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Exhibit 10.1
SETTLEMENT
TERM SHEET
The following terms outline the understanding among Xxxx Xxxxxx, Xxxxx
Xxxxxx, Xxxx Xxxxxxxxx and Xxxxx Xxxxxxx (collectively, the "Employee Parties")
and Xxxx Xxxxxx, Horseshoe Gaming, Inc. ("Gaming") and Horseshoe Gaming L.L.C.
("LLC") (Xxxxxx, Gaming and the LLC are collectively referred to as the
"Horseshoe Parties") regarding the resolution of certain matters involving,
among other matters, the exercise of certain put rights (the "Put Rights") by
the Employee Parties with respect to ownership interests of the Employee Parties
in Horseshoe Gaming, L.L.C. (the "Ownership Interests").
1. For purposes of determining the fair market value of the Ownership
Interests, the percentage interest ("Percentage Interest") of each Employee (or,
as appropriate, their family partnerships) in the LLC is as follows:
Employee Percentage Interest
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Xxxx X. Xxxxxx 3.3644
Xxxxx X. Xxxxxx 1.6822
Xxxx X. Xxxxx 1.4032
Xxxx Xxxxxxxxx .8000
Xxxxx Xxxxxxx .1340
2. In connection with the exercise of the Put Rights, the parties hereto
agree to establish the fair market value of each Employee Party's Ownership
Interest with respect to each Employee
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Party's Employment Agreement by multiplying each Employee Party's Percentage
Interest by the agreed valuation ("AV") as established in paragraph 3. Employee
Parties agree that the Put Rights constitute all right any of them have to any
equity interest of any kind in LLC, Horseshoe Gaming, Inc., New Gaming Capital
Partnership or any of their respective affiliates.
3. The AV shall be $470 million in the event the Agreement and Plan of
Merger dated September 2, 1998, as amended, involving LLC and Empress
Entertainment, Inc. ("Empress Xxxxxx") does not close and shall be $500 million
in the event the Empress Xxxxxx closes. The parties agree that the Empress
Xxxxxx will be deemed to have closed in any of the following circumstances:
a. The Empress Manager is consummated in accordance with its
terms or as may be amended by the parties to that agreement,
or their successors, assignees or transferees;
b. The LLC renegotiates the agreement relating to the Empress
Merger so as to allow the merger to be consummated as to
either Empress Casino Xxxxxxx Corporation ("Hammond") or
Empress Casino Joliet Corporation ("Joliet") and the merger is
then consummated with either Hammond or Joliet;
c. LLC combines with another party such that the Empress Xxxxxx
is consummated with LLC obtaining Xxxxxxx or Joliet and the
other party obtaining the other;
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d. LLC consummates the Empress Merger in accordance with its
terms or as may be amended by the parties to that agreement,
but either Xxxxxxx or Joliet is spun off such that LLC is
combined with only one; or
e. LLC sells or transfers its interest in the Empress Merger
agreement to an unrelated third party.
4. The amount payable to each Employee ("Employee Amount") shall be as
follows:
Percentage Interest X AV
/ Capital Account as of the Cutoff Date
- Balance of Employee Loan as of the Date of Determination
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= Employee Amount
In the case of Xxxxx Xxxxxxx, the beginning of the formula shall be
modified to provide for Percentage Interest X (AV minus $350 million).
5. Employee Parties shall agree, subject to verification, that each
Employee has a loan from LLC in the amount of principal and accrued interest as
set forth below as of May 19, 1999:
Employee Loan Balance
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Xxxx X. Xxxxxx $1,055,553.40
Xxxxx X. Xxxxxx $765,692.03
Xxxx X. Xxxxx $263,383.49
Xxxx Xxxxxxxxx $288,673.57
Xxxxx Xxxxxxx $63,548.30
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A per diem amount shall be added to the balance above to determine the amount
owed on the Date of Determination.
6. Employee Parties shall agree that each Employee has a capital account
balance as of April 30, 1999 (the "Cutoff Date") in the amount set forth below:
Employee Capital Account Balance
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Xxxx X. Xxxxxx $2,478,573
Xxxxx X. Xxxxxx $1,240,539
Xxxx X. Xxxxx $967,451
Xxxx Xxxxxxxxx $535,793
Xxxxx Xxxxxxx $31,327
7. The Employee Amount for each employee shall be paid pursuant to the
terms of each Employee's employment agreement, or such agreements that the
Employee may be bound by, with the first payment (the first payment being 1/3 of
the Employee Amount) being made (such date being defined as the "Date of
Determination") within ten days of the dismissal of the Arbitration Demand,
notification of the American Arbitration Association, and notification of all
appropriate regulatory bodies (as provided in paragraph 14, below), but subject
to the covenants and other restrictions set forth in the debt agreements of the
Horseshoe Parties (the "Debt Agreements"). With respect to payments that may be
limited pursuant to the Debt Agreements, (a) payments to be made as a result of
the exercise of the Put Rights ("Put Payments") shall take priority over
payments to be made pursuant to agreements entered into after the date hereof
and (b) payments to be made pursuant to
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agreements entered into prior to the date hereof shall take priority over the
Put Payments, regardless of when such payments are due under such agreements.
8. Each of the Employee Parties and the Horseshoe Parties hereby provides
broad mutual releases of the other parties hereto, Does 1 through 10, and their
employees, members, officers, directors, legal counsel and affiliates relating
to all issues between each or all of the Employee Parties on the one hand and
the Horseshoe Parties on the other hand, whether known or unknown; provided that
the Employee Parties shall not be released from the noncompetition and
confidentiality provisions of their respective employment agreements, which
shall remain in full force and effect; provided further that the obligations of
the parties hereunder and under the settlement agreement contemplated herein
shall not be included in such release. The releases to be given as herein
described shall not be for the benefit of Xxxxxx Xxxxxxxxx or Onyx Partners,
Inc., unless and until they signify a mutual intent to give the releases herein
described. The Employee Parties acknowledge that their respective employments
with LLC and Gaming terminated as of the dates set forth in their employment
agreements, although the noncompetition and confidentiality provisions of their
Employment Agreements continue in full force and effect in accordance with the
terms thereof.
9. Employee Parties shall agree to keep the terms of this settlement
confidential except as provided in this term sheet and as may be required to be
disclosed by applicable law.
10. Employee Parties shall agree not to solicit, or initiate any attempt
to hire, or hire any employees of the Horseshoe Parties consistent with the
applicable terms established in the Xxxxx Settlement Agreement (as defined in
paragraph 11 below). Each of the parties hereto also agrees to
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refrain from disparagement of other parties hereto consistent with Section 4.3
of the Xxxxx Settlement Agreement.
11. Employee Parties and Horseshoe Parties agree to use their respective
best efforts to document the settlement evidenced by this term sheet as soon as
possible (but not later than May 26, 1999) through a settlement agreement
consistent with the terms of this term sheet, but otherwise containing terms
customary in such agreements, including by way of example those appropriate
provisions set forth in the draft Agreement by and among Xxxx Xxxxxxx Xxxxx and
certain of the Horseshoe Parties (the "Xxxxx Settlement Agreement") set forth in
Exhibit "A".
12. This Term Sheet is intended to be a legally binding agreement among
the parties hereto.
13. All parties agree that the transactions contemplated hereby shall be
subject to obtaining all required regulatory approvals.
14. The Employee Parties shall: (a) immediately withdraw and dismiss with
prejudice the Arbitration Demand dated May 5, 1999 as against Horseshoe Gaming,
Inc., Xxxx X. Xxxxxx, Horseshoe Gaming, L.L.C. and Does 1-10 (the "Arbitration
Defendants"), and (b) advise the American Arbitration Association and all
appropriate regulatory bodies, including but not limited to the regulatory
bodies in the states of Mississippi, Illinois, Nevada, Indiana and Louisiana,
that the matter has been settled as to the Arbitration Defendants and the
Employee Parties are no longer making any of the claims set forth in the
Arbitration Demand as to the parties being dismissed.
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15. The matters contained herein are in the nature of compromise and
settlement and none of the parties admits or denies any allegations made in
connection with the dispute among the parties.
16. Each party hereto and each party to any document entered into as
contemplated hereby shall bear such party's own legal costs and expenses.
17. From and after the Cutoff Date, the Employee Parties shall have no
rights or interests whatsoever as members of LLC, including without limitation
rights as to distributions.
18. X. Xxxxxxx Xxxxx is an intended third party beneficiary of this
agreement and of the parties' final settlement agreement.
19. Xxxx Xxxxxx represents that he has authority to bind Xxxxx Xxxxxxx to
the terms of this agreement.
20. This Settlement Term Sheet may be executed in one or more
counterparts, and facsimile signatures shall suffice to bind the parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Term Sheet as of
the ______ day of May, 1999.
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, individually and on behalf of
Horseshoe Gaming, Inc. and Horseshoe Gaming,
L.L.C.
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, individually and on behalf of
the Alanis Family Partnership
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/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, individually and on behalf
of the Ostrow Family Partnership
/s/ Xxxx Xxxxxxxxx
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Xxxx Xxxxxxxxx
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
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