1
Exhibit 10.8
STOCKHOLDERS' AGREEMENT
FOR
HORSESHOE GAMING HOLDING CORP.
STOCKHOLDERS' AGREEMENT, dated as of April 29, 1999 (this "Agreement"), by
and among (i) Horseshoe Gaming Holding Corp., a Delaware corporation (the
"Corporation"), (ii) the stockholders of the Corporation listed on Annex A
hereto (the "Initial Stockholders"), and (iii) each such additional Person that
may hereafter hold Shares and assume the status of "Stockholder" hereunder by
executing a counterpart hereof (such Persons, together with the Initial
Stockholders, are referred to herein collectively as the "Stockholders," and
each individually as a "Stockholder"). Capitalized terms used herein are defined
in Section 1.2 hereof.
W I T N E S S E T H :
WHEREAS, the Corporation and the Initial Stockholders, among others, are
parties to that certain Subscription and Reorganization Agreement dated as of
April 29, 1999 (the "Subscription Agreement"), pursuant to which (i) certain
members of Horseshoe Gaming, L.L.C., a Delaware limited liability company
("Horseshoe LLC"), will contribute all of the units of membership interest they
hold in Horseshoe LLC solely in exchange for the issuance and transfer by the
Corporation to such persons or trusts of shares of Class A Common Stock of the
Corporation, par value $0.01 per share (the "Class A Common"), or Class B Common
Stock of the Corporation, par value $0.01 per share (the "Class B Common"), as
specified therein, (ii) the stockholders of Horseshoe Gaming, Inc., a Nevada
corporation ("HGI"), will contribute all of the shares of common stock of HGI
that they own solely in exchange for the issuance and transfer by the
Corporation to such persons of shares of Class A Common or Class B Common, as
specified therein and (iii) Xxxxxxxx Property Group, Inc., a Nevada corporation
("RPGI"), will merge with and into the Corporation, and the sole stockholder of
RPGI will exchange all of her shares of common stock of RPGI solely in exchange
for the issuance and transfer by the Corporation to such person of shares of
Class A Common;
WHEREAS, it is a condition precedent to the Closing of the transactions
contemplated by the Subscription Agreement that the parties to this Agreement
execute and deliver this Agreement at such Closing;
WHEREAS, as of the Closing, each Initial Stockholder Beneficially Owns the
number and class of shares of Common Stock set forth opposite such Stockholder's
name on Annex A hereto (such Stockholder's "Initial Shares"); and
WHEREAS, the Corporation and the Stockholders desire to (a) establish the
composition of the Corporation's Board of Directors, (b) assure continuity in
the ownership and management of the Corporation, (c) provide for the future
transfer of Shares, (d) preserve the Corporation's status as an S corporation
for income tax purposes and (e) establish certain other rights and procedures as
hereinafter specified.
2
NOW, THEREFORE, in consideration of the promises made herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
EFFECTIVE DATE; DEFINITIONS
1.1 Effective Date of Agreement. This Agreement shall become effective on
the date and at the time that the Closing occurs.
1.2 Definitions. Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Subscription Agreement. Whenever
used in this Agreement, the following capitalized terms shall have the meanings
set forth below:
"Accounting Year" means, and shall refer to, the accounting year of the
Corporation, ending December 31 of each year.
"Affiliate" means, with respect to any specified Person: (i) any Person
who directly or indirectly through one or more intermediaries controls or
is controlled by or is under common control with the specified Person;
(ii) any Person who is an officer, director, employee, partner, agent or
trustee of, or who serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, director,
employee, partner, agent or trustee, or with respect to which the
specified Person serves in a similar capacity; (iii) any Person who,
directly or indirectly, is the beneficial owner of, or controls, any
equity securities of, or otherwise has a beneficial interest in, the
specified Person or of which the specified Person is directly or
indirectly the owner of any equity securities (other than publicly held
securities) or in which the specified Person has a beneficial interest;
and (iv) any member of the Immediate Family of the specified Person.
"Agreement" has the meaning given to such term in the preface to this
Agreement and shall include any amendments made in the manner described
herein.
"Applicable Capital Gain Tax Rate" in respect of each of the Corporation
or any Subsidiary shall mean for each such entity calculated separately,
an amount equal to the sum of (i) the highest marginal Federal capital
gain tax rate applicable to any Stockholder plus (ii) an amount equal to
the sum of the highest marginal state and local capital gain tax rates
applicable to any Stockholder, multiplied by a factor equal to 1 minus
such highest marginal Federal capital gain tax rate.
"Applicable Income Tax Rate" in respect of the Corporation or any
Subsidiary shall mean for each such entity calculated separately, an
amount equal to the sum of (i) the highest marginal Federal income tax
rate applicable to any Stockholder plus (ii) an amount equal to
2
3
the sum of the highest marginal state and local income tax rates
applicable to any Stockholder, multiplied by a factor equal to 1 minus
such highest marginal Federal income tax rate.
"Authority" means any applicable authority that is a public body and
politic created by a state in which the Corporation or any Subsidiary are
conducting or seeking to conduct their respective Businesses and that is
authorized to regulate gaming business or food or liquor retailing
establishments, or any other agency so authorized. To the extent
applicable, Authority shall also include any other governmental body or
agency having jurisdiction over the operations of the Businesses.
"Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person would
constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act.
"Xxxxxx" means Xxxx X. Xxxxxx.
"Binion Holder" means any holder of Xxxxxx Shares.
"Xxxxxx Shares" means (a) the Initial Shares issued to Xxxxxx, (b) Shares
hereafter acquired by Xxxxxx and (c) any securities of the Corporation
issued with respect to the securities referred to in clauses (a) or (b)
above by way of a payment-in-kind, stock dividend, or stock split or in
connection with a combination of shares, exchange, conversion,
recapitalization, merger, consolidation or other reorganization. Any
Shares or securities referred to in (a) through (c) of the immediately
preceding sentence shall continue to be Xxxxxx Shares as a result of a
Transfer thereof by Xxxxxx, but shall cease to be Xxxxxx Shares if they
are redeemed by the Corporation or retired as treasury shares.
"Board" means the Board of Directors of the Corporation.
"Businesses" means the acquisition, development, operation, management,
financing and maintenance by the Corporation or any Subsidiaries of (a)
any gaming business, including without limitation the facilities that
comprise gaming businesses and any and all facilities related to, and
compatible with, such gaming businesses, and (b) any other business owned
or operated by the Corporation or any Subsidiary.
"Change of Control" means a Transfer of Shares that would result in the
transferee of such Shares (which did not, immediately prior to the
Transfer, hold Shares representing more than fifty percent of the votes
entitled to be cast at a meeting of the stockholders of the
3
4
Corporation) Beneficially Owning Shares representing more than fifty
percent of the votes entitled to be cast at a meeting of the stockholders
of the Corporation immediately following the consummation of such
Transfer.
"Class A Common" has the meaning given to such term in the recitals to
this Agreement.
"Class B Common" has the meaning given to such term in the recitals to
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Common Stock" means collectively the Class A Common, the Class B Common
and any other class or series of authorized capital stock of the
Corporation which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation.
"Corporation" has the meaning given to such term in the preface to this
Agreement.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended, or any successor statute thereto.
"Empress Merger" means the acquisition by the Corporation of all of the
outstanding shares of common stock of each of Empress Casino Joliet
Corporation and Empress Casino Xxxxxxx Corporation pursuant to the Empress
Merger Agreement.
"Empress Merger Agreement" means that certain Agreement and Plan of Merger
by and between Horseshoe LLC and Empress Entertainment, dated as of
September 2, 1998.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute thereto.
"Flow Through Entity" means an entity which (x) for Federal income tax
purposes constitutes (i) an S corporation, (ii) a "qualified subchapter S
subsidiary" (as defined in Section 1361(b)(3)(B) of the Code), (iii) a
"partnership" (within the meaning of Section 7701(a)(2) of the Code) other
than a "publicly traded partnership" (as defined in Section 7704 of the
Code), or (iv) a business entity which is disregarded as an entity
separate from its owner under the Code, the Treasury Regulations or any
published administrative guidance of the Internal Revenue Service and (y)
for state and local jurisdictions in respect of which Permitted Tax
Distributions are being made, is subject to substantially similar "flow
through" treatment under the applicable state or local income tax law.
"HGI" has the meaning given to such term in the recitals to this
Agreement.
4
5
"Horseshoe LLC" has the meaning given to such term in the recitals to this
Agreement.
"Immediate Family" of a specified individual means the husband, wife,
children, parents, brothers, sisters, direct lineal ancestors and
descendants, nieces, nephews, aunts and uncles of such specified
individual; and with respect to Xxxxxx, such term shall also include
Xxxxxxx X. Xxxx and any member of her Immediate Family.
"Initial Shares" has the meaning given to such term in the recitals to
this Agreement.
"Initial Stockholders" has the meaning given to such term in the preface
to this Agreement.
"Licenses" means all licenses and permits required to operate any of the
Businesses including, but not limited to, gaming licenses and liquor
licenses.
"Loan" means any commercial or private party loan from an entity that may
or may not be a Stockholder or an Affiliate of a Stockholder or a
Subsidiary, including from an officer or director of the Corporation or
any of its Subsidiaries or Affiliates, the proceeds of which loan,
directly or through a loan or contribution of such proceeds to a
Subsidiary, will be used to finance the development or operation of, or
improvements to, the Properties and the Businesses.
"Majority Xxxxxx Holders" has the meaning given to such term in Section
3.5(a).
"Permitted Tax Distributions" in respect of the Corporation and each
Subsidiary that qualifies as a Flow Through Entity shall mean, with
respect to any taxable year, the sum of: (I) the product of (A) the excess
of (i) all items of taxable income or gain (other than capital gain)
allocated by the Corporation and each such Subsidiary to the Stockholders
for that year over (ii) all items of taxable deduction or loss (other than
capital loss) allocated to such Stockholders by the Corporation and each
such Subsidiary, respectively, for such year and (B) the Applicable Income
Tax Rate, plus (II) the product of (A) the net capital gain (i.e., net
long-term capital gain over net short-term capital loss), if any,
allocated by the Corporation and each such Subsidiary to the Stockholders
for such year and (B) the Applicable Capital Gain Tax Rate, plus (III)
taking into account the Corporation's and each such Subsidiary's capital
gain and loss, respectively, the product of (A) the net short-term capital
gain (i.e., net short-term capital gain in excess of net long-term capital
loss), if any, allocated by the Corporation and each such Subsidiary to
the Stockholders for such year and (B) the Applicable Income Tax Rate,
minus (IV) the aggregate Tax Loss Benefit Amounts for the Corporation and
each such Subsidiary, respectively, for such year. For purposes of
calculating the amount of the Permitted Tax Distributions, the
proportionate part of the items of taxable income, gain, deduction or loss
(including capital gain or loss) of any Subsidiary which is a Flow Through
Entity shall be included in determining the Corporation's taxable income,
gain, deduction or loss (including capital gain or loss).
5
6
"Person" means an individual, corporation, limited liability company,
partnership, joint venture, joint stock company, association, trust,
business trust, unincorporated organization or other entity.
"Properties" means the parcels of real property on which the Businesses
are or will be operated.
"Proxies" has the meaning given to such term in Section 4.1.
"Quarterly Distribution Date" has the meaning given to such term in
Section 6.1.
"Qualifying S Corporation Shareholder" shall mean a Person (and if the
Person is an individual and has a spouse having a community property
interest in any Shares or in the income therefrom, such Person together
with such Person's spouse) who is described in Section 1361(b)(1)(B) of
the Code because such person (and such spouse) at the time of reference
is:
(i) an individual who is not a nonresident alien (as defined
in Section 7701(b)(1)(B) of the Code);
(ii) a grantor trust described in Section 1361(c)(2)(A)(i) of
the Code (other than by virtue of Section 1361(d) of the
Code);
(iii) an electing small business trust which is described in
Sections 1361(c)(2)(A)(v) and 1361(e) of the Code; or
(iv) a qualified subchapter S trust treated as a trust
described in Section 1361(c)(2)(A)(i) of the Code by
reason of Section 1361(d) of the Code and of which,
except as permitted by Treas. Reg. Section
1.1361(j)(2)(i), there is currently only one income
beneficiary and such beneficiary is a citizen or
resident of the United States.
"RPGI" has the meaning given to such term in the recitals to this
Agreement.
"S corporation" has the meaning given to such term in Section 1361(a) of
the Code.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute thereto.
"Selling Stockholder" has the meaning given to such term in Section
5.2(a).
"Shares" means all shares of Common Stock now or hereafter issued and
outstanding.
6
7
"State Acts" shall mean any state securities or blue sky laws and
regulations applicable to the Transfer of Shares.
"Stockholder" and "Stockholders" have the meanings given to such terms in
the preface to this Agreement.
"Subscription Agreement" has the meaning given to such term in the
recitals to this Agreement.
"Subsidiary or Subsidiaries" shall mean, individually or collectively,
Empress Casino Joliet Corporation, Empress Casino Xxxxxxx Corporation,
Xxxxxxxx Property Group, Limited Partnership, a Mississippi limited
partnership, Horseshoe Entertainment L.P., a Louisiana limited
partnership, and any other casino gambling operation or other business
compatible therewith in which, or through which, the Corporation holds any
direct or indirect equity or ownership interest in any Businesses.
"Tax Loss Benefit Amount" as to the Corporation's or any Subsidiary's
taxable years shall mean the amount by which the Permitted Tax
Distributions would be reduced were a net operating loss or net capital
loss from a prior taxable year of such entity beginning on or after the
Closing and ending prior to the taxable year of reference carried forward
to the applicable taxable year; provided, that for such purpose the amount
of any such net operating loss or net capital loss shall be utilized only
once and in each case shall be carried forward to the next succeeding
taxable year until so utilized.
"Transfer" means to transfer, sell, exchange, gift, bequest, hypothecate,
pledge, grant any security interest in or otherwise dispose of or encumber
any share of Common Stock, or enter into any agreement to do so (including
any agreement that creates or grants an option, warrant, or right to
obtain an interest), whether voluntarily or by operation of law, which in
any case would change or transfer the legal or beneficial ownership of, or
any legal or beneficial ownership interest in, any share of Common Stock
(including, without limitation, any transaction that creates a form of
joint ownership in any share of Common Stock between the transferor and
one or more Persons).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants that this Agreement has been duly authorized,
executed and delivered by the Corporation and constitutes the valid and binding
obligation of the Corporation, enforceable against the Corporation in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium or assignment
for the
7
8
benefit of creditors laws and other laws affecting the rights and remedies of
creditors generally, including without limitation laws regarding fraudulent
transfers, fraudulent conveyances, preferences, avoidance and automatic stay.
2.2 Representations and Warranties of Each of the Stockholders. Each of
the Stockholders hereby represents and warrants, severally as to itself only,
that at the time such Stockholder becomes a party to this Agreement (and after
giving effect to the transactions to be consummated at the Closing):
(a) Ownership of Initial Shares. Such Stockholder is the sole record
owner and Beneficial Owner of the number and class of Shares set forth opposite
its name on Annex A attached hereto, free and clear of all liens, claims and
encumbrances, and the number and class of Shares set forth opposite such
Stockholder's name on Annex A hereto constitute all of the Shares owned of
record or Beneficially Owned by such Stockholder. Such Stockholder has sole
voting power and sole power to issue instructions with respect to the matters
set forth in Sections 3.7, 3.8 and 4.1 hereof, sole power of disposition, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares set forth opposite such Stockholder's name on Annex
A hereto, with no limitations, qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Such Stockholder has the legal
capacity (if such Stockholder is an individual), power and authority to enter
into and perform all of such Stockholder's obligations under this Agreement. The
execution, delivery and performance of this Agreement by such Stockholder will
not violate any other agreement to which such Stockholder is a party including,
without limitation, any voting agreement, stockholder agreement or voting trust.
This Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, moratorium or assignment for the benefit of
creditors laws and other laws affecting the rights and remedies of creditors
generally, including without limitation laws regarding fraudulent transfers,
fraudulent conveyances, preferences, avoidance and automatic stay. There is no
Person (other than such Stockholder's spouse if such Stockholder is married and
such Stockholder's Shares constitute community property) whose consent is
required for the execution and delivery of this Agreement or the consummation by
such Stockholder of the transactions contemplated hereby. If such Stockholder is
married and such Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, such Stockholder's spouse, enforceable against
such Person in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium or assignment for the benefit of creditors laws and other laws
affecting the rights and remedies of creditors generally, including without
limitation laws regarding fraudulent transfers, fraudulent conveyances,
preferences, avoidance and automatic stay.
8
9
(c) No Conflicts. (A) No filing with, and no permit, authorization,
consent or approval of, any federal, state or local governmental public body or
authority is necessary for the execution of this Agreement by such Stockholder
and the consummation by such Stockholder of the transactions contemplated hereby
and (B) none of the execution and delivery of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby or the compliance by such Stockholder with any of the
provisions hereof will (1) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
such Stockholder is a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound, or (2) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to such
Stockholder or any of such Stockholder's properties or assets.
(d) Reliance by the Corporation. With respect to the Initial
Stockholders, each such Initial Stockholder understands and acknowledges that
the Corporation and each other Initial Stockholder is entering into the
Subscription Agreement in reliance upon such Initial Stockholder's execution and
delivery of this Agreement.
(e) Regulatory Matters. Such Stockholder acknowledges that: (i) the
Corporation and all Stockholders are or will be subject to the licensing and
permit laws of each state in which the Corporation or any Subsidiary is
conducting or seeking to conduct its Businesses; (ii) the Corporation and all
Stockholders are subject to the suitability standards promulgated from time to
time by the Authorities and as such may be found unsuitable to hold Shares in
the Corporation by such Authorities; and (iii) such Stockholder shall and must,
at all times, fully cooperate with the agencies that promulgate these laws,
including, but not limited to, any Authority, in providing in a timely fashion
all information requested.
ARTICLE III
COVENANTS
3.1 S Corporation Status.
In consideration of the Corporation's agreement to make Permitted
Tax Distributions pursuant to Section 6.1, each Initial Stockholder has agreed
in the Subscription Agreement to consent to the election of the Corporation to
be taxed as an S corporation and to do all things necessary or appropriate to
effectuate that election and hereby further covenants and agrees that so long as
an election under Section 1362(a) of the Code is in effect with respect to the
Corporation:
9
10
(a) Such Stockholder shall maintain his, her or its status as a
Qualifying S Corporation Shareholder;
(b) In the case of any Stockholder which is (or becomes) a qualified
subchapter S trust ("QSST") described in Section 1361(c)(2)(A)(i) of the Code by
reason of Section 1361(d) of the Code, such Stockholder agrees and covenants
that all of the income (within the meaning of Treas. Reg. Section 1.643(b)-1) of
the QSST will be distributed currently for each taxable year of the QSST during
which it holds any Shares; and
(c) If the Corporation's status as an S corporation is terminated
inadvertently for any reason whatsoever and a private letter ruling is sought
from the Internal Revenue Service under Section 1362(f) of the Code, each
Stockholder agrees to make any adjustments for the period specified in Section
1362(f) of the Code required by the Internal Revenue Service and approved by the
Board, as may be required for the Corporation to obtain such a favorable private
letter ruling from the Internal Revenue Service.
3.2 Right to Terminate S Corporation Status. If, and only if, the
Corporation fails to make any Permitted Tax Distribution when and as required by
Section 6.1, and such failure continues for thirty (30) days after notice
thereof by any Stockholder to the Corporation and each other Stockholder, the
Corporation shall take such action in order to effectuate the termination of the
S corporation election of the Corporation, including without limitation, filing
the revocation of the election required by Treas. Reg. Sections 1.1362-2(a) and
-6(a)(3); provided, however, that Stockholders owning shares possessing a
majority of the voting power of the Corporation may, by delivering written
notice to the Corporation, elect to waive such failure (which waiver shall not
relate to any subsequent failures) and not have the Corporation revoke its S
corporation election.
3.3 Repayment of Certain Permitted Tax Distributions.
(a) Promptly after the filing by the Corporation and each Subsidiary
of their respective annual tax return, each Stockholder agrees to reimburse the
Corporation or the applicable Subsidiary, as the case may be, the amount by
which the estimated tax distributions theretofore made to such Stockholder in
respect of the taxable year covered by such annual tax return exceed the
Permitted Tax Distributions for such taxable year determined on the basis of
such tax returns filed in respect of such taxable year for the Corporation or
the applicable Subsidiary, as the case may be.
(b) If the appropriate Federal or state taxing authority finally
determines that the amount of the items of the Corporation's or any Subsidiary's
taxable income, gain, deduction or loss (including capital gain or loss) for any
taxable year or the aggregate Tax Loss Benefit Amounts carried forward to such
taxable year should be changed or adjusted, then each Stockholder shall
reimburse the Corporation or the applicable Subsidiary, as the case may be, if
and to the extent the Permitted Tax Distributions previously made to such
Stockholder in respect of that taxable year exceeded the Permitted Tax
Distributions which should have been made for such taxable year taking into
account such change or adjustment.
10
11
(c) To the extent that any Permitted Tax Distribution would
otherwise be made to any Stockholder at a time when an obligation of such
Stockholder to make a payment to the Corporation or the applicable Subsidiary
pursuant to paragraphs (a) or (b) of this Section 3.3 remains outstanding, the
amount of any Permitted Tax Distribution required to be made by the Corporation
or a Subsidiary, as applicable, shall be reduced by the amounts such Stockholder
is obligated to pay to the Corporation or the applicable Subsidiary until such
amount is recovered in full.
3.4 Tax Rate Information. Each Stockholder shall provide such information
to the Corporation as the Corporation shall reasonably request from time to time
to permit the Corporation to determine the Applicable Tax Rate and the
Applicable Capital Gain Tax Rate. Each Stockholder shall also promptly advise
the Corporation of any changes in the Stockholder's circumstance which would
change the Applicable Income Tax Rate and the Applicable Capital Gain Tax Rate.
3.5 Lock Up Agreement. In the event of an underwritten public offering of
the Corporation's Common Stock in which shares of Common Stock are listed for
trading on a national securities exchange or quoted on the Nasdaq National
Market System (a "Qualified IPO"), if the managing underwriter for such offering
deems it necessary or appropriate, each Stockholder agrees that it will not
Transfer, or agree to Transfer, any Shares during a period deemed by such
managing underwriter to be necessary or appropriate, and each Stockholder will
enter into a written agreement with such managing underwriter and the
Corporation to that effect (including a covenant not to sell or otherwise
Transfer any Shares in a market transaction (including sales pursuant to Rule
144 under the Securities Act) during the applicable restricted period). In order
to enforce the covenant in this Section 3.2, the Corporation may impose
stop-transfer instructions with respect to the Shares of any Stockholder until
the end of such restricted period.
3.6 Licenses. Each Stockholder hereby covenants and agrees to submit in a
timely fashion all information and to perform in a timely fashion any acts that
the Corporation determines are necessary or appropriate to be submitted or
performed by such Stockholder in connection with the Corporation's obtaining
and/or maintaining the Licenses or that are otherwise required of the
Corporation by the Authorities.
3.7 Provisions Concerning the Empress Merger. Until the earlier of the
effective time of the Empress Merger or the termination of the Empress Merger
Agreement in accordance with its terms, each Stockholder shall vote, or cause to
be voted, at any meeting of the Stockholders of the Corporation or by means of
any written consent pursuant to which action is to be taken with respect to the
Empress Merger (including, without limitation, the Empress Merger Agreement),
all voting securities of the Corporation over which such Stockholder has the
power to vote or direct the voting, and shall take promptly all such other
actions as shall be necessary or desirable (i) to approve the Empress Merger,
including without limitation the Empress Merger Agreement, and (ii) to not
breach any covenant, representation or warranty or any other obligation or
agreement of the Corporation or the Subsidiaries under the Empress Merger
Agreement and/or other agreement, instrument or document entered into in
connection with the Empress Merger. Each of the Stockholders hereby
11
12
covenants and agrees that such Stockholder shall not enter into any agreement or
understanding with any Person the effect of which would be inconsistent or
violative of the provisions and agreements contained in this Agreement.
3.8 Composition of Board.
(a) The Board shall be comprised of three directors. Until the
consummation of a Qualified IPO, each Stockholder hereby agrees to vote or cause
to be voted, at any meeting of the stockholders of the Corporation or by means
of any written consent pursuant to which directors are to be elected, all voting
securities of the Corporation over which it has the power to vote or direct the
voting for the election as directors of the Corporation of three Persons
designated by the holders of a majority of the issued and outstanding Xxxxxx
Shares (the "Majority Xxxxxx Holders") to the Board.
(b) If at any time the Majority Xxxxxx Holders shall notify the
other Stockholders of their desire to remove, with or without cause, any
individual from a directorship of the Corporation, each Stockholder will vote,
or cause to be voted, at any meeting of the stockholders of the Corporation or
by means of any written consent pursuant to which directors are to be elected,
all voting securities of the Corporation over which such Stockholder has the
power to vote or direct the voting, and shall take promptly all such other
actions as shall be necessary or desirable to cause the removal of such
director.
(c) If at any time any director designated by the Majority Xxxxxx
Holders ceases to serve on the Board for any reason, then the Majority Xxxxxx
Holders shall be entitled to designate a successor director to fill the vacancy
created thereby and each Stockholder agrees to vote, or cause to be voted, at
any meeting of the stockholders of the Corporation or by means of any written
consent pursuant to which directors are to be elected, all voting securities of
the Corporation over which such Stockholder has the power to vote or direct the
voting, and shall take promptly all such other actions as shall be necessary or
desirable to cause the designated successor to be elected to fill such vacancy.
3.9 Restriction on Transfer and Proxies. Each of the Stockholders hereby
covenants and agrees that, except as otherwise set forth in this Agreement, such
Stockholder shall not, directly or indirectly: (i) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting
agreement, with respect to any Shares; or (ii) take any action that would (A)
make any representation or warranty of such Stockholder contained herein untrue
or incorrect if such representation or warranty were to be made immediately
after giving effect to such action or at any other time prior to the termination
of this Agreement or (B) have the effect of preventing or impeding any
Stockholder from performing such Stockholder's obligations under this Agreement.
3.10 Investment Opportunities. For so long as Xxxxxx holds any Shares,
Xxxxxx and his Affiliates shall be obligated to present and offer to the
Corporation any opportunity that Xxxxxx and/or his Affiliates are offered to
acquire, develop, manage, operate or otherwise invest in any
12
13
gaming business, except that Xxxxxx and his Affiliates may (a) pursue investment
opportunities to acquire, develop, manage, operate or otherwise invest in
businesses ancillary to any gaming business, including but not limited to hotels
and restaurants, so long so they shall disclose such pursuits to the
Corporation, and (b) invest in the stock of any publicly traded company, in each
case free and clear of any restrictions or obligations contained in this Section
3.7.
3.11 Affiliate Dealings With the Corporation. For so long as Xxxxxx holds
any Shares, each of Xxxxxx and his Affiliates shall have the right to contract
or otherwise deal with the Corporation for the sale of goods or services to the
Corporation provided that (a) the compensation paid or agreed to be paid for
such goods or services is reasonable (i.e., at fair market value), and relates
to goods or services actually furnished to the Corporation, (b) the goods or
services to be furnished are reasonable for and necessary to the Corporation,
(c) the fees, terms and conditions of the transactions are at least as favorable
to the Corporation as would be obtainable in an arm's-length transaction, and
(d) any necessary Authority consent is obtained.
ARTICLE IV
GRANT OF PROXY
4.1 Proxy.
(a) Each Stockholder irrevocably appoints Xxxx X. Xxxxxx, ("Xxxxxx")
with full power of substitution, as such Stockholder's true and lawful attorney
and proxy to vote and otherwise act with respect to all of such Stockholder's
Shares of which such Stockholder is now or hereafter the record owner at all
annual, special and other meetings of stockholders of the Corporation, and at
any adjournments thereof, with like effect and as if the undersigned were
personally present and voting, upon the following matters:
(i) In favor of approval of an agreement pursuant to which
the Corporation shall acquire all of the outstanding
shares of common stock of each of Empress Casino Joliet
Corporation and Empress Casino Xxxxxxx Corporation, and
any actions, agreements or other documents required in
furtherance thereof;
(ii) Against any action or agreement that would result in a
breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the
Corporation or any subsidiary of the Corporation under
any agreement pursuant to which the Corporation shall
acquire all of the outstanding shares of common stock of
each of Empress Casino Joliet Corporation and Empress
Casino Xxxxxxx Corporation; and
13
14
(iii) For the election of three (3) nominees of the holders of
a majority of the Xxxxxx Shares to serve as directors on
the Corporation's board of directors.
(b) Each Stockholder understands and agrees that the appointment and
proxy of Xxxx X. Xxxxxx in Section 4(a) relates to all voting rights (whether
limited, fixed or contingent) with respect to the all Shares from time to time
owned by such Stockholder and does not relate to any other right incident to
such Stockholder's ownership of Shares (including, without limitation, the right
to receive dividends and other distributions on those Shares).
(c) The rights of Xxxxxx with respect to any Stockholder under this
Article IV shall terminate and the Proxy granted by such Stockholder pursuant to
this Article IV shall be void and of no further force and effect at such time as
this Agreement is terminated pursuant to 8.19 hereof.
(d) The appointment of proxies specified in Section 4(a) shall
become effective upon the execution and delivery of this Agreement and shall
terminate upon the sale, exchange or other legal disposition of all of such
Stockholder's legal and beneficial right, title and interest in and to all
Shares to a party that is not an Affiliate of such Stockholder.
(e) Each Stockholder acknowledges that Xxxxxx may exercise the
proxies provided for in Section 4.1(a) at any time, from time to time, in his
sole discretion, without notice to the Stockholders with respect to any matter
specified in Section 4.1(a) that is to be voted on by the Stockholders of the
Corporation. Each Stockholder hereby agrees to take any and all action, and to
execute and deliver such documents, as requested by Xxxxxx to assure that the
proxies are, and at all times remain, irrevocable, enforceable and exercisable
by Xxxxxx pursuant to applicable law and in accordance with their terms. The
Corporation hereby agrees that any stockholder action attempted to be taken by
any Stockholder in violation of this Article IV shall be void and the
Corporation shall not execute any documents or record any such attempted action.
(f) Except as expressly provided in Section 4(d), this proxy is
irrevocable and constitutes a power coupled with an interest for all purposes,
including for purposes of Section 212 of the General Corporation Law of the
State of Delaware.
ARTICLE V
RESTRICTIONS UPON THE TRANSFER OF SHARES
5.1 Restrictions on Transfer Generally.
(a) No Stockholder shall Transfer any or all of such Stockholder's
Shares except in accordance with this Article V.
14
15
(b) Any purported Transfer of a Stockholder's Shares, or any part
thereof, although permitted under this Agreement, shall be deemed invalid, null
and void, and of no force or effect, unless and until the transferee, if not
already a party to this Agreement, shall have executed a counterpart to this
Agreement. The Corporation covenants and agrees that it will not issue Shares to
any Person that is not a signatory to this Agreement.
(c) The Corporation shall not permit the Transfer of any Shares to
be made on the books of Corporation unless the Transfer is permitted by this
Agreement, and is made in accordance with the terms of this Agreement. Any
purported Transfer not permitted by this Agreement, or not made in accordance
with the terms of this Agreement, shall be deemed invalid, null and void, and of
no force or effect, the purported transferee shall have no interest in any of
the Shares purported to be transferred, and the Stockholder making the purported
Transfer will continue to be recognized as the owner (both legally and
beneficially) of the Shares.
(d) No Stockholder shall effect a Transfer of any or all of its
Shares until the Corporation has received written notice of such proposed
Transfer, signed by each of the transferring Stockholder and the prospective
transferee, which notice shall set forth the following information:
(i) The number of Shares to be transferred;
(ii) The identity of the transferring Stockholder;
(iii) The name of the prospective transferee and all material
terms and conditions of the proposed transaction between
the transferor and the prospective transferee;
(iv) A representation by the transferring Stockholder that
such Stockholder is not aware of any facts or
information concerning the prospective transferee that
would lead a reasonable person to conclude that the
prospective transferee would not be found suitable as a
gaming licensee under the gaming licensing criteria of
any state in which the Corporation or any of the
Subsidiaries is conducting or actively seeking to
conduct their respective Businesses;
(v) For so long as the Corporation is an S corporation, a
representation by the transferee that such transferee is
a Qualifying S Corporation Shareholder;
(vi) For so long as the Corporation is an S corporation, a
representation by the transferring Stockholder that the
prospective transferee will not count as more than one
"person" for purposes of calculating the number of
permitted shareholders of a corporation that is an S
corporation;
15
16
(vii) The address of the prospective transferee, its social
security number and any other pertinent information
requested by the Corporation in connection with the
conduct of its due diligence investigation into the
suitability of such prospective transferee;
(viii) The agreement in writing by the prospective transferee
to be bound by the terms of this Agreement; and
(ix) The agreement of the transferring Stockholder that any
necessary approval of any Authority shall be obtained
prior to the proposed Transfer.
(e) The Corporation shall have 20 days from its receipt of the
aforesaid notice to deliver to the transferring Stockholder its written
objection to the proposed Transfer, which written objection shall set forth the
specific reasons for the objection to the proposed Transfer and such reasons
shall be based upon (i) the gaming licensing criteria of a state in which the
Corporation or any of the Subsidiaries is conducting or actively seeking to
conduct their respective Businesses, (ii) the integrity, honesty or business
reputation of the transferee and/or (iii) the criteria for maintaining the S
corporation status of the Corporation (unless such status has been revoked). If
the Corporation delivers a timely written objection in accordance with the
foregoing, the Transferring Stockholder may not effect the proposed Transfer.
Any dispute with respect to the basis of the Corporation's written objection
shall be resolved by binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association held in Las Vegas, Nevada.
(f) Notwithstanding any other provision hereof to the contrary, no
Stockholder may Transfer, or enter into any agreement to Transfer, any or all of
such Stockholder's Shares to any Person that (i) is not a Qualifying S
Corporation Shareholder or (ii) would cause the Corporation to have more than
the maximum permitted number of stockholders under the Code as then in effect.
No Transfer or purported Transfer to any Person satisfying the requirements of
the immediately preceding sentence shall be effective or recognized by the
Corporation unless and until the Corporation has received (at the expense of
such Person) an opinion of counsel, which counsel and such opinion is
satisfactory to the Corporation in its sole judgment, that the Person is a
Qualifying S Corporation Shareholder and that the Transfer will not adversely
affect the Corporation's status as an S corporation under Section 1361 of the
Code and as to such other matters relating thereto as the Corporation shall
request.
(g) If by reason of, or in connection with the Transfer the
Corporation's status as an S corporation is terminated inadvertently and the
Corporation, in its sole judgment, elects to seek a private letter ruling from
the Internal Revenue Service under Section 1362(f) of the Code, the transferring
Stockholder agrees to make any adjustments for the period specified in Section
1362(f) of the Code required by the Internal Revenue Service and approved by the
Board, as may be required for the Corporation to obtain such a favorable private
letter ruling from the Internal Revenue Service.
16
17
Each transferring Stockholder's agreement and obligation to make such
adjustments shall continue indefinitely, notwithstanding any Transfer of Shares
by the Stockholder and regardless of whether the Corporation consented thereto.
5.2 Right of First Refusal.
(a) Subject to any employment agreement or other employment or
compensatory arrangement pursuant to which the Corporation has the right to
repurchase shares from a Stockholder (in which is event such right shall be
prior to this Section 5.2), such Stockholder (other than a Binion Holder)
desiring to Transfer any of such Stockholder's Shares (a "Selling Stockholder")
shall first notify the Xxxxxx Holders of such Selling Stockholder's intention to
Transfer such Shares to the proposed transferee (the "Sale Notice") and offer to
sell the same to the Xxxxxx Holders pursuant to the terms and conditions of this
Section 5.2. The Sale Notice shall specify the material terms of the
transaction, including the type of Transfer, the proposed transferee, the number
of Shares to be transferred, the price per share and the terms of payment. The
Xxxxxx Holders may elect to purchase all (but not less than all) of the Shares
to be transferred at the same price specified in the Sale Notice by delivering a
written notice of such election to the Selling Stockholder within 30 days after
the delivery of the Sale Notice (the last day of such 30 day period is referred
to herein as the "Authorization Date"); provided, however, that no Binion Holder
may purchase more than its pro rata share of the Shares to be Transferred unless
one or more Xxxxxx Holders has not elected to purchase its entire pro rata share
(and any subsequent allocation of such unsubscribed Shares shall be made pro
rata among the subscribing Xxxxxx Holders); and provided further that any Binion
Holder may assign its right to purchase any portion of such Shares to any of its
Affiliates. If the Xxxxxx Holders (together with any assignees thereof of the
rights hereunder) have collectively elected to purchase the Shares to be
Transferred, then the Selling Stockholder shall Transfer the Shares to the
Xxxxxx Holders and assignees (if any), at the price and on the terms and
conditions set forth in the Sale Notice, and such Xxxxxx Holders and assignees
(if any) shall consummate the purchase and sale of Shares on such terms not more
than 30 days after the Authorization Date.
(b) If the Xxxxxx Holders (together with any assignees thereof of
the rights hereunder) have not collectively elected to purchase all of the
Shares to be Transferred or if they fail to consummate the purchase and sale of
all of the Shares as provided in Section 5.2(a), then the Selling Stockholder
may Transfer to the proposed transferee specified in the Sale Notice the Shares
specified in the Sale Notice at a price and on terms no more favorable to the
transferee as those set forth in the Sale Notice during the 60-day period
following the Authorization Date. Any Shares not so transferred within such
60-day period again will become subject to all of the provisions of this Section
5.2.
(c) The restrictions contained in this Section 5.2 will not apply
with respect to Transfers of Shares (i) by testamentary or intestate
disposition, (ii) to a member of a Stockholder's Immediate Family or (iii) to a
former spouse pursuant to a court-approved divorce decree; provided that in each
case, the transferee shall hold such Shares subject to the same restrictions
applicable to its transferor and shall agree in writing to be bound by the terms
of this Agreement.
17
18
5.3 Obligation to Sell Shares. Notwithstanding the provisions of any other
binding agreement upon any Stockholder, including without limitation any
employment agreement or any warrant agreement, each Stockholder agrees as
follows:
(a) If the Majority Xxxxxx Holders desire to Transfer all of their
Shares or Shares that would result in a Change of Control of the Corporation,
then (i) all Stockholders shall consent to and raise no objections against such
Transfer, (ii) if the Transfer is structured in whole or in part as a merger or
consolidation, each Stockholder shall waive any dissenters rights, appraisal
rights or similar rights in connection with such merger or consolidation, (iii)
if the Transfer is structured in whole or part as a sale of securities, each
Stockholder agrees to sell its Shares on the same terms and conditions of sale
on which all Shares are to be sold in such Transfer; and (iv) each Stockholder
shall take all actions reasonably requested by the Corporation in connection
with the consummation of such Transfer. In the event that any such Transfer
shall be to any Affiliate of such Majority Xxxxxx Holders, the Stockholders
shall not be required to Transfer their respective Shares unless a nationally
recognized investment banking firm selected by the Corporation shall determine
that the aggregate value of the consideration to be received by the Stockholders
in such Transfer is fair to the stockholders of the Corporation.
(b) If, in the reasonable, good faith opinion of the Board, the
licenses of the Company or one of its Subsidiaries could be suspended, revoked,
or terminated or the ability of the Company or one of its Subsidiaries to
conduct one or more of the Businesses could be jeopardized because of the
ownership of Shares by any Stockholder, such Stockholder shall transfer his or
her Shares to the Corporation for a non-recourse, unsecured, subordinated note
of the Corporation, in a principal amount equal to the then value of such
Shares, as determined by a nationally recognized investment banking firm. In
either case, such note shall accrue interest at the "prime rate" of the bank
with which the Corporation has its primary banking relationship, and all
principal and interest shall, subject to any limitations in any provision of a
Loan to which such note is subordinate, be payable upon the earlier of (i) the
fifth anniversary of such note or (ii) the liquidation of the Corporation;
provided, however, that the amount paid under such note to the holder of such
note on the liquidation of the Corporation shall in no event exceed the amount
to which such holder would have been entitled had such holder retained its
Shares. This Section 5.3(b) is subject to the rules and regulations of any
Authority with respect to the payment by the Corporation to any of its
stockholders for such stockholder's capital stock if such stockholder is not a
suitable licensee.
(c) If requested by the Board, a Stockholder shall pledge such
Stockholder's Shares as additional security under the terms of any Loan or any
guarantee of any Loan, which pledge shall result in the lender(s) under such
Loan becoming the holder of the Shares so pledged upon any default on such Loan,
without any further action by the lender(s); provided, however, that the pledge
of each Stockholder's Shares shall be subject to substantially the same terms
and conditions as the pledge of each other Stockholder's Shares.
18
19
(d) Upon the written request of the Corporation, each Stockholder
agrees to consent to any sale, transfer, reorganization, exchange, merger,
combination or other form of transaction described in this Section 5.3 and to
execute such agreements, powers of attorney, voting proxies or other documents
and instruments as the Corporation determines may be necessary or desirable to
consummate such sale, transfer, reorganization, exchange, merger, combination or
other form of transaction. Each Stockholder further agrees to timely take such
other actions as the Corporation may reasonably request in connection with the
approval of the consummation of such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction, including voting as a
stockholder to approve any such sale, transfer, reorganization, exchange,
merger, combination or other form of transaction.
(e) If at any time and for any reason a Stockholder ceases to be a
Qualifying S Corporation Shareholder or if for any reason whatsoever the
interest of any Stockholder in any Shares or the Transfer of any Shares (whether
or not permitted hereunder) shall cause the Corporation to cease to be an S
corporation (a "Disqualifying Event"), the Shares owned by such Stockholder
immediately prior to the event resulting in a Disqualifying Event shall
automatically be converted as of the date of such Disqualifying Event from
Shares into a right as an unsecured general creditor of the Corporation to
receive an amount equal to such Stockholder's proportionate interest as
represented by such Shares of the book value of the Corporation. As a result,
such Stockholder shall cease as of the Disqualifying Event to be a Stockholder,
and from and after such date, shall have no rights as a Stockholder. Such right
to receive an amount equal to such Stockholder's proportionate interest as
represented by such Shares of the book value of the Corporation shall be
evidenced by an unsecured promissory note providing for payment of the amount
due in a lump sum on a date ten years from the date of the Disqualifying Event
with interest thereon at the "prime rate" of the bank with which the Corporation
has its primary banking relationship, and which promissory note shall be
subordinate to all indebtedness of the Corporation other than trade payables. If
within 30 days of becoming aware of any Disqualifying Event the Person (i)
advises the Corporation that such Disqualifying Event was "inadvertent" within
the meaning of Section 1362(f) of the Code, (ii) at his, her or its own expense,
is applying for, and such Person promptly applies for and obtains a private
letter ruling from the Internal Revenue Service pursuant to Section 1362(f) of
the Code that the Corporation shall be treated as an S corporation at all times
while such Person held, or had any interest in, any Shares, and (iii) furnishes
to the Corporation an opinion of counsel, which counsel and such opinion is
satisfactory to the Corporation in its sole judgment, that such Person is a
Qualifying S Corporation Shareholder, then such Person shall be entitled to
repurchase the same number of Shares previously converted to a promissory note
of the Corporation by operation of this Section 5.3 by exchanging the
Corporation's promissory note for such Shares.
5.4 Transfers by the Xxxxxx Holders. A Binion Holder may Transfer all or
any portion of its Shares, subject only to compliance with the provisions of
Section 5.1. Notwithstanding the foregoing, Xxxxxx may not Transfer 50 percent
or more of his Initial Shares to any Person or Persons (other than an Affiliate
of Xxxxxx or a member of his Immediate Family), without first providing notice
of the material terms of the proposed Transfer to each other Stockholder, which
notice shall
19
20
offer each such Stockholder the opportunity to Transfer the same portion (on a
percentage basis) of such Stockholder's Shares as Xxxxxx is transferring of his
Shares, on substantially the same economic terms and conditions as applied to
the Transfer by Xxxxxx. Only after a period of 20 days after delivery of the
offer to each such Stockholder has elapsed, or after Xxxxxx has received notice
from each such Stockholder as to whether such Stockholder accepts or rejects
such offer, whichever occurs first, may Xxxxxx and the Stockholders who have
accepted such offer effect the proposed Transfer.
5.5 No Release or Waiver. Neither the provisions of, nor consummation of
the transactions contemplated by, this Article V shall constitute a release or
waiver of any claims or rights which the Corporation or any Stockholder may have
against the Corporation or any Stockholder as a consequence of a breach of this
Agreement.
5.6 Securities Laws and Approvals of Authorities. A Share shall not be
Transferred in any manner whatsoever except (a) in accordance with the
Securities Act and any applicable State Acts, and (b) with any necessary prior
or subsequent consent or approval of any Authority. Before giving effect to any
Transfer of Shares, the Corporation may require a transferee of Shares to give
such representations and warranties with respect to compliance with the
Securities Act and applicable State Acts as the Corporation (or its counsel) may
deem necessary or appropriate.
ARTICLE VI
PERMITTED TAX DISTRIBUTIONS
6.1 Permitted Tax Distributions. The Corporation agrees that for each
taxable year that the Corporation qualifies as an S corporation under the Code,
or any similar provision of state or local law, the Corporation will make, and
will cause each Subsidiary any of whose items of income, gain, loss or deduction
(including capital gain or loss) are taxable to the Stockholders to make,
Permitted Tax Distributions to the Stockholders. Estimated amounts of Permitted
Tax Distributions shall be made by the Corporation (and each applicable
Subsidiary) within fifteen days following March 31, May 31, August 31, and
December 31 based upon an estimate of the excess of (x) the Permitted Tax
Distributions that would be payable for the period beginning on January 1 of
such year and ending on March 31, May 31, August 31, and December 31 if such
period were a taxable year (computed as provided above) over (y) the amount of
the distributions attributable to all prior periods during such taxable year.
Promptly after the filing by the Corporation and each such Subsidiary of their
respective annual tax return, the Corporation or the applicable Subsidiary, as
the case may be, shall make a further payment to its respective Stockholder to
the extent such estimated tax distributions were less than the Permitted Tax
Distributions actually payable to such Stockholders with respect to such taxable
year as determined on the basis of such tax returns filed in respect of such
taxable year for that Stockholder.
If any State (or any political subdivision of any State) shall
require the Corporation or any Subsidiary to withhold and pay over any amount
from any Permitted Tax Distribution
20
21
otherwise payable to any Stockholder who is not a resident of that State (or the
political subdivision), the amount so withheld shall be treated for all purposes
of this Agreement as having been paid to such Stockholder.
6.2 Change in Permitted Tax Distributions. So long as there has been no
Change of Control, the Board shall have the right, without the consent of any
Stockholder, to modify or reduce the amount of the Permitted Tax Distributions
payable to the Stockholders; provided, however, that the amount of the Permitted
Tax Distributions shall never be reduced below the amount required calculated
solely by reference to the highest marginal Federal income tax rate applicable
to any Stockholder.
6.3 Termination of S Corporation Status. The Board shall have the right at
any time to terminate the status of the Corporation as an S corporation or to
alter or change the status of any Subsidiary as a Flow Through Entity. Nothing
contained herein shall give any Stockholder the right to have the Corporation
continue as an S corporation or for any Subsidiary to continue as a Flow Through
Entity. If the Board shall determine to revoke the Corporation's election to be
taxed as an S corporation, each Stockholder shall upon request (i) consent to
such revocation at the time and in the manner required by Treas. Reg. ss..
1.1362-6(b) (or any successor or superceding Treasury Regulation thereto) and
(ii) if approved by the Board, consent to an election under Section 1362(e)(2)
of the Code at the time and in the manner required by Treas. Reg. ss..
1.1362-6(b) (or any successor or superceding Treasury Regulation thereto).
ARTICLE VII
SECURITIES ACT COMPLIANCE; LEGENDS ON STOCK
7.1 Legends. In addition to any other legend required from time to time by
the Corporation, all certificates representing Shares shall contain the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE, INCLUDING CERTAIN VOTING
RIGHTS WITH RESPECT THERETO, ARE HELD SUBJECT TO, AND THE TRANSFER OF SUCH
SECURITIES IS RESTRICTED BY, THE TERMS OF A CERTAIN STOCKHOLDERS AGREEMENT
DATED AS OF APRIL 29, 1999, A COPY OF WHICH IS ON FILE AT THE OFFICE OF
THE CORPORATION. THE PROPOSED TRANSFER OF ANY SHARES REPRESENTED BY THIS
CERTIFICATE SHALL BE VOID AND OF NO FORCE AND EFFECT UNLESS MADE IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT."
21
22
ARTICLE VIII
MISCELLANEOUS
8.1 Stockholder Capacity. Each Stockholder executes this Agreement solely
in its capacity as the record and/or Beneficial Owner of such Stockholder's
Shares.
8.2 Entire Agreement. This Agreement and the Subscription Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
8.3 Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any Person to which legal or Beneficial Ownership of such Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, such Stockholder's heirs, guardians, administrators or successors.
8.4 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Corporation and its successors and assigns and the Stockholders and any
subsequent holders of Shares and the respective successors and assigns of each
of them, so long as they hold Shares.
8.5 Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated except upon the
execution and delivery of a written agreement executed by the Corporation and
Stockholders holding a majority of the votes represented by the Shares
outstanding at the time of the amendment; provided, however, that the addition
of any holder of Shares as a party to this Agreement pursuant to its execution
of a counterpart hereto may be effected pursuant to the provisions hereof
without regard to the restrictions contained in this Section 8.5.
8.6 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
given when the same is (a) personally delivered, (b) deposited in the U.S. mail,
certified or registered and postage prepaid, (c) deposited with Federal Express
or similar overnight delivery service or (d) transmitted by telecopier or other
facsimile transmission, answerback requested. All communications hereunder shall
be delivered to the respective parties at the following addresses:
If to any Stockholder: At the addresses set forth
on Annex A hereto
22
23
If to the Corporation: 0000 Xxxxx Xxxxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attention:
with a copy to: Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.7 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
8.8 Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party or parties to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party or parties shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity. If any Person shall institute any action or proceeding to enforce the
provisions of this Agreement, any Person subject to this Agreement against whom
such action or proceeding is brought hereby waives the claim or defense that the
Person instituting the action proceeding has an adequate remedy at law, and no
Person shall in any action or proceeding put forward the claim or defense that
an adequate remedy at law exists. Should any dispute concerning the Transfer of
Shares arise under this Agreement, an injunction may be issued restraining the
Transfer of such Shares pending the determination of such dispute.
8.9 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
23
24
8.10 No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
8.11 No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any Person who or which is
not a party hereto.
8.12 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
8.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR PROCEEDING.
8.14 Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation. As used in this Agreement, the
singular shall include the plural, the plural shall include the singular and the
use of any gender shall include the other gender or be neutral. No provision of
this Agreement will be interpreted in favor of, or against, any of the parties
hereto by reason of the extent to which such party or its counsel participated
in the drafting thereof or by reason of the extent to which any such provision
is inconsistent with any prior draft hereof or thereof.
8.15 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
8.16 Recovery of Fees. In the event litigation shall be necessary to
enforce, interpret or rescind the provisions of this Agreement or relating to
matters set forth herein, the prevailing party shall be entitled to recover from
the adverse party, in addition to such other relief, the prevailing party's
reasonable attorney's fees for services before trial, on trial and on any appeal
therefrom, and all other reasonable litigation costs related thereto.
8.17 Further Acts. Each party agrees to perform any further acts and to
execute and deliver any instruments or documents that may be necessary or
reasonably deemed advisable to carry out the purposes of this Agreement.
8.18 Indemnification. Each Stockholder hereby agrees to indemnify and hold
the Corporation and each other Stockholder harmless from and against any
liability, claim, damage, loss, penalty, cost or expense (including, without
limitation, reasonable attorneys fees and costs of appeal)
24
25
arising out of any breach of the any representations or covenants made by such
Stockholder in this Agreement.
8.19 Termination. The rights and obligations of the parties to this
Agreement shall terminate upon the earlier of the following: (i) upon the
dissolution, liquidation or winding up of the Corporation; (ii) if a majority of
the votes entitled to be cast at a meeting of Stockholders are voted in favor of
terminating this Agreement, which agreement to terminate shall be in writing and
signed by those Stockholders agreeing thereto; (iii) upon the consummation of a
Qualified IPO; or (iv) upon the registration of the Common Stock pursuant to the
Exchange Act; provided, however, that notwithstanding any of such events, the
Corporation's and each Stockholder's obligations in Sections 3.1, 3.3, 6.1 and
6.2 hereof with respect to any taxable year of the Corporation ending prior to
such date shall continue indefinitely.
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the date first above written.
CORPORATION
Horseshoe Gaming Holding Corp., a Delaware
corporation
By: /s/ Xxxx X. Xxxxxx
--------------------------------------
Xxxx X. Xxxxxx, President
STOCKHOLDERS
--------------------------------------------------------------------------------
/s/ Xxxx X. Xxxxxx
-------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxx Xxxxxxx
-------------------------------------
Xxxxx Xxxxxxx,
as Trustee of the Xxxxx X'Xxxxx Trust
25
26
/s/ Xxxxx Xxxxxxx
-------------------------------------------------
Xxxxx Xxxxxxx,
as Trustee of the Xxxxxx X'Xxxxx Trust
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxx X. Xxxxxxx Trust
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Fancy Xxx Xxxxxxx Trust
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxxx Xxxxxxxxxxx Xxxxxxx Trust
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxxxx Xxxxxx Xxxxxxx Trust
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxxx X'Xxxxx Trust
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxxxx X'Xxxxx Trust
/s/ Peri Xxxx Xxxxxx
-------------------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Ben Xxxx Xxxxxxx Trust
26
27
/s/ Peri Xxxx Xxxxxx
---------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxxxx Xxxxxxx Trust
/s/ Peri Xxxx Xxxxxx
---------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxxxx Xxxxxx Trust
/s/ Peri Xxxx Xxxxxx
---------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxxx Xxxxxx Trust
/s/ Peri Xxxx Xxxxxx
---------------------------------------
Peri Xxxx Xxxxxx,
as Trustee of the Xxxx Xxxxxx Trust
/s/ Key Fechser
---------------------------------------
Key Fechser
/s/ Xxxxx Xxxxxxx
---------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
---------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxx
---------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxxx Xxxx
---------------------------------------
Xxxxxxx Xxxx,
as Trustee of the Xxx X. Xxxxxxx Trust
27
28
/s/ Xxxxxxx Xxxx
------------------------------------------
Xxxxxxx Xxxx,
as Trustee of the Fancy Fechser Trust
/s/ Xxxxx Xxxxxxxx
------------------------------------------
Xxxxx Xxxxxxxx,
as Trustee of the Xxxxx X. Xxxxxxx Trust
/s/ Xxxxxxx Xxxxxxxx
------------------------------------------
Xxxxxxx Xxxxxxxx,
as Trustee of the Xxxxxx X. Xxxxxxx Trust
/s/ Xxxxx Xxxxxxxx
------------------------------------------
Xxxxx Xxxxxxxx,
as Trustee of the Xxxxxx Xxxxxxx Trust
/s/ Xxxx Xxxxxx
------------------------------------------
Xxxx Xxxxxx,
as Trustee of the Xxx X. Xxxxxxx Trust
/s/ Xxxx Xxxxxx
------------------------------------------
Xxxx Xxxxxx,
as Trustee of the Xxxxx Xxx Xxxxxxx Trust
/s/ Xxxxx Xxxxxxx
------------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxx Xxxxxxx
------------------------------------------
Xxxx Xxxxxxx
28
29
/s/ Xxx Xxxxxxx
-----------------------
Xxx Xxxxxxx
/s/ Xxxxx Xxxxx
-----------------------
Xxxxx Xxxxx
/s/ Xxxxxxxx Xxxx
-----------------------
Xxxxxxxx Xxxx
/s/ Xxxx Xxxxxxx Xxxxx
-----------------------
Xxxx Xxxxxxx Xxxxx
/s/ Xxxx Xxxxxxxx
-----------------------
Xxxx Xxxxxxxx
/s/ Xxxx Xxxx
-----------------------
Xxxx Xxxx
/s/ Xxxxx Xxxxxx
-----------------------
Xxxxx Xxxxxx
/s/ Xxxxxx XxXxxxx
-----------------------
Xxxxxx XxXxxxx
/s/ G.A. Xxxxxxxx, III
-----------------------
G.A. Xxxxxxxx, III
/s/ Xxxx Xxxxxxxxx
-----------------------
Xxxx Xxxxxxxxx
29
30
/s/ Xxxxxx Xxxxx
---------------------
Xxxxxx Xxxxx
/s/ Xxxxx X. Xxxxx
---------------------
Xxxxx X Xxxxx
/s/ Xxxxxx Xxxx
---------------------
Xxxxxx Xxxx
/s/ Xxxxx Xxxxxx
---------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxxxx
---------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxxxx
---------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxx
---------------------
Xxxxxx Xxxxxxx
/s/ Xxxx Xxxxxxx
---------------------
Xxxx Xxxxxxx
/s/ Xxxx Border
---------------------
Xxxx Border
/s/ Xxxxxxx Xxxxx
---------------------
Xxxxxxx Xxxxx
30
31
Annex A
As of April 29, 1999, the following Persons comprise the Stockholders of
Horseshoe Gaming Holding Corp. as may be amended from time to time hereunder.
--------------------------------------------------------------------------------
Name of Stockholder Number of Shares
------------------- ----------------
--------------------------------------------------------------------------------
Xxxx X. Xxxxxx 9,823.791776
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx, 957.98
as Trustee of the Xxxxx X'Xxxxx Trust
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx, 957.98
as Trustee of the Xxxxxx X'Xxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx 1,266.86
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Xxx X. Xxxxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Fancy Xxx Xxxxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Xxxxx X. Xxxxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Xxxxxx Xxxxxx Xxxxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Xxxxx X'Xxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Xxxxxx X'Xxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Ben Xxxx Xxxxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 276.20
as Trustee of the Xxxxxx Xxxxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 55.24
as Trustee of the Xxxxxx Xxxxxx Trust
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 55.24
as Trustee of the Xxxxx Xxxxxx Trust
--------------------------------------------------------------------------------
32
--------------------------------------------------------------------------------
Peri Xxxx Xxxxxx, 55.24
as Trustee of the Xxxx Xxxxxx Trust
--------------------------------------------------------------------------------
Key Fechser 55.24
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx 55.24
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx 55.24
--------------------------------------------------------------------------------
Xxxxxx Xxxxx 1,199.12
--------------------------------------------------------------------------------
Xxxxxxx Xxxx, 957.98
as Trustee of the Xxx X. Xxxxxxx Trust
--------------------------------------------------------------------------------
Xxxxxxx Xxxx, 957.98
as Trustee of the Fancy Fechser Trust
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx, 638.66
as Trustee of the Xxxxx X. Xxxxxxx Trust
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx, 638.66
as Trustee of the Xxxxxx X. Xxxxxxx Trust
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx, 638.66
as Trustee of the Xxxxxx Xxxxxxx Trust
--------------------------------------------------------------------------------
Xxxx Xxxxxx, 478.99
as Trustee of the Xxx X. Xxxxxxx Trust
--------------------------------------------------------------------------------
Xxxx Xxxxxx, 478.99
as Trustee of the Xxxxx Xxx Xxxxxxx Trust
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx 153.72
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 153.72
--------------------------------------------------------------------------------
Xxxx Xxxxxxx 153.72
--------------------------------------------------------------------------------
Xxx Xxxxxxx 153.72
--------------------------------------------------------------------------------
Xxxxx Xxxxx 614.89
--------------------------------------------------------------------------------
Xxxxxxxx Xxxx 184.70
--------------------------------------------------------------------------------
Xxxx Xxxxxxxx 127.01
--------------------------------------------------------------------------------
Xxxx Xxxx 38.43
--------------------------------------------------------------------------------
Xxxxx Xxxxxx 84.67
--------------------------------------------------------------------------------
Xxxxxx XxXxxxx 42.34
--------------------------------------------------------------------------------
33
--------------------------------------------------------------------------------
G.A. Xxxxxxxx, III 338.69
--------------------------------------------------------------------------------
Xxxxxx Xxxxx 5.70
--------------------------------------------------------------------------------
Xxxxx X. Xxxxx 5.70
--------------------------------------------------------------------------------
Xxxxxx Xxxx .85
--------------------------------------------------------------------------------
Xxxxx Xxxxxx .85
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxxxx .85
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxxxx 734.74
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 375.77
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx 146.27
--------------------------------------------------------------------------------
Xxxx Border 147.00
--------------------------------------------------------------------------------
Xxxxxxx Xxxxx 113.93
--------------------------------------------------------------------------------
