-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MK2d4rgEn4C1zgpNKLupIXw1SBuo2Pawr0cD7rKzHo1F/EgRDCCajOPeFKME51hd CBv0nLvaXjzwwqrNM3xlzg== 0001095811-00-000845.txt : 20000331 0001095811-00-000845.hdr.sgml : 20000331 ACCESSION NUMBER: 0001095811-00-000845 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 28 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HORSESHOE GAMING HOLDING CORP CENTRAL INDEX KEY: 0001088118 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880425131 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-80737 FILM NUMBER: 588262 BUSINESS ADDRESS: STREET 1: 4024 S INDUSTRIAL RD CITY: LAS VEGAS STATE: NV ZIP: 89103 BUSINESS PHONE: 7026500080 MAIL ADDRESS: STREET 1: 4024 INDUSTRIAL RD CITY: LAS VEGAS STATE: NV ZIP: 89103 10-K405 1 FORM 10-K405 YEAR ENDED DECEMBER 31, 1999 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------- FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to [Commission file number 333-0214] HORSESHOE GAMING HOLDING CORP. (Exact name of registrant as specified in its charter) Delaware [88-0425131] (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2300 Empress Drive Joliet, IL 60436 (Address of principal executive offices) Registrant's telephone number, including area code: (815) 773-0700 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the equity of Horseshoe Gaming Holding Corp. held by non-affiliates of Horseshoe Gaming Holding Corp. is inapplicable as the equity of Horseshoe Gaming Holding Corp. is privately held. DOCUMENTS INCORPORATED BY REFERENCE None. ================================================================================ 2 HORSESHOE GAMING HOLDING CORP. INDEX TO ANNUAL REPORT ON FORM 10-K For the fiscal year ended December 31, 1999
Page ---- PART I Item 1. Business 3 Item 2. Properties 24 Item 3. Legal Proceedings 25 Item 4. Submission of Matters to a Vote of Security Holders 25 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 25 Item 6. Selected Financial Data 26 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A Qualitative and Quantitative Disclosures About Market Risk 35 Item 8. Financial Statements and Supplementary Data 35 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 35 PART III Item 10. Directors and Executive Officers of the Registrant 36 Item 11. Executive Compensation 38 Item 12. Security Ownership of Certain Beneficial Owners and Management 41 Item 13. Certain Relationships and Related Transactions 42 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 43
2 3 PART I ITEM 1 BUSINESS GENERAL Horseshoe Gaming Holding Corp. (the "Company") is a leading, multi-jurisdictional gaming company which owns and operates, through its wholly owned subsidiaries, riverboat casinos under the "Empress", "Horseshoe" and "Binion" names in Joliet, Illinois, Hammond, Indiana, Bossier City, Louisiana and Tunica County Mississippi. The principal executive offices of the Company are located at 2300 Empress Drive, Joliet, IL 60436, telephone (815) 773-0700. Horseshoe Entertainment LP, ("HE"), the entity that owns and operates Horseshoe Bossier City commenced operation on July 9, 1994 and Robinson Property Group LP, ("RPG"), the entity that owns and operates Horseshoe Tunica commenced operation on February 13, 1995. Both of these casinos previously were owned indirectly by Horseshoe Gaming, LLC ("Horseshoe Gaming"). On April 15, 1999, the members of Horseshoe Gaming holding over 90% of the aggregate ownership interests in Horseshoe Gaming contributed to the Company their membership interests in Horseshoe Gaming in exchange for interests in the Company. The remaining ownership interests in Horseshoe Gaming either were contributed to the Company in exchange for interests in the Company or acquired by the Company or Horseshoe Gaming so that on December 1, 1999, the Company owned 100% of Horseshoe Gaming. On December 1, 1999, the Company, acquired from Empress Entertainment, Inc. ("Empress"), one of the largest operators of riverboat casinos serving the Chicago metropolitan area, all of the outstanding stock of two of Empress' operating subsidiaries, Empress Casino Hammond Corporation ("Empress Hammond"), which operates Empress Hammond, and Empress Casino Joliet Corporation ("Empress Joliet"), which operates Empress Joliet, for $494.9 million in cash (the "Empress Merger"). Empress Joliet commenced operation on June 17, 1992 and Empress Hammond commenced operation on June 28, 1996. Upon consummation of the Empress Merger, Horseshoe Gaming was merged into the Company (the "Internal Consolidation"). The Empress Merger was accomplished through two simultaneous merger transactions of the Company's wholly owned subsidiaries with and into the Empress subsidiaries that own Empress Hammond and Empress Joliet, with the Empress subsidiaries surviving. In connection with the Empress Merger, the Company assumed $150 million of Empress' 8 1/8% Senior Subordinated Notes due 2006 (the "Empress Notes"). Pursuant to a change in control offer to purchase the Empress Notes at 101% of their principal amount in accordance with the terms of the relevant Empress Indenture, the Company retired all of the Empress Notes in January 2000. Upon the closing of the Empress Mergers, the Company announced its plans to relocate its corporate headquarters and move its senior executives and their support staff to Joliet, Illinois. The Company anticipates the closing of corporate offices in Las Vegas, Nevada and Memphis Tennessee by April 30, 2000. The cost of the relocation is not expected to be material to the financial position or results of operations of the Company. 3 4 CHICAGO OPERATIONS MARKET The Chicago market, which encompasses portions of both Illinois and Indiana, consists of approximately 8.0 million people within a radius of 50 miles from downtown Chicago. The Illinois Riverboat Act authorizes ten owner's licenses for riverboat gaming operations, all of which have been issued, and four of which, including Empress Joliet, serve the Chicago metropolitan area. Current 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 HAMMOND AND EMPRESS JOLIET Empress Hammond, the closest casino to downtown Chicago, includes an approximately 125,000 square foot pavilion. The real estate used by Empress Hammond is leased from the City of Hammond and is subject to a 75-year lease. The casino operation is located on a catamaran vessel and consists of approximately 42,500 square feet of gaming space and contains 1,677 slot machines, 55 table games and 8 poker tables. The pavilion is mythologically-themed and features a lounge, steakhouse, buffet, deli and a 150-seat banquet room. Empress Joliet and the surrounding land-based facilities are located on approximately 350 acres along the Des Plaines River in Joliet, Illinois. The casino is situated on two catamaran vessels and collectively consists of 36,000 square feet of gaming space containing 1,072 slot machines, 46 table games and 7 poker tables. Empress Joliet includes an approximately 150,000 square foot Egyptian-themed pavilion, featuring a lounge, steakhouse, cafe, buffet and a 400-seat banquet room. A three-story hotel with 102 rooms and an 80-space recreational vehicle park support Empress Joliet. Empress Joliet provides surface parking for 2,350 cars. COMPETITION Empress Hammond and Empress Joliet primarily compete with seven casinos, four of which are located on Lake Michigan in Indiana and three of which are located in 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 Rosemont, Illinois, which could have a material adverse effect on the operations of Empress Hammond and Empress Joliet. Outside of Illinois and Indiana, several other states have authorized gaming activities and other states in the future may authorize such gaming activities. To date, riverboat and/or dockside gaming has also been approved in nearby states such as Iowa and Missouri. Moreover, three land-based casinos have been authorized in Detroit, Michigan, two of which have commenced gaming operations. Empress Hammond and Empress Joliet also compete, and expect to compete, with various gaming operations on Native American land, including those located, or to be located, in Michigan, Wisconsin and possibly northern Indiana. The Pokagon Band of the Potawatomi Indians has recently proposed building a land-based casino in northern Indiana, specifically in St. Joseph or Elkhart Counties. In addition, the Saginaw Chippewa Tribe has substantially completed the construction of, and is currently operating, one of the largest Native American gaming complexes in the U.S. in Mt. Pleasant, Michigan, approximately 250 miles northeast of Hammond, Indiana. The Governor of Michigan has recently signed a number of Indian Compacts that would allow land-based casinos in Michigan, including southwest Michigan. The opening of land-based casinos, which generally have a competitive advantage over riverboat casinos, in close proximity to Empress Hammond and Empress Joliet, could have a material adverse effect on the operations of both 4 5 casinos. In addition, lower age limits at Native American casinos may put Empress Hammond and Empress Joliet, each with a minimum age requirement for admittance of 21, at a competitive disadvantage. BOSSIER CITY OPERATIONS MARKET The Bossier City/Shreveport market is the largest gaming market in the State of Louisiana. While approximately 350,000 people are full-time residents of Bossier City/Shreveport, approximately 16.5 million people reside within 250 miles of the Company's Bossier City casino (approximately four hours driving distance). The Bossier City/Shreveport market attracts a significant amount of its gaming clientele from the Dallas/Fort Worth area of Texas. HORSESHOE BOSSIER CITY The Horseshoe Bossier City is located on approximately 30 acres along the east side of the Red River, directly facing downtown Shreveport, Louisiana. The casino is located on a riverboat, which has approximately 62,400 square feet spread out over four-decks with approximately 30,000 square feet of gaming space, including 1,550 gaming devices and 57 table games. The casino operation is complemented by an approximately 55,000 square foot dockside pavilion, a new 25 story hotel with 606 deluxe rooms, meeting facilities, a health club and other luxury hotel amenities and a 1,750 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, Horseshoe Bossier City features a new entertainment facility that provides seating for 1,300 guests. COMPETITION The Horseshoe Bossier City competes directly with three other riverboat casinos in Shreveport and Bossier City. These four riverboats together currently comprise the Bossier City/Shreveport market. The Louisiana Gaming Control Board has recently granted approval to Hollywood Casinos and New Orleans Paddlewheels Company to relocate the license for the New Orleans Flamingo Hilton Casino, which is now closed, to a new facility to be located in Shreveport. The State of Louisiana 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 Control Board accepted applications for the fifteenth license on November 15, 1999, the Louisiana Gaming Control Board has not granted the remaining fifteenth license, and the Governor of the State of Louisiana has included the elimination of the fifteenth license in the March 13, 2000 call of the special session of the Louisiana legislature. If this license is granted, it may be located in the Bossier City/Shreveport market. The impact on operating margins from the overall increase in supply to this market is uncertain. As only 15 Louisiana riverboats and one land-based casino in New Orleans have been authorized by law, potential competition in Louisiana is presently limited. The Bossier City/Shreveport casinos capture the Dallas/Ft. Worth market and share the Houston area market with four existing riverboats in Lake Charles Louisiana, a land-based casino owned by the Coushatta Indian Tribe located near Lake Charles and two riverboats in Baton Rouge, Louisiana. If Texas or Arkansas were to approve gaming, competition would increase, which would have an adverse effect on our operations. Management believes that the Bossier City/Shreveport casinos have an operational advantage over the other Louisiana riverboats because the Bossier City/Shreveport riverboats do not have to 5 6 cruise in three-hour increments. The cruising exemption for the Bossier City/Shreveport market was included in the Louisiana Gaming Statutes to account for the difficult navigational aspects of the Red River. The Horseshoe Bossier City casino remains dockside, allowing passengers to enter and exit as they please and enabling management to conduct 24-hour a day continuous gaming operations. TUNICA OPERATIONS MARKET The Tunica County, Mississippi market is the largest gaming market in the State of Mississippi and the closest legalized gaming jurisdiction to the Memphis, Tennessee metropolitan area, which is only 30 miles away. Tunica County benefits from its proximity to several major population centers and to the popularity of the Memphis region as a vacation destination. Over 2.5 million people live within 90 miles and over 10.7 million people live within 200 miles of the Horseshoe Tunica. Within 500 miles of the Company's Tunica County casino (approximately eight hours driving distance or approximately one-hour flight time) the total population base increases to approximately 54.9 million. HORSESHOE TUNICA The Horseshoe Tunica is located in Tunica County, Mississippi, at Casino Center, a 70-acre three-casino complex. The casino operation consists of approximately 327,000 square feet. The gaming area comprises approximately 62,000 square feet and contains 1,596 slot machines, 61 table games and 14 poker tables. The casino facility includes two specialty restaurants, a buffet, deli, bars, retail outlets, a 14-story hotel tower with 312 deluxe rooms, a total of 507 rooms, a health club, meeting room facilities, an 1,100 space, four-level parking garage, and a 1,000-seat themed entertainment facility, "Bluesville," that has hosted some of the world's renowned musical talent such as Julio Iglesias, Vince Gill, Roger Daltrey and Ringo Starr. COMPETITION The Horseshoe Tunica competes with nine other casinos in the competitive Tunica County, Mississippi, market. Some of our competitors are presently undergoing expansion and others may do so in the future, which may 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 a material adverse effect on the operations of Horseshoe Tunica. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Annual Report on Form 10-K contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which generally can be identified by the use of such terms as "may," "expect," "anticipate," "believe," "continue," or similar variations or the negative thereof. These forward-looking statements involve risks and uncertainties, many of which 6 7 are outside the Company's control and, accordingly, actual results may differ materially. Factors that might cause a difference include, but are not limited to, the competitive nature of the casino gaming industry, risk of increases in the number of competitors in the markets in which the Company operates, risk of changes in gaming laws and regulations, licensing and other governmental approvals, construction factors, environmental restrictions, soil and water conditions, weather and other hazards, access to available and feasible financing, relations with partners, owners, employees and other third parties, conditions of credit markets and other business and economic conditions, litigation, judicial actions and political uncertainties and other factors discussed from time to time in the Company's filings with the SEC. Any forward looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. GAMING REGULATORY MATTERS The company is subject to state and Federal laws, which regulate businesses generally and the gaming business specifically. Below is a brief description of some of the more significant regulations to which the company is subject to. All laws are subject to change and different interpretations. 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. Gaming authority approvals are now required in each of Indiana, Illinois, Mississippi, and Louisiana. INDIANA The Indiana Riverboat Act authorizes the issuance of up to 11 riverboat gaming licenses on waterways located in Indiana counties that 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 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. The Indiana Riverboat Act restricts the granting of the owner's licenses by location. The licenses (excluding the license for Patoka Lake) must be awarded as follows: (i) two licenses for riverboats operating from Gary; (ii) one license for a riverboat operating in Hammond; (iii) one license for a riverboat operating in East Chicago; (iv) one license for a riverboat operating in any city located in LaPorte, Porter or Lake counties, not including the above-named cities; and (v) five licenses for riverboats that operate upon the Ohio River from counties contiguous thereto and with no more than one operating in any county. The Indiana Gaming Commission has issued the five authorized riverboat owner's licenses on Lake Michigan and four riverboat owner's licenses on the Ohio River, and a certificate of suitability has been issued to another applicant, subject to final licensure, on the Ohio River. 7 8 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. The Indiana Riverboat Act requires that a licensed owner undergo a complete investigation every three years. If for any reason the license is terminated, the assets of the riverboat gaming 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 licenses. 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. All Indiana state excise taxes, use taxes, and gross retail taxes apply to sales on a riverboat. 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. The licensee sets minimum and maximum wagers on games. 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 (i) have a valid certificate of inspection from the U.S. Coast Guard to carry at least 500 passengers; and (ii) 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. 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. 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 (i) 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 (ii) when weather or water conditions prevent the boat from cruising. The Indiana Gaming Commission may grant extended cruise hours in its discretion. If the master of the riverboat reasonably determines and certifies in writing that specific weather conditions or 8 9 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 (i) the master determines that the conditions have sufficiently diminished for the riverboat to safely proceed; or (ii) the duration of the authorized excursion has expired. 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. Indiana corporations are also subject to the Indiana gross income tax, the Indiana adjusted gross income tax and the Indiana Supplemental corporate net income tax. 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 a 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. The Indiana Gaming Commission may suspend, limit or revoke the owner's license or impose a fine for failure to comply with the statutory requirements. 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 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. The Indiana Gaming Commission has a rule requiring the reporting of certain currency transactions, which is similar to that required by Federal authorities. 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 9 10 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. 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. 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 (i) it allegedly creates an unequal privilege because under the Indiana Riverboat Act "citizens opposed to riverboat gaming must win several elections to ensure riverboat gaming is not allowed in their county" but "citizens who support riverboat gaming need only win once to entrench riverboat gaming indefinitely into a county"; and (ii) 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 and, on June 10, 1999, the State of Indiana's motion to dismiss the complaint was granted. The matter is now pending before the Indiana Court of Appeals. 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 the Company. ILLINOIS The Illinois Riverboat Act, as amended, authorizes the issuance of up to ten riverboat gaming licenses by the five-member Illinois Gaming Board on water within or forming a boundary of Illinois, except for Lake Michigan. The Illinois Riverboat Act requires the owner of a riverboat gaming operation to hold an owner's license issued by the Illinois Gaming Board. Each owner's license permits up to two boats as a part of a single riverboat gaming operation. The Illinois Riverboat Act regulates the facilities, persons, associations and practices related to riverboat gaming operations. The Illinois Riverboat 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 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 Act restricts the granting of certain of the ten owner's licenses by location. Three 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 five owner's licenses are not restricted as to location. In addition to the ten owner's license which are authorized under the 10 11 Illinois Riverboat 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. For licenses renewed on or after May 1, 1998, renewal may be for a period of up to four years. 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 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: (i) key personnel, including officers, directors, managing agents, or holders of a 5% or greater ownership interest in the business entity; (ii) its organizational form; (iii) the equity and debt capitalization of the entity; (iv) investors and/or debt holders; (v) sources of funds; (vi) the applicant's economic development plan; (vii) riverboat capacity or significant design changes; (viii) the number of gaming positions; (ix) anticipated economic impact; or (x) oral or written agreements relating to the acquisition or disposition of property of a value greater than $1,000,000. 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: (i) working capital requirements, (ii) debt service requirements, (iii) requirements for repairs and maintenance and (iv) capital expenditure requirements. 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 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. On November 30, 1999, the Illinois Gaming Board approved the transfer of the ownership of Empress Joliet from Empress to the Company. Empress Joliet's gaming license will be up for renewal in June 2000. Currently, Jack B. Binion, the principal owner of Empress Joliet, is seeking a key person license approval from the Illinois Gaming Board. 11 12 The investigation of Mr. Binion's key person application by the Illinois Gaming Board is ongoing. The Illinois Gaming Board has not informed Mr. Binion or Horseshoe as to the date the investigation will be completed. It is unknown the effect, if any, a denial of Mr. Binion's key person application will have on the ability of Horseshoe to continue to do business in Illinois or elsewhere. The Illinois Riverboat Act permits the licensee to set the maximum or minimum limits on wagering. No person under the age of 21 is permitted to wager in Illinois. Under the Illinois Riverboat 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 and must comply with applicable Federal and state laws, including, but not limited to, U.S. Coast Guard regulations. A $2 per person admission tax is imposed on the owner of a riverboat operation. Prior to January 1, 1998, the Illinois Riverboat Act imposed a 20% tax on all adjusted gross receipts on each Illinois gaming vessel. Effective on January 1, 1998, the Illinois Riverboat Act was amended to impose the following graduated wagering tax rates on adjusted gross receipts from gaming: (i) 15% of the calendar year adjusted gross receipts up to and including $25.0 million; (ii) 20% of the calendar year adjusted gross receipts in excess of $25.0 million but not exceeding $50.0 million; (iii) 25% of the calendar year adjusted gross receipts in excess of $50.0 million but not exceeding $75.0 million; (iv) 30% of the calendar year adjusted gross receipts in excess of $75.0 million but not exceeding $100.0 million; and (v) 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 on a daily basis. The Illinois Gaming Board is authorized to conduct investigations into the conduct of gaming and into alleged violations of the Illinois Riverboat 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 its license, 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 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 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. 12 13 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. MISSISSIPPI The ownership and operation of casino facilities in Mississippi are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Mississippi Gaming Commission and the Mississippi State Tax Commission. The Mississippi Gaming Control Act (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 Nevada Gaming Control Act. Effective October 29, 1991, the Mississippi Gaming Commission adopted regulations in furtherance of the Mississippi Act (the "regulations") 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: - prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity; - establish and maintain responsible accounting practices and procedures; - 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; - prevent cheating and fraudulent practices; - provide a source of state and local revenues through taxation and licensing fees; and - ensure that gaming licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation by the Mississippi Gaming Commission. Changes in Mississippi law, the regulations and/or interpretations of the Mississippi Act and the regulations by the Mississippi Gaming Commission may limit or otherwise materially affect the types of gaming that may be conducted and could have a material adverse effect on the Company and RPG's Mississippi gaming operations. The Mississippi Act provides for legalized dockside gaming at the discretion of the 14 counties that either border the Gulf Coast or the Mississippi River, but only if the voters in such counties have not voted to prohibit gaming in that county. As of March 17, 2000, dockside gaming was permissible in nine of the 14 eligible counties in the state and gaming operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren and Washington counties. Under Mississippi law, gaming vessels must be located on the Mississippi River or on navigable waters in eligible counties along the Mississippi River, or in the waters of the State of Mississippi lying south of the state in eligible counties along the Mississippi Gulf Coast. On May 29, 1993, the Mississippi Gaming Commission granted preliminary site approval for the site of the Horseshoe Tunica. Although there are no legislative limitations on the number of gaming licenses which may be issued in Mississippi, competition is limited by the availability of legal, suitable and accessible sites. Mississippi law permits unlimited stakes gaming on permanently moored vessels on a continuous 24-hour basis and does not restrict the size of the gaming area or the percentage of vessel space, which may be utilized for gaming. All types of casino games (other than bingo and race 13 14 and/or sports betting) may be offered. House credit may be extended to qualified patrons. The legal age for gaming in Mississippi is 21. The Company and RPG are subject to the licensing and regulatory control of the Mississippi Gaming Commission. The Company is registered under the Mississippi Act as a holding company of RPG and will be required periodically to submit detailed financial, operating and other reports to the Mississippi Gaming Commission and furnish any other information, which the Mississippi Gaming Commission may require. If the Company is unable to satisfy the registration requirements of the Mississippi Act, the Company and RPG cannot own or operate gaming facilities in Mississippi. RPG must maintain a gaming license from the Mississippi Gaming Commission to operate a casino in Mississippi. The Mississippi Gaming Commission issues the licenses. RPG will also be required periodically to submit detailed financial, operating and other reports to the Mississippi Gaming Commission and the Mississippi State Tax Commission and to furnish any other information required thereby. Gaming licenses are not transferable, are issued for a maximum term of three years and must be renewed periodically thereafter. RPG received its Mississippi gaming operator's license on October 13, 1994 and renewals on October 14, 1996 and October 15, 1998. No person may become a stockholder of or receive any percentage of profits from a licensed subsidiary of a holding company without first obtaining licenses and approvals from the Mississippi Gaming Commission. Certain of the Company's officers, directors and employees and the officers, directors and key employees of RPG who are actively and directly engaged in the administration or supervision of gaming in Mississippi must be found suitable or be licensed by the Mississippi Gaming Commission. On October 13, 1994, the Mississippi Gaming Commission found certain key principals of the Company and RPG suitable, and all findings of suitability have been maintained and are current. The Company believes that it and RPG have applied for all necessary findings of suitability with respect to these persons, although the Mississippi Gaming Commission, in its discretion, may require additional persons to file applications for findings of suitability. In addition, any person having a material relationship or involvement with the Company or RPG may be required to be found suitable, in which case those persons must pay the costs and fees associated with the investigation. A finding of suitability requires submission of detailed personal and financial information followed by a thorough investigation. There can be no assurance that a person who is subject to a finding of suitability will be found suitable by the Mississippi Gaming Commission. The Mississippi Gaming Commission may deny an application for a finding of suitability for any cause that it deems reasonable. Findings of suitability must be periodically renewed. Changes in certain licensed positions must be reported to the Mississippi Gaming Commission. In addition to its authority to deny an application for a finding of suitability, the Mississippi Gaming Commission has jurisdiction to disapprove a change in a licensed position. The Mississippi Gaming Commission has the power to require the Company and RPG to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in their capacities. Employees associated with gaming must obtain work permits that are subject to immediate suspension. The Mississippi Gaming Commission will refuse to issue a work permit to a person convicted of a felony and it may refuse to issue a work permit to a gaming employee if the employee has committed various misdemeanors or knowingly violated the Mississippi Act or for any other reasonable cause. 14 15 At any time, the Mississippi Gaming Commission has the power to investigate and require a finding of suitability of the Company's record or beneficial stockholders, regardless of the percentage of ownership. Mississippi law requires any person who acquires more than 5% of the common stock of a publicly-traded corporation registered with the Mississippi Gaming Commission to report the acquisition to the Mississippi Gaming Commission, and that person may be required to be found suitable. Also, any person who becomes a beneficial owner of more than 10% of the common stock of such a company, as reported to the Commission, must apply for a finding of suitability by the Mississippi Gaming Commission and must pay the costs and fees that the Mississippi Gaming Commission incurs in conducting the investigation. The Mississippi Gaming Commission has generally exercised its discretion to require a finding of suitability of any beneficial owner of more than 5% of a registered public or private company's common stock. However, the Mississippi Gaming Commission has adopted a policy that may permit institutional investors to own beneficially up to 15% of a registered public or private company's common stock without a finding of suitability. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The Mississippi Gaming Commission may at any time dissolve, suspend, condition, limit or restrict a finding of suitability to own the Company's equity interests for any cause it deems reasonable. 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. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of the Company's securities beyond the time that the Mississippi Gaming Commission prescribes, may be guilty of a misdemeanor. The Company is subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company or RPG, the Company: - pays the unsuitable person any dividend or other distribution upon its voting securities; - recognizes the exercise, directly or indirectly, or any voting rights conferred by securities held by the unsuitable person; - pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in limited and specific circumstances; or - fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value within ten days. The Company may be required to disclose to the Mississippi Gaming Commission, upon request, the identities of the holders of any debt or other securities. In addition, under the Mississippi Act, the Mississippi Gaming Commission may, in its discretion: - require holders of debt securities of registered corporations to file applications; - investigate the holders; and - require the holders to be found suitable to own the 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 debt or equity securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Gaming Commission in connection with the investigation. 15 16 RPG must maintain in Mississippi a current ledger with respect to the ownership of its equity securities and the Company must maintain in Mississippi a current list of its stockholders which must reflect the record ownership of each outstanding share of any equity security issued by the Company. The ledger and stockholder lists must be available for inspection 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 that disclosure may be grounds for finding the record holder unsuitable. The Company must also render maximum assistance in determining the identity of the beneficial owner. The Mississippi Act requires that the certificates representing securities of the Company bear a legend to the general effect that the securities are subject to the Mississippi Act and the regulations of the Mississippi Gaming Commission. The Mississippi Gaming Commission has the power to impose additional restrictions on the Company and the holders of its securities at any time. Substantially all loans, leases, sales of securities and similar financing transactions by a licensed gaming subsidiary must be reported to or approved by the Mississippi Gaming Commission. A licensed gaming subsidiary may not make a public offering of its securities, but may pledge or mortgage casino facilities if it obtains the prior approval of the Mississippi Gaming Commission. The Company may not make a public offering or private placement of its securities without the prior approval of 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 those purposes. Under the regulations of the Mississippi Gaming Commission, RPG may not guarantee a security issued by the Company pursuant to a public offering or private placement, or pledge its assets to secure payment or performance of the obligations evidenced by the security issued by the Company, without the prior approval of the Mississippi Gaming Commission. Similarly, the Company may not pledge the ownership interests of RPG, nor may the pledgee of such ownership interests foreclose on such a pledge, without the prior approval of the Mississippi Gaming Commission. Moreover, restrictions on the transfer of an equity security issued by RPG and agreements not to encumber such securities are ineffective without the prior approval of the Mississippi Gaming Commission. Neither the Company nor RPG may change its control through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover without the prior approval of the Mississippi Gaming Commission. The Mississippi Gaming Commission may also require controlling stockholders, officers, directors, and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. Neither the Company nor RPG may engage in gaming activities in Mississippi while the Company, RPG and/or persons found suitable to be associated with the gaming license of RPG conduct gaming operations outside of Mississippi without approval of the Mississippi Gaming Commission. The Mississippi Gaming Commission may require determinations that there are means for the Mississippi Gaming Commission to have access to information concerning the Company's and its affiliates' out-of-state gaming operations. RPG received waivers of foreign gaming approval from the Mississippi Gaming Commission for the conduct of gaming operations in Nevada, Louisiana, Wisconsin, Alaska, Indiana and Illinois, but may be required to obtain the approval or 16 17 a waiver of such approval from the Mississippi Gaming Commission before engaging in any additional future gaming operations outside of Mississippi. If the Mississippi Gaming Commission decides that a licensed gaming subsidiary violated a gaming law or regulation, the Mississippi Gaming Commission could limit, condition, suspend or revoke the license of the subsidiary. In addition, the licensee, its registered holding company, and the persons involved could be subject to substantial fines for each separate violation. A violation under a licensee's or any other of its registered holding company's operating subsidiaries' gaming licenses may be deemed a violation of the gaming license of any other of the registered holding company's operating subsidiaries or of the licensee. Because of a violation, the Mississippi Gaming Commission could attempt to appoint a supervisor to operate the casino facilities. Limitation, conditioning or suspension of a licensee's gaming license or its registered holding company's registration as a holding company, or the appointment of a supervisor could, and revocation of any gaming license or registration would, materially adversely affect the business of the licensee, its registered holding company, and its registered holding company's other operating subsidiaries. A licensed gaming subsidiary must pay license fees and taxes, computed in various ways depending on the type of gaming involved, to the State of Mississippi and to the county or city in which the licensed gaming subsidiary conducts operations. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon: - a percentage of the gross gaming revenues received by the casino operation; - the number of slot machines operated by the casino; and - the number of table games operated by the casino. The license fee payable to the State of Mississippi is based upon "gaming receipts," generally defined as gross receipts less payouts to customers as winnings, and equals: - 4% of gaming receipts of $50,000 or less per month; - 6% of gaming receipts over $50,000 and less than $134,000 per month; and - 8% of gaming receipts over $134,000 per month. These license fees are allowed as a credit against a licensees Mississippi income tax liability for the year paid. The gross revenue fee imposed by the Mississippi cities and counties in which casino operations are located is in addition to the fees payable to the State of Mississippi and equals approximately 4% of the gaming receipts. The Mississippi Gaming Commission adopted a regulation in 1994 requiring as a condition of licensure or license renewal that a gaming establishment's plan include a 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. Infrastructure facilities are defined in the regulation to include a hotel with at least 250 rooms, theme park, golf course and other similar facilities. With the opening of its hotel and other amenities, the Company believes the Horseshoe Tunica is in compliance with this requirement. On January 21, 1999, the Mississippi Gaming Commission adopted an amendment to this regulation which increased the infrastructure requirement to 100% from the existing 25%; however, the regulation grandfathers existing licensees and applies only to new casino projects and casinos that are not operating at the time of acquisition or purchase, and would therefore not apply to the Horseshoe Tunica. In any event, the Horseshoe Tunica would comply with the increased requirement. 17 18 Both the local jurisdiction and the Alcoholic Beverage Control Division of the Mississippi State Commission license, control and regulate the sale of alcoholic beverages, including beer and wine, by RPG at the Horseshoe Tunica. The Horseshoe Tunica is in an area designated as a special resort area, which allows casinos located therein to serve alcoholic beverages on a 24-hour basis. The Alcoholic Beverage Control Division requires that all equity owners and managers file personal record forms and fingerprint cards for their licensing process. In addition, owners of more than 5% of RPG's equity and RPG's officers and managers must submit detailed financial information to the Alcoholic Beverage Control Division. All such licenses are non-transferable. The Alcoholic Beverage Control Division must approve changes in key positions. The Alcoholic Beverage Control Division has the full power to limit, condition, suspend or revoke any license for the service of alcoholic beverages or to place a licensee on probation with or without conditions. Any disciplinary action could, and revocation would, have a material adverse effect upon the operations of the Horseshoe Tunica. In Mississippi, two requests were filed with the Secretary of State in 1998 to place on the November 1999 statewide ballot a voter initiative to ban gaming in the state. The local circuit court found the wording of both initiatives invalid. The sponsor appealed the local circuit court's decision on one of the initiatives to the Mississippi Supreme Court, which affirmed the ruling that the initiative's wording was invalid. Therefore, neither initiative was included on the November 1999 ballot. Since Mississippi is a voter initiative state, it is possible that the gaming ban initiative could be re-worded and meet the requirements to be included in the ballot of a later statewide election. A third request for a nearly identical initiative was filed with the Secretary of State in 1999. The local circuit court again found the wording of the initiate invalid. The sponsor has appealed that decision to the Mississippi Supreme Court, where the matter is pending. If the sponsor prevails in court and is able to collect the requisite number of signatures, the third request could place on the November 2002 or a subsequent state-wide ballot a voter initiative to ban gaming in the state. An affirmative vote representing both a majority of the votes cast with respect to the initiative and at least 40% of the voters casting votes on any matter in the election is required to pass any Mississippi initiative. If any initiative is submitted to the voters of Mississippi for their consideration, no assurance can be given regarding the outcome of the vote or the impact of the vote on the Company's gaming operations in Mississippi. LOUISIANA 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 Control Board accepted applications for the fifteenth license on 18 19 November 15, 1999, the Louisiana Gaming Control Board has not granted the remaining fifteenth license, and the Governor of the State of Louisiana included the elimination of the fifteenth license in the March 13, 2000 call of the special session of the Louisiana Legislature. 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) 18.5% 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. 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 off-track 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, Horseshoe Bossier City agreed to pay a 1% tax on its 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, Horseshoe Bossier City has 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. 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 19 20 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 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 ("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 five-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. HE, the Company's subsidiary that owns and operates Horseshoe Bossier City, was issued an initial operator's license by the Louisiana Enforcement Division on November 22, 1993, and HE timely submitted its renewal application to the Louisiana Enforcement Division. On October 20, 1998, the Louisiana Gaming Control Board granted HE's license renewal subject to suitability review, and on October 19, 1999 the Louisiana Gaming Control Board extended the license renewal subject to suitability review. HE is currently in the process of completing the suitability review with the Louisiana Enforcement Division. The federal indictment, ongoing investigation and trial of certain public officials who have been accused of accepting bribes or of being a party to other illegal activities in connection with the awarding of several riverboat licenses has associated such public officials with various gaming interests, which do not include the Company, within the State of Louisiana. While HE has been advised by the U.S. Attorney's office that it is neither a subject nor a target of such investigation, the federal indictment, ongoing investigation and trial have caused delays and heightened scrutiny 20 21 by the Louisiana Gaming Control Board in connection with the renewal of all riverboat gaming licenses in the state of Louisiana, including the renewal of HE's riverboat gaming license which is currently proceeding through the renewal process. The transfer of a license or permit or an interest in a license or permit is prohibited except as permitted by the Louisiana gaming law. The sale, purchase, assignment, transfer, pledge or other hypothecation, lease, disposition or acquisition(a "Transfer") by any person of securities which represent 5% or more of the total outstanding shares issued by a corporation that holds a license is subject to Louisiana Gaming Control Board disapproval. A security issued by a corporation that holds a license must disclose these restrictions. Prior Louisiana Gaming Control Board approval is required for the Transfer of any ownership interest of 5% or more in any non-corporate licensee or for the Transfer of any "economic interest" of 5% or more in any licensee or Affiliated Gaming Person. An "economic interest" is defined for purposes of a Transfer as any interest whereby a person receives or is entitled to receive, by agreement or otherwise, a profit, gain, thing of value, loan, credit, security interest, ownership interest or other economic benefit. Riverboat gaming licensees and their Affiliated Gaming Persons are required to notify the Louisiana Enforcement Division prior to the receipt by any such persons of any loans or extensions of credit. The Louisiana Gaming Control Board is required to investigate the reported loan or extension of credit and, subject to certain exemptions, to either approve or disapprove the transaction. If disapproved, the loan or extension of credit cannot be consummated by the licensee or Affiliated Gaming Person. The Company is an Affiliated Gaming Person of HE. The Company and HE have submitted all required disclosures to the Louisiana Gaming Control Board and the Louisiana Enforcement Division. Any other advances by the Company to HE in the form of loans or other intercompany indebtedness are subject to the disapproval power of the Louisiana Gaming Control Board and the Louisiana Enforcement Division. ENVIRONMENTAL REGULATIONS The Company is 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. Based on our review of certain environmental assessments, the Company is aware that there may be soil and groundwater contamination present on some of the real property used by our existing 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 the costs related to any other future cleanup required at the property as a result of historical conditions. Empress completed the construction of the overpass and associated cleanup efforts 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 the Company assumed pursuant to the Empress Merger, the Company could be obligated to undertake any such cleanup and may be required to make material expenditures with respect to such matters. 21 22 IRS REGULATIONS The Internal Revenue Service ("IRS") requires operators of casinos located in the United States to file information returns for U.S. citizens (including names and addresses of winners) for keno and slot machine winnings in excess of stipulated amounts. The IRS also requires operators to withhold taxes on certain keno, bingo and slot machine winnings of nonresident aliens. Management is unable to predict the extent, if any, to which such requirements, if extended, might impede or otherwise adversely affect operations of, and/or income from, such other games. Regulations adopted by the Financial Crimes Enforcement Network of the Treasury Department and the gaming regulatory authorities in certain domestic jurisdictions in which we operate casinos, or in which we have applied for licensing to operate a casino, require the reporting of currency transactions in excess of $10,000 occurring within a gaming day, including identification of the patron by name and social security number. This reporting obligation commenced in May 1985 and may have resulted in the loss of gaming revenues to jurisdictions outside the United States that are exempt from the ambit of such regulations. STATUS AS AN S CORPORATION As an S corporation, the Company 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 the Company's income (or take into account his proportionate share of any loss). Pursuant to a stockholder' agreement, the Company intends to make distributions to its stockholders to enable them to pay any taxes on their share of the Company's income. While the Company believes it was properly formed and has been properly operating as an S corporation and that its subsidiaries were properly formed and have been properly operating as Qualified Subchapter S Subsidiaries for Federal and state income tax purposes, if the Company's S corporation tax status or the Qualified Subchapter S Subsidiary status of any of its subsidiaries were successfully challenged, the company 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 the Company's respective operations. Such payments could have a material adverse effect on the Company. OTHER LAWS AND REGULATIONS The riverboats operated by the Company's subsidiaries must comply with U.S. Coast Guard requirements as to boat design, on-board facilities, equipment, personnel and safety. Each riverboat must hold a Certificate of Seaworthiness or must be approved by the American Bureau of Shipping, or ABS, for stabilization and floatation, and may also be subject to local zoning and building codes. Loss of a riverboat's Certificate of Seaworthiness or ABS approval would preclude its use as a floating casino. 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. As of December 31, 1999, approximately $14.5 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 as well as an annual payment based on a varying percentage of Empress Hammond's adjusted gross receipts. 22 23 Each of the riverboat casinos 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. EMPLOYEES As of March 1, 2000, the Company employed 8,920 persons of whom 2,055 are employed at Empress Hammond, 1,664 are employed at Empress Joliet, 2,538 are employed at Horseshoe Tunica, 2,663 are employed at Horseshoe Bossier City and 58 are employed in our corporate office. Approximately 21.4% of the Empress Joliet employees are unionized. Empress Joliet's contract with the International Union of Operating Engineers, Local 150 expires in November 2002. Management believes the Company and its subsidiaries maintain an excellent relationship with their respective employees and we are not aware of any threatened labor activity affecting its employees. Neither the Company nor any of its subsidiaries have ever experienced a work stoppage due to a labor dispute. ITEM 2. PROPERTIES The Company owns and operates casinos in Tunica County, Mississippi, Bossier City, Louisiana, Joliet, Illinois and Hammond, Indiana. All of the real property and casinos are subject to first priority liens securing the Company's credit facility. We also lease space in Las Vegas, Nevada and Memphis, Tennessee where the Company maintains executive offices. Both of these offices will be closed during the second quarter of 2000 as a result of the relocation of the Company's headquarters to Joliet, Illinois. HORSESHOE TUNICA Horseshoe Tunica is located in Tunica County, Mississippi at Casino Center, a 70-acre three-property complex. The entire casino complex is approximately 327,000 square feet, with an approximately 62,000 square foot gaming area, two specialty restaurants, a buffet, bars, retail outlets, a 14-story hotel tower, an entertainment venue and an 1,100 parking garage. In addition to the parking garage, there are approximately 4,000 lighted surface parking spaces in the Casino Center complex. The facility also includes over 46,000 square feet of administrative space. HORSESHOE BOSSIER CITY Horseshoe Bossier City is located on approximately 30 acres along the east side of the Red River, directly facing downtown Shreveport, Louisiana. The casino complex consists of an approximately 62,400 square foot, four deck riverboat with approximately 30,000 square feet of gaming space and an approximately 55,000 square foot dockside pavilion, including a 25-story hotel tower, an entertainment venue and a 1,750 parking garage. EMPRESS JOLIET Empress Joliet and the surrounding land based facilities are located on approximately 350 acres along the Des Plaines River in Joliet, Illinois. The casino is situated on two catamaran vessels and collectively consists of 36,000 square feet of gaming space. Empress Joliet includes an approximately 150,000 square foot pavilion, featuring a lounge, steakhouse, cafe, buffet and a 400-seat banquet room. A three-story hotel with 102 rooms and an 80-space recreational vehicle park support Empress Joliet. Empress Joliet provides surface parking for 2,350 cars. 23 24 EMPRESS HAMMOND Empress Hammond, the closest casino to downtown Chicago, includes an approximately 125,000 square foot pavilion. The real estate used by Empress Hammond is leased from the City of Hammond, Indiana and is subject to a 75-year lease. The casino operation is located on a catamaran vessel and consists of approximately 42,500 square feet of gaming space. The pavilion features a lounge, steakhouse, buffet, deli and a 150-seat banquet room. ITEM 3. LEGAL PROCEEDINGS. 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 in venue in the summer of 1998 to Newton County, Indiana. On September 28, 1998, the jury returned a $5.2 million verdict against the City of Hammond. 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. On July 21, 1998, a lawsuit was filed against Empress Hammond and Empress Joliet and four of their employees by two former female employees of Empress Joliet, alleging 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 the Company with respect to this claim and others, there can be no assurances that such indemnity will be adequate or available to the Company or that any judgment in this matter would not have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. 24 25 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. There is no established public trading market for the equity interests in the Company. As of March 1, 2000, the number of record holders of equity interests in the Company was 40. The Company pays tax distributions in accordance with its debt agreements to enable the holders of equity interests in the Company to pay state and federal income taxes on their proportionate share of the Company's income. The amount of tax distributions paid during 1999, 1998 and 1997 were $12,811,000, $13,312,000 and $11,056,000, respectively. In addition to these permitted tax distributions, the Company paid non-tax distributions amounting to $18,700,000 during 1998. The Company's debt agreements contain provisions which restrict the ability of the Company to make distributions to the holders of equity interests, based on the Company's earnings, the ability of the Company to meet certain restrictions on borrowing, and certain other criteria. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA. The following table summarizes certain selected consolidated financial data, which should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto, included elsewhere herein and with "Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected consolidated financial data as of and for the years ended December 31, 1999, 1998, 1997, 1996 and 1995 have been derived from the Company's audited consolidated financial statements included elsewhere herein.
YEAR ENDED DECEMBER 31 --------------------------------------------------------------------- 1999(a) 1998 1997 1996 1995(b) --------- --------- --------- --------- --------- STATEMENT OF OPERATIONS DATA: (Thousands) Net revenues: Casino $ 487,536 $ 429,825 $ 321,236 $ 317,479 $ 283,402 Non-casino 38,017 31,351 13,857 14,258 14,983 --------- --------- --------- --------- --------- 525,553 461,176 335,093 331,737 298,385 OPERATING EXPENSES: Casino 266,482 245,234 175,394 162,408 133,299 Non-casino 35,899 34,654 20,283 20,474 20,131 Other 66,954 58,370 48,217 51,980 54,331 Asset write-down 10,346 12,911 -- -- -- Corporate expenses (c) 8,087 12,947 22,490 10,254 3,375 Depreciation and amortization 41,806 33,888 19,411 15,989 12,545 --------- --------- --------- --------- --------- Operating income 95,979 63,172 49,298 70,632 74,704 Interest (expense) income, net (53,332) (37,672) (15,796) (21,964) (18,735) Other, net (620) (228) (429) 154 -- --------- --------- --------- --------- --------- Net income before extraordinary loss on early retirement of debt and minority interest 42,027 25,272 33,073 48,822 55,969 Extraordinary loss on early retirement of debt (9,653) (787) (5,243) (7,179) Minority interest in (income) loss of subsidiaries (d) -- 640 (420) (1,861) (8,850) --------- --------- --------- --------- --------- Net income $ 32,374 $ 25,125 $ 27,410 $ 46,961 $ 39,940 --------- --------- --------- --------- ---------
AS OF DECEMBER 31 ---------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- BALANCE SHEET DATA: (Thousands) Cash and cash equivalents (e) $ 118,276 $ 84,151 $ 48,710 $ 79,159 $ 65,541 Total Assets 1,409,244 560,448 511,556 377,597 300,088 Long-term debt, including 1,258,948 388,718 313,275 232,708 197,603 current maturities Shareholders'/Members' equity 34,594 71,151 64,595 79,782 52,747
(a) Includes the results of operations of Empress Hammond and Empress Joliet since their acquisition on December 1, 1999. (b) The Horseshoe Tunica opened on February 13, 1995. (c) Includes deferred compensation charges related to redeemable ownership interests of $469,000, $4,245,000, $15,066,000, $4,340,000 and $2,557,000 for the years ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively. (d) Prior to April 1999, the Company owned less than 100% of certain subsidiaries. Minority interest represents the share of each subsidiary's income attributable to those interests not owned by the Company. (e) Excludes escrow funds, restricted for expansion of existing facilities, development of new projects or repayment of debt, amounting to approximately $42,235,000 (1996) and $31,316,000 (1995). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis provides information which Management believes is relevant to an assessment and understanding of the Company's consolidated financial condition and 25 26 results of operations. The discussion should be read in conjunction with "Selected Consolidated Financial Data" and the Consolidated Financial Statements and notes thereto included elsewhere herein. INTRODUCTION Horseshoe Bossier City, which is owned by HE, commenced operations on July 9, 1994, and Horseshoe Tunica, which is owned by RPG, 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 (the "Roll-Up Transaction.") 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, exercised its 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. The consolidated financial statements include the assets, liabilities, revenue and expenses for all entities included in the Roll-Up Transaction, as if such entities were subsidiaries for all periods presented. On December 1, 1999, the Company acquired from Empress all of the outstanding stock of two of Empress' operating subsidiaries, Empress Hammond and Empress Joliet, for $494.9 million in cash (the "Empress Merger"). Empress Joliet commenced operation on June 17, 1992 and Empress Hammond commenced operation on June 28, 1996. The Empress Merger was accomplished through two simultaneous merger transactions of the Company's wholly owned subsidiaries with and into the Empress subsidiaries that own Empress Hammond and Empress Joliet, with the Empress subsidiaries surviving. In connection with the Empress Merger, the Company assumed $150 million of Empress' 8 1/8% Senior Subordinated Notes due 2006 . Pursuant to a change in control offer to purchase the Empress Notes at 101% of their principal amount in accordance with the terms of the Indenture, the Company retired all of the Empress Notes in January 2000. RESULTS OF OPERATIONS OVERVIEW Results of operations include the consolidated results of Horseshoe Tunica and Horseshoe Bossier City and Empress Hammond and Empress Joliet from the date of their acquisition on December 1, 1999. Horseshoe Tunica competes with nine other casinos in the competitive Tunica County, Mississippi market. 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 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 horseracing track in Shreveport, although when and if slot operations will actually begin at the track is uncertain. The impact on operating margins from the overall increase in supply to this market is uncertain. 26 27 The Chicago market encompasses portions of both Illinois and Indiana. The Illinois Riverboat Act authorizes ten owner's licenses for riverboat gaming operations, all of which have been issued, and four of which, including Empress Joliet, serve the Chicago metropolitan area. Current 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. OPERATIONS YEARS ENDED DECEMBER 31, 1999 AND 1998 Net revenues for the year ended December 31, 1999 were $525.6 million compared to $461.2 million for the year ended December 31, 1998. Operating income increased to $96.0 million for the year ended December 31, 1999 from $63.2 million for the year ended December 31, 1998. The operating income margin increased in 1999 to 18.3% of net revenues from 13.7% for the 1998 period. Net revenues, operating income and the operating income margin for the Chicago properties included in the consolidated operating results for the 1999 period was $37.2 million, $7.6 million and 20.4%, respectively. The remaining increase in net revenues and operating income was mainly a result of an increase in gaming volume at both the Horseshoe Tunica and Horseshoe Bossier City. Horseshoe Tunica Horseshoe Tunica contributed net revenues of $236.5 million for the year ended December 31, 1999 and $221.8 million for the year ended December 31, 1998. Horseshoe Tunica's net revenues included casino revenues and non-casino revenues of $226.3 million and $10.2 million, respectively, for the year ended December 31, 1999 and $212.0 million and $9.8 million, respectively, for the year ended December 31, 1998. The increase in casino revenues for the year ended December 31, 1999 compared to the prior year was primarily due to volume increases in slot revenue. Casino revenue per day increased approximately 7% in the year ended December 31, 1999 to $620,000 from $581,000 in the prior year. Operating income was $60.1 million for the year ended December 31, 1999 compared to $44.7 million for the year ended December 31, 1998. The operating income margin was 25.4% of net revenues for 1999 compared to 20.2% for 1998. Operating income increased by $15.4 million in 1999 as compared to 1998. This increase was caused primarily by the increase in net revenues during 1999. In addition, the 1998 period includes $6.8 million in additional bad debt expenses and $2.9 million in additional corporate expenses not present in 1999. Horseshoe Bossier City Horseshoe Bossier City contributed net revenues of $248.3 million for the year ended December 31, 1999 and $239.4 million for the year ended December 31, 1998. Horseshoe Bossier City's net revenues include casino revenues and non-casino revenues of $226.4 million and $21.9 million, respectively, for the year ended December 31, 1999 and $217.8 million and $21.6 million, respectively, for the year ended December 31, 1998. The increase in casino revenues for the year ended December 31, 1999 compared to the prior year was primarily due to volume increases in slot revenue. The increase in slot volume in 1999 over 1998 of $12.5 million was offset by lower than normal win percentages $4.5 million. Casino revenue per day increased approximately 4% in the 27 28 year ended December 31, 1999 to $620,000 from $597,000 in the prior year. Operating income was $26.0 million for the year ended December 31, 1999 compared to $19.3 million for the year ended December 31, 1998. The operating income margin was 10.5% of net revenues for 1999 compared to 8.1% for 1998. Operating income increased by $6.7 million in 1999 as compared to 1998 mainly as a result of the increase in net revenues. Operating income for 1999 and 1998 includes an asset write-down charge of $10.3 million and $12.9 million, respectively, as more fully discussed below. The 1999 period reflects an increase of $3.8 million in depreciation and amortization due to the amortization of a non-compete agreement entered into with the former limited partners (see Liquidity and Capital Resources discussion below). The 1998 period also includes $2.9 million additional corporate expenses. 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, 1999 and 1998. During the year ended December 31, 1998, we recorded an initial charge of $12.9 million to adjust the carrying value of the Queen of the Red to our then estimate of its net realizable value. During 1999, the carrying value was again adjusted downward by $10.3 million primarily due to the passage of the bill by the Illinois Legislature which allowed dockside gaming thereby eliminating the need for cruising vessels. The additional charge was made to reflect the market conditions for idle riverboats. Other Factors Affecting Earnings Corporate expenses decreased approximately $4.9 million during 1999 primarily due to a reduction in non-cash compensation expense. The non-cash compensation expense is recorded to reflect the value of redeemable ownership interests based on an independent appraisal. For more details, see the heading "Liquidity and Capital Resources - Ownership Repurchase Matters." The increase of $15.6 million in net interest expense for the year ended December 31, 1999 compared with the year ended December 31, 1998 was due to the increase in debt outstanding in 1999. Total debt outstanding increased to $1,258.9 million as of December 31, 1999 from $388.7 million as of December 31, 1998. The increased borrowings were necessary to fund the acquisition of the operating subsidiaries of Empress and to extinguish approximately $128.6 million in higher interest debt. The Company recognized an extraordinary loss of $9.7 million from the early retirement of debt. For more details, see the heading "Liquidity and Capital Resources." In January 2000, the Company retired $150.0 million in principal amount of senior subordinated notes assumed by the Company from the acquisition of Empress, at a cost of $151.5 million (plus 1% redemption premium), thereby reducing its total debt outstanding by $151.5 million. Net income increased in 1999 to $32.4 million from $25.1 million in 1998, or 29.1%. The increase in net income was due to the factors discussed above. 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 income increased to $63.2 million for the year ended December 31, 1998 from $49.3 million for the year ended December 31, 1997. The operating income margin decreased in 1998 to 13.7% of net revenues from 14.7% for the 1997 28 29 period. The increase in net revenues and operating income occurred as a result of an increase in gaming capacity from the expansions that occurred at both Horseshoe Tunica and Horseshoe Bossier City. Horseshoe Tunica Horseshoe Tunica contributed net revenues of $221.8 million for the year ended December 31, 1998 and $167.2 million 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 of approximately $43.3 million and table games revenue of approximately $7.4 million as a result of the recently completed expansion. Net revenues in 1998 were also affected by lower than anticipated win percentages in table games and slots which slightly offset the growth in revenues by approximately $7.0 million and $3.8 million, respectively. Casino revenue per day increased approximately 31% in the year ended December 31, 1998 to $581,000 from $442,000 in the prior year. 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 of approximately $5.0 million. 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 $10.4 million remaining increase was caused by an increase in overall volume, primarily in hotel rooms and entertainment. Operating income was $44.7 million for the year ended December 31, 1998 compared to $34.3 million for the year ended December 31, 1997. The operating income margin was 20.2% of net revenues for 1998 compared to 20.5% for 1997. Operating income increased by $10.4 million in 1998 as compared to 1997. This increase was caused primarily by the expansion of the facility during 1997. In addition, the 1997 period includes pre-opening expenses of $1.1 million not present in 1998 and $4.7 million in additional corporate expenses. The 1998 period reflects an increase in bad debt expenses of $4.6 million and an increase of $6.5 million in depreciation and amortization due to the expansion of the facility. Operating income for 1998 was reduced due to the operation of our new entertainment facility by approximately $4.2 million. Horseshoe Bossier City Horseshoe Bossier City contributed net revenues of $239.4 million for the year ended December 31, 1998 and $167.9 million 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. 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. 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, 29 30 1998 compared to $14.9 million for the prior year was partially due to an increase in the pricing structure of non-casino services of approximately $6.0 million. 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 $11.8 million remaining increase was caused by an increase in overall volume of promotional allowances, primarily in hotel rooms. Operating income was $19.3 million for the year ended December 31, 1998 compared to $16.7 million for the year ended December 31, 1997. The operating income margin was 8.1% of net revenues for 1998 compared to 9.9% for 1997. Operating income increased by $2.6 million in 1998 as compared to 1997. Operating income for 1998 includes an asset write-down charge of $12.9 million as more fully discussed below. The 1998 period reflects an increase of $8.0 million in depreciation and amortization due to the expansion of the facility. In addition, the 1997 period includes $1.8 million in pre-opening expenses, whereas the 1998 period only includes $0.7 million. The 1997 period also includes $4.7 million of additional corporate expenses 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 then net realizable value. Other Factors Affecting Earnings Corporate expenses decreased approximately $9.5 million during 1998 primarily due to a reduction in non-cash compensation expense. The non-cash compensation expense was 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 $388.7 million as of December 31, 1998 from $313.3 million as of December 31, 1997. The increased borrowings were necessary to fund a major portion of the construction, as well as our subsequent purchase of outstanding warrants, which closed in January 1999. For more details, see the heading "Liquidity and Capital Resources." During 1998, we purchased $8.4 million in 12.75% senior notes in the open market. An extraordinary loss of $0.8 million was recognized for prepayment penalties, premium and write-off of unamortized discounts and deferred finance charges. The 1997 period includes an extraordinary loss of $5.2 million from the refinancing of certain indebtedness as more fully described below. Net income declined in 1998 to $25.1 million from $27.4 million in 1997, or 8.4%. The decline in net income is due to the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES 30 31 On May 11, 1999, the Company issued $600 million of 8 5/8% Senior Subordinated Notes due May 2009. The proceeds from this issuance were used to refinance Horseshoe Gaming's 12 _% 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 were placed in a secured proceeds account to partially fund the Empress acquisition and consummate the change of control offer on $150.0 million of Empress' 8 1/8% senior subordinated notes due 2006. In January 2000, the change of control offer was consummated and all $150 million of Empress' 8 1/8% senior subordinated notes were retired, and any remaining balance in the secured proceeds account was distributed to the Company. On June 30, 1999, the Company completed a $375 million Senior Secured Credit Facility with a group of banks. The credit facility is comprised of a $250 million revolver and a $125 million term loan. On December 1, 1999, the Company used $175 million of the revolver and $125 million of the term loan to partially fund the Empress acquisition, all of which was outstanding on December 31, 1999. As of March 4, 2000, the Company has repaid $65 million on the outstanding revolver balance. Liquidity, Capital Spending and Financing Net cash provided by operating activities was $115.6 million, $83.8 million and $71.3 million for the years ended December 31, 1999, 1998 and 1997, respectively. Net cash used in investing activities was $488.2 million, $90.4 million and $161.2 million, for the years ended December 31, 1999, 1998 and 1997, respectively. Cash flows from investing activities for 1999 include the effects of the acquisition of Empress Joliet and Empress Hammond which include additional goodwill of approximately $257.9 million and net property and equipment of include $189.7 million. The fluctuations in investing cash flows for 1998 and 1997 are mainly due to the expansion projects completed in Horseshoe Tunica in December 1997 and Horseshoe Bossier City in January 1998. Net cash provided by financing activities was $406.7 million, $42.1 million and $59.4 million for the years ended December 31, 1999, 1998 and 1997, respectively. The additional borrowings completed in 1999 to complete the acquisition of Empress Joliet and Empress Hammond accounted for the fluctuations in financing cash flows in 1999 as compared to 1998. The primary reason for the fluctuations in cash flows from financing activities in 1998 and 1997 are due to the amount of borrowings necessary to complete the Company's expansion and acquisition projects. Cash and cash equivalents totaled $118.3 million as of December 31, 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. 31 32 In May 1999, Horseshoe Gaming purchased redeemable ownership interests comprising an aggregate 7.2% of Horseshoe Gaming from five former employees for an aggregate purchase price of $39.0 million. In June 1999, the first installment of approximately $11.5 million was paid with the remaining amount to be paid over a period not to exceed four years. During the third quarter of 1999, Horseshoe Gaming agreed to purchase redeemable ownership interests of 1.3% of the Company from four current employees for $5.3 million. The first installment of approximately $1.7 million was paid with the remaining amount to be paid over a period not to exceed three years. The notes receivable from these former and current employees was fully paid in connection with the first installment payment made. Operating results for the year ended December 31, 1999 include a $2.9 million reduction in deferred compensation expense resulting from the final valuation of these ownership interests. During the third quarter of 1999, the Company also agreed to purchase ownership interests of 3.2% of the Company from four owners totaling $18.3 million. During the third quarter of 1999, the first installment of approximately $1.8 million was paid with the remaining amount to be paid over a period not to exceed four years. During the fourth quarter of 1999, the Company also agreed to purchase ownership interests of 0.7% of the Company from five owners totaling $5.3 million to be paid in January 2004. The Company has employment agreements and unit option agreements with certain employees which contain put/calls whereby, upon termination of employment, the Company must, at the election of any such employee, and may, at the Company's election, purchase such employee's ownership interest for an amount equal to the fair market value of such interest as determined by an independent appraisal or an arbitration process. As of December 31, 1999, the aggregate fair market value of all interests subject to such put/calls, representing approximately 1.4% ownership of the Company, was $6.8 million. 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. Louisiana Repurchase In April 1999, Horseshoe Gaming exercised its 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 Acquisition On December 1, 1999, the Company completed the acquisition of the operating subsidiaries of Empress for a total purchase price of $651.4 million. The acquisition was accomplished by merging two of our wholly owned subsidiaries into the Empress subsidiaries that own Empress Hammond and Empress Joliet. Consolidated operating results include the results of operations of Empress Hammond and Empress Joliet since the date of their acquisition on December 1, 1999. 32 33 The preliminary allocation of the purchase price is as follows (in millions): PURCHASE PRICE: Cash $494.9 Assumed liabilities 155.0 Tender premium on debt 1.5 ------ Total purchase price $651.4 ====== PRELIMINARY ALLOCATION OF PURCHASE PRICE: Current assets $ 46.0 Property and equipment, net 189.7 Other assets, net 14.5 Intangible assets 15.0 Goodwill 415.0 Current liabilities (28.8) ------ Total allocation of purchase price $651.4 ======
Other Items During 1999, HE recorded an additional $10.3 million charge to adjust the carrying value to its revised estimate of the net realizable value of the Queen of the Red and the equipment on board that vessel. This additional charge was made to reflect the current market conditions for idle riverboats. On March 6, 2000, HE received $.6 million from the sale of the equipment thereby reducing the Company's expected net realizable value to $1.0 million. Year 2000 Throughout 1999, the Company continued its efforts to address the potential impact of the Year 2000 ("Y2K") on the technology systems and equipment essential to its operations. All of the Company's business systems and equipment were tested and evaluated and then replaced or renovated as necessary to become compliant. The Company's systems and equipment were deemed Y2K compliant before the end of 1999, and the Company has not experienced any significant problems related to the turn of the century. 33 34 ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Company's exposure to market risk is changes in its interest rate risk associated with long term debt. To date, the Company has not held or issued derivative financial instruments for trading purposes, and the Company does not enter into derivative transactions that would be considered speculative positions. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. (Dollars in thousands)
Maturity Date ----------------------------------------------------------------------------------- Fair 2000 2001 2002 2003 2004 Thereafter Total Value (1) --------- ------- ------- -------- ---------- --------- -------- -------- Liabilities Long-term debt Fixed rate $ 154,748 $ 850 $ 850 $ 14,684 $ 5,321 $ 757,829 $934,282 $916,482 Average interest rate 8.122% 8.000% 8.000% 8.000% 10.000% 8.783% Variable rate $ 9,497 $ 9,308 $ 9,924 $ 54,375 $ 123,125 $ 118,437 $324,666 $324,666 Average interest rate (2) 8.076% 8.078% 8.073% 8.662% 8.552% 8.580%
(1) The fair values are based on the borrowing rates currently available for debt instruments with similar terms and maturities and market quotes of the Company's publicly traded debt. (2) The average interest rates were based on December 31, 1999, variable rates. Actual rates in future periods could vary. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See the Index to Consolidated Financial Statements and the Index to Financial Statement Schedules included at "Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K". ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 34 35 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth information concerning our executive officers, directors and other key personnel.
Age Position --- -------- Jack B. Binion 63 Chairman of the Board of Directors, Chief Executive Officer and Secretary. Peri Howard 39 Vice Chairperson of the Board of Directors. Leslie Kenny 44 Director Joseph J. Canfora 40 President Kirk C. Saylor 43 Senior Vice President, Treasurer and Chief Financial Officer. Roger Wagner 52 Senior Vice President and Chief Operating Officer. Gary Border 48 Senior Vice President - Marketing. David Carroll 45 Senior Vice President - Human Resources. Floyd Hannon 58 Senior Vice President - Government Affairs J. Lawrence Lepinski 53 Senior Vice President - General Manager of Horseshoe Bossier City. Bob McQueen 46 Senior Vice President - General Manager of Horseshoe Tunica. David Fendrick 51 General Manager of Empress Joliet Rick Mazer 45 General Manager of Empress Hammond Jon Wolfe 32 Vice President - Chief Information Officer. John Moran 36 Vice President - Database Marketing and Analysis.
Mr. Binion has served as Chairman of the Board, Chief Executive Officer and Secretary of the Company since formation in April 1999. Prior thereto, Mr. Binion served as the Chief Executive Officer of Horseshoe Gaming, Inc. ("HGI", the former manager of Horseshoe Gaming, L.L.C.) since 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 and NGCP, the entity that operates Horseshoe Tunica and 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-Chairperson of the board of directors since its inception 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. Ms. Howard is the daughter of Mr. Binion's wife. Ms. Kenny has been one of the Company's directors since its inception in April 1999 and previously served as director of HGI since September 1998. Ms. Kenny has been self-employed as a manicurist since 1983. Ms. Kenny is the daughter of Mr. Binion's wife. Mr. Canfora has been the Company's President since December 1, 1999. Prior thereto, he served as the President of Empress Entertainment, Inc., Empress Hammond and Empress Joliet from June 1997 through November 1999. Mr. Canfora was the President of Midwest Operations for Stations Casinos, Inc. from 1992 through June 1997. 35 36 Mr. Saylor has been our Senior Vice President and Chief Financial Officer since the Company's formation in April 1999. Prior thereto, he served as Vice President and Chief Accounting Officer of HGI since November 1998. He has also served as the Company's Chief Financial Officer since August 1, 1998. From November 1995 to November 1998, Mr. Saylor served as HGI's Corporate Controller. From October 1994 to November 1995, Mr. Saylor served as Vice President and Chief Financial Officer of Lone Star Casino Corp. in Las Vegas. Mr. Wagner has been our Senior Vice President and Chief Operating Officer since the Company's formation in April 1999. Prior thereto, he 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 the Company's Senior Vice President - Marketing since the Company's formation in April 1999. Prior thereto, he served in the same capacity with HGI since July 1996. Since 1987, Mr. Border served as President and founder of Marketing Results, Inc. Mr. Border resigned from his position as Senior Vice President - Marketing effective March 31, 2000. Mr. Carroll has been the Company's Senior Vice President - Human Resources since the Company's formation in April 1999. Prior thereto, he 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 November 1998, Mr. Carroll was Director of Human Resources for Harrah's Casino in Shreveport, Louisiana. Mr. Hannon has been the Company's Senior Vice President - Government Affairs since the Company's formation in April 1999. Prior thereto, he served in the same capacity with HGI since July 1999. From November 1993 to June 1999, Mr. Hannon served as Deputy Director of the Indiana Gaming Commission. Mr. Lepinski has been Senior Vice President and General Manager of the Horseshoe Bossier City since September 1995. Prior thereto, Mr. Lepinski served as General Manager of Bally's Saloon and Gambling Hall in Tunica, Mississippi since August 1993. Mr. McQueen has been Senior Vice President and General Manager of the Horseshoe Tunica since July 1996 and prior to that as Vice President of Casino Operations for Horseshoe Tunica since June 1994. Mr. Fendrick has been General Manager of the Empress Joliet since August 1997. Prior thereto, Mr. Fendrick served as Vice President and General Manager of Station Casino in Kansas City, Missouri from December 1994 the March 1997. Mr. Mazer has been General Manager of the Empress Hammond since February 1996. Prior thereto, Mr. Mazer served as Director of Marketing and Advertising for Empress Joliet from October 1995 to February 1996. Prior to joining the Empress, Mr. Mazer was Vice President of Marketing for Par-A-Dice Riverboat Casino in Peoria, Illinois from 1993 through 1995. Mr. Wolfe has been the Company's Vice President and Chief Information Officer since the Company's formation in April 1999. Prior thereto, he served in the same capacity with HGI since October 1998. From October 1995 to October 1998, Mr. Wolfe was Director of Information 36 37 Systems for HGI. From July 1994 to October 1995 Mr. Wolfe was Director of Information Systems for Horseshoe Tunica. Mr. Moran has been the Company's Vice President - Database Marketing and Analysis since the Company's formation in April 1999. Prior thereto, he 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 the Horseshoe Club and from February 1987 to September 1995 was Director of Marketing Operations for the Claridge Casino and Hotel. ITEM 11. EXECUTIVE COMPENSATION. The following table sets forth all compensation awarded to, earned by or paid to the Chief Executive Officer and the four most highly compensated executive officers (the "Named Executive Officers") for their services to the Company for the years ended December 31, 1999, 1998 and 1997. SUMMARY COMPENSATION TABLE
Long-Term Compensation Other Annual Awards All Other Name Year Salary Bonus Compensation Options Compensation (1) - ---- ---- ------ ----- ------------ ------- ---------------- Jack B. Binion, 1999 $1,000,000 $ -- $ -- -- $ -- Chairman of the Board 1998 $1,000,000 $ -- $ -- -- $ -- CEO and Secretary 1997 $ -- $ -- $ -- -- $ -- Gary A. Border, Senior 1999 $ 350,000 $ 100,000 $ -- 25.622256 $ 4,156 Vice President- 1998 $ 350,000 $ -- $ -- -- $ 3,550 Marketing (2) 1997 $ 350,000 $ -- $ -- -- $ 3,550 Roger P. Wagner, Senior 1999 $ 250,000 $ 62,500 $ -- 18.301612 $ 4,452 Vice President - 1998 $ 32,692 $ -- $ -- -- $ -- Chief Operating Officer 1997 $ -- $ -- $ -- -- $ -- Bob McQueen, Senior VP 1999 $ 201,981 $ 95,000 $ -- 14.641288 $ 7,542 General Manager - 1998 $ 168,476 $ 95,000 $ -- -- $ 12,594 Horseshoe Tunica 1997 $ 161,510 $ 95,000 $ -- -- $ 4,636 Kirk C. Saylor, Senior 1999 $ 222,404 $ 56,250 $ -- 16.471448 $ 7,684 Vice President- 1998 $ 132,488 $ 75,000 $ -- -- $ 4,107 Chief Financial Officer 1997 $ 126,966 $ 15,000 $ -- -- $ 4,006
(1) Premium on insurance policies. (2) Resigned effective March 31, 2000. The following table sets forth certain information regarding grants of stock options made to the executive officers named in the Summary Compensation Table during 1999, including information as to the potential realizable value of such options at assumed annual rates of stock price appreciation for the ten-year option terms. Additional information is provided concerning this potential realizable value for all optionees receiving grants in 1999. 37 38 OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Potential Realizable ---------------------------- Value at Assumed Annual Number of Percent of Rates of Stock Price Securities Total Options/ Appreciation for Underlying SARs Granted Exercise Option/SAR Term (1) Options/SARs to employees or Base Expiration -------------------------- Name Granted (#)(2) in 1999 Price ($/sh.) Date 5% 10% - ---- -------------- ------------- ------------- ---------- ---------- ---------- Jack B. Binion -- Gary A. Border 25.622256 8.30% $ 13,660 12/31/08 $ 220,113 $ 557,810 Roger P. Wagner 18.301612 5.93% $ 13,660 12/31/08 $ 157,224 $ 398,436 Bob McQueen 14.641288 4.74% $ 13,660 12/31/08 $ 125,779 $ 318,748 Kirk C. Saylor 16.471448 5.33% $ 13,660 12/31/08 $ 141,501 $ 358,592 All Option/SARs 308.854441 100.00% $ 13,660 12/31/08 $2,653,276 $6,723,922
(1) The dollar amount under these columns are the result of calculations at five percent and ten percent rates set by the Securities and Exchange Commission and therefore are not intended to forecast possible future appreciation. There is no assurance that the value realized by an officer will be at or near the value estimated above. (2) Employees vest in the right to exercise these options/SARs over a four-year period. Options/SARs are subject to certain conditions, including compliance with terms and conditions of the options/SARs as approved by the Company. The executive officers listed above received tandem SARs in conjunction with the listed options. The tandem SARs have substantially identical terms to the options. The following table sets forth certain information concerning stock option exercises during 1999 by the executive officers named in the Summary Compensation Table and information concerning option values. AGGREGATED OPTION/SAR EXERCISES IN 1999 AND DECEMBER 31, 1999 OPTION/SAR VALUES
Number of Securities Underlying Unexercised Value of Unexercised, Options/SARs Held at In-the-Money Options/SARs Shares December 31, 1999 (#) at December 31, 1999 ($)(1) Acquired on Value -------------------------- --------------------------- Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable - ---- ------------ ------------ ----------- ------------- ----------- -------------- Jack B. Binion -- -- -- -- -- -- Gary A. Border -- -- 6.405564 19.216692 $ 63,928 $191,590 Roger P. Wagner -- -- 4.575403 13.726208 $ 45,663 $136,850 Bob McQueen -- -- 3.660322 10.980966 $ 36,530 $109,480 Kirk C. Saylor -- -- 4.117862 12.353586 $ 41,096 $123,165
(1) Amount represents the difference between the aggregate price of unexercised options/SARs and a $23,640 per share price as determined by the Company pursuant to the Equity Incentive Plan document. The $23,640 per share price represents the latest available fair market price as determined pursuant to the plan document. 38 39 Compensation of Directors; Compensation Committee Interlocks and Insider Participation The Bylaws of the Company provide for a six-member Board of Directors. There are currently three directors. Directors serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Vacancies on the Board of Directors may be filled by a majority of the remaining directors. The Chairman of the Board of Directors receives no compensation for services on the Board, Peri Howard receives $230,000 and Leslie Kenny receives no compensation for services on the board. Officers serve at the discretion of the Board. The Board has no Compensation Committee. The Company's Board of Directors also utilizes various individuals as business advisors. One individual, whom is also an owner, received $ for his advisory services to the Board in 1999. EMPLOYMENT AGREEMENTS Mr. Binion has provided services pursuing, developing and managing gaming operations for the Company and its subsidiaries. A salary of $1,000,000 was accrued for Mr. Binion for his services during 1999 and 1998. There is no existing employment agreement providing for Mr. Binion to receive compensation for his services in the future. Gary Border is employed as the Senior Vice President - Marketing for the Company pursuant to an employment agreement with the Company dated November 23, 1998. Mr. Border's term of employment under the employment agreement expires December 1, 2002. Mr. Border is responsible for supervising the marketing departments of the Company, developing and creating marketing strategies, creative strategies, planning and support for all national local markets, assisting the general managers of various properties owned by subsidiaries or affiliates of the Company and coordinating and overseeing the various department heads charged with casino and hotel marketing. Mr. Border presently earns compensation of three hundred fifty thousand dollars ($350,000) per year base salary and a discretionary bonus not to exceed twenty-five thousand dollars ($25,000) annually. In addition, Mr. Border was granted a one hundred thousand dollar ($100,000) signing bonus upon execution of the employment agreement. Mr. Border resigned from the Company as Senior Vice President-Marketing effective March 31, 2000. Roger Wagner is employed as Senior Vice President and Chief Operating Officer of the Company pursuant to an employment agreement executed on December 1, 1998. Mr. Wagner's term of employment under this agreement expires on December 31, 2002. Mr. Wagner collaborates with Senior Management of the company to develop operating objectives that will achieve the Company's profitability and development goals. He directs and oversees company operations at each casino and assures that each operating division is properly organized, staffed, and directed to fulfill its responsibilities in accordance with company standards. Mr. Wagner presently earns a base salary of three hundred thousand dollars ($300,000) and a discretionary bonus not to exceed 50% of base salary. Robert McQueen is employed as a Senior Vice President - General Manager of Horseshoe Tunica pursuant to an employment agreement with the Company dated October 15, 1998. Mr. McQueen's term of employment under the employment agreement expires October 15, 2001. Mr. McQueen is responsible for supervising the day to day activities of Horseshoe Tunica. Mr. McQueen presently earns compensation of two hundred seven thousand five hundred dollars ($207,500) per year base salary and a bonus of ninety-five thousand dollars ($95,000) for calendar years 1998 and 1999, and a discretionary bonus not to exceed 50% of his base salary for each year thereafter. 39 40 Kirk Saylor is employed as a Senior Vice President - Chief Financial Officer for the Company pursuant to an employment agreement with the Company dated November 15, 1998. Mr. Saylor's term of employment under the employment agreement expires December 1, 2002. Mr. Saylor is responsible for overseeing the senior accounting operations of the Company's facilities and assisting in the opening of any casino and hotel facilities to be developed or acquired by subsidiaries or affiliates of the Company. Mr. Saylor presently earns compensation of two hundred fifty thousand dollars ($250,000) per year base salary and a discretionary bonus not to exceed 50% of the base salary. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information regarding beneficial ownership of common stock in the Company, as of March 1, 2000, by each person who is known by the Company to own beneficially more than 5% of the outstanding shares, by each director of the Company, each of the executive officers and by all directors and executive officers of the Company as a group.
PERCENTAGE NAME(1) NUMBER OF SHARES OF SHARES - ------- ---------------- --------- Jack B. Binion 21,329 (2) 89.48% Phyllis M. Cope 1,907 (3) 8.00% Leslie Kenny 1,194 5.01% Peri Howard 3,629 (4) 15.22% Scott Hamilton 1,272 (5) 5.33% Wanda Parsons 1,907 (6) 8.00% Directors and executive officers as a group (10 persons) 21,361 (7) 89.61%
(1) The persons named in this table have sole voting power and investment power with respect to all shares of capital stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in this table and these notes. Unless otherwise indicated, the address for each of the persons or entities listed above is c/o the Company at 2300 Empress Road, Joliet, IL 60436. (2) Includes (a) the 9,779 shares held by Mr. Binion as an individual; (b) the 1,907 shares owned by Phyllis M. Cope; (c) the 3,629 shares owned by Peri Howard; (d) the 1,194 shares owned by Leslie Kenney; (e) the 1,272 shares owned by Scott Hamilton; (f) the 1,907 shares owned by Wanda Parsons; and (g) the 1,644 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 11,550 shares which are held of record members of Mr. Binion's family or by trusts established for the benefit of certain members of the families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the Exchange Act. (3) Includes 954 shares held by Phyllis M. Cope, as Trustee of the Ted J. Fechser Trust, and 953 shares held by Phyllis M. Cope, as Trustee of the Fancy Ann Fechser Trust. Phyllis M. Cope expressly disclaims beneficial ownership of any shares held by her as trustee of such trusts, which are trusts established for the benefit of certain members of the families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the Exchange Act. 40 41 (4) Includes 275 shares held by Peri Howard, as Trustee of the Ted J. Fechser Trust, 275 shares held by Peri Howard, as Trustee of the Fancy Ann Fechser Trust, 275 shares held by Peri Howard, as Trustee of the James Christopher Fechser Trust, 275 shares held by Peri Howard, as Trustee of the Robert Daniel Fechser Trust, 275 shares held by Peri Howard, as Trustee of the Katie O'Neill Trust, 275 shares held by Peri Howard, as Trustee of the Kellie O'Neill Trust, 275 shares held by Peri Howard, as Trustee of the Rachel Fechser Trust 275 shares held by Peri Howard, as Trustee of the Ben E. Johnson Trust, 55 shares held by Peri Howard, as Trustee of the Bonnie Binion Trust, and 55 shares held by Peri Howard, as Trustee of the Benny Behnen Trust; 55 shares held by Peri Howard, as Trustee of the Jack Behnen Trust, 1,261 shares held by Peri Howard as an individual and 4 shares subject to options that are currently exercisable or will become exercisable within 60 days. Peri Howard expressly disclaims beneficial ownership of any shares held by her as trustee of such trusts, which are trusts established for the benefit of certain members of the families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the Exchange Act. (5) Includes 636 shares held by Scott Hamilton, as Trustee of the James C. Fechser Trust, and 636 shares held by Scott Hamilton, as Trustee of the Rachel Fechser Trust. Scott Hamilton expressly disclaims beneficial ownership of any shares held by him as trustee of such trusts, which are trusts established for the benefit of certain members of the families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the Exchange Act. (6) Includes 954 shares held by Wanda Parsons, as Trustee of the Katie O'Neill Trust, and 953 shares held by Wanda Parsons, as Trustee of the Kellie O'Neill Trust. Wanda Parsons expressly disclaims beneficial ownership of any shares held by her as trustee of such trusts, which are trusts established for the benefit of certain members of the families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the Exchange Act. (7) Includes 27 shares subject to options that are currently exercisable or will become exercisable within 60 days. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Company conducts a portion of its marketing through an entity that is owned by the wife of an officer. Amounts paid to this company for fees and reimbursable expenses totaled $3,157,000, $3,625,000 and $2,648,000 for the years ended December 31, 1999, 1998 and 1997, respectively. The Company has made loans to various employees (including some who are now former employees) with ownership interests in the Company. The notes were repaid during 1999 out of the proceeds of the put/call provisions relating to such ownership interests. The amount outstanding under these loans was $2,677,000 as of December 31, 1998. The Company and Walter Haybert, the former Chief Financial Officer of the Company, are parties to an agreement whereby the Company has agreed to pay Mr. Haybert $150,000 per year for each of 1999 and 2000 as advances against the purchase price for his interest in the Company. Mr. Haybert's interest in the Company is subject to purchase by the Company pursuant to the put/call provisions that were contained in his employment agreement with the Company. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. Page 41 42 Number (a)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS: HORSESHOE GAMING HOLDING CORP. F-2 (a)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES: SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS S-2 All other schedules are omitted as the required information is inapplicable or not present in amounts sufficient to require submission of the schedule, or because the information is presented in the consolidated financial statements or related notes thereto. The exhibits listed on the accompanying Exhibit Index are filed as part of this Form 10-K. (b) REPORTS ON FORM 8-K: In the fourth quarter of 1999 a Form 8-K was filed, dated December 16, 1999 reporting under Item 2 the Company's acquisition of Empress Entertainment, Inc.'s two operating subsidiaries. On February 11, 2000 Form 8-K/A was filed to amend the previously filed Form 8-K to include the financial statements of Empress Entertainment, Inc. 42 43 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Joliet, State of Illinois, on March 30, 2000. Horseshoe Gaming Holding Corp. a Delaware corporation By: /s/ Jack B. Binion ------------------------------- Jack B. Binion Its: Chief Executive Officer, Secretary and Chairman of the Board of Directors Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ Jack B. Binion Chief Executive Officer, Secretary and March 30, 2000 - ---------------------------- Chairman of the Board of Directors Jack B. Binion (Principal Executive Officer) /s/ Peri Howard Director March 30, 2000 - ---------------------------- Peri Howard /s/ Leslie Kenny Director March 30, 2000 - ---------------------------- Leslie Kenny /s/ Kirk C. Saylor Chief Financial Officer and Treasurer March 30, 2000 - ---------------------------- (Principal Financial and Accounting Kirk C. Saylor Officer)
43 44 HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS
Horseshoe Gaming Holding Corp. and Subsidiaries Page - ----------------------------------------------- ---- Report of Independent Public Accountants F-2 Consolidated Financial Statements: Balance sheets as of December 31, 1999 and 1998 F-3 Statements of operations for the years ended December 31, 1999, 1998 and 1997 F-4 Statements of stockholders' equity for the years ended December 31, 1999, 1998 and 1997 F-5 Statements of cash flows for the years ended December 31, 1999, 1998 and 1997 F-6 Notes to consolidated financial statements F-7
F-1 45 Report of Independent Public Accountants To Horseshoe Gaming Holding Corp.: We have audited the accompanying consolidated balance sheets of Horseshoe Gaming Holding Corp. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. 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 auditing standards generally accepted in the United States. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Memphis, Tennessee, March 3, 2000. F-2 46 HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
December 31, ---------------------------- 1999 1998 ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 118,276 $ 84,151 Restricted cash 159,002 -- Accounts receivable, net of allowance for doubtful accounts of $11,089 and $10,346 14,876 9,653 Inventories 4,219 3,548 Prepaid expenses and other 6,212 4,484 ----------- ----------- Total current assets 302,585 101,836 ----------- ----------- Property and Equipment, net 546,464 375,307 Other Assets: Assets held for resale 1,630 12,000 Goodwill, net 463,847 36,124 Other, net 94,718 35,181 ----------- ----------- $ 1,409,244 $ 560,448 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 164,245 $ 1,174 Accounts payable 8,514 8,252 Accrued expenses and other 87,588 40,599 ----------- ----------- Total current liabilities 260,347 50,025 ----------- ----------- Long-term Liabilities: Long-term debt, less current maturities 1,094,703 387,544 Other long-term liabilities 12,840 -- ----------- ----------- Total long-term liabilities 1,107,543 387,544 ----------- ----------- Commitments and Contingencies (Notes 9, 10, 12 and 13) Minority Interest -- (1,965) Redeemable Ownership Interests, net of deferred compensation of $0 and $272 6,760 53,693 Members' Equity -- 71,151 Stockholders' Equity Common Stock, $1.00 par value, 50,000 shares authorized, 25,000 shares issued, 23,772 shares outstanding 25 -- Additional paid-in capital 41,360 -- Retained earnings 16,789 -- ----------- ----------- 58,174 -- Less 1,228 shares of treasury stock at cost (23,580) -- ----------- ----------- Total Stockholders' Equity 34,594 -- ----------- ----------- $ 1,409,244 $ 560,448 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-3 47 HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
Years Ended December 31, --------------------------------------- 1999 1998 1997 --------- --------- --------- Revenues: Casino $ 487,536 $ 429,825 $ 321,236 Food and beverage 52,969 48,263 29,990 Hotel 33,566 35,448 8,773 Retail and other 16,413 9,980 4,305 --------- --------- --------- 590,484 523,516 364,304 Less promotional allowances (64,931) (62,340) (29,211) --------- --------- --------- Net revenues 525,553 461,176 335,093 --------- --------- --------- Expenses: Casino 266,482 245,234 175,394 Food and beverage 16,911 15,959 10,981 Hotel 12,054 11,785 7,877 Retail and other 6,934 6,910 1,425 General and administrative 66,627 57,202 43,600 Corporate expenses 8,088 12,947 22,490 Development 327 515 1,653 Preopening -- 653 2,964 Asset write-down 10,346 12,911 -- Depreciation and amortization 41,806 33,888 19,411 --------- --------- --------- Total expenses 429,575 398,004 285,795 --------- --------- --------- Operating Income 95,978 63,172 49,298 Other Income (Expense): Interest expense (65,219) (39,861) (20,792) Interest income 11,887 2,189 4,996 Other, net (620) 412 (849) --------- --------- --------- Income before Extraordinary Loss on Early Retirement of Debt 42,026 25,912 32,653 Extraordinary Loss on Early Retirement of Debt (9,653) (787) (5,243) --------- --------- --------- Net Income $ 32,373 $ 25,125 $ 27,410 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-4 48 HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
Additional Members' Common Treasury Paid-in Retained Equity Stock Stock Capital Earnings Total -------- -------- -------- -------- -------- -------- Balance, December 31, 1996 $ 79,782 Distributions: Cash (11,056) Payable (15,000) Increase in redeemable ownership interests (16,541) Net income 27,410 -------- Balance, December 31, 1997 64,595 Cash distributions (17,012) Revaluation of land contribution (1,109) Increase in redeemable ownership interests (448) Net income 25,125 -------- Balance, December 31, 1998 71,151 Cash distributions (10,616) Decrease in redeemable ownership interests 2,181 Warrant repurchase (34,426) Net income -------- Balance, June 30, 1999 41,679 Exchange of members' ownership interests for 25,000 shares of common stock at $1.00 par value (41,679) $ 25 $ -- $ 41,654 $ -- $ 41,679 Dividends: Cash -- -- -- -- (566) (566) Payable -- -- -- -- (1,629) (1,629) Increase in redeemable ownership interests -- -- -- (294) -- (294) Purchase of stock for treasury -- -- (23,580) -- -- (23,580) Net income -- -- -- -- 18,984 18,984 -------- -------- -------- -------- -------- -------- Balance, December 31, 1999 $ -- $ 25 $(23,580) $ 41,360 $ 16,789 $ 34,594 ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-5 49 HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Years Ended December 31, --------------------------------------------- 1999 1998 1997 --------- --------- --------- Cash flows from operating activities: Net income $ 32,373 $ 25,125 $ 27,410 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest in income (loss) of subsidiary 311 (640) 420 Depreciation and amortization 41,806 33,888 19,411 Asset write-down 10,346 12,911 -- Amortization of debt discounts, deferred finance charges and other 3,631 2,741 2,313 Loss on disposal of property -- -- 389 Provision for doubtful accounts 4,643 11,937 7,556 Increase in redeemable ownership interests 470 4,245 15,066 Extraordinary loss on early retirement of debt 9,653 787 5,243 Change in assets and liabilities 14,773 (22,238) (6,482) --------- --------- --------- Net cash provided by operating activities 118,006 68,756 71,326 --------- --------- --------- Cash flows from investing activities: Purchases of property and equipment (205,090) (46,576) (215,576) Increase (decrease) in construction payables -- (26,290) 13,879 Proceeds from sale of property -- 383 -- Goodwill (257,928) -- -- Net decrease (increase) in escrow funds -- -- 42,235 Net increase in other assets (25,603) (17,902) (1,717) --------- --------- --------- Net cash used in investing activities (488,621) (90,385) (161,179) --------- --------- --------- Cash flows from financing activities: Proceeds from long-term debt 867,146 85,000 175,438 Payments on debt (236,895) (10,185) (97,877) Capital distributions (12,811) (17,012) (11,056) Warrant repurchases (34,426) -- -- Redeemable ownership payments (16,642) -- -- Increase in restricted cash (159,002) -- -- Purchase of treasury stock (1,788) -- -- Distributions to minority holders (842) (8) (910) Debt issue costs and commitment fees -- (725) (6,191) --------- --------- --------- Net cash provided by financing activities 404,740 57,070 59,404 --------- --------- --------- Net change in cash and cash equivalents 34,125 35,441 (30,449) Cash and cash equivalents, beginning of period 84,151 48,710 79,159 --------- --------- --------- Cash and cash equivalents, end of period $ 118,276 $ 84,151 $ 48,710 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-6 50 HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION Horseshoe Gaming Holding Corp. (the "Company"), a Delaware corporation, conducts casino gaming, hotel and other related operations at riverboat casinos under the "Empress", "Horseshoe" and "Binion" names in Joliet, Illinois; Hammond, Indiana; Bossier City, Louisiana and Tunica County, Mississippi. On April 15, 1999, the Company acquired over 90% of the aggregate ownership of Horseshoe Gaming, LLC ("Horseshoe Gaming") from Horseshoe Gaming's members in exchange for interests in the Company. The remaining ownership interests of Horseshoe Gaming either were contributed to the Company in exchange for interests in the Company or acquired by the Company or Horseshoe Gaming such that on December 31, 1999, the Company owned 100% of Horseshoe Gaming. 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 the Company and its subsidiary, Horseshoe GP, Inc. In April 1999, the Company purchased the remaining 8.08% limited partner interests in Horseshoe Entertainment, L.P. ("HE"), a Louisiana limited partnership which owns and operates the Horseshoe Bossier City (see Note 10), not held by NGCP. As of December 31, 1999 and 1998, NGCP owned 100% and 91.92%, respectively, of HE. - - Robinson Property Group, Limited Partnership ("RPG") is a Mississippi limited partnership which was formed on June 7, 1993. RPG owns and operates the Horseshoe Tunica located in Tunica County, Mississippi, and is 100% owned by the Company and its subsidiary, Horseshoe GP, Inc. - - Empress Casino Joliet Corporation ("Empress Joliet" or "ECJC") is an Illinois Corporation, which was formed on December 26, 1990. The Company acquired Empress Joliet from Empress Entertainment, Inc. on December 1, 1999 (see Note 4). Empress Joliet owns and operates the Empress Casino and Hotel in Joliet, Illinois and is 100% owned by the Company. - - Empress Casino Hammond Corporation ("Empress Hammond" or "ECHC") is an Indiana Corporation, which was formed on November 25, 1992. The Company acquired Empress Hammond from Empress Entertainment, Inc. on December 1, 1999 (see Note 4). Empress Hammond owns and operates the Empress Casino in Hammond, Indiana and is 100% owned by the Company. 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 holds more than a 50% ownership interest in all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents Cash equivalents are highly liquid investments with an original maturity of three months or less and are stated at the lower of cost or market. F-7 51 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Restricted Cash Restricted cash represents the remaining proceeds from the Company's 8.625% Senior Subordinated Notes which were placed in a secured proceeds account and used in January 2000 to retire the assumed Empress debt (see Notes 4 and 8). The proceeds were invested in U.S. Treasuries. Inventories Inventories are stated at the lower of cost, as determined on a first-in, first-out basis, or market value and consist primarily of food, beverage, retail merchandise, kitchen smallwares and employee wardrobe. Property and Equipment Property and equipment are stated at cost. The costs of normal repairs and maintenance are expensed as incurred while major expenditures that extend the useful lives of assets are capitalized. Depreciation is provided on the straight-line basis over the estimated useful lives as follows: Buildings, boat, barge and improvements 15 to 30 years Furniture, fixtures and equipment 3 to 10 years
Capitalized Interest The Company capitalizes interest for associated borrowing costs of major construction projects. Capitalization of interest ceases when the asset is substantially complete and ready for its intended use. Interest capitalized during the years ended December 31, 1999, 1998 and 1997, was $8,000, $163,000 and $11,191,000, respectively. Goodwill Goodwill is amortized on a straight-line basis over 25 years, which management estimates is the related minimum benefit period. Management regularly evaluates whether or not the future undiscounted cash flows of HE, RPG, ECJC and ECHC 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, 1999, 1998 and 1997, was $3,597,000, $1,668,000 and $1,662,000, 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 8). Redeemable Ownership Interests The Company is obligated to repurchase ownership interests totaling 1.4% of the Company's outstanding equity interests 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 equity in the accompanying consolidated balance sheets for all periods presented and expensed over the vesting period (see Note 12). F-8 52 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Dividends and Capital Distributions The Company's debt agreements contain covenants that limit dividends and capital distributions to its stockholders. Dividends and capital distributions to the stockholders are to be based upon taxable income and the highest marginal federal and state corporate statutory tax rates in effect, which are applicable to any stockholder. Such dividends and distributions are to be paid quarterly based upon estimated taxable income. After filing of their annual tax returns by the Company and its subsidiaries, each stockholder is to reimburse the Company for overpayments of capital distributions or the Company is to withhold such amounts from future dividends to the stockholders. 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):
Years Ended December 31, ------------------------------------- 1999 1998 1997 ------- ------- ------- Food and beverage $37,534 $36,705 $24,967 Hotel 8,384 8,325 3,360 Other operating expenses 7,599 5,067 664 ------- ------- ------- $53,517 $50,097 $28,991 ======= ======= =======
Advertising Costs The Company expenses all costs associated with advertising as incurred, and such amounts are included in general and administrative expenses in the accompanying consolidated statements of operations. Development and Preopening Expenses The Company expenses all development and preopening costs related to new construction as incurred in accordance with Statements of Position 98-5 "Reporting on the Cost of Start-up Activities." Total preopening costs of $0, $653,000 and $2,964,000 were expensed during 1999, 1998 and 1997, respectively, in conjunction with expansions at Horseshoe Bossier City and Horseshoe Tunica. Corporate Expenses Expenses associated with the management of the Company are recorded as corporate expenses and are reflected in the accompanying consolidated statements of operations in the periods such expenses are incurred. Included in corporate expenses for the years ended December 31, 1999, 1998 and 1997 are normal operating expenses and compensation expenses related to ownership interests in the Company issued to employees pursuant to employment agreements (see Note 12). Income Taxes The Company is organized as a corporation under Delaware laws and has elected to be taxed as an S Corporation for federal income tax purposes. During 1998, the Company was organized as a limited F-9 53 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) liability company under Delaware laws. The Internal Revenue Service classifies a limited liability company as a partnership for federal income tax purposes if the limited liability company lacks certain characteristics of corporations. Management believed that the Company lacked such corporate characteristics and, accordingly classified the Company as a partnership for federal income tax purposes at December 31, 1998. Accordingly, no provision is made in the accounts of the Company for federal income taxes, as such taxes are liabilities of the stockholders or members. The Company's income tax returns 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 stockholders 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 $18,278,000 and $3,847,000 at December 31, 1999 and 1998, respectively. Taxable income was in excess of net income reported in the accompanying consolidated statements of operations for all periods presented. Impairment of Long-Lived Assets In accordance with Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," management continually evaluates whether events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. Based on management's evaluations, there were no significant impairments of long-lived assets during the year ended December 31, 1997. For the years ended December 31, 1999 and 1998, the Company recorded a write-down in the carrying value of an idle riverboat (see Note 6). Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain amounts from prior years have been reclassified to conform to the current year presentation. 3. CONSOLIDATED STATEMENTS OF CASH FLOWS The following non-cash investing and financing activities are not reflected in the Consolidated Statements of Cash Flows: During 1999, the Company acquired ECHC and ECJC for cash plus the assumption of debt. As a result, the Company increased debt by $151,500,000, which included the tender premium of $1,500,000, increased accrued liabilities by $5,078,000 and increased goodwill by $156,578,000. The Company also recorded additional liabilities and goodwill related to the acquisition of ECHC and ECJC totaling $3,814,000. During 1999, the Company purchased common stock held in treasury for $21,800,000 in notes payable. Also, during 1999, the Company purchased certain ownership interests for $28,100,000 in notes payable. The Company had previously recorded a redeemable ownership liability for the repurchase of these ownership interests. 3. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) During 1999, the Company purchased the remaining 8.08% limited partnership interest not held by NGCP for $30.6 million. The non-cash asset of $25.9 million increased goodwill by $13.0 million and other assets F-10 54 by $12.9 million. The non-cash liability increased accrued expenses by $10.6 million, other long-term accrued expenses by $12.8 million and minority interest by $2.5 million. 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, accrued at December 31, 1997, were paid in February 1998. The net change in assets and liabilities consists of the following (in thousands):
Years Ended December 31, -------- -------- -------- 1999 1998 1997 -------- -------- -------- (Increase) decrease in assets: Accounts receivable $ (9,866) $ (8,072) $(13,091) Inventories (671) (590) (1,523) Prepaid expenses and other (1,730) (2,382) (493) Increase (decrease) in liabilities: Accounts payable 262 (2,226) 5,600 Accrued expenses and other 26,778 (8,968) 3,025 -------- -------- -------- $ 14,773 $(22,238) $ (6,482) ======== ======== ======== Supplemental Disclosure of Cash Flow Information: Cash paid for interest (in thousands) $ 54,681 $ 36,530 $ 29,524
4. ACQUISITION On December 1, 1999, the Company acquired from Empress Entertainment, Inc. ("Empress"), all of the outstanding stock of two of Empress's operating subsidiaries, Empress Hammond and Empress Joliet for $494.9 million in cash. The acquisition was accomplished through two simultaneous merger transactions (collectively the "Empress Mergers") of the Company's wholly owned subsidiaries, Horseshoe Acquisition Indiana, Inc. ("Horseshoe Indiana") with and into Empress Hammond, and Horseshoe Acquisition Illinois, Inc. ("Horseshoe Illinois") with and into Empress Joliet. As additional consideration for the Empress Mergers, the Company assumed the indebtedness and obligations of Empress, Empress River Casino Finance Corporation, Empress Joliet, Empress Hammond and Hammond Residential LLC, a wholly owned subsidiary of Empress Hammond ("Residential"), under an Indenture, dated as of June 18, 1998, for $150 million 8.125% Senior Subordinated Notes due 2006 and the payment of certain transaction costs. The Empress Mergers were consummated pursuant to an Agreement and Plan of Merger, dated as of September 2, 1998, by and among the Company, Horseshoe Gaming, certain of the Company's affiliates named therein, Empress, Empress Joliet and Empress Hammond (as amended by the First Amendment dated as of March 25, 1999 and by the Second Amendment dated as of July 23,1999, and as modified by the Assumption Agreement dated as of November 18, 1999, collectively, the "Merger Agreement"). The consideration was agreed upon as the result of arm's-length, good faith negotiations between the parties to the Merger Agreement and their respective representatives. Empress Joliet, Empress Hammond and Residential, will continue to operate as wholly owned subsidiaries of the Company. The sources of the funds used by the Company to pay the cash merger consideration consisted of funds obtained under: (i) an Indenture conveying $600 million in 8.625% Senior Subordinated Notes due 2009, dated as of May 11, 1999, between the Company and U.S. Trust Company, National Association, as trustee; and (ii) a Credit Agreement, dated as of June 30, 1999, by and among the Company, DLJ Capital Funding, Inc., as Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent, Wells Fargo Bank, National Association, as Documentation Agent, and the Lenders listed therein. 4. ACQUISITION (CONTINUED) The transactions have been recorded using the purchase method of accounting. The purchase price of the acquisitions and related preliminary allocation consist of the following (in thousands): PURCHASE PRICE: Cash $ 493,900 Transactions costs 955 --------- Total cash consideration 494,855 Plus: Debt and accrued interest assumed 155,078
F-11 55 Tender premium on debt 1,500 --------- Total purchase price $ 651,433 ========= PRELIMINARY ALLOCATION OF PURCHASE PRICE: Current assets $ 46,018 Property and equipment 189,695 Other assets, net 14,518 Intangible assets 15,000 Goodwill 414,986 Current liabilities (28,784) --------- Total allocation of purchase price $ 651,433 =========
The Company is currently in the process of allocating the purchase price among the tangible and intangible assets acquired and the liabilities assumed in the Empress acquisition. The Company estimates the value of other acquired intangibles included in other assets, net in the accompanying Consolidated Balance Sheets are $10.0 million for trademarks and $5.0 million for customer lists, to be amortized over five years. Upon completion of the final purchase price allocation, 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 25 years. The following unaudited pro-forma financial information assumes the acquisitions occurred at the beginning of each period presented. These results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made at the beginning of these periods, or as a prediction of results which may occur in the future.
December 31, ------------------------ 1999 1998 -------- -------- (unaudited) (unaudited) Net revenues $940,507 $857,842 Operating income 165,167 112,834 Net income 56,811 14,790
5. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands):
December 31, --------------------------- 1999 1998 --------- --------- Land $ 28,349 $ 16,093 Buildings, boat, barge and improvements 528,610 333,071 Furniture, fixtures and equipment 158,306 83,360 Less: accumulated depreciation (170,868) (61,330) --------- --------- 544,397 371,194 Construction in progress 2,067 4,113 --------- --------- Property and Equipment, net $ 546,464 $ 375,307 ========= =========
F-12 56 6. ASSETS HELD FOR RESALE In January 1998, HE replaced its riverboat casino facility ("Queen of the Red") with a new riverboat casino facility. The Queen of the Red, along with its related gaming equipment is reported as assets held for resale in the accompanying consolidated balance sheets. During 1999, HE recorded an asset write-down of $10,346,000 reducing the carrying value of the Queen of the Red to its current estimated net realizable value of $1,630,000. The estimated net realizable value was based on recent market information concerning riverboats being held for sale. In 1998, based on an appraisal of the Queen of the Red, management reduced the carrying value of the Queen of the Red by $12,911,000. Management is continuing to evaluate various options for use of the Queen of the Red, including sale. Subsequent to December 31, 1999, HE sold the gaming equipment from the Queen of the Red for $630,000 thereby reducing the carrying value to $1,000,000. 7. ACCRUED EXPENSES AND OTHER Accrued expenses and other consist of the following (in thousands):
December 31, ---------------------- 1999 1998 ------- ------- Payroll and related tax liabilities $13,006 $ 8,674 Vacation and other employee benefits 7,417 3,157 Accrued interest 17,476 5,491 Gaming, sales, use and property taxes 7,720 3,815 Progressive slot and slot club liabilities 12,531 6,691 Other accrued expenses 29,438 12,771 ------- ------- $87,588 $40,599 ======= =======
8. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
December 31, ------------------------ 1999 1998 -------- -------- 8.625% Senior Subordinated Notes (effective interest rate of 8.657%), due May 15, 2009, net of unamortized discount of $2,050 $597,950 $ -- 9.375% Senior Subordinated Notes (effective interest of 9.384%), due June 15, 2007, net of unamortized discount of $121 and $137 159,879 159,863 8.125% Empress Senior Subordinated Notes (effective interest rate of 8.125%), due July 1, 2006, including call premium of $1,500 151,500 -- Senior Secured Revolving Credit Facility, secured by substantially all of the assets of the Company, $250 million borrowing capacity, due September 30, 2004, with varying interest rates ranging from 8.33% to 8.73% 175,000 -- Senior Secured Credit Facility Tranche B Term Loan, $125 million borrowing capacity, secured by substantially all of the assets of the Company, principal of $313 plus interest due quarterly with remaining principal and interest due September 30, 2006, with varying interest rates ranging from 8.58% to 8.63% 124,687 --
F-13 57 8. LONG-TERM DEBT (CONTINUED)
December 31, ------------------------------- 1999 1998 ----------- ----------- (in thousands) 12.75% Senior Notes (effective interest rate of 13.01%), substantially paid in full in May 1999, paid in full and retired in September 1999, net of unamortized discount of $909 $ -- $ 127,681 Senior Secured Revolving Credit Facility, secured by substantially all of the assets of the Company, paid in full and retired in May 1999 -- 100,000 Notes Payable, interest ranging from 6% to 12%, due in various installments through January 2004 49,932 1,174 ----------- ----------- 1,258,948 388,718 Less: current maturities (164,245) (1,174) ----------- ----------- $ 1,094,703 $ 387,544 =========== ===========
On June 15, 1997, the Company issued $160,000,000 of 9.375% Senior Subordinated Notes ("Subordinated Notes") due June 15, 2007. The Subordinated Notes were issued at 99.899% of par value. The Subordinated Notes are unsecured and require semi-annual interest payments on June 15 and December 15. A portion of the proceeds were used to retire a previously outstanding credit facility (see below), as well as retire $13 million in senior notes. An extraordinary loss on early retirement of debt of $5,243,000 was recognized in 1997 for prepayment penalties and premium, and the write-off of unamortized discounts and deferred finance charges. The remaining proceeds were used to fund a portion of the expansion of the Company's existing facilities. During 1998, the Company repurchased some of its senior notes from individual note holders in the open market totaling $8,410,000. An extraordinary loss on early retirement of debt of $787,000 was recognized in 1998 for prepayment penalties, premium and the write-off of unamortized discounts and deferred finance charges. In May 1999, the Company completed a private placement offering of $600 million of 8.625% Senior Subordinated Notes due 2009. The proceeds from the notes were used to retire the 12.75% senior notes of $128.6 million and the Company's Amended and Restated Senior Secured Revolving Credit Facility of $75 million. An extraordinary loss on the early retirement of debt of $9.6 million was recognized in 1999 for prepayment penalties, premium and the write-off of unamortized discounts and deferred finance charges. The remaining proceeds amounting to $342.3 million were placed in a secured proceeds account of which $151.5 million was used to fund the redemption of Empress 8.125% Senior Subordinated Notes in January 2000 and $190.8 million was used to partially fund the acquisition of ECJC and ECHC. On June 30, 1999, the Company completed its $375.0 million Senior Secured Credit Facility (the "Credit Facility"). The Credit Facility consists of a $250.0 million, five-year revolver and a $125.0 million, seven-year loan. On December 1, 1999, the Company borrowed $175.0 million of the revolver and the entire $125.0 million term loan to complete the funding requirement for the purchase of ECJC and ECHC. All of the operating subsidiaries guarantee the obligations under the Credit Facility. The term loan requires quarterly principal payments of $312,500 through September 2005 and $29,375,000 quarterly thereafter. The revolving loan commitment is permanently reduced by $9,375,000 per quarter beginning December 31, 2001, $12,500,000 per quarter beginning December 31, 2002 and $40,625,000 per quarter beginning December 31, 2003. As of March 4, 2000, a combined $234.7 million was outstanding under the Credit Facility. The Company's debt agreements contain covenants that, among other things, (i) limit the amount of dividends the Company can pay to its stockholders; (ii) limit the amount of additional indebtedness which may be incurred by the Company and its subsidiaries; (iii) prohibit any consolidation or merger of the Company or its subsidiaries with an affiliate or third party, any sale of substantially all of the Company or F-14 58 8. LONG-TERM DEBT (CONTINUED) its subsidiaries' assets, or any payment of subordinated indebtedness prior to its scheduled maturity; and (iv) limit the amount of restricted payments, as defined, the Company may make. As of December 31, 1999, the five year maturities for long-term debt were $164,245,000 (2000), $10,158,000 (2001), $10,774,000 (2002), $69,059,000 (2003) and $128,446,000 (2004). As of December 31, 1999 the fair market value of the 8.625% Senior Subordinated Notes, based on quoted market prices was $580,500,000. As of December 31, 1999 and 1998, the fair market value of the 9.375% Senior Subordinated Notes, based on quoted market prices was $159,600,000 and $164,800,000, respectively. As of December 31, 1998, the fair market value of the 12.75% Senior Notes, based on market quoted market prices was $138,170,000. The fair market value of the Company's other long-term debt approximated its carrying value as of December 31, 1999 and 1998, based on the borrowing rates currently available for debt with similar terms. 9. LEASE COMMITMENTS The Company and its subsidiaries lease both real estate and equipment used in the operations and classifies those leases as either operating or capital leases following the provisions of SFAS No. 13 "Accounting for Leases." Empress Hammond 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 Empress Hammond's procurement of its operating license from the Indiana Gaming Commission (June 21, 1996). The term of the lease automatically extends for a period equal to each renewal period of the operating license provided that the total term will not exceed 75 years. Empress Hammond has paid in full the rent for the amount of $1.00 per year for the term of the lease. Rent expense for the years ended December 31, 1999, 1998 and 1997 was approximately $2,486,000 $2,105,000 and $1,741,000, respectively. In January 2000, the Company signed a three year lease for computer equipment. The leases require monthly payments of $51,079 and expire on December 31, 2002. As of December 31, 1999, our future minimum rental commitments are $2,098,000 (2000), $1,495,000 (2001), $1,230,000 (2002), $216,000 (2003) and $205,000 (2004). In addition to these minimum rental commitments, certain of the Company's operating leases provide for contingent rentals based on a percentage of revenues in excess of specified amounts. 10. 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 stockholder, 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 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. In May 1999, Horseshoe Gaming purchased redeemable ownership interests comprising an aggregate 7.2% of Horseshoe Gaming from five former employees for an aggregate purchase price of $39.0 million. In June 1999, the first installment of approximately $11.5 million was paid with the remaining amount to be paid F-15 59 10. OWNERSHIP REPURCHASE MATTERS (CONTINUED) over a period not to exceed four years. During the third quarter of 1999, Horseshoe Gaming agreed to purchase redeemable ownership interests of 1.3% of the Company from four current employees for $5.3 million. The first installment of approximately $1.7 million was paid with the remaining amount to be paid over a period not to exceed three years. The notes receivable from these former and current employees was fully paid in connection with the first installment payment made. Operating results for the year ended December 31, 1999 includes a $2.9 million reduction in deferred compensation expense resulting from the final valuation of these ownership interests. During the third quarter of 1999, the Company also agreed to purchase ownership interests of 3.2% of the Company from four owners totaling $18.3 million. During the third quarter of 1999, the first installment of approximately $1.8 million was paid with the remaining amount to be paid over a period not to exceed four years. During the fourth quarter of 1999, the Company also agreed to purchase ownership interests of 0.7% of Horseshoe Gaming from five owners totaling $5.3 million to be paid in January 2004. The Company has employment agreements and unit option agreements with certain employees which contain put/call options whereby, upon termination of employment, the Company must, at the election of any such employee, and may, at the Company's election, purchase such employee's ownership interest for an amount equal to the fair market value of such interest as determined by an independent appraisal or an arbitration process. As of December 31, 1999, the aggregate fair market value of all interests subject to such put/call options, representing approximately 1.4% ownership of the Company, was $6.8 million. Such agreements provide that the purchase price for the employee's ownership interest shall be paid in cash, either upon transfer of the interest to the Company or in installments over a period not to exceed five years depending on the aggregate purchase price. In April 1999, the Company exercised an option to acquire the remaining 8.08% limited partnership interest in HE not held by NGCP for total consideration of $30.6 million, which included payments for a non-compete covenant, consents and a release of claims. The consideration for the repurchase consisted of $2.1 million cash, offsets against the negative capital account balances of the former limited partners and payables amounting to $26.0 million. As of December 31, 1999, the remaining amount to be paid to these limited partners totaled $23.8 million, of which $11.0 million is included in accrued expenses and $12.8 million is included in other long-term liabilities. 11. 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 for Mr. Binion equal to the fair value of his services for each of the years ended December 31, 1999 and 1998. 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 2000. The principals of a placement agent used by the Company to secure financing own approximately 3.9% of the Company. Fees were paid to the placement agent during 1997 for various financial advisory services totaling $600,000. Notes receivable (including accrued interest) from employees and former employees with ownership interests in the Company totaling $583,000 and $3,037,000 are included in other assets in the accompanying consolidated balance sheets as of December 31, 1999 and 1998, respectively. The notes to employees are secured by their ownership interests in the Company and have various due dates and interest rates ranging from 7% to 10%. F-16 60 11. TRANSACTIONS WITH RELATED PARTIES (CONTINUED) Included in other assets in the accompanying consolidated balance sheets at December 31, 1999 and 1998 are notes receivable from the former limited partners of HE totaling $8,252,000 and $8,163,000, respectively. The notes receivable will be offset from the payments to be made to these limited partners pursuant to the acquisition of their ownership interest in HE by the Company. 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 were $3,157,000, $3,625,000 and $2,648,000 for the years ended December 31, 1999, 1998 and 1997, respectively. 12. EMPLOYEE COMPENSATION AND BENEFITS Employment Agreements Certain current and former key employees are covered under employment agreements that provide certain benefits in the event of such employees' termination. These employment agreements include a put/call provision, which if exercised by the employee, would require the Company to repurchase such employees' respective ownership interests in the Company in the event of termination at the then fair market value based on an independent appraisal. Accordingly, these compensation agreements are accounted for as variable stock purchase plans. Compensation expense is recorded each period equal to the change in the fair market value of ownership interests issued and the vesting schedule pursuant to these agreements. The total ownership interest in the Company issued to employees pursuant to such employment agreements was 1.4%, 4.1% and 4.1% as of December 31, 1999, 1998 and 1997, respectively. 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 $470,000, $4,245,000 and $15,066,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Some of the employment agreements also included a guaranteed severance payment in the event of termination. The amount of such liability was $ 0 and $1,810,000 at December 31, 1999 and 1998, respectively (see Note 10.) Unit Option Plan During 1997, the Company approved the 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. As of December 31, 1999, 631,225 units had been granted all of which had vested. As of December 31, 1999, 126,245 units, which were exchanged for 33.6 options to purchase stock in the Company at an exercise price of $13,009.75 per share, remained unexercised. 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 stock in the Company, provided such value exceeds the exercise price of the options. The net value is included in redeemable ownership interests in the accompanying consolidated balance sheets. The Company recognized compensation expense of $1,544,000 and $1,107,000 related to this option plan during 1998 and 1997, respectively, and during 1999, a reduction of $391,000 resulting from the final valuation of the options. In 1998, one former employee that had a Unit Option Agreement (126,245 units) elected not to renew his employment agreement and exercised his option to purchase the units pursuant to the Unit Option Agreement and his option to put the units back to the Company at fair market value. The exercise price was deducted from the proceeds received by the employee for the redemption of his units (see Note 10). F-17 61 12. EMPLOYEE COMPENSATION AND BENEFITS (CONTINUED) In 1999, two employees that had unit options under the Unit Option Agreement (378,735 units), exercised their options pursuant to the Unit Option Agreement and put them back to the Company at fair market value. The exercise price was deducted from the proceeds received by the employees for the redemption of their units. During 1999, the Company approved the 1999 Equity Incentive Plan which provides for certain employees to be granted options (with tandem SARs) to purchase stock in the Company and SARs to certain other employees to share in the increase in the market value of the Company. The exercise price for the options/SARs is determined in accordance with the plan document and represents the fair market value at the date of grant. The options/SARs vest over a period of four years and expire in ten years. Total compensation expense recognized during 1999 was $735,000. The following table represents option (with tandem SAR) activity for 1999:
Number of Average Price Shares per Share ------ ------- Balance, December 31, 1998 -- $ -- Issued 127.23 13,660 Cancelled -- -- Exercised -- -- ------ ------- Balance, December 31, 1999 127.23 $13,660 ====== =======
The following table represents SAR activity for 1999: Balance, December 31, 1998 -- $ -- Issued 181.62 13,702 Cancelled 16.71 13,660 Exercised 2.10 13,660 ------ ------- Balance, December 31, 1999 162.81 $13,706 ====== =======
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. Beginning January 1, 1996, employees of the Company and its subsidiaries other than RPG were allowed to participate in the RPG 401(k) savings plan. 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 $1,205,000, $923,000 and $716,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Upon the acquisition of ECJC and ECHC, on December 1, 1999, the Company took over the 401(k) plan of ECJC and ECHC. The Company's contributions to the plan are based on a discretionary percentage of employee contributions and may include an additional discretionary amount. The Company's contributions for the period from acquisition through December 31, 1999 totaled $67,000. F-18 62 13. COMMITMENTS AND CONTINGENCIES Litigation 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 in venue in the summer of 1998 to Newton County, Indiana. On September 28, 1998, the jury returned a $5.2 million verdict against the City of Hammond. Under the terms of the Development Agreement between Empress Hammond and the City of Hammond, 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, if any, or when, the condemnation award will be paid. On July 21, 1998, a lawsuit was filed against Empress Hammond and Empress Joliet and four of their employees by two former female employees of Empress Joliet, alleging 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 the Company with respect to this claim and others, there can be no assurances that such indemnity will be adequate or available to the Company or that any judgment in this matter would not have a material adverse effect on the Company. The Company and its subsidiaries are from time to time, party to legal proceedings arising in the ordinary course of business. The Company is unaware of any legal proceedings which, even if the outcome were unfavorable to the Company, would have a material adverse impact on either its financial condition or results of operations. Commitments - Empress Hammond License Requirements 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. As of December 31, 1999, approximately $14.5 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 as well as an annual payment based on a varying percentage of Empress Hammond's adjusted gross receipts. F-19 63 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Horseshoe Gaming Holding Corp.: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Horseshoe Gaming Holding Corp. and subsidiaries included in this Form 10-K, and have issued our report thereon dated March 3, 2000. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)2 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements, and in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Memphis, Tennessee, March 3, 2000. S-1 64 SCHEDULE II HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS (In thousands)
Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Additions Balance at Charged to Deductions Balance at Beginning Costs and from Other Close Description of Period Expenses Reserves Changes of Period ----------- --------- ---------- ---------- ------- ---------- Year Ended December 31, 1999 Allowance for Doubtful Accounts $10,346 $ 4,643 $ (7,815)(a) $ 3,915(b) $11,089 ======= ======= ======== ========== ======= Year Ended December 31, 1998 Allowance for Doubtful Accounts $ 8,965 $11,937 $(10,556)(a) $ -- $10,346 ======= ======= ======== ========== ======= Year Ended December 31, 1997 Allowance for Doubtful Accounts $ 3,452 $ 7,556 $ (2,043)(a) $ -- $ 8,965 ======= ======= ======== ========== =======
(a) Uncollectable accounts written off, net of amounts recovered. (b) Includes balances assumed in the Empress Acquisition. S-2 65 EXHIBIT INDEX
Exhibit Sequentially Number Description Numbered Page - ------ ----------- ------------- 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. 2.5### Second Amendment to Agreement and Plan of Merger, dated as of July 23, 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 Entertainment, Inc., Empress Casino Joliet Corporation and Empress Casino Hammond Corporation. 2.6++++ Assumption Agreement, dated as of November 18, 1999, by and among Horseshoe Gaming L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc., Empress Acquisition Indiana, Inc., Empress Entertainment, Inc., Empress Casino Joliet Corporation, Empress Casino Hammond Corporation, Horseshoe Acquisition Illinois, Inc., Horseshoe Acquisition Indiana, Inc., and Horseshoe Gaming Holding Corp. 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. 4.9* Intercompany Senior Secured Note due September 30, 2000, executed by Horseshoe Entertainment in favor of 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. 4.17## 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. 4.19## 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. 4.22## 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. 4.24## 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. 4.26**** 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
66 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. 4.37## 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. 4.51#### Horseshoe Gaming Holding Corp. Credit Agreement, dated as of June 30, 1999, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank of Commerce.(1) 4.52++++++ Indenture dated as of June 18, 1998 by and between Empress Entertainment, Inc., as issuer, the Guarantors named therein and U.S. Bank National Association as Trustee with respect to Empress' 8 1/8%, $150 million Senior Subordinated Notes due 2006. 4.53++++++ Supplemental Indenture, dated as of December 1, 1999, among Empress Casino Hammond Corporation, Empress Residential, L.L.C. and Empress Casino Joliet Corporation (collectively, the "Subsidiary Guarantors") with respect to the unconditional guarantee of all of the Company's obligations under Indenture covering the 9 3/8% Senior Subordinated Notes due 2007 by the Subsidiary Guarantors. 4.54++++++ Supplemental Indenture, dated as of December 1, 1999, among New Gaming Capital Partnership, Horseshoe Entertainment, Horseshoe Gaming, L.L.C., Horseshoe GP, Inc., Empress Casino Hammond Corporation, Empress Residential, L.L.C., Empress Casino Joliet Corporation, Robinson Property Group, Limited Partnership and Bossier City Land Corporation (collectively, the "Guaranteeing Subsidiaries") with respect to the unconditional guarantee of all of the Company's obligations under Indenture covering the 8 1/8%% Senior Subordinated Notes due 2009 by the Guaranteeing Subsidiaries. 4.55++++++ Supplemental Indenture dated as of December 1, 1999, between Horseshoe Gaming Holding Corp., to the 9 3/8% Senior Subordinated Notes due 2007 and U.S. Trust Company of Texas, N.A. 4.56++++++ Amendment No. 1 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 18, 1999, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank of Commerce. 4.57++++++ Amendment No. 2 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 30, 1999, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank of Commerce. 4.58++++++ Amendment No. 3 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of January 20, 2000, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank of Commerce. 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
- -------- (1) In accordance with item 601 of Regulation S-K, the Registrant has not filed the schedules to this Agreement with the Securities and Exchange Commission. The Registrant undertakes to supplementally provide a copy of such schedules to the Securities and Exchange Commission upon request. 67 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. 10.11+ 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. 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.
68 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. 10.37## Employment Agreement, dated as of January 11, 1999, by and between Horseshoe Gaming, Inc. and Joseph J. Canfora. 10.38## Consulting Agreement, dated as of July 23, 1999, by and between Horseshoe Gaming, L.L.C. and Empress Entertainment, Inc. 10.39++++++ Employment Agreement dated as of March 2000, by and between Empress Casino Hammond Corporation and Rick Mazer. 10.40++++++ Employment Agreement dated as January 6, 2000, by and between Empress Casino Joliet Corporation and David Fendrick. 10.41++++++ Release Agreement dated as July 1, 1999 by and between Horseshoe Gaming, L.L.C. and Larry Lepinski. 10.42++++++ Release Agreement dated as July 1, 1999 by and between Horseshoe Gaming, L.L.C. and Glenn Buxton. 10.43++++++ Stock Purchase Agreement dated as of July 1, 1999 by and between Horseshoe Gaming L.L.C. and Rick Cook. 10.44++++++ Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming L.L.C. and Robert McQueen. 10.45++++++ Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming L.L.C. and Gary Border. 10.46++++++ Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming L.L.C. and Gary Anderson. 10.47++++++ Equity Incentive Plan dated as of January 1, 1999 by and between Horseshoe Gaming Holding Corp. and certain employees. 10.48++++++ Promissory Note and Stock Purchase Agreement dated as of November 30, 1999 by and between Horseshoe Gaming L.L.C. and Alpine Associates. 10.49++++++ Promissory Note and Stock Purchase Agreement dated as of November 30, 1999 by and between Horseshoe Gaming L.L.C. and Bear Stearns F/A/O # 2000. 10.50++++++ Promissory Note and Stock Purchase Agreement dated as of November 30, 1999 by and between Horseshoe Gaming L.L.C. and Matthewson CRUT. 10.51++++++ Promissory Note and Stock Purchase Agreement dated as of November 30, 1999 by and between Horseshoe Gaming L.L.C. and Nobutaka Mutaguchi. 10.52++++++ Promissory Note and Stock Purchase Agreement dated as of November 30, 1999 by and between Horseshoe Gaming L.L.C. and Post Balanced Fund. 10.53++++++ Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming L.L.C. and Robert Fechser. 10.54++++++ Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming L.L.C. and Doyle Brunson. 10.55++++++ Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming L.L.C. and Key Fechser. 10.56++++++ Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming L.L.C. and David Reese. 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. 24.1## Power of Attorney (included on signature page hereto). 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.
- ---------- * Filed as an Exhibit to Horseshoe Gaming, L.L.C. Registration Statement on Form 69 ** 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 as an Exhibit to Horseshoe Gaming Holding Corp.'s Form S-4 Registration Statement filed on June 15, 1999. ### Filed as an Exhibit to Amendment No. 1 to Horseshoe Gaming Holding Corp's Form S-4 Registration Statement filed on July 30, 1999. #### Filed as an Exhibit to Amendment No. 2 to Horseshoe Gaming Holding Corp's Form S-4 Registration Statement filed on August 2, 1999. ++ Filed as an Exhibit to Amendment No. 3 to Horseshoe Gaming Holding Corp's Form S-4 Registration Statement filed on August 10, 1999. ++++ Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on December 16, 1999. ++++++ Filed herewith. EX-4.52 2 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.52 ================================================================================ EMPRESS ENTERTAINMENT, INC., as Issuer, THE GUARANTORS NAMED HEREIN and U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee ---------------------------- INDENTURE Dated as of June 18, 1998 ---------------------------- $150,000,000 8 1/8% Senior Subordinated Notes due 2006 ================================================================================ 2 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of June 18, 1998
Trust Indenture Indenture Act Section Section - --------------- ---------- (S)(S) 310 (a)(1)............................................... 6.09 (a)(2)............................................... 6.09 (a)(3)............................................... N/A (a)(4)............................................... N/A (a)(5)............................................... 6.09 (b).................................................. 6.08 (S)(S) 311 (a).................................................. 6.13 (b).................................................. 6.13 (S)(S) 312 (a).................................................. 7.01 (b).................................................. 7.02 (c).................................................. 7.02 (S)(S) 313 (a).................................................. 7.03 (b).................................................. 7.03 (c).................................................. 7.03 (d).................................................. 7.03 (S)(S) 314 (a)(1)............................................... 7.04 (a)(2)............................................... 7.04 (a)(3)............................................... 7.04 (a)(4)...............................................10.08 (b).................................................. N/A (c)(1)......................................... 1.04, 4.03 (c)(2)......................................... 1.04, 4.03 (c)(3)............................................... N/A (d).................................................. N/A (e).................................................. 1.04 (S)(S) 315 (a)............................................... 6.01(a) (b).................................................. 6.02 (c)............................................... 6.01(b) (d)............................................... 6.01(c) (e).................................................. 5.14 (S)(S) 316 (a) (last sentence)................... 1.1 ("Outstanding") ----------- (a)(1)(A)............................................ 5.12 (a)(1)(B)............................................ 5.13 (a)(2)............................................... N/A (b).................................................. 5.08 (S)(S) 317 (a)(1)............................................... 5.03 (a)(2)............................................... 5.04 (b)..................................................10.03 (S)(S) 318 (a).................................................. 1.08
3 TABLE OF CONTENTS -----------------
Page PARTIES....................................................................................................... 1 RECITALS OF THE COMPANY....................................................................................... 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.................................................. 2 Section 1.01. Definitions....................................................................... 2 Section 1.03. Rules of Construction............................................................. 23 Section 1.04. Form of Documents Delivered to Trustee............................................ 24 Section 1.05. Acts of Holders................................................................... 25 Section 1.06. Notices, etc., to the Trustee and the Company..................................... 26 Section 1.07. Notice to Holders; Waiver......................................................... 26 Section 1.08. Conflict with Trust Indenture Act................................................. 27 Section 1.09. Effect of Headings and Table of Contents.......................................... 27 Section 1.10. Successors and Assigns............................................................ 27 Section 1.11. Separability Clause............................................................... 27 Section 1.12. Benefits of Indenture............................................................. 27 Section 1.13. GOVERNING LAW..................................................................... 27 Section 1.14. No Recourse Against Others........................................................ 28 Section 1.15. Independence of Covenants......................................................... 28 Section 1.16. Exhibits and Schedules............................................................ 28 Section 1.17. Counterparts...................................................................... 28 Section 1.18. Duplicate Originals............................................................... 28 Section 1.19. Incorporation by Reference of TIA................................................. 28 ARTICLE TWO SECURITY FORMS........................................................................................... 29 Section 2.01. Form and Dating................................................................... 29 Section 2.02. Execution and Authentication; Aggregate Principal Amount.......................... 30 Section 2.03. Restrictive Legends............................................................... 30 Section 2.04. Book-Entry Provisions for Global Notes............................................ 33 Section 2.05. Special Transfer Provisions....................................................... 34 ARTICLE THREE THE NOTES................................................................................................ 36 Section 3.01. Title and Terms................................................................... 36 Section 3.02. Denominations..................................................................... 36
i 4
Page ---- Section 3.03. Temporary Notes................................................................... 37 Section 3.04. Registration; Registration of Transfer and Exchange............................... 37 Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes....................................... 38 Section 3.06. Payment of Interest; Interest Rights Preserved.................................... 39 Section 3.07. Persons Deemed Owners............................................................. 40 Section 3.08. Cancellation...................................................................... 40 Section 3.09. Computation of Interest........................................................... 40 Section 3.10. Legal Holidays.................................................................... 41 Section 3.11. CUSIP Number...................................................................... 41 Section 3.12. Payment of Additional Interest Under Registration Rights Agreement................ 41 ARTICLE FOUR DEFEASANCE OR COVENANT DEFEASANCE........................................................................ 41 Section 4.01. Defeasance........................................................................ 41 Section 4.02. Covenant Defeasance............................................................... 42 Section 4.03. Conditions to Defeasance or Covenant Defeasance................................... 42 Section 4.04. Deposited Money and U.S. Government Obligations To Be Held in Trust, Etc............................................................. 43 Section 4.05. Reinstatement..................................................................... 44 Section 4.06. Repayment to Company.............................................................. 44 ARTICLE FIVE REMEDIES................................................................................................. 45 Section 5.01. Events of Default................................................................. 45 Section 5.02. Acceleration of Maturity; Rescission and Annulment................................ 46 Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee; Other Remedies........................................................... 47 Section 5.04. Trustee May File Proofs of Claims................................................. 47 Section 5.05. Trustee May Enforce Claims Without Possession of Notes............................ 48 Section 5.06. Application of Money Collected.................................................... 48 Section 5.07. Limitation on Suits............................................................... 49 Section 5.08. Unconditional Right of Holders To Receive Principal, Premium and Interest.............................................................. 49 Section 5.09. Restoration of Rights and Remedies................................................ 50 Section 5.10. Rights and Remedies Cumulative.................................................... 50 Section 5.11. Delay or Omission Not Waiver...................................................... 50 Section 5.12. Control by Majority............................................................... 50
ii 5
Page ---- Section 5.13. Waiver of Past Defaults........................................................... 50 Section 5.14. Undertaking for Costs............................................................. 51 Section 5.15. Waiver of Stay, Extension or Usury Laws........................................... 51 ARTICLE SIX THE TRUSTEE.............................................................................................. 52 Section 6.01. Certain Duties and Responsibilities............................................... 52 Section 6.02. Notice of Defaults................................................................ 53 Section 6.03. Certain Rights of Trustee......................................................... 53 Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Notes or Application of Proceeds Thereof.......................................... 54 Section 6.05. Trustee and Agents May Hold Notes; Collections; etc............................... 55 Section 6.06. Money Held in Trust............................................................... 55 Section 6.07. Compensation and Indemnification of Trustee and Its Prior Claim................... 55 Section 6.08. Conflicting Interests............................................................. 55 Section 6.09. Corporate Trustee Required; Eligibility........................................... 56 Section 6.10. Resignation and Removal; Appointment of Successor Trustee......................... 56 Section 6.11. Acceptance of Appointment by Successor............................................ 57 Section 6.12. Successor Trustee by Merger, etc.................................................. 58 Section 6.13. Preferential Collection of Claims Against Issuers................................. 58 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY........................................................ 59 Section 7.01. Preservation of Information; Company To Furnish Trustee Names and Addresses of Holders............................................ 59 Section 7.02. Communications of Holders......................................................... 59 Section 7.03. Reports by Trustee................................................................ 59 Section 7.04. Reports by Company and Each Guarantor............................................. 60 ARTICLE EIGHT SUCCESSOR CORPORATION.................................................................................... 60 Section 8.01. When Company May Merge, etc....................................................... 60 Section 8.02. Successor Substituted............................................................. 61
iii 6
Page ---- ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS...................................................................... 62 Section 9.01. Without Consent of Holders........................................................ 62 Section 9.02. With Consent of Holders........................................................... 62 Section 9.03. Compliance with Trust Indenture Act............................................... 63 Section 9.04. Effect of Supplemental Indentures................................................. 64 Section 9.05. Revocation and Effect of Consents................................................. 64 Section 9.06. Notation on or Exchange of Notes.................................................. 64 Section 9.07. Trustee May Sign Amendments, etc.................................................. 65 ARTICLE TEN COVENANTS................................................................................................ 65 Section 10.01. Payment of Principal, Premium and Interest........................................ 65 Section 10.02. Maintenance of Office or Agency................................................... 65 Section 10.03. Money for Note Payments To Be Held in Trust....................................... 66 Section 10.04. Existence......................................................................... 67 Section 10.05. Payment of Taxes and Other Claims................................................. 67 Section 10.06. Insurance......................................................................... 67 Section 10.07. Compliance Certificate............................................................ 68 Section 10.08. Reporting Requirements............................................................ 68 Section 10.09. Limitation on Guarantees by Restricted Subsidiaries............................... 68 Section 10.10. Limitation on Incurrence of Indebtedness and Preferred Stock...................... 69 Section 10.11. Limitation on Restricted Payments................................................. 71 Section 10.12. Limitation on Transactions with Affiliates........................................ 72 Section 10.13. Limitation on Sale of Assets and Subsidiary Stock; Event of Loss.................. 73 Section 10.14. Change of Control................................................................. 75 Section 10.15. Limitation on Liens............................................................... 78 Section 10.16. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries................................................. 78 Section 10.17. Restrictions on Sale of Capital Stock of Restricted Subsidiaries.................. 78 Section 10.18. Limitation on Designations of Unrestricted Subsidiaries........................... 79 Section 10.19. Limitation on Other Senior Subordinated Indebtedness.............................. 80 Section 10.20. Limitation on Lines of Business................................................... 80 Section 10.21. Limitation on Status as Investment Company........................................ 80 ARTICLE ELEVEN
iv 7
Page ---- REDEMPTION OF NOTES...................................................................................... 80 Section 11.01. Optional and Special Redemption................................................... 80 Section 11.02. Required Regulatory Redemption.................................................... 81 Section 11.03. Applicability of Article.......................................................... 81 Section 11.04. Election To Redeem; Notice to Trustee............................................. 82 Section 11.05. Selection of Notes To Be Redeemed................................................. 82 Section 11.06. Notice of Redemption.............................................................. 82 Section 11.07. Deposit of Redemption Price....................................................... 83 Section 11.08. Notes Payable on Redemption Date.................................................. 83 Section 11.09. Notes Redeemed or Purchased in Part............................................... 84 ARTICLE TWELVE SATISFACTION AND DISCHARGE............................................................................... 84 Section 12.01. Satisfaction and Discharge of Indenture........................................... 84 Section 12.02. Application of Trust Money........................................................ 85 ARTICLE THIRTEEN GUARANTEE OF NOTES....................................................................................... 85 Section 13.01. Guarantee......................................................................... 85 Section 13.02. Execution and Delivery of Guarantee............................................... 87 Section 13.03. Additional Guarantors............................................................. 87 Section 13.04. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness............................................................... 88 Section 13.05. Release of a Guarantor............................................................ 88 Section 13.06. Waiver of Subrogation............................................................. 89 ARTICLE FOURTEEN SUBORDINATION OF NOTES AND GUARANTEES.................................................................... 89 Section 14.01. Notes Subordinate to Senior Indebtedness; Guarantee Obligations Subordinated to Guarantor Senior Indebtedness......................... 89 Section 14.02. Payment Over of Proceeds upon Dissolution, etc.................................... 90 Section 14.03. Suspension of Payment When Designated Senior Indebtedness is in Default; Suspension of Guarantee Obligations When Guarantor Senior Indebtedness in Default..................................... 91 Section 14.04. Trustee's Relation to Senior Indebtedness and Guarantor Senior Indebtedness............................................................... 93 Section 14.05. Subrogation....................................................................... 93 Section 14.06. Provisions Solely To Define Relative Rights....................................... 94 Section 14.07. Trustee To Effectuate Subordination............................................... 94 Section 14.08. N o Waiver of Subordination Provisions............................................. 95
v 8
Page ---- Section 14.09. Notice to Trustee................................................................. 95 Section 14.10. Reliance on Judicial Order or Certificate of Liquidating Agent.................... 96 Section 14.11. Rights of Trustee as a Holder of Senior Indebtedness or Guarantor Senior Indebtedness; Preservation of Trustee's Rights................... 97 Section 14.12. Article Applicable to Paying Agents............................................... 97 Section 14.13. No Suspension of Remedies......................................................... 97 TESTIMONIUM................................................................................................... SIGNATURES.................................................................................................... Exhibit A Form of Initial Note................................................................................ A-1 Exhibit B Form of Exchange Note............................................................................... B-1 Exhibit C Form of Certificate To Be Delivered in Connection with Subsequent Transfers to Non-QIB Accredited Investors................................................ C-1 Exhibit D Form of Certificate To be Delivered in Connection with Transfers Pursuant to Regulation S............................................................................ D-1 Exhibit E Form of Guarantee................................................................................... E-1
vi 9 INDENTURE, dated as of June 18, 1998, among EMPRESS ENTERTAINMENT, INC., a corporation incorporated under the laws of the State of Delaware (the "Company"), as issuer; Empress Casino Joliet Corporation, a corporation ------- incorporated under the laws of the State of Illinois, Empress River Casino Finance Corporation, a corporation incorporated under the laws of the State of Delaware, Empress Casino Hammond Corporation, a corporation incorporated under the laws of the State of Indiana, and Hammond Residential, L.L.C., a limited liability company organized under the laws of the State of Indiana, each as a Guarantor; and U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking corporation, as trustee (the "Trustee"). ------- RECITALS OF THE COMPANY The Company has duly authorized the issuance of $150,000,000 aggregate principal amount of 8 1/8% Senior Subordinated Notes due 2006 (the "Initial Notes"), and the issuance of 8 1/8% Senior Subordinated Notes due 2006, to be exchanged for the Initial Notes, including the Exchange Securities and the Private Exchange Securities contemplated by the Registration Rights Agreement (as defined herein) (the "Exchange Notes" and, together with the Initial Notes, the "Notes"); Each of the Guarantors has agreed to guarantee, jointly, severally and unconditionally, the Notes. Upon the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement (each as defined herein), this Indenture will be subject to, and shall be governed by, the provisions of the Trust Indenture Act (as defined herein) that are required to be part of and to govern indentures qualified under the Trust Indenture Act; and All acts and things necessary have been done to make (i) the Notes, when duly issued and executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company and (ii) this Indenture a valid agreement of the Company in accordance with the terms of this Indenture. NOW, THEREFOR, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Notes by the Holders (as defined herein) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows: 10 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.0. Definitions. ----------- "Acquired Indebtedness" with respect to the Company means Indebtedness --------------------- of another person existing at the time such person becomes a Restricted Subsidiary or is merged or consolidated into or with the Company or one of its Restricted Subsidiaries, and not incurred in connection with or in anticipation of, such merger or consolidation or of such person becoming a Restricted Subsidiary. "Acquisition" means the purchase or other acquisition of any person or ----------- substantially all the assets of any person by any other person, whether by purchase, merger, consolidation or other transfer, and whether or not for consideration. "Adjusted Consolidated Net Income" means Consolidated Net Income, -------------------------------- minus 100% of the amount of any writedowns, writeoffs, or negative extraordinary charges not otherwise reflected in Consolidated Net Income during 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 the Restricted Subsidiaries; (ii) with respect to the Company and any Restricted Subsidiary, so long as the Company is an S Corporation, any director or stockholder of the Company or such Restricted Subsidiary; (iii) any spouse, immediate family member, or other relative who has the same principal residence of any person described in clauses (i) or (ii) above; and (iv) any trust in which any person described in clauses (i) or (ii) above has a beneficial interest. For purposes of this definition, the term "control" means (a) the power to direct the management and policies of a person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise; or (b) the beneficial ownership of 10% or more of any class of voting Capital Stock of a person (on a fully diluted basis) or of warrants or other rights to acquire such class of Capital Stock (whether or not presently exercisable). "Affiliate Transaction" has the meaning set forth under Section 10.12. --------------------- "Asset Sale" means any direct or indirect sale, issuance, conveyance, ---------- transfer, lease or other disposition (including, without limitation, any merger, consolidation or sale-leaseback transaction) to any person other than the Company or a Restricted Subsidiary, in one or a series of related transactions, of (i) any Capital Stock of any Restricted Subsidiary; (ii) all or substantially all of the assets of any division or line of business of the Company or any Restricted Subsidiary; or (iii) any other properties or assets of the Company or any Restricted Subsidiary other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" will not include (a) any sale of the Capital Stock of an Unrestricted Subsidiary or any other person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest or any merger or consolidation involving only an Unrestricted Subsidiary or any other person (other than a Restricted Subsidiary) in which the 2 11 Company or any Restricted Subsidiary has an ownership interest or any sale, issuance, conveyance, transfer, lease or other disposition of properties or assets governed by the provisions described in Article Eight; (b) sales of property or equipment that have become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of the Company or any Restricted Subsidiary, as the case may be; (c) any sale, conveyance, transfer, lease or other disposition of any property or asset either (i) in the ordinary course of business and consistent with past practice or (ii) whether in one transaction or a series of related transactions, involving assets with a fair market value not in excess of $2.0 million; (d) the sale of the Company's airplane owned on the Issue Date; or (e) the sale, transfer, lease, conveyance or other disposition of all or any portion of a parcel of real estate located in Joliet, Illinois owned by the Company and its Restricted Subsidiaries, comprised of approximately 350 acres, the legal description of which is set forth on Exhibit F attached hereto (the "Joliet Real Estate"). ------------------ "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 of the number of years from the date of determination to the date of each successive scheduled principal (or redemption) payment of such security or instrument and multiplied by the amount of each such respective principal (or redemption) payment by (ii) the sum of all such principal (or redemption) payments. "Bank Indebtedness" means any and all amounts payable from time to ----------------- time under or in respect of the Credit Facility, including principal, premium (if any), interest, (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such a proceeding), fees, charges, expenses, reimbursement obligations, guarantees, indemnities and all other amounts and other liabilities payable thereunder or in respect thereof. "Bankruptcy Law" means Title 11, United States Bankruptcy Code of -------------- 1978, as amended, or any similar United States Federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors, or any amendment to, succession to or change in any such law. "Beneficial Owner" for purposes of the definition of Change of Control ---------------- has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a "person" shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time. "Board of Directors" means, with respect to any person, the board of ------------------ directors, management committee or similar governing body or any authorized committee thereof responsible for the management of the business and affairs of such person. "Board Resolution" means, with respect to any person, a copy of a ---------------- resolution certified by the Secretary or an Assistant Secretary of such person to have been duly adopted by the Board of Directors of such person and to be in full force and effect on the date of such certification, and delivered to the Trustee. 3 12 "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 Stock" means, with respect to any corporation, any and all ------------- shares, interests, rights to purchase (other than convertible or exchangeable Indebtedness), warrants, options, participations or other equivalents of or interests (however designated) in stock issued by that corporation. "Capitalized Lease Obligation" means any obligation under a lease of ---------------------------- (or other agreement conveying the right to use) any property (whether real, personal or mixed) required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of the Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP consistently applied. "Cash Equivalent" means (i) any evidence of Indebtedness with a --------------- maturity of not more than one year 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 or bankers' acceptances with a maturity of not more than one year of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) commercial paper with a maturity of not more than one year issued by a corporation that is not an Affiliate of the Company organized under the laws of any state of the U.S. or the District of Columbia and rated at least A-1 by Standard & Poor's Rating Services, a division of the McGraw Hill Companies, Inc. or at least P-1 by Moody's Investors Service, Inc.; and (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii) above entered into with any financial institution meeting the qualifications specified in clause (ii) above. "Casino" means a gaming establishment owned by the Company or a ------ Restricted Subsidiary, and containing at least 200 slot machines or at least 15 gaining tables, or containing at least 10,000 square feet dedicated to the operation of games of chance, and any hotel, building, restaurant, theater, parking facilities, retail shops, land, equipment and other property or asset directly ancillary thereto or used in connection therewith. "Change of Control" means (i) any merger or consolidation of, or any ----------------- sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the assets of, the Company in each case on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction, any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than Excluded Persons or entities of which a majority of voting power is owned by such Excluded Persons, is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the aggregate voting power normally entitled to vote in the election of directors of the transferee; (ii) the time that any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than 4 13 Excluded Persons or entities of which a majority of voting power is owned by such Excluded Persons, is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the aggregate voting power of all classes of Capital Stock then outstanding of the Company normally entitled to vote in elections of directors; or (iii) 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 or whose nomination for election by the stockholders 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), cease for any reason to constitute a majority of the Board of Directors of the Company then in office. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Company and its Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another person or group may be uncertain. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Commission" or "SEC" means the Securities and Exchange Commission, as ---------- --- from time to time constituted, or if at any time after the execution of this Indenture such Commission is not existing and performing the applicable duties now assigned to it, then the body or bodies performing such duties at such time. "Company" means Empress Entertainment, Inc., a Delaware corporation, ------- unless and until a successor replaces it in accordance with this Indenture, and thereafter means such Surviving Person. "Company Request" or "Company Order" means a written request or order --------------- ------------- of the Company signed in the name of the Company by an Officer of the Company. "Consolidated Depreciation and Amortization Expense" means, for any -------------------------------------------------- period, the total amount of depreciation and amortization expense and other non- cash expenses (excluding any non-cash expense that represents an accrual, reserve or amortization of a cash expenditure for a past, present or future period) for the Company and its Restricted Subsidiaries (but excluding its Unrestricted Subsidiaries or other persons other than its Restricted Subsidiaries, even though such amounts may be included in a consolidated calculation in accordance with GAAP) for such period on a consolidated basis as defined in accordance with GAAP. "Consolidated EBITDA" means, for any period, Consolidated Net Income ------------------- for such period adjusted to add thereto (to the extent deducted from net revenues in determining 5 14 Consolidated Net Income), without duplication, the sum of (i) Consolidated Income Tax Expense; (ii) Consolidated Depreciation and Amortization Expense; and (iii) Consolidated Fixed Charges. "Consolidated Fixed Charge Coverage Ratio" on any date of ---------------------------------------- determination (the "Transaction Date") means the ratio, on a pro forma basis, of ---------------- (a) the aggregate amount of 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 (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 Consolidated Fixed Charges subsequent to the Transaction Date) during the Reference Period; provided, that for purposes of such calculation: (i) Acquisitions or Assets Sales (or transactions which would constitute Asset Sales but for the exclusions set forth in clause (a), and in the last sentence, of the definition of "Asset Sales") 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 Fixed Charge 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 relevant 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 such Reference Period; and (iv) the Consolidated Fixed Charges 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 relevant 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 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 Fixed Charges" means, for any period, the aggregate -------------------------- amount (without duplication) of (a) interest expensed or capitalized, paid, accrued, or scheduled to be paid or accrued in accordance with GAAP (including, in accordance with the following sentence, interest attributable to Capitalized Lease Obligations) during such period in respect of all of Indebtedness of the Company and its Restricted Subsidiaries (but excluding its Unrestricted Subsidiaries or other persons other than its Restricted Subsidiaries, even though such amounts may be included in a consolidated calculation in accordance with GAAP), including (i) original issue discount and non-cash interest payments or accruals on any Indebtedness; (ii) the interest portion of all deferred payment obligations, calculated in accordance with GAAP; and (iii) all commissions, discounts and other fees and charges owed with respect to bankers' acceptance financings and currency and Interest Swap Obligations, in each case to the extent attributable to such period and determined on a consolidated basis in accordance with GAAP; (b) one-third of the rental expense for such period attributable to operating leases of the Company and its Restricted Subsidiaries; and (c) the amount of dividends paid or payable by the Company or any 6 15 of its Restricted 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 by such person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP; (y) interest expense attributable to any Indebtedness represented by the guaranty by such person or a Restricted Subsidiary of such person of an obligation of another person shall be deemed to be the interest expense attributable to the Indebtedness guaranteed; and (z) any interest expense or premium for the period from and after the Issue Date relating to the 10 3/4% Notes shall be excluded from Consolidated Fixed Charges. "Consolidated Income Tax Expense" means, for any period, the provision ------------------------------- for Federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries (but excluding its Unrestricted Subsidiaries or other persons other than its Restricted Subsidiaries, even though such amounts may be included in a consolidated calculation in accordance with GAAP), for such period as determined in accordance with GAAP. "Consolidated Net Income" means, with respect to any period, the net ----------------------- income (or loss) of the Company and its Restricted Subsidiaries (but excluding Unrestricted Subsidiaries or other persons other than its Restricted Subsidiaries, even though such amounts may be included in a consolidated calculation in accordance with GAAP), 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 which are extraordinary (as determined in accordance with GAAP) or are either unusual or nonrecurring (including, without limitation, any gain from the sale or other disposition of assets outside the ordinary course of business or from the sale of any Capital Stock, but gains from the sale of Capital Stock of Unrestricted Subsidiaries (or other persons other than Restricted Subsidiaries) or a merger or consolidation involving Unrestricted Subsidiaries (or other persons other than Restricted Subsidiaries) shall be included in the calculation of net income); (b) the portion of net income, if positive, of any Restricted Subsidiary allocable to minority interests therein, except to the extent of the amount of any dividends or distributions actually paid in cash to the Company or a Restricted Subsidiary; (c) the net income, if positive, of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition; and (d) any interest expense or premium for the period from and after the Issue Date relating to the 10 3/4% Notes, and any interest income relating to securities deposited in connection with the covenant defeasance thereof. "Corporate Trust Office" means the office of the Trustee at which at ---------------------- any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 180 E. Fifth Street, St. Paul, Minnesota 55101; attention: Corporate Trust Administration. "Credit Agreement" means the Credit Agreement to be dated as of June ---------------- 17, 1998 among the Company, certain of the Company's Subsidiaries, the lenders named therein, Wells Fargo Bank, National Association, and Wells Fargo Bank, as in effect on the Issue Date, and as such agreement may be amended, renewed, extended, substituted, refinanced, replaced, 7 16 supplemented or otherwise modified from time to time, and includes (a) related notes, guarantees and other agreements executed in connection therewith and (b) any agreement (i) extending the maturity of all or any portion of the Indebtedness thereunder, (ii) adding additional borrowers or guarantors thereunder and (iii) increasing the amount to be borrowed thereunder; provided, however, that in the case of clauses (i), (ii) and (iii), any such agreement is not prohibited by this Indenture. "Credit Facility" means the $100.0 million revolving line of credit, --------------- including a subfacility for the issuance of standby and documentary letters of credit, established pursuant to the Credit Agreement. "Currency Agreement" means any foreign exchange contract, currency ------------------ swap agreement or other similar agreement or arrangement designed to protect the Company against fluctuations in currency values. "Currency Agreement Obligations" means the obligations of any person ------------------------------ under a foreign exchange contract, currency swap agreement or other similar agreement or arrangement to protect such person against fluctuations in currency values. "Default" means any event which is, or after notice or passage of time ------- or both would be, an Event of Default. "Depositary" means The Depository Trust Company, or such other ---------- depositary as the Company may appoint as a successor thereto. "Designated Senior Indebtedness" means (a) all Senior Indebtedness ------------------------------ outstanding under the Credit Facility and (b) any other Senior Indebtedness in a principal amount of at least $10 million outstanding which, at the time of determination, is specifically designated in the instrument governing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company. "Designation" has the meaning set forth in Section 10.18. ----------- "Designation Amount" has the meaning set forth in Section 10.18. ------------------ "Disqualified Capital Stock" means (a) except as set forth in (b), -------------------------- with respect to any person, Capital Stock of such person that, by its terms or by the terms of any security into which it is convertible, exercisable or exchangeable, is, or upon the happening of an event or the passage of time would be, required to be redeemed or repurchased (including at the option of the holder thereof) by such person or any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the Notes; and (b) with respect to any Subsidiary of such person, any Capital Stock. "Dollars" or "$" means lawful money of the United States of America. ------- - "Equity Offering" has the meaning set forth in Section 11.01. --------------- 8 17 "Event of Default" has the meaning set forth in Section 5.01. ---------------- "Event of Loss" means, with respect to any property or asset, any ------------- loss, destruction or damage of such property or asset or any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of any property or asset, or confiscation or requisition of the use of such property or asset. "Event of Loss Amount" has the meaning setforth in Section 10.13. -------------------- "Excess Proceeds" has the meaning set forth in Section 10.13. --------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ and the rules and regulations promulgated by the Commission thereunder. "Exchange Notes" has the meaning set forth in the preamble hereto. -------------- "Exchange Offer" has the meaning set forth in the Registration Rights -------------- Agreement. "Exchange Offer Registration Statement" has the meaning set forth in ------------------------------------- the Registration Rights Agreement. "Exchange Securities" has the meaning set forth in the Registration ------------------- Rights Agreement. "Excluded Persons" means, collectively, the existing stockholders of ---------------- the Company as of the Issue Date and any of their respective estates, spouses, heirs, ancestors, lineal descendants, legatees, and legal representatives and the trustee of any bona fide trust of which one or more of the foregoing are the sole beneficiaries. "Existing Indebtedness" means Indebtedness outstanding on the date of --------------------- the Indenture. "Facility" means one or more Casinos and related facilities operated -------- by the Company or any of its Restricted Subsidiaries that are located within a ten-mile radius of one another. "Fair Market Value" means, with respect to any asset, the price which ----------------- could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction. Fair Market Value shall be determined by the Board of Directors of the Company acting in good faith evidenced by a board resolution thereof delivered to the Trustee. "FF&E Indebtedness" means Indebtedness which is secured by a Lien upon ----------------- any tangible personal property acquired after the Issue Date, constituting operating assets, which are financed, purchased or leased for the purpose of engaging in or developing a Related Business. 9 18 "GAAP" means U.S. generally accepted accounting principles as in ---- effect on the Issue Date. "Gaming Authority" means any Governmental Authority with appropriate ---------------- jurisdiction and authority relating to a Gaming License. "Gaming Jurisdiction" means any foreign, Federal, state or local ------------------- jurisdiction in which the Company, any Restricted Subsidiary or any of their respective Subsidiaries has a direct or indirect beneficial, legal or voting interest in an entity that conducts casino gaming. "Gaming Law" means any law, rule, regulation or ordinance governing ---------- gaming activities, including the Illinois Riverboat Act and the Indiana Riverboat Act, any administrative rules or regulations promulgated thereunder, and any of the corresponding statutes, rules, and regulations in each Gaming Jurisdiction. "Gaming Licenses" means every license, franchise or other --------------- authorization on the Issue Date or thereafter required to own, lease, operate or otherwise conduct riverboat, dockside or land-based gaming in any Gaming Jurisdiction, and any applicable liquor licenses. "Governmental Authority" means any agency, authority, board, bureau, ---------------------- commission, department, office or instrumentality of any nature whatsoever of the U.S. or a 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. "guarantee" means, as applied to any obligation, (i) a guarantee --------- (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. "Guarantors" means all existing Restricted Subsidiaries of the Company ---------- and all future Restricted Subsidiaries of the Company. "Guarantor Senior Indebtedness" means, with respect to the ----------------------------- Indebtedness of any Guarantor, any such Indebtedness represented by a guarantee by such Guarantor of any Senior Indebtedness or any Senior Indebtedness of any such Guarantor. "Holder" or "Noteholder" means a person in whose name a Note is ------ ---------- registered in the Note Register. "incur" has the meaning set forth in Section 10.10 and "incurrence," ----- "incurred" and "incurring" shall have the meanings correlative to the foregoing. 10 19 "Indebtedness" of any person means, without duplication, (a) all ------------ liabilities and obligations, contingent or otherwise, with respect to any person, (i) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof); (ii) evidenced by bonds (other than surety or performance bonds), notes, debentures or similar instruments; (iii) representing the balance deferred and unpaid of the purchase price of any property or services, except such as would constitute trade payables to trade creditors in the ordinary course of business that are not more than 90 days past their original due date or are being contested in good faith; (iv) evidenced by bankers' acceptances or similar instruments issued or accepted by banks; (v) for the payment of money relating to a Capitalized Lease Obligation; or (vi) evidenced by a letter of credit or a reimbursement obligation of such person with respect to any letter of credit; (b) all net obligations of such person under Interest Swap Obligations and foreign currency hedges; (c) all liabilities of others of the kind described in the preceding clauses (a) or (b) that such person has guaranteed or that is otherwise its legal liability; (d) all obligations to purchase, redeem or acquire any Capital Stock; (e) all obligations secured by a Lien, to which the property or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of such person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be such person's legal liability, provided, that the amount of such obligations shall be limited to the lesser of the fair market value of the assets or property to which such Lien attaches and the amount of the obligation so secured; and (f) any and all deferrals, renewals, extensions, refinancings and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b), (c), (d) or (e), or this clause (f), whether or not between or among the same parties. "Indenture" means this instrument as originally executed (including --------- all exhibits and schedules hereto) and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith ------------------ Incorporated and Wasserstein Perella Securities, Inc. "Institutional Accredited Investor" means an institution that is an --------------------------------- "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Payment Date" means the stated due date of an installment of --------------------- interest on the Notes. "Interest Swap Obligations" means the obligations of any person ------------------------- pursuant to any arrangement with any other person whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such person to such other person calculated by applying a fixed or a floating rate of interest on the same notional amount or any other arrangement involving payments by or to such other person based upon fluctuations in interest rates. 11 20 "Investment" by any person in any other person means (without ---------- duplication) (a) the acquisition by such person (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other person or any agreement to make any such acquisition; (b) the making by such person of any deposit with, or advance, loan or other extension of credit to, such other person (including the purchase of property from another person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other person) or any commitment to make any such advance, loan or extension (but excluding accounts receivable arising in the ordinary course of business that are not more than 30 days past their original due date); (c) other than the Subsidiary Guarantees, 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; or (d) the making of any capital contribution by such person to such other person. "Issue Date" means the date of first issuance of the Notes under the ---------- Indenture. "Joliet Real Estate" shall have the meaning given to such term in the ------------------ definition of "Asset Sale" set forth above. "Lien" means, with respect to any asset, any mortgage, lien, pledge, ---- charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Net Cash Proceeds" means the aggregate amount of U.S. Legal Tender or ----------------- Cash Equivalents received by the Company or a Restricted Subsidiary in the case of a sale of Qualified Capital Stock and by the Company or a Restricted Subsidiary in respect of an Asset Sale, less, in each case, the sum of all fees, commissions and other (in the case of an Asset Sale, reasonable and customary) expenses incurred in connection with such Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only, less the amount (estimated reasonably and in good faith by the Company or such Restricted Subsidiary) of income, franchise, sales and other applicable taxes required to be paid by the Company or such Restricted Subsidiary in connection with such Asset Sale. "Net Proceeds" means the aggregate Net Cash Proceeds and fair market ------------ value of property (valued at the fair market value thereof at the time of receipt in good faith by the Board of Directors of the Company or the applicable Restricted Subsidiary), other than securities of the Company or a Restricted Subsidiary, received by the Company or a Restricted Subsidiary after payment of expenses, commissions, discounts and the like incurred in connection therewith. "Non-Recourse Indebtedness" means Indebtedness of a person to the ------------------------- extent that under the terms thereof or any other document, instrument or filing no personal recourse shall be had against such person for the payment of the principal of, premium, if any, or interest on, such Indebtedness, and enforcement of obligations on such Indebtedness is limited only to recourse 12 21 against interests in property and assets purchased with the proceeds of the incurrence of such Indebtedness and as to which none of the Company or any Restricted Subsidiary provides any credit support or is directly or indirectly liable. Indebtedness shall not lose is characterization as Non-Recourse Indebtedness solely as a result of a person being personally liable for losses caused by misappropriation, fraud or wilful breaches of representations and warranties. "Non-payment Default" means, for purposes of Article Fourteen hereof, ------------------- any default (other than a Payment Default) with respect to any Designated Senior Indebtedness of the Company or any Guarantor pursuant to which the maturity thereof may be accelerated. "Non-U.S. Person" means a person who is not a U.S. person, as defined --------------- in Regulation S. "Note Guarantee" means a guarantee by a Guarantor, if any, of the -------------- Notes and the Company's obligations under this Indenture. "Notes" has the meaning set forth in the preamble hereto. ----- "Obligations" means any principal, interest, penalties, fees, ----------- indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offer to Purchase" means any Change of Control Offer or Asset Sale ----------------- Offer. "Offer to Purchase Price" means any Change of Control Purchase Price ----------------------- or Asset Sale Offer Price. "Offering" shall have the meaning set forth in the Offering -------- Memorandum. "Offering Memorandum" means the offering memorandum dated as of June ------------------- 11, 1998 relating to the Offering and sale of the Notes. "Officer" means, with respect to any person, the Chairman, President, ------- Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General Counsel, any Vice President, Treasurer or Secretary, or any other officer designated by the Board of Directors serving in a similar capacity. "Officer's Certificate" means, with respect to the Company or any --------------------- Restricted Subsidiary, a certificate signed by two Officers of the Company or such Restricted Subsidiary and otherwise complying with the requirements of the Indenture. "Opinion of Counsel" means a written opinion of counsel, who may be an ------------------ employee of or counsel to the Company or a Restricted Subsidiary, and who shall be reasonably acceptable to the Trustee. 13 22 "Outstanding" means, as of the date of determination, all Notes ----------- theretofore authenticated and delivered under this Indenture, except: (i) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company or any Affiliate thereof) in trust for the Holders of such Notes; provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly and irrevocably given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Notes with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Four, to the extent provided in Sections 4.02 and 4.03; and (iv) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any other obligor under the Notes or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor under the Notes or any Affiliate of the Company or such other obligor. "Paying Agent" means any person authorized by the Company to pay the ------------ principal, premium, if any, or interest on any Notes on behalf of the Company. "Payment Blockage Period" shall have the meaning set forth in Section ----------------------- 14.03. "Payment Default" means any default in the payment when due (whether --------------- Stated Maturity, by acceleration or otherwise) of principal or interest on, or of unreimbursed amounts under drawn letters of credit or fees relating to letters of credit constituting, any Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, of the Company or any Guarantor. "Permitted Indebtedness" has the meaning set forth in Section 10.10. ---------------------- 14 23 "Permitted Investments" means the aggregate of (a) any Investment in --------------------- the Company or in any Restricted Subsidiary; (b) any Investment in Cash Equivalents or purchases by the Company or any Restricted Subsidiary of any of the Notes in open market purchase transactions; (c) any Investment by the Company or any Restricted Subsidiary in a person, if as a result of such Investment (i) such person becomes a Restricted Subsidiary of the Company that is engaged in a Related Business, or (ii) such person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary that is engaged in a Related Business; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 10.13; (e) any acquisition of assets solely in exchange for the issuance of Qualified Capital Stock of the Company or its Restricted Subsidiaries; (f) any Investment of the Joliet Real Estate or proceeds from the sale of the Joliet Real Estate; and (g) Investments, the aggregate fair market value of which (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (g) that are at the time outstanding, do not exceed $50.0 million. "Permitted Liens" means any of the following: --------------- (a) Liens existing on the date of the Indenture; (b) Liens securing Obligations of the Company or any of the Restricted Subsidiaries under any Senior Indebtedness permitted to be incurred under the Indenture, including, without limitation, Liens to be incurred under the Credit Agreement; (c) Liens to secure Obligations of the Company or any of its Restricted Subsidiaries under any FF&E Indebtedness permitted to be incurred pursuant to clause (b)(v) of Section 10.10 that do not exceed $7.5 million at any one time outstanding per Facility; (d) Liens to secure Obligations of the Company or any of its Restricted Subsidiaries under any Purchase Money Indebtedness or Non- Recourse Indebtedness permitted to be incurred pursuant to clause (b)(iv) of Section 10.10 in an amount not to exceed $7.5 million in the aggregate at any one time outstanding; (e) Liens to secure Obligations of the Company or any of the Restricted Subsidiaries under any Refinancing Indebtedness incurred to refinance any Indebtedness referred to in the foregoing clauses (a) through (d), provided that (i) the Indebtedness to be refinanced was secured and (ii) the Lien does not extend beyond the amount of Indebtedness to be refinanced; (f) Liens for taxes, assessments or other governmental charges not yet due or which are being contested in good faith and by appropriate proceedings by the Company or the applicable Restricted Subsidiary if adequate reserves with 15 24 respect thereto are maintained on the books of the Company or such Restricted Subsidiary, as applicable, in accordance with GAAP; (g) statutory Liens of carriers, warehousemen, mechanics, landlords, materialmen, repairmen 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; or (ii) such Liens are being contested in good faith and by appropriate proceedings by the Company or the applicable Restricted Subsidiary and adequate reserves with respect thereto are maintained on the books of the Company or such Restricted Subsidiary, as the case may be, in accordance with GAAP; (h) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred 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 a Restricted Subsidiary) or interfere with the ordinary conduct of the business of the Company or a Restricted Subsidiary; provided, 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; and (i) Liens created by the Indenture. "person" means any individual, limited liability company, corporation, ------ partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "Preferred Stock" means, with respect to any person, Capital Stock of --------------- any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such person, over Capital Stock of any other class of such person. "Private Exchange Securities" has the meaning set forth in the --------------------------- Registration Rights Agreement. "Private Placement Legend" means the legend initially set forth on the ------------------------ Initial Notes in the form set forth in Section 2.03. "Purchase Money Indebtedness" means any Non-recourse Indebtedness of --------------------------- such person owed to any seller or other person which is incurred to finance the acquisition of any real or personal tangible property of a Related Business within 90 days of such acquisition. "Qualified Capital Stock" means any Capital Stock of the Company or a ----------------------- Restricted Subsidiary that is not Disqualified Capital Stock. 16 25 "Qualified Exchange" means any defeasance, redemption, repurchase or ------------------ other acquisition of Capital Stock or Indebtedness of a Guarantor with the Net Proceeds received by such Guarantor from the substantially concurrent sale of Qualified Capital Stock of such Guarantor or in exchange for Qualified Capital Stock of such Guarantor. "Qualified Institutional Buyer" or "QIB" shall have the meaning ----------------------------- --- specified in Rule 144A under the Securities Act. "Redeemable Capital Stock" means any class or series of Capital Stock ------------------------ to the extent that, either by its terms, by the terms of any security into which it is convertible or exchangeable, or by contract or otherwise, is or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes or is redeemable at the option of the holder thereof at any time prior to such Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such Stated Maturity. "Redemption Date," when used with respect to any Note to be redeemed, --------------- means the date fixed for such redemption pursuant to the Indenture and the form of Note included therein. "Redemption Price" means, with respect to any Note to be redeemed, the ---------------- price at which it is to be redeemed pursuant to this Indenture and the terms of the Notes. "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 immediately preceding the relevant date upon which such 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 of such person 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) 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) Refinancing Indebtedness of any Restricted Subsidiary shall only be used to Refinance outstanding Indebtedness or Disqualified Capital Stock of such Restricted Subsidiary; (B) Refinancing Indebtedness shall not have an Average Life less than that of the Indebtedness or Disqualified Capital Stock to be so refinanced at the time of such refinancing; (C) such Refinancing Indebtedness shall have no installment of principal (or redemption payment) scheduled to come due earlier than the scheduled maturity of any installment of principal of the Indebtedness (or Disqualified Capital Stock) to be so refinanced which was scheduled to come 17 26 due on or prior to the Stated Maturity; and (D) if the Indebtedness or Disqualified Capital Stock to be so refinanced was subordinate or junior in right of payment to the Guarantee, then the Refinancing Indebtedness shall be so subordinate or junior in right of payment to such Guarantee to an extent no less favorable in respect thereof to the Holders. "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement dated on or about the Issue Date between the Company and the Initial Purchasers for the benefit of themselves and the Holders as the same may be amended from time to time in accordance with the terms thereof. "Regular Record Date" means the Regular Record Date specified in the ------------------- Notes. "Regulation S" means Regulation S under the Securities Act. ------------ "Related Business" means the gaming business conducted (or proposed to ---------------- be conducted) by the Company, its Restricted Subsidiaries and their respective Subsidiaries as of the Issue Date and any and all related businesses in support of, ancillary to or attracting visitors to the gaming business of the Company, its Restricted Subsidiaries and their respective Subsidiaries and additionally expressly includes any riverboat, dockside or land-based gaming or horse racing businesses or any business mandated by a Gaming Authority in order to obtain or retain a Gaming License. "Required Regulatory Redemption" shall have the meaning set for under ------------------------------ Section 11.02. "Responsible Officer" means, with respect to the Trustee, the chairman ------------------- or vice chairman of the board of directors, the chairman or vice chairman of the executive committee of the board of directors, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller and any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Investment" means, in one or a series of related --------------------- transactions, any Investment, other than Investments in Cash Equivalents; provided, that a Restricted Investment shall not include (i) the extension of credit to customers of Casinos consistent with industry practice in the ordinary course of business; and (ii) a guaranty by a Guarantor of Indebtedness incurred by another Guarantor or the Company in accordance with the covenant in Section 10.10. "Restricted Payment" means, with respect to any person, (a) the ------------------ declaration or payment of any dividend or other distribution in respect of Capital Stock of such person or any Restricted Subsidiary of such person; (b) any payment on account of the purchase, redemption or other acquisition or retirement for value of Capital Stock of such person or any Restricted 18 27 Subsidiary of any such person; (c) any purchase, redemption, or other acquisition or retirement for value of, any payment in respect of any amendment of the terms or any defeasance of, any subordinated Indebtedness, directly or indirectly, by such person or a Restricted Subsidiary of such person prior to the scheduled maturity, and scheduled repayment of principal or scheduled sinking fund payment, as the case may be, of such Indebtedness; and (d) any Restricted Investment by such person; provided, however, that the term "Restricted Payment" does not include (i) any dividend, distribution or other payment on or with respect to Capital Stock of an issuer to the extent payable solely in shares of Qualified Capital Stock of such issuer; and (ii) any Investment in the Company or any of the Restricted Subsidiaries by any of their respective Subsidiaries. "Restricted Security" has the meaning assigned to such term in Rule ------------------- 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to receive, at its request, and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "Restricted Subsidiary" means any Subsidiary of the Company that has --------------------- not been Designated by the Board of Directors of the Company, by a Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with the covenant described in Section 10.18. Except in the case of the Guarantors that existed as of the Issue Date, any such Designation may be Revoked by a Board Resolution of the Board of Directors of the Company delivered to the Trustee, subject to the provisions of such covenant. "Revocation" has the meaning set forth in Section 10.18. ---------- "Rule 144A" means Rule 144A under the Securities Act. --------- "Securities Act" means the Securities Act of 1933, as amended, and the -------------- rules and regulations promulgated by the Commission thereunder. "Senior Indebtedness" means (i) the Bank Indebtedness, and (ii) the ------------------- principal of, premium, if any, and interest on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to any Indebtedness of the Company. Notwithstanding the foregoing, "Senior Indebtedness" shall not include, to the extent constituting Indebtedness, (i) Indebtedness evidenced by the Notes, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company, (iii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, U.S. Code, is without recourse to the Company, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v) Indebtedness for goods, materials or services purchased in the ordinary course of business or Indebtedness consisting of trade payables or other current liabilities (other than any current liabilities owing under the Credit Facility or the current portion of any long-term Indebtedness which would constitute Senior Indebtedness but for the operation of this clause (v)), (vi) Indebtedness of or amounts owed by the Company for compensation to employees or for services rendered to the Company, (vii) 19 28 Indebtedness of or amounts owed by the Company or a Restricted Subsidiary to the Company or another Restricted Subsidiary, (viii) any liability for Federal, state, local or other taxes owed or owing by the Company, (ix) Indebtedness of the Company to any other Subsidiary of the Company and (x) that portion of any Indebtedness which at the time of issuance is issued in violation of the Indenture. "Senior Representative" means the representative or representatives --------------------- designated in writing to the Trustee of the holders of any class or issue of Designated Senior Indebtedness; provided that, in the absence of a representative of the type described above, any holder or holders of a majority of the principal amount outstanding of any class or issue of Designated Senior Indebtedness may collectively act as Senior Representative for such class or issue. "Shelf Registration Statement" has the meaning set forth in the ---------------------------- Registration Rights Agreement. "Significant Subsidiary" means any Restricted Subsidiary (i) the ---------------------- assets of which (after intercompany eliminations) exceed 10% of the assets of the Company and its Restricted Subsidiaries, considered as a whole, or (ii) the Consolidated Net Income of which (before income taxes and extraordinary items) exceeds 10% of the Consolidated Net Income of the Company and its Restricted Subsidiaries, considered as a whole, or (iii) that holds a Gaming License with respect to any Casino, if the Facility of which the Casino is a part (were such facility operated by a single Restricted Subsidiary) would be a Significant Subsidiary as set forth in (i) or (ii) above. "Special Record Date" means the Special Record Date specified in the ------------------- Notes. "Stated Maturity," when used with respect to any Note, means July 1, --------------- 2006. "Subordinated Indebtedness" means Indebtedness of a Restricted ------------------------- Subsidiary that is subordinated in right of payment to the Subsidiary Guaranty of such Restricted Subsidiary to any extent. "Subsidiary," with respect to any person, means (i) a corporation at ---------- least a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors 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 or (ii) 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 a majority ownership interest. "Surviving Person" means, with respect to any person involved in any ---------------- consolidation or merger, or any sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of its properties and assets as an entirety, the person formed by or surviving such merger or consolidation or the person to which such sale, assignment, conveyance, transfer or lease is made. 20 29 "Tax Amounts" with respect to any year means an amount equal to (a) ----------- the higher of (i) the product of (A) the taxable income of the Company for such year as determined in good faith by its Board of Directors; and (B) the Tax Percentage (as defined); and (ii) the product of (A) the alternative minimum taxable income attributable to the Company for such year as determined in good faith by its Board of Directors; and (B) the Tax Percentage, plus (b) any deficiencies, penalties or interest payable by the Company's stockholders solely as a result of the taxable income of the Company, less (c) to the extent not previously taken into account, any income tax benefit attributable to the Company which could be realized by the Company's stockholders in the current or a prior taxable year (including, without limitation, tax losses, alternative minimum tax credits, other tax credits and carryforwards and carrybacks thereof); provided, however, that in no event shall such Tax Percentage exceed the lesser of (1) the highest aggregate applicable effective marginal rate of Federal, state and local income tax or, when applicable, alternative minimum tax, to which a corporation doing business in Chicago, Illinois would be subject in the relevant year of determination (as certified to the Trustee by a nationally recognized tax accounting firm) plus 500 "Basis Points"; and (2) 60%. Any part of the Tax Amount not distributed in respect of a tax period for which it is calculated shall be available for distribution in subsequent tax periods (whether or not the Company ceases to qualify as an S Corporation prior to such distribution). The term "Tax Percentage" is the highest aggregate applicable effective marginal rate of Federal, state and local income tax or, when applicable, alternative minimum tax, to which an individual resident of Chicago, Illinois would be subject in the relevant year of determination (as certified to the Trustee by a nationally recognized tax accounting firm). Distributions of Tax Amounts may be made from time to time with respect to a tax year based on reasonable estimates, with a reconciliation within 40 days of the earlier of (i) the Company's filing of the Internal Revenue Service Form 1120S for the applicable taxable year; and (ii) the last date such form is required to be filed (without regard to any extensions). The stockholders of the Company will enter into a binding agreement with the Company to reimburse the Company for certain positive differences between the distributed amount and the Tax Amount, which difference must be paid at the time of such reconciliation; provided, that in lieu thereof, the Company shall notify all stockholders that any such positive differences will be set off against future distributions of Tax Amounts. "10 3/4% Notes" means the 10 3/4% Senior Notes due 2002 issued ------------- pursuant to the terms of an indenture, dated April 7, 1994 among Empress River Casino Finance Corporation, as issuer, the Guarantors named therein and First Trust National Association, as Trustee. "Transaction Date" has the meaning set forth under the definition of ---------------- "Consolidated Fixed Charge Coverage Ratio". "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, ------------------- --- as amended, and as in effect from time to time. "Trustee" means the person named as the "Trustee" in the first ------- paragraph of this Indenture, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. 21 30 "Unrestricted Subsidiary" means a Subsidiary of the Company (other ----------------------- than a Guarantor) designated as such pursuant to and in compliance with Section 10.18. Any such Designation may be Revoked by a Board Resolution of the Company delivered to the Trustee, subject to the provisions of such covenant. "U.S. Government Obligations" means securities that are (i) direct --------------------------- obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a Depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the Holder of such Depositary receipt; provided, however, that (except as required -------- ------- by law) such custodian is not authorized to make any deduction from the amount payable to the Holder of such Depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such Depositary receipt. "U.S. Legal Tender" means such coin or currency of the United States ----------------- of America at the time of payment is legal tender for the payment of public and private debts. Section 1.02. Other Definitions. ----------------- Defined in Term Section ---- ---------- "Act" 1.05 "Agent Members" 2.04 "Asset Sale Offer" 10.13 "Asset Sale Offer Period" 10.13 "Asset Sale Offer Price" 10.13 "Asset Sale Offer Purchase Date" 10.13 "Asset Sale Offer Trigger Date" 10.13 "Authenticating Agent" 2.02 "Change of Control Date" 10.14 "Change of Control Offer" 10.14 "Change of Control Purchase Date" 10.14 "Change of Control Purchase Price" 10.14 "covenant defeasance" 4.03 "Defaulted Interest" 3.06 "Defeasance" 4.01 "Defeased Guarantees" 4.01 "Defeased Notes" 4.01 22 31 "Global Notes" 2.01 "Initial Notes" Recitals "Note Register" 3.04 "Note Registrar" 3.04 "Notice of Default" 5.01 "Offshore Global Note" 2.01 "Offshore Physical Note" 2.01 "Optional Redemption Price" 11.01 "Other Obligations" 1.20 "Payment Blockage Notice" 14.03 "Physical Notes" 2.01 "Refinancing Indebtedness" 10.10 "Repurchase Payments" 10.11 "Required Filing Dates" 10.08 "U.S. Global Note" 2.01 "U.S. Physical Notes" 2.01 Section 1.03. Rules of Construction. --------------------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) the words "herein," "hereof" and "hereunder" and other words of ------ ------ --------- similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) all references to "$" or "dollars" shall refer to the lawful - ------- currency of the United States of America; (f) the words "include," "included" and "including" as used herein ------- -------- --------- shall be deemed in each case to be followed by the phrase "without limitation"; ------------------ (g) words in the singular include the plural, and words in the plural include the singular; and (h) any reference to a Section or Article refers to such Section or Article of this Indenture unless otherwise indicated. 23 32 Section 1.04. Form of Documents Delivered to Trustee. -------------------------------------- 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 (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent (including any covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with, (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of counsel, all such conditions (including any covenants compliance with which constitutes a condition precedent), have been complied with and (c) where applicable, a certificate or opinion by an accountant that complies with Section 314(c) of the Trust Indenture Act. Each Officers' Certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that the person making such certificate or Opinion of Counsel 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 contained in such Officers' Certificate or Opinion of Counsel are based; (c) a statement that, in the opinion of such person, he 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 complied with; and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. In any case where several matters are required to be certified by, or covered by an opinion of, any specified person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such person, or that they be so certified or covered by only one document, but one such person may certify or give an opinion with respect to some matters and one or more other such persons as to other matters, and any such person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care 24 33 should know, that the certificate or opinion or representations with respect to such matters are erroneous. Opinions of Counsel required to be delivered to the Trustee may have qualifications customary for opinions of the type required and counsel delivering such Opinions of Counsel may rely on certificates of the Company or government of other officials customary for opinions of the type required, including certificates certifying as to matters of fact, including that various financial covenants have been complied with. Any certificate of opinion of an Officer of the Company, and Guarantor of other obligor on the Notes may be based, insofar as it relates to accounting matters, upon a certificate or opinion of, or representations by, an accountant or firm of accountants in the employ of the Company, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to accounting matters upon which his certificate or opinion may be based are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Trustee shall contain a statement that such firm is independent with respect to the Company. Section 1.05. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing --- such instrument or instruments. Proof of execution (as provided below in subsection (b) of this Section 1.05) of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient including, without limitation, by verification from a notary public or signature guarantee. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note or the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof to the same extent as the original Holder, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 25 34 Section 1.06. Notices, etc., to the Trustee and the Company. --------------------------------------------- Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed, in writing, to or with the Trustee at its Corporate Trust Office or at any other address previously furnished in writing to the Holders and the Company by the Trustee or at the office of any drop agent specified by or on behalf of the Trustee to the Holders and the Company from time to time; and (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise expressly provided herein) hereunder if in writing and mailed, first-class postage prepaid, to the Company, addressed to it at 2300 Empress Drive, Joliet, Illinois 60436, Attention: General Counsel, with a copy to D'Ancona & Pflaum, 30 North LaSalle Street, Chicago, Illinois 60602, Attention: Joel D. Rubin, or at any other address previously furnished in writing to the Trustee by the Company. Section 1.07. Notice to Holders; Waiver. ------------------------- Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event as required by any provision of this Indenture, then any method of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 26 35 Section 1.08. Conflict with Trust Indenture Act. --------------------------------- If any provision hereof limits, qualifies or conflicts with any provision of the Trust Indenture Act or another provision which is required or deemed to be included in this Indenture by any of the provisions of the Trust Indenture Act, such provision or requirement of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, such provision of the Trust Indenture Act shall be deemed to apply to this Indenture as so modified or excluded, as the case may be, if this Indenture shall then be qualified under the TIA. Section 1.09. Effect of Headings and Table of Contents. ---------------------------------------- The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.10. Successors and Assigns. ---------------------- All covenants and agreements in this Indenture by the Company and Trustee shall bind their respective successors and assigns, whether so expressed or not. Section 1.11. Separability Clause. ------------------- In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.12. Benefits of Indenture. --------------------- Nothing in this Indenture or in the Notes issued pursuant hereto, express or implied, shall give to any person (other than the parties hereto and their successors hereunder, any Paying Agent and the Holders) any benefit or any legal or equitable right, remedy or claim under this Indenture, except as provided in Article Thirteen and Article Fourteen. SECTION 1.13. GOVERNING LAW. ------------- THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE COMPANY, EACH GUARANTOR AND ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES. 27 36 Section 1.14. No Recourse Against Others. -------------------------- No director, officer, employee or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or this Indenture. Each Holder of Notes by accepting a Note waives and releases all such liability, and such waiver and release is part of the consideration for the issuance of the Notes. Section 1.15. Independence of Covenants. ------------------------- All covenants and agreements in this Indenture shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or condition exists. Section 1.16. Exhibits and Schedules. ---------------------- All exhibits and schedules attached hereto are by this reference made a part hereof with the same effect as if herein set forth in full. Section 1.17. Counterparts. ------------ This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Section 1.18. Duplicate 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. Section 1.19. Incorporation by Reference of TIA. --------------------------------- Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in, and made a part of, this Indenture. Any terms incorporated by reference in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them therein. 28 37 ARTICLE TWO SECURITY FORMS Section 2.01. Form and Dating. --------------- The Initial Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto. The --------- Exchange Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit B hereto. The Notes may have --------- notations, legends or endorsements required by law, stock exchange rule or Depositary rule or usage. The Company shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its authentication and shall show the date of its authentication. The additional terms and provisions contained in the forms of Notes and Guarantees, annexed hereto as Exhibits A and E, respectively, shall ---------------- constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes will initially be issued in either of the following forms: (a) Notes offered and sold in reliance on Rule 144A issued initially in the form of one or more global Notes in registered form, substantially in the form set forth in Exhibit A (the "U.S. Global Note"), deposited with --------- the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Section 2.03 hereof. The aggregate principal amount of the U.S. Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary. (b) Notes offered and sold in offshore transactions in reliance on Regulation S represented upon issuance by a temporary global Note (the "Offshore Global Note" and, together with the U.S. Global Note, the "Global Notes"), which will be exchangeable for certificated Notes in registered form in substantially the form set forth in Exhibit A (the "Offshore --------- Physical Notes") only upon the expiration of the "40-day restricted period" within the meaning of Rule 903(c)(3) of Regulation S. Subsequent to the initial issuance of the Global Notes provided for in paragraphs (a) and (b) above, physical certificates for notes transferred in reliance on any exemption from registration under the Securities Act, other than as described in the preceding two paragraphs, shall be issued in substantially the form set forth in Exhibit A, subject to the Company's and the Trustee's --------- right prior to any such transfer to require the delivery of an Opinion of Counsel, certifications and/or other information satisfactory to each of them (the "U.S. Physical Notes"). The Offshore Physical Notes and the U.S. Physical Notes are sometimes collectively herein referred to as the "Physical Notes." Physical Notes may initially be registered in the name of the 29 38 Depositary or a nominee of such Depositary and be delivered to the Trustee as custodian for such Depositary. Beneficial owners of Physical Notes, however, may request registration of such Physical Notes in their names or the names of their nominees. Section 2.02. Execution and Authentication; Aggregate Principal ------------------------------------------------- Amount. - ------ The Notes shall be executed on behalf of the Company by two Officers of the Company. The signature of any Officer on the Notes may be manual or facsimile. If an Officer or Assistant Secretary whose manual or facsimile signature is on a Note was an Officer or Assistant Secretary at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. The Trustee shall authenticate (i) Initial Notes for original issue in the aggregate principal amount not to exceed $150,000,000 and (ii) Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes, in each case upon a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Initial Notes or Exchange Notes and whether the Notes are to be issued as Physical Notes or Global Notes or such other information as the Trustee may reasonably request. The aggregate principal amount of Notes outstanding at any time may not exceed $150,000,000, except as provided in Section 3.05 hereof. The Trustee may appoint an authenticating agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate Notes. Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an agent to deal with the Company or with any Affiliate of the Company. Section 2.03. Restrictive Legends. ------------------- Each Global Note and Physical Note that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the ------------------------ face thereof until the second anniversary of the Issue Date, unless otherwise agreed by the Company and the Holder thereof: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR 30 39 OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S AND (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) INSIDE THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),(2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (E) 31 40 PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE TRANSFER AGENT AND REGISTRAR RESERVE THE RIGHT PRIOR TO ANY OFFER, SALE OR OTHER TRANSFER PURSUANT TO CLAUSES (D),(E) OR (F) ABOVE TO REQUIRE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND OTHER INFORMATION SATISFACTORY TO THE COMPANY, THE TRUSTEE AND THE TRANSFER AGENT AND REGISTRAR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Each Global Note shall also bear a legend on the face thereof in substantially the following form: UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH 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, A NEW YORK CORPORATION ("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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF 32 41 FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.05 OF THE INDENTURE. Section 2.04. Book-Entry Provisions for Global Notes. -------------------------------------- This Section 2.04 shall apply only to the Global Notes deposited with the Depositary or its custodian. (1) So long as the Notes are eligible for book-entry settlement with the Depositary, or unless otherwise required by law, the Global Notes initially shall (i) be registered in the name of the Depositary or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 2.03. Members of, or participants in, the Depositary ("Agent Members") shall ------------- have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Notes, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Notes for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (2) Transfers of the Global Notes shall be limited to transfers in whole, but, subject to the immediately succeeding sentence, not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depositary and the provisions of Section 2.05 hereof. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Notes if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the Global Notes and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Note Registrar has received a written request from the Depositary to issue Physical Notes. (3) In connection with any transfer or exchange of a portion of the beneficial interest in a Global Note to beneficial owners pursuant to paragraph (2), the Note Registrar shall 33 42 (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount. (4) In connection with the transfer of the beneficial interests in an entire Global Note to beneficial owners pursuant to paragraph (2), the Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. (5) Any Physical Note constituting a Restricted Security delivered in exchange for a beneficial interest in a Global Note pursuant to paragraph (2) or (3) shall, except as otherwise provided by paragraphs (1)(a)(x) and (3) of Section 2.05 hereof, bear the Private Placement Legend. (6) The owner of a beneficial interest in a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. Section 2.05. Special Transfer Provisions. --------------------------- (1) Transfers to Non-QIB Institutional Accredited Investors and Non- --------------------------------------------------------------- U.S. Persons. The following provisions shall apply with respect to the - ------------ registration of any proposed transfer of a Note constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person: (a) the Note Registrar shall register the transfer of any Note constituting a Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date or (y) (A) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Note Registrar a certificate substantially in the form of Exhibit C hereto or (B) in the --------- case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Note Registrar a certificate substantially in the form of Exhibit D hereto; and --------- (b) if the proposed transferor is an Agent Member holding a beneficial interest in the Global Note, upon receipt by the Note Registrar of (x) the certificate, if any, required by paragraph (a) above and (y) written instructions given in accordance with the Depositary's and the Note Registrar's procedures, whereupon (i) the Note Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal 34 43 amount of the applicable Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and (ii) the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Notes of like tenor and amount. (2) Transfers to QIBs. The following provisions shall apply with ----------------- respect to the registration of any proposed transfer of a Note constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): (a) the Note Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Note Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Note Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (b) if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in a Global Note, upon receipt by the Note Registrar of written instructions given in accordance with the Depositary's and the Note Registrar's procedures, the Note Registrar shall reflect on its books and records the date and an increase in the principal amount of the applicable Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (3) Private Placement Legend. Upon the transfer, exchange or ------------------------ replacement of Notes not bearing the Private Placement Legend, the Note Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Note Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the requested transfer is after the second anniversary of the Issue Date, or (ii) there is delivered to the Note Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (4) General. By its acceptance of any Note bearing the Private ------- Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. 35 44 The Note Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.04 hereof or this Section 2.05. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time during the Note Registrar's normal business hours upon the giving of reasonable written notice to the Note Registrar. In connection with any transfer of the Notes, the Trustee, the Note Registrar and the Company shall be entitled to receive, shall be under no duty to inquire into, may conclusively presume the correctness of, and shall be fully protected in relying upon the certificates, opinions and other information referred to herein (or in the forms provided herein, attached hereto or to the Notes, or otherwise) received from any Holder and any transferee of any Note regarding the validity, legality and due authorization of any such transfer, the eligibility of the transferee to receive such Note and any other facts and circumstances related to such transfer. ARTICLE THREE THE NOTES Section 3.01. Title and Terms. --------------- The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to $150,000,000, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 3.03, 3.04, 3.05, 9.05, 10.11, 10.13, 10.14 or 11.08. The Notes shall be known and designated as the "8 1/8% Senior Subordinated Notes due 2006" of the Company. The final Stated Maturity of the Notes shall be July 1, 2006. Interest on the Notes will accrue at the rate of 8 1/8% per annum and will be payable semi-annually in arrears on January 1 and July 1 in each year, commencing on January 1, 1999, to Holders of record on the immediately preceding December 15 and June 15, respectively. Interest on the Notes will accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid, from the Issue Date. The additional terms and provisions contained in the forms of Notes and the Guarantees, annexed hereto as Exhibits A and E, respectively, shall ---------------- constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Section 3.02. Denominations. ------------- The Notes shall be issuable only in fully registered form without coupons and in denominations of $1,000 and any integral multiple thereof. 36 45 Section 3.03. Temporary Notes. --------------- Pending the preparation and delivery of definitive Notes, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Notes. Temporary Notes may be printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Notes may consider appropriate, as conclusively evidenced by their execution of such Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. Section 3.04. Registration; Registration of Transfer and Exchange. --------------------------------------------------- The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency designated pursuant to Section 10.02 being herein sometimes referred to as the "Note Register") in which, subject to such reasonable regulations as the person appointed as being responsible for the keeping of the Note Register (the "Note Registrar") may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Note Register shall be in written form or in any form capable of being converted into written form within a reasonable period of time. The Trustee is hereby initially appointed Note Registrar for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint one or more co-registrars. Upon surrender for registration of transfer of any Note at the office or agency of the Company designated pursuant to Section 10.02, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by Section 2.03. At the option of the Holder, Notes in certificated form may be exchanged for other Notes of any authorized denomination or denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company, evidencing the same indebtedness, and entitled to the same 37 46 benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange and no such transfer or exchange shall constitute a repayment of any obligation nor create any new obligations of the Company. Every Note presented or surrendered for registration of transfer, or for exchange or redemption, shall (if so required by the Company, the Trustee, the Note Registrar or any co-registrar) be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee, and the Note Registrar or any co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange or redemption of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 3.03, 9.05, 10.14, 10.15 or 11.08 not involving any transfer. None of the Company, the Trustee, the Note Registrar or any co- registrar shall be required (a) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of the Notes selected for redemption and ending at the close of business on the day of such mailing, (b) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of Notes being redeemed in part or (c) to issue, register, transfer or exchange any Note during a Change of Control Offer or an Asset Sale Offer, if such note is tendered pursuant to such Change of Control Offer or Asset Sale Offer. When Notes are presented to the Note Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Note Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Note Registrar's request. Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes. ------------------------------------------- If (a) any mutilated Note is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company and the Trustee, such security or indemnity, in each case, as may be required by them to save each of them harmless from any loss which either of them may suffer if a Note is replaced, then, in the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a replacement Note of like tenor and principal amount, bearing a number not contemporaneously outstanding. Upon the issuance of any replacement Notes under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that 38 47 may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. Section 3.06. Payment of Interest; Interest Rights Preserved. ---------------------------------------------- Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid by check or wire transfer to the person in whose name that Note (or one or more predecessor Notes) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date and interest on such defaulted interest at the then applicable interest rate borne by the Notes, to the extent lawful (such defaulted interest and interest thereon herein collectively called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the Regular Record Date and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in subsection (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Notes (or their respective predecessor 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 in writing at least 20 days before such payment date of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this subsection (a) provided. Thereupon the Trustee 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 Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company in writing of such Special Record Date. In the name and at the expense of the Company, the Trustee 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, not less than 10 days prior to such Special 39 48 Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, 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 subsection (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this subsection (b), such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. Section 3.07. Persons Deemed Owners. --------------------- Prior to and at the time of due presentment for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name any Note is registered in the Note Register as the owner of such Note for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 3.06) interest on such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 3.08. Cancellation. ------------ All Notes surrendered for payment, redemption, registration of transfer or exchange shall be delivered to the Trustee and, if not already cancelled, shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, as evidenced by a Company Order instructing the Trustee that all Notes so delivered shall be promptly cancelled by the Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 3.08, except as expressly permitted by this Indenture. Cancelled Notes shall be destroyed by the Trustee who shall provide proof of destruction to the Company. The Trustee shall provide the Company with a list of all Notes that have been cancelled from time to time as requested by the Company. Section 3.09. Computation of Interest. ----------------------- Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. 40 49 Section 3.10. Legal Holidays. -------------- In any case where any Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or Stated Maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of principal, premium, if any, or interest need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or at the Stated Maturity, as the case may be, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or Stated Maturity, as the case may be, to the next succeeding Business Day. Section 3.11. CUSIP Number. ------------ The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and if so, the Trustee may use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided, however, that -------- ------- any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. All Initial Notes shall bear identical CUSIP numbers and all Exchange Notes shall bear identical CUSIP numbers. The Company shall promptly notify the Trustee in writing of any change in the CUSIP number of the Notes. Section 3.12. Payment of Additional Interest Under Registration ------------------------------------------------- Rights Agreement. - ---------------- Under certain circumstances the Company will be obligated to pay certain additional amounts of interest to the Holders, as more particularly set forth in section 2(e) of the Registration Rights Agreement. The terms of Section 2(e) of the Registration Rights Agreement are hereby incorporated herein by reference and the Company shall be obligated to provide a copy of such Registration Rights Agreement to the Trustee. ARTICLE FOUR DEFEASANCE OR COVENANT DEFEASANCE Section 4.01. Defeasance. ---------- The Company may, at its option at any time within the final year of the Stated Maturity of the Notes, elect to have its obligations discharged with respect to Outstanding Notes ("defeasance"). Such defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented, and the Indenture shall cease to be of further effect as to all outstanding Notes and Guarantees, except as to (i) rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on such Notes when such 41 50 payments are due solely from the trust fund described below, (ii) the Company's obligations with respect to such Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payments and money for security payments held in trust and (iii) the rights, powers, trusts, duties and immunities of the Trustee and the Company's obligations in connection therewith. Section 4.02. Covenant Defeasance. ------------------- In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and all Guarantors released with respect to Sections 10.05 through 10.20 and the provisions of Article Eight, and any failure to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Notes ("covenant defeasance"). For this purpose, such covenant defeasance means that, with respect to the Outstanding Notes, the Company and the Guarantors 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 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 5.01(c), (d), (e), (f), (g) or (i); provided as specified above, the remainder of this Indenture and such Outstanding Notes shall be unaffected thereby. Section 4.03. Conditions to Defeasance or Covenant Defeasance. ----------------------------------------------- In order to exercise either defeasance or covenant defeasance: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, 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, and interest on the outstanding Notes at Stated Maturity or upon redemption in accordance with Article Eleven, and the Holders must have a valid, perfected, exclusive security interest in such trust; (2) (a) in the case of defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the U.S. 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 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 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 defeasance had not occurred; or (b) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the U.S. 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 42 51 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; (3) no Default or Event of Default shall have occurred and be continuing on the date of such deposit, or insofar as Section 5.01 (d) events are concerned, at any time in the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (4) such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest with respect to any securities of the Company or any Guarantor; (5) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (6) the Company shall have delivered to the Trustee an Officer's Certificate to the effect that the deposit was not made by the Company with the intent of preferring the Holders of such Notes over any other creditors of the Company or 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 Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent under this Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with. Opinions and certificates required to be delivered under this Section shall be in compliance with the requirements set forth in Section 1.04 and this Section 4.03. Section 4.04. Deposited Money and U.S. Government Obligations To Be ----------------------------------------------------- Held in Trust, Etc. - ------------------- Subject to the provisions of the last paragraph of Section 10.03, all U.S. Legal Tender and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or such other person that would qualify to act as successor trustee under Article Six, collectively for purposes of this Section 4.04, the "Trustee") pursuant to Section 4.03 in respect of the Company's election under either Section 4.01 or 4.02, 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 (other than the Company or any Affiliate of the Company) 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, either at the Stated Maturity or on the applicable Redemption Date, as the case may be, but such money need not be segregated from other funds except to the extent required by law; provided that the Trustee shall have been irrevocably instructed to apply such U.S. Legal Tender or the proceeds of such U.S. Government Obligations to said payments with respect to the Notes. 43 52 The Company shall pay and indemnify the Trustee and its agents and hold them harmless against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 4.03 or the principal, premium, if any, 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 Defeased Notes. Anything in this Article Four to the contrary notwithstanding, the Trustee shall deliver to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 4.03 hereof which, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written certification thereof to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 4.05. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 4.03, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Company and each of the Guarantors under this Indenture, the Notes and the Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.03, until such time as the Trustee or Paying Agent is permitted to apply all such money and U.S. Government Obligations in accordance with Section 4.03; provided, however, that if the Company or the Guarantors make any payment of principal, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company or the Guarantors, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money and U.S. Government Obligations held by the Trustee or Paying Agent. Section 4.06. Repayment to Company. -------------------- The Trustee shall pay to the Company (or, if appropriate, the Guarantors) upon Company Request any money held by it for the payment of principal, premium, if any, or interest that remains unclaimed for two years. After payment to the Company or the Guarantors, Noteholders entitled to money must look to the Company and the Guarantors for payment as general creditors unless an applicable abandoned property law designates another person and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. ARTICLE FIVE REMEDIES Section 5.01. Events of Default. ----------------- "Event of Default," wherever used herein, means any one of the ---------------- following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary 44 53 or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the failure by the Company to pay any installment of interest on the Notes as and when due and payable and the continuance of any such failure for 30 days; (b) the failure to pay all or any part of the principal of, or premium, if any, on, the Notes when and as the same become due and payable at maturity, redemption, by acceleration or otherwise, or the failure by the Company or any Restricted Subsidiary to comply with any of its obligations described under Article Eight, Section 10.13 or Section 10.14; (c) the failure by the Company to observe or perform any other covenant or agreement contained in the Notes or the Indenture and, subject to certain exceptions, 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; (d) (i) the Company or any Significant Subsidiary commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (ii) the Company or any Significant Subsidiary consents to the entry of a decree or order for relief in respect of the Company or such Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (iii) the Company or any Significant Subsidiary files a petition or answer or consent seeking reorganization or relief under any applicable Federal or state bankruptcy law, (iv) the Company or any Significant Subsidiary (x) consents to the filing of such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or such Significant Subsidiary or of any substantial part of their respective property, (y) makes an assignment for the benefit of creditors or (z) admits in writing its inability to pay its debts generally as they become due; (e) default or defaults under one or more agreements, indentures or instruments under which the Company or any Restricted Subsidiary then has outstanding Indebtedness in excess of $10.0 million individually or in the aggregate and either (i) such Indebtedness (or any payment of principal, interest or premium thereon) is already due and payable or (ii) such default or defaults results in the acceleration of the maturity of such Indebtedness; (f) final unsatisfied judgments no longer subject to appeal not covered by insurance aggregating in excess of $10.0 million at any one time rendered against the Company or any of the Restricted Subsidiaries and not stayed, bonded or discharged within 60 days; or (g) the loss for 90 days of the legal right to conduct gaming operations at any Casino which, if the Facility of which such Casino is a part were operated by a single Subsidiary, would constitute a Significant Subsidiary. 45 54 The Company shall provide an Officers' Certificate to the Trustee promptly upon any officer of the Company obtaining knowledge of any Default or Event of Default that has occurred and, if applicable, describe such Default or Event of Default and the status thereof. Section 5.02. Acceleration of Maturity; Rescission and Annulment. -------------------------------------------------- If an Event of Default occurs and is continuing (other than an Event of Default specified in clause (d) above relating to the Company or any of the Significant Subsidiaries) unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the Holders of 25% of the aggregate principal amount of the Notes then outstanding, by notice in writing to the Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare all principal of, and accrued and unpaid interest on, the Notes due and payable immediately. If an Event of Default specified in clause (d) above relating to the Company or any of the Significant Subsidiaries occurs, all principal of, and accrued and unpaid interest on, the Notes will be immediately due and payable without any declaration or other act on the part of Trustee or the Holders. The Holders of no less than a majority in aggregate principal amount of Notes are generally authorized to rescind such acceleration if all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on, the Notes which have become due solely by such acceleration, have been cured or waived. Prior to the declaration of acceleration of the maturity of the Notes, the Holders of a majority of the aggregate principal amount of the Notes at the time outstanding may waive on behalf of all the Holders any Default or Event of Default, except a Default or Event of Default in the payment of principal of, or interest on, any Note not yet cured, or a Default or Event of 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 this Indenture relating to the duties of the Trustee, the Trustee will be under no obligation to exercise any of its rights or powers under this Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable security or indemnity. Subject to all provisions of this Indenture and applicable law, the Holders of a majority of the 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. Section 5.03. Collection of Indebtedness and Suits for Enforcement by ------------------------------------------------------- Trustee; Other Remedies. - ----------------------- The Company covenants that if an Event of Default in payment of principal, premium or interest specified in Section 5.01(a) or 5.01(b) hereof occurs and is continuing, the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal, premium, if any, and interest, with interest upon the overdue principal, premium, if any, and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate then borne by the Notes; and, in addition thereto, 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. 46 55 If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may, but is not obligated under this paragraph to, institute a judicial proceeding for the collection of the sums so due and unpaid and may, but is not obligated under this paragraph to, prosecute such proceeding to judgment or final decree, and may, but is not obligated under this paragraph to, enforce the same against the Company, the Guarantors or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Notes, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion, but is not obligated under this paragraph to, (i) proceed to protect and enforce its rights and the rights of the Holders under this Indenture and the Notes by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights, whether for the specific enforcement of any covenant or agreement contained in this Indenture or the Notes or in aid of the exercise of any power granted herein or therein, or (ii) proceed to protect and enforce any other proper remedy. No recovery of any such judgment upon any property of the Company shall affect or impair any rights, powers or remedies of the Trustee or the Holders. Section 5.04. Trustee May File Proofs of Claims. --------------------------------- In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company, the Guarantors or any other obligor upon the Notes, or the property of the Company, the Guarantors or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, but is not obligated under this paragraph (a) to file and prove a claim for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07 hereof. 47 56 Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5.05. Trustee May Enforce Claims Without Possession of Notes. ------------------------------------------------------ All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. Section 5.06. Application of Money Collected. ------------------------------ Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: to the Trustee for amounts due under Section 6.07; Second: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; Third: to Holders for principal amounts and premium, if any, owing under the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and premium; and Fourth: to the Company or, to the extent the Trustee collects any amount from any Guarantor, to such Guarantor. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Noteholders pursuant to this Section 5.06. Section 5.07. Limitation on Suits. ------------------- No Holder of any Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless 48 57 (a) the Holder or Holders of not less than 25.0% in aggregate principal amount of the Outstanding Notes shall have made written request(s) to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (b) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (c) the Trustee for 15 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (d) no direction inconsistent with such written request has been given to the Trustee during such 15-day period by the Holders of a majority in aggregate principal amount of the Outstanding Notes; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture or any Note to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture or any Note except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 5.09. Unconditional Right of Holders To Receive Principal, --------------------------------------------------- Premium and Interest. - -------------------- Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive cash payment, in U.S. Legal Tender, of the principal of, premium, if any, and (subject to Section 3.06 hereof) interest on such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption or repurchase, on the respective Redemption Dates or date fixed for repurchase) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the express consent of such Holder. Section 5.09. Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. 49 58 Section 5.10. Rights and Remedies Cumulative. ------------------------------ No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11. Delay or Omission Not Waiver. ---------------------------- No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Five or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12. Control by Majority. ------------------- The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that: (a) such direction shall not be in conflict with any rule of law or with this Indenture or any Note or expose the Trustee to liability; and (b) subject to the provisions of Section 315 of the TIA, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 5.13. Waiver of Past Defaults. ----------------------- The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes may on behalf of the Holders of all the Notes waive any past Default hereunder and its consequences, except a Default: (a) in the payment of the principal of, premium, if any, or interest on any Note (which may only be waived with the consent of each Holder of Notes affected); or (b) in respect of a covenant or provision under this Indenture which cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. 50 59 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 Event of Default or impair any right consequent thereon. Section 5.14. Undertaking for Costs. --------------------- All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or the Notes, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Notes or to any suit instituted by any Holder for the enforcement of the payment of the principal of, premium, if any, or interest on any Note on or after the respective Stated Maturities expressed in such Note (or, in the case of redemption or repurchase, on or after the respective Redemption Dates or dates fixed for repurchase). Section 5.15. Waiver of Stay, Extension or Usury Laws. --------------------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on the Notes contemplated herein or in the Notes or which 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 will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 51 60 ARTICLE SIX THE TRUSTEE Section 6.01. Certain Duties and Responsibilities. ----------------------------------- (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee or its counsel shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this paragraph does not limit the effect of paragraph (a) of this Section 6.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by an officer of the Trustee or upon advice of its counsel, 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 5.12. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it or it does not receive an indemnity satisfactory to it in its sole discretion against such risk, liability, loss, fee or expense which might be incurred by it in compliance with such request or direction. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.01. 52 61 Section 6.02. Notice of Defaults. ------------------ Within 90 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Note Register, notice of such Default hereunder known to the Trustee; provided, however, that, except in the case of a Default in the payment of the principal of, premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of Responsible Officers or counsel of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. Section 6.03. Certain Rights of Trustee. ------------------------- Subject to Section 6.01 hereof and the provisions of (S) 315 of the TIA: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, appraisal, bond, debenture, note, coupon, security, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors of the Company may be sufficiently evidenced by a Board Resolution of the Company thereof; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate of the Company; (d) the Trustee and its agents may consult with counsel and any written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel; (e) the Trustee and its agents 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, approval, appraisal, bond, debenture, note, coupon, security, other evidence of indebtedness or other paper or document but the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may deem fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of 53 62 the Company, personally or by agent or attorney during the reasonable business hours of the Company; (f) the Trustee and its agents may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other than an agent who is an employee of the Trustee) or attorney appointed with due care by it hereunder; or (g) the Trustee shall not be charged with knowledge of any Default or Event of Default, as the case may be, with respect to the Notes unless either (1) a Responsible Officer of the Trustee shall have actual knowledge of the Default or Event of Default, as the case may be, or (2) written notice of such Default or Event of Default, as the case may be, shall have been given to the Trustee by the Company, any other obligor on the Notes or by any Holder of the Notes. (h) Except with respect to Section 10.01, the Trustee shall have no duty to inquire as to the performance of the Company with respect to the covenants contained in Article Ten. In addition, the Trustee shall not be deemed to have knowledge of an Event of Default except (i) any Default or Event of Default occurring pursuant to Sections 5.01(a), 5.01(b) or 10.01 or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. (i) Delivery of reports, information and documents to the Trustee under Section 10.08 is for informational purposes only and the Trustee's receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 6.04. Trustee Not Responsible for Recitals, Dispositions of ----------------------------------------------------- Notes or Application of Proceeds Thereof. - ---------------------------------------- The recitals contained herein and in the Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Guarantors, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Company and the Guarantors in connection with the registration of any Notes and Guarantees issued hereunder are true and accurate subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of Notes or the proceeds thereof. 54 63 Section 6.05. Trustee and Agents May Hold Notes; Collections; etc. --------------------------------------------------- The Trustee, any Paying Agent, Note Registrar or any other agent of the Company or the Guarantors, in its individual or any other capacity, may become the owner or pledgee of Notes, with the same rights it would have if it were not the Trustee, Paying Agent, Note Registrar or such other agent and, subject to Sections 6.08 and 6.13 hereof and (S)(S) 310 and 311 of the Trust Indenture Act, may otherwise deal with the Company or the Guarantors and receive, collect, hold and retain collections from the Company or the Guarantors with the same rights it would have if it were not the Trustee, Paying Agent, Note Registrar or such other agent. Section 6.06. Money Held in Trust. ------------------- All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder. Section 6.07. Compensation and Indemnification of Trustee and Its --------------------------------------------------- Prior Claim. - ----------- The Company and the Guarantors covenant and agree: (a) to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ), except any such reasonable expense, disbursement or advance as may arise from its negligence or bad faith; and (c) to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and the exercise or performance of any of its powers or duties hereunder, including enforcement of this Section 6.07. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The obligations of the Company and the Guarantors under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute an additional obligation hereunder and shall survive the satisfaction and discharge of this Indenture. Section 6.08. Conflicting Interests. --------------------- The Trustee shall be subject to and comply with the provisions of (S) 310(b) of the TIA. 55 64 Section 6.09. Corporate Trustee Required; Eligibility. --------------------------------------- There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(5) and which shall have a combined capital and, surplus of at least $100,000,000 (or be a member of a bank holding company with combined capital and surplus of at least $100,000,000), and have an office or agency at which Notes may be presented for transfer and redemption and at which demands may be made in The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of United States Federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10. Resignation and Removal; Appointment of Successor ------------------------------------------------- Trustee. - ------- (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee, or any trustee or trustees hereinafter appointed, may at any time resign by giving written notice thereof to the Company and the Guarantors at least 30 Business Days prior to the date of such proposed resignation. Upon receiving such notice of resignation, the Company and the Guarantors shall promptly appoint a successor trustee by written instrument, a copy of which shall be delivered to the resigning Trustee and a copy to the successor trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 Business Days after the giving of such notice of resignation, the resigning Trustee may, or any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper, appoint a successor trustee. (c) The Trustee may be removed at any time with 60 days written notice by an Act of the Holders of a majority in principal amount of the Outstanding Notes, delivered to the Trustee, the Company and the Guarantors. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of (S) 310(b) of the TIA in accordance with Section 6.08 hereof after written request therefor by the Company, the Guarantors or by any Holder who has been a bona fide Holder of a Note for at least six months, or 56 65 (2) the Trustee shall cease to be eligible under Section 6.09 hereof and shall fail to resign after written request therefor by the Company, the Guarantors or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose or rehabilitation, conservation or liquidation, then, in any such case, (i) the Company or the Guarantors may remove the Trustee, or (ii) subject to Section 5.14, the Holder of any Note who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company or the Guarantors shall promptly appoint a successor Trustee. If, within 60 days after such resignation, removal or incapability, or the occurrence of such vacancy, and the Company or the Guarantors have not appointed a successor Trustee, a successor Trustee shall be appointed by act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company, the Guarantors and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company and the Guarantors. If no successor Trustee shall have been so appointed by the Company or the Holders of the Notes and accepted appointment in the manner hereinafter provided, the Holder of any Note who has been a bona fide Holder for at least six months may, subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company and the Guarantors shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Notes as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11. Acceptance of Appointment by Successor. -------------------------------------- Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company, the Guarantors and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee as if originally named as Trustee hereunder; but, nevertheless, on the written request of the Company, the Guarantors or the successor Trustee, upon payment of amounts due it pursuant to Section 6.07, such retiring Trustee shall duly assign, transfer and deliver to the successor Trustee all moneys and property at 57 66 the time held by it hereunder and shall execute and deliver an instrument transferring to such successor Trustee all the rights, powers, duties and obligations of the retiring Trustee. Upon request of any such successor Trustee, the Company and the Guarantors shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. No successor Trustee with respect to the Notes shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor Trustee shall be eligible to act as Trustee under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 6.11, the Company and the Guarantors shall give notice thereof to the Holders of the Notes, by mailing such notice to such Holders at their addresses as they shall appear on the Note Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 6.10(f). If the Company or the Guarantors fail to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. Section 6.12. Successor Trustee by Merger, etc. -------------------------------- Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided such corporation shall be eligible under this Article to serve as Trustee hereunder. In case at the time such successor to the Trustee under this Section 6.12 shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Notes so authenticated; and, in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee under this Section 6.12 may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have been authenticated. Section 6.13. Preferential Collection of Claims Against Issuers. ------------------------------------------------- The Trustee shall comply with Section 311(a) of the TIA, excluding any creditor relationship listed in (S) 311(b) of the TIA. If the present or any future Trustee shall resign or be removed, it shall be subject to (S) 311(a) of the TIA to the extent provided therein. 58 67 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.01. Preservation of Information; Company To Furnish Trustee ------------------------------------------------------- Names and Addresses of Holders. - ------------------------------ (a) 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; provided, however, that if and for so long as the Trustee shall not be the Note Registrar, the Note Register shall satisfy the requirements relating to such list. None of the Company, the Guarantors or the Trustee shall be under any responsibility with regard to the accuracy of such list. (b) The Company will furnish or cause to be furnished to the Trustee (i) semiannually, not more than 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and (ii) at such other times as the Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that if and so long as the Trustee shall be the Note - -------- ------- Registrar, no such list need be furnished pursuant to this Section 7.01(b) Section 7.02. Communications of Holders. ------------------------- Holders may communicate with other Holders with respect to their rights under this Indenture or under the Notes pursuant to (S) 312(b) of the TIA. The Trustee shall comply with (S) 312(b) of the TIA. The Company, the Guarantors and the Trustee and any and all other persons benefited by this Indenture shall have the protection afforded by (S) 312(c) of the TIA. Section 7.03. Reports by Trustee. ------------------ Within 60 days after May 15 of each year commencing with the first May 15 following the date of this Indenture, the Trustee shall mail to all Holders, as their names and addresses appear in the Note Register, a brief report dated as of such May 15 that complies with (S) 313(a) of the TIA; provided, however, that if no such event as described in (S) 313(a) of the TIA has occurred within such period then no such report need be transmitted. The Trustee shall also comply with (S)(S) 313(b), 313(c) and 313(d) of the TIA. At the time of its mailing to Holders, a copy of each report shall be filed with the Company, the Guarantors, the Commission and with each national securities exchange on which the Notes are listed. The Company shall notify the Trustee when the Notes are listed on any stock exchange or any delisting thereof. 59 68 Section 7.04. Reports by Company and Each Guarantor. ------------------------------------- The Company and each Guarantor shall: (a) file with the Trustee copies of the reports and of the information and documents which the Company and each Guarantor is required to provide to any person under Section 10.08, hereof, and, if the Company or any Guarantor is not required to file information, documents or reports pursuant to Section 13 or Section 15(d) of the Exchange Act, to file with the Trustee and the Commission, in accordance with, and so long as not prohibited by, the rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company and each Guarantor with the covenants of this Indenture as is required from time to time by such rules and regulations (including such information, documents and reports referred to in Trust Indenture Act Section 314(a)(2)); and (c) transmit by mail to all Holders, in a manner and to the extent provided in Trust Indenture Act Section 313(c), such summaries of any information, documents and reports required to be filed by the Company and each Guarantor pursuant to Section 10.08 hereof and subsections (a) and (b) of this Section as is required and not prohibited by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT SUCCESSOR CORPORATION Section 8.01. When Company May Merge, etc. --------------------------- The Company shall not consolidate with or merge with or into another person or, directly or indirectly, sell, lease or convey all or substantially all of its assets (computed on a consolidated basis), to another person or group of affiliated persons, unless (i)(A) the Surviving Person shall be a corporation organized under the laws of the United States of America, any State thereof or the District of Columbia and (B) the Surviving Person expressly assumes by supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company in connection with the Notes and this Indenture and the Registration Rights Agreement, and in each case, this Indenture and the Registration Rights Agreement shall remain in full force and effect; (ii) immediately after giving effect to such transaction or series of related transactions on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; and (iii) the Surviving Person immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without 60 69 limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio provision contained in Section 10.10; and (iv) such transaction will not result in the loss of any Gaming License held by a Significant Subsidiary of the Company. For purposes of this Section 8.01, the Consolidated Fixed Charge Coverage Ratio shall be determined on a pro forma consolidated basis (after giving effect, and a pro forma basis, to the transaction and any related incurrence of Indebtedness or Preferred Stock) for the Reference Period which ended immediately preceding such transaction. In connection with any consolidation, merger, transfer, lease or other disposition contemplated hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, transfer, lease or other disposition and the supplemental indenture in respect thereof comply with the requirements under this Indenture. In addition, each Guarantor, in the case of a transaction described in the first paragraph under this Section 8.01, unless it is the other party to the transaction or unless its Note Guarantee will be released and discharged in accordance with its terms as a result of the transaction, will be required to confirm, by supplemental indenture, that its Note Guarantee will continue to apply to the obligations of the Company or the Surviving Person under this Indenture. Section 8.02. Successor Substituted. --------------------- Upon any consolidation or merger of the Company or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company is not the Surviving Person, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes and the Registration Rights Agreement with the same effect as if such Surviving Person had been named as the Company therein; and thereafter, except in the case of (a) a lease or (b) any sale, assignment, conveyance, transfer, lease or other disposition to a Restricted Subsidiary of the Company, the Company shall be discharged from all obligations and covenants under this Indenture and the Notes. For all purposes of this Indenture and the Notes (including the provisions of this Article Eight and Sections 10.10, 10.11 and 10.15), Subsidiaries of any Surviving Person shall, upon such transaction or series of related transactions, become Restricted Subsidiaries unless and until designated as Unrestricted Subsidiaries pursuant to and in accordance with Section 10.18 and all Indebtedness, and all Liens on property or assets, of such Surviving Person and its Restricted Subsidiaries in existence immediately prior to such transaction or series of related transactions will be deemed to have been incurred upon consummation of such transaction or series of related transactions. 61 70 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01. Without Consent of Holders. -------------------------- The Company, the Guarantors, if any, when authorized by their board of directors, and the Trustee may, without the consent of the Holders of any Outstanding Notes, amend, waive or supplement this Indenture or the Notes: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Article Eight; (c) to provide for uncertificated Notes in addition to certificated Notes; (d) to comply with any requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; (e) to provide for additional Guarantors of the Notes; (f) to evidence the release of any Guarantor in accordance with Article Thirteen hereof; (g) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes; or (h) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder; provided, however, that the Company has delivered to the Trustee an Opinion of Counsel stating that such change does not adversely affect the legal rights of any Holder. Section 9.02. With Consent of Holders. ----------------------- Except as provided in Section 9.01, other amendments and modifications of this Indenture or the Notes may be made by the Company, the Guarantors, if any, and the Trustee with the consent of the Holders of not less than a majority of the aggregate principal amount of the outstanding Notes; provided, however, that no such modification or amendment may, without the consent of the Holder of each outstanding Note affected thereby, (i) change the Stated Maturity of any Note; or 62 71 (ii) 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, or change the place of payment where, or the coin or currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or reduce any Offer to Purchase Price; or (iii) alter the redemption provisions in a manner adverse to the Holders; or (iv) make the Notes subordinate to any Indebtedness or other claims; (v) change the provisions of Section 10.14.; or (vi) 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 (vii) 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. The Holders of a majority in aggregate principal amount of the outstanding Notes, on behalf of all Holders of Notes, may waive compliance by the Company and the Guarantors with certain restrictive provisions of this Indenture. Subject to certain rights of the Trustee, as provided in this Indenture, the Holders of a majority in aggregate principal amount of the Notes, on behalf of all Holders of the Notes, may waive any past default under this Indenture (including any such waiver obtained in connection with a tender offer or exchange offer for the Notes), except a default in the payment of principal, premium or interest or a default arising from failure to purchase any Notes tendered pursuant to an optional redemption or repurchase, or a default in respect of a provision hereunder that cannot be modified or amended without the consent of the Holder of each Note that is affected. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. Section 9.03. Compliance with Trust Indenture Act. ----------------------------------- Every amendment of or supplement to this Indenture or the Notes shall comply with the TIA as then in effect if this Indenture shall then be qualified under the TIA. 63 72 Section 9.04. Effect of Supplemental Indentures. --------------------------------- Upon the execution of any supplemental indenture under this Article Nine, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.05. Revocation and Effect of Consents. --------------------------------- Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of that Note or portion of that Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to such Holder's Note or portion of such Note by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. 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 (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder of Notes, unless it makes a change described in any of clauses (i) through (ix) of Section 9.02. In that case, the amendment, supplement or waiver shall bind 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. Section 9.06. Notation on or Exchange of Notes. -------------------------------- If an amendment, supplement or waiver changes the terms of a Note, the Trustee shall (in accordance with the specific direction of the Company) request the Holder of the Note to deliver it to the Trustee. The Trustee shall (in accordance with the specific direction of the Company) place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. 64 73 Section 9.07. Trustee May Sign Amendments, etc. -------------------------------- The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article Nine if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If such amendment, supplement or waiver does affect the rights, duties, liabilities or immunities of the Trustee, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, supplement or waiver, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver is authorized or permitted by this Indenture, that it is not inconsistent herewith and that it will be valid and binding upon the Company in accordance with its terms. ARTICLE TEN COVENANTS Section 10.01. Payment of Principal, Premium and Interest. ------------------------------------------ The Company will duly and punctually pay the principal of, premium, if any, and interest on the Notes in accordance with the terms of the Notes and this Indenture. Section 10.02. Maintenance of Office or Agency. ------------------------------- The Company will maintain in The City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes and the Guarantees may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company or any Guarantor in respect of the Notes, the Guarantees and this Indenture may be served. The office of the Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company 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, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes and the Guarantees may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; provided, however, that no such -------- ------- designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. 65 74 Section 10.03. Money for Note Payments To Be Held in Trust. ------------------------------------------- If the Company shall at any time act as its own Paying Agent, the Company will, on or before each due date of the principal of, premium, if any, or interest on any of the Notes, segregate and hold in trust for the benefit of the Holders entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. If the Company is not acting as Paying Agent, the Company will, on or before each due date of the principal of, premium, if any, or interest on any Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Holders entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. If the Company is not acting as Paying Agent, the Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 10.03, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Notes in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders or otherwise disposed of as herein provided; (b) give the Trustee notice of any Default by the Company (or any other obligor upon the Notes) in the making of any payment of principal of, premium, if any, or interest on the Notes; (c) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (d) acknowledge, accept and agree to comply in all respects with the provisions of this Indenture relating to the duties, rights and liabilities of such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. 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, or interest on any Note 66 75 and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company upon receipt of a Company Request therefor, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general 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, shall 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 10.04. Existence. --------- Subject to Article Eight, each of the Company and each Guarantor will do or cause to be done all things necessary to and will cause each of its Restricted Subsidiaries to preserve and keep in full force and effect its corporate existence and the corporate existence of each of the Restricted Subsidiaries, and the rights (charter and statutory), licenses and franchises of the Company and each of the Restricted Subsidiaries; provided, however, that the Company, the Guarantors or their respective Restricted Subsidiaries shall not be required to preserve any such right, license or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, the Guarantors and their respective Restricted Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders; provided, further, however, that the foregoing shall not prohibit a sale, transfer or conveyance of a Subsidiary of the Company or any of its assets or Capital Stock in compliance with the terms of this Indenture. Section 10.05. Payment of Taxes and Other Claims. --------------------------------- The Company and each Guarantor shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed (i) upon the Company or any of its Restricted Subsidiaries or (ii) upon the income, profits or property of the Company or any of its Restricted Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the property of the Company or any of its Restricted Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings properly instituted and diligently conducted. Section 10.06. Insurance. --------- The Company will at all times keep all of its and the Restricted Subsidiaries' properties which are of an insurable nature insured with insurers, believed by the Company in good faith to be financially sound and responsible, against loss or damage to the extent that 67 76 property of similar character is usually so insured by corporations similarly situated and owning like properties (which may include self-insurance, if reasonable and in comparable form to that maintained by companies similarly situated) except where the failure to do so could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), earnings, business affairs or prospects of the Company and the Restricted Subsidiaries, taken as a whole. Section 10.07. Compliance Certificate. ---------------------- (a) The Company will deliver to the Trustee within 120 days after the end of each of the Company's fiscal years a certificate to the Trustee from the chief financial officer (or if the Company does not have a chief financial officer, the Company's principal executive, financial or accounting officer) of the Company as to his or her knowledge of the compliance of the Company, the Guarantors and the Restricted Subsidiaries with all conditions and covenants under this Indenture and any related documents and whether any Default or Event of Default has occurred, such compliance to be determined without regard to any period of grace or requirement of notice provided herein. (b) The Company will deliver to the Trustee as soon as possible, and in any event within 10 Business Days after the Company becomes aware of the occurrence of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company or the applicable Guarantor, as the case may be, is taking or proposes to take with respect thereto. Section 10.08. Reporting Requirements. ---------------------- So long as any of the Notes are outstanding, the Company will file with the Commission, to the extent then permitted by the Commission, the annual reports, quarterly reports and other documents that the Company would have been required to file with the Commission pursuant to Sections 13(a) and 15(d) of the Exchange Act if the Company was subject to such Sections, and the Company will promptly provide to the Trustee copies of such reports and documents; provided, however, that if the Company is for any reason unable to make such filings it will make available, upon request, to any Holder of Notes or prospective purchaser of Notes the information specified in Rule 144A(d)(4) of the Securities Act. Section 10.09. Limitation on Guarantees by Restricted Subsidiaries. --------------------------------------------------- The Company shall not cause or permit any of its Restricted Subsidiaries, directly or indirectly, to guarantee the payment of any Indebtedness of the Company or any Restricted Subsidiary unless such Restricted Subsidiary (A) is a Guarantor or (B) simultaneously executes and delivers a supplemental indenture to this Indenture pursuant to which it will become a Guarantor on the basis provided for in Article Thirteen of this Indenture. Notwithstanding the foregoing, any Note Guarantee by a Restricted Subsidiary shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer, to any person not an Affiliate of the Company, of all of the Capital Stock of such Restricted Subsidiary, or all or substantially all the assets of such Restricted Subsidiary, pursuant to a transaction which is in 68 77 compliance with this Indenture. The Company shall cause each Restricted Subsidiary hereafter formed or acquired, or any Unrestricted Subsidiary that is designated as a Restricted Subsidiary to become a Guarantor by executing and delivering a supplemental indenture providing for the guarantee of payment of the Notes by such Restricted Subsidiary on the basis provided in this Indenture. Section 10.10. Limitation on Incurrence of Indebtedness and -------------------------------------------- Preferred Stock. - --------------- (a) The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, suffer to exist, become directly or indirectly liable with respect to (including as a result of an acquisition, merger or consolidation), extend the maturity of, or otherwise become responsible for, contingently or otherwise (individually and collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness or any Preferred Stock on or after the Issue Date; provided that the Company and its Restricted Subsidiaries may incur Indebtedness or Preferred Stock if: (i) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect to, on a pro forma basis, such incurrence of such Indebtedness or Preferred Stock; and (ii) on the date of the incurrence of such Indebtedness or Preferred Stock (the "Incurrence Date"), the Consolidated Fixed Charge Coverage Ratio for the Reference Period immediately preceding the Incurrence Date, after giving effect, on a pro forma basis, to the incurrence of such Indebtedness or Preferred Stock as of the first day of the Reference Period, would be at least 2.00 to 1. (b) Notwithstanding the foregoing, the Company and its Restricted Subsidiaries, as applicable, may incur each of the following (collectively, "Permitted Indebtedness"): (i) Indebtedness of the Company or any Guarantor under the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $100.0 million, less the amount of all permanent repayments thereof with the Net Cash Proceeds from an Asset Sale as provided in Section 10.13; (ii) Indebtedness under this Indenture, the Notes and the Note Guarantees; (iii) Indebtedness of the Company or any Restricted Subsidiary not otherwise referred to in this paragraph that is outstanding on the Issue Date, except Indebtedness repaid with the proceeds of the issuance of the Notes as described under "Use of Proceeds" in the Offering Memorandum (which is permitted hereunder); (iv) The Company and its Restricted Subsidiaries may incur Purchase Money Indebtedness or Non-Recourse Indebtedness, provided that the amount of such Indebtedness outstanding at any time pursuant to this paragraph (iv) (including any Indebtedness, whether or not Refinancing Indebtedness, issued to 69 78 refinance, replace or refund such Indebtedness) shall not, in the aggregate, exceed $7.5 million; (v) The Company and its Restricted Subsidiaries may incur FF&E Indebtedness, provided, that the amount of such Indebtedness outstanding at any time pursuant to this paragraph (v) (including any Indebtedness, whether or not Refinancing Indebtedness, issued to refinance, replace or refund such Indebtedness) shall not, in the aggregate, exceed at any time the product of (i) $7.5 million, times (ii) the number of Facilities being operated by the Company and its Restricted Subsidiaries; (vi) The Company and its REstricted Subsidiaries may incur Refinancing Indebtedness with respect to any Indebtedness or Preferred Stock, as applicable, described in clause (i) and clauses (iii) through (v) of this covenant (so long as, in the case of Indebtedness used to refinance, replace or retire Indebtedness in clause (iv), such Refinancing Indebtedness is non-recourse as to any assets other than the assets that secured such Indebtedness being refinanced, replaced or retired; and in the case of clause (iii) of this covenant, other than Refinancing Indebtedness with respect to the 10 3/4% Notes); (vii) The Company and its Restricted Subsidiaries may incur Indebtedness under Interest Swap Obligations, provided that in each case the notional principal amount of such Interest Swap Obligation does not exceed the principal amount Indebtedness to which such Interest Swap Obligation relates; (viii) The Company and its Restricted Subsidiaries may incur Indebtedness in the form of (i) letters of credit and (ii) performance bonds and surety bonds, the aggregate principal amount of which shall not at any time exceed $7.5 million in the aggregate outstanding; (ix) The Company may incur Indebtedness to a Restricted Subsidiary, a Restricted Subsidiary may incur Indebtedness to the Company and a Restricted Subsidiary may incur Indebtedness to another Restricted Subsidiary; provided that any such Indebtedness is made pursuant to an intercompany note and is expressly subordinated in right of payment to the payment and performance of the Company's obligations under the Notes or such Restricted Subsidiary's obligations under the Subsidiary Guarantees, as applicable, and, upon an Event of Default, such Indebtedness shall not be due and payable until such Event of Default is cured, waived or rescinded; provided, further, that any disposition, pledge or transfer of any such Indebtedness to a person (other than a disposition, pledge or transfer to a Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as applicable, not permitted by this clause (ix); and 70 79 (x) The Company and its Restricted Subsidiaries may incur Indebtedness in an aggregate principal amount outstanding at any time of up to $25 million in the aggregate. Section 10.11. Limitation on Restricted Payments. --------------------------------- (a) The Company shall not, and shall not cause or permit any of the Restricted Subsidiaries, to, directly or indirectly, make any Restricted Payment if, immediately prior to such proposed Restricted Payment or after giving effect to such proposed Restricted Payment on a pro forma basis, (1) a Default or an Event of Default shall have occurred and be continuing; or (2) the Company would not be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test contained in Section 10.10; or (3) the aggregate amount of all Restricted Payments made by the Company and its Restricted Subsidiaries, including after giving pro forma effect to such proposed Restricted Payment (including Restricted Payments described in clause (a) of the following paragraph) from and after the Issue Date, would exceed the sum of (a) 50% of the amount by which the aggregate Adjusted Consolidated Net Income for the period (taken as one accounting period) commencing on the first day of the fiscal quarter that includes the Issue Date, to and including the last day of the full fiscal quarter ended immediately prior to the date of each such calculation, exceeds permitted distributions of Tax Amounts made with respect to such period (or, in the event Adjusted Consolidated Net Income less permitted distributions of Tax Amounts made with respect to such period is a deficit, then minus 100% of such deficit) plus (b) 50% of all cash dividends or any other cash payments which represent distributions of net income (determined in accordance with GAAP) paid by an Unrestricted Subsidiary or any other person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest to the Company or a Restricted Subsidiary to the extent the same are not otherwise included in Adjusted Consolidated Net Income or represent a return of capital, plus (c) 100% of the aggregate Net Cash Proceeds received by the Company or any Restricted Subsidiary as a capital contribution (other than capital contributions directly or indirectly made from the Company or any Restricted Subsidiary and other than capital contributions made from the proceeds of loans or advances described in clause (g) of the following paragraph) or from the sale of Qualified Capital Stock after the Issue Date plus (d) in the case of the disposition or repayment of any Investment in an Unrestricted Subsidiary or any other person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest constituting a Restricted Payment made after the Issue Date, an amount equal to the lesser of the return of capital with respect to such Investment and the initial amount of such Investment which was treated as a Restricted Payment, in either case, less the cost of the disposition or repayment of such Investment. (b) The restrictions set forth in paragraph (a), however, will not prohibit (a) the payment of any dividend or redemption payment within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of the Indenture; (b) a Qualified Exchange; 71 80 (c) a Required Regulatory Redemption; (d) 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, distributions of Tax Amounts, provided, however, that prior to any distribution of Tax Amounts, a knowledgeable and duly authorized officer of the Company certifies, and counsel reasonably acceptable to the Trustee opines, to the Trustee that the Company qualifies as an S Corporation for Federal income tax purposes and for the states in respect of which such distributions are being made (or so qualified for the period or periods for which such Tax Amounts are computed); (e) for so long as no Default or Event of Default shall have occurred and be continuing, Restricted Payments in an amount not to exceed $10 million in the aggregate to pay for the redemption of Capital Stock of the Company held by its directors or officers, or by its stockholders, as of the Issue Date; (f) for so long as no Default or Event of Default shall have occurred and be continuing, Restricted Payments in the aggregate amount of up to $10 million, which amount shall increase by $10 million on each of the first four anniversaries of the Issue Date, provided that the Consolidated Fixed Charge Coverage Ratio for the Reference Period immediately preceding the date of making any such Restricted Payment permitted solely by this clause (f) would be at least 3.00 to 1 on a pro forma basis, as if such Restricted Payment were made on the first day of the Reference Period; (g) for so long as no Default or Event of Default shall have occurred and be continuing, loans or advances to officers, directors, employees or stockholders of the Company or any Restricted Subsidiary in an aggregate amount not to exceed $7.5 million at any time outstanding, provided that (A) such loan or advance is used by the officer, director, employee or stockholder receiving such loan or advance to purchase Capital Stock of the Company or any Restricted Subsidiary, and (B) the repayment of such loan or advance is secured by a first priority pledge of the Capital Stock so purchased; and (h) for so long as no Default or Event of Default shall have occurred and be continuing, Permitted Investments. Section 10.12. Limitation on Transactions with Affiliates. ------------------------------------------ The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries, on or after the Issue Date, to enter into any transaction, including any contract, arrangement, agreement, loan, advance, guarantee or understanding and including any series of related transactions, with or for the benefit of any Affiliate (an "Affiliate Transaction") unless such Affiliate Transaction or series of related Affiliate Transactions are made in good faith and (a) the terms of such Affiliate Transaction or series of related Affiliate Transactions are fair and reasonable to the Company or such Restricted Subsidiary, as applicable, and are at least as 72 81 favorable to the Company or such Restricted Subsidiary, as applicable, as the terms that could be obtained by the Company or such Restricted Subsidiary, as applicable, in a comparable transaction made on an arms' length basis between unaffiliated parties, (b) that with respect to any Affiliate Transaction (including any series of related Affiliate Transactions) involving consideration to either party in excess of $2.0 million, the Company shall have delivered to the Trustee an Officer's Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with clause (a) above, and (c) with respect to any Affiliate Transaction (including any series of related Affiliate Transactions) involving consideration to either party in excess of $5.0 million, either (A) such Affiliate Transaction or series of Affiliate Transactions has been approved by a majority of the disinterested directors of the Company or (B) the Company delivers to the Trustee 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. Notwithstanding the foregoing, any transactions solely between or among the Company and its Restricted Subsidiaries, between or among the Restricted Subsidiaries or between or among the Company and its Unrestricted Subsidiaries shall not be deemed to be Affiliate Transactions for purposes of this Section 10.12 (as long as in the case of Unrestricted Subsidiaries, the Capital Stock which is not owned by any of the Company, a Restricted Subsidiary or an Unrestricted Subsidiary, is not owned by an Affiliate of the Company or any of its Restricted Subsidiaries). Section 10.13. Limitation on Sale of Assets and Subsidiary Stock; -------------------------------------------------- Event of Loss. - ------------- The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries, directly or indirectly, to, make any Asset Sale unless (a) 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; (b) the Board of Directors of the Company determines in good faith that the Company or such Restricted Subsidiary, as applicable, receives fair market value as consideration for such Asset Sale, as evidenced by an Officers' Certificate delivered to the Trustee; and (c) at least 75% of the consideration for such conveyance, sale, lease, transfer or other disposition consists of U.S. Legal Tender, Cash Equivalents or securities of a company with a market capitalization of at least $500 million, which securities are traded on a national securities exchange and are of a class and series of securities with a minimum public float of $100 million. Within 360 days following an Asset Sale, the Company and its Restricted Subsidiaries must apply (or enter into a binding contractual commitment to apply) the Net Cash Proceeds therefrom (a) first, to the extent the Company or a Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness), to permanently repay Senior Indebtedness (for purposes of this clause, a repayment of any amount owing under a revolving credit facility shall be deemed a permanent repayment to the extent the amount represented by such repayment is not drawn upon by the Company for a period of six months after such repayment); (b) second, to the extent the Company or a Restricted Subsidiary elects, to reinvest in additional assets that are part of a Related Business of the Company or a Restricted Subsidiary; and (c) third, to the 73 82 extent the Net Cash Proceeds, after application of (a) and (b), exceed $10 million (the "Excess Proceeds"), the Company shall make an offer (the "Asset Sale Offer") to all Holders to purchase the Notes in the amount of the Excess Proceeds at 100% of the principal amount thereof, plus accrued and unpaid interest to the date of payment (the "Asset Sale Offer Price"). Each Asset Sale Offer shall remain open for twenty (20) Business Days following its commencement and no longer, except to the extent that a longer period is expressly required by applicable law (the "Asset Sale Offer Period"). Upon expiration of the Asset Sale Offer Period, the Company shall apply an amount equal to the Excess Proceeds received from an Asset Sale included in such Asset Sale Offer to the purchase of all Notes tendered (on a pro rata basis if the Excess Proceeds are insufficient to purchase all Notes so tendered) at the Asset Sale Offer Price. Notice of an Asset Sale Offer shall be prepared and mailed by the Company with a copy to the Trustee (or, at the Company's written request, by the Trustee in the name and at the expense of the Company) not later than the 20th business day after the Company is obligated to make an Asset Sale Offer (in accordance with the immediately preceding paragraph) to each Holder at such Holder's registered address, stating: (i) that the Company is offering to purchase the maximum principal amount of Notes that may be purchased with the Excess Proceeds (as provided in the immediately preceding paragraph), at an offer price in U. S. Legal Tender in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of the purchase (the "Asset Sale Offer Purchase Date"), which shall be a Business Day, specified in such notice, that is not earlier than 20 days or later than 60 days from the date such notice is mailed; (ii) the amount of accrued and unpaid interest, if any, as of the Asset Sale Offer Purchase Date; (iii) that any Note not tendered will continue to accrue interest in accordance with the terms thereof; (iv) that, unless the Company defaults in the payment of the Asset Sale Offer Price, any Notes accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer Purchase Date; (v) that Holders electing to have Notes purchased pursuant to an Asset Sale Offer will be required to surrender their Notes to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the third Business Day prior to the Asset Sale Offer Purchase Date with the "Option of Holder to Elect Purchase" included with the Asset Sale Offer completed and must complete any form letter of transmittal proposed by the Company (which letter must be completed correctly by such Holder) and which is acceptable to the Trustee and the Paying Agent; 74 83 (vi) that Holders of Notes will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the third Business Day prior to the Asset Sale Offer Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes the Holder delivered for purchase, the Note certificate number (if any) and a statement that such Holder is withdrawing its election to have such Notes purchased; (vii) that Holders whose Notes are purchased only in part will be issued Notes equal in principal amount to the unpurchased portion of the Notes surrendered; and (viii) the instructions that Holders must follow in order to tender their Notes. The notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note shall not affect the validity of the proceedings for the Asset Sale Offer. With respect to any Asset Sale Offer effected pursuant to this Section 10.13, to the extent the aggregate principal amount of Notes tendered pursuant to such Asset Sale Offer exceeds the Excess Proceeds, such Notes shall be purchased pro rata based on the aggregate principal amount of such Notes tendered by each Holder. To the extent the Excess Proceeds exceed the aggregate amount of Notes tendered by the Holders pursuant to such Asset Sale Offer, the Company may retain and utilize any portion of the Excess Proceeds not applied to repurchase the Notes for any purpose consistent with the other terms of this Indenture. Upon an Event of Loss relating to property with a fair market value in excess of $5 million, the Company or any Guarantor shall make an Asset Sale Offer to repurchase at the Asset Sale Offer Price, plus accrued and unpaid interest, that principal amount of Notes equal to the Excess Proceeds of such Event of Loss (the "Event of Loss Amount"), unless the Company or the applicable Guarantor applies (or enters into a binding contractual commitment to apply) the Event of Loss Amount within 365 days after such Event of Loss, in accordance with this Section 10.13. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other applicable securities laws or regulations and any applicable requirements of any securities exchange on which the Notes are listed, and any violation of the provisions of this Indenture relating to such Asset Sale Offer occurring as a result of such compliance shall not be deemed a Default. Section 10.14. Change of Control. ----------------- Upon the occurrence of a Change of Control, each Holder of Notes will have the right, at such Holder's option, pursuant to an irrevocable, unconditional offer by the Company (a "Change of Control Offer") to require the Company to repurchase all or any portion of such Holder's Notes (provided that the principal amount of such Notes at maturity must be $1,000 or an integral multiple thereof) on a date (the "Change of Control Purchase Date") that is no later 75 84 than 30 Business Days after the occurrence of such Change of Control, at a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to and including the Change of Control Purchase Date. The Change of Control Offer must commence within 10 Business Days following a Change of Control and must remain open for a period of at least 20 Business Days following its commencement, except to the extent that a longer period is expressly required by applicable law (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, the Company will purchase all Notes tendered in accordance with the terms of the Indenture in response to the Change of Control Offer. Notice of a Change in Control Offer shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company. The notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note shall not affect the validity of the proceedings for the Change in Control Offer. The notice of the Change of Control Offer shall state: (a) that the Change of Control has occurred and that such Holder has the right to require the Company to purchase all or a portion (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, which shall be a Business Day, specified in such notice, that is not more than 30 Business Days after the Change of Control Date (the "Change of Control Purchase Date"); (b) the amount of accrued and unpaid interest, if any, as of the Change of Control Purchase Date; (c) that any Note not tendered for payment will continue to accrue interest in accordance with the terms thereof; (d) that, unless the Company defaults in the payment of the Change of Control Purchase Price for the Notes payable pursuant to the Change of Control Offer, any Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date; (e) that Holders electing to have Notes purchased pursuant to a Change of Control Offer will be required to surrender their Notes to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the third Business Day prior to the Change of Control Purchase Date with the "Option of Holder to Elect Purchase" included in the change of Control Offer completed and must complete any 76 85 form letter of transmittal proposed by the Company and be completed correctly by such Holder and be acceptable to the Trustee and the Paying Agent; (f) that Holders of Notes will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the third Business Day prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes the Holder delivered for purchase, the Note certificate number (if any) and a statement that such Holder is withdrawing its election to have such Notes purchased; (g) that Holders whose Notes are purchased only in part will be issued Notes equal in principal amount to the unpurchased portion of the Notes surrendered; and (h) the instructions that Holders must follow in order to tender their Notes. On or before the Change of Control Purchase Date, (i) the Company will accept for payment Notes or portions thereof properly tendered to the Company pursuant to the Change of Control Offer; (ii) the Company will deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Change of Control Purchase Price (including accrued and unpaid interest) of all Notes so tendered; and (iii) the Company will deliver to the Trustee Notes so accepted together with an Officers' Certificate listing the Notes or portions thereof being purchased by the Company. The joint and several obligations of each of the Guarantors upon a Change of Control extend both to the payment of principal and interest on the Notes and to the joint and several obligations of each of the Guarantors to honor the Change of Control repurchase obligations of the Company in the event that a Change of Control occurs and the Company is unable to pay in full the Change of Control Purchase Price. The Paying Agent will promptly mail to the Holders of Notes so accepted, payment in an amount equal to the Change of Control Purchase Price (including accrued and unpaid interest), and the Trustee will promptly authenticate and mail or deliver to such Holders a new Note equal to the principal amount of any unpurchased portion of the Note surrendered. Any Notes not so accepted will be promptly mailed or delivered by the Company to the Holder thereof. On and after a Change of Control Purchase Date, interest will cease to accrue on the Notes or portions thereof accepted for payment unless the Company defaults in the payment of the purchase price therefor. The Company will publicly announce the results of the Change of Control Offer as soon as practicable after the Change of Control Purchase Date. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other applicable securities laws or regulations and any applicable requirements of any securities exchange on which the Notes are listed, in connection with the repurchase of Notes pursuant to a Change of Control Offer, and any violation of the provisions of this Indenture relating to such Change of Control Offer occurring as a result of such compliance shall not be deemed a Default. 77 86 Section 10.15. Limitation on Liens. ------------------- The Company shall not, and shall not cause or permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien in or on any right, title or interest to any of their respective properties or assets, now owned or hereafter acquired, securing any obligation unless the Notes are secured on an equal and ratable basis with such Lien, other than Permitted Liens. Section 10.16. Limitation on Dividends and Other Payment Restrictions ------------------------------------------------------ Affecting Restricted Subsidiaries. - --------------------------------- The Company shall not, and shall not cause or permit any of the Restricted Subsidiaries to, directly or indirectly, create, assume or suffer to exist any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make other distributions on its Capital Stock or pay Indebtedness owed to the Company or any other Restricted Subsidiary, (ii) make any loans or advances to the Company or any other Restricted Subsidiary or (iii) transfer any of its assets to the Company or any other Restricted Subsidiary, except (a) restrictions imposed by the Notes or the Indenture, or restrictions imposed by other Senior Indebtedness which are substantially the same as (and apply only to the same persons and property as) such restrictions; (b) restrictions imposed by applicable Gaming Law; and (c) restrictions under any Acquired Indebtedness not incurred in violation of the Indenture or any agreement relating to any property, asset, or business acquired by the Company or any of the Restricted Subsidiaries, which restrictions existed at the time of such acquisition, were not incurred 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. Notwithstanding the foregoing, neither (a) reasonable and customary provisions restricting subletting or assignment of any lease entered into in the ordinary course of business, consistent with industry practice; nor (b) Liens on assets securing Senior Indebtedness not incurred in violation of the Indenture, shall in and of themselves be considered a restriction on the ability of the applicable Restricted Subsidiary to transfer such property or assets, as the case may be. Section 10.17. Restrictions on Sale of Capital Stock of Restricted --------------------------------------------------- Subsidiaries. - ------------ The Company shall not sell, and shall not cause or permit any of the Restricted Subsidiaries to transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any person (other than the Company or a Guarantor), unless (a) (i) such transfer, conveyance, sale, lease or other disposition is of all of the Capital Stock of such Restricted Subsidiary or (ii) after giving effect to such transfer, conveyance, sale, lease or other disposition, the Company or the applicable Guarantor remains the owner of a majority of the Capital Stock of such Restricted Subsidiary and (b) the Net Cash Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 10.13. 78 87 Section 10.18. Limitation on Designations of Unrestricted ------------------------------------------ Subsidiaries. - ------------ The Company may designate after the Issue Date any Subsidiary of the Company (other than a Guarantor in existence on the Issue Date) as an "Unrestricted Subsidiary" under this Indenture (a "Designation") only if, at the time of Designation: (i) no default shall have occurred and be continuing at the time of or after giving effect to such Designation; (ii) the Company would be permitted to make an Investment at the time of Designation (assuming the effectiveness of such Designation) in an amount (the "Designation Amount") equal to the amount of the Company's Investment in such Subsidiary on such date; (iii) neither the Company nor any Restricted Subsidiary has any Indebtedness with respect to which such Unrestricted Subsidiary is also an obligor or guarantor; and (iv) the Company would be permitted under this Indenture to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 10.10 at the time of such Designation (assuming the effectiveness of such Designation). In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to Section 10.11 for all purposes of this Indenture in the Designation Amount. The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if: (i) no Default shall have occurred and be continuing at the time of and after giving effect to such Revocation (unless the Revocation cures such default); and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred by the Company or its Restricted Subsidiaries for all purposes of this Indenture. All Designations and Revocations must be evidenced by Board Resolutions of the Company delivered to the Trustee and an Officer's Certificate certifying compliance with the foregoing provisions. 79 88 Section 10.19. Limitation on Other Senior Subordinated Indebtedness. ---------------------------------------------------- The Company shall not, and shall not cause or permit any of the Restricted Subsidiaries to, create, incur, assume, guarantee or in any other manner become liable with respect to any Indebtedness (other than the Notes and the Guarantees) that is subordinate in right of payment to any Senior Indebtedness of the Company or of such Guarantor, as applicable, unless such Indebtedness is either (a) pari passu in right of payment with the Notes or the Guarantee, as applicable, or (b) subordinate in right of payment to the Notes or the Guarantee, as applicable, in the same manner and at least to the same extent as the Notes are subordinated to Senior Indebtedness or as such Guarantee is subordinated to Senior Indebtedness of such Guarantor, as applicable. Section 10.20. Limitation on Lines of Business. ------------------------------- The Company shall not, and shall not cause or permit any of the Restricted Subsidiaries to, directly or indirectly, engage in any line or lines of business activity other than in a Related Business. Section 10.21. Limitation on Status as Investment Company. ------------------------------------------ Neither the Company nor any Guarantor may become an "investment company" (as such term is defined in the Investment Company Act of 1940, as amended) or otherwise become subject to regulation under the Investment Company Act of 1940, as amended. As used in this section, the phrase "directly or indirectly" shall not be construed so as to prohibit an Unrestricted Subsidiary from undertaking the otherwise prohibited action nor shall such phrase be construed to prohibit the stockholder of an Unrestricted Subsidiary from voting its stock in favor of such action. ARTICLE ELEVEN REDEMPTION OF NOTES Section 11.01. Optional and Special Redemption. ------------------------------- Optional Redemption. The Notes will be redeemable at the option of ------------------- the Company, in whole or in part, at any time on or after July 1, 2002, at the redemption prices (expressed as percentages of principal amount) 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: Redemption Year Price ---- ----------- 2002........................ 104.063% 2003........................ 102.708% 2004........................ 101.354% 2005 and thereafter......... 100.000% 80 89 Optional Redemption upon Equity Offering. On or prior to July 1, 2001, ---------------------------------------- the Company may, at its option, use the Net Proceeds of an Equity Offering to redeem up to 35% of the originally issued aggregate principal amount of the Notes, at a redemption price in cash equal to 108 1/8% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; provided, however, that not less than $97.5 million in aggregate principal amount of Notes is outstanding following such redemption. Notice of any such redemption must be given not later than 60 days after the consummation of the Equity Offering. As used in the preceding paragraph, an "Equity Offering" means a public sale of common stock of the Company in a transaction registered with the SEC. Section 11.02. Required Regulatory Redemption. ------------------------------ The Notes will be redeemable, in whole or in part, at any time, at 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, (i) pursuant to, and in accordance with, any order of any Governmental Authority or (ii) to the extent necessary in the reasonable, good faith judgment of the Board of Directors of the Company to prevent the loss, failure to obtain or material impairment of, or to secure the reinstatement of, any Gaming License, which if lost, impaired, not obtained or not reinstated would reasonably be expected to have a material adverse effect on the Company and its Restricted Subsidiaries, considered as a whole, or would restrict the ability of the Company or any of its Restricted Subsidiaries to conduct business in any Gaming Jurisdiction, in the case of each of (i) and (ii) where such redemption or acquisition is required because the Holder or beneficial owner of such Note is required to be found suitable, or otherwise qualify, under any Gaming Laws and is not found suitable or so qualified (a "Required Regulatory Redemption"). If a Holder or a beneficial owner of a Note is required by any Gaming Authority to be found suitable, the Holder shall apply for a finding of suitability within 30 days after a Gaming Authority requests or sooner if so required by such Gaming Authority. The applicant for a finding of suitability must pay all costs of the investigation for such finding of suitability. If a Holder or beneficial owner is required to be found suitable and is not found suitable by a Gaming Authority, the Holder shall, to the extent required by applicable law, dispose of his Notes within 30 days or within that time prescribed by a Gaming Authority, whichever is earlier. Section 11.03. Applicability of Article. ------------------------ Redemption of Notes at the election of the Company as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. 81 90 Section 11.04. Election To Redeem; Notice to Trustee. ------------------------------------- The election of the Company to redeem any Notes pursuant to Section 11.01(a) shall be evidenced by a Board Resolution of the Company and an Officers' Certificate. In case of any redemption at the election of the Company, the Company shall, at least 20 days prior to the Redemption Date fixed by the Company (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Notes to be redeemed. Section 11.05. Selection of Notes To Be Redeemed. --------------------------------- In the event that less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes or portions thereof for redemption 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 listed on a national securities exchange, on a pro rata basis, by lot or in such other manner as the Trustee deems appropriate and fair; provided, however, that any such redemption made with the Net Proceeds of an Equity Offering shall be made on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of the DTC). The Notes may be redeemed in part in multiples of $1,000 only. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. On and after the Redemption Date, interest will cease to accrue on Notes or portions thereof called for redemption so long as the Company has deposited with the paying agent for the Notes funds in satisfaction of the applicable Redemption Price, plus accrued and unpaid interest, pursuant to this Indenture. Section 11.06. Notice of Redemption. -------------------- Notice of any optional or mandatory redemption shall be mailed by first-class mail, postage prepaid, mailed at least 30 but not more than 60 days before the Redemption Date, to each Holder of Notes to be redeemed at its registered address. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price and the amount of accrued and unpaid interest to be paid; (c) if fewer than all outstanding Notes are to be redeemed, the identification of the particular Notes to be redeemed; (d) in the case of a Note to be redeemed in part, 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 the aggregate principal amount equal to the unredeemed portion thereof will be issued; 82 91 (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (f) that, on the Redemption Date, the Redemption Price will become due and payable upon each such Note or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (g) the place or places where such Notes are to be surrendered for payment of the Redemption Price; (h) the CUSIP number, if any, relating to such Notes; and (i) the paragraph of the Notes pursuant to which the Notes are being redeemed. Notice of redemption of Notes to be redeemed shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company. The notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Section 11.07. Deposit of Redemption Price. --------------------------- On or prior to 10:00 a.m., New York City time, on each Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money in same day funds sufficient to pay the Redemption Price of, and accrued interest on, all the Notes or portions thereof which are to be redeemed on that date. Section 11.08. Notes Payable on Redemption Date. -------------------------------- Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more predecessor Notes, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 3.06. 83 92 On and after any Redemption Date, if money sufficient to pay the Redemption Price of and accrued interest on Notes called for redemption shall have been made available in accordance with Section 11.06, the Notes called for redemption will cease to accrue interest and the only right of the Holders of such Notes will be to receive payment of the Redemption Price of and subject to the provision in the preceding paragraph, accrued and unpaid interest on such Notes to the Redemption Date. If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium, if any, shall, until paid, bear interest from the Redemption Date at the rate then borne by such Note. Section 11.09. Notes Redeemed or Purchased in Part. ----------------------------------- Any Note which is to be redeemed or purchased only in part shall be surrendered to the Paying Agent at the office or agency maintained for such purpose pursuant to Section 10.02 (with, if the Company, the Note Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to, the Company, the Note Registrar or the Trustee duly executed by the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal of the Note so surrendered that is not redeemed or purchased. ARTICLE TWELVE SATISFACTION AND DISCHARGE Section 12.01. Satisfaction and Discharge of Indenture. --------------------------------------- This Indenture shall be discharged and cease to be of further effect (except as to surviving rights or registration of transfer or exchange of Notes herein expressly provided for) as to all outstanding Notes, and the Trustee, on written demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all the 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 the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (ii) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company or any Guarantor 84 93 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 on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (b) the Company or any Guarantor has paid all other sums payable under this Indenture by the Company and the Guarantors; and (c) the Company and each of the Guarantors have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.07 and, if money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this Section 12.01 the obligations of the Trustee under Section 12.02, shall survive. Section 12.02. Application of Trust Money. -------------------------- Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the persons entitled thereto, of the principal of, premium, if any, and interest on the Notes for whose payment such money has been deposited with the Trustee. ARTICLE THIRTEEN GUARANTEE OF NOTES Section 13.01. Guarantee. --------- Subject to the provisions of this Article Thirteen, each Guarantor, if any, hereby jointly and severally and fully and unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of (i) the validity and enforceability of this Indenture, the Notes or the obligations of the Company or any other Guarantors to the Holders or the Trustee hereunder or thereunder or (ii) the absence of any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or default of a Guarantor, that: (a) the principal of, premium, if any, and interest on the Notes will be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Notes and all other 85 94 obligations of the Company or the Guarantors to the Holders or the Trustee hereunder or thereunder (including fees, expenses or other) and all other Obligations on the Notes will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations with respect to the Notes, 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 or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders, for whatever reason, each Guarantor will be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under this Guarantee, and shall entitle the Holders to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the obligations of the Company. Each of the Guarantors, if any, hereby agrees that its 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 provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each of the Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee will not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and this Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject to this Article Thirteen, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Five hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, 86 95 pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes, whether as a "voidable preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. No stockholder, officer, director, employer or incorporator, past, present or future, or any Guarantor, as such, shall have any personal liability under this Guarantee by reason of his, her or its status as such stockholder, officer, director, employer or incorporator. The Guarantors shall have the right to seek contribution from any non- paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guarantee. Notwithstanding any of the foregoing, each Guarantor's liability under this Section 13.01 shall be limited to the maximum amount that would not result in such Guarantor's Guarantee under this Section 13.01 constituting a fraudulent conveyance or fraudulent transfer under applicable law. Section 13.02. Execution and Delivery of Guarantee. ----------------------------------- To further evidence the Guarantee set forth in Section 13.01, each Guarantor hereby agrees that a notation of such Guarantee, substantially in the form included in Exhibit E hereto, shall be endorsed on each Note authenticated and delivered by the Trustee after such Guarantee is executed and executed by either manual or facsimile signature of an Officer of each Guarantor. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Each of the Guarantors hereby agrees that its Guarantee set forth in Section 13.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Note no longer holds that office at the time the Trustee authenticates such Note or at any time thereafter, such Guarantor's Guarantee of such Note shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of the Guarantor. Section 13.03. Additional Guarantors. --------------------- The Company shall cause each Restricted Subsidiary formed or acquired after the Issue Date or any Unrestricted Subsidiary that is designated a Restricted Subsidiary after the Issue Date to (i) execute and deliver to the Trustee a supplemental indenture in a form 87 96 satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes on the terms set forth in this Indenture and (ii) deliver to the Trustee an Opinion of Counsel, subject to customary assumptions and exclusions, stating that such supplemental indenture has been duly executed and delivered by such Restricted Subsidiary. Section 13.04. Guarantee Obligations Subordinated to Guarantor Senior ------------------------------------------------------ Indebtedness. - ------------ Each Guarantor covenants and agrees, and each Holder of a Note, by its acceptance thereof, likewise covenants and agrees, that, in accordance with the terms of Articles Thirteen and Fourteen, all payments pursuant to the Guarantee made by or on behalf of such Guarantor are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all amounts payable under all existing and future Guarantor Senior Indebtedness and Senior Indebtedness, including such Guarantor's Obligations under the Credit Agreement. This Section 13.04 and Article Fourteen shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold Guarantor Senior Indebtedness or any Senior Indebtedness; and such provisions are made for the benefit of the holders of Guarantor Senior Indebtedness and Senior Indebtedness; and such holders (to such extent) are made obligees hereunder and they or each of them may enforce such provisions. Section 13.05. Release of a Guarantor. ---------------------- (a) In the event of (i) a sale or other disposition of all or substantially all of the assets of any Guarantor or the sale of a Guarantor by way of merger, consolidation or otherwise, (ii) a Subsidiary becoming an Unrestricted Subsidiary pursuant to the terms of this Indenture or (iii) a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor or the corporation acquiring the property, as applicable, shall be released and relieved of any obligations under its guarantee, provided that the Company complies with the provisions of the covenant described in Section 10.13. Upon the release of any Guarantor from its Guarantee pursuant to the provisions of this Indenture, each other Guarantor not so released shall remain liable for the full amount of principal of, and interest on, the Notes as and to the extent provided in this Indenture. (b) The Trustee shall deliver an appropriate instrument evidencing the release of a Guarantor upon receipt of a request of the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section 13.05. Any Guarantor not so released or the entity surviving such Guarantor, as applicable, will remain or be liable under its Guarantee as provided in this Article Thirteen. 88 97 The Trustee shall execute any documents reasonably requested by the Company or a Guarantor in order to evidence the release of such Guarantor from its obligations under its Guarantee endorsed on the Notes and under this Article Thirteen. Except as set forth in Articles Eight and Ten and this Section 13.05, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 13.06 Waiver of Subrogation. --------------------- Each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under this Guarantee and this Indenture until all obligations under the Notes have been paid in full, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder of Notes against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Notes shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Notes, and shall, subject to the subordination provisions of this Article Thirteen and to Article Fourteen, forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Notes, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 13.06 is knowingly made in contemplation of such benefits. ARTICLE FOURTEEN SUBORDINATION OF NOTES AND GUARANTEES Section 14.01 Notes Subordinate to Senior Indebtedness; Guarantee --------------------------------------------------- Obligations Subordinated to Guarantor Senior Indebtedness. - --------------------------------------------------------- The Company and each Guarantor covenants and agrees, and each Holder of a Note, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article Fourteen, the Indebtedness represented by the Notes and the Guarantees are hereby expressly made subordinate and subject in right of payment as provided in this Article to the prior payment in full of all Senior Indebtedness and Guarantor Senior Indebtedness, as applicable (including the indebtedness under the Credit 89 98 Agreement). This Indenture shall not be secured by a Lien on any assets of the Company or the Guarantors, including, without limitation, the Company's Indiana and Illinois gaming licenses. This Article Fourteen shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold Senior Indebtedness or Guarantor Senior Indebtedness; and such provisions are made for the benefit of the holders of Senior Indebtedness and Guarantor Senior Indebtedness; and such holders are made obligees hereunder and they or each of them individually or through their representative may enforce such provisions. Section 14.02. Payment Over of Proceeds upon Dissolution, etc. ---------------------------------------------- In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relating to the Company or any Guarantor, or (b) any liquidation, dissolution or other winding-up of the Company or such Guarantor, as applicable, whether voluntary or involuntary or any assignment for the benefit of creditors or other marshalling of assets or liabilities of the Company or such Guarantor, as applicable, and whether or not involving insolvency or bankruptcy, then and in any such event: (1) the holders of all Senior Indebtedness or all Guarantor Senior Indebtedness of such Guarantor, as applicable, shall be entitled to receive payment in full of all Obligations due in respect of such Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, before the Holders are entitled to receive any payment or distribution of any kind or character (except that Holders of Notes may receive Capital Stock or any debt securities that are subordinated to Senior Indebtedness to at least the same extent as the Notes or the Guarantees, as applicable) on account of the Notes or the Guarantees, as applicable, and until all Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, is paid in full, any distribution to which Holders of the Notes or the Guarantees, as applicable, would be entitled but for this provision shall be made to holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, as their interests may appear, except that Holders of the Notes or the Guarantees, as applicable, may receive Capital Stock or any debt securities that are subordinated to Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, to at least the same extent as the Notes or the Guarantees, as applicable; and (2) any payment or distribution of assets of the Company or of such Guarantor, as applicable, of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness or Guarantor 90 99 Senior Indebtedness, as applicable, may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness or Guarantor Senior Indebtedness, as applicable; and (3) in the event that, notwithstanding the foregoing provisions of this Section 14.02, the Trustee or the Holder of any Note or Guarantee, as applicable, shall have received any payment or distribution of properties or assets of the Company or any Guarantor, as applicable, of any kind or character, whether in cash, property or securities, by set off or otherwise in respect of the Notes or the Guarantees, as applicable, before all Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, is paid or provided for in full, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other person making payment or distribution of assets of the Company or such Guarantor, as applicable, for application to the payment of all Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, remaining unpaid, to the extent necessary to pay all Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable. The consolidation of the Company with, or the merger of the Company with or into, another person or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another person upon the terms and conditions set forth in Article Eight hereof shall not be deemed a dissolution, winding-up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Article if the person formed by such consolidation or the surviving entity of such merger or the person which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in such Article Eight. Section 14.03 Suspension of Payment When Designated Senior -------------------------------------------- Indebtedness is in Default; Suspension of Guarantee Obligations When Guarantor - ------------------------------------------------------------------------------ Senior Indebtedness in Default. - ------------------------------ (a) Unless Section 14.02 shall be applicable, during the continuance of any default in the payment of any Designated Senior Indebtedness or Guarantor Senior Indebtedness pursuant to which the maturity thereof may immediately be accelerated beyond any applicable grace period, no payment or distribution of any assets of the Company or of the applicable Guarantor, as applicable, of any kind or character (except that Holders of Notes may receive Capital Stock or any debt securities that are subordinated to Senior Indebtedness and Guarantor Senior Indebtedness to at least the same extent as the Notes) shall be made on 91 100 account of the principal of, premium, if any, or interest on, or the purchase, redemption or other acquisition of, the Notes or such Guarantee, as applicable, unless and until such default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, shall have been discharged or paid in full. (b) Unless Section 14.02 shall be applicable, during the continuance of any Non-payment Default and after receipt by the Trustee from the representatives of any holders of Designated Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, of a written notice of such Non-payment Default, no payment or distribution of any assets of the Company or the applicable Guarantor, as applicable, of any kind or character (except that Holders of Notes may receive Capital Stock or any debt securities that are subordinated to Senior Indebtedness and Guarantor Senior Indebtedness to at least the same extent as the Notes) may be made by the Company or such Guarantor, as applicable, on account of the principal of, premium, if any, or interest on, or the purchase, redemption or other acquisition of, the Notes or the applicable Guarantee, as applicable, for a period (the "Payment Blockage Period") commencing upon the receipt of written notice of a Non-payment Default by the Trustee from the representatives of holders of Designated Senior Indebtedness or such Guarantor Senior Indebtedness, as applicable, specifying an election to effect a Payment Blockage Period and will end on the earlier to occur of the following events: (i) 179 days shall have elapsed since the receipt of such notice of a Non-payment Default (provided that such Designated Senior Indebtedness or such Guarantor Senior Indebtedness, as applicable, shall not theretofore have been accelerated), (ii) such default is cured or waived or ceases to exist or such Designated Senior Indebtedness or such Guarantor Senior Indebtedness, as applicable, is discharged or (iii) such Payment Blockage Period shall have been terminated by written notice to the Company or the Trustee from the representatives of holders of Designated Senior Indebtedness or such Guarantor Senior Indebtedness, as applicable, initiating such Payment Blockage Period. After the end of any Payment Blockage Period, the Company shall promptly resume making any and all required payments in respect of the Notes, including any missed payments, or such Guarantor shall resume making any and all required payments in respect of its obligations under the Guarantee, as applicable. Notwithstanding anything in the subordination provisions of this Indenture or the Notes to the contrary, (x) in no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt by the Trustee of the notice initiating such Payment Blockage Period, (y) there shall be a period of at least 186 consecutive days in each 365-day period when no Payment Blockage Period is in effect and (z) not more than one Payment Blockage Period with respect to the Notes or any Guarantee may be commenced within any period of 365 consecutive days. A Non-payment Default with respect to Designated Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, initiating such Payment Blockage Period cannot be made the basis for the commencement of a second Payment Blockage Period, whether or not within a period of 365 consecutive days, unless such default has been cured or waived for a period of not less than 90 consecutive days and subsequently recurs. 92 101 (c) In the event that, notwithstanding the foregoing, the Trustee or the Holder of any Note shall have received any payment or distribution prohibited by the foregoing provisions of this Section 14.03, then and in such event such payment or distribution shall be paid over and delivered forthwith to representatives of the holders of Senior Indebtedness or such Guarantor Senior Indebtedness, as applicable, as a court of competent jurisdiction shall direct for application to the payment of any due and unpaid Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, to the extent necessary to pay all such due and unpaid Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, after giving effect to any concurrent payment to or for the holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable. Section 14.04 Trustee's Relation to Senior Indebtedness and Guarantor ------------------------------------------------------- Senior Indebtedness. - ------------------- With respect to the holders of Senior Indebtedness and Guarantor Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Fourteen, and no implied covenants or obligations with respect to the holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness or Guarantor Senior Indebtedness, and the Trustee shall not be liable to any holder of Senior Indebtedness or Guarantor Senior Indebtedness, if it shall mistakenly pay over or deliver to Holders, the Company, the Guarantors or any other person moneys or assets to which any holder of Senior Indebtedness or Guarantor Senior Indebtedness shall be entitled by virtue of this Article Fourteen or otherwise. Section 14.05 Subrogation. ----------- Upon the payment in full of all Senior Indebtedness and Guarantor Senior Indebtedness, the Holders shall be subrogated to the rights of the holders of such Senior Indebtedness and Guarantor Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness and Guarantor Senior Indebtedness until the principal of and interest on the Notes and all amounts due under the Guarantees shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness or Guarantor Senior Indebtedness of any cash, property or securities to which the Holders or the Trustee would be entitled except for the provisions of this Article, and no payments pursuant to the provisions of this Article to the holders of Senior Indebtedness or Guarantor Senior Indebtedness by Holders or the Trustee shall, as among the Company, the Guarantors, their respective creditors other than holders of Senior Indebtedness or such Guarantor Senior Indebtedness, and the Holders, be deemed to be a payment or distribution by the Company or any Guarantor to or on account of the Senior Indebtedness or any Guarantor Senior Indebtedness. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article Fourteen shall have been applied, pursuant to the provisions of this Article Fourteen, to the payment of all amounts payable under the Senior 93 102 Indebtedness of the Company or under the Guarantor Senior Indebtedness of the Guarantors, then and in such case the Holders shall be entitled to receive from the holders of such Senior Indebtedness or such Guarantor Senior Indebtedness at the time outstanding any payments or distributions received by such holders of such Senior Indebtedness or such Guarantor Senior Indebtedness in excess of the amount sufficient to pay all amounts payable under or in respect of such Senior Indebtedness or such Guarantor Senior Indebtedness in full. Section 14.06 Provisions Solely To Define Relative Rights. ------------------------------------------- The provisions of this Article Fourteen are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Indebtedness and Guarantor Senior Indebtedness on the other hand. Nothing contained in this Article Fourteen or elsewhere in this Indenture (other than a release pursuant to Section 13.05) or in the Notes is intended to or shall (a) impair, as among the Company, each Guarantor, their respective creditors other than holders of Senior Indebtedness or Guarantor Senior Indebtedness and the Holders, the obligation of the Company and each Guarantor, which is absolute and unconditional, to pay to the Holders the principal of, premium, if any, and interest on the Notes and to make payments in respect of obligations under the Guarantees as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company or any Guarantor of the Holders and creditors of the Company or any Guarantor other than the holders of Senior Indebtedness or Guarantor Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon a Default or an Event of Default under this Indenture, subject to the rights, if any, under this Article Fourteen of the holders of Senior Indebtedness or Guarantor Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company or any Guarantor referred to in Section 14.02, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 14.03, to prevent any payment prohibited by such Section or enforce their rights pursuant to Section 14.03(c). The failure by the Company to make a payment on the Notes or by any Guarantor to make payment in respect of its obligations under a Guarantee by reason of any provision of this Article Fourteen shall not be construed as preventing the occurrence of a Default or an Event of Default hereunder. Section 14.07 Trustee To Effectuate Subordination. ----------------------------------- Each Holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Fourteen and appoints the Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company or any Guarantor whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the Indebtedness of the Company or any Guarantor owing to such Holder in the 94 103 form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file such a claim prior to 30 days before the expiration of the time to file such a claim, the holders of Senior Indebtedness or Guarantor Senior Indebtedness, or any Senior Representative, may file such a claim on behalf of Holders of the Notes. Section 14.08 No Waiver of Subordination Provisions. ------------------------------------- (a) No right of any present or future holder of any Senior Indebtedness or Guarantor Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company or any Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 14.08, the holders of Senior Indebtedness or Guarantor Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article Fourteen or the obligations hereunder of the Holders to the holders of Senior Indebtedness or such Guarantor Senior Indebtedness, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or such Guarantor Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness or such Guarantor Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness or such Guarantor Senior Indebtedness; (3) release any person liable in any manner for the collection or payment of Senior Indebtedness or such Guarantor Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company or such Guarantor and any other person; provided, however, that in no event shall any such actions limit the right of the Holders to take any action to accelerate the maturity of the Notes pursuant to Article Five hereof or to pursue any rights or remedies hereunder or under applicable laws if the taking of such action does not otherwise violate the terms of this Indenture. Section 14.09 Notice to Trustee. ----------------- (a) The Company and each Guarantor shall give prompt written notice to the Trustee of any fact known to the Company or such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Notes or any Guarantee. Notwithstanding the provisions of this Article Fourteen or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Notes or any Guarantee, unless and until the Trustee shall have received written notice thereof from the Company, such Guarantor or a holder of Senior Indebtedness or Guarantor Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of this Section 14.09, shall be 95 104 entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 14.09 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose under this Indenture (including, without limitation, the payment of the principal of or interest on any Note), then, anything herein contained to the contrary notwithstanding but without limiting the rights and remedies of the holders of Senior Indebtedness or Guarantor Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date; nor shall the Trustee be charged with knowledge of the curing of any such default or the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. (b) Subject to the provisions of Section 6.01, the Trustee shall be entitled to rely on the delivery to it of a written notice to the Trustee by a person representing himself to be a holder of Senior Indebtedness or Guarantor Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness or Guarantor Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness or Guarantor Senior Indebtedness to participate in any payment or distribution pursuant to this Article Fourteen, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness or Guarantor Senior Indebtedness 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 Fourteen, 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. Section 14.10 Reliance on Judicial Order or Certificate of -------------------------------------------- Liquidating Agent. - ----------------- Upon any payment or distribution of assets of the Company or any Guarantor referred to in this Article Fourteen, the Trustee, subject to the provisions of Section 6.01, and the Holders, shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the Holders of Senior Indebtedness or Guarantor Senior Indebtedness, as applicable, and other Indebtedness of the Company or such Guarantor, as applicable, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article; provided, however, that the foregoing shall apply only if such court has been fully apprised of the provisions of this Article Fourteen. 96 105 Section 14.11 Rights of Trustee as a Holder of Senior Indebtedness or ------------------------------------------------------- Guarantor Senior Indebtedness; Preservation of Trustee's Rights. - --------------------------------------------------------------- The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Fourteen with respect to any Senior Indebtedness or any Guarantor Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness or Guarantor Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article Fourteen shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.07. Section 14.12 Article Applicable to Paying Agents. ----------------------------------- In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Fourteen in addition to or in place of the Trustee; provided that Section 14.11 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 14.13 No Suspension of Remedies. ------------------------- Nothing contained in this Article Fourteen shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Notes pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Fourteen of the Holders, from time to time, of Senior Indebtedness or any Guarantor Senior Indebtedness. 97 106 S-1 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. EMPRESS ENTERTAINMENT, INC. By: /s/ Peter A. Ferro, Jr. ----------------------------------------- Name: Peter A. Ferro, Jr. Title: Chief Executive Officer EMPRESS RIVER CASINO FINANCE CORPORATION By: /s/ Peter A. Ferro, Jr. ----------------------------------------- Name: Peter A. Ferro, Jr. Title: President EMPRESS CASINO JOLIET CORPORATION By: /s/ Peter A. Ferro, Jr. ----------------------------------------- Name: Peter A. Ferro, Jr. Title: Chief Executive Officer EMPRESS CASINO HAMMOND CORPORATION By: /s/ Peter A. Ferro, Jr. ----------------------------------------- Name: Peter A. Ferro, Jr. Title: Chief Exective Officer HAMMOND RESIDENTIAL, L.L.C. By: /s/ Peter A. Ferro, Jr. ----------------------------------------- Name: Peter A. Ferro, Jr. Title: Chief Executive Officer U.S. BANK TRUST NATIONAL ASSOCIATION as Trustee By: /s/ R. Probosch ----------------------------------------------- Name: Richard H. Probosch Title: Assistant Vice President 107 EXHIBIT A --------- EMPRESS ENTERTAINMENT, INC. -------------- 8 1/8% SENIOR SUBORDINATED NOTE DUE 2006 CUSIP No. No. _________________ $ EMPRESS ENTERTAINMENT, INC., a Delaware corporation (the "Company," which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to _________ or registered assigns, the principal sum of ________ United States Dollars on July 1, 2006, at the office or agency of the Company referred to below, and to pay interest thereon on January 1 and July 1, in each year, commencing on January 1, 1999 (each an "Interest Payment Date"), accruing from the Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 8 1/8% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to on the reverse hereof, be paid in arrears to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the December 15 or June 15 (each a "Regular Record Date"), whether or not a Business Day, as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid, or duly provided for, and interest on such defaulted interest at the then applicable interest rate borne by the Notes, to the extent lawful, shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time 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, all as more fully provided in such Indenture. Payment of the principal of, premium, if any, and interest on this Note will be made at the Corporate Trust office or agency of the Trustee maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check (which may be a check of the Company) mailed to the address of the person entitled thereto as such address shall appear on the Note Register. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. A-2 108 TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Notes referred to in the within-mentioned Indenture. Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: --------------------------------- Authorized Signatory A-3 109 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. EMPRESS ENTERTAINMENT, INC. By: --------------------------- Name: Title: By: --------------------------- Name: Title: A-4 110 (REVERSE OF NOTE) 8 1/8% Senior Subordinated Note due 2006 1. Indenture. This Note is one of a duly authorized issue of Notes of --------- the Company designated as its 8 1/8% Senior Subordinated Notes due 2006 (the "Notes"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $150,000,000, which may be issued under an indenture (the "Indenture") dated as of June 18, 1998, by and among the Company, as Issuer, the Guarantors named therein and U.S. Bank Trust National Association, as trustee (the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Guarantors, the Trustee and the Holders, and of the terms upon which the Notes are, and are to be, authenticated and delivered. All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. No reference herein to the Indenture and no provisions of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed. 2. Guarantees. This Note is entitled to certain senior subordinated ---------- Guarantees, if any, made for the benefit of the Holders. Reference is hereby made to Article Thirteen of the Indenture for terms relating to the Guarantees. 3. Subordination. The Indebtedness evidenced by the Notes is, to the ------------- extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full in cash of all existing and future Senior Indebtedness (including the Indebtedness under the Credit Agreement). Each Holder, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Note shall cease to be so subordinate and subject in right of payment upon any defeasance of this Note referred to in Paragraph 7 below. 4. Redemption. ---------- (a) Optional Redemption. Subject to earlier redemption in the manner ------------------- described in the next two succeeding paragraphs, the Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002 at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the date of redemption, if redeemed during the 12-month period beginning July 1 of the years indicated below: A-5 111
Year Redemption Price ---- ---------------- 2002 104.063% 2003 102.708% 2004 101.354% 2005 and thereafter 100.000%
On or prior to July 1, 2001, the Company may, at its option, use the net proceeds of an Equity Offering to redeem up to 35% of the originally issued aggregate principal amount of the Notes, at a redemption price in cash equal to 108 1/8% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; provided, however, that not less than $97.5 million in aggregate principal amount of Notes is outstanding following such redemption. Notice of any such redemption must be given not later than 60 days after the consummation of the Equity Offering. As used in the preceding paragraph, an "Equity Offering" means a public sale of common stock of the Company in a transaction registered with the Commission. (b) Required Regulatory Redemption. The Notes will be redeemable, in whole ------------------------------ or in part, at any time, at 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, (i) pursuant to, and in accordance with, any order of any Governmental Authority with appropriate jurisdiction and authority relating to a Gaming License (a "Gaming Authority"), or (ii) to the extent necessary in the reasonable, good faith judgment of the Board of Directors of the Company to prevent the loss, failure to obtain or material impairment of, or to secure the reinstatement of, any Gaming License, which if lost, impaired, not obtained or not reinstated would reasonably be expected to have a material adverse effect on the Company or any of its Restricted Subsidiaries, considered as a whole, or would restrict the ability of the Company or any of its Restricted Subsidiaries to conduct business in any Gaming Jurisdiction, in the case of each of (i) and (ii) where such redemption or acquisition is required because the Holder or beneficial owner of such Note is required to be found suitable, or otherwise qualify, under any Gaming Laws and is not found suitable or so qualified. If a Holder or a beneficial owner of a Note is required by any Gaming Authority to be found suitable, the Holder shall apply for a finding of suitability within 30 days after a Gaming Authority requests or sooner if so required by such Gaming Authority. The applicant for a finding of suitability must pay all costs of the investigation for such finding of suitability. If a Holder or beneficial owner is required to be found suitable and is not found suitable by a Gaming Authority, the Holder shall, to the extent required by applicable law, dispose of his Notes within 30 days or within that time prescribed by a Gaming Authority, whichever is earlier. (c) Redemption Upon Change of Control. Upon the occurrence of a Change of --------------------------------- Control, each Holder of Notes will have the right, at such Holder's option, pursuant to an irrevocable, unconditional offer by the Company (a "Change of Control Offer") to require the Company to repurchase all or any portion of such Holder's Notes (provided that the principal amount of such Notes at maturity must be $1,000 or an integral multiple thereof) on a date (the A-6 112 "Change of Control Purchase Date") that is no later than 30 Business Days after the occurrence of such Change of Control, at a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to and including the Change of Control Purchase Date. The Change of Control Offer must commence within 10 Business Days following a Change of Control and must remain open for a period of at least 20 Business Days following its commencement, except to the extent that a longer period is expressly required by applicable law (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, the Company will purchase all Notes tendered in accordance with the terms of the Indenture in response to the Change of Control Offer. (d) Sinking Fund. The Company will not be required to make any mandatory ------------ sinking fund payments in respect of the Notes. (e) Interest Payments. In the case of any redemption of the Notes, ----------------- interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more predecessor Notes, of record at the close of business on the relevant Record Date referred to on the face hereof. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. (f) Partial Redemption. In the event of redemption of the Note in part ------------------ only, a new Note or Notes for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. 5. Offers to Purchase. Sections 10.13 and 10.14 of the Indenture ------------------ provide that following certain Asset Sales (with respect to Section 10.13) and upon the occurrence of a Change of Control (with respect to Section 10.14) and subject to further limitations contained therein, the Company shall make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 6. Defaults and Remedies. If an Event of Default shall occur and be --------------------- continuing, the principal of all of the outstanding Notes, plus all accrued and unpaid interest, if any, to the date the Notes become due and payable, may be declared due and payable in the manner and with the effect provided in the Indenture. 7. Defeasance. The Indenture contains provisions (which provisions ---------- apply to this Note) for defeasance at any time of (a) the entire indebtedness of the Company on this Note and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Company with certain conditions set forth therein. 8. Amendments and Waivers. The Company and the Trustee (if a party ---------------------- thereto) may, without the consent of the Holders of any Outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust A-7 113 Indenture Act of 1939, as amended, and making any change that does not adversely affect the rights of any Holder. Other amendments and modifications of the Indenture or the Notes may be made by the Company and the Trustee with the consent of the Holders of not less than a majority of the aggregate principal amount of the Outstanding Notes, subject to certain exceptions requiring the consent of the Holders of the particular Notes to be affected. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. 9. Denominations, Transfer and Exchange. The Notes are issuable only in ------------------------------------ registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of the authorized denomination, as requested by the Holder surrendering the same. The transfer of this Note is registrable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose in the Borough of Manhattan in The City of New York or at such other office or agency of the Company as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 10. Persons Deemed Owners. Prior to and at the time of due presentment --------------------- of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note shall be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. 11. Registration Rights. Pursuant to the Registration Rights Agreement ------------------- among the Company, the Guarantors, if any, and the Initial Purchasers for themselves and on behalf of the Holders of the Initial Notes, the Company will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for the Company's 8 1/8% Senior Subordinated Notes due 2006, which will have been registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Initial Notes. The Holders of the Initial Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 12. No Recourse Against Others. No director, officer, employee or -------------------------- stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or this Indenture. Each Holder by accepting a Note waives and releases all such liability, and such waiver and release is part of the consideration for the issuance of the Notes. A-8 114 13. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE. A-9 115 ASSIGNMENT FORM If you, the Holder, want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's social security or tax ID number)____________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for such agent. Date:_________________ Your signature: ____________________________________ (Sign exactly as your name appears on the other side of this Note) By:_________________________________ NOTICE: To be executed by an executive officer NOTICE: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. A-10 116 In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) the second anniversary of the Issue Date, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with and that such transfer is: [Check One] --------- (1) _ to the Company or a subsidiary thereof; or (2) _ pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (3) _ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) _ outside the United States to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (5) _ pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof, provided, that if box (3), (4) or (5) is checked, the -------- Company or the Trustee may require, prior to registering any such transfer of the Notes, in its sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4)), and other information as the Trustee, Note Registrar or the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing boxes are checked, the Trustee or Note Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.05 of the Indenture shall have been satisfied. Date:______________ Your signature:_________________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee:_____________ A-11 117 TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: ________________ ______________________________________________________ NOTICE: To be executed by an executive officer A-12 118 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 10.13 or 10.14 of the Indenture, check the Box: [ ] If you wish to have a portion of this Note purchased by the Company pursuant to Section 10.13 or 10.14 of the Indenture, state the amount: $__________________ Date:___________ Your signature: ___________________________ (Sign exactly as your name appears on the other side of this Note) By:________________________ NOTICE: To be signed by an executive officer NOTICE: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. A-13 119 EXHIBIT B --------- EMPRESS ENTERTAINMENT, INC. ----------------- 8 1/8% SENIOR SUBORDINATED NOTE DUE 2006 CUSIP No. No. __________________ $ EMPRESS ENTERTAINMENT, INC., a Delaware corporation (the "Company," which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to _______________________, or registered assigns, the principal sum of __________________ United States Dollars on July 1, 2006, at the office or agency of the Company referred to below, and to pay interest thereon on January 1 and July 1 in each year, commencing on January 1, 1999 (each an "Interest Payment Date"), accruing from the Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 8 1/8% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to on the reverse hereof, be paid in arrears to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the December 15 or June 15 each a "Regular Record Date"), whether or not a Business Day, as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid, or duly provided for, and interest on such defaulted interest at the then applicable interest rate borne by the Notes, to the extent lawful, shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time 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, all as more fully provided in such Indenture. Payment of the principal of, premium, if any, and interest on this Note will be made at the corporate trust office or agency of the Trustee maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts: provided, however, that payment of interest may be made at the option of the Company by check (which may be a check of the Company) mailed to the address of the person entitled thereto as such address shall appear on the Note Register. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. B-1 120 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By:___________________________ Authorized Signatory B-2 121 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. EMPRESS ENTERTAINMENT, INC. By:____________________________ Name: Title: By:____________________________ Name: Title: B-3 122 (REVERSE OF NOTE) 8 1/8% Senior Subordinated Note due 2006 1. Indenture. This Note is one of a duly authorized issue of Notes of --------- the Company designated as its 8% Senior Subordinated Notes due 2006 (the "Notes"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $150,000,000, which may be issued under an indenture (the "Indenture") dated as of June 18, 1998, by and among the Company, as Issuer, the Guarantors named therein and U.S. Bank, National Association, as trustee (the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Guarantors, the Trustee and the Holders, and of the terms upon which the Notes are, and are to be, authenticated and delivered. All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. No reference herein to the Indenture and no provisions of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed. 2. Guarantees. This Note is entitled to certain senior subordinated ---------- Guarantees, if any, made for the benefit of the Holders. Reference is hereby made to Article Thirteen of the Indenture for terms relating to the Guarantees. 3. Subordination. The Indebtedness evidenced by the Notes is, to the ------------- extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full in cash of all existing and future Senior Indebtedness (including the Indebtedness under the Credit Agreement). Each Holder, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Note shall cease to be so subordinate and subject in right of payment upon any defeasance of this Note referred to in Paragraph 7 below. 4. Redemption. ---------- (a) Optional Redemption. Subject to earlier redemption in the manner ------------------- described in the next two succeeding paragraphs, the Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the date of redemption, if redeemed during the 12-month period beginning July 1 of the years indicated below: B-4 123
Year Redemption Price ---- ---------------- 2002 104.063% 2003 102.708% 2004 101.354% 2005 and thereafter 100.000%
On or prior to July 1, 2001, the Company may, at its option, use the net proceeds of an Equity Offering to redeem up to 35% of the originally issued aggregate principal amount of the Notes, at a redemption price in cash equal to 108 1/8% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; provided, however, that not less than $97.5 million in aggregate principal amount of Notes is outstanding following such redemption. Notice of any such redemption must be given not later than 60 days after the consummation of the Equity Offering. As used in the preceding paragraph, an "Equity Offering" means a public sale of common stock of the Company in a transaction registered with the Commission. (b) Required Regulatory Redemption. The Notes will be redeemable, in whole ------------------------------ or in part, at any time, at 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, (i) pursuant to, and in accordance with, any order of any Governmental Authority with appropriate jurisdiction and authority relating to a Gaming License (a "Gaming Authority"), or (ii) to the extent necessary in the reasonable, good faith judgment of the Board of Directors of the Company to prevent the loss, failure to obtain or material impairment of, or to secure the reinstatement of, any Gaming License, which if lost, impaired, not obtained or not reinstated would reasonably be expected to have a material adverse effect on the Company or any of its Restricted Subsidiaries, considered as a whole, or would restrict the ability of the Company or any of its Restricted Subsidiaries to conduct business in any Gaming Jurisdiction, in the case of each of (i) and (ii) where such redemption or acquisition is required because the Holder or beneficial owner of such Note is required to be found suitable, or otherwise qualify, under any Gaming Laws and is not found suitable or so qualified. If a Holder or a beneficial owner of a Note is required by any Gaming Authority to be found suitable, the Holder shall apply for a finding of suitability within 30 days after a Gaming Authority requests or sooner if so required by such Gaming Authority. The applicant for a finding of suitability must pay all costs of the investigation for such finding of suitability. If a Holder or beneficial owner is required to be found suitable and is not found suitable by a Gaming Authority, the Holder shall, to the extent required by applicable law, dispose of his Notes within 30 days or within that time prescribed by a Gaming Authority, whichever is earlier. (c) Redemption Upon Change of Control. Upon the occurrence of a Change of --------------------------------- Control, each Holder of Notes will have the right, at such Holder's option, pursuant to an irrevocable, unconditional offer by the Company (a "Change of Control Offer") to require the Company to repurchase all or any portion of such Holder's Notes (provided that the principal amount of such Notes at maturity must be $1,000 or an integral multiple thereof) on a date (the B-5 124 "Change of Control Purchase Date") that is no later than 30 Business Days after the occurrence of such Change of Control, at a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to and including the Change of Control Purchase Date. The Change of Control Offer must commence within 10 Business Days following a Change of Control and must remain open for a period of at least 20 Business Days following its commencement, except to the extent that a longer period is expressly required by applicable law (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, the Company will purchase all Notes tendered in accordance with the terms of the Indenture in response to the Change of Control Offer. (d) Sinking Fund. The Company will not be required to make any mandatory ------------ sinking fund payments in respect of the Notes. (e) Interest Payments. In the case of any redemption of the Notes, ----------------- interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more predecessor Notes, of record at the close of business on the relevant Record Date referred to on the face hereof. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. (f) Partial Redemption. In the event of redemption of the Note in part ------------------ only, a new Note or Notes for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. 5. Offers to Purchase. Sections 10.13 and 10.14 of the Indenture provide ------------------ that following certain Asset Sales (with respect to Section 10.13) and upon the occurrence of a Change of Control (with respect to Section 10.14) and subject to further limitations contained therein, the Company shall make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 6. Defaults and Remedies. If an Event of Default shall occur and be --------------------- continuing, the principal of all of the outstanding Notes, plus all accrued and unpaid interest, if any, to the date the Notes become due and payable, may be declared due and payable in the manner and with the effect provided in the Indenture. 7. Defeasance. The Indenture contains provisions (which provisions apply ---------- to this Note) for defeasance at any time of (a) the entire indebtedness of the Company on this Note and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Company with certain conditions set forth therein. 8. Amendments and Waivers. The Company and the Trustee (if a party ---------------------- thereto) may, without the consent of the Holders of any Outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust B-6 125 Indenture Act of 1939, as amended, and making any change that does not adversely affect the rights of any Holder. Other amendments and modifications of the Indenture or the Notes may be made by the Company and the Trustee with the consent of the Holders of not less than a majority of the aggregate principal amount of the Outstanding Notes, subject to certain exceptions requiring the consent of the Holders of the particular Notes to be affected. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. 9. Denominations, Transfer and Exchange. The Notes are issuable only in ------------------------------------ registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of the authorized denomination, as requested by the Holder surrendering the same. The transfer of this Note is registrable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose in the Borough of Manhattan in The City of New York or at such other office or agency of the Company as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 10. Persons Deemed Owners. Prior to and at the time of due presentment of --------------------- this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note shall be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. 11. No Recourse Against Others. No director, officer or employee or -------------------------- stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or the Indenture. Each Holder of Notes by accepting a Note waives and releases all such liability, and such waiver and release is part of the consideration for the issuance of the Notes. 12. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE. B-7 126 ASSIGNMENT FORM If you, the Holder, want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's social security or tax ID number) ___________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for such agent. Date:__________________ Your signature:____________________________________ (Sign exactly as your name appears on the other side of this Note) By:_________________________________ NOTICE: To be executed by an executive officer NOTICE: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. B-8 127 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 10.13 or 10.14 of the Indenture, check the Box: [_] If you wish to have a portion of this Note purchased by the Company pursuant to Section 10.13 or 10.14 of the Indenture, state the amount: $_________________ Date: ____________ Your signature:____________________________ (Sign exactly as your name appears on the other side of this Note) By:_________________________ NOTICE: To be signed by an executive officer NOTICE: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. B-9 128 EXHIBIT C --------- Form of Certificate To Be Delivered in Connection with Subsequent Transfers to Non-QIB Accredited Investors ----------------------------------------- ______________, ____ Re: Empress Entertainment, Inc. (the "Company") 8 1/8% Senior Subordinated Notes due 2006 (the "Notes") ------------------------------------------------------- Ladies and Gentlemen: In connection with our proposed purchase of $_______ aggregate principal amount of the Notes, we confirm that: 1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of June 18, 1998 relating to the Notes (the "Indenture") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the Notes have not been registered under the Securities Act, and that the Notes 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 any Notes within two years after the original issuance of the Notes, we will do so only (A) to the Company or any subsidiary thereof, (B) inside the United States in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) inside the United States 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 a signed letter substantially in the form of this letter, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein, or (F) pursuant to another available exemption from the registration requirements of the Securities Act. 3. We understand that, on any proposed resale of any Notes, we will be required to furnish to you and the Company such certification, written 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. 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 C-1 129 risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment, as the case may be. 5. We are acquiring the Notes 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. C-2 130 You the Company and counsel for 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. Very truly yours, [Name of Transferee] By: ______________________________ Authorized Signature C-3 131 EXHIBIT D --------- Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ----------------------------------- ______________, ____ Attention: Re: Empress Entertainment, Inc. (the "Company") 8 1/8% Senior Subordinated Notes due 2006 (the "Notes") ------------------------------------------------------- Ladies and Gentlemen: In connection with our proposed sale of $__________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. D-1 132 You, the Company and counsel for 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. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferee] By: ________________________ D-2 133 EXHIBIT E SENIOR SUBORDINATED GUARANTEE ----------------------------- For value received, the undersigned hereby unconditionally guarantees to the Holder of this Note the payments of principal of, premium, if any, and interest on this Note in the amounts and at the time when due and interest on the overdue principal, premium, if any, and interest, if any, of this Note, if lawful, and the payment or performance of all other obligations of the Company under the Indenture or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, Article Thirteen of the Indenture and this Guarantee. This Guarantee will become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note. The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article Thirteen of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates. The Indebtedness evidenced by this Guarantee is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full in cash of all Guarantor Senior Indebtedness as defined in the Indenture, and this Guarantee is issued subject to such provisions. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided that such subordination provisions shall cease to affect amounts deposited in accordance with the defeasance provisions of the Indenture upon the terms and conditions set forth therein. This Guarantee is subject to release upon the terms set forth in the Indenture. [ ] By:_________________________________ Name: Title: E-1 EX-4.53 3 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.53 SUPPLEMENTAL INDENTURE Supplemental Indenture (this "Supplemental Indenture"), dated as of December 1, 1999, among Empress Casino Hammond Corporation, Hammond Residential, L.L.C. and Empress Casino Joliet Corporation (collectively, the "Subsidiary Guarantors"), each a Subsidiary of Horseshoe Gaming Holding Corp., a Delaware corporation (the "Company"), the successor to Horseshoe Gaming, L.L.C. ("LLC") under the Indenture, dated as of June 15, 1997 (the "Indenture"), among LLC, Robinson Property Group, Limited Partnership and U.S. Trust Company of Texas, N.A., as trustee (the "Trustee"), providing for the issuance of 9_% Senior Subordinated Notes due 2007 (the "Notes"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee a Supplemental Indenture, dated as of December 1, 1999, under which the Company assumed all of LLC's obligations under the Indenture and the Notes; WHEREAS, the Indenture provides that under certain circumstances the Subsidiaries of the Company are required to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiaries 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"). NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Subsidiary Guarantors, the Company 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. 2. Agreement to Guarantee. The Subsidiary Guarantors jointly and severally irrevocably and unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and its successors and assigns, irrespective of the validity or enforceability of the Indenture, the Notes or the Obligations of the Company under the Indenture or the Notes, that (x) the principal and premium (if any) of and interest and Liquidated Damages, if any, on the Notes and related costs and expenses will be paid in full when due, whether at the maturity or interest payment date, by acceleration, call for redemption, upon an Offer to Purchase, or otherwise and interest on the overdue principal and premium (if any) of and interest and Liquidated Damages, if 2 any, on the Notes and all other obligations of the Company to the Holders or the Trustee under the Indenture or the Notes will be promptly paid in full or performed all in accordance with the terms of the Indenture and the Notes; and (y) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, they will be paid in full when due in accordance with the terms of the extension or renewal, whether at maturity, by acceleration, call for redemption, upon an Offer to Purchase or otherwise. The obligations of the Subsidiary Guarantors to the Holders and to the Trustee pursuant to this Supplemental Indenture and the Indenture are expressly set forth in Article XII of the Indenture and reference is hereby made to such Indenture for the precise terms of this Supplemental Indenture. THE TERMS OF ARTICLE XII OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. 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 Supplemental Indenture 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 Subsidiary Guarantors and their successors and assigns until full and final payment of all of the 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 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 Subsidiary Guarantors under this Supplemental Indenture shall be limited to the extent necessary to ensure that they do not constitute a fraudulent conveyance under applicable law. 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. -2- 3 5. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 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. COMPANY: HORSESHOE GAMING HOLDING CORP. --------------------------------- Name: Jack B. Binion Title: President THE SUBSIDIARY GUARANTORS: EMPRESS CASINO HAMMOND CORPORATION By: --------------------------------------- Name: Jack B. Binion Title: President EMPRESS CASINO JOLIET CORPORATION By: -------------------------------------- Name: Jack B. Binion Title: President HAMMOND RESIDENTIAL, L.L.C. By: EMPRESS CASINO HAMMOND CORPORATION, its Managing Member --------------------------------- Name: Jack B. Binion Title: President THE TRUSTEE: U.S. TRUST COMPANY OF TEXAS, N.A. By: --------------------------------- Name: Title: -3- EX-4.54 4 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.54 SUPPLEMENTAL INDENTURE Supplemental Indenture (this "Supplemental Indenture"), dated as of December 1, 1999, among New Gaming Capital Partnership, Horseshoe Entertainment, Horseshoe Gaming, L.L.C., Horseshoe GP, Inc., Empress Casino Hammond Corporation, Empress Casino Joliet Corporation, Hammond Residential, L.L.C., Robinson Property Group, Limited Partnership and Bossier City Land Corporation (collectively, the "Guaranteeing Subsidiaries"), each a Subsidiary of Horseshoe Gaming Holding Corp., a Delaware corporation (the "Company"), the Company 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_% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Subsidiaries of the Company are required to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiaries 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 Subsidiaries 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. 2 2. Agreement to Guarantee. The Guaranteeing Subsidiaries irrevocably and unconditionally guarantee 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 Supplemental Indenture. The obligations of the Guaranteeing Subsidiaries to the Holders and to the Trustee pursuant to this Supplemental Indenture 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 Supplemental Indenture. 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 Supplemental Indenture 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 Subsidiaries and their 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 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 Subsidiaries under this Supplemental Indenture shall be limited to the extent necessary to ensure that they do not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE X OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. -2- 3 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. -3- 4 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: Jack B. Binion Title: President THE GUARANTEEING SUBSIDIARIES: HORSESHOE GP, INC. By: ------------------------------------ Name: Jack B. Binion Title: President NEW GAMING CAPITAL PARTNERSHIP By: HORSESHOE GP, INC., its General Partner ------------------------------- Name: Jack B. Binion Title: President -4- 5 HORSESHOE ENTERTAINMENT By: NEW GAMING CAPITAL PARTNERSHIP, its General Partner By: HORSESHOE GP, INC., its General Partner ------------------------------- Name: Jack B. Binion Title: President HORSESHOE GAMING, L.L.C. By: HORSESHOE GAMING HOLDING CORP., its Managing Member --------------------------------- Name: Jack B. Binion Title: President EMPRESS CASINO HAMMOND CORPORATION By: ------------------------------------ Name: Jack B. Binion Title: President EMPRESS CASINO JOLIET CORPORATION By:_________________________________ Name: Jack B. Binion Title: President -5- 6 HAMMOND RESIDENTIAL, L.L.C. By: EMPRESS CASINO HAMMOND CORPORATION, its Managing Member --------------------------------- Name: Jack B. Binion Title: President ROBINSON PROPERTY GROUP LIMITED PARTNERSHIP By: HORSESHOE GP, INC., its General Partner ------------------------------- Name: Jack B. Binion Title: President BOSSIER CITY LAND CORPORATION By: ------------------------------------ Name: Jack B. Binion Title: President TRUSTEE: U.S. TRUST COMPANY, NATIONAL ASSOCIATION By: ------------------------------------ Name: Title: -6- EX-4.55 5 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.55 SUPPLEMENTAL INDENTURE Supplemental Indenture (this "Supplemental Indenture"), dated as of December 1, 1999, between Horseshoe Gaming Holding Corp., a Delaware corporation (the "Company"), the successor of Horseshoe Gaming, L.L.C. ("LLC"), to the Indenture referred to below, and U.S. Trust Company of Texas, N.A. (the "Trustee"). W I T N E S S E T H WHEREAS, LLC has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of June 15, 1997, among LLC, Robinson Property Group, Limited Partnership and the Trustee providing for the issuance of 9_% Senior Subordinated Notes due 2007 (the "Notes"); WHEREAS, LLC and the Company entered into an Agreement of Merger (the "Merger"), dated as of December 1, 1999, which provides, among other things, for the merger of LLC with and into the Company; WHEREAS, the Indenture permits the Merger to occur if certain conditions are met and if the Company and the Trustee enter into this Supplemental Indenture to which the Company expressly assumes from LLC all of the Obligations of LLC with respect to the Notes and the Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Trustee mutually covenant and agree as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Assumption and Discharge. As of the date hereof, the Company expressly assumes all of the Obligations of LLC with respect to the Notes and the Indenture, and the parties release LLC from its obligations under the Indenture and the Notes except as to any obligations that arise from or result from the Merger. THE TERMS OF ARTICLE V OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. 2 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. 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: Jack B. Binion Title: President TRUSTEE: U.S. TRUST COMPANY OF TEXAS, N.A. By: ------------------------------------ Name: Title: -2- EX-4.56 6 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.56 HORSESHOE GAMING HOLDING CORP. FIRST AMENDMENT TO CREDIT AGREEMENT This FIRST AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of November 18, 1999 and entered into by and among HORSESHOE GAMING HOLDING CORP, a Delaware corporation ("COMPANY"), the financial institutions listed on the signature pages hereof ("LENDERS"), DLJ CAPITAL FUNDING, INC., as Syndication Agent (the "Syndication Agent") and CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent (the "Administrative Agent"), and is made with reference to that certain Credit Agreement dated as of June 30, 1999 (the "CREDIT AGREEMENT"), by and among Company, Lender, Syndication Agent and Administrative Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Lenders desire to amend the Credit Agreement to amend the definition of "Subsidiary Guarantor"; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO DEFINED TERMS Subsection 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Subsidiary Guarantor" therefrom in its entirety and substituting the following therefor: A. "SUBSIDIARY GUARANTOR" means any Domestic Subsidiary of Company that executes and delivers a counterpart of the Subsidiary Guaranty on the Initial Funding Date or from time to time thereafter pursuant to subsection 6.8; provided that any Domestic Subsidiary having both (a) assets valued at less than one percent (1%) of the value of the 2 aggregate consolidated assets of Company and its Subsidiaries and (b) revenues accounting for less than one percent (1%) of the aggregate consolidated revenues of Company and its Subsidiaries for the most recently ended four consecutive Fiscal Quarters shall not be required to be a Subsidiary Guarantor. 1.2 AMENDMENTS TO SECTION 6: COMPANY'S AFFIRMATIVE COVENANTS Subsection 6.8A of the Credit Agreement is hereby amended by adding the following proviso to the end of such subsection: "provided that any Domestic Subsidiary not satisfying the definition of "Subsidiary Guarantor" shall not be subject to this subsection; provided, further that any Domestic Subsidiary that is no longer excluded from the definition of "Subsidiary Guarantor" shall be subject to this subsection as any new Domestic Subsidiary would be." SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Lender that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. D. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. E. ABSENCE OF DEFAULT. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default. 2 3 SECTION 3. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the effective date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. B. HEADINGS. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. C. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. D. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Requisite Lenders and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. HORSESHOE GAMING HOLDING CORP. By: -------------------------------- Name: Title: DLJ CAPITAL FUNDING, INC., INDIVIDUALLY AND AS SYNDICATION AGENT By: -------------------------------- Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE, INDIVIDUALLY AND AS ADMINISTRATIVE AGENT By: -------------------------------- Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, INDIVIDUALLY AND AS DOCUMENTATION AGENT By: -------------------------------- Name: Title: ------------------------------------- ------------------------------------, AS A LENDER By: -------------------------------- Name: Title: 4 EX-4.57 7 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.57 HORSESHOE GAMING HOLDING CORP. SECOND AMENDMENT TO CREDIT AGREEMENT This SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of November 30, 1999 and entered into by and among HORSESHOE GAMING HOLDING CORP, a Delaware corporation ("COMPANY"), the financial institutions listed on the signature pages hereof ("LENDERS"), DLJ CAPITAL FUNDING, INC., as Syndication Agent (the "Syndication Agent") and CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent (the "Administrative Agent"), and is made with reference to that certain Credit Agreement dated as of June 30, 1999 (as amended by the First Amendment described below, the "CREDIT AGREEMENT"), by and among Company, Lender, Syndication Agent and Administrative Agent, as amended by that certain First Amendment to Credit Agreement dated as of November 18, 1999. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Lenders desire to amend the Credit Agreement to amend the negative covenant in the Credit Agreement relating to Indebtedness; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENT TO SECTION 7: COMPANY'S NEGATIVE COVENANTS Subsection 7.1(vi) of the Credit Agreement is hereby amended to read in its entirety as follows: "(vi) After the Signing Date but prior to the earlier of the Empress Joliet Acquisition Date and the date on which the Tranche B Term Loans must be paid in full pursuant to subsection 2.4A, Company and its Subsidiaries may become liable for up to $35,000,000 on terms acceptable to Agents in Indebtedness relating to the repurchase of Company's capital stock from its shareholders and membership interests in Horseshoe from 2 Horseshoe's members (including no more than $3,000,000 to the Majority Shareholders), and Company and its Subsidiaries may remain liable for such Indebtedness;" SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Lender that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. D. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. E. ABSENCE OF DEFAULT. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default. SECTION 3. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the effective date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. 2 3 (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. B. HEADINGS. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. C. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. D. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Requisite Lenders and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. HORSESHOE GAMING HOLDING CORP. By: -------------------------------- Name: Title: DLJ CAPITAL FUNDING, INC., INDIVIDUALLY AND AS SYNDICATION AGENT By: -------------------------------- Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE, INDIVIDUALLY AND AS ADMINISTRATIVE AGENT By: -------------------------------- Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, INDIVIDUALLY AND AS DOCUMENTATION AGENT By: -------------------------------- Name: Title: ------------------------------------- ------------------------------------, AS A LENDER By: -------------------------------- Name: Title: 4 EX-4.58 8 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.58 HORSESHOE GAMING HOLDING CORP. THIRD AMENDMENT TO CREDIT AGREEMENT This THIRD AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of January 20, 2000 and entered into by and among HORSESHOE GAMING HOLDING CORP, a Delaware corporation ("COMPANY"), the financial institutions listed on the signature pages hereof ("LENDERS"), DLJ CAPITAL FUNDING, INC., as Syndication Agent (the "Syndication Agent") and CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent (the "Administrative Agent"), and is made with reference to that certain Credit Agreement dated as of June 30, 1999 (as amended by the First Amendment and the Second Amendment described below, the "CREDIT AGREEMENT"), by and among Company, Lender, Syndication Agent and Administrative Agent, as amended by that certain First Amendment to Credit Agreement dated as of November 18, 1999 and that certain Second Amendment to Credit Agreement dated as of November 30, 1999. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Lenders desire to amend the Credit Agreement to amend the definition of "Ships"; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO DEFINED TERMS Subsection 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Ships" therefrom in their entirety and substituting the following therefor: A. "SHIPS" means, collectively, King of the Red (U.S. Coast Guard Official Number D1061968), Empress (U.S. Coast Guard Official Number 984286), Empress II (U.S. Coast Guard Official Number 998517), Empress III (U.S. Coast Guard Official Number 1035754) and the barge located at the Horseshoe Casino and Hotel, Tunica, all together with 2 any and all present and future engines, boilers, machinery, components, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, capstans, outfit, tools, pumps, gear, furnishings, appliances, fittings, spare and replacement parts, and any and all appurtenances thereto or belonging to such ship, whether now or hereafter acquired, and whether on board or not on board, together with any and all present and future additions, improvements and replacements therefore, made in or to such ship, or any part or parts thereof; and all accounts, earned hire, charter payments, freight, earnings, revenues, income and profits therefrom and additionally all log books, manuals, trip records, maintenance records, inspection records, seaworthiness certificates and other historical records or information relating to such ship. SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Lender that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company. C. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. D. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. E. ABSENCE OF DEFAULT. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default. 2 3 SECTION 3. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the effective date hereof, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. B. HEADINGS. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. C. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. D. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company and Requisite Lenders and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. HORSESHOE GAMING HOLDING CORP. By: -------------------------------- Name: Title: DLJ CAPITAL FUNDING, INC., INDIVIDUALLY AND AS SYNDICATION AGENT By: -------------------------------- Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE, INDIVIDUALLY AND AS ADMINISTRATIVE AGENT By: -------------------------------- Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, INDIVIDUALLY AND AS DOCUMENTATION AGENT By: -------------------------------- Name: Title: ------------------------------------- ------------------------------------, AS A LENDER By: -------------------------------- Name: Title: 4 EX-10.39 9 MATERIAL CONTRACT 1 EXHIBIT 10.39 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment Agreement") entered into as of March ___, 2000, by and between Empress Casino Hammond Corporation ("Employer"), and Ricky S. Mazer ("Employee"). RECITALS WHEREAS, Employer is the owner and operator of a casino and hotel facility in Hammond Indiana (the "Hammond Facility") and WHEREAS, Employee is currently employed by Employer pursuant to a written contract (the "Original Employment Agreement") which is set to expire on ____________ (the "Original Termination Date"); 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 desires 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 ______________ 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 General Manager and shall perform each and all of the duties and shall have all of the responsibilities described herein. Employee shall at all times report directly to and take directives from the Chief Operating Officer, Chief Executive Officer and President of Employer. 1. Duties and Responsibilities. A. Duties. In his capacity as General Manager of Employer, Employee shall devote his best efforts and his full business time and attention to the performance at the 2 Hammond Facility of the duties customarily incident to the position of General Manager and to such other duties of a senior officer as may be reasonably requested by the President of the Employer in a manner so as to maximize, to the best of his ability, the profitability of the Hammond Facility, for and on behalf of the Employer 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"). Employee acknowledges and agrees that in connection with his employment he may be required to travel on behalf of Employer. 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, any person or entity associated with or affiliated with Employee, or any person or entity 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(s) 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. 1. 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 _______________________________________ ($________) 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 (the "Base Compensation") which appraisals shall be performed in a manner suitable to Employer in all respects, and which shall be payable in equal semi-monthly installments; -2- 3 B. a discretionary bonus in an amount determined in accordance with Employer's bonus plan, as may be amended from time to time by Employer in Employer's sole discretion, (the "Bonus"); 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, at Employer's sole discretion, 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 any Employer's health coverage plan, policies, and practices for Employee and all members of his immediate family which Employer may offer, to it Employees and Executives in Employer's sole discretion, from time to time; C. participation in such pension plans as Employer shall adopt for all of the employees of Employer; it being understood and agreed that the only pension plan that Employer has adopted at this time is a Section 401(k) form of pension plan; D. participation in such deferred compensation plan as Employer may adopt for all of the executive level employees of the Employer; it being understood that a deferred compensation plan exists at the time of the execution of this Agreement; E. occasional use of a company vehicle as and when needed in connection with the performance of Employee's duties and responsibilities; F. participation in Employer's "Paid Days Off/Vacation" policy; G. participation in any agreement, which Employer may adopt in its sole discretion allowing for payment to general managers of other facilities owned or controlled by Horseshoe Gaming Holding Corp. as a result of a change of control; and H. use of an Employer-owned automobile currently provided to Employee pursuant to the Original Employment Agreement until such time as the lease of that automobile expires and after expiration, the sum of $850 per month as an allowance for an automobile. -3- 4 7. Gaming License. Employer and Employee understand that it shall be necessary for Employee to maintain in full force and effect at all times, gaming licenses required by each of the various jurisdictions in which subsidiaries or affiliates 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 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 Chief Executive Officer, Chief Operating Officer or Board of Directors of the Employee (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 immediately 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- 5 B. Termination for Cause, Resignation, or Expiration of Term. Upon termination of Employee's employment with Employer (i) by Employer for cause or (ii) upon the resignation of Employee or all compensation as defined by Section 5 herein and all Fringe Benefits as defined by Section 6 hereof will cease at the date of termination. In the event that this Agreement expires and Employee is not retained by Employer in a position of similar or increased compensation and prestige, Employee shall receive Base Compensation and health insurance for six (6) months from the date of expiration. C. Termination Without Cause. Employer in its discretion may terminate Employee at any time without cause. If Employee is terminated by Employer without cause, Employee shall continue to receive, for a period of time equal to the greater of (i) one year or (ii)the remaining term of this Agreement, (a) Base Compensation, (b) health insurance and(c) a bonus equal to the last annual bonus Employee received prorated for that portion of the year Employee is employed by Employer. The Base Compensation shall be paid by continuing to pay Employee on the regular pay days of the Employer for that period of time that Base Compensation would continue; provided, however, the payment of such Base Compensation shall be reduced by 50% from and after the time that the Employee accepts employment of any kind or nature including but not limited to self employment. Other than health insurance, all Fringe Benefits as described herein, or otherwise provided to Employee, including life and disability insurance ,shall terminate immediately upon the termination of the Employee. 9. Survival of Certain Covenants. The covenants not to compete, solicit or hire and the confidentiality agreements set forth in Sections 10 and 11 herein below shall continue to apply beyond termination in the manner and to the extent set forth herein. 10. Covenants Not to Compete, Solicit or Hire. A. Covenant Not to Compete. Upon termination of Employee without cause, Employee shall not, for a period of time equal to the greater of (i) the balance of the term of this contract if it had expired by its term without early termination or (ii) one year, directly or indirectly, whether 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 or gaming operation of any kind conducting business within one hundred (100) miles of any gaming facility principally owned or controlled by Jack B. Binion, Employer, or Employer's subsidiaries or related companies, unless such gaming facility is located in Las Vegas, Reno, Lake Tahoe or Atlantic City. Employer and Employee agree that such covenant not to compete is a condition of Employee's employment and that the covenant not to compete has been given by Employee to Employer for full and adequate consideration. If Employee ceases to be employed by Employer, because Employer terminates Employee with cause or because this Agreement expires by its terms, Employee shall not, for a period of time equal to six months, directly or indirectly, whether 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 or gaming operation of any kind conducting business within one hundred (100) miles of any gaming facility principally owned or -5- 6 controlled by Jack B. Binion, Employer, or Employer's subsidiaries or related companies, unless such gaming facility is located in Las Vegas, Reno, Lake Tahoe or Atlantic City. Employer and Employee agree that such covenant not to compete is a condition of Employee's employment and that the covenant not to compete has been given by Employee to Employer for full and adequate consideration. Nothing contained herein shall prohibit Employee from owning or holding stock in casino or gaming operation wherever located, provided that such the entity or entities operating and/or owning said gaming or casino operation is publically traded and the stock owned or held by the Employee does not constitute more than one percent (1%) of the outstanding equity interest of said gaming or casino operation. B. Covenant Not to Solicit or Hire. For a period of time equal to the greater of (i) the balance of the term of this contract if it had expired by its term without early termination or (ii) one year, 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, or any other gaming operations principally owned or controlled by Jack B. Binion, Employer, or Employer's subsidiaries or related companies. 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, acquisition or growth 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, until such time as the confidential information becomes generally known to or readily ascertainable by proper means by, the public, 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. Mistake or lack of knowledge as to the status of information wrongly disclosed or used by Employer shall not serve as a defense to this -6- 7 Employment Agreement. During the Term of this Agreement and thereafter, Employee shall not produce for publication, circulation or production any movies or writing of any kind including but not limited to articles, books, manuscripts and playwrights about, concerning, discussing, or mentioning Jack Binion, or any person related to Jack Binion by blood or marriage whether such related person is now or at a later date is deceased. Further, Employee shall not disclose and information to any party, or consult with any person or entity engaged in or making any efforts to publish, circulate or produce any writing, movie or television program of any kind whatsoever including but not limited to an article, book, manuscript, or playwright concerning Jack Binion, or any person related to Jack Binion by blood or marriage whether such related person is now or at a later date deceased. 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 other than from Employer, or its agents, lawyers or accountants, provided however, that such information received is not received from sources which received 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. 12. Reasonableness of Terms. The Employer and the Employee stipulate and agree that the terms and covenants contained in Section 10 and Section 11 herein are fair and reasonable in all respects, including the time period and geographical coverage in Section 10, that these restrictions are designed for the reasonable protection of the Employer's business and Employer's legitimate interests therein, do not stifle the inherent skills or -7- 8 experience of Employee and would not operate as a bar to Employee's sole means of earning wages. In the event that these restrictions are found to be overly broad or unreasonable, the Employer and the Employee agree that such restrictions shall be severable and enforceable on such modified terms as may be deemed reasonable and enforceable by a court of competent jurisdiction. 13. Representations and Warranties. Employee hereby represents and warrants to Employer, and its affiliated or related entities 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 and agrees to its terms. 14. Entire Agreement. This Employment Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter set forth herein, and supersedes any and all previous oral or written agreements, understandings or discussions between the parties hereto with respect to the subject matter set forth herein with respect to the employment of Employee. 15. All Amendments in Writing. This Employment Agreement may be amended only pursuant to a written instrument executed by Employer and Employee. 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. -8- 9 16. Arbitration. In the event of any dispute or controversy between Employer and Employee with respect to any of the matters set forth herein, both Employer and Employee agree to submit such dispute or controversy to binding arbitration, to be conducted in Las Vegas, Nevada pursuant to the then prevailing rules and regulations of the American Arbitration Association. In such arbitration, the prevailing party shall be entitled, in addition to any award made in such proceeding, to recover all of its costs and expenses incurred in connection therewith, including, without limitation, attorneys' fees. This provision does not in any way affect Section 23 of this Employment Agreement. 17. Governing Law. This Employment Agreement shall be governed and construed in accordance with the internal laws of the State of Indiana. The terms of this Employment Agreement are intended to supplement but not displace, the parties respective rights under the Nevada Uniform Trade Secrets Act, Nev. Rev. Stat. Ann. 600A.010 et seq., as amended, and any similar laws adopted in Indiana, Illinois, Mississippi or Louisiana. 18. Notices. All notices required or desired to be given under this Employment Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the date of receipt by the party to whom notice is to be given if transmitted to such party by telefax, provided a copy is mailed as set forth below on the date of transmission, or (iii) on the third day after mailing if mailed to the party to whom notice is to be given by registered or certified mail, return receipt requested, postage prepaid, to 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 Holding Corp. 2300 Empress Drive Joliet, IL 60436 Attn: President If to Employee: Mr. Ricky S. Mazer 19. Assignment. This Employment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, administrators and assigns. Notwithstanding the foregoing, Employee understands and agrees that the nature of this Employment Agreement is a personal services agreement, and that Employer is entering into this Employment Agreement based upon the specific services to be rendered personally by Employee hereunder; and accordingly, Employee shall not assign, transfer or delegate in any manner any of his duties, responsibilities or obligations hereunder. 20. No Third Party Beneficiaries. This Employment Agreement is solely for the benefit of Employee, Employer, Employer's affiliated or related companies and Employee's majority owner Jack Binion and his heirs, and in no event shall any other person or entity by -9- 10 deemed or construed as a third party beneficiary of any of the provisions or conditions set forth herein. 21. Waiver. No waiver of any term, condition or covenant of this Employment Agreement by a party shall be deemed to be a waiver of any subsequent breaches of the same or other terms, covenants or conditions hereof by such party. 22. Construction. Whenever possible, each provision of this Employment Agreement shall be interpreted in such manner as to be effective or valid under applicable law, but if any provision of 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. 23. Withholding. Employer shall withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law. 24. Injunctive Relief. Employee and Employer each acknowledge that the provisions of Sections 10 and 11 are reasonable and necessary, that the damages that would be suffered as a result of a breach or threatened breach by Employee of Sections 10 and/or 11 may not be calculable, and that the award of a money judgment to Employer for such a breach or threatened breach thereof by Employee would be an inadequate remedy. Consequently, Employee agrees that in addition to any other remedy to which Employer may be entitled in law or in equity, the provisions of Sections 10 and 11 may be enforced by Employer by injunctive or other equitable relief, including a temporary and/or permanent injunction (without proving a breach therefor), and Employer shall not be obligated to post bond or other security in seeking such relief. Employee hereby waives any and all objections he may have and consents to the jurisdiction of any state or federal court located in the States of Nevada, Mississippi, Illinois, Indiana or Louisiana and hereby waives any and all objections to venue. 25. Indemnification. The Employee shall have, during the term of this Agreement and for a period of not less than two years after the termination of this Agreement, the benefit of the current indemnification provisions as provided under applicable law and the Bylaws of the Employer. The Employer shall cause the Employee to be covered by any policies of directors and officer liability insurance of the Employer now in force or hereafter obtained. 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. -10- 11 IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement as of the day and year first above written. "EMPLOYER" EMPRESS CASINO HAMMOND CORPORATION an Indiana corporation By: ------------------------------------- Joseph Canfora, President "EMPLOYEE" ------------------------------------- Ricky S. Mazer -11- 12 EXHIBIT A DEFINITIONS All capitalized terms referenced or used in this Employment Agreement and not specifically defined therein shall have the meaning set forth below in this Exhibit A, which is attached to and made a part of this Employment Agreement for all purposes. Gaming Authorities. The term "Gaming Authorities" shall mean all agencies, authorities and instrumentalities of any state, nation (including Native American nations) or other governmental entity or any subdivision thereof, regulating gaming or related activities in the United States or any state or political subdivision thereof, including, without limitation, the Mississippi and Louisiana Gaming Commissions. Governmental Authority. The term "Governmental Authority" means the governments of (i) the United States of America, (ii)the State of Mississippi, (iii) Tunica County, (iv) the State of Louisiana, (v) Bossier City, Louisiana and (vi) any other political subdivision of any state of the United States in which a casino Facility is located, and any court or political subdivision, agency, commission, board or instrumentality or officer thereof, whether federal, state or local, having or exercising jurisdiction over Employer or a Facility, and including, without limitation, any Gaming Authority. -12- EX-10.40 10 MATERIAL CONTRACT 1 EXHIBIT 10.40 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment Agreement") entered into as of January 6, 2000, by and between Empress Casino Joliet Corporation ("Employer"), and David Fendrick ("Employee"). RECITALS WHEREAS, Employer is the owner and operator of a casino and hotel facility in Joliet, Illinois (the "Joliet Facility") and WHEREAS, Employee is currently employed by Employer pursuant to a written contract (the "Original Employment Agreement") which is set to expire on July 31, 2000 (the "Original Termination Date"); 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 desires 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 July 31, 2003, 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 General Manager and shall perform each and all of the duties and shall have all of the responsibilities described herein. Employee shall at all times report directly to and take directives from the Chief Operating Officer, Chief Executive Officer and President of Employer. 1. Duties and Responsibilities. A. Duties. In his capacity as General Manager of Employer, Employee shall 2 devote his best efforts and his full business time and attention to the performance at 2300 Empress Drive, Joliet, Illinois 60436 of the duties customarily incident to the position of General Manager and to such other duties of a senior officer as may be reasonably requested by the President of the Employer in a manner so as to maximize, to the best of his ability, the profitability of each Facility, for and on behalf of the Employer 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"). Employee acknowledges and agrees that in connection with his employment he may be required to travel on behalf of Employer. 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, any person or entity associated with or affiliated with Employee, or any person or entity 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(s) 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. 1. 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 Thousand Dollars ($200,000) per year, which may be adjusted annually by a merit increase based upon Employer's existing policy and an annual performance appraisal of Employee and Employer (the "Base Compensation") which appraisals shall be performed in a manner suitable to Employer in all respects, and which shall be payable in equal semi-monthly installments; 2 3 B. a discretionary bonus in an amount determined in accordance with Employer's bonus plan, as may be amended from time to time by Employer in Employer's sole discretion, (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, at Employer's sole discretion, 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. 1. Fringe Benefits. It is understood and agreed that the Base Compensation to be received by Employee is to be all-inclusive of other typical fringe benefits provided to executives in a similar position as Employee; provided, however, that Employee shall be entitled to the following benefits: A. reimbursement, on an on-going basis, for all reasonable entertainment, traveling and other similar expenses incurred in the performance of his duties and responsibilities hereunder, such expenses to be subject to budgets established for such purpose and the Employer's reimbursement procedures; B. participation in Employer's health coverage plan for Employee and all members of his immediate family, with such plan and the terms of Employee's participation in such plan to be on terms and conditions determined solely by Employer; and C. participation in such pension plans as Employer shall adopt for all of the employees of Employer; it being understood and agreed that the only pension plan that Employer has adopted at this time is a Section 401(k) form of pension plan; and D. occasional use of a company vehicle as and when needed in connection with the performance of Employee's duties and responsibilities; and E. participation in Employer's "Paid Days Off/Vacation" policy; and ** F. use of an Employer-owned automobile currently provided to Employee pursuant to the Original Employment Agreement until such time as the lease of that automobile expires. 7. Gaming License. Employer and Employee understand that it shall be necessary for Employee to maintain in full force and effect at all times, gaming licenses required by each of the various jurisdictions in which subsidiaries or affiliates are conducting gaming operations for persons serving in a similar capacity as Employee. Accordingly, during the course of his 3 4 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 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 Chief Financial Officer, Chief Executive Officer, Chief Operating Officer or Board of Directors of the Employee (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 immediately 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 5 B. Termination for Cause, Resignation, or Expiration of Term. Upon termination of Employee's employment with Employer (i) by Employer for cause (ii) upon the resignation of Employee or (iii) upon the expiration of the term of this Employment Agreement, all compensation as defined by Section 5 herein and all Fringe Benefits as defined by Section 6 hereof will cease at the date of termination. C. Termination Without Cause. Employer in its discretion may terminate Employee at any time without cause. If Employee is terminated by Employer without cause, Employee shall continue to receive the Base Compensation for a period of time equal to six (6) months immediately following the date of termination (payable as provided in Subsection 5(A)); provided, however, all Fringe Benefits as described herein, or otherwise provided to Employee shall terminate immediately and Employee shall not be entitled to a Bonus. Notwithstanding anything contained herein to the contrary, in the event Employer terminates Employee without cause prior to July 31, 2000, Employee shall continue to receive Base Compensation through February 1, 2001, however, all Fringe Benefits either defined herein or provided by Employer shall terminate immediately upon termination of employment. 9. Survival of Certain Covenants. The covenants not to compete, solicit or hire and the confidentiality agreements set forth in Sections 10 and 11 herein below shall continue to apply beyond termination in the manner and to the extent set forth herein. 10. Covenants Not to Compete, Solicit or Hire. A. Covenant Not to Compete. For so long as the Employee is receiving Base Compensation and for a period of six (6) months from and after the last date on which any amount constituting Base Compensation is paid to Employee, Employee agrees that he will not directly or indirectly, whether as principal, manager, agent, consultant, officer, director, stockholder, partner, investor, lender or employee, or in any other capacity, carry on, be engaged in or employed by or be a consultant to or to have any financial interest in any other casino operation conducting business within one hundred (100) miles of any other gaming facility principally owned or controlled by Jack B. Binion, Employer, or Employer's subsidiaries or related companies, including, but not limited to, the Existing Facilities or the To Be Acquired Facilities, unless such gaming facility is located in Las Vegas, Reno, Lake Tahoe or Atlantic City. Employer and Employee agree that such covenant not to compete is a condition of Employee's employment and that the covenant not to compete has been given by Employee to Employer for full and adequate consideration. B. Covenant Not to Solicit or Hire. For so long as the Employer is receiving Base Compensation and for a period of one (1) year from and after the last date on which any amount constituting Base Compensation is paid to Employee, 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 5 6 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, or any other gaming operations principally owned or controlled by Jack B. Binion, Employer, or Employer's subsidiaries or related companies, including, but not limited to, the Existing Facilities or the To Be Acquired Facilities. 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, acquisition or growth 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, until such time as the confidential information becomes generally known to or readily ascertainable by proper means by, the public, 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. Mistake or lack of knowledge as to the status of information wrongly disclosed or used by Employer shall not serve as a defense 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 other than from Employer, or its agents, lawyers or accountants, provided however, that such information received is not received from sources which received 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 6 7 property of Employer and which relate in anyway to the business, customers, products, practices or techniques of Employer, as well as all other property of Employer, including but not limited to, all documents which in whole or in part contain any Confidential Information of Employer which in any of these cases are in Employee's possession or under Employee's control. E. Compelled Disclosure. In the event a third party seeks to compel disclosure of Confidential Information by Employee by judicial or administrative process, Employee shall promptly notify Employer of such occurrence and furnish to Employer a copy of the demand, summons, subpoena or other process served upon Employee to compel such disclosure, and will permit Employer to assume, at its expense, but with Employee's cooperation, defense of such disclosure demand. In the event that Employer refuses to contest such a third party disclosure demand under judicial or administrative process, or a final judicial judgment is issued compelling Employee to disclose Confidential Information, Employee shall be entitled to disclose such information in compliance with the terms of such administrative or judicial process or order. 12. Reasonableness of Terms. The Employer and the Employee stipulate and agree that the terms and covenants contained in Section 10 and Section 11 herein are fair and reasonable in all respects, including the time period and geographical coverage in Section 10, and that these restrictions are designed for the reasonable protection of the Employer's business and Employer's legitimate interests therein. In the event that these restrictions are found to be overly broad or unreasonable, the Employer and the Employee agree that such restrictions shall be severable and enforceable on such modified terms as may be deemed reasonable and enforceable by a court of competent jurisdiction. 13. Representations and Warranties. Employee hereby represents and warrants to Employer, and its affiliated or related entities 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; 7 8 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 and agrees to its terms. 14. Entire Agreement. This Employment Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter set forth herein, and supersedes any and all previous oral or written agreements, understandings or discussions between the parties hereto with respect to the subject matter set forth herein with respect to the employment of Employee. 15. All Amendments in Writing. This Employment Agreement may be amended only pursuant to a written instrument executed by Employer and Employee. It shall not be reasonable for either Employer or Employee to rely on any oral statements or representations by the other party that are in conflict with the terms of this Employment Agreement. 16. Arbitration. In the event of any dispute or controversy between Employer and Employee with respect to any of the matters set forth herein, both Employer and Employee agree to submit such dispute or controversy to binding arbitration, to be conducted in Las Vegas, Nevada pursuant to the then prevailing rules and regulations of the American Arbitration Association. In such arbitration, the prevailing party shall be entitled, in addition to any award made in such proceeding, to recover all of its costs and expenses incurred in connection therewith, including, without limitation, attorneys' fees. This provision does not in any way affect Section 23 of this Employment Agreement. 17. Governing Law. This Employment Agreement shall be governed and construed in accordance with the internal laws of the State of Nevada. The terms of this Employment Agreement are intended to supplement but not displace, the parties respective rights under the Nevada Uniform Trade Secrets Act, Nev. Rev. Stat. Ann. 600A.010 et seq., as amended, and any similar laws adopted in Indiana, Illinois, Mississippi or Louisiana. 8 9 18. Notices. All notices required or desired to be given under this Employment Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the date of receipt by the party to whom notice is to be given if transmitted to such party by telefax, provided a copy is mailed as set forth below on the date of transmission, or (iii) on the third day after mailing if mailed to the party to whom notice is to be given by registered or certified mail, return receipt requested, postage prepaid, to 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 Holding Corp. 2300 Empress Drive Joliet, IL 6089101 Attn: President If to Employee: Mr. David Fendrick 9 10 19. Assignment. This Employment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, administrators and assigns. Notwithstanding the foregoing, Employee understands and agrees that the nature of this Employment Agreement is a personal services agreement, and that Employer is entering into this Employment Agreement based upon the specific services to be rendered personally by Employee hereunder; and accordingly, Employee shall not assign, transfer or delegate in any manner any of his duties, responsibilities or obligations hereunder. 20. No Third Party Beneficiaries. This Employment Agreement is solely for the benefit of Employer and Employee, and in no event shall any other person or entity by deemed or construed as a third party beneficiary of any of the provisions or conditions set forth herein. 21. Waiver. No waiver of any term, condition or covenant of this Employment Agreement by a party shall be deemed to be a waiver of any subsequent breaches of the same or other terms, covenants or conditions hereof by such party. 22. Construction. Whenever possible, each provision of this Employment Agreement shall be interpreted in such manner as to be effective or valid under applicable law, but if any provision of 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. 23. Withholding. Employer shall withhold from any payments due to Employee hereunder, all taxes, FICA or other amounts required to be withheld pursuant to any applicable law. 24. Injunctive Relief. Employee and Employer each acknowledge that the provisions of Sections 10 and 11 are reasonable and necessary, that the damages that would be suffered as a result of a breach or threatened breach by Employee of Sections 10 and/or 11 may not be calculable, and that the award of a money judgment to Employer for such a breach or threatened breach thereof by Employee would be an inadequate remedy. Consequently, Employee agrees that in addition to any other remedy to which Employer may be entitled in law or in equity, the provisions of Sections 10 and 11 may be enforced by Employer by injunctive or other equitable relief, including a temporary and/or permanent injunction (without proving a breach therefor), 10 11 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" EMPRESS CASINO JOLIET CORPORATION an Illinois corporation By: --------------------------------------- Kirk Saylor, Chief Financial Officer "EMPLOYEE" ------------------------------------------- David Fendrick 11 12 EXHIBIT A DEFINITIONS All capitalized terms referenced or used in this Employment Agreement and not specifically defined therein shall have the meaning set forth below in this Exhibit A, which is attached to and made a part of this Employment Agreement for all purposes. Gaming Authorities. The term "Gaming Authorities" shall mean all agencies, authorities and instrumentalities of any state, nation (including Native American nations) or other governmental entity or any subdivision thereof, regulating gaming or related activities in the United States or any state or political subdivision thereof, including, without limitation, the Mississippi and Louisiana Gaming Commissions. Governmental Authority. The term "Governmental Authority" means the governments of (i) the United States of America, (ii)the State of Mississippi, (iii) Tunica County, (iv) the State of Louisiana, (v) Bossier City, Louisiana and (vi) any other political subdivision of any state of the United States in which a casino Facility is located, and any court or political subdivision, agency, commission, board or instrumentality or officer thereof, whether federal, state or local, having or exercising jurisdiction over Employer or a Facility, and including, without limitation, any Gaming Authority. 12 EX-10.41 11 MATERIAL CONTRACT 1 EXHIBIT 10.41 RELEASE AGREEMENT ----------------- THIS RELEASE AGREEMENT (the "Agreement") is made and entered into by and between Larry Lepinski ("Lepinski") and Horseshoe Gaming, L.L.C. (the "Company"). All capitalized terms used but not defined herein shall have the meanings set forth in the Unit Option Agreement (as defined below). W I T N E S S E T H: -------------------- WHEREAS, the parties entered into a Unit Option Agreement dated February 1, 1997 ("Unit Option Agreement") whereby the Company granted Lepinski an Option to purchase 252,490 units of the Company (the "Units") at a price of $3.47 per Unit, or .268668% of the Company at a purchase price of $940,338; WHEREAS, pursuant to paragraph 13 of the Unit Option Agreement Lepinski has the right to require the Company to purchase back his Units in the Company (the "Put Right"); and WHEREAS, the Company is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and the consideration of the monies paid and other representations made in conjunction herewith, the parties to this Agreement agree as follows: 1. Lepinski hereby exercises his option to purchase all of the Units pursuant to the Unit Option Agreement. 2. Simultaneously with Lepinski's exercise of the Option, Lepinski hereby exercises his Put Right pursuant to paragraph 13 of the Unit Option Agreement. The Company hereby waives any requirements of written notice set forth in the Unit Option Agreement, and further waives the condition that the Put Right can be exercised only in the event of termination of Lepinski's employment. 3. The Company shall purchase the Units owned by Lepinski for an amount determined as follows: Percentage interest is .268668% Fair market value of Company $470 m multiplied by .268668% = $1,262,739.60 Less initial minimum value $350 m multiplied by .268668% = $ (940,338.00) ---- ------------- $ 322,402.00
2 Such fair market value of the Company has been fully negotiated between the parties and which price the parties agree constitutes the Fair Market Value of the Units (all as set forth in and required by Paragraph 13 of the Unit Option Plan). 4. Lepinski hereby unconditionally releases and discharges the Company from any and all claims, known or unknown, directly or indirectly related to or in any way connected with (i) the Unit Option Agreement, (ii) Lepinski's exercise of the Option; (iii) Lepinski's exercise of the Put Right, (iv) Lepinski's ownership of the Units, and (v) this Agreement and all of the agreements, documents and instruments to be executed and delivered in connection with this Agreement. Lepinski acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, he shall have no rights of any kind to acquire units in the Company or any of its affiliates or subsidiaries; provided however, that Lepinski shall have the rights, if any, afforded to him under the Company's option plan to be first effective on or after January 1, 1999. 5. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), the Company shall pay Lepinski in addition to the Purchase Price an amount equal to $80,600 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) the Company renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) the Company combines with another party such that the Acquisition is consummated with the Company obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) the Company consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Company is combined with only one; or (v) the Company sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount shall be paid, together with the final payment, within forty-five (45) days of Acquisition Closing Date. 6. This Agreement shall be construed under and governed by the laws of the State of Delaware without regard to the conflict of law provisions thereof. 7. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall be deemed one Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of this _____ day of July, 1999. "LEPINSKI" ------------------------------------ Larry Lepinski 2 3 "COMPANY" HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming, Inc., its Manager By: -------------------------------- Kirk Saylor, Chief Financial Officer 3 EX-10.42 12 MATERIAL CONTRACT 1 EXHIBIT 10.42 RELEASE AGREEMENT ----------------- THIS RELEASE AGREEMENT (the "Agreement") is made and entered into by and between Glenn Buxton ("Buxton") and Horseshoe Gaming, L.L.C. (the "Company"). All capitalized terms used but not defined herein shall have the meanings set forth in the Unit Option Agreement (as defined below). W I T N E S S E T H: -------------------- WHEREAS, the parties entered into a Unit Option Agreement dated February 1, 1997 ("Unit Option Agreement") whereby the Company granted Buxton an Option to purchase 126,245 units of the Company (the "Units") at a price of $3.47 per Unit, or .134334% of the Company at a purchase price of $470,169; WHEREAS, pursuant to paragraph 13 of the Unit Option Agreement Buxton has the right to require the Company to purchase back his Units in the Company (the "Put Right"); and WHEREAS, the Company is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and the consideration of the monies paid and other representations made in conjunction herewith, the parties to this Agreement agree as follows: 1. Buxton hereby exercises his option to purchase all of the Units pursuant to the Unit Option Agreement. 2. Simultaneously with Buxton's exercise of the Option, Buxton hereby exercises his Put Right pursuant to paragraph 13 of the Unit Option Agreement. The Company hereby waives any requirements of written notice set forth in the Unit Option Agreement, and further waives the condition that the Put Right can be exercised only in the event of termination of Buxton's employment. 3. The Company shall purchase the Units owned by Buxton for an amount determined as follows: Percentage interest is .134334% Fair market value of Company $470 m multiplied by .134334% = $ 631,370.00 Less initial minimum value $350 m multiplied by .134334% = $(470,169.00) ---- ------------ $ 161,201.00
Such fair market value of the Company has been fully negotiated between the parties and which price the parties agree constitutes the Fair Market Value of the Units (all as set forth in and required by Paragraph 13 of the Unit Option Plan). 2 4. Buxton hereby unconditionally releases and discharges the Company from any and all claims, known or unknown, directly or indirectly related to or in any way connected with (i) the Unit Option Agreement, (ii) Buxton's exercise of the Option; (iii) Buxton's exercise of the Put Right, (iv) Buxton's ownership of the Units, and (v) this Agreement and all of the agreements, documents and instruments to be executed and delivered in connection with this Agreement. Buxton acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, he shall have no rights of any kind to acquire units in the Company or any of its affiliates or subsidiaries; provided however, that Buxton shall have the rights, if any, afforded to him under the Company's option plan to be first effective on or after January 1, 1999. 5. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), the Company shall pay Buxton in addition to the Purchase Price an amount equal to $40,300 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) the Company renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) the Company combines with another party such that the Acquisition is consummated with the Company obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) the Company consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Company is combined with only one; or (v) the Company sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount shall be paid, together with the final payment, within forty-five (45) days of Acquisition Closing Date. 6. This Agreement shall be construed under and governed by the laws of the State of Delaware without regard to the conflict of law provisions thereof. 7. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall be deemed one Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of this _____ day of July, 1999. "BUXTON" ------------------------------------ Glenn Buxton "COMPANY" HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming, Inc., its Manager By: ------------------------------- Kirk Saylor, Chief Financial Officer 2 EX-10.43 13 MATERIAL CONTRACT 1 EXHIBIT 10.43 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the 1st day of July, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and RICK COOK ("Cook"). RECITALS: A. Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. B. Cook is the current owner of a .139922% interest in Horseshoe and an employee of Horseshoe by virtue of an Amended and Restated Employment Contract dated February 1, 1999 by and between Horseshoe and Cook ("Employment Contract"). C. Pursuant to his Employment Contract, Cook has certain put rights with respect to his ownership ("Put Rights"). Cook has provided notice of his intent to exercise his Put Rights and Horseshoe believes it is in its best interest to acquire from Cook his .139922% ownership interest. D. Horseshoe and Cook have agreed that the fair market value of the .139922% interest in Horseshoe is $657,633 and that the value of his capital account at June 30, 1999 was $82,664. E. Pursuant to his Employment Contract with Horseshoe, Cook has borrowed certain sums from Horseshoe and as of June 30, 1999, Cook is indebted to Horseshoe in the principal amount of $52,000 plus interest of $10,320, for a total due, as of June 30, 1999, of $62,320 (the "Cook Debt"). F. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Cook hereby exercises his Put Right. Horseshoe hereby waives any requirements of written notice and further waives the condition that the Put Right can be exercised only in the event of termination of Cook's employment. 2. Concurrently with the execution of this Agreement, Cook has sold to Horseshoe, and Horseshoe has purchased from Cook, Cook's .139922% interest in Horseshoe at the price of $657,633, plus a return of capital of $82,664, for a total purchase price of $740,297 ("Purchase Price"). In full and complete satisfaction of the Cook Debt, the Purchase Price shall be reduced by the amount of the Cook Debt. Cook hereby acknowledges the receipt of the Purchase Price less the Cook Debt. 2 3. Cook hereby unconditionally releases and discharges the Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with (i) Cook's exercise of the Put Right, (ii) Cook's ownership of Horseshoe, and (iii) this Agreement and all of the agreements, documents and instruments to be executed and delivered in connection with this Agreement. Cook acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, he shall have no equity ownership in the Horseshoe nor will he have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; provided however, that Cook shall have the rights, if any, afforded to him under Horseshoe's option plan to be first effective on or after January 1, 1999. 4. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay Cook in addition to the Purchase Price an amount equal to $41,976.60 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount shall be paid, together with the final payment, within forty-five (45) days of Acquisition Closing Date. 5. Cook represents and warrants that he is the lawful record and beneficial owner of the .139922% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 6. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 7. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 8. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. 9. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall be deemed one Agreement. 2 3 IN WITNESS WHEREOF, the parties have executed this Agreement as of this _____ day of July, 1999. "COOK" ------------------------------------------ Rick Cook "COMPANY" HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., its Manager By: -------------------------------------- Kirk Saylor, Chief Financial Officer 3 EX-10.44 14 MATERIAL CONTRACT 1 EXHIBIT 10.44 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the ____ day of August, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and ROBERT MCQUEEN ("McQueen"). RECITALS: A. Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. B. McQueen is the current owner of a .154144% interest in Horseshoe and an employee of Horseshoe by virtue of an Amended and Restated Employment Agreement dated October 15, 1998 by and between Horseshoe and McQueen ("Employment Contract"). C. Pursuant to his Employment Contract, McQueen has certain put rights with respect to his ownership ("Put Rights"). McQueen has provided notice of his intent to exercise his Put Rights and Horseshoe believes it is in its best interest to acquire from McQueen his .154144% ownership interest. D. Horseshoe and McQueen have agreed that the fair market value of the .154144% interest in Horseshoe is $724,477 and that the value of his capital account at July 31, 1999 was $100,820. E. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. McQueen hereby exercises his Put Right. Horseshoe hereby waives any requirements of written notice and further waives the condition that the Put Right can be exercised only in the event of termination of McQueen's employment. 2. Concurrently with the execution of this Agreement, McQueen has sold to Horseshoe, and Horseshoe has purchased from McQueen, McQueen's .154144% interest in Horseshoe at the price of $724,477, plus a return of capital of $100,820, for a total purchase price of $825,297 ("Purchase Price"). The Purchase price shall be paid as follows: (i) 25% of the Purchase Price at the time of the execution of this Agreement and (ii) 25% of the Purchase Price on August 1 during each of the next 3 years. All sums due under this Agreement shall bear interest at a rate of 8% per annum. 3. McQueen hereby unconditionally releases and discharges the Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with (i) McQueen's exercise of the Put Right, (ii) McQueen's ownership of Horseshoe, and (iii) this Agreement and all of 2 the agreements, documents and instruments to be executed and delivered in connection with this Agreement. McQueen acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, he shall have no equity ownership in the Horseshoe nor will he have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; provided however, that McQueen shall have the rights, if any, afforded to him under Horseshoe's option plan to be first effective on or after January 1, 1999. 4. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay McQueen in addition to the Purchase Price an amount equal to $46,243.20 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount, if any, shall be paid, in equal installments with the remaining installment payments of the Purchase Price. If the Purchase Price has been paid in full at the time of the Acquisition Closing Date, then the Additional Amounts shall be paid within 45 days of the Acquisition Closing Date. 5. McQueen represents and warrants that he is the lawful record and beneficial owner of the .154144% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 6. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 7. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 8. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. 9. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall be deemed one Agreement. 2 3 IN WITNESS WHEREOF, the parties have executed this Agreement as of this _____ day of August, 1999. "MCQUEEN" ------------------------------------ Robert McQueen "HORSESHOE" HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., its Manager By: -------------------------------- Kirk Saylor, Chief Financial Officer 3 EX-10.45 15 MATERIAL CONTRACT 1 EXHIBIT 10.45 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the _____ day of August, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and GARY BORDER ("Border"). RECITALS: A. Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. B. Border is the current owner of a .535232% interest in Horseshoe and an employee of Horseshoe by virtue of an Amended and Restated Employment Agreement dated November 23, 1998, by and between Horseshoe and Border ("Employment Contract"). C. Pursuant to his Employment Contract, Border has certain put rights with respect to his ownership ("Put Rights"). Border has provided notice of his intent to exercise his Put Rights and Horseshoe believes it is in its best interest to acquire from Border his .535232% ownership interest. D. Horseshoe and Border have agreed that the fair market value of the .535232% interest in Horseshoe is $2,515,590 and that the value of his capital account at July 31, 1999 was $185,230. E. Pursuant to his Employment Contract, Border has borrowed certain sums from Horseshoe and as of July 31, 1999, Border is indebted to Horseshoe in the principal amount of $150,000 plus interest of $3,873.97, thus Border is indebted to Horseshoe as of July 31, 1999, in the total amount of $153,873.97 (the "Border Debt"). F. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Border hereby exercises his Put Right. Horseshoe hereby waives any requirements of written notice and further waives the condition that the Put Right can be exercised only in the event of termination of Border's employment. 2. The Company shall purchase Border's ownership interest for an amount determined as follows: Percentage interest is .535232% Fair market value of Company $470 m multiplied by .535232% = $ 2,515,590 Less initial minimum value $350 m multiplied by .535232% = $(1,873,312) ---- ----------- $ 642,278
2 Such fair market value of the Company has been fully negotiated between the parties and which price the parties agree constitutes the Fair Market Value of Border's ownership interest. 3. Concurrently with the execution of this Agreement, Border has sold to Horseshoe, and Horseshoe has purchased from Border, Border's .535232% interest in Horseshoe at the price of $642,278, plus a return of capital of $185,230, for a total purchase price of $827,508 ("Purchase Price"). In full and complete satisfaction of the Border Debt, the Purchase Price shall be reduced by the amount of the Border Debt (the Purchase Price less the Border Debt being referred to herein as the "Net Purchase Price.") The Net Purchase price shall be paid as follows: (i) 33% of the Net Purchase Price at the time of the execution of this Agreement, (ii) 33% of the Net Purchase Price on January 30, 2000, and (iii) the balance on July 1, 2000. All sums due under this Agreement shall bear interest at a rate of 8% per annum. 4. Border hereby unconditionally releases and discharges the Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with (i) Border's exercise of the Put Right, (ii) Border's ownership of Horseshoe, and (iii) this Agreement and all of the agreements, documents and instruments to be executed and delivered in connection with this Agreement. Border acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, he shall have no equity ownership in the Horseshoe nor will he have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; provided however, that Border shall have the rights, if any, afforded to him under Horseshoe's option plan to be first effective on or after January 1, 1999. 5. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay Border in addition to the Purchase Price an amount equal to $160,569.60 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount, if any, shall be paid, in equal installments with the remaining installment payments of the Purchase Price. If the Purchase Price has been paid in full at the time of the Acquisition Closing Date, then the Additional Amounts shall be paid within 45 days of the Acquisition Closing Date. 6. Border represents and warrants that he is the lawful record and beneficial owner of the .535232% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 2 3 7. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 8. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 9. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. 10. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall be deemed one Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of this _____ day of August, 1999. "BORDER" ----------------------------------------- Gary Border "HORSESHOE" HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., its Manager By: ------------------------------------- Kirk Saylor, Chief Financial Officer 3 EX-10.46 16 MATERIAL CONTRACT 1 EXHIBIT 10.46 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the ____ day of August, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and GARY ANDERSON ("Anderson"). RECITALS: A. Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. B. Anderson is the current owner of a .462431% interest in Horseshoe and an employee of Horseshoe by virtue of an Employment Agreement dated November 1, 1998, by and between Horseshoe and Anderson ("Employment Contract"). C. Pursuant to his Employment Contract, Anderson has certain put rights with respect to his ownership ("Put Rights"). Anderson has provided notice of his intent to exercise his Put Rights and Horseshoe believes it is in its best interest to acquire from Anderson his .462431% ownership interest. D. Horseshoe and Anderson have agreed that the fair market value of the .462431% interest in Horseshoe is $2,173,426 and that the value of his capital account at July 31, 1999 was $297,458. E. Pursuant to his Employment Contract, Anderson has borrowed certain sums from Horseshoe and as of July 31, 1999, Anderson is indebted to Horseshoe in the principal amount of $130,000 plus interest of $11,994, thus Anderson is indebted to Horseshoe as of July 31, 1999, in the total amount of $141,994 (the "Anderson Debt"). F. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Anderson hereby exercises his Put Right. Horseshoe hereby waives any requirements of written notice and further waives the condition that the Put Right can be exercised only in the event of termination of Anderson's employment. 2. Concurrently with the execution of this Agreement, Anderson has sold to Horseshoe, and Horseshoe has purchased from Anderson, Anderson's .462431% interest in Horseshoe at the price of $2,173,426, plus a return of capital of $297,458, for a total purchase price of $2,470,884 ("Purchase Price"). In full and complete satisfaction of the Anderson Debt, the Purchase Price shall be reduced by the amount of the Anderson Debt (the Purchase Price less the Anderson Debt being referred to herein as 2 the "Net Purchase Price.") The Net Purchase price shall be paid as follows: (i) 25% of the Net Purchase Price at the time of the execution of this Agreement and (ii) 25% of the Net Purchase Price on August 1 during each of the next 3 years. All sums due under this Agreement shall bear interest at a rate of 8% per annum. 3. Anderson hereby unconditionally releases and discharges the Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with (i) Anderson's exercise of the Put Right, (ii) Anderson's ownership of Horseshoe, and (iii) this Agreement and all of the agreements, documents and instruments to be executed and delivered in connection with this Agreement. Anderson acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, he shall have no equity ownership in the Horseshoe nor will he have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; provided however, that Anderson shall have the rights, if any, afforded to him under Horseshoe's option plan to be first effective on or after January 1, 1999. 4. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay Anderson in addition to the Purchase Price an amount equal to $138,729.30 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount, if any, shall be paid, in equal installments with the remaining installment payments of the Purchase Price. If the Purchase Price has been paid in full at the time of the Acquisition Closing Date, then the Additional Amounts shall be paid within 45 days of the Acquisition Closing Date. 5. Anderson represents and warrants that he is the lawful record and beneficial owner of the .462431% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 6. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 7. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 8. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. 2 3 9. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall be deemed one Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of this _____ day of August, 1999. "ANDERSON" ------------------------------------ Gary Anderson "HORSESHOE" HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., its Manager By: -------------------------------- Kirk Saylor, Chief Financial Officer 3 EX-10.47 17 MATERIAL CONTRACT 1 EXHIBIT 10.47 HORSESHOE GAMING HOLDING CORP. EQUITY INCENTIVE PLAN Section 1. PURPOSE OF THE PLAN The purpose of the Horseshoe Gaming Holding Corp. Equity Incentive Plan (the "Plan") is to further the interests of Horseshoe Gaming Holding Corp. (the "Corporation") and its shareholders by providing long-term performance incentives to those key employees of the Corporation and its Subsidiaries who are largely responsible for the management, growth and protection of the business of the Corporation and its Subsidiaries. Section 2. DEFINITIONS For purposes of the Plan, the following terms shall be defined as set forth below: (a) "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. (b) "Award" means any Option, SAR (including a Limited SAR), Restricted Common Stock, Common Stock granted as a bonus or in lieu of other awards, other Common Stock-Based Award, Tax Bonus or other cash payments granted to a Participant under the Plan. (c) "Award Agreement" shall mean the written agreement, instrument or document evidencing an Award. (d) "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. 2 (e) "Change of Control" means and includes each of the following occurring after the effective date of this Plan: (i) prior to the completion of an Initial Public Offering by the Corporation, the failure at any time of Excluded Persons as a group to own and control at least 40% of the issued and outstanding Equity Interests of the Company; (ii) after the completion of an Initial Public Offering by the Corporation, 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 Corporation 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 Corporation 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 Corporation entitled to vote in the election of directors of the Corporation 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 Corporation; (iii) any merger or consolidation of the Corporation with or into any person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all assets of the Corporation, 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 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; 2 3 (iv) during any period of 12 consecutive months after the effective date of the Plan, 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 (v) the Company adopts a plan of liquidation. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (g) "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. (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. (i) "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. (j) "Fair Market Value" means, with respect to Common Stock, Awards, or other property, the fair market value of such Common Stock, Awards, or other property determined by such methods or procedures as shall be established from time to time by the Board in good faith and in accordance with applicable law. Unless and until determined otherwise by the Board, the Fair Market Value of Common Stock shall be determined pursuant to the methodology and procedures set forth on Exhibit A to this Plan. (k) "Initial Public Offering" or "IPO" means a bona fide underwritten initial public offering of Capital Stock of the Company for cash pursuant to an effective registration under the Securities Act. 3 4 (l) "Limited SAR" means an SAR exercisable only for cash upon a Change of Control or other event, as specified by the Board. (m) "Option" means a right granted to a Participant pursuant to Section 6(b) to purchase Common Stock at a specified price during specified time periods. (n) "Restricted Common Stock" means Common Stock awarded to a Participant pursuant to Section 6(c) that may be subject to certain restrictions and to a risk of forfeiture. (o) "SAR" or "Common Stock Appreciation Right" means the right granted to a Participant pursuant to Section 6(d) to be paid an amount measured by the appreciation in the Fair Market Value of Common Stock from the date of grant to the date of exercise of the right, with payment to be made in cash, Common Stock or as specified in the Award, as determined by the Board. (p) "Subsidiary" shall mean any corporation, partnership, joint venture or other business entity of which 50% or more of the outstanding voting power is beneficially owned, directly or indirectly, by the Corporation. (q) "Tax Bonus" means a payment in cash in the year in which an amount is included in the gross income of a Participant in respect of an Award of an amount equal to the federal, foreign, if any, and applicable state and local income and employment tax liabilities payable by the Participant as a result of (i) the amount included in gross income in respect of the Award and (ii) the payment of the amount in this clause (ii). For purposes of determining the amount to be paid to the Participant pursuant to the preceding sentence, the Participant shall be deemed to pay federal, foreign, if any, and state and local income taxes at the highest marginal rate of tax imposed upon ordinary income for the year in which an amount in respect of the Award is included in gross income, after giving effect to any deductions therefrom or credits available with respect to the payment of any such taxes. Section 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Board of Directors of the Corporation (the "Board"). Any action of the Board in administering the Plan shall be final, conclusive and binding on all persons, including the Corporation, its Subsidiaries, employees, Participants, persons claiming rights from or through Participants and members of the Corporation. Subject to the provisions of the Plan, the Board shall have full and final authority in its discretion: (a) to select the key employees who will receive Awards pursuant to the Plan ("Participants"); (b) to determine the type or types of Awards to be granted to each Participant; (c) to determine the number of shares of Common Stock to which an Award will relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, restrictions as to 4 5 transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, and waivers of or modifications to performance conditions relating to an Award, based in each case on such considerations as the Board shall determine) and all other matters to be determined in connection with an Award; (d) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Common Stock, other Awards or other property, or an Award may be canceled, forfeited, or surrendered; (e) to determine whether, and to certify that, performance goals to which the settlement of an Award is subject are satisfied; (f) to correct any defect or supply any omission or reconcile any inconsistency in the Plan, and to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan; and (g) to make all other determinations as it may deem necessary or advisable for the administration of the Plan. Section 4. PARTICIPATION IN THE PLAN Participants in the Plan shall be selected by the Board from among the key employees of the Corporation and its Subsidiaries. Section 5. PLAN LIMITATIONS; COMMON STOCK SUBJECT TO THE PLAN Subject to the provisions of Section 8(a) hereof, the aggregate number of shares of the Class A Common Stock, $0.01 par value, of the Corporation (the "Common Stock") available for issuance as Awards under the Plan shall not exceed 2,500 shares of Common Stock. No Award may be granted if the number of shares of Common Stock to which such Award relates, when added to the number of shares of Common Stock previously issued under the Plan and the number of shares of shares of Common Stock which may then be acquired pursuant to other outstanding, unexercised Awards, exceeds the number of shares of Common Stock available for issuance pursuant to the Plan. If any shares of Common Stock subject to an Award are forfeited or such Award is settled in cash or otherwise terminates for any reason whatsoever without an actual distribution of shares of Common Stock to the Participant, any shares of Common Stock counted against the number of shares of Common Stock available for issuance pursuant to the Plan with respect to such Award shall, to the extent of any such forfeiture, settlement, or termination, again be available for Awards under the Plan; provided, however, that the Board may adopt procedures for the counting of shares of Common Stock relating to any Award to ensure appropriate counting, avoid double counting, and provide for adjustments in any case in which the number of shares of Common Stock actually distributed differs from the number of shares of Common Stock previously counted in connection with such Award. Section 6. AWARDS (a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Board may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 8(a)), such additional terms and conditions, not inconsistent with the 5 6 provisions of the Plan, as the Board shall determine, including terms requiring forfeiture of Awards in the event of termination of employment by the Participant; provided, however, that the Board shall retain full power to accelerate or waive any such additional term or condition as it may have previously imposed. All Awards shall be evidenced by an Award Agreement. (b) Options. The Board may grant Options to Participants on the following terms and conditions: (i) Exercise Price. The exercise price of each Option shall be determined by the Board at the time the Option is granted, but (except as provided in Section 7(a)) the exercise price of any Option shall not be less than the Fair Market Value of the Common Stock covered thereby at the time the Option is granted. (ii) Time and Method of Exercise. The Board shall determine the time or times at which an Option may be exercised in whole or in part, whether the exercise price shall be paid in cash or by the surrender at Fair Market Value of Common Stock, or by any combination of cash and Common Stock, including, without limitation, cash, Common Stock, other Awards, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis, such as through "cashless exercise" arrangements, to the extent permitted by applicable law), and the methods by which Common Stock will be delivered or deemed to be delivered to Participants. (c) Restricted Common Stock. The Board is authorized to grant Restricted Common Stock to Participants on the following terms and conditions: (i) Restricted Period. Restricted Common Stock awarded to a Participant shall be subject to such restrictions on transferability and other restrictions for such periods as shall be established by the Board, in its discretion, at the time of such Award, which restrictions may lapse separately or in combination at such times, under such circumstances, or otherwise, as the Board may determine. (ii) Forfeiture. Restricted Common Stock shall be forfeitable to the Corporation upon termination of employment during the applicable restricted periods. The Board, in its discretion, whether in an Award Agreement or anytime after an Award is made, may accelerate the time at which restrictions or forfeiture conditions will lapse or remove any such restrictions, including upon death, disability or retirement, whenever the Board determines that such action is in the best interests of the Corporation. (iii) Certificates for Common Stock. Restricted Common Stock granted under the Plan may be evidenced in such manner as the Board shall determine. If certificates representing Restricted Common Stock are registered in the name of the Participant, such certificates may bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Common Stock. 6 7 (iv) Rights as a Common Stockholder. Subject to the terms and conditions of the Award Agreement, the Participant shall have all the rights of a Common Stockholder of the Corporation with respect to Restricted Common Stock awarded to him or her, including, without limitation, the right to vote such Common Stock and the right to receive all dividends or other distributions made with respect to such Common Stock. If any such dividends or distributions are paid in Common Stock, the Common Stock shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Common Stock with respect to which the Common Stock has been distributed. (d) Common Stock Appreciation Rights. The Board is authorized to grant SARs to Participants on the following terms and conditions: (i) Right to Payment. An SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Common Stock on the date of exercise over (B) the grant price of the SAR as determined by the Board as of the date of grant of the SAR, which grant price (except as provided in Section 7(a)) shall not be less than the Fair Market Value of one share of Common Stock on the date of grant. (ii) Other Terms. The Board shall determine the time or times at which an SAR may be exercised in whole or in part, the method of exercise, method of settlement, form of consideration payable in settlement, method by which Common Stock will be delivered or deemed to be delivered to Participants, whether or not an SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR. Limited SARs may be granted on such terms, not inconsistent with this Section 6(d), as the Board may determine. Limited SARs may be either freestanding or in tandem with other Awards. (e) Other Common Stock-Based Awards. The Board is authorized, subject to limitations under applicable law, to grant to Participants such other Common Stock-Based Awards in addition to those provided in Sections 6(b), (c) and (d) hereof, as deemed by the Board to be consistent with the purposes of the Plan. The Board shall determine the terms and conditions of such Awards. Common Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(e) shall be purchased for such consideration and paid for at such times, by such methods, and in such forms, including, without limitation, cash, Common Stock, other Awards, or other property, as the Board shall determine. (f) Cash Payments. The Board is authorized, subject to limitations under applicable law, to grant to Participants Tax Bonuses and other cash payments, whether awarded separately or as a supplement to any Common Stock-Based Award. The Board shall determine the terms and conditions of such Awards. 7 8 Section 7. ADDITIONAL PROVISIONS APPLICABLE TO AWARDS (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan or any award granted under any other plan of the Corporation or any Subsidiary, or any business entity acquired by the Corporation or any Subsidiary, or any other right of a Participant to receive payment from the Corporation or any Subsidiary. If an Award is granted in substitution for another Award or award, the Board shall require the surrender of such other Award or award in consideration for the grant of the new Award. Awards granted in addition to, or in tandem with other Awards or awards may be granted either as of the same time as, or a different time from, the grant of such other Awards or awards. The per share exercise price of any Option, grant price of any SAR, or purchase price of any other Award conferring a right to purchase Common Stock: (i) granted in substitution for an outstanding Award or award (including, without limiting the generality of the foregoing, options and other awards previously made to any employee of Horseshoe Gaming LLC, a Subsidiary), shall be not less than the lesser of (A) the Fair Market Value of a share of Common Stock at the date such substitute Award is granted or (B) such Fair Market Value at that date, reduced to reflect the Fair Market Value at that date of the Award or award required to be surrendered by the Participant as a condition to receipt of the substitute Award; or (ii) retroactively granted in tandem with an outstanding Award or award, shall not be less than the lesser of the Fair Market Value of a share of Common Stock at the date of grant of the later Award or at the date of grant of the earlier Award or award. (b) Exchange and Buy Out Provisions. The Board may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Common Stock, other Awards (subject to Section 7(a)), or other property based on such terms and conditions as the Board shall determine and communicate to a Participant at the time that such offer is made. (c) Performance Conditions. The right of a Participant to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Board. (d) Term of Awards. The term of each Award shall, except as provided herein, be for such period as may be determined by the Board. (e) Form of Payment. Subject to the terms of the Plan and any applicable Award Agreement, payments or transfers to be made by the Corporation or a Subsidiary upon the grant or exercise of an Award may be made in such forms as the Board shall determine, including, without limitation, cash, Common Stock, other Awards, or other property (and may be made in a single payment or transfer, in installments, or on a deferred basis), in each case determined in accordance with rules adopted by, and at the discretion of, the Board. (Such payments may include, without 8 9 limitation, provisions for the payment or crediting of reasonable interest on installments or deferred payments.) The Board, in its discretion, may accelerate any payment or transfer upon a change in control as defined by the Board. The Board may also authorize payment upon the exercise of an Option by net issuance or other cashless exercise methods. (f) Loan Provisions. With the consent of the Board, and subject at all times to laws and regulations and other binding obligations or provisions applicable to the Corporation, the Corporation may make, guarantee, or arrange for a loan or loans to a Participant with respect to the exercise of any Option or other payment in connection with any Award, including the payment by a Participant of any or all federal, state, or local income or other taxes due in connection with any Award. Subject to such limitations, the Board shall have full authority to decide whether to make a loan or loans hereunder and to determine the amount, terms, and provisions of any such loan or loans, including the interest rate to be charged in respect of any such loan or loans, whether the loan or loans are to be with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which the loan or loans may be forgiven. (g) Change of Control. In the event of a Change of Control of the Corporation, all Awards granted under the Plan that are still outstanding and not yet vested or exercisable or which are subject to restrictions shall become immediately 100% vested in each Participant or shall be free of any restrictions, as of the first date that the definition of Change of Control has been fulfilled, and shall be exercisable for the remaining duration of the Award. All Awards that are exercisable as of the effective date of the Change of Control will remain exercisable for the remaining duration of the Award. Section 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; ACCELERATION IN CERTAIN EVENTS (a) In the event that the Board shall determine that any dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, or other similar corporate transaction or event, affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Board shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of Common Stock which may thereafter be issued in connection with Awards, (ii) the number and kind of Common Stock issuable in respect of outstanding Awards, (iii) the aggregate number and kind of Common Stock available under the Plan, and (iv) the exercise price, grant price, or purchase price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award. (b) In addition, the Board is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding paragraph) affecting the Corporation or any Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. 9 10 Section 9. GENERAL PROVISIONS (a) Changes to the Plan and Awards. The Board of Directors of the Corporation may amend, alter, suspend, discontinue, or terminate the Plan or the Board's authority to grant Awards under the Plan without the consent of the Corporation's shareholders or Participants; provided, however, that without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights of such Participant under any Award theretofore granted and any Award Agreement relating thereto; and provided , further, that without the approval of shareholders holding a majority of the voting power of all classes of the common stock of the Corporation then issued and outstanding, no amendment will: (i) change the class of persons eligible to receive Awards; (ii) materially increase the benefits accruing to Participants under the Plan, or (iii) increase the number of shares of Common Stock subject to the Plan. The Board may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted and any Award Agreement relating thereto; provided, however, that without the consent of an affected Participant, no such amendment, alteration, suspension, discontinuation, or termination of any Award may materially and adversely affect the rights of such Participant under such Award. The foregoing notwithstanding, any performance condition specified in connection with an Award shall not be deemed a fixed contractual term, but shall remain subject to adjustment by the Board, in its discretion at any time in view of the Board's assessment of the Corporation's strategy, performance of comparable companies, and other circumstances. (b) No Right to Award or Employment. No employee or other person shall have any claim or right to receive an Award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Corporation or any Subsidiary. (c) Taxes. The Corporation or any Subsidiary is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Common Stock or any payroll or other payment to a Participant, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Board may deem advisable to enable the Corporation and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Common Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations. (d) Limits on Transferability; Beneficiaries. No Award or other right or interest of a Participant under the Plan shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation, or liability of such Participants to, any party, other than the Corporation or any Subsidiary, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution, and such Awards and rights shall be exercisable during the lifetime of the Participant only by the Participant or his or her guardian or legal representative. 10 11 Notwithstanding the foregoing, the Board may, in its discretion, provide that Awards or other rights or interests of a Participant granted pursuant to the Plan be transferable, without consideration, to immediate family members (i.e., children, grandchildren or spouse), to trusts for the benefit of such immediate family members and to partnerships in which such family members are the only partners. The Board may attach to such transferability feature such terms and conditions as it deems advisable. In addition, a Participant may, in the manner established by the Board, designate a beneficiary (which may be a person or a trust) to exercise the rights of the Participant, and to receive any distribution, with respect to any Award upon the death of the Participant. A beneficiary, guardian, legal representative or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Board, and to any additional restrictions deemed necessary or appropriate by the Board. (e) No Rights to Awards; No Rights as a Common Stockholder. No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants. No Award shall confer on any Participant any of the rights of a Common Stockholder of the Corporation unless and until Common Stock is duly issued or transferred to the Participant in accordance with the terms of the Award. (f) Discretion. In exercising, or declining to exercise, any grant of authority or discretion hereunder, the Board may consider or ignore such factors or circumstances and may accord such weight to such factors and circumstances as the Board alone and in its sole judgment deems appropriate and without regard to the affect such exercise, or declining to exercise such grant of authority or discretion, would have upon the affected Participant, any other Participant, any employee, the Corporation, any Subsidiary, any member or any other person. (g) Effective Date. The effective date of the Plan is January 1, 1999. 11 12 EXHIBIT A VALUATION METHODOLOGY: 1. Compute the Enterprise Value of comparable gaming companies as follows: o Compute market value by multiplying trading value of common stock as quoted by the applicable stock exchange at the end of applicable quarter by the total actual outstanding shares. o Add carrying value of any preferred stock, if any o Add total long-term debt o Sum equals "Enterprise Value" 2. Compute EBITDA for the four (4) preceding fiscal quarters of these comparable gaming companies by adding depreciation and amortization to Operating Income. 3. Compute the EBITDA multiple for these comparable gaming companies by dividing Enterprise Value by EBITDA. 4. Determine the MEDIAN multiple of these same comparable gaming companies. 5. Apply the MEDIAN multiple to Horseshoe's preceding four (4) fiscal quarters EBITDA, as calculated above, to determine Enterprise Value. 6. Subtract total long-term debt and the balance in the undistributed capital of all current owners to determine total Fair Market Value. 7. Total Fair Market Value is then divided by total existing outstanding shares plus total issued stock options (whether or not vested) to determine option price. 8. The comparable gaming companies (including, but not limited to) are: o Argosy o Aztar o Hollywood Park o Park Place o MGM o Mirage o Players o Harrah's o Boyd o Station Casinos o Trump o Mandalay Bay 12 EX-10.48 18 MATERIAL CONTRACT 1 EXHIBIT 10.48 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. HORSESHOE GAMING, L.L.C. PROMISSORY NOTE DUE JANUARY 2, 2004 $844,583.00 November 30, 1999 New York, New York FOR VALUE RECEIVED, HORSESHOE GAMING, L.L.C., a Delaware limited liability company (the "Company"), subject to Section 3 hereof, promises to pay, on or before January 4, 2004 (the "Maturity Date"), to the order of Alpine Associates (the "Holder"), at the Company'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 EIGHT HUNDRED FORTY-FOUR THOUSAND FIVE HUNDRED EIGHTY-THREE DOLLARS ($844,583.00) 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. 1. Purchase Agreement. This Note is issued pursuant to the terms and conditions of a Purchase Agreement dated as of the date hereof (the "Purchase Agreement"), between the Company and the Holder, as consideration for the repurchase by the Company of the Holder's ownership interest in the Company (the "Ownership Interest"), made in connection with the proposed acquisition by the Company of Empress Casino Hammond Corporation, an Indiana corporation and 2 Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. 2. Interest. The Company promises to pay simple interest on the outstanding principal amount of this Note at a rate equal to 10% per annum (the "Interest Rate") from November 30, 1999 until the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note, when all accrued interest shall be immediately due and payable. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Subject to the terms of (i) the Credit Agreement dated as of June 30, 1999 (the "Credit Agreement"), among Horseshoe Gaming Holding Corp. ("HGHC"), as Borrower, the lenders listed therein, DLJ Capital Funding, Inc., as Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent and Wells Fargo Bank, National Association, as Documentation Agent; (ii) the Indenture dated as of June 15, 1997 (the "9_% Indenture"), as the same shall have been amended to date, for the Company's 9_% Senior Subordinated Notes due 2007, among the Company, Robinson Property Group, Limited Partnership, New Gaming Capital Partnership, Horseshoe Entertainment, Horseshoe GP, Inc., Bossier City Land Corporation and Texas Trustee; (iii) the Indenture dated as of May 11, 1999 (the "8_% Indenture"), for HGHC's 8_% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes"), by and between HGHC and U.S. Trust Company, National Association, as trustee; (iv) the Indenture dated as of June 18, 1998 (the "Empress Indenture"), for Empress Entertainment, Inc.'s 8_% Senior Subordinated Notes due 2006, among Empress Entertainment, Inc., Empress River Casino Finance Corporation, Empress Joliet, Empress Casino Hammond Corporation, Hammond Residential and U.S. Bank Trust National Association (the documents described in (i), (ii), (iii) and (iv) above being referred to as the "Financing Documents"); and (v) the various agreements entered into prior to the date hereof to repurchase the interests of various former employees and members of the Company which, among other things, do not permit the Company to make principal payments on the repurchase of the Ownership Interest prior to the repayment in full of amounts due under the Repurchase Agreements), the Company shall pay accrued interest semiannually on June 30 and December 31 of each year, beginning on June 30, 2000. To the extent that the Company is not permitted to make interest payments under the Financing Documents or the Repurchase Agreements, interest shall accrue and be compounded at the Interest Rate until the earlier of the date such interest is paid, the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note. 2 3 3. Payment of Principal. If the Company is not permitted under the terms of the Financing Documents or the Repurchase Agreements to pay the principal of this Note in full on the Maturity Date, then the payment of the portion of the principal on this Note which may not be paid may be delayed until such date as such principal payments are permitted under the terms of the Financing Documents and the Repurchase Agreements. However, the portion of this Note which may be paid on the Maturity Date shall be paid on the Maturity Date and the balance shall be paid promptly thereafter as permitted by the Financing Documents and the Repurchase Agreements 4. Optional Prepayment. The Company, at its option, may prepay all or any portion of this Note, at any time, by paying an amount equal to the outstanding principal amount of this Note, or a portion thereof, together with interest accrued and unpaid thereon to the date of prepayment and any other amounts due under this Note, without penalty or premium. 5. Application of Payments. All mandatory payments under Section 3 of this Note and all optional prepayments under Section 4 of this Note shall include payment of accrued interest on the principal amount so paid or prepaid and all other amounts due under this Note and shall be applied, first to all reasonable costs, fees, and expenses incurred by the Holder in the exercise of the Holder's rights hereunder, second to payment of other accrued interest, and thereafter to principal. 6. Acceleration. This Note shall accelerate and the outstanding principal of and all accrued interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived, if a Change in Control (as defined in the 8_% Indenture) or an Event of Default (as defined in the 8_% Indenture) occurs, which Change of Control or Event of Default results in the acceleration and repayment of all of the Senior Subordinated Notes. 7. Replacement Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company from the Holder and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. 3 4 8. Pari Passu Payments. All payments on this Note will be made pari passu with payment to holders of similar notes issued on the date hereof in respect of the repurchase of membership interests in the Company. 9. Amendment. Any amendment, supplement or modification of or to any provision of this Note shall be effective only with the express written consent of the Company and the Holder. 10. Covenants Bind Successors and Assigns. All the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Company or the Holder shall bind its successors and assigns, whether so expressed or not. 11. Governing Law. This Note and the rights and obligations of the Company and the Holder hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 12. Variation in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. 13. Headings. The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: --------------------------------------- Kirk Saylor, Chief Financial Officer 4 5 PURCHASE AGREEMENT PURCHASE AGREEMENT dated and effective as of the 30th day of November, 1999 (this "Agreement"), between Horseshoe Gaming, L.L.C., a Delaware limited liability company ("Horseshoe"), and Alpine Associates ("Seller"). RECITALS: Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. Seller is the current owner of a .112611% interest in Horseshoe (the "Ownership Interest"). Horseshoe is the party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation and Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. In connection with the Acquisition, Seller desires to sell and Horseshoe believes it is in its best interest to acquire from Seller the Ownership Interest. Horseshoe and Seller have agreed that the fair market value of the Ownership Interest is EIGHT HUNDRED FORTY-FOUR THOUSAND FIVE HUNDRED EIGHTY-THREE DOLLARS ($844,583.00). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Subject to the terms and conditions set forth herein, Seller agrees to sell, transfer, convey, assign and deliver to Horseshoe, and Horseshoe agrees to purchase, acquire and accept from Seller, the Ownership Interest, at the price of $844,583.00 (the "Purchase Price"), payable by a promissory note of Horseshoe, which is attached hereto (the "Promissory Note"). 2. Seller hereby unconditionally releases and discharges Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with Seller's ownership of Horseshoe and any and all agreements in any way connected with or related thereto other than this Agreement and the Promissory Note. Seller acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, Seller shall have no equity ownership or any other interest in Horseshoe or any of its affiliates or subsidiaries nor will Seller have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; the only rights Seller shall have will be to enforce the terms of the Promissory Note. 5 6 3. Seller represents and warrants that Seller is the lawful record and beneficial owner of the Ownership Interest, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 4. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 5. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 6. This Agreement and the rights and obligations of the Company and the Seller hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 7. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. 8. Horseshoe, on the one hand, and Seller, on the other hand, shall pay their respective fees and expenses incurred by them in connection with the transaction contemplated herein. 9. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms and provisions of this Agreement in any other jurisdiction. 6 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: ---------------------------------------- Kirk Saylor, Chief Financial Officer Seller: By: --------------------------------------- 7 EX-10.49 19 MATERIAL CONTRACT 1 EXHBIT 10.49 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. HORSESHOE GAMING, L.L.C. PROMISSORY NOTE DUE JANUARY 2, 2004 $760,125.00 November 30, 1999 New York, New York FOR VALUE RECEIVED, HORSESHOE GAMING, L.L.C., a Delaware limited liability company (the "Company"), subject to Section 3 hereof, promises to pay, on or before January 4, 2004 (the "Maturity Date"), to the order of Bear Stearns F/A/O #2000 (the "Holder"), at the Company'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 SEVEN HUNDRED SIXTY THOUSAND ONE HUNDRED TWENTY-FIVE DOLLARS ($760,125.00) 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. 1. Purchase Agreement. This Note is issued pursuant to the terms and conditions of a Purchase Agreement dated as of the date hereof (the "Purchase Agreement"), between the Company and the Holder, as consideration for the repurchase by the Company of the Holder's ownership interest in the Company (the "Ownership Interest"), made in connection with the proposed acquisition by the Company of Empress Casino Hammond Corporation, an Indiana corporation and 2 Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. 2. Interest. The Company promises to pay simple interest on the outstanding principal amount of this Note at a rate equal to 10% per annum (the "Interest Rate") from November 30, 1999 until the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note, when all accrued interest shall be immediately due and payable. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Subject to the terms of (i) the Credit Agreement dated as of June 30, 1999 (the "Credit Agreement"), among Horseshoe Gaming Holding Corp. ("HGHC"), as Borrower, the lenders listed therein, DLJ Capital Funding, Inc., as Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent and Wells Fargo Bank, National Association, as Documentation Agent; (ii) the Indenture dated as of June 15, 1997 (the "9_% Indenture"), as the same shall have been amended to date, for the Company's 9_% Senior Subordinated Notes due 2007, among the Company, Robinson Property Group, Limited Partnership, New Gaming Capital Partnership, Horseshoe Entertainment, Horseshoe GP, Inc., Bossier City Land Corporation and Texas Trustee; (iii) the Indenture dated as of May 11, 1999 (the "8_% Indenture"), for HGHC's 8_% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes"), by and between HGHC and U.S. Trust Company, National Association, as trustee; (iv) the Indenture dated as of June 18, 1998 (the "Empress Indenture"), for Empress Entertainment, Inc.'s 8_% Senior Subordinated Notes due 2006, among Empress Entertainment, Inc., Empress River Casino Finance Corporation, Empress Joliet, Empress Casino Hammond Corporation, Hammond Residential and U.S. Bank Trust National Association (the documents described in (i), (ii), (iii) and (iv) above being referred to as the "Financing Documents"); and (v) the various agreements entered into prior to the date hereof to repurchase the interests of various former employees and members of the Company which, among other things, do not permit the Company to make principal payments on the repurchase of the Ownership Interest prior to the repayment in full of amounts due under the Repurchase Agreements), the Company shall pay accrued interest semiannually on June 30 and December 31 of each year, beginning on June 30, 2000. To the extent that the Company is not permitted to make interest payments under the Financing Documents or the Repurchase Agreements, interest shall accrue and be compounded at the Interest Rate until the earlier of the date such interest is paid, the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note. 2 3 3. Payment of Principal. If the Company is not permitted under the terms of the Financing Documents or the Repurchase Agreements to pay the principal of this Note in full on the Maturity Date, then the payment of the portion of the principal on this Note which may not be paid may be delayed until such date as such principal payments are permitted under the terms of the Financing Documents and the Repurchase Agreements. However, the portion of this Note which may be paid on the Maturity Date shall be paid on the Maturity Date and the balance shall be paid promptly thereafter as permitted by the Financing Documents and the Repurchase Agreements 4. Optional Prepayment. The Company, at its option, may prepay all or any portion of this Note, at any time, by paying an amount equal to the outstanding principal amount of this Note, or a portion thereof, together with interest accrued and unpaid thereon to the date of prepayment and any other amounts due under this Note, without penalty or premium. 5. Application of Payments. All mandatory payments under Section 3 of this Note and all optional prepayments under Section 4 of this Note shall include payment of accrued interest on the principal amount so paid or prepaid and all other amounts due under this Note and shall be applied, first to all reasonable costs, fees, and expenses incurred by the Holder in the exercise of the Holder's rights hereunder, second to payment of other accrued interest, and thereafter to principal. 6. Acceleration. This Note shall accelerate and the outstanding principal of and all accrued interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived, if a Change in Control (as defined in the 8_% Indenture) or an Event of Default (as defined in the 8_% Indenture) occurs, which Change of Control or Event of Default results in the acceleration and repayment of all of the Senior Subordinated Notes. 7. Replacement Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company from the Holder and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. 3 4 8. Pari Passu Payments. All payments on this Note will be made pari passu with payment to holders of similar notes issued on the date hereof in respect of the repurchase of membership interests in the Company. 9. Amendment. Any amendment, supplement or modification of or to any provision of this Note shall be effective only with the express written consent of the Company and the Holder. 10. Covenants Bind Successors and Assigns. All the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Company or the Holder shall bind its successors and assigns, whether so expressed or not. 11. Governing Law. This Note and the rights and obligations of the Company and the Holder hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 12. Variation in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. 13. Headings. The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: --------------------------------------- Kirk Saylor, Chief Financial Officer 4 5 PURCHASE AGREEMENT PURCHASE AGREEMENT dated and effective as of the 30th day of November, 1999 (this "Agreement"), between Horseshoe Gaming, L.L.C., a Delaware limited liability company ("Horseshoe"), and Bear Stearns F/A/O #2000 ("Seller"). RECITALS: Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. Seller is the current owner of a .101350% interest in Horseshoe (the "Ownership Interest"). Horseshoe is the party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation and Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. In connection with the Acquisition, Seller desires to sell and Horseshoe believes it is in its best interest to acquire from Seller the Ownership Interest. Horseshoe and Seller have agreed that the fair market value of the Ownership Interest is SEVEN HUNDRED SIXTY THOUSAND ONE HUNDRED TWENTY-FIVE DOLLARS ($760,125.00). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Subject to the terms and conditions set forth herein, Seller agrees to sell, transfer, convey, assign and deliver to Horseshoe, and Horseshoe agrees to purchase, acquire and accept from Seller, the Ownership Interest, at the price of $760,125.00 (the "Purchase Price"), payable by a promissory note of Horseshoe, which is attached hereto (the "Promissory Note"). 2. Seller hereby unconditionally releases and discharges Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with Seller's ownership of Horseshoe and any and all agreements in any way connected with or related thereto other than this Agreement and the Promissory Note. Seller acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, Seller shall have no equity ownership or any other interest in Horseshoe or any of its affiliates or subsidiaries nor will Seller have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; the only rights Seller shall have will be to enforce the terms of the Promissory Note. 5 6 3. Seller represents and warrants that Seller is the lawful record and beneficial owner of the Ownership Interest, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 4. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 5. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 6. This Agreement and the rights and obligations of the Company and the Seller hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 7. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. 8. Horseshoe, on the one hand, and Seller, on the other hand, shall pay their respective fees and expenses incurred by them in connection with the transaction contemplated herein. 9. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms and provisions of this Agreement in any other jurisdiction. 6 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: --------------------------------------- Kirk Saylor, Chief Financial Officer Seller: By: --------------------------------------- 7 EX-10.50 20 MATERIAL CONTRACT 1 EXHBIT 10.50 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. HORSESHOE GAMING, L.L.C. PROMISSORY NOTE DUE JANUARY 2, 2004 $253,373.00 November 30, 1999 New York, New York FOR VALUE RECEIVED, HORSESHOE GAMING, L.L.C., a Delaware limited liability company (the "Company"), subject to Section 3 hereof, promises to pay, on or before January 4, 2004 (the "Maturity Date"), to the order of Matthewson CRUT (the "Holder"), at the Company'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 FIFTY-THREE THOUSAND THREE HUNDRED SEVENTY-THREE DOLLARS ($253,373.00) 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. 1. Purchase Agreement. This Note is issued pursuant to the terms and conditions of a Purchase Agreement dated as of the date hereof (the "Purchase Agreement"), between the Company and the Holder, as consideration for the repurchase by the Company of the Holder's ownership interest in the Company (the "Ownership Interest"), made in connection with the proposed acquisition by the Company of Empress Casino Hammond Corporation, an Indiana corporation and 2 Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. 2. Interest. The Company promises to pay simple interest on the outstanding principal amount of this Note at a rate equal to 10% per annum (the "Interest Rate") from November 30, 1999 until the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note, when all accrued interest shall be immediately due and payable. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Subject to the terms of (i) the Credit Agreement dated as of June 30, 1999 (the "Credit Agreement"), among Horseshoe Gaming Holding Corp. ("HGHC"), as Borrower, the lenders listed therein, DLJ Capital Funding, Inc., as Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent and Wells Fargo Bank, National Association, as Documentation Agent; (ii) the Indenture dated as of June 15, 1997 (the "9_% Indenture"), as the same shall have been amended to date, for the Company's 9_% Senior Subordinated Notes due 2007, among the Company, Robinson Property Group, Limited Partnership, New Gaming Capital Partnership, Horseshoe Entertainment, Horseshoe GP, Inc., Bossier City Land Corporation and Texas Trustee; (iii) the Indenture dated as of May 11, 1999 (the "8_% Indenture"), for HGHC's 8_% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes"), by and between HGHC and U.S. Trust Company, National Association, as trustee; (iv) the Indenture dated as of June 18, 1998 (the "Empress Indenture"), for Empress Entertainment, Inc.'s 8_% Senior Subordinated Notes due 2006, among Empress Entertainment, Inc., Empress River Casino Finance Corporation, Empress Joliet, Empress Casino Hammond Corporation, Hammond Residential and U.S. Bank Trust National Association (the documents described in (i), (ii), (iii) and (iv) above being referred to as the "Financing Documents"); and (v) the various agreements entered into prior to the date hereof to repurchase the interests of various former employees and members of the Company which, among other things, do not permit the Company to make principal payments on the repurchase of the Ownership Interest prior to the repayment in full of amounts due under the Repurchase Agreements), the Company shall pay accrued interest semiannually on June 30 and December 31 of each year, beginning on June 30, 2000. To the extent that the Company is not permitted to make interest payments under the Financing Documents or the Repurchase Agreements, interest shall accrue and be compounded at the Interest Rate until the earlier of the date such interest is paid, the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note. 2 3 3. Payment of Principal. If the Company is not permitted under the terms of the Financing Documents or the Repurchase Agreements to pay the principal of this Note in full on the Maturity Date, then the payment of the portion of the principal on this Note which may not be paid may be delayed until such date as such principal payments are permitted under the terms of the Financing Documents and the Repurchase Agreements. However, the portion of this Note which may be paid on the Maturity Date shall be paid on the Maturity Date and the balance shall be paid promptly thereafter as permitted by the Financing Documents and the Repurchase Agreements 4. Optional Prepayment. The Company, at its option, may prepay all or any portion of this Note, at any time, by paying an amount equal to the outstanding principal amount of this Note, or a portion thereof, together with interest accrued and unpaid thereon to the date of prepayment and any other amounts due under this Note, without penalty or premium. 5. Application of Payments. All mandatory payments under Section 3 of this Note and all optional prepayments under Section 4 of this Note shall include payment of accrued interest on the principal amount so paid or prepaid and all other amounts due under this Note and shall be applied, first to all reasonable costs, fees, and expenses incurred by the Holder in the exercise of the Holder's rights hereunder, second to payment of other accrued interest, and thereafter to principal. 6. Acceleration. This Note shall accelerate and the outstanding principal of and all accrued interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived, if a Change in Control (as defined in the 8_% Indenture) or an Event of Default (as defined in the 8_% Indenture) occurs, which Change of Control or Event of Default results in the acceleration and repayment of all of the Senior Subordinated Notes. 7. Replacement Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company from the Holder and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. 3 4 8. Pari Passu Payments. All payments on this Note will be made pari passu with payment to holders of similar notes issued on the date hereof in respect of the repurchase of membership interests in the Company. 9. Amendment. Any amendment, supplement or modification of or to any provision of this Note shall be effective only with the express written consent of the Company and the Holder. 10. Covenants Bind Successors and Assigns. All the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Company or the Holder shall bind its successors and assigns, whether so expressed or not. 11. Governing Law. This Note and the rights and obligations of the Company and the Holder hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 12. Variation in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. 13. Headings. The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: --------------------------------------- Kirk Saylor, Chief Financial Officer 4 5 PURCHASE AGREEMENT PURCHASE AGREEMENT dated and effective as of the 30th day of November, 1999 (this "Agreement"), between Horseshoe Gaming, L.L.C., a Delaware limited liability company ("Horseshoe"), and Mattewson CRUT ("Seller"). RECITALS: Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. Seller is the current owner of a .033783% interest in Horseshoe (the "Ownership Interest"). Horseshoe is the party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation and Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. In connection with the Acquisition, Seller desires to sell and Horseshoe believes it is in its best interest to acquire from Seller the Ownership Interest. Horseshoe and Seller have agreed that the fair market value of the Ownership Interest is TWO HUNDRED FIFTY-THREE THOUSAND THREE HUNDRED SEVENTY-THREE DOLLARS (253,373.00). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Subject to the terms and conditions set forth herein, Seller agrees to sell, transfer, convey, assign and deliver to Horseshoe, and Horseshoe agrees to purchase, acquire and accept from Seller, the Ownership Interest, at the price of $253,373.00 (the "Purchase Price"), payable by a promissory note of Horseshoe, which is attached hereto (the "Promissory Note"). 2. Seller hereby unconditionally releases and discharges Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with Seller's ownership of Horseshoe and any and all agreements in any way connected with or related thereto other than this Agreement and the Promissory Note. Seller acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, Seller shall have no equity ownership or any other interest in Horseshoe or any of its affiliates or subsidiaries nor will Seller have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; the only rights Seller shall have will be to enforce the terms of the Promissory Note. 5 6 3. Seller represents and warrants that Seller is the lawful record and beneficial owner of the Ownership Interest, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 4. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 5. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 6. This Agreement and the rights and obligations of the Company and the Seller hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 7. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. 8. Horseshoe, on the one hand, and Seller, on the other hand, shall pay their respective fees and expenses incurred by them in connection with the transaction contemplated herein. 9. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms and provisions of this Agreement in any other jurisdiction. 6 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: ------------------------------- Kirk Saylor, Chief Financial Officer Seller: By: ------------------------------- 7 EX-10.51 21 MATERIAL CONTRACT 1 EXHIBIT 10.51 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. HORSESHOE GAMING, L.L.C. PROMISSORY NOTE DUE JANUARY 2, 2004 $422,295.00 November 30, 1999 New York, New York FOR VALUE RECEIVED, HORSESHOE GAMING, L.L.C., a Delaware limited liability company (the "Company"), subject to Section 3 hereof, promises to pay, on or before January 4, 2004 (the "Maturity Date"), to the order of Nobutaka Motaguchi (the "Holder"), at the Company'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 FOUR HUNDRED TWENTY-TWO THOUSAND TWO HUNDRED NINTY-FIVE DOLLARS ($422,295.00) 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. I. Purchase Agreement. This Note is issued pursuant to the terms and conditions of a Purchase Agreement dated as of the date hereof (the "Purchase Agreement"), between the Company and the Holder, as consideration for the repurchase by the Company of the Holder's ownership interest in the Company (the "Ownership Interest"), made in connection with the proposed acquisition by the Company of Empress Casino Hammond Corporation, an Indiana corporation and Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. II. Interest. The Company promises to pay simple interest on the outstanding principal amount of this Note at a rate equal to 10% per annum (the "Interest Rate") from November 30, 1999 until the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note, when all accrued interest shall be immediately due and payable. Interest shall be 2 computed on the basis of a 360-day year of twelve 30-day months. Subject to the terms of (i) the Credit Agreement dated as of June 30, 1999 (the "Credit Agreement"), among Horseshoe Gaming Holding Corp. ("HGHC"), as Borrower, the lenders listed therein, DLJ Capital Funding, Inc., as Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent and Wells Fargo Bank, National Association, as Documentation Agent; (ii) the Indenture dated as of June 15, 1997 (the "9_% Indenture"), as the same shall have been amended to date, for the Company's 9_% Senior Subordinated Notes due 2007, among the Company, Robinson Property Group, Limited Partnership, New Gaming Capital Partnership, Horseshoe Entertainment, Horseshoe GP, Inc., Bossier City Land Corporation and Texas Trustee; (iii) the Indenture dated as of May 11, 1999 (the "8_% Indenture"), for HGHC's 8_% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes"), by and between HGHC and U.S. Trust Company, National Association, as trustee; (iv) the Indenture dated as of June 18, 1998 (the "Empress Indenture"), for Empress Entertainment, Inc.'s 8_% Senior Subordinated Notes due 2006, among Empress Entertainment, Inc., Empress River Casino Finance Corporation, Empress Joliet, Empress Casino Hammond Corporation, Hammond Residential and U.S. Bank Trust National Association (the documents described in (i), (ii), (iii) and (iv) above being referred to as the "Financing Documents"); and (v) the various agreements entered into prior to the date hereof to repurchase the interests of various former employees and members of the Company which, among other things, do not permit the Company to make principal payments on the repurchase of the Ownership Interest prior to the repayment in full of amounts due under the Repurchase Agreements), the Company shall pay accrued interest semiannually on June 30 and December 31 of each year, beginning on June 30, 2000. To the extent that the Company is not permitted to make interest payments under the Financing Documents or the Repurchase Agreements, interest shall accrue and be compounded at the Interest Rate until the earlier of the date such interest is paid, the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note. III. Payment of Principal. If the Company is not permitted under the terms of the Financing Documents or the Repurchase Agreements to pay the principal of this Note in full on the Maturity Date, then the payment of the portion of the principal on this Note which may not be paid may be delayed until such date as such principal payments are permitted under the terms of the Financing Documents and the Repurchase Agreements. However, the portion of this Note which may be paid on the Maturity Date shall be paid on the Maturity Date and the balance shall be paid promptly thereafter as permitted by the Financing Documents and the Repurchase Agreements IV. Optional Prepayment. The Company, at its option, may prepay all or any portion of this Note, at any time, by paying an amount equal to the outstanding principal amount of this Note, or a portion thereof, together with interest accrued and unpaid thereon to the date of prepayment and any other amounts due under this Note, without penalty or premium. V. Application of Payments. All mandatory payments under Section 3 of this Note and all optional prepayments under Section 4 of this Note shall include payment of accrued interest on the principal amount so paid or prepaid and all other amounts due under this Note and shall be applied, first to all reasonable costs, fees, and expenses incurred by the Holder in the exercise of the Holder's rights hereunder, second to payment of other accrued interest, and thereafter to principal. 2 3 VI. Acceleration. This Note shall accelerate and the outstanding principal of and all accrued interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived, if a Change in Control (as defined in the 8_% Indenture) or an Event of Default (as defined in the 8_% Indenture) occurs, which Change of Control or Event of Default results in the acceleration and repayment of all of the Senior Subordinated Notes. VII. Replacement Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company from the Holder and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. VIII. Pari Passu Payments. All payments on this Note will be made pari passu with payment to holders of similar notes issued on the date hereof in respect of the repurchase of membership interests in the Company. IX. Amendment. Any amendment, supplement or modification of or to any provision of this Note shall be effective only with the express written consent of the Company and the Holder. X. Covenants Bind Successors and Assigns. All the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Company or the Holder shall bind its successors and assigns, whether so expressed or not. XI. Governing Law. This Note and the rights and obligations of the Company and the Holder hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. XII. Variation in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. 3 4 XIII. Headings. The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: --------------------------------------- Kirk Saylor, Chief Financial Officer 4 5 PURCHASE AGREEMENT PURCHASE AGREEMENT dated and effective as of the 30th day of November, 1999 (this "Agreement"), between Horseshoe Gaming, L.L.C., a Delaware limited liability company ("Horseshoe"), and Nobutaka Mutaguchi ("Seller"). RECITALS: Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. Seller is the current owner of a .056306% interest in Horseshoe (the "Ownership Interest"). Horseshoe is the party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation and Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. In connection with the Acquisition, Seller desires to sell and Horseshoe believes it is in its best interest to acquire from Seller the Ownership Interest. Horseshoe and Seller have agreed that the fair market value of the Ownership Interest is FOUR HUNDRED TWENTY-TWO-THOUSAND TWO HUNDRED NINETY-FIVE DOLLARS ($422,295.00). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: Subject to the terms and conditions set forth herein, Seller agrees to sell, transfer, convey, assign and deliver to Horseshoe, and Horseshoe agrees to purchase, acquire and accept from Seller, the Ownership Interest, at the price of $422,295.00 (the "Purchase Price"), payable by a promissory note of Horseshoe, which is attached hereto (the "Promissory Note"). Seller hereby unconditionally releases and discharges Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with Seller's ownership of Horseshoe and any and all agreements in any way connected with or related thereto other than this Agreement and the Promissory Note. Seller acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, Seller shall have no equity ownership or any other interest in Horseshoe or any of its affiliates or subsidiaries nor will Seller have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; the only rights Seller shall have will be to enforce the terms of the Promissory Note. 5 6 Seller represents and warrants that Seller is the lawful record and beneficial owner of the Ownership Interest, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement and the rights and obligations of the Company and the Seller hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. Horseshoe, on the one hand, and Seller, on the other hand, shall pay their respective fees and expenses incurred by them in connection with the transaction contemplated herein. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms and provisions of this Agreement in any other jurisdiction. 6 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: --------------------------------------- Kirk Saylor, Chief Financial Officer Seller: By: --------------------------------------- 7 EX-10.52 22 MATERIAL CONTRACT 1 EXHIBIT 10.52 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. HORSESHOE GAMING, L.L.C. PROMISSORY NOTE DUE JANUARY 2, 2004 $3,040,515.00 November 30, 1999 New York, New York FOR VALUE RECEIVED, HORSESHOE GAMING, L.L.C., a Delaware limited liability company (the "Company"), subject to Section 3 hereof, promises to pay, on or before January 4, 2004 (the "Maturity Date"), to the order of Post Balanced Fund (the "Holder"), at the Company'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 THREE MILLION FORTY THOUSAND FIVE HUNDRED FIFTEEN DOLLARS ($3,040,515.00) 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. 1. Purchase Agreement. This Note is issued pursuant to the terms and conditions of a Purchase Agreement dated as of the date hereof (the "Purchase Agreement"), between the Company and the Holder, as consideration for the repurchase by the Company of the Holder's ownership interest in the Company (the "Ownership Interest"), made in connection with the proposed acquisition by the Company of Empress Casino Hammond Corporation, an Indiana corporation and 2 Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. 2. Interest. The Company promises to pay simple interest on the outstanding principal amount of this Note at a rate equal to 10% per annum (the "Interest Rate") from November 30, 1999 until the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note, when all accrued interest shall be immediately due and payable. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Subject to the terms of (i) the Credit Agreement dated as of June 30, 1999 (the "Credit Agreement"), among Horseshoe Gaming Holding Corp. ("HGHC"), as Borrower, the lenders listed therein, DLJ Capital Funding, Inc., as Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent and Wells Fargo Bank, National Association, as Documentation Agent; (ii) the Indenture dated as of June 15, 1997 (the "9_% Indenture"), as the same shall have been amended to date, for the Company's 9_% Senior Subordinated Notes due 2007, among the Company, Robinson Property Group, Limited Partnership, New Gaming Capital Partnership, Horseshoe Entertainment, Horseshoe GP, Inc., Bossier City Land Corporation and Texas Trustee; (iii) the Indenture dated as of May 11, 1999 (the "8_% Indenture"), for HGHC's 8_% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes"), by and between HGHC and U.S. Trust Company, National Association, as trustee; (iv) the Indenture dated as of June 18, 1998 (the "Empress Indenture"), for Empress Entertainment, Inc.'s 8_% Senior Subordinated Notes due 2006, among Empress Entertainment, Inc., Empress River Casino Finance Corporation, Empress Joliet, Empress Casino Hammond Corporation, Hammond Residential and U.S. Bank Trust National Association (the documents described in (i), (ii), (iii) and (iv) above being referred to as the "Financing Documents"); and (v) the various agreements entered into prior to the date hereof to repurchase the interests of various former employees and members of the Company which, among other things, do not permit the Company to make principal payments on the repurchase of the Ownership Interest prior to the repayment in full of amounts due under the Repurchase Agreements), the Company shall pay accrued interest semiannually on June 30 and December 31 of each year, beginning on June 30, 2000. To the extent that the Company is not permitted to make interest payments under the Financing Documents or the Repurchase Agreements, interest shall accrue and be compounded at the Interest Rate until the earlier of the date such interest is paid, the maturity date of this Note or the earlier acceleration of this Note pursuant to Section 6 of this Note. 2 3 3. Payment of Principal. If the Company is not permitted under the terms of the Financing Documents or the Repurchase Agreements to pay the principal of this Note in full on the Maturity Date, then the payment of the portion of the principal on this Note which may not be paid may be delayed until such date as such principal payments are permitted under the terms of the Financing Documents and the Repurchase Agreements. However, the portion of this Note which may be paid on the Maturity Date shall be paid on the Maturity Date and the balance shall be paid promptly thereafter as permitted by the Financing Documents and the Repurchase Agreements 4. Optional Prepayment. The Company, at its option, may prepay all or any portion of this Note, at any time, by paying an amount equal to the outstanding principal amount of this Note, or a portion thereof, together with interest accrued and unpaid thereon to the date of prepayment and any other amounts due under this Note, without penalty or premium. 5. Application of Payments. All mandatory payments under Section 3 of this Note and all optional prepayments under Section 4 of this Note shall include payment of accrued interest on the principal amount so paid or prepaid and all other amounts due under this Note and shall be applied, first to all reasonable costs, fees, and expenses incurred by the Holder in the exercise of the Holder's rights hereunder, second to payment of other accrued interest, and thereafter to principal. 6. Acceleration. This Note shall accelerate and the outstanding principal of and all accrued interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived, if a Change in Control (as defined in the 8_% Indenture) or an Event of Default (as defined in the 8_% Indenture) occurs, which Change of Control or Event of Default results in the acceleration and repayment of all of the Senior Subordinated Notes. 7. Replacement Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company from the Holder and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. 3 4 8. Pari Passu Payments. All payments on this Note will be made pari passu with payment to holders of similar notes issued on the date hereof in respect of the repurchase of membership interests in the Company. 9. Amendment. Any amendment, supplement or modification of or to any provision of this Note shall be effective only with the express written consent of the Company and the Holder. 10. Covenants Bind Successors and Assigns. All the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Company or the Holder shall bind its successors and assigns, whether so expressed or not. 11. Governing Law. This Note and the rights and obligations of the Company and the Holder hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 12. Variation in Pronouns. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. 13. Headings. The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: --------------------------------------- Kirk Saylor, Chief Financial Officer 4 5 PURCHASE AGREEMENT PURCHASE AGREEMENT dated and effective as of the 30th day of November, 1999 (this "Agreement"), between Horseshoe Gaming, L.L.C., a Delaware limited liability company ("Horseshoe"), and Post Balanced Fund ("Seller"). RECITALS: Horseshoe is a casino owner/operator with its principal office in Las Vegas, Nevada. Seller is the current owner of a .405402% interest in Horseshoe (the "Ownership Interest"). Horseshoe is the party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation and Empress Casino Joliet Corporation, an Illinois corporation, both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation. In connection with the Acquisition, Seller desires to sell and Horseshoe believes it is in its best interest to acquire from Seller the Ownership Interest. Horseshoe and Seller have agreed that the fair market value of the Ownership Interest is THREE MILLION FORTY THOUSAND FIVE HUNDRED FIFTEEN DOLLARS ($3,040,515.00). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Subject to the terms and conditions set forth herein, Seller agrees to sell, transfer, convey, assign and deliver to Horseshoe, and Horseshoe agrees to purchase, acquire and accept from Seller, the Ownership Interest, at the price of $3,040,515.00 (the "Purchase Price"), payable by a promissory note of Horseshoe, which is attached hereto (the "Promissory Note"). 2. Seller hereby unconditionally releases and discharges Horseshoe from any and all claims, known or unknown, directly or indirectly related to or in any way connected with Seller's ownership of Horseshoe and any and all agreements in any way connected with or related thereto other than this Agreement and the Promissory Note. Seller acknowledges and agrees that following the consummation of the transaction contemplated by this Agreement, Seller shall have no equity ownership or any other interest in Horseshoe or any of its affiliates or subsidiaries nor will Seller have rights of any kind to acquire an ownership interest in Horseshoe or any of its affiliates or subsidiaries; the only rights Seller shall have will be to enforce the terms of the Promissory Note. 5 6 3. Seller represents and warrants that Seller is the lawful record and beneficial owner of the Ownership Interest, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 4. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 5. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 6. This Agreement and the rights and obligations of the Company and the Seller hereunder shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York (including Section 5-1401 of the General Obligations Law of the State of New York), without regard to conflicts of laws principles. 7. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. 8. Horseshoe, on the one hand, and Seller, on the other hand, shall pay their respective fees and expenses incurred by them in connection with the transaction contemplated herein. 9. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms and provisions of this Agreement in any other jurisdiction. 6 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. HORSESHOE GAMING, L.L.C. By: Horseshoe Gaming Holding Corp., Manager By: ------------------------------------ Kirk Saylor, Chief Financial Officer Seller: By: ------------------------------------ 7 EX-10.53 23 MATERIAL CONTRACT 1 EXHIBIT 10.53 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the 1st day of August, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and BOBBY FECHSER ("Fechser"). RECITALS: A. Horseshoe is a holding company which holds ownership interests in various companies which own and operate casinos. Horseshoe's principal office is located in Las Vegas, Nevada. B. Fechser is the current owner of a .220958% interest in Horseshoe. C. Horseshoe believes it is in its best interest to acquire from Fechser his .220958% interest. D. Horseshoe and Fechser have agreed that the fair market value of the .220958% interest in Horseshoe is $945,278. E. Horseshoe will also return to Fechser, as part of this Agreement, an amount equal to the current value of his capital account at July 31, 1999 which was $140,053. F. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Concurrently with the execution of this Agreement, Fechser has sold to Horseshoe, and Horseshoe has purchased from Fechser, Fechser's .220958% interest in Horseshoe at the price of $945,278 plus a return of capital of $140,053, for a total purchase price of $1,085,331 ("Purchase Price"). The Purchase Price shall be paid as follows: a. The sum of $112,500 shall be paid in cash concurrently with the purchase of Fechser's interest by Horseshoe, at the execution of this Agreement. b. The principal sum of $112,500 on or before October 15, 2000, plus accumulated interest as provided herein. 2 c. The balance shall be paid on or before April 15, 2003. The outstanding balance of the Purchase Price shall bear interest at a rate of 12% per annum. After making the payment as required in Section 1(b) hereof, Horseshoe shall pay outstanding interest, if any, to Fechser on or before April 15th of each year 2. If, prior to Horseshoe making all payments to Fechser due under this Agreement, Jack Binion, his family members or trusts for his benefit or for the benefit of his family members (collectively, the "Binion Seller") transfers or sell for cash (an "Actual Cash Sale") an ownership stake in Horseshoe equal to or greater than 60% of the outstanding equity interest in Horseshoe, then Horseshoe shall, in lieu of making the remainder of the payments set forth hereunder, pay to Fechser a lump sum equal to .220958% of the Value of Horseshoe, less all amounts (including capital payments, interest and principal) paid by Horseshoe to Fechser prior to the date of the Actual Cash Sale. For purposes of this Agreement, the "Value" of Horseshoe shall be the price which would have been received by the Binion Seller upon a sale for cash of 100% of the outstanding equity interest of Horseshoe (the "Hypothetical Sale") assuming (a) the Binion Seller owned 100% of the outstanding equity interest of Horseshoe and (b) the per unit purchase price paid for each unit in the Hypothetical Sale would be equal to the purchase price per unit paid to the Binion Seller in the Actual Cash Sale. 3. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay Fechser in addition to the Purchase Price an amount equal to $60,337 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount, if any, shall be paid, with the final installment payment of the Purchase Price on or before April 15, 2003, including interest at 12% from the Acquisition Closing Date. If the Purchase Price has been paid in full at the time of the Acquisition Closing Date, then the Additional Amounts shall be paid within 45 days of the Acquisition Closing Date. 4. Fechser represents and warrants that he is the lawful record and beneficial owner of the .220958% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 2 3 5. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 6. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 7. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, this Agreement was executed by the parties as of the date and year first written above. "HORSESHOE" HORSESHOE GAMING, L.L.C. By: -------------------------------- Jack B. Binion, President "FECHSER" ------------------------------------ Bobby Fechser 3 EX-10.54 24 MATERIAL CONTRACT 1 EXHIBIT 10.54 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the 1st day of August, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and DOYLE BRUNSON ("Brunson"). RECITALS: A. Horseshoe is a holding company which holds ownership interests in various companies which own and operate casinos. Horseshoe's principal office is located in Las Vegas, Nevada. B. Brunson is the current owner of a .614885% interest in Horseshoe. C. Horseshoe believes it is in its best interest to acquire from Brunson his .614885% interest. D. Horseshoe and Brunson have agreed that the fair market value of the .614885% interest in Horseshoe is $2,630,543. E. Horseshoe will also return to Brunson, as part of this Agreement, an amount equal to the value of his capital account at July 31, 1999 which was $391,617. F. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Concurrently with the execution of this Agreement, Brunson has sold to Horseshoe, and Horseshoe has purchased from Brunson, Brunson's .614885% interest in Horseshoe at the price of $2,630,543, plus a return of capital of $391,617, for a total purchase price of $3,022,160 ("Purchase Price"). The Purchase Price shall be paid as follows: a. The sum of $312,500 shall be paid in cash concurrently with the purchase of Brunson's interest by Horseshoe, at the time of the execution of this Agreement. b. The principal sum of $312,500 on or before October 15, 2000, plus accumulated interest as provided herein. 2 c. The balance shall be paid on or before April 15, 2003. The outstanding balance of the Purchase Price shall bear interest at a rate of 12% per annum. After making the payment as required in Section 1(b) hereof, Horseshoe shall pay outstanding interest, if any, to Brunson or before April 15th of each year. 2. If, prior to Horseshoe making all payments to Brunson due under this Agreement, Jack Binion, his family members or trusts for his benefit or for the benefit of his family members (collectively, the "Binion Seller") transfers or sell for cash (an "Actual Cash Sale") an ownership stake in Horseshoe equal to or greater than 60% of the outstanding equity interest in Horseshoe, then Horseshoe shall, in lieu of making the remainder of the payments set forth hereunder, pay to Brunson a lump sum equal to .614885% of the Value of Horseshoe, less all amounts (including capital payments, interest and principal) paid by Horseshoe to Brunson prior to the date of the Actual Cash Sale. For purposes of this Agreement, the "Value" of Horseshoe shall be the price which would have been received by the Binion Seller upon a sale for cash of 100% of the outstanding equity interest of Horseshoe (the "Hypothetical Sale") assuming (a) the Binion Seller owned 100% of the outstanding equity interest of Horseshoe and (b) the per unit purchase price paid for each unit in the Hypothetical Sale would be equal to the purchase price per unit paid to the Binion Seller in the Actual Cash Sale. 3. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay Brunson in addition to the Purchase Price an amount equal to $167,907 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount, if any, shall be paid, with the final payment of the Purchase Price on or before April 15, 2003, including interest at 12% from the Acquisition Closing Date. If the Purchase Price has been paid in full at the time of the Acquisition Closing Date, then the Additional Amounts shall be paid within 45 days of the Acquisition Closing Date. 4. Brunson represents and warrants that he is the lawful record and beneficial owner of the .614885% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 2 3 5. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 6. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 7. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, this Agreement was executed by the parties as of the date and year first written above. "HORSESHOE" HORSESHOE GAMING, L.L.C. By: ------------------------------------- Jack B. Binion, President "BRUNSON" ----------------------------------------- Doyle Brunson 3 EX-10.55 25 MATERIAL CONTRACT 1 EXHIBIT 10.55 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the 1st day of August, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and KEY FECHSER ("Fechser"). RECITALS: A. Horseshoe is a holding company which holds ownership interests in various companies which own and operate casinos. Horseshoe's principal office is located in Las Vegas, Nevada. B. Fechser is the current owner of a .220958% interest in Horseshoe. C. Horseshoe believes it is in its best interest to acquire from Fechser his .220958% interest. D. Horseshoe and Fechser have agreed that the fair market value of the .220958% interest in Horseshoe is $945,278. E. Horseshoe will also return to Fechser, as part of this Agreement, an amount equal to the value of his capital account at July 31, 1999 which was $140,053. F. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Concurrently with the execution of this Agreement, Fechser has sold to Horseshoe, and Horseshoe has purchased from Fechser, Fechser's .220958% interest in Horseshoe at the price of $945,278 plus a return of capital of $140,053, for a total purchase price of $1,085,331 ("Purchase Price"). The Purchase Price shall be paid as follows: a. The sum of $112,500 shall be paid in cash concurrently with the purchase of Fechser's interest by Horseshoe, at the execution of this Agreement. b. The principal sum of $112,500 on or before October 15, 2000, plus accumulated interest as provided herein. 2 c. The balance shall be paid on or before April 15, 2003. The outstanding balance of the Purchase Price shall bear interest at a rate of 12% per annum. After making the payment as required in Section 1(b) hereof, Horseshoe shall pay outstanding interest, if any, to Fechser on or before April 15th of each year. 2. If, prior to Horseshoe making all payments to Fechser due under this Agreement, Jack Binion, his family members or trusts for his benefit or for the benefit of his family members (collectively, the "Binion Seller") transfers or sell for cash (an "Actual Cash Sale") an ownership stake in Horseshoe equal to or greater than 60% of the outstanding equity interest in Horseshoe, then Horseshoe shall, in lieu of making the remainder of the payments set forth hereunder, pay to Fechser a lump sum equal to .220958% of the Value of Horseshoe, less all amounts (including capital payments, interest and principal) paid by Horseshoe to Fechser prior to the date of the Actual Cash Sale. For purposes of this Agreement, the "Value" of Horseshoe shall be the price which would have been received by the Binion Seller upon a sale for cash of 100% of the outstanding equity interest of Horseshoe (the "Hypothetical Sale") assuming (a) the Binion Seller owned 100% of the outstanding equity interest of Horseshoe and (b) the per unit purchase price paid for each unit in the Hypothetical Sale would be equal to the purchase price per unit paid to the Binion Seller in the Actual Cash Sale. 3. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay Fechser in addition to the Purchase Price an amount equal to $60,337 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount, if any, shall be paid, with the final installment payment of the Purchase Price on or before April 15, 2003, including interest at 12% from the Acquisition Closing Date. If the Purchase Price has been paid in full at the time of the Acquisition Closing Date, then the Additional Amounts shall be paid within 45 days of the Acquisition Closing Date. 4. Fechser represents and warrants that he is the lawful record and beneficial owner of the .220958% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 5. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 2 3 6. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 7. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, this Agreement was executed by the parties as of the date and year first written above. "HORSESHOE" HORSESHOE GAMING, L.L.C. By: ------------------------------ Jack B. Binion, President "FECHSER" ------------------------------------ Key Fechser 3 EX-10.56 26 MATERIAL CONTRACT 1 EXHIBIT 10.56 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated and effective as of the 1st day of August, 1999, between HORSESHOE GAMING, L.L.C. ("Horseshoe"), and DAVID REESE ("Reese"). RECITALS: A. Horseshoe is a holding company which holds ownership interests in various companies which own and operate casinos. Horseshoe's principal office is located in Las Vegas, Nevada. B. Reese is the current owner of a 2.45954% interest in Horseshoe. C. Horseshoe believes it is in its best interest to acquire from Reese his 2.45954% interest. D. Horseshoe and Reese have agreed that the fair market value of the 2.45954% interest in Horseshoe is $10,522,181. E. Horseshoe will also return to Reese, as part of this Agreement, an amount equal to the value of his capital account at July 31, 1999 which was $1,583,644. F. Horseshoe is party to an agreement pursuant to which it may acquire (the "Acquisition") Empress Casino Hammond Corporation, an Indiana corporation ("Empress Hammond"), and Empress Casino Joliet Corporation, an Illinois corporation ("Empress Joliet"), both of which are subsidiaries of Empress Entertainment, Inc., a Delaware corporation (collectively, "Empress"). NOW, THEREFORE, in consideration of the premises and each act performed by either party hereto, the parties agree as follows: 1. Concurrently with the execution of this Agreement, Reese has sold to Horseshoe, and Horseshoe has purchased from Reese, Reese's 2.45954% interest in Horseshoe at the price of $10,522,181, plus a return of capital of $1,583,644, for a total purchase price of $12,105,825 ("Purchase Price"). The Purchase Price shall be paid as follows: a. The sum of $1,250,000 shall be paid in cash concurrently with the purchase of Reese's interest by Horseshoe, at the time of the execution of this Agreement. b. The principal sum of $1,250,000 on or before October 15, 2000, plus accumulated interest as provided herein. 2 c. The balance shall be paid on or before April 15, 2003. The outstanding balance of the Purchase Price shall bear interest at a rate of 12% per annum. After making the payment as required in Section 1(b) hereof, Horseshoe shall pay outstanding interest, if any, to Reese or before April 15th of each year. 2. If, prior to Horseshoe making all payments to Reese due under this Agreement, Jack Binion, his family members or trusts for his benefit or for the benefit of his family members (collectively, the "Binion Seller") transfers or sell for cash (an "Actual Cash Sale") an ownership stake in Horseshoe equal to or greater than 60% of the outstanding equity interest in Horseshoe, then Horseshoe shall, in lieu of making the remainder of the payments set forth hereunder, pay to Reese a lump sum equal to 2.45954% of the Value of Horseshoe, less all amounts (including capital payments, interest and principal) paid by Horseshoe to Reese prior to the date of the Actual Cash Sale. For purposes of this Agreement, the "Value" of Horseshoe shall be the price which would have been received by the Binion Seller upon a sale for cash of 100% of the outstanding equity interest of Horseshoe (the "Hypothetical Sale") assuming (a) the Binion Seller owned 100% of the outstanding equity interest of Horseshoe and (b) the per unit purchase price paid for each unit in the Hypothetical Sale would be equal to the purchase price per unit paid to the Binion Seller in the Actual Cash Sale. 3. If the Acquisition is closed (the date of such closing being referred to as the "Acquisition Closing Date"), Horseshoe shall pay Reese in addition to the Purchase Price an amount equal to $671,629 (the "Additional Amount"). The parties hereto agree that the Acquisition shall be deemed to have closed in any of the following circumstances: (i) the Acquisition is consummated in accordance with its terms or as may be amended by the parties to the Acquisition agreement, or their successors, assignees or transferees; (ii) Horseshoe renegotiates the agreement relating to the Acquisition so as to allow the merger to be consummated as to either Empress Hammond or Empress Joliet and the merger is then consummated with either Empress Hammond or Empress Joliet; (iii) Horseshoe combines with another party such that the Acquisition is consummated with Horseshoe obtaining Empress Hammond or Empress Joliet and the other party obtaining the other; (iv) Horseshoe consummates the Acquisition in accordance with its terms or as may be amended by the parties to that agreement, but either Empress Hammond or Empress Joliet is spun off such that the Horseshoe is combined with only one; or (v) Horseshoe sells or transfers its interest in the Acquisition agreement to an unrelated third party. The Additional Amount, if any, shall be paid, with the final payment of the Purchase Price on or before April 15, 2003, including interest at 12% from the Acquisition Closing Date. If the Purchase Price has been paid in full at the time of the Acquisition Closing Date, then the Additional Amounts shall be paid within 45 days of the Acquisition Closing Date. 4. Reese represents and warrants that he is the lawful record and beneficial owner of the 2.45954% interest in Horseshoe, free and clear of any liens, claims, encumbrances, marital property rights, security agreements, equities, options, charges or restrictions of any kind. 2 3 5. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and may be amended only by a writing signed by each party hereto. 6. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, personal representatives, successors and assigns. 7. This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, this Agreement was executed by the parties as of the date and year first written above. "HORSESHOE" HORSESHOE GAMING, L.L.C. By: ---------------------------------- Jack B. Binion, President "REESE" -------------------------------------- David Reese 3 EX-21.1 27 EXHIBIT 21.1 1 EXHIBIT 21.1 HORSESHOE GAMING HOLDING CORP. SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1999 SUBSIDIARY STATE OF INCORPORATION - ---------- ---------------------- Horseshoe GP, Inc.(1) Nevada New Gaming Capital Partnership(2) Nevada Horseshoe Entertainment L.P. Louisiana Bossier City Land Corporation(3) Louisiana Robinson Property Group, Limited Partnership Mississippi Empress Casino Hammond Corporation(6) Indiana Hammond Residential LLC(4) Indiana Hammond Bridge and Road Works(4) Indiana Empress Casino Joliet Corporation(6) Illinois Horseshoe Gaming, Inc.(6) Nevada Horseshoe Ventures(5) Nevada Red Oak Insurance Company Ltd.(6) Barbados Horseshoe Maryland, Inc.(6) Maryland (1) 100% owned by Horseshoe Gaming Holding Corp. and is the 1% General Partner of both New Gaming Capital Partnership and Robinson Property Group Limited Partnership. (2) New Gaming Capital Partnership is the 89% General Partner and a 2.92% Limited Partner of Horseshoe Entertainment L.P. (3) Bossier City Land Corporation is 100% owned by Horseshoe Entertainment. (4) Hammond Residential LLC and Hammond Bridge and Road Works are 100% owned by Empress Casino Hammond Corporation (5) Horseshoe Ventures is owned 50% by Horseshoe Gaming, L.L.C. (6) 100% by Horseshoe Gaming Holding Corp. EX-27.1 28 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1999 DEC-31-1999 65,604 211,674 25,965 11,089 4,219 302,585 717,332 170,868 1,409,244 260,347 1,258,948 0 0 25 34,569 1,409,244 0 525,553 0 377,423 52,152 4,643 65,219 42,026 0 42,026 0 9,653 0 32,373 0 0
-----END PRIVACY-ENHANCED MESSAGE-----