, a "Triggering Event"), the Company shall, in
accordance with the procedures set forth in clause (c) below and in the Security
Agreement, redeem (a "Triggering Event Mandatory Redemption") $325 million
aggregate principal amount of Notes, for a price equal to 101% of their
principal amount, plus accrued and unpaid interest thereon through the
redemption date (the "Triggering Event Mandatory Redemption Price"), together
with Liquidated Damages, if any. The Triggering Event Mandatory Redemption must
occur on a date (the "Triggering Event Mandatory
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<PAGE> 154
Redemption Date"), which is no later than the earlier of (i) December 8, 1999,
and (ii) 10 Business Days after the Triggering Event.
(b) If (i) after consummation of the Empress Change of Control
Offer, more than $75 million aggregate principal amount of Empress Notes remain
outstanding, or (ii) the Company fails to consummate the Empress Change of
Control Offer on or before the 35th Business Day after consummation of the
Empress Merger, the Company shall, in accordance with the procedures set forth
in clause (c) below and in the Security Agreement, redeem (a "Change of Control
Mandatory Redemption") Notes having an aggregate principal amount equal to the
principal amount of Empress Notes that remain outstanding on the Change of
Control Mandatory Redemption Date (as defined below), for a price equal to 101%
of their principal amount, plus accrued and unpaid interest thereon through the
Change of Control Mandatory Redemption Date (the "Change of Control Mandatory
Redemption Price") together with Liquidated Damages, if any. The "Change of
Control Mandatory Redemption Date" shall be the date which is the earlier of (1)
five Business Days after consummation of the Empress Change of Control Offer and
(2) 40 Business Days after the Empress Merger.
(c) In the event of either a Triggering Event Mandatory Redemption
or an Empress Change of Control Mandatory Redemption (each, a "Mandatory
Redemption"), the Trustee will direct the Securities Intermediary to liquidate
assets in the Secured Proceeds Account in an amount to generate sufficient net
proceeds (after deducting the customary expenses of the Trustee and Securities
Intermediary) to pay, as applicable, the Triggering Event Mandatory Redemption
Price or the Change of Control Mandatory Redemption Price (each, a "Mandatory
Redemption Price") and to deliver the net proceeds to the Trustee. In either
event, notice of a Mandatory Redemption will be mailed to each Holder of Notes
to be redeemed, at its registered address, at least five Business Days before,
as applicable, the Change of Control Mandatory Redemption Date or the Triggering
Event Mandatory Redemption Date (each, a "Mandatory Redemption Date"). On the
Mandatory Redemption Date, upon payment to the Holders of the Mandatory
Redemption Price, a portion of each Holder's Notes (equal to that Holder's pro
rata share of the Notes to be redeemed) shall, automatically and without any
further action by that Holder, be deemed to be no longer outstanding for any
purpose under this Indenture.
(d) Except as set forth above and in Section 3.9 of the Indenture,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes (however, the Company is required to offer to repurchase
Notes in
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<PAGE> 155
accordance with the provisions of Sections 4.13 and 4.14 of the Indenture) and
the Notes shall not have the benefit of any sinking fund.
7. Mandatory Disposition Pursuant to Gaming Laws. Each Holder, by
accepting this Note, shall be deemed to have agreed that if the Gaming Authority
of any jurisdiction in which the Company or any of its subsidiaries conducts or
proposes to conduct gaming requires that a Person who is a Holder or the
beneficial owner of Notes be licensed, qualified or found suitable under
applicable Gaming Laws, such Holder or beneficial owner, as the case may be,
shall apply for a license, qualification or a finding of suitability within the
required time period. If such Person fails to apply or become licensed or
qualified or is found unsuitable, the Company shall have the right, at its
option (a) to require such Person to dispose of its Notes or beneficial interest
therein within 30 days of receipt of notice of the Company's election or such
earlier date as may be requested or prescribed by such Gaming Authority, or (b)
to redeem such Notes at a redemption price equal to the lesser of (i) such
Person's cost or (ii) 100% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the earlier of the redemption date or the
date of the finding of unsuitability, which may be less than 30 days following
the notice of redemption if so requested or prescribed by the applicable Gaming
Authority.
The Company shall notify the Trustee in writing of any such redemption as
soon as practicable, which may be less than 30 days following the notice of
redemption if so requested or prescribed by the applicable Gaming Authority. The
Company shall not be responsible for any costs or expenses any Holder or
beneficial owner may incur in connection with its application for a license,
qualification or a finding or suitability.
8. Offers to Purchase.
a. Change of Control. In the event that a Change of Control
Triggering Event has occurred, each Holder of Notes will have the right, at such
Holder's option, pursuant to an offer (subject only to conditions required by
applicable law, if any) by the Company (the "Change of Control Offer"), to
require the Company to repurchase all or any part of such Holder's Notes
(provided, that the principal amount of such Notes must be $1,000 or an integral
multiple thereof) on a date (the "Change of Control Purchase Date") that is no
later than 35 Business Days after the occurrence of such Change of Control
Triggering Event, at a cash price equal to 101% of the principal amount thereof
(the "Change of Control Purchase Price"), together with accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Change of Control
Purchase Date. The Change of Control Offer shall be made within 10 Business Days
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following a Change of Control Triggering Event and shall remain open for 20
Business Days following its commencement (the "Change of Control Offer Period").
Upon expiration of the Change of Control Offer Period, the Company promptly
shall purchase all Notes properly tendered in response to the Change of Control
Offer.
Prior to the commencement of a Change of Control Offer, but in any event
within 30 days following any Change of Control Triggering Event, the Company
will (1)(a) repay in full and terminate all commitments of Indebtedness under
the Horseshoe Credit Agreement or the New Credit Facility, as the case may be,
and all other Senior Debt the terms of which require repayment upon a Change of
Control Triggering Event or (b) offer to repay in full and terminate all
commitments of Indebtedness under the Horseshoe Credit Agreement or the New
Credit Facility, as the case may be, and all such other Senior Debt and repay
the Indebtedness owed to each lender which has accepted such offer in full or
(2) obtain the requisite consents under the Horseshoe Credit Agreement or the
New Credit Facility, as the case may be, and all such other Senior Debt to
permit the repurchase of the Notes as provided herein. The failure of the
Company to comply with the preceding sentence shall constitute an Event of
Default described in clause (3), but without giving effect to the stated
exceptions in such clause, of Section 6.1 of the Indenture.
On or before the Change of Control Purchase Date, the Company shall (1)
accept for payment Notes or portions thereof properly tendered and not validly
withdrawn pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent cash sufficient to pay the Change of Control Purchase Price (together with
accrued and unpaid interest and Liquidated Damages, if any, thereon) of all
Notes so tendered and (3) deliver to the Trustee the Notes so accepted together
with an Officers' Certificate listing the Notes or portions thereof being
purchased by the Company. The Paying Agent promptly will pay the Holders of
Notes so accepted an amount equal to the Change of Control Purchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any,
thereon) and the Trustee promptly will authenticate and deliver to such Holders
a new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be delivered promptly by the Company
to the Holder thereof. The Company publicly will announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
b. Asset Sale. Prior to the Internal Consolidation, the Company and
any Guarantors will not, and will not permit any of their Subsidiaries to, in
one or a series of related transactions, consummate an Asset Sale (as defined
below), other than
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<PAGE> 157
any transaction described in clauses (1), (3), (4) and (5) of the fourth
paragraph of Section 4.13 of the Indenture.
Following the Internal Consolidation, the Company and the Guarantors
shall not, and shall not permit any of their Subsidiaries to, in one or a series
of related transactions, convey, sell, transfer, assign or otherwise dispose of,
directly or indirectly, any of their property, business or assets, including by
merger or consolidation (in the case of a Subsidiary of the Company), and
including any sale or other transfer or issuance of any Equity Interests of any
Subsidiary of the Company, whether by the Company or any Subsidiary of the
Company or through the issuance, sale or transfer of Equity Interests by a
Subsidiary of the Company, and including any sale and leaseback transaction (any
of the foregoing, an "Asset Sale"), unless:
(l) (a) the Net Cash Proceeds therefrom (the "Asset Sale Offer
Amount") are applied
(i) within 270 days after the date of such Asset Sale to the
optional redemption of the Notes in accordance with the terms of
this Indenture and other Indebtedness of the Company ranking on a
parity with the Notes and with similar provisions requiring the
Company to redeem such Indebtedness with the proceeds from such
Asset Sale, pro rata in proportion to the respective principal
amounts (or accreted values in the case of Indebtedness issued with
an original issue discount) of the Notes and such other Indebtedness
then outstanding, or
(ii) within 300 days after the date of such Asset Sale to the
repurchase of the Notes and such other Indebtedness on a parity with
the Notes and with similar provisions requiring the Company to make
an offer to purchase such Indebtedness with the proceeds from such
Asset Sale pursuant to a cash offer (subject only to conditions
required by applicable law, if any) (pro rata in proportion to the
respective principal amounts (or accreted values in the case of
Indebtedness issued with an original issue discount) of the Notes
and such other Indebtedness then outstanding) (the "Asset Sale
Offer") at a purchase price of 100% of principal amount (or accreted
value in the case of Indebtedness issued with an original issue
discount) (the "Asset Sale Offer Price") together with accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date
of payment, made within 270 days of such Asset Sale, or
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<PAGE> 158
(b) within 270 days following such Asset Sale, the Asset Sale Offer
Amount is
(i) invested in assets and property (other than notes, bonds,
obligations and securities) which in the good faith reasonable
judgment of the Board of Directors of the Company will immediately
constitute or be a part of a Related Businesses of the Company or
one of its Subsidiaries immediately following such transaction, or
(ii) used to retire Purchase Money Indebtedness secured by the
asset which was the subject of the Asset Sale, Indebtedness
outstanding under the Horseshoe Credit Agreement or the New Credit
Facility, as the case may be, or other Senior Debt the terms of
which require retirement upon such Asset Sale, on a pro rata basis
and, to permanently reduce (in the case of Senior Debt that is not
such Purchase Money Indebtedness) the amount of Indebtedness
outstanding on the Issue Date or permitted pursuant to paragraph
(b), (c) or (d), as applicable, of Section 4.7 of the Indenture
(including that in the case of a revolver or similar arrangement
that makes credit available, such commitment is so permanently
reduced by such amount);
(2) 75% of the total consideration for such Asset Sale or series of
related Asset Sales consists of cash or Cash Equivalents;
(3) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro
forma basis, to, such Asset Sale, unless such Asset Sale is in
consideration solely of cash or Cash Equivalents and such consideration is
applied immediately to the permanent reduction of the amount of
Indebtedness outstanding under the New Credit Facility or other bank
credit facility debt which is incurred pursuant to clause (c)(1) or (2) of
Section 4.7 of the Indenture; and
(4) the Board of Directors of the Company determines in good faith
that the Company or such Subsidiary, as applicable, receives not less than
fair market value for such Asset Sale.
An acquisition of Notes pursuant to an Asset Sale Offer may be deferred
until the accumulated Net Cash Proceeds from Asset Sales not applied to the uses
set forth in 1(a)(i) or 1(b) above (the "Excess Proceeds") exceeds $10 million.
Each Asset Sale
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<PAGE> 159
Offer shall remain open for 20 Business Days following its commencement (the
"Asset Sale Offer Period"). Upon expiration of the Asset Sale Offer Period, the
Company shall apply the Asset Sale Offer Amount plus an amount equal to accrued
and unpaid interest and Liquidated Damages, if any, to the purchase of all
Indebtedness properly tendered (on a pro rata basis if the Asset Sale Offer
Amount is insufficient to purchase all Indebtedness so tendered) at the Asset
Sale Offer Price (together with accrued interest and Liquidated Damages, if
any). To the extent that the aggregate amount of Notes and such other pari passu
Indebtedness tendered pursuant to an Asset Sale Offer is less than the Asset
Sale Offer Amount, the Company may use any remaining Net Cash Proceeds for
general corporate purposes as otherwise permitted by this Indenture and
following each Asset Sale Offer the Excess Proceeds amount shall be reset to
zero. For purposes of (2) above, total consideration received means the total
consideration received for such Asset Sales minus the amount of, (a) Purchase
Money Indebtedness secured solely by the assets sold and assumed by a
transferee; provided, that the Company and the Subsidiaries are fully released
from all obligations relating thereto and (b) property that within 30 days of
such Asset Sale is converted into cash or Cash Equivalents; provided, that such
cash and Cash Equivalents shall be treated as Net Cash Proceeds attributable to
the original Asset Sale for which such property was received).
Notwithstanding, and without complying with, the provisions of Section
4.13 of the Indenture, (1) the Company and its Subsidiaries may, in the ordinary
course of business, (a) convey, sell, transfer, assign or otherwise dispose of
inventory and other assets acquired and held for resale in the ordinary course
of business and (b) liquidate Cash Equivalents, (2) following the Internal
Consolidation, the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of assets pursuant to and in accordance with Article
V of the Indenture, (3) the Company and its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of business
so long as such property is no longer necessary for the proper conduct of the
business of the Company or such Subsidiary, as applicable, (4) the Company's
Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets
(including by way of merger) to the Company or any other Subsidiary and the
Company may convey, sell, transfer, assign or otherwise dispose of assets to any
Subsidiary, and (5) the Company and each of its Subsidiaries may surrender or
waive contract rights or settle, release or surrender contract, tort or other
claims of any kind or grant Liens not prohibited by the Indenture.
Upon the accumulation of $10 million of Net Cash Proceeds from an Event of
Loss (other than the proceeds of any business interruption insurance) each
dollar of Net Cash Proceeds from an Event of Loss that exceeds such amount shall
be (1) applied to
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<PAGE> 160
the redemption or repurchase of the Notes and other of Indebtedness of the
Company ranking on a parity with the Notes and with similar provisions requiring
the Company to redeem or repurchase such Indebtedness (pro rata in proportion to
the respective principal amounts or (accreted values in the case of Indebtedness
issued with an original issue discount) of the Notes and such other Indebtedness
then outstanding), (2) invested in assets and property (other than notes, bonds,
obligation and securities) which in the good faith reasonable judgment of the
Board of Directors of the Company will immediately constitute or be a part of a
Related Business of the Company or one of its Subsidiaries immediately following
such Event of Loss or (3) used to retire Purchase Money Indebtedness secured by
the asset which was the subject of the Event of Loss, Indebtedness outstanding
under the Horseshoe Credit Agreement or the New Credit Facility, as the case may
be, or other Senior Debt the terms of which so require and to permanently reduce
(in the case of Senior Debt that is not such Purchase Money Indebtedness) the
amount of Indebtedness outstanding on the Issue Date or permitted pursuant to
paragraph (b), (c) or (d), as applicable, of Section 4.7 of the Indenture
(including that in the case of a revolver or similar arrangement that makes
credit available, such commitment is so permanently reduced by such amount), all
within the time periods and as otherwise provided above in clauses 1(a) or 1(b)
of the first paragraph of Section 4.13 of the Indenture.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a Record Date and
the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture, the Notes or the Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes, and any existing Default or compliance with any provision of
the Indenture, the
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Notes or the Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes; provided, that no
such modification may, without the consent of Holders of at least 66 2/3% in
aggregate principal amount of Notes at the time outstanding, modify the
provisions (including the defined terms used therein) of Section 4.14 of the
Indenture in a manner adverse to the Holders. Without the consent of any Holder
of a Note, the Indenture, the Notes or the Guarantees may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to provide for additional Guarantees as
set forth in the Indenture or for the release or assumption of Guarantees in
compliance with the Indenture, to make any change that would provide any
additional rights or benefits to the Holders of the Notes (including the
addition of any Guarantor) or that does not adversely affect the rights under
the Indenture of any such Holder, to comply with the provisions of the
Depositary, Euroclear or Cedel or the Trustee with respect to the provisions of
the Indenture or the Notes relating to transfers and exchanges of Notes or
beneficial interests therein, or to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA.
12. Defaults and Remedies. The Indenture provides that each of the
following constitutes an Event of Default: (1) the failure by the Company to pay
any installment of interest (or Liquidated Damages, if any) on the Notes as and
when the same becomes due and payable and the continuance of any such failure
for 30 days; (2) the failure by the Company to pay all or any part of the
principal, or premium, if any, on the Notes when and as the same becomes due and
payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, payment of the Mandatory Redemption Price upon the
occurrence of an event giving rise to a Mandatory Redemption, or payment of the
Change of Control Purchase Price (except as provided in Section 4.14 of the
Indenture, or the Asset Sale Offer Price on Notes validly tendered and not
properly withdrawn pursuant to a Change of Control Offer or Asset Sale Offer, as
applicable (as set forth in Sections 4.14 and 4.13 of the Indenture); (3) the
failure by the Company or any Subsidiary of the Company to observe or perform
any other covenant or agreement contained in the Notes or the Indenture and,
except for the provisions under Sections 4.13, 4.14, 4.20 and 4.21 and Article V
of the Indenture, the continuance of such failure for a period of 30 days after
written notice is given to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Notes outstanding; (4) a default in Indebtedness of the Company with an
aggregate amount outstanding in excess of $10 million (other than Indebtedness
of the Company solely to any of its Subsidiaries) (a) resulting
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from the failure to pay principal at final stated maturity or (b) as a result of
which the maturity of such Indebtedness has been accelerated prior to its final
stated maturity; (5) final non-appealable unsatisfied judgments not covered by
insurance aggregating in excess of $10 million, at any one time rendered against
the Company or any of its Subsidiaries and not stayed, bonded or discharged
within 60 days; (6) any Guarantee of a Guarantor that is a Significant
Subsidiary ceases to be in full force and effect or becomes unenforceable or
invalid or is declared null and void (other than in accordance with the terms of
the Guarantee) or any Guarantor that is a Significant Subsidiary denies or
disaffirms its Obligations under its Guarantee; (7) the suspension or loss of
the legal right of the Company or any of its Subsidiaries to operate the gaming
establishment included within any Casino and such suspension or loss continuing
for more than 90 consecutive days or for 120 days within any consecutive 180 day
period; (8) the failure of the Company to effect the Internal Consolidation
following the occurrence of the Empress Merger, or a Triggering Event Mandatory
Redemption, as applicable, or the failure of the Company to cause its
Subsidiaries to guarantee the Notes upon the consummation of the Empress Merger
and the Internal Consolidation as described in Section 4.16 of the Indenture;
(9) a court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Subsidiary in an involuntary
case under any applicable Bankruptcy Law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or (10) the Company or any Significant Subsidiary (A) commences a voluntary case
under any applicable Bankruptcy Law now or hereafter in effect, or consents to
the entry of an order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company or
any Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any general
assignment for benefit of creditors.
13. Subordination. The Notes and the Guarantees are subordinated in right
of payment, to the extent and in the manner provided in Article XI and Section
10.7 of the Indenture, to the prior payment in full of all Senior Debt. The
Company agrees, and each Holder by accepting a Note consents and agrees, to the
subordination provided in the Indenture and authorizes the Trustee to give it
effect.
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14. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
15. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator or stockholder (direct or indirect) of the
Company or the Guarantors (or any such successor entity), as such, shall have
any liability for any Obligations of the Company or the Guarantors under the
Notes, the Guarantees or this Indenture or for any claim based on, in respect
of, or by reason of, such Obligations or their creation, except in their
capacity as an obligor or Guarantor of the Notes in accordance with this
Indenture. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
16. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. Additional Rights of Holders of Transfer Restricted Notes.(7) In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of the date of the Indenture, between the
Company and the Initial Purchasers (the "Registration Rights Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers
- --------
(7)To be included only on Transfer Restricted Notes.
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<PAGE> 164
placed thereon, and any such redemption shall not be affected by any defect in
or omission of such numbers.
20. Notation of Guarantee. As more fully set forth in the Indenture, each
of the Guarantors from time to time shall be required to Guarantee the Notes and
the Indenture pursuant to Section 4.16 of the Indenture, in accordance with the
provisions of the Indenture, unconditionally and jointly and severally guarantee
in accordance with Section 10.1 of the Indenture, to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, that: (a) the principal of, and premium, if any, Liquidated
Damages, if any, and interest on the Notes will be duly and punctually paid in
full when due, whether at maturity, by acceleration, call for redemption, upon a
Change of Control Offer, upon an Asset Sale Offer or otherwise, and interest on
overdue principal of, and premium, if any, Liquidated Damages, if any and (to
the extent permitted by law) interest on any interest, if any, on the Notes and
all other obligations of the Company to the Holders or the Trustee hereunder or
under the Notes (including fees, expenses or other) will be promptly paid in
full or performed, all in accordance with the terms hereof; and (b) in case of
any extension of time of payment or renewal of any Notes or any of such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration, call for redemption, upon a Change of Control Offer,
upon an Asset Sale Offer or otherwise. Such Guarantees are subordinated in right
of payment to the prior payment in full of all Obligations in respect of Senior
Debt of the Guarantors as set forth in Article XI of the Indenture and shall
cease to apply, and shall be null and void, with respect to any Guarantor who,
pursuant to Article X of the Indenture, is released from its Guarantee or whose
Guarantee otherwise ceases to be applicable pursuant to the terms of the
Indenture.
When a successor assumes all the obligations of its predecessor under the
Notes and the Indenture, the predecessor will be released from those
obligations.
20. Governing Law. THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING,
WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
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The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Horseshoe Gaming Holding Corp.
4024 S. Industrial Road
Las Vegas, Nevada 89103
Attention: Chief Financial Officer
Telephone No.: (702) 650-0080
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<PAGE> 166
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:_________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*
- --------------------------------------------------------------------------------
*NOTICE: The Signature must be guaranteed by an Institution which is a member of
one of the following recognized signature Guarantee Programs: (i) The Securities
Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange
Medallion Program (INSP.); (iii) The Stock Exchange Medallion Program (SEEP); or
(iv) in such other guarantee program acceptable to the Trustee.
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Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.13 or 4.14 of the Indenture, check the box below:
|_| Section 4.13 |_| Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.13 or Section 4.14 of the Indenture, state the
amount you elect to have purchased (in denominations of $1,000 only, except if
you have elected to have all of your Notes purchased): $___________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No.:______________
Signature Guarantee*
- --------------------------------------------------------------------------------
*NOTICE: The Signature must be guaranteed by an Institution which is a member of
one of the following recognized signature Guarantee Programs: (i) The Securities
Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange
Medallion Program (INSP.); (iii) The Stock Exchange Medallion Program (SEEP); or
(iv) in such other guarantee program acceptable to the Trustee.
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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Notes or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount of Signature of
decrease in increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
---------------- ---------------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE> 169
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Horseshoe Gaming Holding Corp.
4024 S. Industrial Road
Las Vegas, Nevada 89103
Attention: Chief Financial Officer
U.S. Trust Company, National Association
515 South Flower Street
Suite 2700
Los Angeles, California 90071
Attention: Corporate Trust Group
Re: 8 5/8% Senior Subordinated Notes due 2009
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 11, 1999 (the
"Indenture"), between Horseshoe Gaming Holding Corp., Inc., as issuer (the
"Company"), and U.S. Trust Company, National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture. ______________, (the "Transferor") owns and proposes to
transfer the Notes] or interest in such Notes] specified in Annex A hereto, in
the principal amount of $___________ in such Notes] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one
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or more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any State of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the 144A Global
Note and/or the Definitive Note and in the Indenture and the Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Distribution
Compliance Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser) and the
interest transferred will be held immediately thereafter through Euroclear or
Cedel. Upon consummation of the proposed transfer in accordance with the terms
of the Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note and/or the Definitive Note and in
the Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of a beneficial
interest in a Definitive Note pursuant to any provision of the Securities Act
other than Rule 144A or Regulation S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities
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<PAGE> 171
Act and any applicable blue sky securities laws of any State of the United
States, and accordingly the Transferor hereby further certifies that (check
one):
(a) |_| Such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act; or
(b) |_| Such Transfer is being effected to the Company or a subsidiary
thereof; or
(c) |_| Such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act; or
(d) |_| such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive
Notes and the requirements of the exemption claimed, which certification
is supported by (1) a certificate executed by the Transferee in a form of
Exhibit D to the Indenture and (2) if such Transfer is in respect of a
principal amount of Notes at the time of transfer of less than $250,000,
an Opinion of Counsel provided by the Transferor or the Transferee (a copy
of which the Transferor has attached to this certification and provided to
the Company, which has confirmed its acceptability), to the effect that
such Transfer is in compliance with the Securities Act. Upon consummation
of the proposed transfer in accordance with the terms of the Indenture,
the Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Definitive Notes
and in the Indenture and the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) |_| Check if Transfer is Pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and
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any applicable blue sky securities laws of any State of the United States and
(ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture and the Securities Act.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture and the Securities
Act.
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
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<PAGE> 173
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
________________________________ Dated:
[Insert Name of Transferor]
By: ____________________________
Name:
Title:
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<PAGE> 174
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _______), or
(ii) |_| Regulation S Global Note (CUSIP ), or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _____), or
(ii) |_| Regulation S Global Note (CUSIP _____), or
(iii) |_| Unrestricted Global Note (CUSIP _____); or
(b) |_| a Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
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<PAGE> 175
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Horseshoe Gaming Holding Corp.
4024 S. Industrial Road
Las Vegas, Nevada 89103
Attention: Chief Financial Officer
U.S. Trust Company, National Association
515 South Flower Street
Suite 2700
Los Angeles, California 90071
Attention: Corporate Trust Group
Re: 8 5/8% Senior Subordinated Notes due 2009
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 11, 1999
(the "Indenture"), between Horseshoe Gaming Holding Corp., as issuer (the
"Company") and party thereto and U.S. Trust Company, National Association, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Notes]
or interest in such Notes] specified herein, in the principal amount of
$____________ in such Notes] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests
in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial
Interests in an Unrestricted Global Note.
(a) |_| Check if Exchange is from beneficial interest
in a Restricted Global Note to beneficial interest in an Unrestricted
Global Note. In connection with the Exchange of the Owner's beneficial
interest in a Restricted Global Note for a beneficial interest in an
Unrestricted Global Note in an equal
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<PAGE> 176
principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and in
accordance with the United States Securities Act of 1933, as amended
(the "Securities Act"), (iii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance
with any applicable blue sky securities laws of any State of the United
States.
(b) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any State
of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Note
to beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any State
of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Note
to Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
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<PAGE> 177
hereby certifies (i) the Unrestricted Definitive Note is being acquired
for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Note is being acquired in compliance with any applicable blue
sky securities laws of any State of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Note
to beneficial interest in a Restricted Global Note. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the: [CHECK ONE] 144A Global Note or Regulation S Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any State of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
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This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
__________________________
[Insert Name of Owner]
By:_______________________
Name:
Title:
Dated:________________
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<PAGE> 179
EXHIBIT D
FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
Horseshoe Gaming Holding Corp.
4024 S. Industrial Road
Las Vegas, Nevada 89103
Attention: Chief Financial Officer
U.S. Trust Company, National Association
515 South Flower Street
Suite 2700
Los Angeles, California 90071
Attention: Corporate Trust Group
Re: 8 5/8% Senior Subordinated Notes due 2009
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 11, 1999
(the "Indenture"), between Horseshoe Gaming Holding Corp., as issuer (the
"Company") and party thereto and U.S. Trust Company, National Association, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of: (a) a beneficial interest in a Global Note, or (b) a
Definitive Note, we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
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<PAGE> 180
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any Guarantor or any of their
respective subsidiaries, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if the proposed transfer is in respect of an aggregate principal amount of
Notes of less than $250,000, an Opinion of Counsel in form reasonably acceptable
to the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144 under the Securities Act, (F) in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel accept able to the Company) or (G) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note from us in a transaction meeting the
requirements of clauses (A) through (F) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Initial Purchasers.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any
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<PAGE> 181
accounts for which we are acting are each able to bear the economic risk of our
or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
D-3
<PAGE> 182
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
____________________________________ Dated: __________________
[Insert Name of Accredited Investor]
By:_______________________________
Name:
Title:
D-4
<PAGE> 183
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT
SUBSIDIARY GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Horseshoe Gaming Holding Corp. (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the Guarantors (as defined in
the Indenture referred to herein) party thereto and U.S. Trust Company, National
Association, as trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 11, 1999, providing for
the issuance of 8 5/8% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances
Subsidiaries of the Company are required to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Subsidiary shall unconditionally
guarantee all of the Company's obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
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<PAGE> 184
2. Agreement to Guarantee. The Guaranteeing Subsidiary irrevocably
and unconditionally guarantees the Guarantee Obligations, which include (i) the
due and punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes, whether at maturity, by acceleration,
call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer or
otherwise, the due and punctual payment of interest on the overdue principal and
premium, if any, and (to the extent permitted by law) interest on any interest
on the Notes, and payment of expenses, and the due and punctual performance of
all other obligations of the Company, to the Holders or the Trustee all in
accordance with the terms set forth in Article X of the Indenture, (ii) in case
of any extension of time of payment or renewal of any Notes or any such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration, call for redemption, upon a Change of Control Offer,
upon an Asset Sale Offer or otherwise, and (iii) the payment of any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee in enforcing any rights under this Guarantee.
The obligations of Guaranteeing Subsidiary to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article X of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee.
No past, present or future director, officer, employee, incorporator
or stockholder (direct or indirect) of the Guarantors (or any such successor
entity), as such, shall have any liability for any Obligations of the Guarantors
under this Subsidiary Guarantees or the Indenture or for any claim based on, in
respect of, or by reason of, such Obligations or their creation, except in their
capacity as an obligor or Guarantor of the Notes in accordance with the
Indenture.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Guaranteeing Subsidiary and its successors
and assigns until full and final payment of all of the Company's obligations
under the Notes and Indenture or until released in accordance with the Indenture
and shall inure to the benefit of the successors and assigns of the Trustee and
the Holders, and, in the event of any transfer or assignment of rights by any
Holder or the Trustee, the rights and privileges herein conferred upon that
party shall automatically extend to
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<PAGE> 185
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. This is a Guarantee of payment and not of collectibility.
The Obligations of the Guaranteeing Subsidiary under its Subsidiary
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent conveyance under applicable law.
THE TERMS OF ARTICLE X OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
3. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, INCLUDING,
WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
4. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
5. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
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<PAGE> 186
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
THE COMPANY:
HORSESHOE GAMING HOLDING CORP.
By: ________________________________
Name:
Title:
THE GUARANTOR[S]:
[ ]
By: ________________________________
Name:
Title:
[ ]
By: ________________________________
Name:
Title:
TRUSTEE:
U.S. TRUST COMPANY,
NATIONAL ASSOCIATION
By: ________________________________
Name:
Title:
<PAGE> 1
Exhibit 4.2
- --------------------------------------------------------------------------------
HORSESHOE GAMING, L.L.C.,
Issuer,
THE GUARANTOR NAMED HEREIN,
and
U.S. TRUST COMPANY, NATIONAL ASSOCIATION,
Trustee
---------------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of May 11, 1999
to
INDENTURE
Dated as of October 10, 1995
---------------------------------
12.75% Senior Notes Due 2000
- --------------------------------------------------------------------------------
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE dated as of May 11, 1999 among HORSESHOE
GAMING, L.L.C., as Issuer (the "Company"), ROBINSON PROPERTY GROUP, LIMITED
PARTNERSHIP, as Guarantor (the "Guarantor"), and U.S. TRUST COMPANY, NATIONAL
ASSOCIATION (formerly known as U.S. Trust Company of California, N.A.), as
Trustee (the "Trustee").
RECITALS
WHEREAS, the Company, the Guarantor and the Trustee have heretofore
executed and delivered an Indenture dated as of October 10, 1995, as amended to
date (the "Indenture"), providing for the issuance of $150,000,000 aggregate
principal amount of the Company's Senior Notes Due 2000 (the "Senior Notes") and
the related Guarantee of the Guarantor;
WHEREAS, pursuant to an Offer to Purchase and Consent Solicitation
Statement dated April 20, 1999, the Company solicited consents to various
amendments and waivers (the "Amendments and Waivers") to and under the Indenture
and related Security Documents intended to increase the Company's operating and
financial flexibility and to accommodate the Company's acquisition by means of
merger of the operating subsidiaries of Empress Entertainment, Inc.;
WHEREAS, the requisite consents of the holders of the Senior Notes have
been obtained and the Company, the Guarantor and the Trustee now desire to amend
the Indenture pursuant to and in accordance with the provisions of Section 9.2
thereof to give effect to the Amendments and Waivers;
WHEREAS, the execution and delivery of this Second Supplemental Indenture
has been authorized by a resolution of the respective Boards of Directors of the
manager of the Company and the general partner of the Guarantor; and
WHEREAS, all conditions and requirements necessary to make this Second
Supplemental
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<PAGE> 3
Indenture a valid, binding and legal instrument in accordance with its terms
have been performed and fulfilled and the execution and delivery hereof have
been in all respects duly authorized.
NOW, THEREFORE, in consideration of the above premises, each party agrees,
for the benefit of the other and for the equal and ratable benefit of the
holders of the Senior Notes, as follows:
ARTICLE I
AMENDMENTS AND WAIVERS
Section 1.1 Amendment to Section 4.3 (Limitation on Restricted Payments).
Section 4.3 is hereby deleted in its entirety.
Section 1.2 Amendments to Section 4.5 (Payment of Taxes and Other
Claims).
Section 4.5 is hereby deleted in its entirety.
Section 1.3 Amendment to Section 4.6 (Maintenance of Insurance).
Section 4.6 is hereby deleted in its entirety.
Section 1.4 Amendment to Section 4.7 (Compliance Certificates; Notice of
Default).
Section 4.7 is hereby deleted in its entirety.
Section 1.5 Amendment to Section 4.8 (Reports).
Section 4.8 is hereby deleted in its entirety.
Section 1.6 Amendment to Section 4.9 (Waiver of Stay, Extension or Usury
Laws).
Section 4.9 is hereby deleted in its entirety.
Section 1.7 Amendment to Section 4.10 (Limitation on Transaction with
Affiliates).
Section 4.10 is hereby deleted in its entirety.
Section 1.8 Amendment to Section 4.11 (Limitation an Incurrence of
Additional
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<PAGE> 4
Indebtedness and Disqualified Capital).
Section 4.11 is hereby deleted in its entirety.
Section 1.9 Amendment to Section 4.12 (Limitation on Dividends and Other
Payment Restrictions Affecting Subsidiaries).
Section 4.12 is hereby deleted in its entirety.
Section 1.10 Amendment to Section 4.13 (Liens).
Section 4.13 is hereby deleted in its entirety.
Section 1.11 Amendment to Section 4.15 (Limitation on Lines of Business).
Section 4.15 is hereby deleted in its entirety.
Section 1.12 Amendment to Section 4.16 (Limitation on Status as Investment
Company).
Section 4.16 is hereby deleted in its entirety.
Section 1.13 Amendment to Section 4.17 (Restrictions on Issuance or Sale
of Subsidiary Capital).
Section 4.17 is hereby deleted in its entirety.
Section 1.14 Amendment to Section 4.18 (Additional Subsidiary Guarantors).
Section 4.18 is hereby deleted in its entirety.
Section 1.15 Amendment to Section 4.19 (Excess Proceeds Escrow Agreement).
Section 4.19 is hereby deleted in its entirety.
Section 1.16 Amendment to Section 4.20 (Intercreditor Agreement with GE).
Section is 4.20 hereby deleted in its entirety.
Section 1.17 Amendment to Section 5.1 (Limitation on Consolidation, Merger
and Sale of Assets).
Section 5.1 is hereby deleted in its entirety.
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<PAGE> 5
Section 1.18 Amendment to Section 5.2 (Successor Corporation Substituted).
Section 5.2 is hereby deleted in its entirety.
Section 1.19 Amendment to Section 13.1 (Security).
Section 13.1 is hereby amended to read as follows:
(a) In order to secure the due and punctual payment of the principal of
and interest on the Senior Notes when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by acceleration, call for
redemption or otherwise, and interest on the overdue principal, related costs
and expenses and, to the extent permitted by applicable law, overdue interest,
if any, on the Senior Notes and the performance of all other obligations of the
Company to the Holders or the Trustee under this Indenture and the Senior Notes
according to the terms hereunder or thereunder, the Company, the Guarantor,
certain Subsidiaries and certain of the Binion Partners (each, a "Grantor" and
collectively, the "Grantors") have granted or will grant, as applicable, a
security interest in the Collateral to the Collateral Agent under the Security
Documents described in clauses (i) through (vii) below for the equal and ratable
benefit and security of the Holders without preference, priority or distinction
of any thereof over any other by reason or difference in time, of issuance, sale
or otherwise, and for the Collateral Agent or any other agent for such Holders
to the extent provided in the Security Documents.
(i) The Company has granted, pursuant to the HG Second Pledge
Agreement, to the Collateral Agent for the ratable benefit of the Holders,
a second pledge of all its equity interests in (1) NGCP, (2) the
Guarantor, (3) HIND, (4) HGP and (5) Horseshoe Ventures. The HG Second
Pledge Agreement also provides for the second pledge, for the ratable
benefit of the Holders, of the Company's equity interest in all future (A)
Subsidiaries, (B) Unrestricted Subsidiaries and (C) all other Persons;
provided, however, that the Company shall not be required to pledge its
equity interest of any entity described in clause (B) or (C) if prohibited
by applicable law and, if so prohibited, such equity interest shall not be
pledged to any other Person. The HG Second Pledge Agreement is subject to
the terms of the Intercreditor Agreement.
(ii) The Company has assigned, pursuant to the HG Note Assignment,
to the Credit Facility Purchasers and the Collateral Agent, for the
ratable benefit of the Holders, the HE Intercompany Senior Note and the
RPG Intercompany Senior Note. In addition, all loans by the Company or a
Subsidiary of the Company to another Subsidiary shall be evidenced by an
Intercompany Note and such Intercompany Note shall be pledged to the
Collateral Agent, for the ratable benefit of the Holders, and secured by
the Casino and real property of such Subsidiary as described under the
definition of "Intercompany Note". The HG Note Assignment is subject to
the terms of the Intercreditor Agreement.
(iii) Repayment of the principal of the HE Intercompany Senior Note
and
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<PAGE> 6
premium, if any, and interest thereon, will be secured by certain real
property of HE and the Horseshoe Bossier City Casino (and all related
fixtures and equipment) pursuant to the Bossier City Mortgage, the Bossier
City Second Ship Mortgage and the Bossier City Second Security Agreement.
The Bossier City Mortgage will be assigned by the Company to the Credit
Facility Purchasers and the Collateral Agent, for the ratable benefit of
the Holders, pursuant to the Assignment of Bossier City Mortgage. The
Bossier City Second Ship Mortgage and the Bossier City Second Security
Agreement will be assigned by the Company to the Collateral Agent, for the
ratable benefit of the Holders, pursuant to the Assignment of Bossier City
Second Ship Mortgage and the Assignment of Bossier City Second Security
Agreement, respectively. The Bossier City Mortgage, the Bossier City
Second Ship Mortgage and the Bossier City Second Security Agreement are
subject to the terms of the Intercreditor Agreement.
(iv) The obligations of the Guarantor under the Guarantee and
repayment of the principal of the RPG Intercompany Senior Notes and
premium, if any, and interest thereof will be secured on the date hereof
by the grant of a second lien on certain real property of the Guarantor
and the Horseshoe Tunica Casino pursuant to the Tunica County Second Deed
of Trust, the Tunica County Second Ship Mortgage and the Tunica County
Second Security Agreement. The Company's interest in the Tunica County
Second Deed of Trust, the Tunica County Second Ship Mortgage and the
Tunica County Second Security Agreement will be assigned by the Company to
the Collateral Agent, for the ratable benefit of the Holders, pursuant to
the Assignment of Tunica County Second Deed of Trust, the Assignment of
Tunica County Second Ship Mortgage and the Assignment of Tunica County
Second Security Agreement, respectively. The Tunica County Second Deed of
Trust, the Tunica County Second Ship Mortgage and the Tunica County Second
Security Agreement are subject to the terms of the Intercreditor
Agreement.
(v) The Company's obligations hereunder and under the Senior Notes
will be secured by the second pledge by Jack Binion and B&O of their
equity interest in HIND and by JBB Gaming Investments, L.L.C. of its
equity interests in Horseshoe Ventures and, in the future, the equity
interests of any of the Binion Partners in any future (A) Subsidiaries of
the Company or (B) Unrestricted Subsidiaries of the Company (provided that
the pledge of the equity interest in such Unrestricted Subsidiaries shall
not be required if prohibited by applicable law and if so prohibited,
shall not be pledged to any other Person), pursuant to the Binion Partners
Second Pledge Agreement. The Binion Partners Second Pledge Agreement will
be subject to the terms of the Intercreditor Agreement. Any Binion Partner
that acquires an equity interest in any Subsidiary of the Company shall
become a party to the Binion Partners Second Pledge Agreement and pledge
its equity interest in such Subsidiary to the Collateral Agent, for the
ratable benefit of the Holders.
(vi) The obligations of each Additional Guarantor shall be secured
by the Casino and real property of such Additional Guarantor pursuant to
appropriate security agreements to be executed by such Additional
Guarantor and delivered to the Collateral Agent, for the
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<PAGE> 7
ratable benefit of the Holders (the "Additional Guarantor Security
Agreements"), and each Additional Guarantor shall be deemed a Grantor
under this Article XIII and all the terms of this Indenture which apply to
the Grantors shall apply to each Additional Guarantor. The grant of the
security interest by the Additional Guarantor in their Casinos and real
property pursuant to the Additional Guarantor Security Agreements shall be
subject to the terms of the Intercreditor Agreement. Each Additional
Guarantor shall execute and become a party to the Collateral Agency
Agreement.
(vii) The Company shall cause each of its Subsidiaries and
Unrestricted Subsidiaries to pledge to the Collateral Agent for the
ratable benefit of the Holders pursuant to appropriate pledge agreements
to be executed by such Subsidiary or such Unrestricted Subsidiary, as the
case may be (the "Additional Pledge Agreements"), all Capital owned or
acquired by such Subsidiary or such Unrestricted Subsidiary, as the case
may be, after the Issue Date of (A) all Subsidiaries of the Company, (B)
all Unrestricted Subsidiaries of the Company and (C) all other Persons in
which the Company acquires an equity interest; provided, however, that no
Subsidiary or Unrestricted Subsidiary of the Company shall be required to
pledge Capital of any Person described in clause (B) or (C) if prohibited
by applicable law and, if so prohibited, such Capital shall not be pledged
to any other Person.
(b) At the time this Indenture and the Security Documents are executed,
each Grantor will have full right, power and lawful authority to grant, convey,
hypothecate, assign, mortgage and pledge the property constituting the
Collateral owned by such Grantor, in the manner and form done, or intended to be
done, in this Indenture and in the Security Document to which it is a party,
free and clear of all Liens whatsoever, except the Liens created by this
Indenture and the Security Documents, Liens permitted by Section 4.13 and except
to the extent otherwise provided therein and herein, and the Grantors covenant
and agree to (a) forever warrant and defend the title to the same against the
claims of all Persons whatsoever (other than claims brought by persons with
Liens which are permitted by Section 4.13 and are superior to those granted to
the Collateral Agent for the benefit of the Holders of the Senior Notes pursuant
to the Security Documents), (b) execute, acknowledge and deliver to the Trustee
and the Collateral Agent (if the Collateral Agent is a Person other than the
Trustee) such further assignments, transfers, assurances or other instruments as
the Trustee or the Collateral Agent may reasonably require or request, and (c)
do or cause to be done all such acts and things as may be necessary or proper,
or as may be reasonably required by the Trustee or the Collateral Agent, to
assure and confirm to the Trustee and the Collateral Agent the security
interests in the Collateral contemplated hereby and by the Security Documents,
or any part thereof, as from time to time constituted, so as to render the same
available for the security and benefit of this Indenture and of the Senior Notes
and the other Obligations secured hereby, according to the intent and purposes
herein expressed. This Indenture and the Security Documents will create in favor
of the Collateral Agent for the benefit of the Holders of the Senior Notes a
direct and valid second priority Lien, (the "Holder Lien") on the property
constituting the Collateral, as set forth herein and therein.
(c) The foregoing shall not prohibit the Company from (i) granting Liens
on the
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<PAGE> 8
Collateral and on any other assets of the Company and its subsidiaries and from
entering into amendments to the Security Documents in connection with the
financing of the acquisition (the "Merger") by the Company of the gaming
business of Empress Entertainment, Inc., as contemplated by the Offer to
Purchase and Consent Solicitation Statement of the Company with respect to the
Senior Notes, dated as of April 20, 1999 and (ii) allowing the Trustee (at the
direction of the Company) to enter into an intercreditor agreement with the
agent representing the lenders (the "New Lenders") providing such financing,
which intercreditor agreement shall provide that the liens on the Collateral
benefitting the New Lenders will be pari passu with the liens on the Collateral
benefitting the Holders.
Section 1.20 Definition of Permitted Liens.
The definition of "Permitted Liens" is hereby amended to read as follows:
"Permitted Liens" means any of the following:
(a) Liens for taxes, assessments or other governmental charges not yet
delinquent or which are being contested in good faith and by appropriate
proceedings by the Company or one or more of its Subsidiaries if adequate
reserves with respect thereto are maintained on the books of the company or such
Subsidiary or Subsidiaries, as the case may be, in accordance with GAAP;
(b) Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen and for crew wages or salvage or other like Liens arising by operation
of law in the ordinary course of business and consistent with industry practices
and Liens on deposits made to obtain the release of such Liens if (i) the
underlying obligations are not overdue for a period of more than sixty (60) days
or (ii) such Liens are being contested in good faith and by appropriate
proceedings by the Company or one or more of its Subsidiaries and adequate
reserves with respect thereto are maintained on the books of the Company or such
Subsidiary, as the case may be, in accordance with GAAP;
(c) easements, rights-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred or imposed, as applicable, in the
ordinary course of business and consistent with industry practices which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto (as such
property is used by the Company or one or more of its Subsidiaries) or interfere
with the ordinary conduct of the business of the Company or such Subsidiary;
provided, however, that any such liens are not incurred in connection with any
borrowing of money or any commitment to loan any money or to extend any credit;
(d) Liens disclosed on Schedule 1 to this Indenture;
(e) Liens that secure Acquired Indebtedness of the Company or any of its
Subsidiaries; provided, however, in each case, that the incurrence of such
Acquired Indebtedness was permitted under Section 4.11 and such Liens do not
encumber any other property or assets other than the
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<PAGE> 9
property and assets acquired in such acquisition, merger or consolidation and
were not put in place in connection with or in anticipation of such acquisition,
merger or consolidation;
(f) customary Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance and other types of social security
legislation or to secure the performance of tenders, statutory obligations,
surety, indemnity and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(g) judgment and attachment Liens with respect to judgments and
attachments not giving rise to an Event of Default;
(h) leases or subleases granted to others not interfering in any material
respect with the ordinary conduct of the business of the Company or of any of
its Subsidiaries or which do not in any case materially detract from the value
of the property subject thereto (as such property is used by the Company or one
or more of its Subsidiaries);
(i) any (x) interest or title of a lessor or sublessor under any lease,
including under any Capital Lease Obligation, (y) restriction or encumbrance
that the interest or title of such lessor or sublessor may be subject to, or (z)
subordination of the interest of the lessee or sublessee under such lease to any
restriction or encumbrance referred to in subclause (y);
(j) Liens arising form filing of precautionary UCC financing statements
relating solely to leases not prohibited by this Indenture or the Security
Documents;
(k) any lien in favor of the company or any Subsidiary thereof so long as
such Lien is subordinate in priority to any Lien on Collateral and any Lien
granted with respect to the obligations of any Subsidiary to the Company under
any Intercompany Note;
(l) any Lien created or granted to, or for the benefit of, the lenders,
financial institutions, purchasers and bondholders providing financing for the
Merger or entering into Interest Swap and Hedging Obligations with respect to
such financing.
Section 1.21 Amendments to Section 6.1 (Events of Default).
Paragraphs (3) through (11) are hereby deleted in their
entirety.
Section 1.22 Amendment to Section 12.1 (Guarantee).
Section 12.1 is hereby deleted in its entirety.
Section 1.23 Amendment to Section 12.2 (Execution and Delivery of
Guarantee).
-8-
<PAGE> 10
Section 12.2 is hereby deleted in its entirety.
Section 1.24 Amendment to Section 12.3 (Certain Bankruptcy Events).
Section 12.3 is hereby deleted in its entirety.
Section 1.25 Amendment to Section 12.4 (Release of Guarantor).
Section 12.4 is hereby deleted in its entirety.
Section 1.26 Waiver.
The Holders waive compliance by the Company with any provisions of
the Indenture, the Senior Notes or the Security Documents which would prohibit
or, with the passage of time or otherwise, be violated by, any component of the
Merger (as defined in the Agreement and Plan of Merger) and any transactions
contemplated by the Agreement and Plan of Merger, dated as of September 2, 1998,
as amended, by and between the Company and certain of its subsidiaries and
Empress Entertainment, Inc. and certain of its subsidiaries (the "Agreement and
Plan of Merger"), including, without limiting the generality of the foregoing,
the incurrence of indebtedness to finance such transactions, the granting and
priority of liens to secure such indebtedness and the perfection of such liens.
This waiver shall not apply to any such provision which, pursuant to the
Indenture, may not be waived without the consent of each Holder of Senior Notes
that remain outstanding.
ARTICLE II
MISCELLANEOUS
Section 2.1 Supplemental Indenture Controls. To the extent of any
inconsistency, ambiguity or conflict between the terms of the Indenture and this
Second Supplemental Indenture, the terms of this Second Supplemental Indenture
shall govern and control.
Section 2.2 Terms Defined. All capitalized terms used in this Second
Supplemental Indenture and not otherwise defined shall have the meanings
specified in the Indenture.
Section 2.3 Confirmation of Terms. Except as amended hereby, the Indenture
and the Senior Notes are in all respects ratified and confirmed and all the
terms shall remain in full force and effect.
-9-
<PAGE> 11
Section 2.4 Governing Law. The laws of the State of New York shall govern
this Second Supplemental Indenture.
Section 2.5 Successors. All agreements of the Company and the Guarantor in
this Second Supplemental Indenture shall bind their respective successors.
Section 2.6 Multiple Counterparts. The parties may sign multiple
counterparts of this Second Supplemental Indenture. Each signed counterpart
shall be deemed an original, but all of them together shall represent the same
agreement.
Section 2.7 Effectiveness. The provisions of this Second Supplemental
Indenture will take effect immediately upon its execution and delivery by the
Trustee.
Section 2.8 Trustee Disclaimer. The Trustee accepts the Amendments and
Waivers to and under the Indenture effected by this Second Supplemental
Indenture and agrees to execute the trust created by the Indenture as hereby
amended, but only upon the terms and conditions set forth in the Indenture,
including the terms and provisions defining and limiting the liabilities and
responsibilities of the Trustee, which terms and provisions shall in like manner
define and limit its liabilities and responsibilities in the performance of the
trust created by the Indenture as hereby amended, and, without limiting the
generality of the foregoing, the Trustee shall not be responsible in any manner
whatsoever for or with respect to any of the recitals or statements contained
herein, all of which recitals or statements are made solely by the Company and
the Guarantor, for or with respect to (i) the validity, efficacy or sufficiency
of this Second Supplemental Indenture or any of the terms or provisions hereof,
(ii) the proper authorization hereof by the Company or the Guarantor by
corporate action or otherwise, (iii) the due execution hereof by the Company or
the Guarantor or (iv) the consequences (direct or indirect and whether
deliberate or inadvertent) of any amendment herein
-10-
<PAGE> 12
provided for, and the Trustee makes no representation with respect to any such
matters.
-11-
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed by their respective authorized
officers as of the date first written above.
HORSESHOE GAMING, L.L.C., as Issuer
By: HORSESHOE GAMING, INC., its Manager
By: /s/ Jack B. Binion
---------------------------------------
Name: Jack B. Binion
Title: Chairman of the Board and Chief
Executive Officer
ROBINSON PROPERTY GROUP, LIMITED
PARTNERSHIP, as Guarantor
By: HORSESHOE GP, INC., its General Partner
By: /s/ Jack B. Binion
---------------------------------------
Name: Jack B. Binion
Title: President
U.S. TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Sandra H. Leess
---------------------------------------
Name: Sandra H. Leess
Title: Senior Vice President
<PAGE> 1
Exhibit 4.15
- --------------------------------------------------------------------------------
---------------------------------
AMENDMENT NO. 1 TO
SECOND PLEDGE AGREEMENT
---------------------------------
From
JACK BINION
B&O DEVELOPMENT LIMITED PARTNERSHIP
JBB GAMING INVESTMENTS, 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.
---------------------------------
Dated as of May 11, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT NO. 1 TO SECOND PLEDGE AGREEMENT, dated as of May 11, 1999, from
JACK BINION, B&O DEVELOPMENT LIMITED PARTNERSHIP and JBB GAMING INVESTMENTS,
L.L.C. ( collectively referred to herein as the "Pledgors") in favor of UNITED
STATES TRUST COMPANY OF NEW YORK for the ratable benefit of the holders of the
12.75% Senior Notes due September 30, 2000 (the "Senior Notes").
RECITALS
WHEREAS, the Pledgors have heretofore executed and delivered a Second
Pledge Agreement dated as of October 10, 1995 (the "Pledge Agreement"),
providing that the Pledgors pledge for the ratable benefit of the Holders of the
Senior Notes a security interest in the Pledged Collateral;
WHEREAS, pursuant to an Offer to Purchase and Consent Solicitation
Statement dated April 20, 1999, Horseshoe Gaming, L.L.C. ("Horseshoe Gaming")
solicited consents to various amendments and waivers (the "Amendments and
Waivers") from the Holders of the Senior Notes to and under certain Security
Documents, including the Pledge Agreement intended to increase the Horseshoe
Gaming's operating and financial flexibility and to accommodate Horseshoe
Gaming's acquisition by means of merger of the operating subsidiaries of Empress
Entertainment, Inc.;
WHEREAS, the requisite consents of the Holders of the Senior Notes have
been obtained and the Pledgors now desire to amend the Pledge Agreement pursuant
to and in accordance with the provisions of Section 10 thereof to give effect to
the Amendments and Waivers; and
WHEREAS, the execution and delivery of this Amendment No. 1 to the Pledge
Agreement (this "Amendment") has been authorized by the Pledgors.
-1-
<PAGE> 3
NOW, THEREFORE, in consideration of the above premises, the Pledgors
hereby agree, for the equal and ratable benefit of the Holders of the Senior
Notes, as follows:
ARTICLE I
AMENDMENTS AND WAIVERS
Section 1.1 Amendment to Section 8.1 (Limitation on Liens).
Section 8.1 is hereby deleted in its entirety.
Section 1.2 Amendments to Section 8.2 (Continuous Perfection).
Section 8.2 is hereby deleted in its entirety.
Section 1.3 Waiver.
The Holders waive compliance by the Pledgors with any provisions of
the Pledge Agreement, the Indenture, the Senior Notes or the other Security
Documents which would prohibit or, with the passage of time or otherwise, be
violated by, any component of the Merger (as defined in the Agreement and Plan
of Merger) and any transactions contemplated by the Agreement and Plan of
Merger, dated as of September 2, 1998, as amended, by and between Horseshoe
Gaming, and certain of its subsidiaries, and Empress Entertainment, Inc., and
certain of its subsidiaries (the "Agreement and Plan of Merger"), including,
without limiting the generality of the foregoing, the incurrence of indebtedness
to finance such transactions, the granting and priority of liens to secure such
indebtedness and the perfection of such liens. This waiver shall not apply to
any such provision which, pursuant to the Indenture or the Pledge Agreement, may
not be waived without the consent of each Holder of Senior Notes that remain
outstanding.
-2-
<PAGE> 4
ARTICLE II
MISCELLANEOUS
Section 2.1 Amendment Controls. To the extent of any inconsistency,
ambiguity or conflict between the terms of the Pledge Agreement and this
Amendment, this Amendment shall govern and control.
Section 2.2 Terms Defined. All capitalized terms used in this Amendment
and not otherwise defined shall have the meanings specified in the Indenture.
Section 2.3 Confirmation of Terms. Except as amended hereby, the Pledge
Agreement is in all respects ratified and confirmed and all the terms shall
remain in full force and effect.
Section 2.4 Governing Law. The laws of the State of New York shall govern
this Amendment, without regard to principles of conflicts of laws.
Section 2.5 Successors. All agreements of the Company in this Amendment
shall bind its successors.
Section 2.6 Effectiveness. The provisions of this Amendment will take
effect immediately upon its execution and delivery by the Pledgors.
-3-
<PAGE> 5
IN WITNESS WHEREOF, the party hereto has caused this Amendment to be duly
executed by its authorized officer as of the date first written above.
/s/ Jack B. Binion
------------------------------
JACK B. BINION
B&O DEVELOPMENT LIMITED
PARTNERSHIP
By: B&O DEVELOPMENT, INC.
its general partner
By: /s/ Jack B. Binion
--------------------------
Name:
Title:
JBB GAMING INVESTMENTS, L.L.C.
By: /s/ Jack B. Binion
--------------------------
Name:
Title:
<PAGE> 1
Exhibit 4.17
- --------------------------------------------------------------------------------
---------------------------------
AMENDMENT NO. 1 TO
SECOND PLEDGE AGREEMENT
---------------------------------
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.
---------------------------------
Dated as of May 11, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT NO. 1 TO SECOND PLEDGE AGREEMENT, dated as of May 11, 1999, from
HORSESHOE GAMING, L.L.C. (the "Company") in favor of UNITED STATES TRUST COMPANY
OF NEW YORK for the ratable benefit of the Holders of the 12.75% Senior Notes
due September 30, 2000 (the "Senior Notes") issued by the Company.
RECITALS
WHEREAS, the Company has heretofore executed and delivered a Second Pledge
Agreement dated as of October 10, 1995 (the "Pledge Agreement"), providing that
the Company pledge for the ratable benefit of the Holders of the Senior Notes a
security interest in the Pledged Collateral;
WHEREAS, pursuant to an Offer to Purchase and Consent Solicitation
Statement dated April 20, 1999, the Company solicited consents to various
amendments and waivers (the "Amendments and Waivers") from the holders of the
Senior Notes to and under certain Security Documents, including the Pledge
Agreement intended to increase the Company's operating and financial flexibility
and to accommodate the Company's acquisition by means of merger of the operating
subsidiaries of Empress Entertainment, Inc.;
WHEREAS, the requisite consents of the Holders of the Senior Notes have
been obtained and the Company now desires to amend the Pledge Agreement pursuant
to and in accordance with the provisions of Section 10 thereof to give effect to
the Amendments and Waivers; and
WHEREAS, the execution and delivery of this Amendment No. 1 to the Pledge
Agreement (this "Amendment") has been authorized by a resolution of the Board of
Directors of the managing member of the Company.
-1-
<PAGE> 3
NOW, THEREFORE, in consideration of the above premises, the Company hereby
agrees, for the equal and ratable benefit of the Holders of the Senior Notes, as
follows:
ARTICLE I
AMENDMENTS AND WAIVERS
Section 1.1 Amendment to Section 8.1 (Limitation on Liens).
Section 8.1 is hereby deleted in its entirety.
Section 1.2 Amendments to Section 8.2 (Continuous Perfection).
Section 8.2 is hereby deleted in its entirety.
Section 1.3 Waiver.
The Holders waive compliance by the Company with any
provisions of the Pledge Agreement, the Indenture, the Senior Notes or the other
Security Documents which would prohibit or, with the passage of time or
otherwise, be violated by, any component of the Merger (as defined in the
Agreement and Plan of Merger) and any transactions contemplated by the Agreement
and Plan of Merger, dated as of September 2, 1998, as amended, by and between
the Company, and certain of its subsidiaries, and Empress Entertainment, Inc.,
and certain of its subsidiaries (the "Agreement and Plan of Merger"), including,
without limiting the generality of the foregoing, the incurrence of indebtedness
to finance such transactions, the granting and priority of liens to secure such
indebtedness and the perfection of such liens. This waiver shall not apply to
any such provision which, pursuant to the Indenture or the Pledge Agreement, may
not be waived without the consent of each Holder of Senior Notes that remain
outstanding.
-2-
<PAGE> 4
ARTICLE II
MISCELLANEOUS
Section 2.1 Amendment Controls. To the extent of any inconsistency,
ambiguity or conflict between the terms of the Pledge Agreement and this
Amendment, this Amendment shall govern and control.
Section 2.2 Terms Defined. All capitalized terms used in this Amendment
and not otherwise defined shall have the meanings specified in the Indenture.
Section 2.3 Confirmation of Terms. Except as amended hereby, the Pledge
Agreement is in all respects ratified and confirmed and all the terms shall
remain in full force and effect.
Section 2.4 Governing Law. The laws of the State of New York shall govern
this Amendment, without regard to principles of conflicts of laws.
Section 2.5 Successors. All agreements of the Company in this Amendment
shall bind its successors.
Section 2.6 Effectiveness. The provisions of this Amendment will take
effect immediately upon its execution and delivery by the Company.
-3-
<PAGE> 5
IN WITNESS WHEREOF, the party hereto has caused this Amendment to be duly
executed by its authorized officer as of the date first written above.
HORSESHOE GAMING, L.L.C.
By: HORSESHOE GAMING, INC., its Manager
By: /s/ Jack B. Binion
--------------------------------------
Name: Jack B. Binion
Title: Chairman of the Board and Chief
Executive Officer
ACKNOWLEDGED AND ACCEPTED
THIS __ DAY OF MAY, 1999
NEW GAMING CAPITAL PARTNERSHIP
By: HORSESHOE GP, INC.
its general partner
By: /s/ Jack B. Binion
--------------------------
Name:
Title:
ROBINSON PROPERTY GROUP LIMITED PARTNERSHIP
By: HORSESHOE GP, INC.
its general partner
By: /s/ Jack B. Binion
--------------------------
Name:
Title:
HORSESHOE GP, INC.
By: /s/ Jack B. Binion
--------------------------
Name:
Title:
<PAGE> 6
HORSESHOE VENTURES, L.L.C.
By: HORSESHOE GAMING, L.L.C.
By: HORSESHOE GAMING, INC.
By: /s/ Jack B. Binion
--------------------------
Name: Jack B. Binion
Title: Chairman of the Board and Chief
Executive Officer
<PAGE> 1
Exhibit 4.19
- --------------------------------------------------------------------------------
---------------------------------
AMENDMENT NO. 1 TO
SECOND SHIP MORTGAGE
ON THE WHOLE OF THE
QUEEN OF THE RED
---------------------------------
HORSESHOE ENTERTAINMENT
Owner and Mortgagor
in Favor of
HORSESHOE GAMING, L.L.C.,
Mortgagee
---------------------------------
Dated as of May 11, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT NO. 1 TO SECOND SHIP MORTGAGE ON THE WHOLE OF THE QUEEN OF THE
RED, dated as of May 11, 1999, from HORSESHOE ENTERTAINMENT (the "Company") in
favor of HORSESHOE GAMING, L.L.C. ("Horseshoe Gaming").
RECITALS
WHEREAS, the Company has heretofore executed and delivered a Second Ship
Mortgage dated as of September 29, 1995 (the "Ship Mortgage"), providing that
the Company mortgage to (i) the Holders of the 12.75% Senior Notes due September
30, 2000 (the "Senior Notes") issued by Horseshoe Gaming, (ii) Horseshoe Gaming,
and (iii) United States Trust Company of New York the whole of the Queen of the
Red;
WHEREAS, pursuant to an Offer to Purchase and Consent Solicitation
Statement dated April 20, 1999, Horseshoe Gaming solicited consents to various
amendments and waivers (the "Amendments and Waivers") from the holders of the
Senior Notes to and under certain Security Documents, including the Ship
Mortgage intended to increase Horseshoe Gaming's operating and financial
flexibility and to accommodate Horseshoe Gaming's acquisition by means of merger
of the operating subsidiaries of Empress Entertainment, Inc.;
WHEREAS, the requisite consents of the holders of the Senior Notes have
been obtained and the Company now desires to amend the Ship Mortgage; and
WHEREAS, the execution and delivery of this Amendment No. 1 to the Ship
Mortgage (this "Amendment") has been authorized on behalf of the Company by a
resolution of the Board of Directors of the General Partner of the Company.
NOW, THEREFORE, in consideration of the above premises, the Company hereby
agrees, for the equal and ratable benefit of the Holders of the Senior Notes, as
follows:
-1-
<PAGE> 3
ARTICLE I
AMENDMENTS AND WAIVERS
Section 1.1 Amendment to Article II Section 9.
Article II, Section 9 is hereby deleted in its entirety.
Section 1.2 Waiver.
The Holders waive compliance by the Company and Horseshoe
Gaming with any provisions of the Ship Mortgage, the Indenture, the Senior Notes
or the other Security Documents which would prohibit or, with the passage of
time or otherwise, be violated by, any component of the Merger (as defined in
the Agreement and Plan of Merger) and any transactions contemplated by the
Agreement and Plan of Merger, dated as of September 2, 1998, as amended, by and
between Horseshoe Gaming, and certain of its subsidiaries, and Empress
Entertainment, Inc., and certain of its subsidiaries (the "Agreement and Plan of
Merger"), including, without limiting the generality of the foregoing, the
incurrence of indebtedness to finance such transactions, the granting and
priority of liens to secure such indebtedness and the perfection of such liens.
This waiver shall not apply to any such provision which, pursuant to the
Indenture or the Ship Mortgage, may not be waived without the consent of each
Holder of Senior Notes that remain outstanding.
ARTICLE II
MISCELLANEOUS
Section 2.1 Amendment Controls. To the extent of any inconsistency,
ambiguity or conflict between the terms of the Ship Mortgage and this Amendment,
this Amendment shall govern and control.
-2-
<PAGE> 4
Section 2.2 Terms Defined. All capitalized terms used in this Amendment
and not otherwise defined shall have the meanings specified in the Indenture.
Section 2.3 Confirmation of Terms. Except as amended hereby, the Ship
Mortgage is in all respects ratified and confirmed and all the terms shall
remain in full force and effect.
Section 2.4 Governing Law. The laws of the State of New York shall govern
this Amendment, without regard to principles of conflicts of laws.
Section 2.5 Successors. All agreements of the Company in this Amendment
shall bind its successors..
Section 2.6 Effectiveness. The provisions of this Amendment will take
effect immediately upon its execution and delivery by the Company.
-3-
<PAGE> 5
IN WITNESS WHEREOF, the party hereto has caused this Amendment to be duly
executed by its authorized officer as of the date first written above.
HORSESHOE ENTERTAINMENT
By: NEW GAMING CAPITAL PARTNERSHIP
its general partner
By: HORSESHOE GP, INC.
its general partner
By: /s/ Jack B. Binion
-------------------------------
Name:
Title:
<PAGE> 1
Exhibit 4.22
- --------------------------------------------------------------------------------
---------------------------------
AMENDMENT NO. 1 TO
SECOND DEED OF TRUST, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASES AND RENTS
---------------------------------
From
ROBINSON PROPERTY GROUP. LIMITED PARTNERSHIP
to
ROWAN H. TAYLOR, JR.
for the benefit of
HORSESHOE GAMING, L.L.C. AND
UNITED STATES TRUST COMPANY OF NEW YORK
FOR THE RATABLE BENEFIT OF
THE HOLDERS OF
12.75% SENIOR NOTES DUE SEPTEMBER 30, 2000
ISSUED BY
HORSESHOE GAMING, L.L.C.
---------------------------------
Dated as of May 11, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT NO. 1 TO SECOND DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT
OF LEASES AND RENTS, dated as of May 11, 1999, by ROBINSON PROPERTY GROUP,
LIMITED PARTNERSHIP (the "Company") to ROWAN H. TAYLOR, JR. for the benefit of
HORSESHOE GAMING, L.L.C. ("Horseshoe Gaming") and UNITED STATES TRUST COMPANY OF
NEW YORK for the ratable benefit of the Holders of the 12.75% Senior Notes due
September 30, 2000 (the "Senior Notes").
RECITALS
WHEREAS, the Company has heretofore executed and delivered a Second Deed
of Trust, Security Agreement and Assignment of Leases and Rents dated as of
October 10, 1995 (the "Deed of Trust"), providing that the Company grants a
security interest in for the ratable benefit of the Holders of the Senior Notes
a security interest in the Trust Property;
WHEREAS, pursuant to an Offer to Purchase and Consent Solicitation
Statement dated April 20, 1999, Horseshoe Gaming, L.L.C. ("Horseshoe Gaming")
solicited consents to various amendments and waivers (the "Amendments and
Waivers") from the Holders of the Senior Notes to and under certain Security
Documents, including the Deed of Trust intended to increase the Horseshoe
Gaming's operating and financial flexibility and to accommodate Horseshoe
Gaming's acquisition by means of merger of the operating subsidiaries of Empress
Entertainment, Inc.;
WHEREAS, the requisite consents of the Holders of the Senior Notes have
been obtained and the Company now desires to amend the Deed of Trust; and
-1-
<PAGE> 3
WHEREAS, the execution and delivery of this Amendment No. 1 to the Deed of
Trust (this "Amendment") has been authorized on behalf of the Company by a
resolution of the Board of Directors of the General Partner of the Company.
NOW, THEREFORE, in consideration of the above premises, the Company hereby
agrees, for the equal and ratable benefit of the Holders of the Senior Notes, as
follows:
ARTICLE I
AMENDMENTS AND WAIVERS
Section 1.1 Amendment to Section 1.10 (Restrictions on Transfers and
Encumbrances).
Section 1.10 is hereby deleted in its entirety.
Section 1.2 Waiver.
The Holders waive compliance by the Company with any
provisions of the Deed of Trust, the Indenture, the Senior Notes or the other
Security Documents which would prohibit or, with the passage of time or
otherwise, be violated by, any component of the Merger (as defined in the
Agreement and Plan of Merger) and any transactions contemplated by the Agreement
and Plan of Merger, dated as of September 2, 1998, as amended, by and between
Horseshoe Gaming, and certain of its subsidiaries, and Empress Entertainment,
Inc., and certain of its subsidiaries (the "Agreement and Plan of Merger"),
including, without limiting the generality of the foregoing, the incurrence of
indebtedness to finance such transactions, the granting and priority of liens to
secure such indebtedness and the perfection of such liens. This waiver shall not
apply to any such provision which, pursuant to the Indenture or the Deed of
Trust, may not be waived without the consent of each Holder of Senior Notes that
remain outstanding.
-2-
<PAGE> 4
ARTICLE II
MISCELLANEOUS
Section 2.1 Amendment Controls. To the extent of any inconsistency,
ambiguity or conflict between the terms of the Deed of Trust and this Amendment,
this Amendment shall govern and control.
Section 2.2 Terms Defined. All capitalized terms used in this Amendment
and not otherwise defined shall have the meanings specified in the Indenture.
Section 2.3 Confirmation of Terms. Except as amended hereby, the Deed of
Trust is in all respects ratified and confirmed and all the terms shall remain
in full force and effect.
Section 2.4 Governing Law. The laws of the State of New York shall govern
this Amendment, without regard to principles of conflicts of laws.
Section 2.5 Successors. All agreements of the Company in this Amendment
shall bind its successors.
Section 2.6 Effectiveness. The provisions of this Amendment will take
effect immediately upon its execution and delivery by the Company.
-3-
<PAGE> 5
IN WITNESS WHEREOF, the party hereto has caused this Amendment to be duly
executed by its authorized officer as of the date first written above.
ROBINSON PROPERTY GROUP LIMITED
PARTNERSHIP
By: HORSESHOE GP, INC.,
its general partner
By: /s/ Jack B. Binion
---------------------------
Name:
Title:
<PAGE> 1
Exhibit 4.24
- --------------------------------------------------------------------------------
---------------------------------
AMENDMENT NO. 1 TO
SECOND SHIP MORTGAGE
ON THE WHOLE OF THE
HORSESHOE CASINO & HOTEL, TUNICA
---------------------------------
ROBINSON PROPERTY GROUP, LIMITED PARTNERSHIP
Owner and Mortgagor
in Favor of
HORSESHOE GAMING, L.L.C.,
and
UNITED STATES TRUST COMPANY OF NEW YORK
Mortgagee
---------------------------------
Dated as of May 11, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT NO. 1 TO SECOND SHIP MORTGAGE ON THE WHOLE OF THE HORSESHOE
CASINO & HOTEL, TUNICA, dated as of May 11, 1999, from ROBINSON PROPERTY GROUP,
LIMITED PARTNERSHIP (the "Company") in favor of HORSESHOE GAMING, L.L.C.
("Horseshoe Gaming") and UNITED STATES TRUST COMPANY OF NEW YORK for the ratable
benefit of the holders of the 12.75% Senior Notes due September 30, 2000 (the
"Senior Notes") issued by Horseshoe Gaming.
RECITALS
WHEREAS, the Company has heretofore executed and delivered a Second Ship
Mortgage dated as of September 29, 1995 (the "Ship Mortgage"), providing that
the Company mortgage to the Holders of the Senior Notes the whole of the
Horseshoe Casino & Hotel, Tunica;
WHEREAS, pursuant to an Offer to Purchase and Consent Solicitation
Statement dated April 20, 1999, Horseshoe Gaming solicited consents to various
amendments and waivers (the "Amendments and Waivers") from the holders of the
Senior Notes to and under certain Security Documents, including the Ship
Mortgage intended to increase Horseshoe Gaming's operating and financial
flexibility and to accommodate Horseshoe Gaming's acquisition by means of a
merger of the operating subsidiaries of Empress Entertainment, Inc.;
WHEREAS, the requisite consents of the holders of the Senior Notes have
been obtained and the Company now desires to amend the Ship Mortgage; and
WHEREAS, the execution and delivery of this Amendment No. 1 to the Ship
Mortgage (this "Amendment") has been authorized on behalf of the Company by a
resolution of the Board of Directors of the General Partner of the Company.
NOW, THEREFORE, in consideration of the above premises, the Company hereby
agrees,
-1-
<PAGE> 3
for the equal and ratable benefit of the Holders of the Senior Notes, as
follows:
ARTICLE I
AMENDMENTS AND WAIVERS
Section 1.1 Amendment to Article II Section 9.
Article II, Section 9 is hereby deleted in its entirety.
Section 1.2 Waiver.
The Holders waive compliance by the Company and Horseshoe
Gaming with any provisions of the Ship Mortgage, the Indenture, the Senior Notes
or the other Security Documents which would prohibit or, with the passage of
time or otherwise, be violated by, any component of the Merger (as defined in
the Agreement and Plan of Merger) and any transactions contemplated by the
Agreement and Plan of Merger, dated as of September 2, 1998, as amended, by and
between Horseshoe Gaming, and certain of its subsidiaries, and Empress
Entertainment, Inc., and certain of its subsidiaries (the "Agreement and Plan of
Merger"), including, without limiting the generality of the foregoing, the
incurrence of indebtedness to finance such transactions, the granting and
priority of liens to secure such indebtedness and the perfection of such liens.
This waiver shall not apply to any such provision which, pursuant to the
Indenture or the Ship Mortgage, may not be waived without the consent of each
Holder of Senior Notes that remain outstanding.
ARTICLE II
MISCELLANEOUS
Section 2.1 Amendment Controls. To the extent of any inconsistency,
ambiguity or conflict between the terms of the Ship Mortgage and this Amendment,
this Amendment shall govern and control.
-2-
<PAGE> 4
Section 2.2 Terms Defined. All capitalized terms used in this Amendment
and not otherwise defined shall have the meanings specified in the Indenture.
Section 2.3 Confirmation of Terms. Except as amended hereby, the Ship
Mortgage is in all respects ratified and confirmed and all the terms shall
remain in full force and effect.
Section 2.4 Governing Law. The laws of the State of New York shall govern
this Amendment, without regard to the principles of conflicts of laws.
Section 2.5 Successors. All agreements of the Company in this Amendment
shall bind its successors.
Section 2.6 Effectiveness. The provisions of this Amendment will take
effect immediately upon its execution and delivery by the Company.
-3-
<PAGE> 5
IN WITNESS WHEREOF, the party hereto has caused this Amendment to be duly
executed by its authorized officer as of the date first written above.
ROBINSON PROPERTY GROUP LIMITED PARTNERSHIP
By: HORSESHOE GP, INC.
its general partner
By: /s/ Jack B. Binion
----------------------------------------
Name: Jack B. Binion
Title:
<PAGE> 1
Exhibit 4.37
- --------------------------------------------------------------------------------
---------------------------------
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
NOTE ASSIGNMENT
---------------------------------
From
HORSESHOE GAMING, L.L.C.,
in Favor of
THE HOLDERS OF
SENIOR SECURED CREDIT FACILITY NOTES DUE SEPTEMBER 30, 1999
ISSUED BY
HORSESHOE GAMING, L.L.C.
And
UNITED STATES TRUST COMPANY OF NEW YORK
FOR THE RATABLE BENEFIT OF THE HOLDERS OF
12.75% SENIOR NOTES DUE SEPTEMBER 30, 2000
ISSUED BY
HORSESHOE GAMING, L.L.C.
---------------------------------
Dated as of May 11, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED NOTE ASSIGNMENT, dated as of
May 11, 1999, from HORSESHOE GAMING, L.L.C. (the "Company") in favor of the
HOLDERS of SENIOR SECURED CREDIT FACILITY NOTES due September 30, 1999 issued by
THE COMPANY AND UNITED STATES TRUST COMPANY OF NEW YORK for the ratable benefit
of the Holders of the 12.75% Senior Notes due September 30, 2000 (the "Senior
Notes") issued by the Company.
RECITALS
WHEREAS, the Company has heretofore executed and delivered a Note
Assignment dated as of October 10, 1995 (the "Note Assignment"), providing that
the Company assign for the ratable benefit of the Holders of the Senior Notes a
security interest in the Assigned Collateral;
WHEREAS, pursuant to an Offer to Purchase and Consent Solicitation
Statement dated April 20, 1999, the Company solicited consents to various
amendments and waivers (the "Amendments and Waivers") from the Holders of the
Senior Notes to and under certain Security Documents, including the Note
Assignment intended to increase the Company's operating and financial
flexibility and to accommodate the Company's acquisition by means of merger of
the operating subsidiaries of Empress Entertainment, Inc.;
WHEREAS, the requisite consents of the Holders of the Senior Notes have
been obtained and the Company now desires to amend the Note Assignment pursuant
to and in accordance with the provisions of Section 13 thereof to give effect to
the Amendments and Waivers; and
-2-
<PAGE> 3
WHEREAS, the execution and delivery of this Amendment No. 1 to the Note
Assignment (this "Amendment") has been authorized on behalf of the Company by a
resolution of the Board of Directors of the managing member of the Company.
NOW, THEREFORE, in consideration of the above premises, the Company hereby
agrees, for the equal and ratable benefit of the Holders of the Senior Notes, as
follows:
ARTICLE I
AMENDMENTS AND WAIVERS
Section 1.1 Amendment to Section 8.1 (Limitation on Liens).
Section 8.1 is hereby amended to read as follows:
"The Company shall not, directly or indirectly, create,
receive, assume or permit to exist or otherwise cause or
permit to become in effect any Lien upon or with respect to
the Assigned Collateral, other than the Liens granted to the
Agent, for the ratable benefit of the Lenders and the
Collateral Agent, for the ratable benefit of the Senior
Noteholders, pursuant to this Assignment or pursuant to the
Amended and Restated Credit Agreement or pursuant to the
Senior Note Purchase Agreement or pursuant to the Indenture,
as same may be amended or supplemented."
Section 1.2 Amendments to Section 8.2 (Continuous Perfection).
Section 8.2 is hereby amended to read as follows:
"The Company shall not change its name, identity or structure
in any manner which might make any financing or continuation
statement filed hereunder misleading within the meaning of
Section 9-402 (7) of the UCC (or any other then applicable
provision of the UCC) unless the Company shall have given the
Agent at least 90 days' prior written notice of its intention
to so change and shall have taken all action (or made
arrangements to take such action
-3-
<PAGE> 4
substantially simultaneously with such change if it is
impossible to take such action in advance) necessary, or
reasonably requested by the Agent, to amend such financing or
continuation statement so that it is not misleading."
Section 1.3 Waiver.
The Holders waive compliance by the Company with any
provisions of the Note Assignment, the Indenture, the Senior Notes or the other
Security Documents which would prohibit or, with the passage of time or
otherwise, be violated by, any component of the Merger (as defined in the
Agreement and Plan of Merger) and any transactions contemplated by the Agreement
and Plan of Merger, dated as of September 2, 1998, as amended, by and between
the Company, and certain of its subsidiaries, and Empress Entertainment, Inc.,
and certain of its subsidiaries (the "Agreement and Plan of Merger"), including,
without limiting the generality of the foregoing, the incurrence of indebtedness
to finance such transactions, the granting and priority of liens to secure such
indebtedness and the perfection of such liens. This waiver shall not apply to
any such provision which, pursuant to the Indenture or the Note Assignment, may
not be waived without the consent of each Holder of Senior Notes that remain
outstanding.
ARTICLE II
MISCELLANEOUS
Section 2.1 Amendment Controls. To the extent of any inconsistency,
ambiguity or conflict between the terms of the Note Assignment and this
Amendment, this Amendment shall govern and control.
Section 2.2 Terms Defined. All capitalized terms used in this Amendment
and not otherwise defined shall have the meanings specified in the Indenture.
-4-
<PAGE> 5
Section 2.3 Confirmation of Terms. Except as amended hereby, the Note
Assignment is in all respects ratified and confirmed and all the terms shall
remain in full force and effect.
Section 2.4 Governing Law. The laws of the State of New York shall govern
this Amendment, without regard to principles of conflicts of laws.
Section 2.5 Successors. All agreements of the Company in this Amendment
shall bind its successors.
Section 2.6 Effectiveness. The provisions of this Amendment will take
effect immediately upon its execution and delivery by the Company.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the party hereto has caused this Amendment to be duly
executed by its authorized officer as of the date first written above.
HORSESHOE GAMING, L.L.C.
By: HORSESHOE GAMING, INC., its Manager
By: /s/ Jack B. Binion
--------------------------------------
Name: Jack B. Binion
Title: Chairman of the Board and Chief
Executive Officer
ACKNOWLEDGED AND ACCEPTED
THIS __ DAY OF MAY, 1999
HORSESHOE ENTERTAINMENT
By: NEW GAMING CAPITAL PARTNERSHIP
its general partner
By: HORSESHOE GP, INC.
its general partner
By: /s/ Jack B. Binion
---------------------------------------
Name:
Title:
ROBINSON PROPERTY GROUP LIMITED PARTNERSHIP
By: HORSESHOE GP, INC.
its general partner
By: /s/ Jack B. Binion
---------------------------------------
Name:
Title:
HORSESHOE GP, INC.
By: /s/ Jack B. Binion
---------------------------------------
Name:
Title:
<PAGE> 7
HORSESHOE VENTURES, L.L.C.
By: HORSESHOE GAMING, L.L.C.
its manager
By: HORSESHOE GAMING, INC.
its manager
By: /s/ Jack B. Binion
---------------------------------------
Name: Jack B. Binion
Title: Chairman of the Board and Chief
Executive Officer
<PAGE> 1
Exhibit 10.1
SETTLEMENT
TERM SHEET
The following terms outline the understanding among Paul Alanis, Loren
Ostrow, John Schreiber and Cliff Kortman (collectively, the "Employee Parties")
and Jack Binion, Horseshoe Gaming, Inc. ("Gaming") and Horseshoe Gaming L.L.C.
("LLC") (Binion, Gaming and the LLC are collectively referred to as the
"Horseshoe Parties") regarding the resolution of certain matters involving,
among other matters, the exercise of certain put rights (the "Put Rights") by
the Employee Parties with respect to ownership interests of the Employee Parties
in Horseshoe Gaming, L.L.C. (the "Ownership Interests").
1. For purposes of determining the fair market value of the Ownership
Interests, the percentage interest ("Percentage Interest") of each Employee (or,
as appropriate, their family partnerships) in the LLC is as follows:
<TABLE>
<CAPTION>
Employee Percentage Interest
-------- -------------------
<S> <C>
Paul R. Alanis 3.3644
Loren S. Ostrow 1.6822
John M. Allen 1.4032
John Schrieber .8000
Cliff Kortman .1340
</TABLE>
2. In connection with the exercise of the Put Rights, the parties hereto
agree to establish the fair market value of each Employee Party's Ownership
Interest with respect to each Employee
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
<PAGE> 2
Party's Employment Agreement by multiplying each Employee Party's Percentage
Interest by the agreed valuation ("AV") as established in paragraph 3. Employee
Parties agree that the Put Rights constitute all right any of them have to any
equity interest of any kind in LLC, Horseshoe Gaming, Inc., New Gaming Capital
Partnership or any of their respective affiliates.
3. The AV shall be $470 million in the event the Agreement and Plan of
Merger dated September 2, 1998, as amended, involving LLC and Empress
Entertainment, Inc. ("Empress Merger") does not close and shall be $500 million
in the event the Empress Merger closes. The parties agree that the Empress
Merger will be deemed to have closed in any of the following circumstances:
a. The Empress Manager is consummated in accordance with its
terms or as may be amended by the parties to that agreement,
or their successors, assignees or transferees;
b. The LLC renegotiates the agreement relating to the Empress
Merger so as to allow the merger to be consummated as to
either Empress Casino Hammond Corporation ("Hammond") or
Empress Casino Joliet Corporation ("Joliet") and the merger is
then consummated with either Hammond or Joliet;
c. LLC combines with another party such that the Empress Merger
is consummated with LLC obtaining Hammond or Joliet and the
other party obtaining the other;
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
-2-
<PAGE> 3
d. LLC consummates the Empress Merger in accordance with its
terms or as may be amended by the parties to that agreement,
but either Hammond or Joliet is spun off such that LLC is
combined with only one; or
e. LLC sells or transfers its interest in the Empress Merger
agreement to an unrelated third party.
4. The amount payable to each Employee ("Employee Amount") shall be as
follows:
Percentage Interest X AV
/ Capital Account as of the Cutoff Date
- Balance of Employee Loan as of the Date of Determination
--------------------------------------------------------------
= Employee Amount
In the case of Cliff Kortman, the beginning of the formula shall be
modified to provide for Percentage Interest X (AV minus $350 million).
5. Employee Parties shall agree, subject to verification, that each
Employee has a loan from LLC in the amount of principal and accrued interest as
set forth below as of May 19, 1999:
<TABLE>
<CAPTION>
Employee Loan Balance
-------- ------------
<S> <C>
Paul R. Alanis $1,055,553.40
Loren S. Ostrow $765,692.03
John M. Allen $263,383.49
John Schrieber $288,673.57
Cliff Kortman $63,548.30
</TABLE>
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
-3-
<PAGE> 4
A per diem amount shall be added to the balance above to determine the amount
owed on the Date of Determination.
6. Employee Parties shall agree that each Employee has a capital account
balance as of April 30, 1999 (the "Cutoff Date") in the amount set forth below:
<TABLE>
<CAPTION>
Employee Capital Account Balance
-------- -----------------------
<S> <C>
Paul R. Alanis $2,478,573
Loren S. Ostrow $1,240,539
John M. Allen $967,451
John Schrieber $535,793
Cliff Kortman $31,327
</TABLE>
7. The Employee Amount for each employee shall be paid pursuant to the
terms of each Employee's employment agreement, or such agreements that the
Employee may be bound by, with the first payment (the first payment being 1/3 of
the Employee Amount) being made (such date being defined as the "Date of
Determination") within ten days of the dismissal of the Arbitration Demand,
notification of the American Arbitration Association, and notification of all
appropriate regulatory bodies (as provided in paragraph 14, below), but subject
to the covenants and other restrictions set forth in the debt agreements of the
Horseshoe Parties (the "Debt Agreements"). With respect to payments that may be
limited pursuant to the Debt Agreements, (a) payments to be made as a result of
the exercise of the Put Rights ("Put Payments") shall take priority over
payments to be made pursuant to agreements entered into after the date hereof
and (b) payments to be made pursuant to
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
-4-
<PAGE> 5
agreements entered into prior to the date hereof shall take priority over the
Put Payments, regardless of when such payments are due under such agreements.
8. Each of the Employee Parties and the Horseshoe Parties hereby provides
broad mutual releases of the other parties hereto, Does 1 through 10, and their
employees, members, officers, directors, legal counsel and affiliates relating
to all issues between each or all of the Employee Parties on the one hand and
the Horseshoe Parties on the other hand, whether known or unknown; provided that
the Employee Parties shall not be released from the noncompetition and
confidentiality provisions of their respective employment agreements, which
shall remain in full force and effect; provided further that the obligations of
the parties hereunder and under the settlement agreement contemplated herein
shall not be included in such release. The releases to be given as herein
described shall not be for the benefit of Andrew Astrachan or Onyx Partners,
Inc., unless and until they signify a mutual intent to give the releases herein
described. The Employee Parties acknowledge that their respective employments
with LLC and Gaming terminated as of the dates set forth in their employment
agreements, although the noncompetition and confidentiality provisions of their
Employment Agreements continue in full force and effect in accordance with the
terms thereof.
9. Employee Parties shall agree to keep the terms of this settlement
confidential except as provided in this term sheet and as may be required to be
disclosed by applicable law.
10. Employee Parties shall agree not to solicit, or initiate any attempt
to hire, or hire any employees of the Horseshoe Parties consistent with the
applicable terms established in the Allen Settlement Agreement (as defined in
paragraph 11 below). Each of the parties hereto also agrees to
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
-5-
<PAGE> 6
refrain from disparagement of other parties hereto consistent with Section 4.3
of the Allen Settlement Agreement.
11. Employee Parties and Horseshoe Parties agree to use their respective
best efforts to document the settlement evidenced by this term sheet as soon as
possible (but not later than May 26, 1999) through a settlement agreement
consistent with the terms of this term sheet, but otherwise containing terms
customary in such agreements, including by way of example those appropriate
provisions set forth in the draft Agreement by and among John Michael Allen and
certain of the Horseshoe Parties (the "Allen Settlement Agreement") set forth in
Exhibit "A".
12. This Term Sheet is intended to be a legally binding agreement among
the parties hereto.
13. All parties agree that the transactions contemplated hereby shall be
subject to obtaining all required regulatory approvals.
14. The Employee Parties shall: (a) immediately withdraw and dismiss with
prejudice the Arbitration Demand dated May 5, 1999 as against Horseshoe Gaming,
Inc., Jack B. Binion, Horseshoe Gaming, L.L.C. and Does 1-10 (the "Arbitration
Defendants"), and (b) advise the American Arbitration Association and all
appropriate regulatory bodies, including but not limited to the regulatory
bodies in the states of Mississippi, Illinois, Nevada, Indiana and Louisiana,
that the matter has been settled as to the Arbitration Defendants and the
Employee Parties are no longer making any of the claims set forth in the
Arbitration Demand as to the parties being dismissed.
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
-6-
<PAGE> 7
15. The matters contained herein are in the nature of compromise and
settlement and none of the parties admits or denies any allegations made in
connection with the dispute among the parties.
16. Each party hereto and each party to any document entered into as
contemplated hereby shall bear such party's own legal costs and expenses.
17. From and after the Cutoff Date, the Employee Parties shall have no
rights or interests whatsoever as members of LLC, including without limitation
rights as to distributions.
18. J. Michael Allen is an intended third party beneficiary of this
agreement and of the parties' final settlement agreement.
19. Paul Alanis represents that he has authority to bind Cliff Kortman to
the terms of this agreement.
20. This Settlement Term Sheet may be executed in one or more
counterparts, and facsimile signatures shall suffice to bind the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Term Sheet as of
the ______ day of May, 1999.
/s/ Jack B. Binion
---------------------------------------------
Jack B. Binion, individually and on behalf of
Horseshoe Gaming, Inc. and Horseshoe Gaming,
L.L.C.
/s/ Paul R. Alanis
---------------------------------------------
Paul R. Alanis, individually and on behalf of
the Alanis Family Partnership
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
-7-
<PAGE> 8
/s/ Loren S. Ostrow
---------------------------------------------
Loren S. Ostrow, individually and on behalf
of the Ostrow Family Partnership
/s/ John Schrieber
---------------------------------------------
John Schrieber
/s/ Cliff Kortman
---------------------------------------------
Cliff Kortman
----- ----- -----
JBB PRA LSO
----- ----- -----
JS CK
-8-
<PAGE> 1
Exhibit 10.2
HORSESHOE NOTE PLEDGE AND SECURITY AGREEMENT
HORSESHOE GAMING HOLDING CORP., a Delaware corporation (the
"Pledgor"), HORSESHOE GAMING, L.L.C., a Delaware limited liability company (the
"Obligor"), and U.S. TRUST COMPANY, NATIONAL ASSOCIATION (formerly known as U.S.
Trust Company of California, N.A.), as trustee (the "Trustee") for the
registered holders from time to time (the "Holders") of the Notes (as defined
herein) issued by the Pledgor under the Indenture referred to below, hereby
enter into this HORSESHOE NOTE PLEDGE AGREEMENT (this "Pledge Agreement"), as of
and on May 11, 1999.
Capitalized terms not otherwise defined herein have the meanings
given to them in the Indenture referred to below.
RECITALS
A. The Pledgor and the Trustee have entered into that certain
Indenture, dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), under which the Pledgor
is issuing on the date hereof $600,000,000 in aggregate principal amount of
85/8% Senior Subordinated Notes due 2009 (together with any notes that may from
time to time be issued in substitution therefor, the "Notes").
B. The Obligor has executed a promissory note in the original
principal amount of $240,349,125.00, dated as of the date hereof (the "Horseshoe
Note"), in favor of the Pledgor.
C. Horseshoe Entertainment, L.P., a Louisiana limited partnership,
and Robinson Property Group, Limited Partnership, a Mississippi limited
partnership (each, a "Guarantor"), have each executed a written guarantee, dated
as of the date hereof (the "Guarantees") of the Obligor's payment of all amounts
due, and its performance of all its other obligations under, the Horseshoe Note.
D. The Pledgor has entered into a Security and Control Agreement,
dated as of the date hereof (the "Security Agreement"), with the Trustee, as
trustee and as securities intermediary (as such, the "Securities Intermediary")
thereunder, under which the Trustee will have a security interest in a
securities account main-
<PAGE> 2
tained by the Securities Intermediary and funded by a portion of the proceeds of
the Notes, and in certain other collateral specified therein, to secure the
Pledgor's performance of the Obligations (as defined below).
E. It is a condition to the issuance of the Notes that the Pledgor
and the Obligor enter into this Pledge Agreement with the Trustee and that the
Pledgor (i) pledge the Horseshoe Note to the Trustee (for the benefit of the
Holders of the Notes), and (ii) grant a security interest in the Guarantees to
the Trustee (for the benefit of the Holders of the Notes), all in accordance
with the provisions hereof, to secure further the Pledgor's performance of the
Obligations (as defined below).
NOW, THEREFORE, in view of the foregoing, and in consideration of
the mutual promises herein and the benefits to be received therefrom, the
Pledgor, the Obligor, and the Trustee hereby agree as follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Trustee, for
its benefit and the ratable benefit of the Holders of the Notes, and grants to
the Trustee, for its benefit and the ratable benefit of the Holders of the
Notes, a security interest in, the following (the "Pledged Collateral"):
(i) the Horseshoe Note, the Pledgor's right to receive the
Obligor's performance under the Horseshoe Note, and all interest, cash,
instruments, and other property from time to time received, receivable or
otherwise distributed on account of or in exchange for the Horseshoe Note;
(ii) each Guarantee;
(iii) the Pledgor's right to receive each Guarantor's
performance of its obligations under its respective Guarantee, and all
interest, cash, instruments, and other property from time to time
received, receivable or otherwise distributed on account of or in exchange
for either or both Guarantees; and
(iv) all proceeds of any and all of the foregoing (including,
without limitation, proceeds that constitute property of the types
described above).
SECTION 2. Security for Obligations. This Pledge Agreement and the
security interest granted hereby secure (i) the Pledgor's prompt and complete
2
<PAGE> 3
payment of all amounts due, either at maturity or upon acceleration, under the
Notes and, (ii) the Pledgor's timely and full payment and performance of all its
other obligations under the Notes, the Indenture, the Registration Rights
Agreement, the Security Agreement, and this Pledge Agreement (collectively, the
"Obligations").
SECTION 3. Delivery of Pledged Collateral; No Amendment of Horseshoe
Note.
(a) On the Issue Date (as defined in the Indenture), the Pledgor
shall deliver to the Trustee an executed copy of this Pledge Agreement
together with the original Horseshoe Note and the original of all
certificates or other instruments representing or evidencing the Pledged
Collateral, all in form and substance satisfactory to the Trustee.
(b) The Pledgor agrees that, before the Termination Date (as defined
below) and so long as the Horseshoe Note is in the Trustee's possession,
the Pledgor shall not seek to amend or modify or waive any provision of
the Horseshoe Note or either Guarantee without the Trustee's prior written
consent.
(c) Concurrently with the execution and delivery of this Pledge
Agreement, the Pledgor shall deliver to the Trustee executed copies of
proper financing statements, which shall be duly filed in the office of
the Secretary of State of Nevada, covering the Pledged Collateral
described in this Pledge Agreement. A single financing statement, covering
both the collateral pledged under this Pledge Agreement and the collateral
pledged under the Security Agreement, may be delivered and filed.
SECTION 4. Pledgor's Instruction; Obligor's Consent.
(a) Before the Maturity Date (as defined in the Horseshoe Note), and
so long as no Event of Default (as defined in the Indenture) has occurred,
the Obligor may make all payments that become due under the Horseshoe Note
to the Pledgor. The Pledgor hereby irrevocably instructs the Obligor and
each Guarantor that, notwithstanding the foregoing, the terms of the
Horseshoe Note, or any other agreement or any instructions from the
Pledgor or any other entity to the contrary, the Obligor and each
Guarantor shall make all payments that become due under the Horseshoe Note
or either Guarantee, as the case may be, to the Trustee (1) if the Trustee
delivers written notice to
3
<PAGE> 4
the Obligor and each Guarantor that an Event of Default (as defined in the
Indenture) has occurred and is continuing and (2) on and after the
Maturity Date.
(b) The Obligor hereby consents to the Pledgor's pledge of the
Pledged Collateral, including the Horseshoe Note, to the Trustee and to
all other terms of this Pledge Agreement. Notwithstanding the terms of the
Horseshoe Note or any other agreement or any instructions from the Pledgor
or any other entity to the contrary, the Obligor agrees to make all
payments that become due under the Horseshoe Note, as the case may be, to
the Trustee (1) if the Trustee delivers written notice to the Obligor that
an Event of Default (as defined in the Indenture) has occurred and is
continuing and (2) on and after the Maturity Date. Once the Obligor
becomes obligated to make payments hereunder to the Trustee, it shall
remain so obligated until other wise instructed by the Trustee. The
Obligor shall not enter into any agreement with any other Person that is
inconsistent with its obligations under the Horseshoe Note and this Pledge
Agreement. The Pledgor and the Obligor acknowledge that no amendment,
modification, or waiver of any provision of the Horseshoe Note or either
Guarantee will be valid without the Trustee's prior written consent.
SECTION 5. The Pledgor's and Obligor's Representations and
Warranties. The Pledgor and the Obligor hereby represent and warrant that, as of
the date hereof:
(a) Its execution and delivery of, and its performance of its
obligations under, this Pledge Agreement and (with respect to the Obligor)
the Horseshoe Note will not (i) conflict with any provision of applicable
law or statute, its organizational documents, any material agreement or
other material instrument binding upon it or any of its affiliates, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over it or any of its affiliates, or (ii) result in the
creation or imposition of any Lien on any of its assets, except for the
security interest granted to the Trustee herein. No consent, approval,
authorization or order of, qualification with, or other action by any
governmental or regulatory body or agency or any third party is required
for (i) the execution, delivery or performance of this Pledge Agreement
and (with respect to the Obligor) the Horseshoe Note, or (ii) the
Pledgor's grant of, or the perfection and maintenance of, the security
interest created hereby (including its first priority nature).
Notwithstanding the
4
<PAGE> 5
foregoing, a breach of any of the representations and warranties in this
Section 5 will not constitute a default under this Pledge Agreement unless
that breach causes a material adverse effect on (i) the validity or
enforceability of this Pledge Agreement or any other material agreement
executed in connection with the transactions contemplated herein or in the
Indenture, (ii) the Pledgor's ability to perform its material obligations
under the Notes and the Indenture, or (iii) the Trustees ability to enjoy
the benefits of this Pledge Agreement as contemplated herein.
(b) The Pledgor and the Obligor have duly and validly authorized,
executed, and delivered this Pledge Agreement. This Pledge Agreement
constitutes the valid and binding agreement of the Pledgor and the
Obligor, enforceable against each of them in accordance with its terms,
except as (i) may be limited by bankruptcy, insolvency, fraudulent
transfer, preference, reorganization, moratorium, or similar laws now or
hereafter in effect relating to or affecting creditors' rights or remedies
generally, (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability and the discretion of the
court considering the matter, and (iii) the exculpation provisions and
rights to indemnification hereunder may be limited by federal and state
securities laws and public policy considerations.
(c) The Pledgor is the legal and beneficial owner of the Horseshoe
Note, free and clear of any Lien or claim of any person or entity (except
for the security interest granted to the Trustee herein). No financing
statement or other instrument similar in effect covering the Pledgor's
interest in the Horseshoe Note is on file in any public office, other than
any financing statement filed under this Pledge Agreement.
(d) The Horseshoe Note evidences the legal and binding obligation of
the Obligor. The Obligor has not agreed to make the payments due under the
Horseshoe Note to any entity other than the Pledgor or (in accordance with
this Pledge Agreement) the Trustee.
(e) The security interest granted to the Trustee herein will
constitute a first priority security interest in the Pledged Collateral
(except, with respect to proceeds, only to the extent permitted by UCC ss.
9-306), enforceable as such against all creditors of the Pledgor and
against any Person purporting to purchase the Pledged Collateral from the
Pledgor, except insofar as enforce-
5
<PAGE> 6
ment may be affected by general equitable principles (whether in a
proceeding in equity or at law).
(f) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor or
any of its affiliates is a party or relating to any property of the
Pledgor or any affiliate that would materially adversely affect the
Pledgor's or the Obligor's power or ability to perform its obligations
under this Pledge Agreement.
(g) The Pledgor's chief executive offices are located at 4024 South
Industrial Road, Las Vegas, Nevada 89103. The Pledgor will not change the
location of its chief executive offices before the Termination Date (as
defined below) without giving at least 30 days' prior written notice to
the Trustee.
(h) No Event of Default (as defined below) exists.
SECTION 6. Further Assurances. The Pledgor shall, at any time and
from time to time and at its expense, promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Trustee may reasonably request, in order to perfect and
protect the security interest granted hereby or to enable the Trustee to
exercise and enforce its rights and remedies with respect thereto.
SECTION 7. Transfers and Other Liens. The Pledgor agrees that it
will not (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral,
or (ii) create or permit to exist any Lien, security interest, option or other
charge or encumbrance upon any of the Pledged Collateral, except for the
security interest under this Agreement.
SECTION 8. Agent Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Trustee as the Pledgor's attorney-in-fact, with full authority in
the place of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in the Trustee's discretion to take any action and to execute any
instrument which the Trustee may deem necessary or advisable to accomplish the
purposes of this Pledge Agreement, including, without limitation, to receive and
indorse any instrument issued in exchange for or on account of the Note and to
collect all amounts due under the Note or any such substituted instrument. If
the Pledgor fails to perform any of its obligations herein, the Trustee may
perform, or cause perfor-
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<PAGE> 7
mance of, that obligation and shall be entitled to reimbursement of its
reasonable expenses, incurred in connection therewith, under Section 10 hereof.
SECTION 9. The Trustee's Duties. The Trustee undertakes to perform
only those duties expressly and specifically set forth herein. This Pledge
Agreement does not, and may not be interpreted to, impose any implied duties or
obligations on the Trustee, including, without limitation, any obligation to
monitor the Pledgor's performance of its obligations hereunder. Except as
provided by applicable law or by the Indenture, the Trustee shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral if the Trustee accords the Pledged Collateral treatment substantially
similar to that which the Trustee accords similar property held by the Trustee
in a similar capacity.
SECTION 10. Indemnity.
(a) The Pledgor hereby indemnifies, holds harmless, and agrees to
defend the Trustee and each of its directors, officers, employees,
attorneys, and agents (each, an "Indemnified Person") from and against any
and all claims, actions, obligations, liabilities and expenses, including
reasonable defense costs, reasonable investigative fees and costs,
reasonable legal fees and expenses, and damages, arising from the
performance by the Trustee of its obligations under this Pledge Agreement.
The Pledgor shall, upon demand by any Indemnified Person, promptly pay or
reimburse that Indemnified Person for all amounts indemnified hereunder.
Notwithstanding the foregoing, the Pledgor (i) shall not be obligated to
indemnify any Indemnified Person from any claim, action, obligation,
liability or expense against or incurred by that Indemnified Person that
is judicially determined (the determination having become final) to be
directly attributable to the gross negligence or willful misconduct of
that Indemnified Person, and (ii) shall, upon that final judicial
determination, be entitled to recover from that Indemnified Person all
amounts therefore paid hereunder, provided that before any such judicial
determination becomes final, the Pledgor must promptly pay all amounts
demanded hereunder by any Indemnified Person.
(b) In addition, and without limiting the provisions of the
foregoing Section 10(a), if the Trustee is required to take any action
hereunder to enforce its rights with respect to the Pledged Collateral,
the Trustee's rights and duties shall be as set forth in Article VII of
the Indenture, and the Trustee
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<PAGE> 8
shall be entitled to the benefit of the indemnity and compensation
provisions and all other protections and exculpatory provisions therein.
SECTION 11. Remedies upon Default. As used herein, "Event of
Default" means (i) any Event of Default as that term is defined in the
Indenture, (ii) any breach by the Pledgor or Obligor of their representations,
warranties, covenants, or agreements under the Notes or herein, or (iii) any
breach by the Obligor of its representations, warranties, covenants, or
agreements under the Horseshoe Note. If an Event of Default occurs before the
Termination Date and is continuing:
(a) The Trustee may (for the benefit of the Holders of the Notes)
enforce all of the Pledgor's rights against the Obligor under the
Horseshoe Note and against each Guarantor under its respective Guarantee,
including without limitation the right to sue the Obligor and the
Guarantors to collect all amounts due under the Horseshoe Note or the
Guarantees, respectively, and may apply all amounts collected to the
payment of amounts due under the Notes.
(b) The Trustee (for the benefit of the Holders of the Notes) shall
have, in addition to all other rights given by law, by this Pledge
Agreement, or by the Indenture, all of the rights and remedies with
respect to the Pledged Collateral of a secured party under the UCC. With
respect to any Pledged Collateral that shall then be in or shall
thereafter come into the possession or custody or under the control of the
Trustee, the Trustee may, upon the direction of a majority in aggregate
principal amount of the Holders of the Notes, sell or cause the same to be
sold at any broker's board or at public or private sale, in one or more
sales or lots, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any Pledged Collateral so
sold shall thereafter hold the same absolutely, free from any claim,
encumbrance or right of any kind whatsoever of, or created by or through,
the Pledgor. The Trustee shall give the Pledgor such notice of the time
and place of any public sale of the Pledged Collateral as is feasible and
reasonable under the circumstances, except no notice of sale shall be
required if the Trustee determines, in its reasonable judgment, that (i)
an immediate sale is necessary because the Pledged Collateral threatens to
decline speedily in value or (ii) the Pledged Collateral is or becomes of
a type regularly sold on a recognized market. To the extent permitted by
applicable law, the Pledgor agrees that any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of banks,
insurance companies,
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<PAGE> 9
commercial finance companies, or other financial institutions disposing of
property similar to the Pledged Collateral shall be deemed to be
commercially reasonable. Subject to the other provisions of this Section
11(b), notice mailed to the Pledgor as provided herein at least 10 days
before the time of the sale or disposition shall constitute reasonable
notice. The Trustee or any Holder of Notes may, in its own name or in the
name of a designee or nominee, buy any of the Pledged Collateral at any
public sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys' fees, expenses
and disbursements) of, or incident to, the enforcement of any of the
provisions hereof shall be recoverable from the proceeds of the sale or
other disposition of the Pledged Collateral.
SECTION 12. Expenses. Except as provided in any fee agreement to the
contrary, the Pledgor shall, promptly upon demand, pay to the Trustee any and
all reasonable expenses, including, without limitation, the reasonable fees,
expenses and disbursements of counsel, experts and agents, that the Trustee may
incur in connection with (a) the review, negotiation and administration of this
Pledge Agreement, (b) the custody, preservation, or sale of, collection from, or
other realization upon, any of the Pledged Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder, (d) the Pledgor's failure to perform or observe any of the provisions
hereof, or (e) any claim covered by Section 10 hereof.
SECTION 13. Security Interest Absolute. The rights of the Trustee
and the Holders of the Notes and the security interest granted to the Trustee
hereunder, and the Pledgor's obligations hereunder, shall be absolute and
unconditional under all circumstances, including but not limited to:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment or
performance of, or in any other term of, any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the
Indenture;
(c) any taking, exchange, surrender, release or non-perfection of
any other collateral or any taking, release, amendment, or waiver of any
provision of any guaranty for all or any of the Obligations;
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<PAGE> 10
(d) any change, restructuring or termination of the corporate
structure or existence of the Pledgor or any of its affiliates; or
(e) to the extent permitted by applicable law, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Pledge
Agreement.
SECTION 14. Miscellaneous Provisions.
Section 14.1 Notices. Any notice or communication given hereunder
shall be sufficiently given if in writing and delivered in person or mailed by
first class mail, commercial courier service or telecopier communication,
addressed as follows:
if to the Pledgor or Obligor:
Horseshoe Gaming Holding Corp.
(or Horseshoe Gaming, L.L.C.,
in care of Horseshoe Gaming Holding Corp., as appropriate)
4024 South Industrial Road
Las Vegas, Nevada 89103
Attention: Chief Financial Officer
Telecopier: (702) 650-0081
with a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue, 20th Floor
New York, NY 10022
Attention: Robert M. Friedman, Esq.
Telecopier: (212) 758-9526
10
<PAGE> 11
if to the Trustee:
U.S. Trust Company, National Association
515 South Flower Street
Suite 2700
Los Angeles, CA 90022
Attention: Larry Gerquest
Assistant Vice President
Corporate Trust Department
Telecopier: (213) 488-1370
Section 14.2 Severability. The provisions of this Pledge Agreement
are severable. If a court in any jurisdiction holds that a clause or provision
is invalid, illegal or unenforceable, in whole or in part, that holding shall
affect the validity or enforceability of that clause or provision in that
jurisdiction only, without effect in any other jurisdiction or with respect to
any other clause or provision hereof.
Section 14.3 Headings. The headings in this Pledge Agreement are
included for convenience of reference only, are not to be considered a part
hereof, and do not modify or restrict any of the terms or provisions hereof.
Section 14.4 Counterpart Originals. This Pledge Agreement may be
signed in counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement.
Section 14.5 Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto, their successors hereunder, all Indemnified Persons, and (subject to the
provisions of the Indenture) the Holders of the Notes, any legal or equitable
right, remedy or claim. Other than the Persons identified in the foregoing
sentence, there are and shall be no third-party beneficiaries of this Pledge
Agreement. No Holder of Notes shall have any independent rights hereunder, other
than those rights granted to individual Holders of the Notes under the
Indenture.
Section 14.6 Amendments, Waivers and Consents. Any amendment or
waiver of a provision of this Pledge Agreement and any consent by the Pledgor to
departure from a provision of this Pledge Agreement shall be effective only if
made or duly given in compliance with the Indenture. Neither the Trustee nor
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<PAGE> 12
any Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default. A failure to exercise, a delay in exercising,
or a waiver of any right, power or privilege hereunder by the Trustee or any
Holder of Notes shall not preclude any subsequent exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
provided herein are cumulative, may be exercised singly or concurrently, and are
not exclusive of any rights or remedies provided by law.
Section 14.7 Interpretation of Agreement. Acceptance of or
acquiescence in a course of performance rendered under this Pledge Agreement
shall not be relevant to determine the meaning of this Pledge Agreement, even if
the accepting or acquiescing party had knowledge of the nature of the
performance and an opportunity to object thereto.
Section 14.8 Continuing Security Interest; Termination.
(a) This Pledge Agreement shall remain in full force and effect
until the Termination Date. As used herein, "Termination Date" means the
date of consummation of the Internal Consolidation in accordance with the
provisions of the Indenture.
(b) Notwithstanding the foregoing, the Pledgor's obligations under
Sections 10 and 12 shall survive this Pledge Agreement's termination.
Section 14.9 Survival of Representations and Covenants. The
Pledgor's representations, warranties and covenants herein shall survive this
Pledge Agreement's execution and delivery and shall terminate only on the
Termination Date.
Section 14.10 Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
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<PAGE> 13
Section 14.11 The Trustee's Authority.
(a) The Trustee may exercise all rights and powers granted
hereunder, together with any powers reasonably incident hereto, may
perform any of its duties hereunder or in connection with the Pledged
Collateral by or through agents or employees, and shall be entitled to
retain counsel and to rely conclusively upon the advice of counsel
concerning those rights, powers and duties. The Trustee shall not be
responsible for the validity, effectiveness or sufficiency hereof or of
any document or security furnished in accordance herewith and shall be
entitled to indemnification hereunder from any claims related thereto. The
Trustee and its respective directors, officers, employees, attorneys and
agents may conclusively rely on any communication, instrument or document
reasonably believed by them to be genuine and correct and to have been
signed or sent by the proper person or persons.
(b) The Pledgor acknowledges that, as between the Pledgor and the
Trustee, with respect to any action or inaction by the Trustee in
connection with the performance of its duties hereunder, the Trustee shall
be conclusively presumed to be acting as agent for the Holders of the
Notes with full and valid authority so to act or refrain from acting, and
the Pledgor may not make any inquiry respecting such authority.
Section 14.12 Final Expression. This Pledge Agreement is the final
expression and a complete and exclusive statement of the terms and conditions
thereof, subject to any amendment duly made in accordance herewith.
Section 14.13 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES.
(a) THE LAW OF THE STATE OF NEW YORK INCLUDING, WITHOUT LIMITATION,
SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW
YORK CIVIL PRACTICE AND RULES 327 SHALL GOVERN THIS PLEDGE AGREEMENT, THE
HORSESHOE NOTE, THE OTHER PLEDGED COLLATERAL, AND ANY DISPUTE ARISING
FROM, RELATED TO, OR IN CONNECTION WITH THE FOREGOING OR THE RELATIONSHIP
AMONG OR THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO.
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<PAGE> 14
(b) THE PLEDGOR AGREES THAT THE TRUSTEE MAY, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, PROCEED
AGAINST THE PLEDGOR OR THE PLEDGED COLLATERAL IN ANY COURT HAVING PERSONAL
OR IN REM JURISDICTION OVER THE PLEDGOR OR THE PLEDGED COLLATERAL, AS THE
CASE MAY BE, TO ENABLE THE TRUSTEE TO ASSERT A CLAIM OR EXERCISE ITS
RIGHTS AND REMEDIES UNDER THIS PLEDGE AGREEMENT. THE PLEDGOR AGREES THAT
IT WILL NOT ASSERT ANY COUNTERCLAIM, SETOFF, OR CROSSCLAIM AGAINST THE
TRUSTEE IN ANY PROCEEDING BROUGHT BY THE TRUSTEE UNDER THIS PLEDGE
AGREEMENT, THE SECURITY AGREEMENT, OR THE INDENTURE OTHER THAN A
COUNTERCLAIM, SETOFF, OR CROSSCLAIM THAT, IF NOT ASSERTED IN THAT
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES
ANY OBJECTION BASED ON THE GROUNDS OF IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE TRUSTEE'S COMMENCEMENT AND PROSECUTION OF SUCH A
PROCEEDING IN ANY COURT IN THE CITY OF NEW YORK.
(c) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES, THE
TRUSTEE, THE SECURITIES INTERMEDIARY, NOR ANY OTHER INDEMNIFIED PERSON
SHALL BE LIABLE TO THE PLEDGOR FOR LOSSES ARISING FROM, RELATING TO, OR IN
CONNECTION WITH THIS PLEDGE AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREBY OR IN THE INDENTURE, OR THE DUTIES IMPOSED HEREUNDER, UNLESS A
COURT DETERMINES (SUCH DETERMINATION HAVING BECOME FINAL) THAT THE LOSSES
RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON ON
WHOM THE PLEDGOR SEEKS TO IMPOSE LIABILITY.
(d) TO THE EXTENT PERMITTED BY LAW, THE PLEDGOR WAIVES THE POSTING
OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN
CONNECTION WITH ANY JUDICIAL PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER
COURT ORDER, ENTERED AGAINST THE PLEDGOR, RELATING TO THIS PLEDGE
AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT OR TO ENFORCE BY SPECIFIC
PERFOR-
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<PAGE> 15
MANCE, TEMPORARY RESTRAINING ORDER, OR PRELIMINARY OR PERMANENT INJUNCTION
THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT AGAINST THE
PLEDGOR.
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<PAGE> 16
IN WITNESS WHEREOF, the Pledgor, the Obligor, and the Trustee have
each caused this Pledge Agreement to be duly executed and delivered as of the
date first above written.
Pledgor:
HORSESHOE GAMING HOLDING CORP.
By: /s/ Kirk C. Saylor
----------------------------
Kirk C. Saylor
Chief Financial Officer
Obligor:
HORSESHOE GAMING, L.L.C.
By: Horseshoe Gaming, Inc.,
its Manager
By: /s/ Kirk C. Saylor
----------------------------
Name: Kirk C. Saylor
Title: CFO/Treasurer
Trustee:
U.S. TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Sandra H. Leess
----------------------------
Name: Sandra H. Leess
Title: Senior Vice President
<PAGE> 1
Exhibit 10.3
PROMISSORY NOTE
$240,349,125.00 New York, New York
May 11, 1999
FOR VALUE RECEIVED, HORSESHOE GAMING, L.L.C., a Delaware limited
liability company (the "Maker"), promises to pay, on or before the Maturity Date
(as defined below), to the order of HORSESHOE GAMING HOLDING CORP., a Delaware
corporation (the "Holder"), at the Maker's offices at 4024 South Industrial
Road, Las Vegas, Nevada 89013, or in accordance with such other instructions as
the Holder (or any other entity entitled to payment hereunder) may hereafter
designate from time to time in writing, the principal sum of TWO HUNDRED FORTY
MILLION, THREE HUNDRED FORTY-NINE THOUSAND, ONE HUNDRED TWENTY-FIVE DOLLARS
($240,349,125.00 ) in lawful money of the United States, with interest on the
unpaid principal amount from the date of this Promissory Note (together with all
supplements, amendments or modifications hereto and replacements or renewals
hereof, this "Note") to and including the date of payment, calculated as
provided below.
All references in this Note to the "Indenture" are to the Indenture,
dated as of the date hereof, by and between the Holder and U.S. Trust Company,
National Association, as trustee, under which the Holder is issuing on the date
hereof $600,000,000 in aggregate principal amount of 8 5/8% Senior Subordinated
Notes due 2009 (the "Senior Subordinated Notes").
1. Principal Balance. As used herein, "Principal Balance" means the
outstanding principal balance of this Note from time to time.
2. Maturity Date. As used herein, "Maturity Date" means the first
Business Day (as defined in the Indenture) after the earlier of (a) the date of
consummation of the Empress Merger (as defined in the Indenture) or (b) a
Triggering Event Mandatory Redemption Date (as defined in the Indenture).
Notwithstanding the foregoing, if an Event of Default (as defined in the
Indenture) occurs and is continuing, then this Note shall accelerate and the
Principal Balance, and all accrued and unpaid interest thereon, shall be
immediately due and payable.
<PAGE> 2
3. Interest. The Principal Balance shall bear simple interest at the
rate of 8 5/8% per annum, calculated on the basis of a 360-day year, and payable
on each May 15 and November 15, beginning November 15, 1999.
4. [Intentionally omitted.]
5. No Usury. This Note is subject to the express condition that at
no time shall the Maker be required to pay interest on the Principal Balance at
a rate that could subject the Holder to civil or criminal liability. If at any
time the terms of this Note require the Maker to pay interest on the Principal
Balance at a rate exceeding the maximum rate that the Maker is permitted by law
to contract or agree to pay, the interest rate shall immediately decline to the
maximum rate allowed by law, interest payable hereunder shall be computed at
that maximum rate, and the portion of all previous interest payments in excess
of the maximum rate shall be deemed to have been applied to reduce the Principal
Balance then outstanding. This paragraph shall supersede any other provision to
the contrary in any agreement between the Maker and the Holder.
6. Maker's Waivers. The Maker, for itself, its successors and its
assigns, hereby waives presentment and demand for payment, notice of dishonor,
notice of non-payment, protest and notice of protest of this Note and agrees to
pay all costs of collection when incurred, including attorneys' fees, charges
and disbursements (which amounts shall be added to the Principal Balance). No
extension of time for payment of this Note and no alteration, amendment or
waiver of any provision of this Note shall release, discharge, modify, change or
affect the liability of the Maker hereunder.
7. Registration. The Maker shall keep, or cause to be kept, books
for the registration of this Note showing the name and address of the Holder,
the principal amount of this Note, the date of this Note, the identity of any
entity holding a security interest or pledge of this Note, and a copy of the
pledge agreement creating that security interest or pledge. The Maker may deem
and treat the registered holder of this Note as the absolute owner for all
purposes, except as provided in any such pledge agreement. This Note may only be
exchanged for another Note of like tenor when surrendered to the Maker at its
principal offices accompanied by written request to transfer the Note by a
person authorized to make the request, and upon its surrender for exchange the
Maker shall cancel this Note.
2
<PAGE> 3
8. Choice of Law. This Note and the rights and obligations of the
Holder and the Maker hereunder shall be construed in accordance with, and the
foregoing shall be governed by, the laws of the State of New York including,
without limitation, Section 5-1401 of The New York General Obligations Law.
9. Amendment. No amendment of this Note shall be valid unless it is
in writing and signed by the Holder. Notwithstanding the foregoing, if the Maker
has created a security interest in this Note, no amendment signed by the Holder
will be valid unless the beneficiary of the Pledge Agreement creating that
security interest has also signed the amendment.
10. Authorization. The undersigned individual hereby represents and
warrants that (a) he or she is an officer of the Maker; (b) the Maker has duly
authorized the execution and delivery of this Note; and (c) the execution and
delivery of this Note does not conflict with any provision of law, any court
judgment or order, or any agreement to which the Maker or any of its affiliates
is a party.
11. Headings. The Section headings in this Note are for convenience
of reference only and may not be used to construe, restrict, alter or affect the
meaning or interpretation of any provision in this Note.
12. Guarantees. Horseshoe Entertainment, L.P., a Louisiana limited
partnership, and Robinson Property Group, Limited Partnership, a Mississippi
limited partnership, have executed written guarantees, dated as of the date
hereof, of the Maker's payment of this Note and its performance of all its other
obligations hereunder.
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<PAGE> 4
IN WITNESS WHEREOF, the Maker has duly executed this Note on the
date first above written.
MAKER:
HORSESHOE GAMING, L.L.C., a
Delaware limited liability company
By: Horseshoe Gaming, Inc.,
its Manager
By: /s/ Kirk C. Saylor
----------------------------------
Name: Kirk C. Saylor
Title: Chief Financial Officer and
Treasurer
<PAGE> 1
Exhibit 10.4
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of May 11, 1999
by and among
HORSESHOE GAMING HOLDING CORP.
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC INC.
UTENDAHL CAPITAL PARTNERS, L.P.
WASSERSTEIN PERELLA SECURITIES, INC.
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of May 11, 1999, by and among Horseshoe Gaming Holding Corp., a
Delaware corporation (the "Company"), and Donaldson, Lufkin & Jenrette
Securities Corporation, CIBC Inc., Utendahl Capital Partners, LP and Wasserstein
Perella Securities, Inc. (each an "Initial Purchaser" and, collectively, the
"Initial Purchasers"), each of whom has agreed to purchase the Company's 85/8%
Series A Senior Subordinated Notes due May 15, 2009 (the "Series A Notes")
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated May
6, 1999, (the "Purchase Agreement"), by and among the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to purchase the Series A
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers set forth in Sections 2 and 3 of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture, dated as of May 11,
1999, between the Company and U.S. Trust Company, National Association, as
Trustee, relating to the Series A Notes and the Series B Notes (the
"Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Certificated Securities: Definitive Notes, as defined in the
Indenture.
Closing Date: The date hereof.
<PAGE> 3
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof, and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes tendered by
Holders thereof pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a
principal amount of Series B Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount
of Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and pursuant to Regulation S
under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supple-
2
<PAGE> 4
mented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 85/8% Series B Senior Subordinated
Notes due May 15, 2009 to be issued pursuant to the Indenture: (i) in the
Exchange Offer or (ii) as contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note, until the
earliest to occur of (a) the date on which such Series A Note is exchanged in
the Exchange Offer for a Series B Note which is entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such Series A Note has been
disposed of in accordance with a Shelf Registration Statement (and the
purchasers thereof have been issued Series B Notes), or (c) the date on which
such Series A Note is distributed to the public pursuant to Rule 144 under the
Act or may be sold under Rule 144(k) under the Act
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(and purchasers thereof have been issued Series B Notes) and each Series B Note
until the date on which such Series B Note is disposed of by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including the delivery of the Prospectus contained
therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause the Exchange Offer Registration
Statement to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 60 days after the Closing Date (such
60th day being the "Filing Deadline"), (ii) use its best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 180 days after the Closing Date (such
180th day being the "Effectiveness Deadline"), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities and
(ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Series A Notes that such Broker-Dealer acquired for its own account as a
result of market making activities or other trading activities (other than
Series A Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
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<PAGE> 6
(b) The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to be effective continuously, and shall keep the Ex
change Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
Business Days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Series B Notes (and guarantees thereof, if any) shall be included in the
Exchange Offer Registration Statement. The Company shall use its best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 Business Days thereafter (such 30th Business Day being the
"Consummation Deadline").
(c) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted Securities
that were acquired for the account of such Broker-Dealer as a result of
market-making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement. See the Shearman & Sterling
no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a prospectus meeting
the requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company shall
permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.
To the extent necessary to ensure that the prospectus contained in the Exchange
Offer Registration Statement is available for sales of Series B Notes by
Broker-Dealers, the Company agrees to use its best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented, amended and
current as required by and subject to the provisions of Section 6(a) and (c)
hereof and in conformity with the
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<PAGE> 7
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of one year from
the Consummation Deadline or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have been
sold pursuant thereto. The Company shall provide sufficient copies of the latest
version of such Prospectus to such Broker-Dealers, promptly upon request, and in
no event later than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted
by applicable law (after the Company has complied with the procedures set forth
in Section 6(a)(i) below), (ii) if for any reason the Exchange Offer is not
consummated before the Consummation Deadline, or (iii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company shall:
(x) cause to be filed, on or prior to 30 days after the earlier of
(i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above, (ii)
the Consummation Deadline and (iii) the date on which the Company receives the
notice specified in clause (a)(ii) above (such earlier date, the "Filing
Deadline"), a shelf registration statement pursuant to Rule 415 under the Act
(which may be an amendment to the Exchange Offer Registration Statement (the
"Shelf Registration Statement")), relating to all Transfer Restricted
Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 60 days after the
Filing Deadline for the Shelf Registration Statement (such 60th day the
"Effectiveness Deadline").
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<PAGE> 8
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) continuously effective, supplemented,
amended and current as required by and subject to the provisions of Sections
6(b) and (c) hereof and in conformity with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of at least three years (as extended pursuant to
Section 6(c)(i)) following the Closing Date, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto or otherwise cease to be
a Transfer Restricted Security
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein or prospectus supplement
thereto. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information. Each selling Holder agrees to promptly
furnish additional information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
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<PAGE> 9
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 2 Business Days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself declared effective within 5 Business Days of filing
such post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then the
Company hereby agrees to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.35 per week
per $1,000 in principal amount of Transfer Restricted Securities; provided that
the Company shall in no event be required to pay liquidated damages for more
than one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Series A
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<PAGE> 10
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company to pay liquidated damages with respect to securities shall survive until
such time as such obligations with respect to such securities shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its best efforts to effect such exchange and to
permit the resale of Series B Notes by Broker-Dealers that tendered in the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by applicable
federal law, the Company hereby agrees to seek a no-action letter or other
favorable decision from the Commission allowing the Company to Consummate an
Exchange Offer for such Transfer Restricted Securities. The Company hereby
agrees to use reasonable best efforts to pursue the issuance of such a decision
to the Commission staff level, including (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases, if
any, upon which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be favorable)
by the Commission staff; provided, however, that the use of reasonable best
efforts shall not require the payment of a material amount of money not
otherwise or ordinarily incidental to such process.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request
of the Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the
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<PAGE> 11
Exchange Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary course
of business. As a condition to its participation in the Exchange Offer each
Holder using the Exchange Offer to participate in a distribution of the Series B
Notes shall acknowledge and agree that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired directly from
the Company or an Affiliate thereof, it (1) could not, under Commission policy
as in effect on the date of this Agreement, rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991)
and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action letter
obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection with
a secondary resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer in
reliance on the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available
June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant
to clause (i) above, (B) including a representation that the Company has not
entered into any arrangement or understanding with any Person to distribute the
Series B Notes to be received in the Exchange Offer and that, to the best of the
Company's information and belief, each Holder participating in the Exchange
Offer is acquiring the Series B Notes in its ordinary course of business and has
no arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and (C) any
other undertaking or representation required by the Commission as set forth in
any no-action letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall:
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<PAGE> 12
(i) comply with all the provisions of Section 6(c) below and
use its best efforts to effect such registration to permit the sale of the
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
will prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof; and
(ii) issue, upon the request of any Holder or purchaser of
Series A Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation, and the
Company shall register Series B Notes on the Shelf Registration Statement for
this purpose and issue the Series B Notes to the purchaser(s) of securities
subject to the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement, the Company
shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for the
period specified in Section 3 or 4 hereof, as applicable. Upon the occurrence of
any event that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not misleading
or (B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement curing such
defect, and, if Commission review is required, use its best efforts to cause
such amendment to be declared effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may be
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<PAGE> 13
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or Section 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully
with Rules 424, 430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise each Holder promptly and, if requested by such
Holder, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes and (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities or
Blue Sky laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare
a supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or file any
other
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<PAGE> 14
required document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(v) furnish to each Holder in connection with such exchange or
sale, if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or supplements to
any such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to which
such Holders shall reasonably object within five Business Days after the receipt
thereof. A Holder shall be deemed to have reason ably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as applicable,
as proposed to be filed, contains an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such exchange
or sale, if any, make the Company's representatives available for discussion of
such document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such Holders may
reasonably request;
(vii) make available, at reasonable times, for inspection by
each Holder and any attorney or accountant retained by such Holders, all
financial and other pertinent corporate documents and records of the Company and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, attorney or accountant in connection
with such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness; provided,
however, that such persons shall first agree in writing with the Company that
any information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of
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<PAGE> 15
delivery of such information shall be kept confidential by such persons, unless
(i) disclosure of such information is required by court or administrative order
or is necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any disclosure
requirements pursuant to Federal securities laws in connection with the filing
of any Registration Statement or the use of any Prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement;
(viii) if requested by any Holders in connection with such
exchange or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities; and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange
or sale without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including, if
requested, all documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Holder reasonably may request; the Company hereby
consents to the use (in accordance with law) of the Prospectus and any amendment
or supplement thereto by each selling Holder in connection with the offering and
the sale of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such
agreements (including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of the Transfer Restricted Securities
pursuant to any applicable Registration Statement contemplated by this Agreement
as may be
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<PAGE> 16
reasonably requested by any Holder in connection with any sale or resale
pursuant to any applicable Registration Statement. In such connection, the
Company shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished) to
each Holder, upon Consummation of the Exchange Offer or upon the
effectiveness of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of
the Company by (x) the President or any Vice President and (y) a principal
financial or accounting officer of the Company, (i) confirming, as of the
date thereof, the matters set forth in Sections 6(cc), 9(a) and 9(b) of
the Purchase Agreement and such other similar matters as such Holders may
reasonably request and (ii) stating that the industry, statistical and
market-related data, if any, included in the Registration Statement have
been reviewed by such persons and, to the best knowledge of such persons,
is true and accurate in all material respects, which certificate shall be
in the same form as the certificate delivered upon closing of the
transactions contemplated by the Purchase Agreement;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company covering matters
similar to those set forth in paragraphs (e) and (f) of Section 9 of the
Purchase Agreement and such other matter as such Holder may reasonably
request, and in any event including a statement to the effect that such
counsel has participated in conferences with officers and other
representatives of the Company, including representatives of the
independent public accountants for the Company, in connection with the
preparation of such Registration Statement and the related Prospectus and
have considered the matters required to be stated therein and the
statements contained therein, although such counsel has not independently
verified the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing (relying as
to materiality to the extent such counsel deems appropriate upon the
statements of officers and other representatives of the Company) and
without independent check or verification no facts
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<PAGE> 17
came to such counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective and, in
the case of the Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement as of its
date and, in the case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and schedules
and other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) customary comfort letters, dated the date of
Consummation of the Exchange Offer, or as of the date of effectiveness of
the Shelf Registration Statement, as the case may be, from the Company's
independent accountants and from Empress Entertainment, Inc.'s independent
accountants if Empress' financial statements or other financial data are
included or incorporated by reference in the Registration Statement, in
the customary form and covering matters of the type customarily covered in
comfort letters to underwriters in connection with underwritten offerings,
and affirming the matters set forth in the comfort letters delivered
pursuant to Section 9(h) of the Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with
the matters covered in clause (A) above and with any customary conditions
contained in any agreement entered into by the Company pursuant to this
clause (xi);
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(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in connection
with the registration and qualification of the Transfer Restricted Securities
under the securities or Blue Sky laws of such jurisdictions as the selling
Holders may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to register or qualify
as a foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement, in
any jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Series B Notes having an aggregate principal amount equal to the aggregate
principal amount of Series A Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder; such Series B Notes to be
registered in the name of such Holder or in the name of the purchaser(s) of such
Series B Notes, as the case may be; in return, the Series A Notes held by such
Holder shall be surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to register
such Transfer Restricted Securities in such denominations and such names as the
selling Holders may request at least two Business Days prior to such sale of
Transfer Restricted Securities;
(xv) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to consummate the
disposition of such Transfer Restricted Securities, subject to the proviso
contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under the
Indenture with
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printed certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(xvii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders with regard to any applicable Registration Statement, as
soon as practicable, a consolidated earnings statement meeting the requirements
of Rule 158 (which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is defined
in paragraph (c) of Rule 158 under the Act);
(xviii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner;
(xix) use its best efforts to cause the Transfer Restricted
Securities or the Series B Notes, as applicable, covered by an effective
registration statement required by Section 3 or 4 hereof to be rated by one or
two rating agencies, if and as so requested by the Holders of a majority in
aggregate principal amount of Transfer Restricted Securities relating to such
registration statement or the managing underwriters in connection therewith, if
any;
(xx) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act; and
(xxi) use its best efforts to take all other steps necessary
to effect the registration of the Transfer Restricted Securities covered by a
Registration Statement contemplated hereby.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such
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<PAGE> 20
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until (i) such Holder has
received copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving
a Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws (including, without limitation, reasonable fees and disbursements of one
firm of lawyers in connection with Blue Sky qualifications of the Transfer
Restricted Securities or Series B Notes); (iii) all expenses of printing
(including printing certificates for the Series B Notes to be issued in the
Exchange Offer and printing of Prospectuses), messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Company and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing the Series B
Notes on a national securities exchange or automated quotation system pursuant
to the requirements hereof in the event the Notes are so listed and (vi) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
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<PAGE> 21
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company. Notwithstanding the foregoing or anything in this
Agreement to the contrary, each Holder of the Transfer Restricted Securities
being registered shall, if applicable, pay all commissions, placement agent fees
and underwriting discounts and commissions with respect to any Transfer
Restricted Securities sold by it and, except as otherwise provided herein
(including in Section 7(b) below), the fees and disbursements of any counsel or
other advisors or experts retained by such Holders.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Series A Notes into in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Skadden, Arps, Slate, Meagher & Flom LLP, unless
another firm shall be chosen by the Holders of a majority in principal amount of
the Transfer Restricted Securities for whose benefit such Registration Statement
is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and its subsidiaries agree to indemnify and hold
harmless each Holder, its directors, officers and each Person, if any, who
controls such Holder (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act), from and against any and all losses, claims, damages,
liabilities, and judgments, (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any Holder or any prospective purchaser of Series B
Notes or registered Series A Notes, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
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<PAGE> 22
losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders; provided, however, that the foregoing indemnity agreement
with respect to any preliminary Prospectus shall not inure to the benefit of any
Indemnified Person who failed to deliver a final Prospectus (as then amended or
supplemented, provided by the Company to the several Indemnified Persons in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgements caused by any untrue statement or alleged untrue
statement of a material fact contained in any preliminary Prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in the final Prospectus. The Company agrees to notify the
Holders promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation) or litigation in
connection with the matters addressed by this Agreement which involves the
Company or any Person indemnified hereunder. This indemnity agreement will be in
addition to any liability which the Company may otherwise have, including under
this Agreement.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company, its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company to the same extent
as the foregoing indemnity from the Company set forth in section (a) above, but
only with reference to information relating to such Holder furnished in writing
to the Company by such Holder expressly for use in any Registration Statement.
In no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
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<PAGE> 23
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
(provided, that the failure to give such notice shall not relieve the
indemnifying party of its obligations pursuant to this Agreement to the extent
that such failure does not materially prejudice the position of the indemnifying
party as determined by a court of competent jurisdiction) and the indemnifying
party shall assume the defense of such action, including the employment of
counsel reasonably satisfactory to the indemnified party and the payment of all
fees and expenses of such counsel, as incurred (except that in the case of any
action in respect of which indemnity may be sought pursuant to both Sections
8(a) and 8(b), a Holder shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such counsel,
except as provided below, shall be at the expense of the Holder). Any
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the
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<PAGE> 24
expense of the indemnifying party) and, prior to the date of such settlement,
the indemnifying party shall have failed to comply with such reimbursement
request. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, on
the one hand, and the Holders, on the other hand, from their sale of Transfer
Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company, on the one hand, and of the Holder, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata
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<PAGE> 25
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total amount received by such Holder with respect to the sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages which such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9. RULE 144A and RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
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<PAGE> 26
(a) Remedies. The Company acknowledges and agrees that any failure
by the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Except with respect
to the 12 3/4% Senior Notes due 2000 and the 9 3/8% Senior Subordinated Notes
due 2005 of Horseshoe Gaming, L.L.C., the Company has not previously entered
into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
25
<PAGE> 27
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Horseshoe Gaming Holding Corp.
4024 S. Industrial Road
Las Vegas, NV 89103
Telecopier No.: (702) 650-0081
Attention: Chief Financial Officer
With a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
20th Floor
New York, NY 10022
Telecopier No.: (212) 758-9526
Attention: Robert M. Friedman, Esq.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
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<PAGE> 28
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; provided, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Securities such
Person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase Agreement,
and such Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties
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<PAGE> 29
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
(l) Gaming Approvals. Prior to consummation of the Exchange Offer or
filing of the Shelf Registration Statement, as the case may be, the Company
shall make or obtain such permits, licenses, consents, exemptions, franchises,
authorizations and other approvals necessary or desirable for the consummation
of the transactions contemplated hereby, including, without limitation, the
required approvals of the Louisiana Gaming Control Board, the Mississippi Gaming
Commission, the Indiana Gaming Commission, and the Illinois Gaming Board.
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<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
HORSESHOE GAMING HOLDING CORP.
By: /s/ Kirk C. Saylor
----------------------------------
Name: Kirk C. Saylor
Title: Chief Financial Officer and
Treasurer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC INC.
UTENDAHL CAPITAL PARTNERS, L.P.
WASSERSTEIN PERELLA SECURITIES, INC.
By: Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ Omar Karame
--------------------------------
Name: Omar Karame
Title: Vice President
<PAGE> 1
Exhibit 10.5
SECURITY AND CONTROL AGREEMENT
HORSESHOE GAMING HOLDING CORP., a Delaware corporation (the
"Pledgor"), U.S. Trust Company, National Association (formerly known as U.S.
Trust Company of California, N.A.), as trustee (the "Trustee") for the
registered holders from time to time (the "Holders") of the Notes (as defined
herein) issued by the Pledgor under the Indenture referred to below, and as
securities intermediary hereunder (the "Securities Intermediary"), hereby enter
into this SECURITY AND CONTROL AGREEMENT (this "Security Agreement"), as of and
on May 11, 1999.
All references herein to the "UCC" are to the Uniform Commercial
Code in effect in the State of New York. Capitalized terms not otherwise defined
herein have the meaning given them in the Indenture referred to below.
RECITALS
A. The Pledgor and the Trustee have entered into that certain
Indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), under which the Pledgor
is issuing on the date hereof $600,000,000 in aggregate principal amount of 8
5/8% Senior Subordinated Notes due 2009 (together with any notes that may from
time to time be issued in substitution therefor, the "Notes").
B. The Pledgor has agreed that, on the date hereof, $342,265,625 of
the net proceeds from the Notes' sale (the "Reserved Proceeds") will be paid
directly to the Securities Intermediary, to be applied in accordance with the
express terms of this Security Agreement.
C. The Securities Intermediary shall use the Reserved Proceeds to
purchase U.S. Government Obligations (as defined in the Indenture), as more
fully described in Section 3(f) below (the "Pledged Securities"), and shall
deposit the Pledged Securities in, or credit the Pledged Securities to, an
account (the "Securities Account") maintained by the Trustee with the Securities
Intermediary for the benefit of the Holders of the Notes.
D. The Trustee has opened an account with the Securities
Intermediary, at the Securities Intermediary's office at 515 South Flower
Street, Suite 2700,
<PAGE> 2
Los Angeles, California 90071. This account bears Account No. ____________, is
in the name of "U.S. Trust Company, National Association, as Indenture Trustee
for Certain Outstanding Securities of Horseshoe Gaming Holding Corp.," and will
serve as the Securities Account. The Securities Account is the "Secured Proceeds
Account" referred to in the Indenture.
E. It is a condition to the issuance of the Notes that the Pledgor
(i) presently grant to the Trustee for the Trustee's benefit and the ratable
benefit of the Holders of the Notes a first priority lien and security interest
in the Pledged Securities and related collateral to secure the Pledgor's payment
and performance of its Obligations (as defined below), and (ii) execute and
deliver this Security Agreement to create and perfect that first priority lien
and security interest.
NOW, THEREFORE, in view of the foregoing and in consideration of the
mutual promises herein and the benefits to be received therefrom, the Pledgor,
the Trustee, and the Securities Intermediary hereby adopt each of the foregoing
recitals and further agree as follows:
SECTION 1. Grant of Security Interest. The Pledgor hereby presently
grants to the Trustee, for its benefit and for the ratable benefit of the
Holders of the Notes, a continuing first priority lien and security interest in
and to all of the Pledgor's right, title and interest in, to and under the
following (wherever located), whether investment property, general intangibles,
other rights, interests, claims, or otherwise (collectively, the "Pledged
Collateral"): (a) the Securities Account, all "Financial Assets" (as defined in
UCC ss. 8-102(a)(9)) held therein (including the Pledged Securities), and all
"Security Entitlements" (as defined in UCC Section 8-102(a)(17)) with respect
thereto, (b) any successor or other account into which Financial Assets held in
the Securities Account may be transferred or held at any time and all Security
Entitlements with respect thereto, and (c) all proceeds of any and all of the
foregoing (including, without limitation, proceeds that constitute property of
the types described in the foregoing clauses (a) and (b)).
SECTION 2. Security for Obligations. This Security Agreement and the
security interest granted hereby secure (i) the Pledgor's prompt and complete
payment of all amounts due, whether at maturity, upon acceleration or mandatory
prepayment, or otherwise, under the Notes and (ii) the Pledgor's timely and full
payment and performance of all its other obligations under the Notes, the
Indenture, the Registration Rights Agreement, the Horseshoe Note Pledge
Agreement entered into on and as of the date hereof by the Pledgor, Horseshoe
Gaming, L.L.C., a
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Delaware limited liability company, and the Trustee, and this Security Agreement
(collectively, the "Obligations").
SECTION 3. Delivery of Pledged Securities; Maintenance of Securities
Account.
(a) Upon the Securities Intermediary's acquisition of Pledged
Securities or any other Pledged Collateral, the Securities Intermediary
shall promptly make appropriate book entries indicating that the Trustee
is the sole "Entitlement Holder" (as defined in UCC ss. 8-102(a)(7)) with
respect thereto. Subject to the other terms and conditions of this
Security Agreement, all funds or other property held by the Trustee under
this Security Agreement shall be held in the Securities Account and be
subject to the Trustee's exclusive dominion and control (including,
without limitation, "control" as defined in UCC ss.ss. 8-106 and
9-115(l)(e)), for the benefit of the Trustee and for the ratable benefit
of the Holders of the Notes, and segregated from all other funds or other
property otherwise held by the Trustee.
(b) The Securities Intermediary shall cause all securities or other
property underlying any Financial Assets credited to the Securities
Account, including, without limitation, all Pledged Securities, to be
registered in the name of the Securities Intermediary, endorsed to the
Securities Intermediary or in blank, or credited to another securities
account maintained in the name of the Securities Intermediary. In no case
will any Financial Asset credited to the Securities Account be registered
in the name of, payable to the order of, or specially endorsed to the
Pledgor, unless it has been specially endorsed to the Securities
Intermediary or in blank.
(c) The Securities Intermediary shall not disburse or dispose of any
Pledged Collateral except in accordance with the terms hereof.
(d) Concurrently with the execution and delivery of this Security
Agreement, the Trustee and the Securities Intermediary are delivering to
the Pledgor and to Donaldson, Lufkin & Jenrette Securities Corporation,
Wasserstein Perella Securities, Inc., CIBC Inc., and Utendahl Capital
Partners, LP, as the Notes' initial purchasers, a certificate, in the form
of Exhibit A hereto, duly executed by an officer of each of the Trustee
and the Securities Intermediary, confirming that (i) the Trustee has
established and will maintain the Securities Account with the Securities
Intermediary, and (ii) the Securities Intermediary has received the
Reserved Proceeds, has used the
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Reserved Proceeds to acquire Pledged Securities or a Securities
Entitlement thereto, and has credited the same to the Securities Account,
in accordance with this Security Agreement.
(e) Concurrently with the execution and delivery of this Security
Agreement, the Pledgor shall deliver to the Trustee executed copies of
proper financing statements, which shall be duly filed in the office of
the Secretary of State of Nevada, covering the Pledged Collateral
described in this Security Agreement.
(f) The Pledged Securities shall consist solely of short-term U.S.
Government Obligations with a maturity date not later than November 30,
1999.
(g) This Security Agreement and the Securities Account shall be
governed by the law of the State of New York.
SECTION 4. Entitlement Orders; Subordination of Lien, Waiver of
Set-Off, etc.
(a) The Trustee shall be the sole Entitlement Holder of, and have
the sole power to originate "Entitlement Orders" (as defined in UCC ss.
8-102(a)(8)) with respect to, the Pledged Collateral. The Securities
Intermediary shall comply with Entitlement Orders issued by the Trustee
with respect to the Pledged Collateral, without further consent of the
Pledgor or any other Person.
(b) The Securities Intermediary hereby agrees that any security
interest in any of the Pledged Collateral that it has or may in the future
acquire shall be subordinate to the Trustee's security interest created
hereby. The Financial Assets held in the Securities Account will not be
subject to deduction, setoff, banker's lien, or any other right in favor
of any Person other than the Trustee (except that the Securities
Intermediary may set off or deduct all amounts due to it as customary fees
for the routine operation and maintenance of the Securities Account and
for the customary fees owed to the Trustee).
(c) In the event of any conflict between this Security Agreement and
any other agreement, the terms of this Security Agreement shall prevail.
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(d) The Securities Intermediary hereby confirms and agrees that:
(i) It has not entered into any agreement (other than
this Security Agreement and the Indenture) with the Pledgor with respect
to the Securities Account;
(ii) It has not granted, and until the termination of
this Security Agreement will not grant, control (including without
limitation, "control" as defined in UCC ss. ss. 8-106 and 9-115(l)(e))
over or with respect to any Pledged Collateral to any Person other than
the Trustee (for the benefit of Holders of the Notes). It has not entered
into, and until the termination of this Security Agreement will not enter
into, any agreement with any Person in which it agrees to comply with
Entitlement Orders, relating to the Pledged Collateral, from any Person
other than the Trustee or which purports to limit or condition its
obligation under this Section 4 to comply with the Trustee's Entitlement
Orders.
(iii) It has not entered into, and until the termination
of this Security Agreement will not enter into, any agreement purporting
to limit or condition its obligation to comply with the Trustee's
Entitlement Orders as provided in this Section 4.
SECTION 5. Adverse Claims. The Securities Intermediary does not know
of any claim to, or interest in, any Pledged Collateral other than those of the
Trustee (for the benefit of Holders of the Notes) and the Pledgor (although the
Securities Intermediary has not performed any investigation with respect
thereto). If any Person asserts or attempts to enforce any Lien or adverse claim
(including by means of writ, garnishment, judgment, warrant of attachment,
execution or similar process) against any Pledged Collateral, the Securities
Intermediary will promptly notify the Trustee and the Pledgor thereof.
SECTION 6. Disbursement; Redemption; Release
SECTION 6.1 Disbursement
(a) If the Pledgor delivers to the Trustee a written request
substantially in the form of Exhibit B hereto (an "Empress Merger
Disbursement Request") containing the certifications described therein,
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together with the other material described therein, then as soon as
practicable after receipt thereof the Trustee shall instruct the
Securities Intermediary to -
(i) liquidate sufficient assets in the Securities
Account so that the net liquidation proceeds (after deducting any
applicable Securities Intermediary and Trustee fees and charges) will
equal the Merger Release Amount (as defined below);
(ii) transfer the Merger Release Amount as directed in
the Empress Merger Disbursement Request, on the disbursement date set
forth therein, which disbursement date must be (x) no more than five and
no less than two Business Days after the Trustee's receipt of the Empress
Merger Disbursement Request, and (y) no later than December 1, 1999.
(b) If, after the consummation of the Empress Merger, the Pledgor
delivers to the Trustee a written request substantially in the form of
Exhibit C hereto (a "Change of Control Disbursement Request" and, with the
Empress Merger Disbursement Request, each a "Disbursement Request")
containing the certifications described therein, then as soon as
practicable after receipt thereof the Trustee shall instruct the
Securities Intermediary to -
(i) liquidate sufficient assets in the Securities
Account so that the net liquidation proceeds (after deducting any
applicable Securities Intermediary and Trustee fees and charges) will
equal the Change of Control Release Amount (as defined below);
(ii) transfer the Change of Control Release Amount to
the indenture trustee for the Empress Notes, as directed in the Change of
Control Disbursement Request, on the disbursement date set forth therein,
which disbursement date must be (x) the second Business Day after the
Trustee's receipt of the Change of Control Disbursement Request, and (y)
no later than 35 Business Days after the disbursement date specified in
the Empress Merger Disbursement Request.
(c) As used herein -
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(i) "Merger Release Amount" means the amount by which
the value of the assets in the Securities Account exceeds $159,000,000;
and
(ii) "Change of Control Release Amount" means the
amount, as set forth in the Change of Control Disbursement Request, that
the Pledgor determined in good faith will be necessary to consummate the
Empress Change of Control Offer on the terms set forth in the Empress
Indenture, provided that if Empress Notes with an aggregate principal
amount of more than $75 million will remain outstanding after consummation
of the Empress Change of Control Offer, there must remain in the
Securities Account sufficient assets to fund the Change of Control
Mandatory Redemption described in subsection 6.2(b) below.
SECTION 6.2 Redemption
(a) If the Trustee does not receive an Empress Merger Disbursement
Request by November 29, 1999, or if at any time the Pledgor notifies the
Trustee in writing that the Empress Merger will not occur on or before
December 1, 1999 (either event, a "Triggering Event"), the Trustee shall -
(i) as soon as practicable instruct the Securities
Intermediary (x) to liquidate sufficient assets in the Securities Account
so that the net liquidation proceeds (after deducting any applicable
Securities Intermediary and Trustee fees and charges) will suffice to fund
the redemption (the "Triggering Event Mandatory Redemption") described in
the immediately following clause (ii), and (y) to deliver the net
liquidation proceeds to the account of the Trustee; and
(ii) use the net liquidation proceeds received in
accordance with the foregoing clause (i) to redeem $325 million aggregate
principal amount of Notes, for a price equal to 101% of their principal
amount, plus accrued and unpaid interest thereon through the redemption
date, plus Liquidated Damages, if any, all in accordance with Section 3.8
of the Indenture. The Triggering Event Mandatory Redemption must occur no
later than the earlier of (x) five
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Business Days after December 1, 1999 and (y) ten Business Days after the
Triggering Event.
(b) (1) If the Trustee does not receive a Change of Control
Disbursement Request on or before the 33rd Business Day after the
disbursement date specified in the Empress Merger Disbursement Request or
(2) if the Change of Control Disbursement Request states that Empress
Notes with an aggregate principal amount of more than $75 million will
remain outstanding after consummation of the Empress Change of Control
Offer, the Trustee shall -
(i) as soon as practicable instruct the Securities
Intermediary (x) to liquidate sufficient assets in the Securities Account
so that the net liquidation proceeds (after deducting any applicable
Securities Intermediary and Trustee fees and charges) will suffice to fund
the redemption (the "Change of Control Mandatory Redemption") described in
the immediately following clause (ii), and (y) to deliver the net
liquidation proceeds to the account of the Trustee; and
(ii) use the net liquidation proceeds received in
accordance with the foregoing clause (i) to redeem Notes with an aggregate
principal amount equal to (A) if the condition described in clause (b)(1)
above has occurred, $150 million, and (B) if the condition described in
clause (b)(2) above has occurred, the aggregate principal amount of
Empress Notes that will remain outstanding after consummation of the
Empress Change of Control Offer, in either case for a price equal to 101%
of their principal amount, plus accrued and unpaid interest thereon
through the redemption date, plus Liquidated Damages, if any, all in
accordance with Section 3.8 of the Indenture. The Change of Control
Mandatory Redemption must occur on the earlier of (x) the fifth Business
Day after the consummation of the Empress Change of Control Offer, and (y)
the 40th Business Day after the disbursement date specified in the Empress
Merger Disbursement Request.
SECTION 6.3 Release of Unapplied Amounts
(a) If (i) the Empress Merger and the Empress Change of Control
Offer have both occurred and (ii) the Pledgor is not obligated under the
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Indenture to make a Change of Control Mandatory Redemption, then the
Trustee shall, as promptly as possible after the disbursement date
specified in the Empress Change of Control Disbursement Request, instruct
the Securities Intermediary to liquidate all assets remaining in the
Securities Account (if any) and to pay the net liquidation proceeds (after
deducting any applicable Securities Intermediary and Trustee fees and
charges) to or as instructed by the Pledgor.
(b) If either a Triggering Event Mandatory Redemption or a Change of
Control Mandatory Redemption has occurred, then the Trustee shall, as
promptly as possible after the consummation thereof, instruct the
Securities Intermediary to liquidate all assets remaining in the
Securities Account (if any) and to pay the net liquidation proceeds (after
deducting any applicable Securities Intermediary and Trustee fees and
charges) to or as instructed by the Pledgor.
(c) Notwithstanding the provisions of paragraphs (a) or (b) of this
Section 6.3, the Trustee shall instruct the Securities Intermediary not to
make any payment otherwise required therein if at the time of payment an
Event of Default has occurred and is continuing.
SECTION 6.4 General Provisions
(a) Nothing in this Security Agreement shall afford the Pledgor any
right to issue Entitlement Orders with respect to any Pledged Collateral.
(b) Nothing in this Section 6 shall limit the Trustee's rights and
powers under this Security Agreement.
(c) The Trustee may, in its discretion, retain a nationally-known
accounting firm to advise it with respect to the calculation of any amount
to be disbursed from or retained in the Securities Account in accordance
with this Section 6 or to confirm a calculation contained in a
Disbursement Request, and shall be entitled to rely conclusively upon that
advice. The Trustee may cause payment of that accounting firm's reasonable
fees and expenses (in an amount not to exceed $1,000 with respect to
advice regarding any single calculation) from the assets in the Securities
Account or, at its option, demand the payment thereof by the Pledgor. The
Pledgor shall promptly pay all such reasonable fees and expenses promptly
upon receipt of that demand.
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SECTION 7. Representations and Warranties. The Pledgor hereby
represents and warrants that, as of the date hereof:
(a) The Pledgor's execution and delivery of, and its performance of
its obligations under, this Security Agreement will not (i) contravene any
provision of applicable law or statute, the Pledgor's organizational
documents, any material agreement or other material instrument binding
upon the Pledgor or any of its affiliates, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
the Pledgor or any of its affiliates, or (ii) result in the creation or
imposition of any Lien on any of the Pledgor's assets, except for the
security interest granted to the Trustee herein. No consent, approval,
authorization or order of, qualification with, or other action by any
governmental or regulatory body or agency or any third party is required
for (i) the Pledgor's execution, delivery or performance of this Security
Agreement, or (ii) the Pledgor's grant of, or the perfection and
maintenance of, the security interest created hereby (including its first
priority nature), assuming the Securities Intermediary's compliance with
its obligations hereunder. Notwithstanding the foregoing, a breach of any
of the representations and warranties in this Section 7(a) will not
constitute a default under this Security Agreement unless that breach
causes a material adverse effect on (i) the validity or enforceability of
this Security Agreement or any other material agreement executed in
connection with the transactions contemplated herein or in the Indenture,
or (ii) the Pledgor's ability to perform its material obligations under
the Notes and the Indenture.
(b) The Pledgor has duly and validly authorized, executed, and
delivered this Security Agreement. Assuming the Trustee's and Security
Intermediary's due authorization, execution and delivery of this Security
Agreement and its enforceability against the Trustee and the Securities
Intermediary in accordance with its terms, this Security Agreement
constitutes the Pledgor's valid and binding agreement, enforceable against
the Pledgor in accordance with its terms, except as (i) may be limited by
bankruptcy, insolvency, fraudulent transfer, preference, reorganization,
moratorium, or similar laws now or hereafter in effect relating to or
affecting creditors' rights or remedies generally, (ii) the availability
of equitable remedies may be limited by equitable principles of general
applicability and the discretion of the court considering the matter,
(iii) the exculpation provisions and rights to indemnification hereunder
may be limited by federal and state securities laws and public policy
considerations, and (iv) applicable
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law may limit the enforceability of the waiver of rights and defenses in
and other provisions of Sections 13(b), 16.10, and 16.15 hereof.
(c) The Pledgor is the legal and beneficial owner of the Pledged
Securities and other Pledged Collateral. The Pledgor owns the Pledged
Securities and other Pledged Collateral free and clear of any Lien or
claim of any person or entity (except for the security interest granted to
the Trustee herein). No financing statement or other instrument similar in
effect covering the Pledgor's interest in the Pledged Securities is on
file in any public office, other than any financing statement filed under
this Security Agreement.
(d) Upon the Trustee's acquisition of a Security Entitlement in the
Pledged Collateral in accordance herewith, and the Securities
Intermediary's performance of its obligations hereunder, the security
interest granted to the Trustee herein will constitute a first priority
security interest in the Pledged Collateral (except, with respect to
proceeds, only to the extent permitted by UCC ss. 9-306), enforceable as
such against all creditors of the Pledgor and against any Person
purporting to purchase any of the Pledged Collateral from the Pledgor,
except insofar as enforcement may be affected by general equitable
principles (whether in a proceeding in equity or at law).
(e) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor or
any of its affiliates is a party or relating to any property of the
Pledgor or any affiliate that would materially adversely affect the
Pledgor's power or ability to perform its obligations under this Security
Agreement, the Notes, or the Indenture.
(f) No law or governmental regulation (including, without
limitation, Regulations T, U and X of the Board of Governors of the
Federal Reserve System) applicable to the Pledgor prohibits the grant of
the security interest to the Trustee hereunder.
(g) The Pledgor's chief executive offices are located at 4024 South
Industrial Road, Las Vegas, Nevada 89103. The Pledgor will not change the
location of its chief executive offices before the Termination Date (as
defined below) without giving at least 30 days' prior written notice to
the Trustee.
(h) No Event of Default (as defined below) exists.
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SECTION 8. Pledgor's Covenants. In addition to its other agreements
herein, the Pledgor covenants and agrees with the Trustee and the Holders of the
Notes that from and after the date hereof until the Termination Date:
(a) It will, promptly upon request by the Trustee, execute and
deliver or cause to be executed and delivered, or use its commercially
reasonable efforts to procure, all assignments, instruments and other
documents, in form and substance reasonably satisfactory to the Trustee,
and take any other action that is necessary or desirable to perfect,
further evidence the perfection of, continue the perfection of, or protect
the first priority of, the Trustee's security interest in the Pledged
Collateral, to protect the Pledged Collateral against rights, claims, or
interests asserted therein by third persons (other than any right, claim,
or interest created by the Trustee on behalf of the Holders of the Notes),
to enable the Trustee to enforce its rights and remedies hereunder, and to
effect the purposes of this Security Agreement. The Pledgor will promptly
pay all reasonable costs incurred in connection with any of the foregoing;
(b) It will not (and will not purport to) (i) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the
Pledged Collateral or its beneficial interest therein, or (ii) create or
permit to exist any Lien or other adverse interest in or with respect to
its beneficial interest in any of the Pledged Collateral (other than the
security interest granted herein);
(c) It will not (i) enter into any agreement or understanding that,
directly or indirectly, restricts or inhibits or purports to restrict or
inhibit the Trustee's rights or remedies hereunder, including, without
limitation, the Trustee's right to dispose of the Pledged Collateral as
provided herein, or (ii) fail to pay or discharge any tax, assessment or
levy of any nature with respect to its beneficial interest in the Pledged
Collateral later than five days before the date of any proposed sale under
any judgment, writ or warrant of attachment with respect to its beneficial
interest; and
(d) It will at all times remain the sole beneficial owner of the
Pledged Collateral (subject to the security interest granted to the
Trustee herein).
SECTION 9. Securities Intermediary's Representations, Warranties and
Covenants. The Securities Intermediary represents and warrants that it is, as of
the date hereof, and it agrees that for so long as it maintains the
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Securities Account and acts as securities intermediary under this Security
Agreement it shall be, a "Securities Intermediary" (as defined in the UCC and in
31 C.F.R. ss.357.2). In furtherance of the foregoing, and in addition to its
other representations, warranties, and agreements herein, the Securities
Intermediary hereby:
(a) represents and warrants that it is a financial institution that,
in the ordinary course of its business, maintains securities accounts for
others and is acting in that capacity with respect to the Securities
Account;
(b) covenants that, as Securities Intermediary hereunder and with
respect to the Securities Account, it shall not take any action
inconsistent with, and represents and warrants that it is not and so long
as this Security Agreement remains in effect will not become party to any
agreement whose terms are materially inconsistent with, and would prevent
the Trustee and the Pledgor from substantial enjoyment of the benefits
contemplated by, this Security Agreement;
(c) agrees to treat any item of property credited to the Securities
Account as a Financial Asset;
(d) agrees, so long as it serves as Securities Intermediary under
this Security Agreement, to maintain the Securities Account as a
securities account and maintain appropriate books and records in respect
thereof in accordance with its usual procedures and subject to the terms
of this Security Agreement;
(e) agrees, with the other parties to this Security Agreement, that
its jurisdiction, for purposes of UCC ss. 8-110(e) and 31 C.F.R. 357.11(b)
as it pertains to this Security Agreement, the Securities Account and all
Security Entitlements relating thereto, shall be the State of New York;
and
(f) agrees that it will maintain the Securities Account, at its
office at the address set forth in the Recitals hereof, segregated from
all other accounts, and will not change the name on the account or its
account number without the Trustee's prior written consent.
SECTION 10. Power of Attorney. Upon the occurrence and continuation
of an Event of Default, in addition to all of the powers granted to the Trustee
under the Indenture, the Pledgor hereby appoints and constitutes the Trustee as
the Pledgor's attorney-in-fact, with full authority in its place its name to
take, from
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time to time in the Trustee's discretion, to take any action and to execute any
instrument that the Trustee may deem necessary or advisable to accomplish the
purposes of this Security Agreement. The Trustee's authority under this Section
10 shall include, without limitation, the authority to endorse and negotiate any
checks or instruments representing proceeds of Pledged Collateral in the name of
the Pledgor, execute and give receipt for any certificate of ownership or any
document constituting Pledged Collateral, transfer title to any item of Pledged
Collateral, sign the Pledgor's name on all financing statements (to the extent
permitted by applicable law) or any other document deemed necessary or
appropriate by the Trustee to preserve, protect or perfect the security interest
in the Pledged Collateral and to file the same, prepare, file and sign the
Pledgor's name on any notice of Lien, and to take any other actions arising from
or incident to the powers granted to the Trustee in this Security Agreement.
This power of attorney is coupled with an interest and is irrevocable.
Notwithstanding anything to the contrary herein, the Trustee has no duty or
obligation to exercise any of the powers in this Section 10.
SECTION 11. No Assumption of Duties; Reasonable Care. The Trustee
and the Securities Intermediary undertake to perform only those duties that are
expressly and specifically set forth herein. This Security Agreement does not,
and may not be interpreted to, impose any implied duties or obligations on
either of them, including, without limitation, any obligation to monitor the
Pledgor's performance of its obligations hereunder. The Pledgor acknowledges
that the Trustee and Securities Intermediary have not participated in the
selection of financial assets to be deposited in or credited to the Securities
Account. Except as provided by applicable law or by the Indenture, the Trustee
shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral if the Trustee accords the Pledged
Collateral treatment substantially similar to that which the Trustee accords
similar property held by the Trustee for similar accounts, it being understood
that the Trustee shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or other
matters relative to any Pledged Collateral, whether or not the Trustee has or is
deemed to have knowledge of such matters, (ii) monitoring the Pledgor's
compliance with its covenants herein, or (iii) any loss on any investment
(including without limitation any loss resulting from the sale of a Financial
Asset held in or credited to the Securities Account before its maturity).
SECTION 12. Indemnity.
(a) The Pledgor hereby indemnifies, holds harmless, and agrees to
defend the Trustee, the Securities Intermediary, and each of their
respective
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directors, officers, employees, attorneys, and agents (each, an
"Indemnified Person") from and against any and all claims, actions,
obligations, liabilities and expenses, including reasonable defense costs,
reasonable investigative fees and costs and reasonable legal fees and
expenses and damages, arising from the performance by the Trustee and the
Securities Intermediary of their respective obligations under this
Security Agreement. The Pledgor shall, upon demand by any Indemnified
Person, promptly pay or reimburse that Indemnified Person for all such
expenses, costs, fees and damages. Notwithstanding the foregoing, the
Pledgor (i) shall not be obligated to indemnify any Indemnified Person
from any claim, action, obligation, liability or expense against or
incurred by that Indemnified Person that is judicially determined (the
determination having become final) to be directly attributable to the
gross negligence or willful misconduct of that Indemnified Person, and
(ii) shall, upon that final judicial determination, be entitled to recover
from that Indemnified Person all amounts therefore paid hereunder,
provided that before any such judicial determination becomes final, the
Pledgor must promptly pay all amounts demanded by any Indemnified Person.
(b) In addition, and without limiting the provisions of the
foregoing Section 12(a), if the Trustee is required to take any action
hereunder to enforce its rights with respect to the Pledged Collateral,
the Trustee's rights and duties shall be as set forth in Article VII of
the Indenture, and the Trustee shall be entitled to the benefit of the
indemnity and compensation provisions and all other protections and
exculpatory provisions therein.
SECTION 13. Remedies Upon Event of Default. As used herein, "Event
of Default" means (i) any Event of Default as that term is defined in the
Indenture, and (ii) any breach by the Pledgor of its representations,
warranties, covenants, or agreements herein. If any Event of Default occurs
before the Termination Date and is continuing:
(a) The Trustee (for the benefit of the Holders of the Notes) shall
have, in addition to all other rights given by law, by this Security
Agreement, or by the Indenture, all of the rights and remedies with
respect to the Pledged Collateral of a secured party under the UCC. In
addition, with respect to any Pledged Collateral that shall then be in or
shall thereafter come into the possession or custody or under the control
of the Trustee, the Trustee may, upon the direction of a majority in
aggregate principal amount of the Holders of the Notes, sell or cause the
same to be sold at any broker's board or at
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public or private sale, in one or more sales or lots, for cash or on
credit or for future delivery, without assumption of any credit risk. The
purchaser of any Pledged Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind
whatsoever of, or created by or through, the Pledgor. The Trustee shall
give the Pledgor such notice of the time and place of any public sale of
the Pledged Collateral as is feasible and reasonable under the
circumstances, except no notice of sale shall be required if the Trustee
determines, in its reasonable judgment, that (i) an immediate sale is
necessary because the Pledged Collateral threatens to decline speedily in
value or (ii) the Pledged Collateral is or becomes of a type regularly
sold on a recognized market. To the extent permitted by applicable law,
the Pledgor agrees that any sale of the Pledged Collateral conducted in
conformity with reasonable commercial practices of banks, insurance
companies, commercial finance companies, or other financial institutions
disposing of property similar to the Pledged Collateral shall be deemed to
be commercially reasonable. Subject to the other provisions of this
Section 13(a), notice mailed to the Pledgor as provided in Section 16.1
hereof at least 10 days before the time of the sale or disposition shall
constitute reasonable notice. The Trustee or any Holder of Notes may, in
its own name or in the name of a designee or nominee, buy any of the
Pledged Collateral at any public sale and, if permitted by applicable law,
at any private sale. All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Pledged Collateral.
(b) The Pledgor shall use its reasonable best efforts to do or cause
to be done all such other acts as may be necessary to make a sale of all
or portion of the Pledged Collateral under this Section 13 valid and
binding and in compliance with any applicable requirements of law. The
Pledgor agrees that a breach of any of its covenants in this Section 13
will cause irreparable injury to the Trustee and the Holders of the Notes,
that the Trustee and the Holders of the Notes would have no adequate
remedy at law in respect of that breach and, as a consequence, that each
of its covenants in this Section 13 shall be specifically enforceable
against the Pledgor. The Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of these covenants
except for a defense that no Event of Default has occurred.
16
<PAGE> 17
(c) The Trustee may, without notice to the Pledgor except as
required by law and at any time or from time to time, charge, setoff and
otherwise apply all or any part of the Obligations against the Securities
Account or any part thereof.
SECTION 14. Expenses. Except as provided in any fee agreement to the
contrary, the Pledgor shall, promptly upon demand, pay to each of the Trustee
and the Securities Intermediary any and all reasonable expenses, including,
without limitation, the reasonable fees, expenses and disbursements of counsel,
experts and agents, that either the Trustee or the Securities Intermediary may
incur in connection with (a) the review, negotiation and administration of this
Security Agreement, (b) the maintenance and administration of the Securities
Account and the custody, preservation, or sale of, collection from, or other
realization upon, any of the Pledged Collateral, (c) the exercise or enforcement
of any of the rights of the Trustee and the Holders of the Notes hereunder, (d)
the Pledgor's failure to perform or observe any of the provisions hereof, or (e)
any claim covered by Section 12 hereof.
SECTION 15. Security Interest Absolute. All rights of the Trustee
and the Holders of the Notes and the security interest granted to the Trustee
hereunder, and all obligations of the Pledgor hereunder, shall be absolute and
unconditional under all circumstances, including but not limited to:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment or
performance of, or in any other term of, any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the
Indenture;
(c) any taking, exchange, surrender, release or non-perfection of
any other collateral or any taking, release, amendment, or waiver of any
provision of any guaranty for all or any of the Obligations;
(d) any change, restructuring or termination of the corporate
structure or existence of the Pledgor or any of its affiliates; or
(e) to the extent permitted by applicable law, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this
Security Agreement.
17
<PAGE> 18
SECTION 16. Miscellaneous Provisions.
SECTION 16.1 Notices. Any notice or communication given hereunder
shall be sufficiently given if in writing and delivered in person or mailed by
first class mail, commercial courier service or telecopier communication,
addressed as follows:
if to the Pledgor:
Horseshoe Gaming Holding Corp.
4024 South Industrial Road
Las Vegas, Nevada 89103
Attention: Chief Financial Officer
Telecopier: (702) 650-0081
with a copy to:
Swidler Belin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022
Attention: Robert M. Friedman, Esq.
Telecopier: (212) 758-9526
if to the Trustee:
U.S. Trust Company, National Association
515 South Flower Street
Suite 2700
Los Angeles, CA 90071
Attention: Lawrence Gerquest
Assistant Vice President
Corporate Trust Department
Telecopier: (213) 488-1370
18
<PAGE> 19
if to the Securities Intermediary:
U.S. Trust Company, National Association
515 South Flower Street
Suite 2700
Los Angeles, CA 90071
Attention: Lawrence Gerquest
Assistant Vice President
Corporate Trust Department
Telecopier: (213) 488-1370
SECTION 16.2 Severability. The provisions of this Security Agreement
are severable. If a court in any jurisdiction holds that a clause or provision
is invalid, illegal or unenforceable, in whole or in part, then that holding
shall affect the validity or enforceability of that clause or provision in that
jurisdiction only, without effect in any other jurisdiction or with respect to
any other clause or provision hereof.
SECTION 16.3 Headings. The headings in this Security Agreement are
included for convenience of reference only, are not to be considered a part
hereof, and do not modify or restrict any of the terms or provisions hereof.
SECTION 16.4 Counterpart Originals. This Security Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement. A
photocopy or other reproduction of this Security Agreement or any financing
statement covering the Pledged Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
SECTION 16.5 Benefits of Security Agreement. Nothing in this
Security Agreement, express or implied, shall give to any person, other than the
parties hereto, their successors hereunder, all Indemnified Persons, and
(subject to the provisions of the Indenture) the Holders of the Notes, any legal
or equitable right, remedy or claim. Other than the Persons identified in the
preceding sentence, there are and shall be no third-party beneficiaries of this
Security Agreement. No Holder of Notes shall have any independent rights
hereunder, other than those rights granted to individual Holders of the Notes
under the Indenture.
SECTION 16.6 Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Security Agreement and any consent
19
<PAGE> 20
to any departure by the Pledgor from any provision of this Security Agreement
shall be effective only if made or duly given in compliance with all of the
terms and provisions of the Indenture. Neither the Trustee nor any Holder of
Notes shall be deemed, by any act, delay, indulgence, omission or otherwise, to
have waived any right or remedy hereunder or to have acquiesced in any Default
or Event of Default or in any breach of any of the terms and conditions hereof.
A failure to exercise, a delay in exercising, or a waiver of any right, power or
privilege hereunder by the Trustee or any Holder of Notes shall not preclude any
subsequent exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided herein are cumulative, may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
SECTION 16.7 Interpretation of Agreement. Acceptance of or
acquiescence in a course of performance rendered under this Security Agreement
shall not be relevant to determine the meaning of this Security Agreement, even
if the accepting or acquiescing party had knowledge of the nature of the
performance and an opportunity to object thereto.
SECTION 16.8 Continuing Security Interest; Termination.
(a) This Security Agreement shall create a continuing security
interest in and to the Pledged Collateral, shall be binding upon the
Pledgor, its transferees, successors and assigns, shall inure, together
with the rights and remedies of the Trustee hereunder, to the benefit of
the Trustee, the Securities Intermediary, the Holders of the Notes and
their respective successors, transferees and assigns, and shall remain in
full force and effect until the Termination Date. On or as soon as
practicable after the Termination Date, the Trustee shall, at the
Pledgor's expense, take any reasonable action necessary to release the
security interest created hereby, including the execution and delivery of
any termination statements prepared and delivered to it by the Pledgor.
Any redelivery of the Pledged Collateral hereunder to the Pledgor shall be
without warranty by or recourse to the Trustee in its capacity as such,
except as to the absence of any Liens on the Pledged Collateral created by
or arising through the Trustee, and shall be at the reasonable expense of
the Pledgor.
(b) This Security Agreement will terminate on the date on which all
assets in the Securities Account have been liquidated and applied in
accordance with any applicable provisions of Section 6 hereof.
20
<PAGE> 21
(c) Notwithstanding the foregoing, the Pledgor's obligations under
Sections 12 and 14 shall survive this Security Agreement's termination.
SECTION 16.9 Survival of Representations and Covenants. All
representations, warranties and covenants of the Pledgor herein shall survive
execution and delivery of this Security Agreement, and shall terminate only on
the Termination Date.
SECTION 16.10 Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
SECTION 16.11 Authority of the Trustee and Securities Intermediary.
(a) Each of the Trustee and Securities Intermediary may exercise all
rights and powers granted hereunder, together with any powers reasonably
incident hereto. The Trustee and the Securities Intermediary may perform
any of their respective duties hereunder or in connection with the Pledged
Collateral by or through agents or employees and shall be entitled to
retain counsel and to rely conclusively upon the advice of counsel
concerning their rights, powers and duties hereunder. The Trustee and the
Securities Intermediary shall not be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security
furnished in accordance herewith and shall be entitled to indemnification
hereunder from any claims related thereto. The Trustee, the Securities
Intermediary, and their respective directors, officers, employees,
attorneys and agents may conclusively rely on any communication,
instrument or document reasonably believed by them to be genuine and
correct and to have been signed or sent by the proper person or persons.
(b) The Pledgor acknowledges that, as between the Pledgor and the
Trustee, with respect to any action or inaction by the Trustee in
connection with the performance of its duties hereunder, the Trustee shall
be conclusively presumed to be acting as agent for the Holders of the
Notes with full and valid authority so to act or refrain from acting, and
the Pledgor may not make any inquiry respecting such authority.
21
<PAGE> 22
(c) No provision of this Security Agreement shall require either the
Trustee or the Securities Intermediary to expend or risk its own funds or
otherwise incur any financial liability in the performance of its duties
or the exercise of any of its rights and powers hereunder. If,
notwithstanding the foregoing, the Trustee determines to advance funds,
the Trustee shall be entitled to reimbursement thereof from the Pledgor
within ten days of demand therefor, together with interest at the maximum
rate permitted by law.
SECTION 16.12 Removal or Resignation of the Securities Intermediary.
The Securities Intermediary may resign by notice to, or be removed by notice
from, the Trustee at any time, except that in either case the Securities
Intermediary's duties hereunder shall not terminate until the Trustee has
appointed a successor Securities Intermediary, who has accepted the appointment
(by delivery of an agreement substantially in the form hereof), and until all
assets held by the retiring Securities Intermediary have been transferred to the
successor Securities Intermediary in accordance with the Trustee's instruction.
SECTION 16.13 [Intentionally deleted]
SECTION 16.14 Final Expression. This Security Agreement, together
with the Indenture and any other agreement executed in connection herewith, is
intended by the parties as a final expression of this Security Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof, subject to any amendment duly made in accordance herewith.
SECTION 16.15 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES.
(a) THIS SECURITY AGREEMENT, THE SECURITIES ACCOUNT, AND THE
SECURITIES ENTITLEMENTS RELATED THERETO SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND
5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE
AND RULES 327. ANY DISPUTE ARISING FROM, RELATED TO, OR IN CONNECTION WITH
ANY OF THE FOREGOING, OR THE RELATIONSHIP AMONG OR THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO, SHALL LIKEWISE BE GOVERNED BY THE LAW
OF THE STATE OF NEW YORK. REGARDLESS OF ANY PROVISION OF ANY OTHER
AGREEMENT,
22
<PAGE> 23
FOR PURPOSES OF THE UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITIES
INTERMEDIARY'S JURISDICTION.
(b) THE PLEDGOR AGREES THAT THE TRUSTEE MAY, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, PROCEED
AGAINST THE PLEDGOR OR THE PLEDGED COLLATERAL IN ANY COURT HAVING PERSONAL
OR IN REM JURISDICTION OVER THE PLEDGOR OR THE PLEDGED COLLATERAL, AS THE
CASE MAY BE, TO ENABLE THE TRUSTEE TO ASSERT A CLAIM OR EXERCISE ITS
RIGHTS AND REMEDIES UNDER THIS SECURITY AGREEMENT. THE PLEDGOR AGREES THAT
IT WILL NOT ASSERT ANY COUNTERCLAIM, SETOFF, OR CROSSCLAIM AGAINST THE
TRUSTEE IN ANY PROCEEDING BROUGHT BY THE TRUSTEE UNDER THIS SECURITY
AGREEMENT OR THE INDENTURE OTHER THAN A COUNTERCLAIM, SETOFF, OR
CROSSCLAIM THAT, IF NOT ASSERTED IN THAT PROCEEDING, COULD NOT OTHERWISE
BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES ANY OBJECTION BASED ON THE
GROUNDS OF IMPROPER VENUE OR FORUM NON CONVENIENS TO THE TRUSTEE'S
COMMENCEMENT AND PROSECUTION OF SUCH A PROCEEDING IN ANY COURT IN THE CITY
OF NEW YORK.
(c) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES, THE
TRUSTEE, THE SECURITIES INTERMEDIARY, NOR ANY OTHER INDEMNIFIED PERSON
SHALL BE LIABLE TO THE PLEDGOR FOR LOSSES ARISING FROM, RELATING TO, OR IN
CONNECTION WITH THIS SECURITY AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREBY OR IN THE INDENTURE, OR THE DUTIES IMPOSED HEREUNDER, UNLESS A
COURT DETERMINES (SUCH DETERMINATION HAVING BECOME FINAL) THAT THE LOSSES
RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON ON
WHOM THE PLEDGOR SEEKS TO IMPOSE LIABILITY.
(d) TO THE EXTENT PERMITTED BY LAW, THE PLEDGOR WAIVES THE POSTING
OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN
CONNECTION WITH ANY JUDICIAL PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER
COURT ORDER, ENTERED AGAINST THE PLEDGOR RELATING TO THIS SECURITY
AGREEMENT OR ANY RELATED
23
<PAGE> 24
AGREEMENT OR DOCUMENT OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS SECURITY
AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT AGAINST THE PLEDGOR.
SECTION 16.16 No Conflict
The Pledgor acknowledges that U.S. Trust Company, National
Association, is acting in two capacities in the transactions contemplated
herein: as Trustee under the Indenture and as Securities Intermediary under this
Security Agreement. The Pledgor has requested that U.S. Trust Company, National
Association serve in those two capacities and anticipates that it will enjoy
significant benefits from U.S. Trust Company, National Association's agreement
to do so. Accordingly, the Pledgor consents to U.S. Trust Company, National
Association's service in those two capacities and agrees that, if any dispute
arises hereunder between the Pledgor and U.S. Trust Company, National
Association, the Pledgor will not assert that U.S. Trust Company, National
Association's service in those two capacities presented either an actual or a
potential conflict of interest.
24
<PAGE> 25
IN WITNESS WHEREOF, the Pledgor, the Trustee and the Securities
Intermediary have each caused this Security Agreement to be duly executed and
delivered as of the date first above written.
Pledgor:
HORSESHOE GAMING HOLDING CORP.
By: /s/ Kirk C. Saylor
-----------------------------------
Kirk C. Saylor
Chief Financial Officer
Trustee:
U.S. TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Sandra H. Leess
-----------------------------------
Name:
Title:
U.S. TRUST COMPANY, NATIONAL
ASSOCIATION, as Securities Intermediary
By: /s/ Sandra H. Leess
-----------------------------------
Name:
Title:
<PAGE> 26
EXHIBIT A
CERTIFICATE
On and as of May 11, 1999, and in accordance with Section 3(d) of
the Security and Control Agreement, dated of even date herewith (the "Security
Agreement"), by and among Horseshoe Holding Gaming Corp. (the "Pledgor"), U.S.
Trust Company, National Association, as indenture trustee (the "Trustee") for
the holders of the Pledgor's 8 5/8% Senior Subordinated Notes due 2009 (the
"Notes"), and U.S. Trust Company, National Association, as securities
intermediary (the "Securities Intermediary"), the undersigned officers of the
Trustee and the Securities Intermediary, on behalf of the Trustee and the
Securities Intermediary respectively, hereby make the following certifications
to the Pledgor and the initial purchasers of the Notes. Capitalized terms used
and not defined in this certificate have the meanings given them in the Security
Agreement or in the documents referenced therein.
1. Substantially contemporaneously with the execution and delivery
of this Certificate, the Trustee has established and will maintain the
Securities Account with the Securities Intermediary. The Securities Intermediary
has received $342,265,625 from the net proceeds from the sale of the Notes and
has used those funds to purchase the Pledged Securities (or will do so as soon
as practicable). The Securities Intermediary has made or will (upon purchase of
the Pledged Securities) make appropriate book entries in its records
establishing that the Pledged Securities and the Trustee's Security Entitlement
thereto have been credited to and are held in the Securities Account.
2. The Trustee has established and maintained and will maintain the
Securities Account, all Security Entitlements thereto, and all rights with
respect to the Pledged Collateral solely in its capacity as Trustee and has not
asserted and will not assert any claim to or interest in the Pledged Collateral
except in that capacity.
3. The Trustee and the Securities Intermediary have acquired their
Security Entitlements to the Pledged Securities for value and without notice of
any adverse claim thereto but, with the Pledgor's permission, have not performed
any UCC searches with respect thereto. Without limiting the generality of the
foregoing, neither the Pledged Securities nor the Security Entitlements thereto
of the Securities
A-1
<PAGE> 27
Intermediary and the Trustee are, to their knowledge, subject to any Lien
granted by either of them in favor of any other securities intermediary or any
other person.
4. Each signatory represents and warrants that he or she is duly
authorized to execute this certificate.
IN WITNESS WHEREOF, the undersigned officers have executed this
Certificate on behalf of the Trustee and the Securities Intermediary,
respectively, on the date first shown above.
U.S. TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee
By:
----------------------
Name:
Title:
U.S. TRUST COMPANY,
NATIONAL ASSOCIATION,
as Securities Intermediary
By:
----------------------
Name:
Title:
A-2
<PAGE> 28
EXHIBIT B
EMPRESS MERGER DISBURSEMENT REQUEST
[Letterhead of Horseshoe Gaming Holding Corp.]
[date]
U.S. Trust Company, National Association, Trustee
515 South Flower Street
Suite 2700
Los Angeles, CA 90071
Attention: Lawrence Gerquest
Assistant Vice President
Corporate Trust Department
Ladies and Gentlemen:
I am the [title] of Horseshoe Gaming Holding Corp. (the "Company").
I refer you to the Security and Control Agreement, dated May 11, 1999 (the
"Security Agreement"), among the Company and you in your separate capacities as
Trustee under the Indenture identified in the Security Agreement's Recitals and
as Securities Intermediary under the Security Agreement. Unless otherwise
indicated, capitalized terms used but not otherwise defined herein have the
meanings given them, as applicable, in the Security Agreement or in the
documents referenced therein.
The Company hereby requests, in accordance with Section 6.1(a) of
the Security Agreement, that you cause (i) the liquidation of sufficient assets
in the Securities Account to generate net proceeds equal to the Merger Release
Amount, and (ii) the delivery of the Merger Release Amount to the Company on
______ __, 1999 (the "Disbursement Date," which day is (x) a Business Day not
more than five nor less than two Business Days after the date hereof and (y) on
or before December 1, 1999), in accordance with the wire instructions given
below.
B-1
<PAGE> 29
The Company hereby certifies that its representations and warranties
in the Security Agreement are true on the date hereof and will be true on the
Disbursement Date, and that no Event of Default has occurred and is continuing
on the date hereof.
The Company further certifies that:
1. The Empress Merger will occur on the Disbursement Date, on terms
substantially as set forth in the Merger Agreement (as defined in the Indenture)
and in the final offering memorandum, dated May 6, 1999, relating to the sale of
the Notes.
2. The Company will use all amounts delivered in accordance with
this Request solely to pay a portion of the Empress Merger Consideration and
Related Costs (as defined in the Indenture).
3. As of the date hereof and on the Disbursement Date, the Company
owns and will own all of the Equity Interests (as defined in the Indenture) of
Horseshoe Gaming.
4. The Company will cause the Internal Consolidation (as defined in
the Indenture) to occur substantially concurrently with, and not more than one
Business Day after, the Empress Merger.
The Company makes the foregoing certifications in accordance with
the Indenture and Security Agreement but acknowledges that you have no
obligation to monitor our use of any funds released in connection herewith.
Also enclosed herewith is an opinion of the Company's counsel, ad
dressed to the Trustee, to the effect that the consummation of the Empress
Merger and the transactions contemplated thereby will not conflict with or
result in a violation or breach of, or constitute a default (with or without due
notice or the passage of time or both) under, any of the terms, conditions or
other provisions of the indenture governing the Empress Notes.
B-2
<PAGE> 30
The undersigned signatory represents and warrants that [he/she] is
authorized to execute this Request on the Company's behalf and that to the best
of [his/her] knowledge, all of the Company's certifications herein are true and
correct.
Very truly yours,
HORSESHOE GAMING HOLDING
CORP.
By:
--------------------
Name:
Title:
Wire Instructions:
[to come]
B-3
<PAGE> 31
EXHIBIT C
EMPRESS CHANGE OF CONTROL DISBURSEMENT REQUEST
[Letterhead of Horseshoe Gaming Holding Corp.]
[date]
U.S. Trust Company, National Association, Trustee
515 South Flower Street
Suite 2700
Los Angeles, CA 90071
Attention: Lawrence Gerquest
Assistant Vice President
Corporate Trust Department
Ladies and Gentlemen:
I am the [title] of Horseshoe Gaming Holding Corp. (the "Company").
I refer you to the Security and Control Agreement, dated May 11, 1999 (the
"Security Agreement"), among the Company and you in your separate capacities as
Trustee under the Indenture identified in the Security Agreement's Recitals and
as Securities Intermediary under the Security Agreement. Unless otherwise
indicated, capitalized terms used but not otherwise defined herein have the
meanings given them, as applicable, in the Security Agreement or in the
documents referenced therein.
The Company hereby certifies that after the consummation of the
Empress Change of Control Offer (as defined in the Indenture), Empress Notes
with a principal amount of $_________ (the "Outstanding Amount") will remain
outstanding.
The Company hereby requests, in accordance with Section 6.1(b) of
the Security Agreement, that you cause (i) the liquidation of sufficient assets
in the Securities Account to generate net liquidation proceeds of
$______________ (the "Change of Control Release Amount"), and (ii) the delivery
of that amount to the indenture trustee for the Empress Notes on ___________ __,
1999 (the "Disbursement
C-1
<PAGE> 32
Date," which day is (x) a Business Day not less than two Business Days after the
date hereof and (y) no later than 35 Business Days after the disbursement date
specified in the Empress Merger Disbursement Request previously delivered to
you), in accordance with the wire instructions given below. Notwithstanding the
foregoing, if the Outstanding Amount exceeds $75 million, then the Change of
Control Release Amount may not exceed the difference between the value of all
assets in the Securities Account as of the date hereof and the amount necessary
to fund the Change of Control Mandatory Redemption in accordance with Section
6.2(b) of the Security Agreement and Section 3.8 of the Indenture.
The Company hereby certifies that its representations and warranties
in the Security Agreement are true on the date hereof and will be true on the
Disbursement Date, and that no Event of Default has occurred and is continuing
on the date hereof.
The Company further certifies that:
1. The Empress Change of Control Offer will be consummated on the
Disbursement Date.
2. The Company will use all amounts delivered in accordance with
this Request solely to fund the Empress Change of Control Offer.
3. The Empress Merger and the Internal Consolidation (as each term
is defined in the Indenture) have been consummated.
The Company makes the foregoing certifications in accordance with
the Indenture and Security Agreement but acknowledges that you have no
obligation to monitor our use of any funds released in connection herewith.
C-2
<PAGE> 33
The undersigned signatory represents and warrants that [he/she] is
authorized to execute this Request on the Company's behalf and that to the best
of [his/her] knowledge, all of the Company's certifications herein are true and
correct.
Very truly yours,
HORSESHOE GAMING HOLDING
CORP.
By:
--------------------
Name:
Title:
Wire Instructions:
[to come]
C-3
<PAGE> 1
Exhibit 10.6
GUARANTEE
This GUARANTEE, dated as of May 11, 1999 (this "Guarantee"), is
executed by Robinson Property Group, Limited Partnership, a Mississippi limited
partnership (the "Guarantor") for the benefit of Horseshoe Gaming Holding Corp.,
a Delaware corporation (the "Company").
RECITALS:
WHEREAS, Horseshoe Gaming, L.L.C., a Delaware limited liability
company ("Horseshoe Gaming"), has executed a promissory note, of even date
herewith (the "Note"), in the principal amount of $240,349,125 to the order of
the Company; and
WHEREAS, Horseshoe Gaming has agreed to cause the Guarantor to
deliver a guarantee of its obligations under the Note pursuant to and in
accordance with this Guarantee.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor hereby irrevocably and unconditionally guarantees:
(a) the full and prompt payment when due (whether at maturity,
by optional or mandatory prepayment, upon acceleration or otherwise) of the
principal and interest payable on the Note;
(b) the payment of all other obligations and indebtedness
(including, without limitation, all obligations which, but for the automatic
stay under Section 362(a) of the Bankruptcy Code and the operation of Sections
502(b) and 506(b) of the Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506 (b),
would become due) of Horseshoe Gaming now existing or hereafter incurred under,
arising out of, or in connection with the Note;
(c) the due performance and compliance by Horseshoe Gaming
with all of the terms, conditions and agreements contained in the Note; and
(d) all renewals, extensions, amendments and changes of, or
substitutions or replacements for, all or any part of the foregoing (all such
principal, interest, obligations, indebtedness, performance, compliance and
payments, collectively, the "Guaranteed Obligations").
<PAGE> 2
All payments by the Guarantor under this Guarantee shall be made on
the same basis as payments by Horseshoe Gaming under the Note.
This guarantee is a primary obligation of the Guarantor and is a
guarantee of payment, and not merely of collection.
2. The Company may, at any time and from time to time, without the
consent of, or notice to, the Guarantor, without incurring responsibility to the
Guarantor and without impairing or releasing the obligations of the Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter the Guaranteed
Obligations, or any liability incurred directly or indirectly in respect
thereof, and the guarantee herein made shall apply to the Guaranteed Obligations
as so changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by whomsoever at
any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset there
against;
(c) exercise or refrain from exercising any rights against
Horseshoe Gaming or others, or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations or
any liability (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof, and may subordinate the payment of all or any part
thereof to the payment of any liability (whether due or not) of Horseshoe Gaming
to creditors of Horseshoe Gaming other than the Company and the Guarantor;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of Horseshoe Gaming to the Company regardless of
what liabilities or liabilities of Horseshoe Gaming remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, the Note, or otherwise amend, modify or supplement the Note; or
(g) act or fail to act in any manner referred to in this
Guarantee which may deprive the Guarantor of its right to subrogation against
Horseshoe Gaming to recover full indemnity for any payments made pursuant to
this Guarantee.
2
<PAGE> 3
3. The liability of the Guarantor hereunder is exclusive and
independent of any security for or other guarantee of the indebtedness of
Horseshoe Gaming whether executed by the Guarantor or by any other person or
entity, and the liability of the Guarantor hereunder shall not be affected or
impaired by any circumstance or occurrence whatsoever, including, without
limitation: (a) any direction as to the application of payment by Horseshoe
Gaming or any other person or entity; (b) any other continuing or other
guarantee, undertaking or maximum liability of the Guarantor or of any other
person or entity as to the indebtedness of Horseshoe Gaming; (c) any payment on
or in reduction of any such other guarantee or undertaking; (d) any dissolution,
termination or increase, decrease or change in personnel by Horseshoe Gaming;
(e) any payment made to the Company in respect of the Guaranteed Obligations
which the Company repays to Horseshoe Gaming or the Guarantor pursuant to court
order in any bankruptcy, reorganization, arrangement, moratorium or other debtor
relief proceeding, and the Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding; (f)
any action or inaction by the Company as contemplated by Section 2 hereof; or
(g) any invalidity, irregularity or unenforceability of all or part of the
Guaranteed Obligations. Notwithstanding the foregoing, the Guarantor agrees that
this Guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment (in whole or in part) of the Guaranteed
Obligations is rescinded or must otherwise be restored by the Company, upon the
insolvency, bankruptcy or reorganization of Horseshoe Gaming or otherwise, as
though such payment had not been made.
4. The obligations of the Guarantor hereunder are independent of the
obligations of Horseshoe Gaming, and a separate action or actions may be brought
and prosecuted against the Guarantor whether or not action is brought against
Horseshoe Gaming, and whether or not Horseshoe Gaming be joined in any such
action or actions.
5. The Guarantor represents and warrants to the Company as follows:
(a) The Guarantor (i) is a duly formed and validly existing
limited partnership in good standing under the laws of the jurisdiction of the
State of Mississippi and (ii) has the power and authority to own its property
and assets and to transact the business in which it is engaged.
(b) The Guarantor has the power to execute, deliver and
perform the terms and provisions of this Guarantee and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Guarantee. The Guarantor has duly executed and delivered this Guarantee, and
this Guarantee constitutes the legal, valid and binding obligation of the
Guarantor enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy,
3
<PAGE> 4
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
(c) Neither the execution, delivery or performance by the
Guarantor of this Guarantee, nor compliance by it with the terms and provisions
hereof, (i) will contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien or encumbrance upon any of the property
or assets of the Guarantor pursuant to the terms of any material indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
agreement, contract or instrument to which such Guarantor is a party or by which
it or any of its property or assets is bound or to which it may be subject or
(iii) will violate any provision of the certificate of limited partnership,
partnership agreement or other organizational documents of the Guarantor,
excluding from the foregoing clauses (i) and (ii) such contraventions,
conflicts, breaches or defaults which could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
financial condition of the Guarantor or its ability to perform its obligations
under this Guarantee.
6. This Guarantee is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of the
Company in exercising any right, power or privilege hereunder and no course of
dealing between the Guarantor and the Company shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights, powers and remedies herein
expressly provided are cumulative and not exclusive of any rights, powers or
remedies which the Company would otherwise have. No notice to or demand on the
Guarantor in any case shall entitle the Guarantor to any other further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the Company to any other or further action in any circumstances without notice
or demand.
7. This Guarantee shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Company and its
permitted successors and assigns.
8. This Guarantee will terminate automatically upon the payment in
full of the principal of and interest on the Note. Neither this Guarantee nor
any provision hereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination shall be in a writing signed by
the Company.
4
<PAGE> 5
9. Notices given pursuant to any provision of this Agreement shall
be deemed given when received and shall be addressed as follows: (i) if to the
Company to Horseshoe Gaming Holding Corp., 4024 S. Industrial Road, Las Vegas,
Nevada 89103, with a copy to Swidler Berlin Shereff Friedman, LLP, 919 Third
Avenue, 20th Floor, New York, New York 10022, Attention: Robert M. Friedman,
Esq. and (ii) if to the Guarantor, c/o Horseshoe Gaming Holding Corp., 4024 S.
Industrial Road, Las Vegas, Nevada 89103, with a copy to Swidler Berlin Shereff
Friedman, LLP, 919 Third Avenue, 20th Floor, New York, New York 10022,
Attention: Robert M. Friedman, Esq., or in any case to such other address as the
person to be notified may have requested in writing.
10. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Horseshoe Gaming or others
(including the Guarantor), with respect to the Guaranteed Obligations shall, if
the statute of limitations in favor of the Guarantor against the Company shall
have commenced to run, toll the running of such statute of limitations, and if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
11. The Guarantor confirms that neither the guarantee by the
Guarantor pursuant to this Guarantee nor any liability or payment by it
hereunder shall (i) render the Guarantor "insolvent," or (ii) constitute a
fraudulent transfer or conveyance, or (iii) constitute a transaction at an
undervalue or preference, or (iv) give rise to any similar or analogous event,
thing or circumstance, in each case, for purposes of the Bankruptcy Code, the
Uniform Fraudulent Conveyances Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, the Company
and the Guarantor hereby irrevocably agree that the Guaranteed Obligations shall
be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of the Guarantor, result in the Guaranteed
Obligations hereunder neither rendering the Guarantor "insolvent" nor
constituting such fraudulent transfer or conveyance, such transaction at an
undervalue or preference or such other event, thing or circumstance, in each
case, under any such law.
12. This Guarantee and the rights and obligations of the Company and
the Guarantor hereunder shall be construed in accordance with and governed by
the law of the State of New York, including without limitation, Section 5-1401
of The New York General Obligations Law.
13. The Guarantor hereby:
(a) waives any right to require the Company to proceed against
Horseshoe Gaming or any other party, or pursue any other remedy in the Company'
power whatsoever;
5
<PAGE> 6
(b) waives any defense based on or arising out of any defense
of Horseshoe Gaming or any other party other than payment in full of the
Guaranteed Obligations, including, without limitation, any defense based on or
arising out of the disability of Horseshoe Gaming or any other party, the
absence of any other party in any proceeding or the unenforceability of the
Guaranteed Obligations or any part thereof from any cause, or the cessation from
any cause of the liability of Horseshoe Gaming other than payment in full of the
Guaranteed Obligations;
(c) agrees that the Company may, at its election, exercise any
right or remedy the Company may have against Horseshoe Gaming or any other
party, without affecting or impairing in any way the liability of the Guarantor
hereunder, and waives any defense arising out of any such election by the
Company, even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the Guarantor against
Horseshoe Gaming or any other party;
(d) waives all presentments, demands for performance, protests
and notices, including, without limitation, notices of nonperformance, notices
of protest, notices of dishonor, notices of acceptance of this Guarantee, and
notices of the existence, creation or incurring of new or additional
indebtedness;
(e) assumes all responsibility for being and keeping itself
informed of the financial condition and assets of Horseshoe Gaming, and of all
other circumstances bearing upon the risk of non-payment of the Guaranteed
Obligations and the nature, scope and extent of the risks the Guarantor assumes
and incurs hereunder, and agrees that the Company shall have no duty to advise
the Guarantor of information known to it regarding such circumstances or risks;
(f) so long as the Guaranteed Obligations remain unpaid, the
Guarantor hereby agrees that it will not claim and hereby irrevocably waives for
such period all rights of subrogation it may at any time otherwise have as a
result of this Guarantee (whether contractual, under Section 509 of the United
States Bankruptcy Code, or otherwise) to the claims of the Company against
Horseshoe Gaming; and
(g) waives all claims (as such term is defined in the United
States Bankruptcy Code) it may at any time otherwise have against Horseshoe
Gaming arising from any transaction whatsoever, including without limitation,
its right to assert or enforce any such claims.
The Guarantor acknowledges that it will receive substantial direct
and indirect benefits from this Guarantee, the Note and the transactions
contemplated in connection therewith and the waivers set forth herein are
knowingly made in contemplation of such benefits. The Guarantor warrants and
agrees that each of the waivers set forth in this Guarantee is made with full
knowledge of its significance and
6
<PAGE> 7
consequences and that if any of such waivers are determined to be contrary to
any applicable law or public policy, such waivers shall be effective only to the
maximum extent permitted by law.
14. Any rights of the Guarantor, whether now existing or later
arising, to receive payment on account of any indebtedness (including interest)
owed to it by Horseshoe Gaming or to receive any payment from Horseshoe Gaming
shall at all times be subordinate as to lien and time of payment and in all
other respects to the full and prior repayment of the Guaranteed Obligations.
The Guarantor shall not be entitled to enforce or receive payment of any sums
hereby subordinated until the Guaranteed Obligations have been paid and
performed in full and any such sums received in violation of this Guarantee
shall be received by the Guarantor in trust for the Company.
15. The Guarantor hereby consents to the Company's pledge of this
Guarantee and the other Pledged Collateral (under and as defined in that certain
Horseshoe Note Pledge and Security Agreement, of even date herewith (the "Pledge
Agreement"), among the Company, Horseshoe Gaming and U.S. Trust Company,
National Association, as trustee (the "Trustee") under the Indenture, of even
date herewith, between the Company and the Trustee relating to the Company's
85/8% Senior Subordinated Notes due 2009) to the Trustee and to all other terms
of the Pledge Agreement. Notwithstanding the terms of this Guarantee or any
other agreement or any instructions from the Company or any other entity to the
contrary, the Guarantor agrees to make all payments that become due under this
Guarantee to the Trustee (1) if the Trustee delivers written notice to the
Guarantor that an Event of Default (as defined in the Indenture) has occurred
and is continuing and (2) on and after the Maturity Date (as defined in the
Note). Once the Guarantor becomes obligated to make payments hereunder to the
Trustee, it shall remain so obligated until otherwise instructed by the Trustee.
The Guarantor shall not enter into any agreement with any other Person that is
inconsistent with its obligations under this paragraph 15. The Guarantor
acknowledges that no amendment, modification, or waiver of any provision of this
Guarantee will be valid without the Trustee's prior written consent.
7
<PAGE> 8
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be
executed and delivered as of the date first above written.
GUARANTOR:
ROBINSON PROPERTY GROUP,
LIMITED PARTNERSHIP
By: Horseshoe GP, Inc.,
its General Partner
By: /s/ Kirk C. Saylor
----------------------------------
Name: Kirk C. Saylor
Title: Chief Financial Officer and
Treasurer
<PAGE> 1
Exhibit 10.7
GUARANTEE
This GUARANTEE, dated as of May 11, 1999 (this "Guarantee"), is
executed by Horseshoe Entertainment, a Louisiana limited partnership (the
"Guarantor") for the benefit of Horseshoe Gaming Holding Corp., a Delaware
corporation (the "Company").
RECITALS:
WHEREAS, Horseshoe Gaming, L.L.C., a Delaware limited liability
company ("Horseshoe Gaming"), has executed a promissory note, of even date
herewith (the "Note"), in the principal amount of $240,349,125 to the order of
the Company; and
WHEREAS, Horseshoe Gaming has agreed to cause the Guarantor to
deliver a guarantee of its obligations under the Note pursuant to and in
accordance with this Guarantee.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor hereby irrevocably and unconditionally guarantees:
(a) the full and prompt payment when due (whether at maturity,
by optional or mandatory prepayment, upon acceleration or otherwise) of the
principal and interest payable on the Note;
(b) the payment of all other obligations and indebtedness
(including, without limitation, all obligations which, but for the automatic
stay under Section 362(a) of the Bankruptcy Code and the operation of Sections
502(b) and 506(b) of the Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506 (b),
would become due) of Horseshoe Gaming now existing or hereafter incurred under,
arising out of, or in connection with the Note;
(c) the due performance and compliance by Horseshoe Gaming
with all of the terms, conditions and agreements contained in the Note; and
(d) all renewals, extensions, amendments and changes of, or
substitutions or replacements for, all or any part of the foregoing (all such
principal,
<PAGE> 2
interest, obligations, indebtedness, performance, compliance and payments,
collectively, the "Guaranteed Obligations").
All payments by the Guarantor under this Guarantee shall be made on
the same basis as payments by Horseshoe Gaming under the Note.
This guarantee is a primary obligation of the Guarantor and is a
guarantee of payment, and not merely of collection.
2. The Company may, at any time and from time to time, without the
consent of, or notice to, the Guarantor, without incurring responsibility to the
Guarantor and without impairing or releasing the obligations of the Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter the Guaranteed
Obligations, or any liability incurred directly or indirectly in respect
thereof, and the guarantee herein made shall apply to the Guaranteed Obligations
as so changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by whomsoever at
any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset there
against;
(c) exercise or refrain from exercising any rights against
Horseshoe Gaming or others, or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations or
any liability (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof, and may subordinate the payment of all or any part
thereof to the payment of any liability (whether due or not) of Horseshoe Gaming
to creditors of Horseshoe Gaming other than the Company and the Guarantor;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of Horseshoe Gaming to the Company regardless of
what liabilities or liabilities of Horseshoe Gaming remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, the Note, or otherwise amend, modify or supplement the Note; or
2
<PAGE> 3
(g) act or fail to act in any manner referred to in this
Guarantee which may deprive the Guarantor of its right to subrogation against
Horseshoe Gaming to recover full indemnity for any payments made pursuant to
this Guarantee.
3. The liability of the Guarantor hereunder is exclusive and
independent of any security for or other guarantee of the indebtedness of
Horseshoe Gaming whether executed by the Guarantor or by any other person or
entity, and the liability of the Guarantor hereunder shall not be affected or
impaired by any circumstance or occurrence whatsoever, including, without
limitation: (a) any direction as to the application of payment by Horseshoe
Gaming or any other person or entity; (b) any other continuing or other
guarantee, undertaking or maximum liability of the Guarantor or of any other
person or entity as to the indebtedness of Horseshoe Gaming; (c) any payment on
or in reduction of any such other guarantee or undertaking; (d) any dissolution,
termination or increase, decrease or change in personnel by Horseshoe Gaming;
(e) any payment made to the Company in respect of the Guaranteed Obligations
which the Company repays to Horseshoe Gaming or the Guarantor pursuant to court
order in any bankruptcy, reorganization, arrangement, moratorium or other debtor
relief proceeding, and the Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding; (f)
any action or inaction by the Company as contemplated by Section 2 hereof; or
(g) any invalidity, irregularity or unenforceability of all or part of the
Guaranteed Obligations. Notwithstanding the foregoing, the Guarantor agrees that
this Guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment (in whole or in part) of the Guaranteed
Obligations is rescinded or must otherwise be restored by the Company, upon the
insolvency, bankruptcy or reorganization of Horseshoe Gaming or otherwise, as
though such payment had not been made.
4. The obligations of the Guarantor hereunder are independent of the
obligations of Horseshoe Gaming, and a separate action or actions may be brought
and prosecuted against the Guarantor whether or not action is brought against
Horseshoe Gaming, and whether or not Horseshoe Gaming be joined in any such
action or actions.
5. The Guarantor represents and warrants to the Company as follows:
(a) The Guarantor (i) is a duly formed and validly existing
limited partnership in good standing under the laws of the jurisdiction of the
State of Mississippi and (ii) has the power and authority to own its property
and assets and to transact the business in which it is engaged.
3
<PAGE> 4
(b) The Guarantor has the power to execute, deliver and
perform the terms and provisions of this Guarantee and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Guarantee. The Guarantor has duly executed and delivered this Guarantee, and
this Guarantee constitutes the legal, valid and binding obligation of the
Guarantor enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and by general equitable
principles (regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law).
(c) Neither the execution, delivery or performance by the
Guarantor of this Guarantee, nor compliance by it with the terms and provisions
hereof, (i) will contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien or encumbrance upon any of the property
or assets of the Guarantor pursuant to the terms of any material indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
agreement, contract or instrument to which such Guarantor is a party or by which
it or any of its property or assets is bound or to which it may be subject or
(iii) will violate any provision of the certificate of limited partnership,
partnership agreement or other organizational documents of the Guarantor,
excluding from the foregoing clauses (i) and (ii) such contraventions,
conflicts, breaches or defaults which could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
financial condition of the Guarantor or its ability to perform its obligations
under this Guarantee.
6. This Guarantee is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of the
Company in exercising any right, power or privilege hereunder and no course of
dealing between the Guarantor and the Company shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights, powers and remedies herein
expressly provided are cumulative and not exclusive of any rights, powers or
remedies which the Company would otherwise have. No notice to or demand on the
Guarantor in any case shall entitle the Guarantor to any other further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the Company to any other or further action in any circumstances without notice
or demand.
4
<PAGE> 5
7. This Guarantee shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Company and its
permitted successors and assigns.
8. This Guarantee will terminate automatically upon the payment in
full of the principal of and interest on the Note. Neither this Guarantee nor
any provision hereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination shall be in a writing signed by
the Company.
9. Notices given pursuant to any provision of this Agreement shall
be deemed given when received and shall be addressed as follows: (i) if to the
Company to Horseshoe Gaming Holding Corp., 4024 S. Industrial Road, Las Vegas,
Nevada 89103, with a copy to Swidler Berlin Shereff Friedman, LLP, 919 Third
Avenue, 20th Floor, New York, New York 10022, Attention: Robert M. Friedman,
Esq. and (ii) if to the Guarantor, c/o Horseshoe Gaming Holding Corp., 4024 S.
Industrial Road, Las Vegas, Nevada 89103, with a copy to Swidler Berlin Shereff
Friedman, LLP, 919 Third Avenue, 20th Floor, New York, New York 10022,
Attention: Robert M. Friedman, Esq., or in any case to such other address as the
person to be notified may have requested in writing.
10. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Horseshoe Gaming or others
(including the Guarantor), with respect to the Guaranteed Obligations shall, if
the statute of limitations in favor of the Guarantor against the Company shall
have commenced to run, toll the running of such statute of limitations, and if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
11. The Guarantor confirms that neither the guarantee by the
Guarantor pursuant to this Guarantee nor any liability or payment by it
hereunder shall (i) render the Guarantor "insolvent," or (ii) constitute a
fraudulent transfer or conveyance, or (iii) constitute a transaction at an
undervalue or preference, or (iv) give rise to any similar or analogous event,
thing or circumstance, in each case, for purposes of the Bankruptcy Code, the
Uniform Fraudulent Conveyances Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, the Company
and the Guarantor hereby irrevocably agree that the Guaranteed Obligations shall
be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of the Guarantor, result in the Guaranteed
Obligations hereunder neither rendering the Guarantor "insolvent" nor
constituting such fraudulent transfer or conveyance, such transaction at an
undervalue or preference or such other event, thing or circumstance, in each
case, under any such law.
12. This Guarantee and the rights and obligations of the Company and
the Guarantor hereunder shall be construed in accordance with and governed by
the
5
<PAGE> 6
law of the State of New York, including without limitation, Section 5-1401 of
The New York General Obligations Law.
13. The Guarantor hereby:
(a) waives any right to require the Company to proceed against
Horseshoe Gaming or any other party, or pursue any other remedy in the Company'
power whatsoever;
(b) waives any defense based on or arising out of any defense
of Horseshoe Gaming or any other party other than payment in full of the
Guaranteed Obligations, including, without limitation, any defense based on or
arising out of the disability of Horseshoe Gaming or any other party, the
absence of any other party in any proceeding or the unenforceability of the
Guaranteed Obligations or any part thereof from any cause, or the cessation from
any cause of the liability of Horseshoe Gaming other than payment in full of the
Guaranteed Obligations;
(c) agrees that the Company may, at its election, exercise any
right or remedy the Company may have against Horseshoe Gaming or any other
party, without affecting or impairing in any way the liability of the Guarantor
hereunder, and waives any defense arising out of any such election by the
Company, even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the Guarantor against
Horseshoe Gaming or any other party;
(d) waives all presentments, demands for performance, protests
and notices, including, without limitation, notices of nonperformance, notices
of protest, notices of dishonor, notices of acceptance of this Guarantee, and
notices of the existence, creation or incurring of new or additional
indebtedness;
(e) assumes all responsibility for being and keeping itself
informed of the financial condition and assets of Horseshoe Gaming, and of all
other circumstances bearing upon the risk of non-payment of the Guaranteed
Obligations and the nature, scope and extent of the risks the Guarantor assumes
and incurs hereunder, and agrees that the Company shall have no duty to advise
the Guarantor of information known to it regarding such circumstances or risks;
(f) so long as the Guaranteed Obligations remain unpaid, the
Guarantor hereby agrees that it will not claim and hereby irrevocably waives for
such period all rights of subrogation it may at any time otherwise have as a
result of this Guarantee (whether contractual, under Section 509 of the United
States Bankruptcy Code, or otherwise) to the claims of the Company against
Horseshoe Gaming; and
6
<PAGE> 7
(g) waives all claims (as such term is defined in the United
States Bankruptcy Code) it may at any time otherwise have against Horseshoe
Gaming arising from any transaction whatsoever, including without limitation,
its right to assert or enforce any such claims.
The Guarantor acknowledges that it will receive substantial direct
and indirect benefits from this Guarantee, the Note and the transactions
contemplated in connection therewith and the waivers set forth herein are
knowingly made in contemplation of such benefits. The Guarantor warrants and
agrees that each of the waivers set forth in this Guarantee is made with full
knowledge of its significance and consequences and that if any of such waivers
are determined to be contrary to any applicable law or public policy, such
waivers shall be effective only to the maximum extent permitted by law.
14. Any rights of the Guarantor, whether now existing or later
arising, to receive payment on account of any indebtedness (including interest)
owed to it by Horseshoe Gaming or to receive any payment from Horseshoe Gaming
shall at all times be subordinate as to lien and time of payment and in all
other respects to the full and prior repayment of the Guaranteed Obligations.
The Guarantor shall not be entitled to enforce or receive payment of any sums
hereby subordinated until the Guaranteed Obligations have been paid and
performed in full and any such sums received in violation of this Guarantee
shall be received by the Guarantor in trust for the Company.
15. The Guarantor hereby consents to the Company's pledge of this
Guarantee and the other Pledged Collateral (under and as defined in that certain
Horseshoe Note Pledge and Security Agreement, of even date herewith (the "Pledge
Agreement"), among the Company, Horseshoe Gaming and U.S. Trust Company,
National Association, as trustee (the "Trustee") under the Indenture, of even
date herewith, between the Company and the Trustee relating to the Company's
8 5/8% Senior Subordinated Notes due 2009) to the Trustee and to all other terms
of the Pledge Agreement. Notwithstanding the terms of this Guarantee or any
other agreement or any instructions from the Company or any other entity to the
contrary, the Guarantor agrees to make all payments that become due under this
Guarantee to the Trustee (1) if the Trustee delivers written notice to the
Guarantor that an Event of Default (as defined in the Indenture) has occurred
and is continuing and (2) on and after the Maturity Date (as defined in the
Note). Once the Guarantor becomes obligated to make payments hereunder to the
Trustee, it shall remain so obligated until otherwise instructed by the Trustee.
The Guarantor shall not enter into any agreement with any other Person that is
inconsistent with its obligations under this paragraph 15. The Guarantor
acknowledges that no amendment, modification, or waiver of any provision of this
Guarantee will be valid without the Trustee's prior written consent.
7
<PAGE> 8
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be
executed and delivered as of the date first above written.
GUARANTOR:
HORSESHOE ENTERTAINMENT
By: New Gaming Capital Partnership,
its General Partner
By: Horseshoe GP, Inc.,
its General Partner
By: /s/ Kirk C. Saylor
----------------------------------
Name: Kirk C. Saylor
Title: Chief Financial Officer and
Treasurer
<PAGE> 1
Exhibit 10.8
STOCKHOLDERS' AGREEMENT
FOR
HORSESHOE GAMING HOLDING CORP.
STOCKHOLDERS' AGREEMENT, dated as of April 29, 1999 (this "Agreement"), by
and among (i) Horseshoe Gaming Holding Corp., a Delaware corporation (the
"Corporation"), (ii) the stockholders of the Corporation listed on Annex A
hereto (the "Initial Stockholders"), and (iii) each such additional Person that
may hereafter hold Shares and assume the status of "Stockholder" hereunder by
executing a counterpart hereof (such Persons, together with the Initial
Stockholders, are referred to herein collectively as the "Stockholders," and
each individually as a "Stockholder"). Capitalized terms used herein are defined
in Section 1.2 hereof.
W I T N E S S E T H :
WHEREAS, the Corporation and the Initial Stockholders, among others, are
parties to that certain Subscription and Reorganization Agreement dated as of
April 29, 1999 (the "Subscription Agreement"), pursuant to which (i) certain
members of Horseshoe Gaming, L.L.C., a Delaware limited liability company
("Horseshoe LLC"), will contribute all of the units of membership interest they
hold in Horseshoe LLC solely in exchange for the issuance and transfer by the
Corporation to such persons or trusts of shares of Class A Common Stock of the
Corporation, par value $0.01 per share (the "Class A Common"), or Class B Common
Stock of the Corporation, par value $0.01 per share (the "Class B Common"), as
specified therein, (ii) the stockholders of Horseshoe Gaming, Inc., a Nevada
corporation ("HGI"), will contribute all of the shares of common stock of HGI
that they own solely in exchange for the issuance and transfer by the
Corporation to such persons of shares of Class A Common or Class B Common, as
specified therein and (iii) Robinson Property Group, Inc., a Nevada corporation
("RPGI"), will merge with and into the Corporation, and the sole stockholder of
RPGI will exchange all of her shares of common stock of RPGI solely in exchange
for the issuance and transfer by the Corporation to such person of shares of
Class A Common;
WHEREAS, it is a condition precedent to the Closing of the transactions
contemplated by the Subscription Agreement that the parties to this Agreement
execute and deliver this Agreement at such Closing;
WHEREAS, as of the Closing, each Initial Stockholder Beneficially Owns the
number and class of shares of Common Stock set forth opposite such Stockholder's
name on Annex A hereto (such Stockholder's "Initial Shares"); and
WHEREAS, the Corporation and the Stockholders desire to (a) establish the
composition of the Corporation's Board of Directors, (b) assure continuity in
the ownership and management of the Corporation, (c) provide for the future
transfer of Shares, (d) preserve the Corporation's status as an S corporation
for income tax purposes and (e) establish certain other rights and procedures as
hereinafter specified.
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NOW, THEREFORE, in consideration of the promises made herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
EFFECTIVE DATE; DEFINITIONS
1.1 Effective Date of Agreement. This Agreement shall become effective on
the date and at the time that the Closing occurs.
1.2 Definitions. Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Subscription Agreement. Whenever
used in this Agreement, the following capitalized terms shall have the meanings
set forth below:
"Accounting Year" means, and shall refer to, the accounting year of the
Corporation, ending December 31 of each year.
"Affiliate" means, with respect to any specified Person: (i) any Person
who directly or indirectly through one or more intermediaries controls or
is controlled by or is under common control with the specified Person;
(ii) any Person who is an officer, director, employee, partner, agent or
trustee of, or who serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, director,
employee, partner, agent or trustee, or with respect to which the
specified Person serves in a similar capacity; (iii) any Person who,
directly or indirectly, is the beneficial owner of, or controls, any
equity securities of, or otherwise has a beneficial interest in, the
specified Person or of which the specified Person is directly or
indirectly the owner of any equity securities (other than publicly held
securities) or in which the specified Person has a beneficial interest;
and (iv) any member of the Immediate Family of the specified Person.
"Agreement" has the meaning given to such term in the preface to this
Agreement and shall include any amendments made in the manner described
herein.
"Applicable Capital Gain Tax Rate" in respect of each of the Corporation
or any Subsidiary shall mean for each such entity calculated separately,
an amount equal to the sum of (i) the highest marginal Federal capital
gain tax rate applicable to any Stockholder plus (ii) an amount equal to
the sum of the highest marginal state and local capital gain tax rates
applicable to any Stockholder, multiplied by a factor equal to 1 minus
such highest marginal Federal capital gain tax rate.
"Applicable Income Tax Rate" in respect of the Corporation or any
Subsidiary shall mean for each such entity calculated separately, an
amount equal to the sum of (i) the highest marginal Federal income tax
rate applicable to any Stockholder plus (ii) an amount equal to
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the sum of the highest marginal state and local income tax rates
applicable to any Stockholder, multiplied by a factor equal to 1 minus
such highest marginal Federal income tax rate.
"Authority" means any applicable authority that is a public body and
politic created by a state in which the Corporation or any Subsidiary are
conducting or seeking to conduct their respective Businesses and that is
authorized to regulate gaming business or food or liquor retailing
establishments, or any other agency so authorized. To the extent
applicable, Authority shall also include any other governmental body or
agency having jurisdiction over the operations of the Businesses.
"Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person would
constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act.
"Binion" means Jack B. Binion.
"Binion Holder" means any holder of Binion Shares.
"Binion Shares" means (a) the Initial Shares issued to Binion, (b) Shares
hereafter acquired by Binion and (c) any securities of the Corporation
issued with respect to the securities referred to in clauses (a) or (b)
above by way of a payment-in-kind, stock dividend, or stock split or in
connection with a combination of shares, exchange, conversion,
recapitalization, merger, consolidation or other reorganization. Any
Shares or securities referred to in (a) through (c) of the immediately
preceding sentence shall continue to be Binion Shares as a result of a
Transfer thereof by Binion, but shall cease to be Binion Shares if they
are redeemed by the Corporation or retired as treasury shares.
"Board" means the Board of Directors of the Corporation.
"Businesses" means the acquisition, development, operation, management,
financing and maintenance by the Corporation or any Subsidiaries of (a)
any gaming business, including without limitation the facilities that
comprise gaming businesses and any and all facilities related to, and
compatible with, such gaming businesses, and (b) any other business owned
or operated by the Corporation or any Subsidiary.
"Change of Control" means a Transfer of Shares that would result in the
transferee of such Shares (which did not, immediately prior to the
Transfer, hold Shares representing more than fifty percent of the votes
entitled to be cast at a meeting of the stockholders of the
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Corporation) Beneficially Owning Shares representing more than fifty
percent of the votes entitled to be cast at a meeting of the stockholders
of the Corporation immediately following the consummation of such
Transfer.
"Class A Common" has the meaning given to such term in the recitals to
this Agreement.
"Class B Common" has the meaning given to such term in the recitals to
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Common Stock" means collectively the Class A Common, the Class B Common
and any other class or series of authorized capital stock of the
Corporation which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation.
"Corporation" has the meaning given to such term in the preface to this
Agreement.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended, or any successor statute thereto.
"Empress Merger" means the acquisition by the Corporation of all of the
outstanding shares of common stock of each of Empress Casino Joliet
Corporation and Empress Casino Hammond Corporation pursuant to the Empress
Merger Agreement.
"Empress Merger Agreement" means that certain Agreement and Plan of Merger
by and between Horseshoe LLC and Empress Entertainment, dated as of
September 2, 1998.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute thereto.
"Flow Through Entity" means an entity which (x) for Federal income tax
purposes constitutes (i) an S corporation, (ii) a "qualified subchapter S
subsidiary" (as defined in Section 1361(b)(3)(B) of the Code), (iii) a
"partnership" (within the meaning of Section 7701(a)(2) of the Code) other
than a "publicly traded partnership" (as defined in Section 7704 of the
Code), or (iv) a business entity which is disregarded as an entity
separate from its owner under the Code, the Treasury Regulations or any
published administrative guidance of the Internal Revenue Service and (y)
for state and local jurisdictions in respect of which Permitted Tax
Distributions are being made, is subject to substantially similar "flow
through" treatment under the applicable state or local income tax law.
"HGI" has the meaning given to such term in the recitals to this
Agreement.
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"Horseshoe LLC" has the meaning given to such term in the recitals to this
Agreement.
"Immediate Family" of a specified individual means the husband, wife,
children, parents, brothers, sisters, direct lineal ancestors and
descendants, nieces, nephews, aunts and uncles of such specified
individual; and with respect to Binion, such term shall also include
Phyllis M. Cope and any member of her Immediate Family.
"Initial Shares" has the meaning given to such term in the recitals to
this Agreement.
"Initial Stockholders" has the meaning given to such term in the preface
to this Agreement.
"Licenses" means all licenses and permits required to operate any of the
Businesses including, but not limited to, gaming licenses and liquor
licenses.
"Loan" means any commercial or private party loan from an entity that may
or may not be a Stockholder or an Affiliate of a Stockholder or a
Subsidiary, including from an officer or director of the Corporation or
any of its Subsidiaries or Affiliates, the proceeds of which loan,
directly or through a loan or contribution of such proceeds to a
Subsidiary, will be used to finance the development or operation of, or
improvements to, the Properties and the Businesses.
"Majority Binion Holders" has the meaning given to such term in Section
3.5(a).
"Permitted Tax Distributions" in respect of the Corporation and each
Subsidiary that qualifies as a Flow Through Entity shall mean, with
respect to any taxable year, the sum of: (I) the product of (A) the excess
of (i) all items of taxable income or gain (other than capital gain)
allocated by the Corporation and each such Subsidiary to the Stockholders
for that year over (ii) all items of taxable deduction or loss (other than
capital loss) allocated to such Stockholders by the Corporation and each
such Subsidiary, respectively, for such year and (B) the Applicable Income
Tax Rate, plus (II) the product of (A) the net capital gain (i.e., net
long-term capital gain over net short-term capital loss), if any,
allocated by the Corporation and each such Subsidiary to the Stockholders
for such year and (B) the Applicable Capital Gain Tax Rate, plus (III)
taking into account the Corporation's and each such Subsidiary's capital
gain and loss, respectively, the product of (A) the net short-term capital
gain (i.e., net short-term capital gain in excess of net long-term capital
loss), if any, allocated by the Corporation and each such Subsidiary to
the Stockholders for such year and (B) the Applicable Income Tax Rate,
minus (IV) the aggregate Tax Loss Benefit Amounts for the Corporation and
each such Subsidiary, respectively, for such year. For purposes of
calculating the amount of the Permitted Tax Distributions, the
proportionate part of the items of taxable income, gain, deduction or loss
(including capital gain or loss) of any Subsidiary which is a Flow Through
Entity shall be included in determining the Corporation's taxable income,
gain, deduction or loss (including capital gain or loss).
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"Person" means an individual, corporation, limited liability company,
partnership, joint venture, joint stock company, association, trust,
business trust, unincorporated organization or other entity.
"Properties" means the parcels of real property on which the Businesses
are or will be operated.
"Proxies" has the meaning given to such term in Section 4.1.
"Quarterly Distribution Date" has the meaning given to such term in
Section 6.1.
"Qualifying S Corporation Shareholder" shall mean a Person (and if the
Person is an individual and has a spouse having a community property
interest in any Shares or in the income therefrom, such Person together
with such Person's spouse) who is described in Section 1361(b)(1)(B) of
the Code because such person (and such spouse) at the time of reference
is:
(i) an individual who is not a nonresident alien (as defined
in Section 7701(b)(1)(B) of the Code);
(ii) a grantor trust described in Section 1361(c)(2)(A)(i) of
the Code (other than by virtue of Section 1361(d) of the
Code);
(iii) an electing small business trust which is described in
Sections 1361(c)(2)(A)(v) and 1361(e) of the Code; or
(iv) a qualified subchapter S trust treated as a trust
described in Section 1361(c)(2)(A)(i) of the Code by
reason of Section 1361(d) of the Code and of which,
except as permitted by Treas. Reg. Section
1.1361(j)(2)(i), there is currently only one income
beneficiary and such beneficiary is a citizen or
resident of the United States.
"RPGI" has the meaning given to such term in the recitals to this
Agreement.
"S corporation" has the meaning given to such term in Section 1361(a) of
the Code.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute thereto.
"Selling Stockholder" has the meaning given to such term in Section
5.2(a).
"Shares" means all shares of Common Stock now or hereafter issued and
outstanding.
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"State Acts" shall mean any state securities or blue sky laws and
regulations applicable to the Transfer of Shares.
"Stockholder" and "Stockholders" have the meanings given to such terms in
the preface to this Agreement.
"Subscription Agreement" has the meaning given to such term in the
recitals to this Agreement.
"Subsidiary or Subsidiaries" shall mean, individually or collectively,
Empress Casino Joliet Corporation, Empress Casino Hammond Corporation,
Robinson Property Group, Limited Partnership, a Mississippi limited
partnership, Horseshoe Entertainment L.P., a Louisiana limited
partnership, and any other casino gambling operation or other business
compatible therewith in which, or through which, the Corporation holds any
direct or indirect equity or ownership interest in any Businesses.
"Tax Loss Benefit Amount" as to the Corporation's or any Subsidiary's
taxable years shall mean the amount by which the Permitted Tax
Distributions would be reduced were a net operating loss or net capital
loss from a prior taxable year of such entity beginning on or after the
Closing and ending prior to the taxable year of reference carried forward
to the applicable taxable year; provided, that for such purpose the amount
of any such net operating loss or net capital loss shall be utilized only
once and in each case shall be carried forward to the next succeeding
taxable year until so utilized.
"Transfer" means to transfer, sell, exchange, gift, bequest, hypothecate,
pledge, grant any security interest in or otherwise dispose of or encumber
any share of Common Stock, or enter into any agreement to do so (including
any agreement that creates or grants an option, warrant, or right to
obtain an interest), whether voluntarily or by operation of law, which in
any case would change or transfer the legal or beneficial ownership of, or
any legal or beneficial ownership interest in, any share of Common Stock
(including, without limitation, any transaction that creates a form of
joint ownership in any share of Common Stock between the transferor and
one or more Persons).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants that this Agreement has been duly authorized,
executed and delivered by the Corporation and constitutes the valid and binding
obligation of the Corporation, enforceable against the Corporation in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium or assignment
for the
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benefit of creditors laws and other laws affecting the rights and remedies of
creditors generally, including without limitation laws regarding fraudulent
transfers, fraudulent conveyances, preferences, avoidance and automatic stay.
2.2 Representations and Warranties of Each of the Stockholders. Each of
the Stockholders hereby represents and warrants, severally as to itself only,
that at the time such Stockholder becomes a party to this Agreement (and after
giving effect to the transactions to be consummated at the Closing):
(a) Ownership of Initial Shares. Such Stockholder is the sole record
owner and Beneficial Owner of the number and class of Shares set forth opposite
its name on Annex A attached hereto, free and clear of all liens, claims and
encumbrances, and the number and class of Shares set forth opposite such
Stockholder's name on Annex A hereto constitute all of the Shares owned of
record or Beneficially Owned by such Stockholder. Such Stockholder has sole
voting power and sole power to issue instructions with respect to the matters
set forth in Sections 3.7, 3.8 and 4.1 hereof, sole power of disposition, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares set forth opposite such Stockholder's name on Annex
A hereto, with no limitations, qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Such Stockholder has the legal
capacity (if such Stockholder is an individual), power and authority to enter
into and perform all of such Stockholder's obligations under this Agreement. The
execution, delivery and performance of this Agreement by such Stockholder will
not violate any other agreement to which such Stockholder is a party including,
without limitation, any voting agreement, stockholder agreement or voting trust.
This Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium or assignment for the benefit of
creditors laws and other laws affecting the rights and remedies of creditors
generally, including without limitation laws regarding fraudulent transfers,
fraudulent conveyances, preferences, avoidance and automatic stay. There is no
Person (other than such Stockholder's spouse if such Stockholder is married and
such Stockholder's Shares constitute community property) whose consent is
required for the execution and delivery of this Agreement or the consummation by
such Stockholder of the transactions contemplated hereby. If such Stockholder is
married and such Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, such Stockholder's spouse, enforceable against
such Person in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium or assignment for the benefit of creditors laws and other laws
affecting the rights and remedies of creditors generally, including without
limitation laws regarding fraudulent transfers, fraudulent conveyances,
preferences, avoidance and automatic stay.
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(c) No Conflicts. (A) No filing with, and no permit, authorization,
consent or approval of, any federal, state or local governmental public body or
authority is necessary for the execution of this Agreement by such Stockholder
and the consummation by such Stockholder of the transactions contemplated hereby
and (B) none of the execution and delivery of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby or the compliance by such Stockholder with any of the
provisions hereof will (1) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
such Stockholder is a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound, or (2) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to such
Stockholder or any of such Stockholder's properties or assets.
(d) Reliance by the Corporation. With respect to the Initial
Stockholders, each such Initial Stockholder understands and acknowledges that
the Corporation and each other Initial Stockholder is entering into the
Subscription Agreement in reliance upon such Initial Stockholder's execution and
delivery of this Agreement.
(e) Regulatory Matters. Such Stockholder acknowledges that: (i) the
Corporation and all Stockholders are or will be subject to the licensing and
permit laws of each state in which the Corporation or any Subsidiary is
conducting or seeking to conduct its Businesses; (ii) the Corporation and all
Stockholders are subject to the suitability standards promulgated from time to
time by the Authorities and as such may be found unsuitable to hold Shares in
the Corporation by such Authorities; and (iii) such Stockholder shall and must,
at all times, fully cooperate with the agencies that promulgate these laws,
including, but not limited to, any Authority, in providing in a timely fashion
all information requested.
ARTICLE III
COVENANTS
3.1 S Corporation Status.
In consideration of the Corporation's agreement to make Permitted
Tax Distributions pursuant to Section 6.1, each Initial Stockholder has agreed
in the Subscription Agreement to consent to the election of the Corporation to
be taxed as an S corporation and to do all things necessary or appropriate to
effectuate that election and hereby further covenants and agrees that so long as
an election under Section 1362(a) of the Code is in effect with respect to the
Corporation:
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(a) Such Stockholder shall maintain his, her or its status as a
Qualifying S Corporation Shareholder;
(b) In the case of any Stockholder which is (or becomes) a qualified
subchapter S trust ("QSST") described in Section 1361(c)(2)(A)(i) of the Code by
reason of Section 1361(d) of the Code, such Stockholder agrees and covenants
that all of the income (within the meaning of Treas. Reg. Section 1.643(b)-1) of
the QSST will be distributed currently for each taxable year of the QSST during
which it holds any Shares; and
(c) If the Corporation's status as an S corporation is terminated
inadvertently for any reason whatsoever and a private letter ruling is sought
from the Internal Revenue Service under Section 1362(f) of the Code, each
Stockholder agrees to make any adjustments for the period specified in Section
1362(f) of the Code required by the Internal Revenue Service and approved by the
Board, as may be required for the Corporation to obtain such a favorable private
letter ruling from the Internal Revenue Service.
3.2 Right to Terminate S Corporation Status. If, and only if, the
Corporation fails to make any Permitted Tax Distribution when and as required by
Section 6.1, and such failure continues for thirty (30) days after notice
thereof by any Stockholder to the Corporation and each other Stockholder, the
Corporation shall take such action in order to effectuate the termination of the
S corporation election of the Corporation, including without limitation, filing
the revocation of the election required by Treas. Reg. Sections 1.1362-2(a) and
- -6(a)(3); provided, however, that Stockholders owning shares possessing a
majority of the voting power of the Corporation may, by delivering written
notice to the Corporation, elect to waive such failure (which waiver shall not
relate to any subsequent failures) and not have the Corporation revoke its S
corporation election.
3.3 Repayment of Certain Permitted Tax Distributions.
(a) Promptly after the filing by the Corporation and each Subsidiary
of their respective annual tax return, each Stockholder agrees to reimburse the
Corporation or the applicable Subsidiary, as the case may be, the amount by
which the estimated tax distributions theretofore made to such Stockholder in
respect of the taxable year covered by such annual tax return exceed the
Permitted Tax Distributions for such taxable year determined on the basis of
such tax returns filed in respect of such taxable year for the Corporation or
the applicable Subsidiary, as the case may be.
(b) If the appropriate Federal or state taxing authority finally
determines that the amount of the items of the Corporation's or any Subsidiary's
taxable income, gain, deduction or loss (including capital gain or loss) for any
taxable year or the aggregate Tax Loss Benefit Amounts carried forward to such
taxable year should be changed or adjusted, then each Stockholder shall
reimburse the Corporation or the applicable Subsidiary, as the case may be, if
and to the extent the Permitted Tax Distributions previously made to such
Stockholder in respect of that taxable year exceeded the Permitted Tax
Distributions which should have been made for such taxable year taking into
account such change or adjustment.
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(c) To the extent that any Permitted Tax Distribution would
otherwise be made to any Stockholder at a time when an obligation of such
Stockholder to make a payment to the Corporation or the applicable Subsidiary
pursuant to paragraphs (a) or (b) of this Section 3.3 remains outstanding, the
amount of any Permitted Tax Distribution required to be made by the Corporation
or a Subsidiary, as applicable, shall be reduced by the amounts such Stockholder
is obligated to pay to the Corporation or the applicable Subsidiary until such
amount is recovered in full.
3.4 Tax Rate Information. Each Stockholder shall provide such information
to the Corporation as the Corporation shall reasonably request from time to time
to permit the Corporation to determine the Applicable Tax Rate and the
Applicable Capital Gain Tax Rate. Each Stockholder shall also promptly advise
the Corporation of any changes in the Stockholder's circumstance which would
change the Applicable Income Tax Rate and the Applicable Capital Gain Tax Rate.
3.5 Lock Up Agreement. In the event of an underwritten public offering of
the Corporation's Common Stock in which shares of Common Stock are listed for
trading on a national securities exchange or quoted on the Nasdaq National
Market System (a "Qualified IPO"), if the managing underwriter for such offering
deems it necessary or appropriate, each Stockholder agrees that it will not
Transfer, or agree to Transfer, any Shares during a period deemed by such
managing underwriter to be necessary or appropriate, and each Stockholder will
enter into a written agreement with such managing underwriter and the
Corporation to that effect (including a covenant not to sell or otherwise
Transfer any Shares in a market transaction (including sales pursuant to Rule
144 under the Securities Act) during the applicable restricted period). In order
to enforce the covenant in this Section 3.2, the Corporation may impose
stop-transfer instructions with respect to the Shares of any Stockholder until
the end of such restricted period.
3.6 Licenses. Each Stockholder hereby covenants and agrees to submit in a
timely fashion all information and to perform in a timely fashion any acts that
the Corporation determines are necessary or appropriate to be submitted or
performed by such Stockholder in connection with the Corporation's obtaining
and/or maintaining the Licenses or that are otherwise required of the
Corporation by the Authorities.
3.7 Provisions Concerning the Empress Merger. Until the earlier of the
effective time of the Empress Merger or the termination of the Empress Merger
Agreement in accordance with its terms, each Stockholder shall vote, or cause to
be voted, at any meeting of the Stockholders of the Corporation or by means of
any written consent pursuant to which action is to be taken with respect to the
Empress Merger (including, without limitation, the Empress Merger Agreement),
all voting securities of the Corporation over which such Stockholder has the
power to vote or direct the voting, and shall take promptly all such other
actions as shall be necessary or desirable (i) to approve the Empress Merger,
including without limitation the Empress Merger Agreement, and (ii) to not
breach any covenant, representation or warranty or any other obligation or
agreement of the Corporation or the Subsidiaries under the Empress Merger
Agreement and/or other agreement, instrument or document entered into in
connection with the Empress Merger. Each of the Stockholders hereby
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covenants and agrees that such Stockholder shall not enter into any agreement or
understanding with any Person the effect of which would be inconsistent or
violative of the provisions and agreements contained in this Agreement.
3.8 Composition of Board.
(a) The Board shall be comprised of three directors. Until the
consummation of a Qualified IPO, each Stockholder hereby agrees to vote or cause
to be voted, at any meeting of the stockholders of the Corporation or by means
of any written consent pursuant to which directors are to be elected, all voting
securities of the Corporation over which it has the power to vote or direct the
voting for the election as directors of the Corporation of three Persons
designated by the holders of a majority of the issued and outstanding Binion
Shares (the "Majority Binion Holders") to the Board.
(b) If at any time the Majority Binion Holders shall notify the
other Stockholders of their desire to remove, with or without cause, any
individual from a directorship of the Corporation, each Stockholder will vote,
or cause to be voted, at any meeting of the stockholders of the Corporation or
by means of any written consent pursuant to which directors are to be elected,
all voting securities of the Corporation over which such Stockholder has the
power to vote or direct the voting, and shall take promptly all such other
actions as shall be necessary or desirable to cause the removal of such
director.
(c) If at any time any director designated by the Majority Binion
Holders ceases to serve on the Board for any reason, then the Majority Binion
Holders shall be entitled to designate a successor director to fill the vacancy
created thereby and each Stockholder agrees to vote, or cause to be voted, at
any meeting of the stockholders of the Corporation or by means of any written
consent pursuant to which directors are to be elected, all voting securities of
the Corporation over which such Stockholder has the power to vote or direct the
voting, and shall take promptly all such other actions as shall be necessary or
desirable to cause the designated successor to be elected to fill such vacancy.
3.9 Restriction on Transfer and Proxies. Each of the Stockholders hereby
covenants and agrees that, except as otherwise set forth in this Agreement, such
Stockholder shall not, directly or indirectly: (i) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting
agreement, with respect to any Shares; or (ii) take any action that would (A)
make any representation or warranty of such Stockholder contained herein untrue
or incorrect if such representation or warranty were to be made immediately
after giving effect to such action or at any other time prior to the termination
of this Agreement or (B) have the effect of preventing or impeding any
Stockholder from performing such Stockholder's obligations under this Agreement.
3.10 Investment Opportunities. For so long as Binion holds any Shares,
Binion and his Affiliates shall be obligated to present and offer to the
Corporation any opportunity that Binion and/or his Affiliates are offered to
acquire, develop, manage, operate or otherwise invest in any
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gaming business, except that Binion and his Affiliates may (a) pursue investment
opportunities to acquire, develop, manage, operate or otherwise invest in
businesses ancillary to any gaming business, including but not limited to hotels
and restaurants, so long so they shall disclose such pursuits to the
Corporation, and (b) invest in the stock of any publicly traded company, in each
case free and clear of any restrictions or obligations contained in this Section
3.7.
3.11 Affiliate Dealings With the Corporation. For so long as Binion holds
any Shares, each of Binion and his Affiliates shall have the right to contract
or otherwise deal with the Corporation for the sale of goods or services to the
Corporation provided that (a) the compensation paid or agreed to be paid for
such goods or services is reasonable (i.e., at fair market value), and relates
to goods or services actually furnished to the Corporation, (b) the goods or
services to be furnished are reasonable for and necessary to the Corporation,
(c) the fees, terms and conditions of the transactions are at least as favorable
to the Corporation as would be obtainable in an arm's-length transaction, and
(d) any necessary Authority consent is obtained.
ARTICLE IV
GRANT OF PROXY
4.1 Proxy.
(a) Each Stockholder irrevocably appoints Jack B. Binion, ("Binion")
with full power of substitution, as such Stockholder's true and lawful attorney
and proxy to vote and otherwise act with respect to all of such Stockholder's
Shares of which such Stockholder is now or hereafter the record owner at all
annual, special and other meetings of stockholders of the Corporation, and at
any adjournments thereof, with like effect and as if the undersigned were
personally present and voting, upon the following matters:
(i) In favor of approval of an agreement pursuant to which
the Corporation shall acquire all of the outstanding
shares of common stock of each of Empress Casino Joliet
Corporation and Empress Casino Hammond Corporation, and
any actions, agreements or other documents required in
furtherance thereof;
(ii) Against any action or agreement that would result in a
breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the
Corporation or any subsidiary of the Corporation under
any agreement pursuant to which the Corporation shall
acquire all of the outstanding shares of common stock of
each of Empress Casino Joliet Corporation and Empress
Casino Hammond Corporation; and
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(iii) For the election of three (3) nominees of the holders of
a majority of the Binion Shares to serve as directors on
the Corporation's board of directors.
(b) Each Stockholder understands and agrees that the appointment and
proxy of Jack B. Binion in Section 4(a) relates to all voting rights (whether
limited, fixed or contingent) with respect to the all Shares from time to time
owned by such Stockholder and does not relate to any other right incident to
such Stockholder's ownership of Shares (including, without limitation, the right
to receive dividends and other distributions on those Shares).
(c) The rights of Binion with respect to any Stockholder under this
Article IV shall terminate and the Proxy granted by such Stockholder pursuant to
this Article IV shall be void and of no further force and effect at such time as
this Agreement is terminated pursuant to 8.19 hereof.
(d) The appointment of proxies specified in Section 4(a) shall
become effective upon the execution and delivery of this Agreement and shall
terminate upon the sale, exchange or other legal disposition of all of such
Stockholder's legal and beneficial right, title and interest in and to all
Shares to a party that is not an Affiliate of such Stockholder.
(e) Each Stockholder acknowledges that Binion may exercise the
proxies provided for in Section 4.1(a) at any time, from time to time, in his
sole discretion, without notice to the Stockholders with respect to any matter
specified in Section 4.1(a) that is to be voted on by the Stockholders of the
Corporation. Each Stockholder hereby agrees to take any and all action, and to
execute and deliver such documents, as requested by Binion to assure that the
proxies are, and at all times remain, irrevocable, enforceable and exercisable
by Binion pursuant to applicable law and in accordance with their terms. The
Corporation hereby agrees that any stockholder action attempted to be taken by
any Stockholder in violation of this Article IV shall be void and the
Corporation shall not execute any documents or record any such attempted action.
(f) Except as expressly provided in Section 4(d), this proxy is
irrevocable and constitutes a power coupled with an interest for all purposes,
including for purposes of Section 212 of the General Corporation Law of the
State of Delaware.
ARTICLE V
RESTRICTIONS UPON THE TRANSFER OF SHARES
5.1 Restrictions on Transfer Generally.
(a) No Stockholder shall Transfer any or all of such Stockholder's
Shares except in accordance with this Article V.
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(b) Any purported Transfer of a Stockholder's Shares, or any part
thereof, although permitted under this Agreement, shall be deemed invalid, null
and void, and of no force or effect, unless and until the transferee, if not
already a party to this Agreement, shall have executed a counterpart to this
Agreement. The Corporation covenants and agrees that it will not issue Shares to
any Person that is not a signatory to this Agreement.
(c) The Corporation shall not permit the Transfer of any Shares to
be made on the books of Corporation unless the Transfer is permitted by this
Agreement, and is made in accordance with the terms of this Agreement. Any
purported Transfer not permitted by this Agreement, or not made in accordance
with the terms of this Agreement, shall be deemed invalid, null and void, and of
no force or effect, the purported transferee shall have no interest in any of
the Shares purported to be transferred, and the Stockholder making the purported
Transfer will continue to be recognized as the owner (both legally and
beneficially) of the Shares.
(d) No Stockholder shall effect a Transfer of any or all of its
Shares until the Corporation has received written notice of such proposed
Transfer, signed by each of the transferring Stockholder and the prospective
transferee, which notice shall set forth the following information:
(i) The number of Shares to be transferred;
(ii) The identity of the transferring Stockholder;
(iii) The name of the prospective transferee and all material
terms and conditions of the proposed transaction between
the transferor and the prospective transferee;
(iv) A representation by the transferring Stockholder that
such Stockholder is not aware of any facts or
information concerning the prospective transferee that
would lead a reasonable person to conclude that the
prospective transferee would not be found suitable as a
gaming licensee under the gaming licensing criteria of
any state in which the Corporation or any of the
Subsidiaries is conducting or actively seeking to
conduct their respective Businesses;
(v) For so long as the Corporation is an S corporation, a
representation by the transferee that such transferee is
a Qualifying S Corporation Shareholder;
(vi) For so long as the Corporation is an S corporation, a
representation by the transferring Stockholder that the
prospective transferee will not count as more than one
"person" for purposes of calculating the number of
permitted shareholders of a corporation that is an S
corporation;
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(vii) The address of the prospective transferee, its social
security number and any other pertinent information
requested by the Corporation in connection with the
conduct of its due diligence investigation into the
suitability of such prospective transferee;
(viii) The agreement in writing by the prospective transferee
to be bound by the terms of this Agreement; and
(ix) The agreement of the transferring Stockholder that any
necessary approval of any Authority shall be obtained
prior to the proposed Transfer.
(e) The Corporation shall have 20 days from its receipt of the
aforesaid notice to deliver to the transferring Stockholder its written
objection to the proposed Transfer, which written objection shall set forth the
specific reasons for the objection to the proposed Transfer and such reasons
shall be based upon (i) the gaming licensing criteria of a state in which the
Corporation or any of the Subsidiaries is conducting or actively seeking to
conduct their respective Businesses, (ii) the integrity, honesty or business
reputation of the transferee and/or (iii) the criteria for maintaining the S
corporation status of the Corporation (unless such status has been revoked). If
the Corporation delivers a timely written objection in accordance with the
foregoing, the Transferring Stockholder may not effect the proposed Transfer.
Any dispute with respect to the basis of the Corporation's written objection
shall be resolved by binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association held in Las Vegas, Nevada.
(f) Notwithstanding any other provision hereof to the contrary, no
Stockholder may Transfer, or enter into any agreement to Transfer, any or all of
such Stockholder's Shares to any Person that (i) is not a Qualifying S
Corporation Shareholder or (ii) would cause the Corporation to have more than
the maximum permitted number of stockholders under the Code as then in effect.
No Transfer or purported Transfer to any Person satisfying the requirements of
the immediately preceding sentence shall be effective or recognized by the
Corporation unless and until the Corporation has received (at the expense of
such Person) an opinion of counsel, which counsel and such opinion is
satisfactory to the Corporation in its sole judgment, that the Person is a
Qualifying S Corporation Shareholder and that the Transfer will not adversely
affect the Corporation's status as an S corporation under Section 1361 of the
Code and as to such other matters relating thereto as the Corporation shall
request.
(g) If by reason of, or in connection with the Transfer the
Corporation's status as an S corporation is terminated inadvertently and the
Corporation, in its sole judgment, elects to seek a private letter ruling from
the Internal Revenue Service under Section 1362(f) of the Code, the transferring
Stockholder agrees to make any adjustments for the period specified in Section
1362(f) of the Code required by the Internal Revenue Service and approved by the
Board, as may be required for the Corporation to obtain such a favorable private
letter ruling from the Internal Revenue Service.
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Each transferring Stockholder's agreement and obligation to make such
adjustments shall continue indefinitely, notwithstanding any Transfer of Shares
by the Stockholder and regardless of whether the Corporation consented thereto.
5.2 Right of First Refusal.
(a) Subject to any employment agreement or other employment or
compensatory arrangement pursuant to which the Corporation has the right to
repurchase shares from a Stockholder (in which is event such right shall be
prior to this Section 5.2), such Stockholder (other than a Binion Holder)
desiring to Transfer any of such Stockholder's Shares (a "Selling Stockholder")
shall first notify the Binion Holders of such Selling Stockholder's intention to
Transfer such Shares to the proposed transferee (the "Sale Notice") and offer to
sell the same to the Binion Holders pursuant to the terms and conditions of this
Section 5.2. The Sale Notice shall specify the material terms of the
transaction, including the type of Transfer, the proposed transferee, the number
of Shares to be transferred, the price per share and the terms of payment. The
Binion Holders may elect to purchase all (but not less than all) of the Shares
to be transferred at the same price specified in the Sale Notice by delivering a
written notice of such election to the Selling Stockholder within 30 days after
the delivery of the Sale Notice (the last day of such 30 day period is referred
to herein as the "Authorization Date"); provided, however, that no Binion Holder
may purchase more than its pro rata share of the Shares to be Transferred unless
one or more Binion Holders has not elected to purchase its entire pro rata share
(and any subsequent allocation of such unsubscribed Shares shall be made pro
rata among the subscribing Binion Holders); and provided further that any Binion
Holder may assign its right to purchase any portion of such Shares to any of its
Affiliates. If the Binion Holders (together with any assignees thereof of the
rights hereunder) have collectively elected to purchase the Shares to be
Transferred, then the Selling Stockholder shall Transfer the Shares to the
Binion Holders and assignees (if any), at the price and on the terms and
conditions set forth in the Sale Notice, and such Binion Holders and assignees
(if any) shall consummate the purchase and sale of Shares on such terms not more
than 30 days after the Authorization Date.
(b) If the Binion Holders (together with any assignees thereof of
the rights hereunder) have not collectively elected to purchase all of the
Shares to be Transferred or if they fail to consummate the purchase and sale of
all of the Shares as provided in Section 5.2(a), then the Selling Stockholder
may Transfer to the proposed transferee specified in the Sale Notice the Shares
specified in the Sale Notice at a price and on terms no more favorable to the
transferee as those set forth in the Sale Notice during the 60-day period
following the Authorization Date. Any Shares not so transferred within such
60-day period again will become subject to all of the provisions of this Section
5.2.
(c) The restrictions contained in this Section 5.2 will not apply
with respect to Transfers of Shares (i) by testamentary or intestate
disposition, (ii) to a member of a Stockholder's Immediate Family or (iii) to a
former spouse pursuant to a court-approved divorce decree; provided that in each
case, the transferee shall hold such Shares subject to the same restrictions
applicable to its transferor and shall agree in writing to be bound by the terms
of this Agreement.
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5.3 Obligation to Sell Shares. Notwithstanding the provisions of any other
binding agreement upon any Stockholder, including without limitation any
employment agreement or any warrant agreement, each Stockholder agrees as
follows:
(a) If the Majority Binion Holders desire to Transfer all of their
Shares or Shares that would result in a Change of Control of the Corporation,
then (i) all Stockholders shall consent to and raise no objections against such
Transfer, (ii) if the Transfer is structured in whole or in part as a merger or
consolidation, each Stockholder shall waive any dissenters rights, appraisal
rights or similar rights in connection with such merger or consolidation, (iii)
if the Transfer is structured in whole or part as a sale of securities, each
Stockholder agrees to sell its Shares on the same terms and conditions of sale
on which all Shares are to be sold in such Transfer; and (iv) each Stockholder
shall take all actions reasonably requested by the Corporation in connection
with the consummation of such Transfer. In the event that any such Transfer
shall be to any Affiliate of such Majority Binion Holders, the Stockholders
shall not be required to Transfer their respective Shares unless a nationally
recognized investment banking firm selected by the Corporation shall determine
that the aggregate value of the consideration to be received by the Stockholders
in such Transfer is fair to the stockholders of the Corporation.
(b) If, in the reasonable, good faith opinion of the Board, the
licenses of the Company or one of its Subsidiaries could be suspended, revoked,
or terminated or the ability of the Company or one of its Subsidiaries to
conduct one or more of the Businesses could be jeopardized because of the
ownership of Shares by any Stockholder, such Stockholder shall transfer his or
her Shares to the Corporation for a non-recourse, unsecured, subordinated note
of the Corporation, in a principal amount equal to the then value of such
Shares, as determined by a nationally recognized investment banking firm. In
either case, such note shall accrue interest at the "prime rate" of the bank
with which the Corporation has its primary banking relationship, and all
principal and interest shall, subject to any limitations in any provision of a
Loan to which such note is subordinate, be payable upon the earlier of (i) the
fifth anniversary of such note or (ii) the liquidation of the Corporation;
provided, however, that the amount paid under such note to the holder of such
note on the liquidation of the Corporation shall in no event exceed the amount
to which such holder would have been entitled had such holder retained its
Shares. This Section 5.3(b) is subject to the rules and regulations of any
Authority with respect to the payment by the Corporation to any of its
stockholders for such stockholder's capital stock if such stockholder is not a
suitable licensee.
(c) If requested by the Board, a Stockholder shall pledge such
Stockholder's Shares as additional security under the terms of any Loan or any
guarantee of any Loan, which pledge shall result in the lender(s) under such
Loan becoming the holder of the Shares so pledged upon any default on such Loan,
without any further action by the lender(s); provided, however, that the pledge
of each Stockholder's Shares shall be subject to substantially the same terms
and conditions as the pledge of each other Stockholder's Shares.
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(d) Upon the written request of the Corporation, each Stockholder
agrees to consent to any sale, transfer, reorganization, exchange, merger,
combination or other form of transaction described in this Section 5.3 and to
execute such agreements, powers of attorney, voting proxies or other documents
and instruments as the Corporation determines may be necessary or desirable to
consummate such sale, transfer, reorganization, exchange, merger, combination or
other form of transaction. Each Stockholder further agrees to timely take such
other actions as the Corporation may reasonably request in connection with the
approval of the consummation of such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction, including voting as a
stockholder to approve any such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction.
(e) If at any time and for any reason a Stockholder ceases to be a
Qualifying S Corporation Shareholder or if for any reason whatsoever the
interest of any Stockholder in any Shares or the Transfer of any Shares (whether
or not permitted hereunder) shall cause the Corporation to cease to be an S
corporation (a "Disqualifying Event"), the Shares owned by such Stockholder
immediately prior to the event resulting in a Disqualifying Event shall
automatically be converted as of the date of such Disqualifying Event from
Shares into a right as an unsecured general creditor of the Corporation to
receive an amount equal to such Stockholder's proportionate interest as
represented by such Shares of the book value of the Corporation. As a result,
such Stockholder shall cease as of the Disqualifying Event to be a Stockholder,
and from and after such date, shall have no rights as a Stockholder. Such right
to receive an amount equal to such Stockholder's proportionate interest as
represented by such Shares of the book value of the Corporation shall be
evidenced by an unsecured promissory note providing for payment of the amount
due in a lump sum on a date ten years from the date of the Disqualifying Event
with interest thereon at the "prime rate" of the bank with which the Corporation
has its primary banking relationship, and which promissory note shall be
subordinate to all indebtedness of the Corporation other than trade payables. If
within 30 days of becoming aware of any Disqualifying Event the Person (i)
advises the Corporation that such Disqualifying Event was "inadvertent" within
the meaning of Section 1362(f) of the Code, (ii) at his, her or its own expense,
is applying for, and such Person promptly applies for and obtains a private
letter ruling from the Internal Revenue Service pursuant to Section 1362(f) of
the Code that the Corporation shall be treated as an S corporation at all times
while such Person held, or had any interest in, any Shares, and (iii) furnishes
to the Corporation an opinion of counsel, which counsel and such opinion is
satisfactory to the Corporation in its sole judgment, that such Person is a
Qualifying S Corporation Shareholder, then such Person shall be entitled to
repurchase the same number of Shares previously converted to a promissory note
of the Corporation by operation of this Section 5.3 by exchanging the
Corporation's promissory note for such Shares.
5.4 Transfers by the Binion Holders. A Binion Holder may Transfer all or
any portion of its Shares, subject only to compliance with the provisions of
Section 5.1. Notwithstanding the foregoing, Binion may not Transfer 50 percent
or more of his Initial Shares to any Person or Persons (other than an Affiliate
of Binion or a member of his Immediate Family), without first providing notice
of the material terms of the proposed Transfer to each other Stockholder, which
notice shall
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offer each such Stockholder the opportunity to Transfer the same portion (on a
percentage basis) of such Stockholder's Shares as Binion is transferring of his
Shares, on substantially the same economic terms and conditions as applied to
the Transfer by Binion. Only after a period of 20 days after delivery of the
offer to each such Stockholder has elapsed, or after Binion has received notice
from each such Stockholder as to whether such Stockholder accepts or rejects
such offer, whichever occurs first, may Binion and the Stockholders who have
accepted such offer effect the proposed Transfer.
5.5 No Release or Waiver. Neither the provisions of, nor consummation of
the transactions contemplated by, this Article V shall constitute a release or
waiver of any claims or rights which the Corporation or any Stockholder may have
against the Corporation or any Stockholder as a consequence of a breach of this
Agreement.
5.6 Securities Laws and Approvals of Authorities. A Share shall not be
Transferred in any manner whatsoever except (a) in accordance with the
Securities Act and any applicable State Acts, and (b) with any necessary prior
or subsequent consent or approval of any Authority. Before giving effect to any
Transfer of Shares, the Corporation may require a transferee of Shares to give
such representations and warranties with respect to compliance with the
Securities Act and applicable State Acts as the Corporation (or its counsel) may
deem necessary or appropriate.
ARTICLE VI
PERMITTED TAX DISTRIBUTIONS
6.1 Permitted Tax Distributions. The Corporation agrees that for each
taxable year that the Corporation qualifies as an S corporation under the Code,
or any similar provision of state or local law, the Corporation will make, and
will cause each Subsidiary any of whose items of income, gain, loss or deduction
(including capital gain or loss) are taxable to the Stockholders to make,
Permitted Tax Distributions to the Stockholders. Estimated amounts of Permitted
Tax Distributions shall be made by the Corporation (and each applicable
Subsidiary) within fifteen days following March 31, May 31, August 31, and
December 31 based upon an estimate of the excess of (x) the Permitted Tax
Distributions that would be payable for the period beginning on January 1 of
such year and ending on March 31, May 31, August 31, and December 31 if such
period were a taxable year (computed as provided above) over (y) the amount of
the distributions attributable to all prior periods during such taxable year.
Promptly after the filing by the Corporation and each such Subsidiary of their
respective annual tax return, the Corporation or the applicable Subsidiary, as
the case may be, shall make a further payment to its respective Stockholder to
the extent such estimated tax distributions were less than the Permitted Tax
Distributions actually payable to such Stockholders with respect to such taxable
year as determined on the basis of such tax returns filed in respect of such
taxable year for that Stockholder.
If any State (or any political subdivision of any State) shall
require the Corporation or any Subsidiary to withhold and pay over any amount
from any Permitted Tax Distribution
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otherwise payable to any Stockholder who is not a resident of that State (or the
political subdivision), the amount so withheld shall be treated for all purposes
of this Agreement as having been paid to such Stockholder.
6.2 Change in Permitted Tax Distributions. So long as there has been no
Change of Control, the Board shall have the right, without the consent of any
Stockholder, to modify or reduce the amount of the Permitted Tax Distributions
payable to the Stockholders; provided, however, that the amount of the Permitted
Tax Distributions shall never be reduced below the amount required calculated
solely by reference to the highest marginal Federal income tax rate applicable
to any Stockholder.
6.3 Termination of S Corporation Status. The Board shall have the right at
any time to terminate the status of the Corporation as an S corporation or to
alter or change the status of any Subsidiary as a Flow Through Entity. Nothing
contained herein shall give any Stockholder the right to have the Corporation
continue as an S corporation or for any Subsidiary to continue as a Flow Through
Entity. If the Board shall determine to revoke the Corporation's election to be
taxed as an S corporation, each Stockholder shall upon request (i) consent to
such revocation at the time and in the manner required by Treas. Reg. ss..
1.1362-6(b) (or any successor or superceding Treasury Regulation thereto) and
(ii) if approved by the Board, consent to an election under Section 1362(e)(2)
of the Code at the time and in the manner required by Treas. Reg. ss..
1.1362-6(b) (or any successor or superceding Treasury Regulation thereto).
ARTICLE VII
SECURITIES ACT COMPLIANCE; LEGENDS ON STOCK
7.1 Legends. In addition to any other legend required from time to time by
the Corporation, all certificates representing Shares shall contain the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE, INCLUDING CERTAIN VOTING
RIGHTS WITH RESPECT THERETO, ARE HELD SUBJECT TO, AND THE TRANSFER OF SUCH
SECURITIES IS RESTRICTED BY, THE TERMS OF A CERTAIN STOCKHOLDERS AGREEMENT
DATED AS OF APRIL 29, 1999, A COPY OF WHICH IS ON FILE AT THE OFFICE OF
THE CORPORATION. THE PROPOSED TRANSFER OF ANY SHARES REPRESENTED BY THIS
CERTIFICATE SHALL BE VOID AND OF NO FORCE AND EFFECT UNLESS MADE IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT."
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ARTICLE VIII
MISCELLANEOUS
8.1 Stockholder Capacity. Each Stockholder executes this Agreement solely
in its capacity as the record and/or Beneficial Owner of such Stockholder's
Shares.
8.2 Entire Agreement. This Agreement and the Subscription Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
8.3 Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any Person to which legal or Beneficial Ownership of such Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, such Stockholder's heirs, guardians, administrators or successors.
8.4 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Corporation and its successors and assigns and the Stockholders and any
subsequent holders of Shares and the respective successors and assigns of each
of them, so long as they hold Shares.
8.5 Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated except upon the
execution and delivery of a written agreement executed by the Corporation and
Stockholders holding a majority of the votes represented by the Shares
outstanding at the time of the amendment; provided, however, that the addition
of any holder of Shares as a party to this Agreement pursuant to its execution
of a counterpart hereto may be effected pursuant to the provisions hereof
without regard to the restrictions contained in this Section 8.5.
8.6 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
given when the same is (a) personally delivered, (b) deposited in the U.S. mail,
certified or registered and postage prepaid, (c) deposited with Federal Express
or similar overnight delivery service or (d) transmitted by telecopier or other
facsimile transmission, answerback requested. All communications hereunder shall
be delivered to the respective parties at the following addresses:
If to any Stockholder: At the addresses set forth
on Annex A hereto
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If to the Corporation: 4024 South Industrial Road
Las Vegas, NV 89103
Attention:
with a copy to: Swidler Berlin Shereff Friedman, LLP
919 Third Avenue, 20th Floor
New York, NY 10022
Attention: Robert M. Friedman, Esq.
Telephone: (212) 891-9310
Facsimile: (212) 758-9526
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.7 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
8.8 Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party or parties to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party or parties shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity. If any Person shall institute any action or proceeding to enforce the
provisions of this Agreement, any Person subject to this Agreement against whom
such action or proceeding is brought hereby waives the claim or defense that the
Person instituting the action proceeding has an adequate remedy at law, and no
Person shall in any action or proceeding put forward the claim or defense that
an adequate remedy at law exists. Should any dispute concerning the Transfer of
Shares arise under this Agreement, an injunction may be issued restraining the
Transfer of such Shares pending the determination of such dispute.
8.9 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
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8.10 No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
8.11 No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any Person who or which is
not a party hereto.
8.12 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
8.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.
8.14 Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation. As used in this Agreement, the
singular shall include the plural, the plural shall include the singular and the
use of any gender shall include the other gender or be neutral. No provision of
this Agreement will be interpreted in favor of, or against, any of the parties
hereto by reason of the extent to which such party or its counsel participated
in the drafting thereof or by reason of the extent to which any such provision
is inconsistent with any prior draft hereof or thereof.
8.15 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
8.16 Recovery of Fees. In the event litigation shall be necessary to
enforce, interpret or rescind the provisions of this Agreement or relating to
matters set forth herein, the prevailing party shall be entitled to recover from
the adverse party, in addition to such other relief, the prevailing party's
reasonable attorney's fees for services before trial, on trial and on any appeal
therefrom, and all other reasonable litigation costs related thereto.
8.17 Further Acts. Each party agrees to perform any further acts and to
execute and deliver any instruments or documents that may be necessary or
reasonably deemed advisable to carry out the purposes of this Agreement.
8.18 Indemnification. Each Stockholder hereby agrees to indemnify and hold
the Corporation and each other Stockholder harmless from and against any
liability, claim, damage, loss, penalty, cost or expense (including, without
limitation, reasonable attorneys fees and costs of appeal)
24
<PAGE> 25
arising out of any breach of the any representations or covenants made by such
Stockholder in this Agreement.
8.19 Termination. The rights and obligations of the parties to this
Agreement shall terminate upon the earlier of the following: (i) upon the
dissolution, liquidation or winding up of the Corporation; (ii) if a majority of
the votes entitled to be cast at a meeting of Stockholders are voted in favor of
terminating this Agreement, which agreement to terminate shall be in writing and
signed by those Stockholders agreeing thereto; (iii) upon the consummation of a
Qualified IPO; or (iv) upon the registration of the Common Stock pursuant to the
Exchange Act; provided, however, that notwithstanding any of such events, the
Corporation's and each Stockholder's obligations in Sections 3.1, 3.3, 6.1 and
6.2 hereof with respect to any taxable year of the Corporation ending prior to
such date shall continue indefinitely.
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the date first above written.
CORPORATION
Horseshoe Gaming Holding Corp., a Delaware
corporation
By: /s/ Jack B. Binion
--------------------------------------
Jack B. Binion, President
STOCKHOLDERS
- --------------------------------------------------------------------------------
/s/ Jack B. Binion
- -------------------------------------
Jack B. Binion
/s/ Wanda Parsons
- -------------------------------------
Wanda Parsons,
as Trustee of the Katie O'Neill Trust
25
<PAGE> 26
/s/ Wanda Parsons
- -------------------------------------------------
Wanda Parsons,
as Trustee of the Kellie O'Neill Trust
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard,
as Trustee of the Ted J. Fechser Trust
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard,
as Trustee of the Fancy Ann Fechser Trust
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard,
as Trustee of the James Christopher Fechser Trust
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard,
as Trustee of the Robert Daniel Fechser Trust
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard,
as Trustee of the Katie O'Neill Trust
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard,
as Trustee of the Kellie O'Neill Trust
/s/ Peri Cope Howard
- -------------------------------------------------
Peri Cope Howard,
as Trustee of the Ben Evan Johnson Trust
26
<PAGE> 27
/s/ Peri Cope Howard
- ---------------------------------------
Peri Cope Howard,
as Trustee of the Rachel Fechser Trust
/s/ Peri Cope Howard
- ---------------------------------------
Peri Cope Howard,
as Trustee of the Bonnie Binion Trust
/s/ Peri Cope Howard
- ---------------------------------------
Peri Cope Howard,
as Trustee of the Benny Behnen Trust
/s/ Peri Cope Howard
- ---------------------------------------
Peri Cope Howard,
as Trustee of the Jack Behnen Trust
/s/ Key Fechser
- ---------------------------------------
Key Fechser
/s/ Bobby Fechser
- ---------------------------------------
Bobby Fechser
/s/ Mindy Johnson
- ---------------------------------------
Mindy Johnson
/s/ Leslie Kenny
- ---------------------------------------
Leslie Kenny
/s/ Phyllis Cope
- ---------------------------------------
Phyllis Cope,
as Trustee of the Ted J. Fechser Trust
27
<PAGE> 28
/s/ Phyllis Cope
- ------------------------------------------
Phyllis Cope,
as Trustee of the Fancy Fechser Trust
/s/ Scott Hamilton
- ------------------------------------------
Scott Hamilton,
as Trustee of the James C. Fechser Trust
/s/ Deborah Hamilton
- ------------------------------------------
Deborah Hamilton,
as Trustee of the Robert D. Fechser Trust
/s/ Scott Hamilton
- ------------------------------------------
Scott Hamilton,
as Trustee of the Rachel Fechser Trust
/s/ Greg Stuart
- ------------------------------------------
Greg Stuart,
as Trustee of the Ben E. Johnson Trust
/s/ Greg Stuart
- ------------------------------------------
Greg Stuart,
as Trustee of the Jamie Lyn Johnson Trust
/s/ Doyle Brunson
- ------------------------------------------
Doyle Brunson
/s/ Louis Brunson
- ------------------------------------------
Louise Brunson
/s/ Todd Brunson
- ------------------------------------------
Todd Brunson
28
<PAGE> 29
/s/ Pam Brunson
- -----------------------
Pam Brunson
/s/ David Reese
- -----------------------
David Reese
/s/ Kathleen Rose
- -----------------------
Kathleen Rose
/s/ John Michael Allen
- -----------------------
John Michael Allen
/s/ Gary Anderson
- -----------------------
Gary Anderson
/s/ Rick Cook
- -----------------------
Rick Cook
/s/ Jerry Howard
- -----------------------
Jerry Howard
/s/ Robert McQueen
- -----------------------
Robert McQueen
/s/ G.A. Robinson, III
- -----------------------
G.A. Robinson, III
/s/ John Schreiber
- -----------------------
John Schreiber
29
<PAGE> 30
/s/ Daniel Engel
- ---------------------
Daniel Engel
/s/ David A. Sachs
- ---------------------
David A Sachs
/s/ Eileen Holz
- ---------------------
Eileen Holz
/s/ Cathy Hunter
- ---------------------
Cathy Hunter
/s/ Silvia Rodriguez
- ---------------------
Silvia Rodriguez
/s/ Andrew Astrachan
- ---------------------
Andrew Astrachan
/s/ Donald Schupak
- ---------------------
Donald Schupak
/s/ Walt Haybert
- ---------------------
Walt Haybert
/s/ Gary Border
- ---------------------
Gary Border
/s/ Patrick Savin
- ---------------------
Patrick Savin
30
<PAGE> 31
Annex A
As of April 29, 1999, the following Persons comprise the Stockholders of
Horseshoe Gaming Holding Corp. as may be amended from time to time hereunder.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name of Stockholder Number of Shares
- ------------------- ----------------
- --------------------------------------------------------------------------------
<S> <C>
Jack B. Binion 9,823.791776
- --------------------------------------------------------------------------------
Wanda Parsons, 957.98
as Trustee of the Katie O'Neill Trust
- --------------------------------------------------------------------------------
Wanda Parsons, 957.98
as Trustee of the Kellie O'Neill Trust
- --------------------------------------------------------------------------------
Peri Cope Howard 1,266.86
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the Ted J. Fechser Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the Fancy Ann Fechser Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the James C. Fechser Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the Robert Daniel Fechser Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the Katie O'Neill Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the Kellie O'Neill Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the Ben Evan Johnson Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 276.20
as Trustee of the Rachel Fechser Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 55.24
as Trustee of the Bonnie Binion Trust
- --------------------------------------------------------------------------------
Peri Cope Howard, 55.24
as Trustee of the Benny Behnen Trust
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 32
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Peri Cope Howard, 55.24
as Trustee of the Jack Behnen Trust
- --------------------------------------------------------------------------------
Key Fechser 55.24
- --------------------------------------------------------------------------------
Bobby Fechser 55.24
- --------------------------------------------------------------------------------
Mindy Johnson 55.24
- --------------------------------------------------------------------------------
Leslie Kenny 1,199.12
- --------------------------------------------------------------------------------
Phyllis Cope, 957.98
as Trustee of the Ted J. Fechser Trust
- --------------------------------------------------------------------------------
Phyllis Cope, 957.98
as Trustee of the Fancy Fechser Trust
- --------------------------------------------------------------------------------
Scott Hamilton, 638.66
as Trustee of the James C. Fechser Trust
- --------------------------------------------------------------------------------
Deborah Hamilton, 638.66
as Trustee of the Robert D. Fechser Trust
- --------------------------------------------------------------------------------
Scott Hamilton, 638.66
as Trustee of the Rachel Fechser Trust
- --------------------------------------------------------------------------------
Greg Stuart, 478.99
as Trustee of the Ben E. Johnson Trust
- --------------------------------------------------------------------------------
Greg Stuart, 478.99
as Trustee of the Jamie Lyn Johnson Trust
- --------------------------------------------------------------------------------
Doyle Brunson 153.72
- --------------------------------------------------------------------------------
Louise Brunson 153.72
- --------------------------------------------------------------------------------
Todd Brunson 153.72
- --------------------------------------------------------------------------------
Pam Brunson 153.72
- --------------------------------------------------------------------------------
David Reese 614.89
- --------------------------------------------------------------------------------
Kathleen Rose 184.70
- --------------------------------------------------------------------------------
Gary Anderson 127.01
- --------------------------------------------------------------------------------
Rick Cook 38.43
- --------------------------------------------------------------------------------
Jerry Howard 84.67
- --------------------------------------------------------------------------------
Robert McQueen 42.34
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
G.A. Robinson, III 338.69
- --------------------------------------------------------------------------------
Daniel Engel 5.70
- --------------------------------------------------------------------------------
David A. Sachs 5.70
- --------------------------------------------------------------------------------
Eileen Holz .85
- --------------------------------------------------------------------------------
Cathy Hunter .85
- --------------------------------------------------------------------------------
Silvia Rodriguez .85
- --------------------------------------------------------------------------------
Andrew Astrachan 734.74
- --------------------------------------------------------------------------------
Donald Schupak 375.77
- --------------------------------------------------------------------------------
Walter J. Haybert 146.27
- --------------------------------------------------------------------------------
Gary Border 147.00
- --------------------------------------------------------------------------------
Patrick Savin 113.93
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10.30
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment Agreement")
entered into as of November 23, 1998, by and between Horseshoe Gaming, Inc., a
Nevada Corporation ("Employer"), and David Carroll ("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 18, 1997 (the "Original Employment Agreement") which is due to
expire on August 3, 2000; 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, 2001, 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-Human Resources 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 Chief Executive 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 Senior Vice President of Employer,
Employee shall have the responsibility for overseeing all aspects of Human
Resources 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:
A. a base salary of One Hundred Sixty Thousand Dollars ($160,000)
per year, which may be adjusted annually by a merit increase based upon
Employer's existing policy and an
2
<PAGE> 3
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 its employees; 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. 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.
3
<PAGE> 4
8. Termination
A. 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.
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:
4
<PAGE> 5
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 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, 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 a
benefit upon Employer disproportionate to any detriment to Employee.
5
<PAGE> 6
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.
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
6
<PAGE> 7
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.
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 an 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
7
<PAGE> 8
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. Laws. 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. David Carroll
338 Mockingbird Lane
Shreveport, LA 71105
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,
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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 and/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 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: /s/ Jack B. Binion
---------------------------------------
Jack B. Binion, Chief Executive Officer
"EMPLOYEE" /s/ David Carroll
---------------------------------------
David Carroll
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<PAGE> 10
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 10.31
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment Agreement")
entered into as of the first day of December, 1998, by and between Horseshoe
Gaming, Inc., a Nevada Corporation ("Employer"), and John Moran ("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"); and
WHEREAS, Employer and Employee are parties to an employment agreement
dated January 1, 1997 (the "Original Employment Agreement") which is due to
expire on December 31, 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.
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-Data Base Marketing and
Analysis 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 Senior Vice President-Marketing
of Employer (the "Supervisor").
<PAGE> 2
4. Duties and Responsibilities.
A. Duties. In his capacity as Vice President-Data Base Marketing and
Analysis of Employer, Employee shall have the responsibility for overseeing the
marketing 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:
A. a base salary of One Hundred Thousand Dollars ($100,000) per
year, which may be adjusted annually by a merit increase based upon Employer's
existing policy and an annual
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<PAGE> 3
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 its employees; 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. Accordingly, during the course of his employment, Employee
agrees to use his best efforts to 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.
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<PAGE> 4
8. Termination
A. 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 Supervisor or the
Board of Directors of Employer (or persons of comparable or senior position);
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:
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<PAGE> 5
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 those such facilities located in Las Vegas, Reno, Lake
Tahoe and 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 a
benefit upon Employer disproportionate to any detriment to Employee.
11. Nondisclosure of Confidential Information.
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<PAGE> 6
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.
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.
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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;
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.
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,
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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. John Moran
-------------------------------
-------------------------------
-------------------------------
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
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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.
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 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: /s/ Jack B. Binion
----------------------------------------
Jack B. Binion, Chief Executive Officer
"EMPLOYEE" /s/ John Moran
----------------------------------------
John Moran
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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 10.32
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Employment Agreement") entered into as of
November 3, 1998, by and between Horseshoe Gaming, Inc., a Nevada Corporation
("Employer"), and Mr. Roger Wagner ("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"); and
WHEREAS, Employer desires to employ Employee, and Employee desires to
accept such employment, pursuant to the terms of this 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 Senior Vice President-Chief Operating
Officer of Employer, and shall perform each and all of the duties and shall have
all of the responsibilities described herein. Employee shall at all times report
directly to and take directives from the Chief Executive Officer of Employer
(the "CEO") or such other executive of Employer as directed by Employer.
4. Duties and Responsibilities.
A. General Duties. In his capacity as Senior Vice President-Chief
Operating Officer of Employer, Employee shall have the responsibility for
overseeing the 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
<PAGE> 2
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 CEO or the Board of Directors of
Employer (the "Board").
B. Specific Duties. Employee shall be responsible for supervising
and directing the day-to-day activities and affairs of each Facility, including,
without limitation, customer relations, marketing, employee relations, service
and quality of the casino and hotel operations, 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 chief
operating officer of a major casino and hotel facility. Employee acknowledges
and agrees, however, that in connection with his employment he may be required
to travel on behalf of Employer. 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.
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, efficient and
professional manner.
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 CEO. 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 CEO and agrees that at all
times his authority shall be subordinate to such CEO. The wishes and directives
of the CEO shall prevail in all matters and decisions as to which there is a
disagreement between Employee and the CEO, and Employee shall carry out any and
all lawful directives from the CEO to the best of his ability.
2
<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 Fifty Thousand Dollars ($250,000)
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 the 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 its employees; 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 obtain and maintain in full force and effect at all
times, gaming licenses required by
3
<PAGE> 4
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.
8. Termination.
A. 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 failure of Employee to obtain any of the gaming
licenses required pursuant to Section 7 within the first six (6) months of
employment or 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 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.
4
<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 gaming facility principally owned or controlled by
Jack B. Binion unless such gaming facility is located in Las Vegas, Reno, Lake
Tahoe and 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.
5
<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, 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.
6
<PAGE> 7
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.
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.
7
<PAGE> 8
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. Roger Wagner
-----------------------
-----------------------
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.
8
<PAGE> 9
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 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.
9
<PAGE> 10
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: /s/ Jack B. Binion
----------------------------------------
Jack B. Binion, Chief Executive Officer
"EMPLOYEE" /s/ Roger Wagner
----------------------------------------
Roger Wagner
10
<PAGE> 11
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 12.1
HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Quarter Ended March 31, Year Ended December 31,
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) from continuing
operations before minority interests
and extraordinary loss on early
retirement of debt $ 16,881 $ 9,949 $25,272 $33,073 $48,822 $55,969 $ 3,924
Add:
Portion of rents representative
of the interest factor 78 67 304 236 207 517 292
Interest on indebtedness 9,584 9,059 37,704 18,393 24,809 17,365 5,215
Amortization of debt expense 676 670 2,157 2,399 3,281 2,823 1,582
-----------------------------------------------------------------------------------
Income as adjusted $ 27,219 $19,745 $65,437 $54,101 $77,119 $76,674 $11,013
===================================================================================
Fixed charges
Portion of rents representative
of the interest factor 78 $ 67 $ 304 $ 236 $ 207 $ 517 $ 292
Interest on indebtedness 9,584 9,059 37,704 18,393 24,809 17,365 5,215
Amortization of debt expense 676 670 2,157 2,399 3,281 2,823 1,582
Capitalized interest 8 107 163 11,191 1,272 651 3,595
-----------------------------------------------------------------------------------
Fixed charges $ 10,346 $ 9,903 $40,328 $32,219 $29,569 $21,356 $10,684
===================================================================================
Ratio of earnings to fixed charges 2.6 2.0 1.6 1.7 2.6 3.6 1.0
===================================================================================
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Pro Forma
March 31, December 31,
1999 1998
---- ----
<S> <C>
$ 22,200 $ 33,700
318 832
21,390 85,559
1,010 4,441
- --------------------------------------
$ 44,918 $124,532
======================================
318 832
21,390 85,559
1,010 4,441
8 286
- --------------------------------------
$ 22,726 $ 91,118
======================================
2.0 1.4
======================================
</TABLE>
<PAGE> 1
EXHIBIT 21
HORSESHOE GAMING HOLDING CORP.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
SUBSIDIARY STATE OF INCORPORATION
- ---------- ----------------------
<S> <C>
Horseshoe Gaming, L.L.C. (1) Delaware
Horseshoe Gaming, Inc. Nevada
Horseshoe GP, Inc. (2) Nevada
New Gaming Capital Partnership (3) Nevada
Horseshoe Entertainment L.P. Louisiana
Bossier City Land Corporation (4) Louisiana
Robinson Property Group, Limited Partnership Mississippi
Horseshoe Ventures (5) Nevada
Red Oak Insurance Company Ltd. (6) Barbados
</TABLE>
(1) Horseshoe Gaming, L.L.C. owns 8.08% Limited Partnership interest in
Horseshoe Entertainment.
(2) 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.
(3) New Gaming Capital Partnership is the 89% General Partner and a 2.92%
Limited Partner of Horseshoe Entertainment L.P.
(4) Bossier City Land Corporation is 100% owned by Horseshoe Entertainment.
(5) Horseshoe Ventures is owned 50% by Horseshoe Gaming, L.L.C.
(6) Red Oak Insurance Company Ltd is owned 100% by Horseshoe Gaming, L.L.C.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Horseshoe Gaming Holding Corp.
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a party of this
registration statement.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 11, 1999.
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 26, 1999, with respect to the financial
statements of Empress Entertainment, Inc. included in the Registration Statement
(Form S-4) and related Prospectus of Horseshoe Gaming Holding Corp. for the
registration of $600,000,000 of Series B Senior Subordinated Notes Due 2009.
ERNST & YOUNG LLP
Chicago, Illinois
June 11, 1999
<PAGE> 1
Exhibit 25.1
Exhibit T-1.7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) |_|
-------------------------
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
95-4311476
(I.R.S. employer
Identification No.)
515 South Flower Street, Suite 2700
Los Angeles, CA 90071
(Address of principal (Zip Code)
executive offices)
DWIGHT LIU
515 South Flower Street, Suite 2700
Los Angeles, California 90071
(213) 861-5000
(Name, address, including zip code and telephone number of agent for service)
----------------------------
HORSESHOE GAMING HOLDING CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 88-042513
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
<PAGE> 2
Exhibit T-1.7
4024 S. Industrial Road
Las Vegas, NV 89103
(Address of principal chief executive offices)
8 5/8% Senior Subordinated Notes Due 2009
(Title of indenture securities)
GENERAL
1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
490 L'Enfant Plaza East, S.W.
Washington, D.C. 20219
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Federal Reserve Bank (12th District)
San Francisco, California
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
<PAGE> 3
Exhibit T-1.7
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15.
The obligor currently is not in default under any of its outstanding
securities for which U.S. Trust Company, National Association is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15
of Form T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 - A copy of the Articles of Association of U.S. Trust Company,
National Association currently in effect; incorporated herein by reference to
Exhibit T-1.1 filed with Form T-1 Statement, Registration No. 333-59485.
T-1.2 - A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association, incorporated herein
by reference to Exhibit T- 1.1 filed with Form T-1 Statement, Registration No.
33-33031.
T-1.3 -A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified in
paragraph (1) or (2) above, incorporated herein by reference to Exhibit T-1.1
filed with Form T-1 Statement, Registration No. 33-33031.
T-1.4 - A copy of the By-Laws of U.S. Trust Company, National Association,
as amended to date; incorporated by reference to Exhibit T-1.4 filed with Form
T-1 Statement, Registration No. 33-54136.
T-1.6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939; incorporated herein by reference to Exhibit T-1.6 filed
with Form T-1 Statement, Registration No. 33-33031.
T-1.7 - A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority
T-1.8 - Not applicable.
T-1.9 - Not applicable.
NOTE
<PAGE> 4
Exhibit T-1.7
As of June 10, 1999, the Trustee had 20,000 shares of Capital Stock outstanding,
all of which are owned by U.S. Trust Corporation.
The responses to Items 2, 5, 6, 7, 8, 9, 10, 11 and 14 set forth the information
requested as though U. S. Trust Company, National Association and U.S. Trust
Corporation were the "trustee."
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
--------------------
Pursuant to the requirements of the Trust Indenture of Act of 1939, the trustee,
U.S. Trust Company, National Association, a corporation organized and existing
under the laws of the State of California, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Los Angeles, and State of
California, on the 29th day of April 1999.
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
Trustee
By: /s/ Sandee Parks
----------------------------------------
Sandee Parks
Authorized Signatory
<PAGE> 5
Exhibit T-1.7
<TABLE>
<S> <C> <C> <C> <C> <C>
U.S. Trust Company, N.A. Call Date: ST-BK: 06-0784 FFIEC 033
515 South Flower Street, Suite 2700 12/31/98 Cert #: 33332 Page RC-1
Los Angeles, CA 90071 Vendor ID:
D
Transit #:
12204024
---------
9
---------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
<CAPTION>
Schedule RC - Balance Sheet
C200 <-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
1. Cash and balances due from depository institutions (from Schedule RC-A) RCON
---- ---------
a. Noninterest-bearing balances and currency and coin ______ _______ 0081 10,239 1.a
(1)_________________
=========
b. Interest bearing balances ______ _______ 0071 199 1.b
(2)___________________________________________ ---------
2. Securities: ---------
a. Held-to-maturity securities (from Schedule RC-B, column ______ ______ 1754 0 2.a
A)______________
---------
b. Available-for-sale securities (from Schedule RC-B, column ______ _______ 1773 167,359 2.b
D)_____________
-- ---------
3. Federal funds sold and securities purchased under agreements to ______ _______ 1350 65,000 3.
resell_______
RCON ---------
4. Loans and lease financing receivables: ----
-------
a. Loans and leases, net of unearned income (from Schedule RC- 2122 60,536 4.a
C)___________
=======
b. LESS: Allowance for loan and lease 3123 979 4.b
losses______________________________
=======
c. LESS: Allocated transfer risk 3128 0 4.c
reserve___________________________________
-------
d. Loans and leases, net of unearned income, allowance, and reserve RCON ---------
(item 4.a minus 4.b and 4.c) ______________________________________ ---- 59,557
______ _______ 2125 4.d
=========
5. Trading assets__________________________________________________________ ______ _______ 3545 0 5.
=========
6. Premises and fixed assets (including capitalized ______ _______ 2145 9,041 6.
leases)_____________________
=========
7. Other real estate owned (from Schedule RC-M)_____________________________ ______ _______ 2150 0 7.
=========
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)____________________________________________________ ______ _______ 2130 0 8.
=========
9. Customers' liability to this bank on acceptances ______ _______ 2155 0 9.
outstanding_________________
=========
10. Intangible assets (from Schedule RC-M)___________________________________ ______ _______ 2143 30,166 10.
=========
11. Other assets (from Schedule RC-F)_______________________________________ ______ _______ 2160 6,802 11.
=========
12. Total assets (sum of items 1 through 11)________________________________ ______ _______ 2170 348,363 12.
---------
</TABLE>
- -------------
<PAGE> 6
Exhibit T-1.7
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 7
Exhibit T-1.7
<TABLE>
<S> <C> <C> <C> <C> <C>
U.S. Trust Company, N.A. Call Date: ST-BK: 06-0784 FFIEC 033
515 South Flower Street, Suite 2700 12/31/98 Cert #: 33332 Page RC-2
Los Angeles, CA 90071 Vendor ID:
D
Transit #:
12204024
---------
10
---------
</TABLE>
<TABLE>
<CAPTION>
Schedule RC - Continued
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
<S> <C> <C> <C> <C> <C> <C>
13. Deposits: RCON
a. In domestic offices (sum of totals of columns A and C from Schedule ---- -------
RC-E)__________________________________ 2200 291235 13.a
RCON -------
---- -------
(1) Noninterest-bearing 6631 84,867 13.a.
(1)____________________________________________ 1
======
(2) Interest-bearing 6636 206,36
__________________________________________________ 8
------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing____________________________________________
(2) Interest-bearing______________________________________________ -------
14. Federal funds purchased(2) and securities sold under agreements to RCON 0 14
repurchase: ----
2800
-------
15. a. Demand notes issued to the U.S. Treasury___________________________ ______ _______ 2840 0 15.a
=======
b. Trading liabilities________________________________________________ ______ _______ 3548 0 15.b
-------
16. Other borrowed money (includes mortgage indebtedness and obligations
under capitalized leases):
-------
a. With a remaining maturity of one year or less______________________ ______ _______ 2332 0 16.a
=======
b. With a remaining maturity of more than one year through three 0
years____________________ ______ _______ A547 16.b
-------
c. With a remaining maturity of more than three years_________________ ______ _______ A548 0 16.c
-------
17. Not applicable
-------
18. Bank's liability on acceptances executed and outstanding_______________ ______ _______ 2920 0 18.
=======
19. Subordinated notes and debentures______________________________________ ______ _______ 3200 0 19.
=======
20. Other liabilities (from Schedule RC-G)_________________________________ ______ _______ 2930 9,492 20.
-------
21. Total liabilities (sum of items 13 through 20)_________________________ ______ _______ 2948 300,727 21.
-------
22. Not applicable
EQUITY CAPITAL
-------
23. Perpetual preferred stock and related surplus__________________________ ______ ______ 3838 5,000 23.
=======
24. Common stock___________________________________________________________ ______ ______ 3230 2,000 24.
=======
25. Surplus (exclude all surplus related to preferred stock)_______________ ______ ______ 3839 25,004 25.
=======
26. a. Undivided profits and capital reserves_____________________________ ______ ______ 3632 14,703 26.a
=======
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
-------
b. Net unrealized holding gains (losses) on available-for-sale ______ ______ 8434 929 26.b
securities_______ -------
27. Cumulative foreign currency translation adjustments____________________
-------
28. a. Total equity capital (sum of items 23 through 27)__________________ ______ ______ 3210 47,636 28.
=======
29. Total liabilities and equity capital (sum of items 21 and 28)__________ ______ ______ 3300 348,363 29.
-------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that -------
best describes the most comprehensive level of auditing work performed RCON
for the bank by independent external auditors as of any date during ----
1997____________________________________________________________________ 6724 N/A M.1
-------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ---------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited life preferred stock and related surplus.
<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 ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<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-BASIC> 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>
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
for
Tender of all Outstanding
8 5/8% Series A Senior Subordinated Notes Due 2009
in Exchange for
8 5/8% Series B Senior Subordinated Notes Due 2009
of
Horseshoe Gaming Holding Corp.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _________, 1999 (THE "EXPIRATION DATE"),
UNLESS EXTENDED BY HORSESHOE GAMING HOLDING CORP.
EXCHANGE AGENT:
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
U.S. Trust Company, National Association U.S. Trust Company, National Association
c/o United States Trust Company of New York c/o United States Trust Company of New York
P.O. Box 841 770 Broadway, 13th Floor
Peter Cooper Station New York, New York 10003
New York, New York 10276-0841 Attention: Corporate Trust Operations
By Hand: By Facsimile:
U.S. Trust Company, National Association (212) 420-6211
c/o United States Trust Company of New York Attention: Customer Service
111 Broadway, Lower Level
New York, New York 10006-1906 Confirm by telephone:
Attention: Corporate Trust Operations (800) 225-2398
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated __________,
1999 (the "Prospectus") of Horseshoe Gaming Holding Corp. (the "Company"),
which, together with this Letter of Transmittal (the "Letter of Transmittal"),
constitute the Company's offer (the "Exchange Offer") to exchange $1,000 in
principal amount of a new series of 8 5/8% Series B Senior Subordinated Notes
Due 2009 (the "New Notes") of the Company for each $1,000 in principal amount of
outstanding 8 5/8% Series A Senior Subordinated Notes Due 2009 (the "Original
Notes") of the Company. The terms of the New Notes are identical in all material
respects to the terms of the
<PAGE> 2
Original Notes for which they may be exchanged pursuant to the Exchange Offer,
except that the offer and sale of the New Notes will have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and, therefore,
the New Notes will not bear legends restricting the transfer thereof.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Original Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
=============================================================================================
DESCRIPTION OF ORIGINAL NOTES TENDERED HEREWITH
=============================================================================================
Name(s) and Address(es) of Certificate Aggregate Principal Amount
Registered Holder(s) (Please Number(s) Principal Amount Tendered*
fill in) Represented by
Notes
<S> <C> <C> <C>
----------------- ------------------
Total $ $
================= ================= ==================
- ---------------------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered the full
aggregate principal amount represented by Original Notes. See Instruction 2.
=============================================================================================
</TABLE>
This Letter of Transmittal is to be used if certificates for Original
Notes are to be forwarded herewith.
-2-
<PAGE> 3
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person in whose name Original Notes are
registered or any other person who has obtained a properly completed bond power
from the registered holder.
Holders whose Original Notes are not immediately available or who cannot
deliver their Original Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Original
Notes according to the guaranteed delivery procedure set forth in the Prospectus
in the section "The Exchange Offer" under the heading "Procedures for
Tendering."
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE
THE FOLLOWING:
Name of Registered Holder(s):_____________________________________________
Name of Eligible Institution that Guaranteed Delivery:____________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO AND COMPLETE THE FOLLOWING:
Name:_____________________________________________________________________
Address:__________________________________________________________________
-3-
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of Original Notes. Subject to, and effective upon, the acceptance for exchange
of the Original Notes tendered herewith, the undersigned hereby exchanges,
assigns and transfers to, or upon the order of, the Company all of the
undersigned's right, title and interest in and to such Original Notes. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent as
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that said Exchange Agent acts as the agent of the Company in
connection with the Exchange Offer) to cause the Original Notes to be assigned,
transferred and exchanged. The undersigned represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire New Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The undersigned also warrants that, upon request, it will
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Original Notes.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus in the section "Exchange Offer" under the heading "Conditions." The
undersigned recognizes that as a result of these conditions (which may be
waived, in whole or in part, by the Company) as more particularly set forth in
the Prospectus, the Company may not be required to exchange any of the Original
Notes tendered hereby and, in such event, the Original Notes not exchanged will
be returned to the undersigned at the address shown below the signature of the
undersigned.
By tendering, each Holder of the Original Notes who wishes to exchange
Original Notes for New Notes in the Exchange Offer represents and acknowledges,
for the Holder and for each beneficial owner of such Original Notes, whether or
not the beneficial owner is the Holder, that: (i) the New Notes to be acquired
by the Holder and each beneficial owner, if any, are being acquired in the
ordinary course of business; (ii) neither the Holder nor any beneficial owner is
an affiliate, as defined in Rule 405 of the Securities Act of the Company or any
of the Company's subsidiaries; (iii) any person participating in the Exchange
Offer with the intention or purpose of distributing New Notes received in
exchange for Original Notes, including a broker-dealer that acquired Original
Notes directly from the Company, but not as a result of market-making activities
or other trading activities, will comply with the registration and prospectus
delivery requirements of the Securities Act, in connection with a secondary
resale of the New Notes acquired by such person; (iv) if the Holder is not a
broker-dealer, the Holder and each beneficial owner, if any, are not
participating, do not intend to participate and have no arrangement or
understanding with any person to participate in any distribution of the New
Notes received in exchange for Original Notes; and (v) if the Holder is a
broker-dealer that will receive New Notes for the Holder's own account in
exchange for Original
-4-
<PAGE> 5
Notes, the Original Notes to be so exchanged were acquired by the Holder as a
result of market-making or other trading activities and the Holder will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes received in the Exchange Offer. However, by so
representing and acknowledging and by delivering a prospectus, the Holder will
not be deemed to admit that it is an underwriter within the meaning of the
Securities Act.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Tendered Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time on the business day
prior to the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Original
Notes and any Original Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned.
(signature(s) on following page)
-5-
<PAGE> 6
TENDERING HOLDER(S) SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated: , 1999
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Original Notes or by any person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted herewith. If
signature by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, please set forth the full title of such person.) See Instruction 3.
Name(s):________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title):__________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.: ___________________________________________________
Tax Identification No.__________________________________________________________
-6-
<PAGE> 7
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instruction 3)
Authorized
Signature:______________________________________________________________________
Name:___________________________________________________________________________
Title:__________________________________________________________________________
Address:________________________________________________________________________
Name of Firm:___________________________________________________________________
Area Code and Telephone No.:____________________________________________________
Dated: __________________, 1999
-7-
<PAGE> 8
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Delivery of this Letter of Transmittal and Certificates. Certificates
for all physically delivered Original Notes, as well as a properly completed and
duly executed copy of this Letter of Transmittal or facsimile thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date.
The method of delivery of this Letter of Transmittal, the Original Notes
and any other required documents is at the election and risk of the Holder and,
except as otherwise provided below, the delivery will be deemed made only when
actually received by the Exchange Agent. Instead of delivery by mail, it is
recommended that Holders use an overnight or hand delivery service.
Holders whose Original Notes are not immediately available or who cannot
deliver their Original Notes and all other required documents to the Exchange
Agent on or prior to the Expiration Date may tender their Original Notes
pursuant to the guaranteed delivery procedure set forth in the Prospectus in the
section "Exchange Offer" under the heading "Procedures for Tendering." Pursuant
to such procedure: (i) such tender must be made by or through an Eligible
Institution (as defined in the Prospectus); (ii) on or prior to the Expiration
Date, the Exchange Agent must have received from such Eligible Institution a
letter, telegram or facsimile transmission setting forth the name and address of
the tendering Holder, the names in which such Original Notes are registered,
and, if possible, the certificate numbers of the Original Notes to be tendered;
and (iii) all tendered Original Notes as well as this Letter of Transmittal and
all other documents required by this Letter of Transmittal must be received by
the Exchange Agent within three trading days after the date of execution of such
letter, telex, telegram or facsimile transmission, all as provided in the
Prospectus in the section "Exchange Offer" under the heading "Procedures for
Tendering."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Original Notes for exchange.
2. Partial Tenders; Withdrawals. Tenders of Original Notes will be
accepted in denominations of $1,000 principal amount and integral multiples in
excess thereof. If less than the entire principal amount of Original Notes
evidenced by a submitted certificate is tendered, the tendering Holder must fill
in the principal amount tendered in the box entitled "Principal Amount
Tendered." A newly issued certificate for the principal amount of Original Notes
submitted but not tendered will be sent to such Holder as soon as practicable
after the Expiration Date. All Original Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
-8-
<PAGE> 9
Tenders of Original Notes pursuant to the Exchange Offer are irrevocable,
except that Original Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date. To be effective, a written, telegraphic, telex
or facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent. Any such notice of withdrawal must specify the person named in
the Letter of Transmittal as having tendered Original Notes to be withdrawn, the
certificate numbers and designation of the Original Notes to be withdrawn, the
principal amount of Original Notes delivered for exchange, a statement that such
a Holder is withdrawing its election to have such Original Notes exchanged, and
the name of the registered Holder of such Original Notes, and must be signed by
the Holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Original Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Original Notes promptly
following receipt of notice of withdrawal.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed
by the registered Holder(s) of the Original Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Original Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Original
Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Original Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Original Notes listed, such Original Notes
must be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the registered
Holder or Holders, in either case signed exactly as the name or names of the
registered Holder or Holders appear(s) on the Original Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
-9-
<PAGE> 10
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Original Notes are tendered: (i) by a
registered Holder of such Original Notes; or (ii) for the account of any
Eligible Institution.
4. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Original Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes, or Original Notes for principal
amounts not tendered or accepted for exchange, are to be delivered to, or are to
be issued in the name of, any person other than the registered Holder of the
Original Notes tendered hereby, or if a transfer tax is imposed for any reason
other than the exchange of Original Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Original Notes listed in this Letter of
Transmittal.
5. Waiver of Conditions. The Company reserves the absolute right to waive,
in whole or in part, any of the conditions to the Exchange Offer set forth in
the Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Notes. Any Holder whose Original
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
7. Requests for Assistance or Additional Copies. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth above. In addition, all questions
relating to the Exchange Offer, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be directed to the
Exchange Agent at the address specified in the Prospectus.
8. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or
Original Notes will be resolved by the Company, whose determination will be
final and binding. The Company reserves the absolute right to reject any or all
Letters of Transmittal or tenders that are not in proper form or the acceptance
of which would, in the opinion of the Company's counsel, be unlawful. The
Company also reserves the right to waive any irregularities or conditions of
tender as to the particular Original Notes covered by any Letter of Transmittal
or tendered pursuant to such Letter of Transmittal. None of the Company, the
Exchange Agent or any other person will be under any duty to give notification
of any defects or irregularities in tenders or incur any liability for failure
to give any such notification. The
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<PAGE> 11
Company's interpretation of the terms and conditions of the Exchange Offer shall
be final and binding.
9. Definitions. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together
with certificates for Original Notes and all other required documents) or a
Notice of Guaranteed Delivery must be received by the Exchange Agent on or prior
to the Expiration Date.
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<PAGE> 1
Exhibit 99.2
Tender for all Outstanding
8 5/8% Series A Senior Subordinated Notes Due 2009
in Exchange for
8 5/8% Series B Senior Subordinated Notes Due 2009
of
Horseshoe Gaming Holding Corp.
To Registered Holders:
We are enclosing herewith the material listed below relating to the
offer (the "Exchange Offer") by Horseshoe Gaming Holding Corp., a Delaware
corporation (the "Company"), to exchange its 8 5/8% Series B Senior Subordinated
Notes Due 2009 (the "New Notes"), the offer and sale of which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of the Company's issued and outstanding 8 5/8%
Series A Senior Subordinated Notes Due 2009 (the "Original Notes"), upon the
terms and subject to the conditions set forth in the Prospectus of the Company,
dated _________, 1999 (the "Prospectus"), and the related Letter of Transmittal.
Enclosed herewith are copies of the following documents:
1. Prospectus dated _________, 1999;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder from Beneficial Owner; and
5. Letter that may be sent to your clients for whose account you hold
Original Notes in your name or in the name of your nominee, to
accompany the instruction form referred to above, for obtaining such
client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire at 5:00 p.m., New York City time, on ____________,
1999, unless extended.
The Exchange Offer is not conditioned upon any minimum principal
amount of Original Notes being tendered.
<PAGE> 2
Pursuant to the Letter of Transmittal, each holder of Original Notes
will represent to the Company that: (i) the New Notes to be acquired by the
Holder and each beneficial owner, if any, are being acquired in the ordinary
course of business; (ii) neither the Holder nor any beneficial owner is an
affiliate, as defined in Rule 405 of the Securities Act of the Company or any of
the Company's subsidiaries; (iii) any person participating in the Exchange Offer
with the intention or purpose of distributing New Notes received in exchange for
Original Notes, including a broker-dealer that acquired Original Notes directly
from the Company, but not as a result of market-making activities or other
trading activities, will comply with the registration and prospectus delivery
requirements of the Securities Act, in connection with a secondary resale of the
New Notes acquired by such person; (iv) if the Holder is not a broker-dealer,
the Holder and each beneficial owner, if any, are not participating, do not
intend to participate and have no arrangement or understanding with any person
to participate in any distribution of the New Notes received in exchange for
Original Notes; and (v) if the Holder is a broker-dealer that will receive New
Notes for the Holder's own account in exchange for Original Notes, the Original
Notes to be so exchanged were acquired by the Holder as a result of
market-making or other trading activities and the Holder will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes received in the Exchange Offer. However, by so
representing and acknowledging and by delivering a prospectus, the Holder will
not be deemed to admit that it is an underwriter within the meaning of the
Securities Act.
The enclosed Instruction to Registered Holder from Beneficial Owner
contains an authorization by the beneficial owners of the Original Notes for you
to make the foregoing representations on their behalf.
The Company will not pay any fee or commission to any broker or
dealer or to any other persons (other than the exchange agent for the Exchange
Offer) in connection with the solicitation of tenders of Original Notes pursuant
to the Exchange Offer. The Company will pay or cause to be paid any transfer
taxes payable on the transfer of Original Notes to it, except as otherwise
provided in Instruction 4 of the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
Exchange Agent
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<PAGE> 3
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF THE COMPANY OR U.S. TRUST COMPANY, NATIONAL ASSOCIATION, OR AUTHORIZE
YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH
THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
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<PAGE> 1
Exhibit 99.3
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
of
8 5/8% Series A Senior Subordinated Notes Due 2009
of
Horseshoe Gaming Holding Corp.
To Registered Holder:
The undersigned hereby acknowledges receipt of the Prospectus dated
_________, 1999 (the "Prospectus"), of Horseshoe Gaming Holding Corp., a
Delaware corporation (the "Company"), and accompanying Letter of Transmittal
(the "Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange $1,000 in principal amount of a new series of
8 5/8% Series B Senior Subordinated Notes Due 2009 (the "New Notes") of the
Company for each $1,000 in principal amount of outstanding 8 5/8% Series A
Senior Subordinated Notes Due 2009 (the "Original Notes") of the Company.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
This will instruct you, the registered holder, as to the action to
be taken by you relating to the Exchange Offer with respect to the Original
Notes held by you for the account of the undersigned.
The aggregate face amount of the Original Notes held by you for the
account of the undersigned is (fill in amount):
$__________ of 8 5/8% Series A Senior Subordinated Notes Due 2009.
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate box):
|_| To TENDER the following Original Notes held by you for the
account of the undersigned (insert principal amount of Original
Notes to be tendered (if any)):
$__________ of 8 5/8% Series A Senior Subordinated Notes Due 2009.
|_| NOT to TENDER any Original Notes held by you for the account of
the undersigned.
If the undersigned instructs you to tender Original Notes held by
you for the account of the undersigned, it is understood that you are authorized
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that: (i)
the New Notes to be acquired by the Holder and each beneficial owner, if any,
are being acquired in the ordinary course
<PAGE> 2
of business; (ii) neither the Holder nor any beneficial owner is an affiliate,
as defined in Rule 405 of the Securities Act of the Company or any of the
Company's subsidiaries; (iii) any person participating in the Exchange Offer
with the intention or purpose of distributing New Notes received in exchange for
Original Notes, including a broker-dealer that acquired Original Notes directly
from the Company, but not as a result of market-making activities or other
trading activities, will comply with the registration and prospectus delivery
requirements of the Securities Act, in connection with a secondary resale of the
New Notes acquired by such person; (iv) if the Holder is not a broker-dealer,
the Holder and each beneficial owner, if any, are not participating, do not
intend to participate and have no arrangement or understanding with any person
to participate in any distribution of the New Notes received in exchange for
Original Notes; and (v) if the Holder is a broker-dealer that will receive New
Notes for the Holder's own account in exchange for Original Notes, the Original
Notes to be so exchanged were acquired by the Holder as a result of
market-making or other trading activities and the Holder will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes received in the Exchange Offer. However, by so
representing and acknowledging and by delivering a prospectus, the Holder will
not be deemed to admit that it is an underwriter within the meaning of the
Securities Act.
SIGN HERE
Name of beneficial owner(s) (please print):_____________________________________
Signature(s):___________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer identification or Social Security Number:______________________________
________________________________________________________________________________
Date:___________________________________________________________________________
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<PAGE> 3
Tender for all Outstanding
8 5/8% Series A Senior Subordinated Notes Due 2009
in Exchange for
8 5/8% Series B Senior Subordinated Notes Due 2009
of
Horseshoe Gaming Holding Corp.
To Our Clients:
We are enclosing herewith a Prospectus, dated _________, 1999, of
Horseshoe Gaming Holding Corp., a Delaware corporation (the "Company"), and a
related Letter of Transmittal (which together constitute the "Exchange Offer")
relating to the offer by the Company to exchange its 8 5/8% Series B Senior
Subordinated Notes Due 2009 (the "New Notes"), the offer and sale of which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of its issued and outstanding 8 5/8% Series A
Senior Subordinated Notes Due 2009 (the "Original Notes") upon the terms and
subject to the conditions set forth in the Exchange Offer.
Please note that the Exchange Offer will expire at 5:00 p.m., New York
City time, on ___________, 1999 unless extended.
The Exchange Offer is not conditioned upon any minimum principal
amount of Original Notes being tendered.
We are the holder of record of Original Notes held by us for your
account. A tender of such Original Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender Original
Notes held by us for your account.
We request instructions as to whether you wish to tender any or all
of the Original Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we may
on your behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Original Notes
will represent to the Company that (i) the New Notes to be acquired by the
Holder and each beneficial owner, if any, are being acquired in the ordinary
course of business, (ii) neither the Holder nor any beneficial owner is an
affiliate, as defined in Rule 405 of the Securities Act of the Company or any of
the Company's subsidiaries, (iii) any person participating in the Exchange Offer
with the intention or purpose of distributing New Notes received in exchange for
Original Notes, including a broker-dealer that acquired Original Notes directly
from the Company, but not as a result of market-making activities or other
trading activities, will comply with the registration and prospectus delivery
requirements
<PAGE> 4
of the Securities Act, in connection with a secondary resale of the New Notes
acquired by such person, (iv) if the Holder is not a broker-dealer, the Holder
and each beneficial owner, if any, are not participating, do not intend to
participate and have no arrangement or understanding with any person to
participate in any distribution of the New Notes received in exchange for
Original Notes, and (v) if the Holder is a broker-dealer that will receive New
Notes for the Holder's own account in exchange for Original Notes, the Original
Notes to be so exchanged were acquired by the Holder as a result of
market-making or other trading activities and the Holder will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes received in the Exchange Offer. However, by so
representing and acknowledging and by delivering a prospectus, the Holder will
not be deemed to admit that it is an underwriter within the meaning of the
Securities Act.
Very truly yours,
-2-
<PAGE> 1
Exhibit 99.4
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
8 5/8% Series A Senior Subordinated Notes Due 2009
in Exchange for
8 5/8% Series B Senior Subordinated Notes Due 2009
of
Horseshoe Gaming Holding Corp.
Registered holders of outstanding 8 5/8% Series A Senior Subordinated
Notes Due 2009 (the "Original Notes") of Horseshoe Gaming Holding Corp. (the
"Company"), who wish to tender their Original Notes in exchange for a like
principal amount of 8 5/8% Series B Senior Subordinated Notes Due 2009 (the "New
Notes") of the Company, and whose Original Notes are not immediately available
or who cannot deliver their Original Notes and Letter of Transmittal (and any
other documents required by the Letter of Transmittal) to U.S. Trust Company,
National Association (the "Exchange Agent"), prior to the Expiration Date, may
use this Notice of Guaranteed Delivery or one substantially equivalent hereto.
This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight delivery) or mail to the Exchange Agent. See the section
"The Exchange Offer" under the heading "Procedures for Tendering" in the
Prospectus of the Company, dated ____________, 1999 (the "Prospectus").
The Exchange Agent for the Exchange Offer is:
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
U.S. Trust Company, National Association U.S. Trust Company, National Association
c/o United States Trust Company of New York c/o United States Trust Company of New York
P.O. Box 841 770 Broadway, 13th Floor
Peter Cooper Station New York, New York 10003
New York, New York 10276-0841 Attention: Corporate Trust Operations
By Hand: By Facsimile:
U.S. Trust Company, National Association (212) 420-6211
c/o United States Trust Company of New York Attention: Customer Service
111 Broadway, Lower Level
New York, New York 10006-1906 Confirm by telephone:
Attention: Corporate Trust Operations (800) 225-2398
</TABLE>
<PAGE> 2
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
(signature(s) on following page)
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<PAGE> 3
Ladies & Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Exchange Offer and the Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Original Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus.
The undersigned understands that tenders of Original Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned understands that tenders of Original Notes pursuant to
the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time on
the business day prior to the Expiration Date. Tenders of Original Notes may
also be withdrawn if the Exchange Offer is terminated without any such Original
Notes being purchased thereunder or as otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Owner(s) or Name(s) of Registered Holder(s):
Authorized Signatory:_________________ ________________________________________
______________________________________ ________________________________________
______________________________________ ________________________________________
________________________________________
Principal Amount of Original Notes Address: _______________________________
Tendered: ____________________________
______________________________________ ________________________________________
______________________________________
Certificate No(s). of Original Notes Area Code and Telephone No.: ___________
(if available): _____________________
______________________________________ ________________________________________
_____________________________________ Date: __________________________________
-3-
<PAGE> 4
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Original Notes exactly as its (their) name(s) appear(s) on
certificates for Original Notes or on a security position listing it (them) as
the owner of Original Notes, or by person(s) authorized to become registered
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): _______________________________________________________________
_______________________________________________________________
Capacity: _______________________________________________________________
Address(es): _______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
Do not send Original Notes with this form. Original Notes should be sent to the
Exchange Agent together with a properly completed and duly executed Letter of
Transmittal.
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States or an "eligible guarantor institution" as defined by Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
hereby (a) represents that each holder of Original Notes on whose behalf this
tender is being made "own(s)" the Original Notes covered hereby within the
meaning of Rule 14e-4 under the Exchange Act, (b) represents that such tender of
Original Notes complies with such Rule 14e-4, and (c) guarantees that, within
three New York Stock Exchange trading days after the date of this Notice of
Guaranteed Delivery, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), together with certificates representing
the Orginal Notes covered hereby in proper form for transfer and required
documents will be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Original Notes tendered hereby to the Exchange Agent within the
time set forth above and that failure to do so could result in financial loss to
the undersigned.
Name of Firm:______________________ Authorized Signature:___________________
Address:___________________________
___________________________________ Name:___________________________________
Area Code and Telephone No.:_______ Title:__________________________________
___________________________________ Date:___________________________________
- --------------------------------------------------------------------------------
-4-
