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EXHIBIT 10.1
EMPRESS CASINO JOLIET SETTLEMENT AGREEMENT
This Empress Casino Joliet Settlement Agreement (the "Agreement") is
entered into between the Illinois Gaming Board ("Gaming Board"), Horseshoe
Gaming Holding Corp. ("HGHC"), HGHC's wholly-owned subsidiary Empress Casino
Joliet Corporation ("Empress") and Xxxx Xxxxxx ("Xxxxxx") effective as of the
date of execution by all parties (the "Effective Date").
WHEREAS on June 30, 2000 the Gaming Board, pursuant to Sections 5(b)(1),
7(a) and 7(g) of the Riverboat Gambling Act (the "Act") and Board Rule 3000.236,
made an initial decision to deny Empress's application for renewal of its
owner's license (the "Initial Finding") based upon the Gaming Board's
preliminary findings that Xxxx Xxxxxx and Empress failed to establish by clear
and convincing evidence that they met the standards set forth under Sections
7(a), 7(b) and 7(g) of the Act and the Board Rules.
WHEREAS on July 19, 2000 the Gaming Board timely filed its formal Notice
of Denial denying Empress's application for renewal of its owner's license and
alleging certain grounds as the basis for denial.
WHEREAS on July 26, 2000 Empress, pursuant to Board Rule 3000.405,
timely filed its verified Request for Hearing in which it denied each of the
allegations in the Notice of Denial and asserted defenses to those allegations.
WHEREAS on August 1, 2000 Gaming Board Chairman Xxxxxxx X. Xxxxx granted
Empress's Request for Hearing and appointed an Administrative Law Judge to
conduct such a hearing.
WHEREAS the proceeding before the Administrative Law Judge will provide
HGHC, Empress, Xxxxxx and the Gaming Board with an opportunity to establish a
complete and accurate evidentiary record based on testimony given under oath or
affirmation and subject to cross-examination regarding the allegations cited in
the Gaming Board's Initial Finding and Notice of Denial (the "Hearing").
WHEREAS only after the Administrative Law Judge hears the evidence,
makes an adjudication and transmits its findings to the Gaming Board, and only
if the Gaming Board then adopts those findings or otherwise takes final action
does the action of the Gaming Board carry the force of law and become appealable
in the courts.
WHEREAS the Gaming Board, HGHC, Empress and Xxxxxx mutually desire to
avoid the expense and risk of protracted litigation.
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NOW THEREFORE, in consideration of the foregoing premises (which
constitute an integral part of this Agreement) and the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Gaming Board,
HGHC, Empress and Xxxxxx hereby agree as follows:
TERMS
1. By entering into this Agreement, HGHC, Empress and Xxxxxx are making
no admissions regarding the accuracy or truthfulness of the allegations of the
Gaming Board's Initial Finding and Notice of Denial and are herein specifically
denying those allegations.
2. Not later than thirty (30) days following the Effective Date, HGHC
shall engage an independent, nationally-recognized investment banking firm to
arrange for the sale of HGHC's ownership interest in Empress, subject to the
Gaming Board's approval of the proposed transaction and the prospective
purchaser of Empress ("Prospective Purchaser"). If HGHC does not enter into an
enforceable and definitive agreement to sell its ownership interest in Empress
within one hundred fifty (150) days of the Effective Date of this Agreement,
HGHC will cause Empress to establish a five (5) person Board of Directors (the
"New Empress Board") comprised of no more than two (2) non-independent directors
(the "Non-Independent Directors") selected by HGHC and at least three (3)
outside independent directors (the "Independent Directors"), each of which
Non-Independent and Independent Director must be approved by the Gaming Board as
provided below. Within ninety (90) days of the Effective Date, HGHC and Xxxxxx
will submit the names of at least two (2) proposed Non-Independent Directors and
the names of at least three (3) proposed Independent Directors for the Gaming
Board's approval. If the Gaming Board does not approve one or more of the
persons submitted by HGHC and Xxxxxx to be Non-Independent or Independent
Directors, the Gaming Board will notify HGHC and Xxxxxx in writing of such
disapproval ("Notice of Disapproval"). Within fourteen (14) days of receiving a
Notice of Disapproval from the Gaming Board, HGHC and Xxxxxx will submit the
names of other proposed Non-Independent Directors or Independent Directors, as
the case may be, for the Gaming Board's approval. This process will continue
until the Gaming Board approves no more than two (2) Non-Independent Directors
and at least three (3) Independent Directors. Pursuant to Board Rules 220 and
223, HGHC will reimburse the Gaming Board for the cost of the Gaming Board's
investigation of the prospective Non-Independent and Independent Directors. If a
New Empress Board is established pursuant to this Agreement, the persons who
comprise the Board of Directors for Empress at the time that the New Empress
Board is established will be immediately relieved of their duties and will have
no further responsibilities relating to the management or operation of Empress,
unless such person(s) has been approved as a Non-Independent Director as
provided for herein.
3. The New Empress Board established in accordance with this Agreement
will discharge its responsibilities and duties in accordance with the Memorandum
of Understanding entered into between the Gaming Board, on the one hand, and
HGHC, Empress and Xxxxxx, on the other hand. If a Trustee is appointed pursuant
to paragraph 9 of this Agreement, the Board of Directors shall consult with that
Trustee regarding any decisions that may affect or impact the sale of HGHC's
ownership interest in Empress. An executed copy of the Memorandum of
Understanding is attached hereto as Exhibit A and is expressly incorporated in
this Agreement by reference herein.
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4. Notwithstanding any other provision contained in this Agreement, no
later than ninety (90) days from the Effective Date of this Agreement or upon
the closing of HGHC's sale of Empress, whichever should occur first, Xxxxxx
shall: (a) notify the Gaming Board in writing that he is withdrawing his request
to be approved as a Key Person under the Act ("Notice of Withdrawal"); (b) cease
to exercise, either directly or indirectly, at the HGHC parent level or
otherwise, any control over the management or operation of the day to day
activities of Empress; (c) cease to receive any direct form of compensation or
dividends from the operation of the Empress; (d) cease to serve as a director,
officer, employee or consultant to Empress; and (e) until HGHC's corporate
offices are relocated from the Empress premises, which relocation shall take
place no more than one hundred twenty (120) days from the Effective Date, Xxxxxx
shall use or otherwise occupy HGHC's corporate offices at Empress only to
perform services that are related to HGHC's ownership interest in non-Illinois
casinos.
Moreover, by entering into this Agreement, Xxxxxx hereby agrees that he
will not apply for licensure under the Act in the future nor will he put himself
in a position in the future whereby he will be subject to being approved by the
Gaming Board under the Act. None of the terms of this agreement shall have any
effect upon or application to any proceeds or benefits from the sale of Empress
flowing to HGHC or Xxxxxx.
5. Notwithstanding any other provision in this Agreement, Xxxxxx may,
from the Effective Date to the Divestiture Date, as defined in paragraph 8 of
this Agreement, continue to perform services for HGHC that are directly related
to assisting the sale of HGHC's interest in Empress.
6. Upon Binion's submission of his Notice of Withdrawal to the Gaming
Board, Empress shall withdraw as moot that portion of its Request for Hearing
that relates to Xxxxxx ("Empress's Withdrawal"). Upon receipt of the Notice of
Withdrawal and Empress's Withdrawal, the Gaming Board shall acknowledge by an
of-record resolution that the Gaming Board accepts said Notice of Withdrawal and
Empress's Withdrawal and that, as a result, the Gaming Board's Initial Finding
as to Xxxxxx only has become moot and without legal or practical significance
for the purposes of licensing in Illinois.
7. If HGHC enters into an enforceable and definitive agreement to sell
Empress within 150 days from the Effective Date, but no closing of such sale
occurs within 150 days from the Effective Date, the "Current Management" of
Empress (defined herein to include all current personnel responsible for
operating and managing Empress, except Xxxxxx) may, in the sole and absolute
discretion of the Gaming Board, remain in place and continue to manage and
operate Empress until the closing of such sale or January 31, 2002, whichever
occurs first. If the Gaming Board determines at any time after 150 days from the
Effective Date that the Current Management of Empress requires the oversight of
a Board of Directors other than the Board then in place, upon the order of the
Gaming Board, HGHC will cause Empress to establish the New Empress Board.
Notwithstanding any other provision of this paragraph, the Gaming Board, in its
sole and absolute discretion, may permit the Current Management to remain in
place beyond January 31, 2002.
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8. By not later than January 31, 2002 (the "Divestiture Date"), HGHC
will divest its ownership interest in Empress to a party or parties who, in the
Gaming Board's sole and absolute discretion, meet the suitability requirements
and all other requirements for licensure under the Act and the Board Rules.
Notwithstanding the foregoing sentence of this paragraph, the Gaming Board, in
its sole and absolute discretion, may extend the Divestiture Date. The Gaming
Board shall make every reasonable effort to expedite the process of
investigating and determining the suitability of the Prospective Purchaser. If
the investigation of the controlling shareholders (as defined by the by-laws of
the Prospective Purchaser) and Key Persons, as that term is defined in the Act
and Board Rules, of the Prospective Purchaser has not been completed by the
Divestiture Date, the Divestiture Date shall be extended until the investigation
of the controlling shareholders and Key Persons has been completed by the Gaming
Board.
9. In the event that HGHC fails to divest its ownership interest in
Empress by the Divestiture Date, and the Gaming Board does not extend the
Divestiture Date as provided for in paragraph 8 of this Agreement, HGHC will
immediately place its ownership interest in Empress in a trust to be sold by a
trustee to be appointed and approved solely by the Gaming Board (the "Trustee").
The Gaming Board shall choose as Trustee a person who is either a partner in a
"Big Six" accounting firm and has experience in the gaming industry or who is a
managing director in a nationally recognized investment banking firm and who has
experience in the gaming industry. The Trustee appointed by and approved by the
Gaming Board shall be invested with the sole authority to execute the sale of
HGHC's ownership interest in Empress. The Trustee shall raise to the then
current Board of Directors of Empress any concerns he/she may have regarding the
operation of Empress that may affect the sale of HGHC's ownership interest in
Empress. If within one (1) year of the appointment of the Trustee, the Trustee
is unable to enter into an enforceable and definitive agreement to sell HGHC's
ownership interest n Empress, the Gaming Board may, at its sole and absolute
discretion, recover and otherwise dispose of the license previously issued to
Empress in accordance with the Act and the Board rules.
10. If a New Empress Board is established pursuant to this Agreement,
said New Empress Board shall remain in place and continue to discharge its
duties and responsibilities until the closing of the sale of HGHC's ownership
interest in Empress or until recovery of the license by the Gaming Board as
provided for herein. Notwithstanding the foregoing sentence of this paragraph,
the Gaming Board retains its authority to seek the removal of any person from
the New Empress Board if the Gaming Board determines that such person(s) is no
longer suitable under the Act and/or the Board Rules.
11. On or before one hundred and forty-five (145) days from the date of
this Agreement, Empress shall deposit in escrow the amount of two million
dollars ($2,000,000). If Empress has not timely produced a sales agreement
within one hundred fifty (150) days, as required by paragraph 2 of this
Agreement, that sum shall be forfeited to the Gaming Board as Liquidated Damages
and Empress shall pay an additional sum of ten thousand dollars ($10,000) per
day thereafter, unless and until said sales agreement has been produced or
January 31, 2002, which ever is first to occur.
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12. HGHC, Empress and Xxxxxx hereby release the Gaming Board, each of
its Members, its staff and its attorneys, agents and representatives from any
and all legal, equitable, or other claims or causes of action which are now
known or unknown as of the Effective Date including, but not limited to, claims
arising out of the Gaming Board's approval of transfer of ownership on November
30, 1999, its Initial Finding or its Notice of Denial. The Gaming Board hereby
releases HGHC, Empress and Xxxxxx, their attorneys, agents and representatives
from any and all legal, equitable or other claims or causes of action that are
based solely on facts of which the Gaming Board had actual knowledge as of July
19, 2000, when the Notice of Denial was issued.
13. Notwithstanding the foregoing, the Gaming Board, HGHC, Empress and
Xxxxxx reserve their rights to file an action or take other steps to enforce the
terms of this Agreement, including bringing any disputes under this Agreement
before the Administrative Law Judge, until his jurisdiction is ended pursuant to
paragraph 16 of this Agreement.
14. If HGHC, Empress, and Xxxxxx comply with the terms of this Agreement
and the Gaming Board approves the sale of HGHC's ownership interest in Empress,
said approval by the Gaming Board shall include an express order that the
Initial Finding has no effect upon Empress' purchaser. Empress or Empress'
successor in interest, pursuant to Board Rule 3000.237, shall consent to and
receive a renewed license of one (1) year.
15. Within seven (7) days of the Effective Date of this Agreement, the
Gaming Board and Empress shall file an agreed motion asking the Administrative
Law Judge to stay the Hearing for a period of one hundred fifty (150) days from
the Effective Date. At the conclusion of the 150 day period contemplated herein,
Empress and the Board will inform the Administrative Law Judge whether HGHC,
Empress and Xxxxxx have abided to date with their respective obligations under
this Agreement. If HGHC, Empress and Xxxxxx have complied to date with their
respective obligations under this Agreement, Empress and the Board shall ask the
Administrative Law Judge to continue the stay of the Hearing pending further
action by either Empress or the Board. If either HGHC, Empress or Xxxxxx fail to
comply with their respective obligations under this Agreement, the Gaming Board
may, in addition to any other remedies available to it under applicable law,
seek the entry by the Administrative Law Judge of an order dismissing Empress's
Request For Hearing with prejudice. If, at an evidentiary hearing before the
Administrative Law Judge, the Gaming Board demonstrates by clear and convincing
evidence that, as a result of acts within HGHC, Empress and/or Binion's control,
HGHC, Empress or Xxxxxx failed to comply with any material obligation under this
Agreement including, but not limited to, (a) the obligation of HGHC and Xxxxxx
to submit within ninety (90) days of the Effective Date the names of at least
two (2) proposed Non-Independent Directors and the names of at least three (3)
proposed Independent Directors for the Gaming Board's approval, (b) each of the
obligations of Xxxxxx under paragraph 4 of this Agreement, (c) the obligation of
HGHC to move its corporate offices out of the Empress premises within 120 days
of the Effective Date pursuant to paragraph 4 of this Agreement, (d) the
obligation of HGHC to cause Empress to establish the New Empress Board pursuant
to paragraph 7 of this Agreement, (e) the obligation of HGHC to divest its
ownership interest in Empress pursuant to paragraphs 8 and 9 of this Agreement
and (f) the obligation of Empress to pay the sums set forth in paragraph 11 of
this Agreement, HGHC, Empress and Xxxxxx hereby stipulate to, consent to and
agree that the Administrative Law Judge may then dismiss Empress's Request For
Hearing and the Gaming Board may enter a Final Order of Denial of Renewal
without further hearing.
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16. Providing that Empress and Xxxxxx comply with their respective
obligations under this Agreement, Empress, upon the closing of the sale of
HGHC's ownership interest in Empress, as contemplated herein, shall seek leave
from the Administrative Law Judge to withdraw the Request For Hearing it
previously submitted. Upon Empress's withdrawal of its Request For Hearing,
Empress and the Gaming Board shall file an agreed motion asking the
Administrative Law Judge to recommend dismissal of the Hearing pending before
him with prejudice and with each party bearing its own costs. Within fourteen
(14) days of the termination of the Hearing, the Gaming Board shall acknowledge
by an of-record resolution that the Gaming Board accepts Empress's withdrawal of
its Request For Hearing and that, as a result of the sale of HGHC's ownership
interest in Empress, the Notice of Denial previously issued by the Gaming Board
has become moot and is without legal or practical effect for licensing in
Illinois.
17. The parties hereto represent and warrant to, and agree with the
others as follows:
(a) Each party has received independent legal advice from its own
attorneys with respect to the advisability of making the
settlement provided for herein, and with respect to the
advisability of executing this Agreement. Each party has
contributed to the drafting of this Agreement and, therefore,
the Agreement shall not be construed against either party.
(b) No party (nor any agent, associate, representative, or attorney
of or for any other party), has made any statement or
representation to any other party regarding any fact relied upon
by the other party in entering into this Agreement, and no party
hereto relies upon any statement, representation or promise of
any other party (or of any agent, associate, representative or
attorney of or for any other party), in executing this
Agreement, or in making the settlement provided for herein,
except as expressly stated in this Agreement.
(c) Each party, and its attorney, has made such investigation of the
facts pertaining to this settlement and this Agreement, and has
all information with respect to all the matters pertaining
thereto, as he, she or it deems necessary to make a final and
binding decision to execute this Agreement and abide by the
provisions herein.
(d) This Agreement has been carefully read by all parties, the
contents hereof are known and understood by all parties, and it
is signed freely by each person or entity executing this
Agreement, and each of the persons executing this Agreement on
behalf of himself and/or the entity is empowered to do so.
(e) The terms of this Agreement are contractual, not a mere recital,
and are the result of negotiation among all the parties.
(f) Each party hereto relies on the finality of this Agreement as a
material factor inducing that party's execution of this
Agreement, and the obligations assumed by this Agreement.
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18. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns. No person or entity is, or is
intended to be, a third-party beneficiary of this Agreement.
19. This Agreement shall be deemed to have been executed and delivered
within the State of Illinois, and the laws of the State of Illinois shall apply
to the interpretation and enforcement of this Agreement without reference to the
choice of law rules thereof.
20. Each signatory to this Agreement hereby represents and warrants that
he/she is authorized to act on behalf of the party or parties he/she purports to
represent or upon whose behalf he/she purports to act.
21. In any action to enforce this Agreement, the prevailing party in any
proceeding shall be entitled to an award of interest, reasonable attorneys' fees
and costs in connection with those proceedings.
22. This Agreement may be signed in counterparts and delivered by
facsimile, with each executed counterpart in a facsimile standing as an
original.
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ILLINOIS GAMING BOARD HORSESHOE GAMING HOLDING CORP.
/s/ Xxxxxx Xxxxxx /s/ Xxxx X. Xxxxxx
--------------------------------------- ---------------------------------
By: Xxxxxx Xxxxxx By: Xxxx Xxxxxx
Its: Administrator Its: President
Dated: January 31, 2001 Dated: January 30, 2001
EMPRESS CASINO /s/ X. X. Xxxxxx
JOLIET CORPORATION ---------------------------------
By: Xxxxxxx X. Xxxxxx
Its: Attorney
Dated: January 30, 2001
/s/ Xxxxx X. Xxxxxx XXXX XXXXXX
---------------------------------------
By: Xxxxx Xxxxxx
Its: President
Dated: January 30, 2001 /s/ Xxxx X. Xxxxxx
---------------------------------
By: Xxxx Xxxxxx
/s/ X. X. Xxxxxx Dated: January 30, 2001
---------------------------------------
By: Xxxxxxx X. Xxxxxx
Its: Attorney
Dated: January 30, 2001 /s/ X. X. Xxxxxx
---------------------------------
By: Xxxxxxx X. Xxxxxx
Its: Attorney
Dated: January 30, 2001
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EXHIBIT A
MEMORANDUM OF UNDERSTANDING
The Illinois Gaming Board ("Gaming Board"), on the one hand, and
Horseshoe Gaming Holding Corp. ("HGHC"), Empress Casino Joliet Corporation
("Empress") and Xxxx Xxxxxx ("Xxxxxx"), on the other hand, enter into this
Memorandum Of Understanding regarding the responsibilities and duties of the new
Board of Directors of Empress (the "New Empress Board"). This Memorandum shall
remain in effect as long as the New Empress Board established under the Empress
Casino Joliet Settlement Agreement (the "Agreement"), which is expressly
incorporated in this Memorandum of Understanding by reference herein, remains in
place.
1. The New Empress Board established pursuant to the terms of the
Agreement shall immediately assume and maintain complete and exclusive control
of the management and operation of Empress Joliet for as long as said New
Empress Board remains in place. The New Empress Board, at its sole and absolute
discretion, may retain all or a portion of the Current Management, as that term
is defined in the Agreement. Under no circumstances, however, shall the New
Empress Board seek to enlist the services of Xxxxxx or otherwise consult Xxxxxx
with regard to the management and operation of the Empress Casino Joliet.
2. The New Empress Board will establish Audit, Compliance and
Transaction Committees, made up of Board Members, which will oversee and assure
the integrity of Empress's financial statements, regulatory compliance and the
fairness of any transaction between Empress and HGHC or between Empress and any
third-party contractor.
A. Audit Committee. The Audit Committee will have the oversight
responsibility to ensure the integrity of Empress's financial
statements. The majority of the Audit Committee will be composed
of Independent Directors, as that term is defined in the
Agreement. The Audit Committee will review the accounting
policies of Empress and reports from Empress's outside auditors.
It will approve the engagement of Empress's outside auditors.
B. Compliance Committee. The Compliance Committee will have the
responsibility for adopting a plan designed to ensure Empress's
compliance with the Riverboat Gambling Act and the Adopted Rules
of the Illinois Gaming Board and for supervising the personnel
charged with implementing the compliance plan. The majority of
the Compliance Committee will be composed of Independent
Directors, as that term is defined in the Agreement.
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C. Transactions Committee. The majority of the Transactions
Committee will be composed of Independent Directors, as that
term is defined in the Agreement. The Transactions Committee
shall be responsible for reviewing and approving the terms of
any proposed contract, agreement or transaction, whether oral or
written, between Empress or HGHC, on the one hand, and any
person or entity, on the other hand, relating to the Empress
Joliet Casino. The entire Empress Board shall approve or
disapprove, as the case may be, any and all transactions to be
entered into involving payments by Empress in excess of $25,000,
individually or in the aggregate, and all professional
contracts.
3. The New Empress Board will have the sole and absolute authority to
hire, fire and determine the compensation of the senior executives and officers
of Empress, subject to the terms of any existing employment agreements between
Empress and such senior executives and officers.
4. The New Empress Board may use Empress's cash flow to service existing
indebtedness of HGHC including any refinancing of that indebtedness. The New
Empress Board will not authorize Empress to incur additional indebtedness except
such indebtedness as the New Empress Board determines is needed in connection
with Empress's business in Illinois.
5. The New Empress Board may not distribute more than 45% of Empress's
taxable income to its corporate parent in a tax distribution.
6. The New Empress Board will not permit any officer or employee of
Empress to also be an officer or employee of HGHC.
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ILLINOIS GAMING BOARD HORSESHOE GAMING HOLDING CORP.
/s/ Xxxxxx Xxxxxx /s/ Xxxx X. Xxxxxx
---------------------------------------- ---------------------------------
By: Xxxxxx Xxxxxx By: Xxxx Xxxxxx
Its: Administrator Its: President
Dated: January 31, 2001 Dated: January 30, 2001
EMPRESS CASINO /s/ X. X. Xxxxxx
JOLIET CORPORATION ---------------------------------
By: Xxxxxxx X. Xxxxxx
Its: Attorney
Dated: January 30, 2001
/s/ Xxxxx X. Xxxxxx XXXX XXXXXX
------------------------------------
By: Xxxxx Xxxxxx
Its: President
Dated: January 30, 2001 /s/ Xxxx X. Xxxxxx
---------------------------------
By: Xxxx Xxxxxx
/s/ X. X. Xxxxxx Dated: January 30, 2001
------------------------------------
By: Xxxxxxx X. Xxxxxx
Its: Attorney
Dated: January 30, 2001 /s/ X. X. Xxxxxx
---------------------------------
By: Xxxxxxx X. Xxxxxx
Its: Attorney
Dated: January 30, 2001
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