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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
___________________________

FORM 10-K

(Mark One)



|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- |  | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2001

OR



|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|---- |  | ----------------------------------------------------------------------------------------

For the transition period from
____________ to ____________.

Commission file number 333-0214


HORSESHOE GAMING HOLDING CORP.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 88-0425131
(I.R.S. Employer
Identification No.)

18454 S. West Creek Drive
Tinley Park, IL 60477
(Address of principal executive offices)

Registrants telephone number, including area code: (708) 429-8300

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES   [X]   NO   [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the equity of Horseshoe Gaming Holding Corp.
held by non-affiliates of Horseshoe Gaming Holding Corp. is inapplicable as the
equity of Horseshoe Gaming Holding Corp. is privately held.

As of March 15, 2002, the Registrant had 13,366 shares of Class A Common
Stock and 9,779 of Class B Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
None.



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TABLE OF CONTENTS



|              |                                                                                                |  |  |  |  |  |  | 
|------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. Business.                                                                             
|              | Item 2. Properties.                                                                           
|              | Item 3. Legal Proceedings.                                                                    
|              | Item 4. Submission of Matters to a Vote of Security Holders.                                  
|PART II      
|              | Item 5. Market for Registrants Common Equity and Related Stockholder Matters.                
|              | Item 6. Selected Consolidated Financial Data.                                                 
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|              | Item 7A. Quantitative and Qualitative Disclosures about Market Risk.                          
|              | Item 8. Financial Statements and Supplementary Data.                                          
|              | Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. 
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant.                                  
|              | Item 11. Executive Compensation.                                                              
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management                       
|              | Item 13. Certain Relationships and Related Transactions.                                      
|PART IV      
|              | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.                    
|SIGNATURES   
|EXHIBIT 10.33
|EXHIBIT 10.34
|EXHIBIT 10.35
|EXHIBIT 10.37
|EXHIBIT 10.38
|EXHIBIT 10.41
|EXHIBIT 21.1 
|EXHIBIT 99.1 



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HORSESHOE GAMING HOLDING CORP.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 2001

|         |  |                                                                                       |  |     
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                       |  | Page
|         |  |                                                                                       |  |     
|         |  | PART I                                                                                |  |     
|Item 1.  |  | Business                                                                              |  | 3   
|Item 2.  |  | Properties                                                                            |  | 20  
|Item 3.  |  | Legal Proceedings                                                                     |  | 20  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 21  
|        
|        
|        
|        
|         |  | PART II                                                                               |  |     
|        
|        
|        
|        
|Item 5.  |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 22  
|Item 6.  |  | Selected Financial Data                                                               |  | 22  
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results
of Operations |  | 23  
|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 32  
|Item 8.  |  | Financial Statements and Supplementary Data                                           |  | 32  
|Item 9.  |  | Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure  |  | 32  
|        
|        
|        
|        
|         |  | PART III                                                                              |  |     
|        
|        
|        
|        
|Item 10. |  | Directors and Executive Officers of the Registrant                                    |  | 33  
|Item 11. |  | Executive Compensation                                                                |  | 34  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 38  
|Item 13. |  | Certain Relationships and Related Transactions                                        |  | 40  
|        
|        
|        
|        
|         |  | PART IV                                                                               |  |     
|        
|        
|        
|        
|Item 14. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 41  
|         |  | Signatures                                                                            |  | 45  

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PART I




Item 1. Business.

General

Horseshoe Gaming Holding Corp. (the Company) is a leading
multi-jurisdictional gaming company which owns and operates, through its wholly
owned subsidiaries, riverboat casinos under the Horseshoe brand. These
include the Horseshoe Bossier City Casino (Horseshoe Bossier City or
Bossier) in Bossier City, Louisiana, which commenced operations on July 9,
1994, the Horseshoe Tunica Casino (Horseshoe Tunica or Tunica) which
commenced operations on February 13, 1995 and the Horseshoe Casino Hammond
(Horseshoe Hammond or Hammond) in Hammond, Indiana. Hammond, along with
Empress Casino Joliet (Empress Joliet or Joliet) in Joliet, Illinois, were
acquired (the Empress Merger) from Empress Entertainment, Inc. (Empress) on
December 1, 1999. Hammond commenced operations on June 28, 1996. On July 31,
2001, the Company sold Joliet pursuant to the settlement agreement discussed
below. The Company was incorporated in Delaware on April 15, 1999 and prior to
such date operated under predecessor companies. The principal executive offices
of the Company are currently located at 18454 S. West Creek Drive, Tinley Park,
IL 60477, telephone (708) 429-8300.

On April 15, 1999, the Company acquired over 90% of the aggregate
ownership of Horseshoe Gaming, LLC (Horseshoe Gaming) from Horseshoe Gamings
members in exchange for interests in the Company. The remaining ownership
interests of Horseshoe Gaming either were contributed to the Company in
exchange for interests in the Company or acquired by the Company or Horseshoe
Gaming and Horseshoe Gaming was subsequently dissolved.

The Joliet casino gaming license was due to be renewed by the Illinois
Gaming Board (IGB) in June 2000. On June 30, 2000, the IGB preliminarily
denied Joliets application to renew its gaming license and preliminarily found
Jack Binion (Binion), the Companys Chairman of the Board and CEO, unsuitable
to be licensed as a key person. Joliet filed a Verified Request for Hearing of
the IGBs decision. Effective January 31, 2001, the IGB approved a settlement
agreement between the IGB, the Company, Joliet and Binion. Pursuant to the
pertinent parts of the settlement agreement: (a) the Company sold Joliet to a
suitable purchaser; (b) Binion withdrew his key person application; and (c)
Joliet withdrew its Verified Request for Hearing, thereby causing the previous
denial to be moot.

Operating data for the three most recent fiscal years is set forth in Item
14, pages F-1 through F-21 of this report. For a discussion of those results,
see Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operation included herein on pages 23 through 31.

This Annual Report on Form 10-K contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, which generally can be identified by the use of such terms as may,
expect, anticipate, believe, continue, or similar variations or the
negative thereof. These forward-looking statements involve risks and
uncertainties, many of which are outside the Companys control and,
accordingly, actual results may differ materially. Factors that might cause a
difference include, but are not limited to, the competitive nature of the
casino gaming industry, risk of increases in the number of competitors in the
markets in which the Company operates, risk of changes in gaming laws and
regulations, risks of substantial indebtedness, debt service and liquidity,
licensing and other governmental approvals, construction factors, environmental
restrictions, soil and water conditions, weather

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and other hazards, access to
available and feasible financing, relations with partners, owners, employees
and other third parties, conditions of credit markets and other business and
economic conditions, litigation, judicial actions and political uncertainties
and other factors discussed from time to time in the Companys filings with the
Securities and Exchange Commission. Any forward looking statements are made
pursuant to the Private Securities Litigation Reform Act of 1995 and, as such,
speak only as of the date made.

Bossier City Operations

Market

The Bossier City/Shreveport market is the largest gaming market in the
State of Louisiana. While approximately 350,000 people are full-time residents
of Bossier City/Shreveport, approximately 16.5 million people reside within 250
miles of the Companys Bossier City casino (approximately four hours driving
distance). The Bossier City/Shreveport market attracts a significant amount of
its gaming clientele from the Dallas/Fort Worth area of Texas.

Horseshoe Bossier City

The Horseshoe Bossier City is located on approximately 30 acres along the
east side of the Red River, directly facing downtown Shreveport, Louisiana.
The casino is located on a riverboat, which has approximately 86,000 square
feet spread out over four-decks with approximately 30,000 square feet of gaming
space, including 1,600 gaming devices and 51 table
games. The casino operation is complemented by an approximately 62,000 square
foot dockside pavilion, a 25 story hotel with 606 deluxe rooms, meeting
facilities, a health club and other luxury hotel amenities and a 1,770 car
parking garage. The riverboat and pavilion are joined via an enclosed,
climate-controlled boarding ramp with handicap access and escalators serving
each of the gaming decks. In addition, Horseshoe Bossier City features an
entertainment facility that provides seating for 1,300 guests.

Competition

The Horseshoe Bossier City competes directly with four other riverboat
casinos in Shreveport and Bossier City. These five riverboats together
currently comprise the Bossier City/Shreveport market. The Bossier
City/Shreveport casinos primarily draw from the Dallas/Ft. Worth market and
share the Houston area market with four existing riverboats in Lake Charles,
Louisiana, an additional riverboat to be located in Lake Charles, Louisiana is
expected to be open sometime in 2003, a land-based casino owned by the
Coushatta Indian Tribe located near Lake Charles, a horse racing facility
containing 1,500 slot machines located near Lake Charles, Louisiana, and two
riverboats in Baton Rouge, Louisiana. Additionally, a horse racing facility
located within 20 miles of Horseshoe Bossier City has been approved for up to
1,500 slot machines. Should this facility open, it may have a material adverse
impact on our operations. If Texas or Arkansas were to approve gaming,
competition would increase, which could have a material adverse effect on our
operations.

Tunica Operations

Market

The Tunica County, Mississippi market is the closest legalized gaming
jurisdiction to the Memphis, Tennessee metropolitan area, which is only 30
miles away. Tunica County benefits from its proximity to several major
population centers and to the popularity of the Memphis

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region as a vacation
destination. Over 2.5 million people live within 90 miles and over 10.7
million people live within 200 miles of the Horseshoe Tunica.

Horseshoe Tunica

Horseshoe Tunica is located in Tunica County, Mississippi at Casino
Center, an 80-acre three-casino complex. The casino operation consists of
approximately 360,000 square feet. The gaming area comprises approximately
65,000 square feet and contains 2,082 slot machines, 72 table games and 12
poker tables. The casino facility includes three specialty restaurants, a 650
seat buffet, a deli, bars, retail outlets, a 14-story hotel tower with 507
rooms, a health club, meeting room facilities, an 1,100 space, four-level
parking garage, and an entertainment facility that provides seating for 1,175
guests.

Competition

Horseshoe Tunica competes with nine other casinos in the competitive
Tunica County, Mississippi market. Additional entrants into the market or the
expansion of existing competitors could have a material adverse effect on the
operations of Horseshoe Tunica.

Tennessees legislature has recently approved a resolution allowing a
referendum that would enable the legislature to establish a state lottery. The
referendum will be on the ballot and voted upon on November 5, 2002. If passed,
the referendum would provide an exception to the Tennessee constitution thus
allowing the legislature to establish a state lottery no earlier than the 2003
legislative session. Such a lottery could possibly affect local market
conditions causing a material adverse effect on the operations of Horseshoe
Tunica.

In November 1996, the Mississippi county closest to Memphis (DeSoto
County) voted against permitting legalized gaming to be conducted aboard
vessels located in DeSoto County. Legislation passed in 1997 precludes DeSoto
County from holding a subsequent election on the issue until at least October
2004. If gaming were approved in DeSoto County or in Arkansas or Tennessee,
numerous additional sites closer to Memphis would be available for gaming.
Thus, while Tunica County is currently the closest legalized gaming
jurisdiction to the Memphis metropolitan area, there is no assurance that this
situation will not change in the future. If DeSoto County, Arkansas or
Tennessee were to approve gaming, competition would increase, which could have
a material adverse effect on the operations of Horseshoe Tunica.

Chicago Operations

Market

The Chicago market, which encompasses portions of both Illinois and
Indiana, consists of approximately 8.0 million people within a radius of 50
miles from downtown Chicago. The Illinois Riverboat Act authorizes ten owners
licenses for riverboat gaming operations, all of which have been issued, and
four of which serve the Chicago metropolitan area. Current Indiana gaming
legislation authorizes a total of five licenses to operate riverboat casinos in
northern Indiana on Lake Michigan, all of which have been issued to casinos
that are currently operating, including Hammond.

Horseshoe Hammond

Horseshoe Hammond, the closest casino to downtown Chicago, includes an
approximately 125,000 square foot pavilion. The real estate used by Horseshoe
Hammond is leased from the City of Hammond and is subject to a 75-year lease.
The casino operation is

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located on a catamaran vessel and consists of
approximately 42,500 square feet of gaming space and contains 1,518 slot
machines and 51 table games. The pavilion features a steakhouse, buffet, deli,
coffee shop, retail shops, a 150-seat banquet room and two lounges. The
facility also includes a 1,150 car parking garage.

Competition

Horseshoe Hammond primarily competes with eight casinos, four of which are
located on Lake Michigan in Indiana and four of which are located in Illinois.
In addition, in May 1999, the Illinois legislature enacted amendments to the
Illinois Riverboat Gambling Act, which allowed all riverboats to become
permanently moored, and could result in one of the ten state-authorized
licenses for Illinois being relocated to an area closer to Hammond, which could
cause an increase in competition and which may have a material adverse effect
on Horseshoe Hammond.

Outside of Illinois and Indiana, several other states have authorized
gaming activities and other states in the future may authorize such gaming
activities. To date, riverboat and/or dockside gaming has also been approved
in nearby states such as Iowa and Missouri. Moreover, three land-based casinos
have been authorized in Detroit, Michigan, all three of which have commenced
gaming operations.

Horseshoe Hammond competes, and expects to compete, with various gaming
operations on Native American land, including those located, or to be located,
in Michigan, Wisconsin and possibly northern Indiana. The Pokagon Band of the
Potawatomi Indians is planning to build a land-based casino in New Buffalo,
Michigan located in southwest Michigan, approximately ten minutes from Michigan
City, Indiana. In addition, the Saginaw Chippewa Tribe is currently operating
one of the largest Native American gaming complexes in the United States in Mt.
Pleasant, Michigan, approximately 250 miles northeast of Hammond, Indiana. The
opening of land based casinos, which generally have a competitive advantage
over riverboat casinos, in close proximity to Horseshoe Hammond could have a
material adverse effect on the operations of the casino. In addition, lower
age limits at Native American casinos may put Horseshoe Hammond, with a minimum
age requirement for admittance of 21, at a competitive disadvantage.

Gaming Regulatory Matters

The Company is subject to state and Federal laws, which regulate
businesses generally and the gaming business specifically. Below is a brief
description of some of the more significant regulations which govern the
Company and its operations. All laws and regulations which govern the Company
are subject to change and different interpretations. Changes in laws or their
interpretation may result in the imposition of more stringent, burdensome or
expensive requirements, or the outright prohibition of an activity.

Louisiana

In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
The legislation granted authority to supervise riverboat gaming activities to
the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement
Division of the Louisiana State Police, or the Louisiana Enforcement Division.
The Louisiana Riverboat Gaming Commission was authorized to hear and determine
all appeals relative to the granting, suspension, revocation, condition or
renewal of all licenses, permits and applications. In addition, the Louisiana
Riverboat Gaming Commission was authorized to establish regulations concerning
authorized routes, duration of excursions, minimum levels of insurance,
construction of riverboats and periodic inspections. The Louisiana

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Enforcement
Division was authorized to investigate applicants and issue licenses,
investigate violations of the statute and conduct continuing reviews of gaming
activities. The Louisiana gaming law authorizes the issuance of up to 15
licenses to conduct gaming activities on a riverboat of new construction on
certain designated waterways in accordance with applicable law. However, no
more than six licenses may be granted to riverboats operating from any
designated waterway.

The state has granted approval to applicants for the 15 legislatively
authorized licenses, five of which have been approved for the northern region
of the state in Bossier City/Shreveport. The Louisiana Gaming Control Board
awarded the fifteenth license on October 16, 2001. Prior to the passage of
legislation legalizing dockside gaming, effective April 1, 2001, in the 2001
Special Session of the Louisiana Legislature, the Louisiana gaming law stated
that riverboat casinos must cruise, but the Bossier City/Shreveport casinos
were granted a legislative exemption in June 1993 that allows them to operate
as dockside facilities. Louisiana permits most types of casino games, other
than bingo and sports betting, and has neither betting nor loss limits.
Moreover, house credit may be extended to qualified patrons. The only
significant limitation imposed by Louisiana gaming regulations restricts gaming
space on riverboats to no more than 30,000 square feet. Prior to the passage of
legislation legalizing dockside gaming, effective April 1, 2001, in the 2001
Special Session of the Louisiana Legislature, fees to the State
of Louisiana for conducting gaming activities on a riverboat were (1) $50,000
per riverboat for the first year of operation and $100,000 per year per
riverboat thereafter plus (2) 18.5% of net gaming proceeds. In the 2001
Special Session of the Louisiana Legislature, a law was passed legalizing
dockside gaming and increasing the fees paid to the state of Louisiana to 21.5%
of net gaming proceeds effective April 1, 2001 for the riverboats outside of
the northern region of the state in Bossier City/Shreveport, while the fee
increase to 21.5% of net gaming proceeds will be phased in over an
approximately two year period for the riverboats in the northern region of the
state in Bossier City/ Shreveport. The city of Bossier City also imposes a
3.2% tax on gaming revenue plus an annual fee of $700,000.

In the 1996 Special Session of the Louisiana Legislature, Louisiana
lawmakers passed a measure which established the Louisiana Gaming Control Board
and provided that it is the successor to all such prior authorities with regard
to the regulation and supervision of gaming in Louisiana except for the
regulation of horse racing and off-track betting and the conducting of
charitable gaming operations. Effective May 1, 1996, the powers, duties,
functions, and responsibilities with respect to riverboat gaming of the
Louisiana Riverboat Gaming Commission and the Louisiana Enforcement Division
were transferred to the Louisiana Gaming Control Board. The Louisiana
Enforcement Division continues to provide investigative and enforcement support
to the Louisiana Gaming Control Board.

In addition, legislation was passed in 1996 authorizing the Bossier Police
Jury, the governing body of Bossier Parish, to impose a boarding fee of $0.50
per patron entering riverboat gaming facilities in Bossier Parish. In response
to this legislation, Horseshoe Bossier City and the Isle of Capri Casino in
Bossier City commenced litigation against the Bossier Police Jury, asserting
that the Bossier Police Jury had previously contracted away their right to
impose an additional $0.50 boarding fee. In January 1997, Horseshoe Bossier
City separately settled with the Bossier Police Jury, and the lawsuit was
dismissed as it relates to Horseshoe Bossier City, but not Isle of Capri
Casino, and the Bossier Police Jury. As part of the settlement, Horseshoe
Bossier City agreed to pay a 1% tax on its gross casino revenues to Bossier
Parish with a minimum annual payment of $1,500,000, regardless of actual
revenue. Under the terms of the settlement, Horseshoe Bossier City has the
right to receive a credit against gross gaming tax for the amount of increased
property taxes assessed against our property in Bossier Parish resulting from
increased assessments attributable to our major expansion project. Such credit
may be taken up to a maximum of 80% of the tax on casino revenues, and applies
during the entire ten-year term of the agreement.

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In the 1997 Regular Session of the Louisiana Legislature, a law was passed
authorizing the operation of slot machines at certain horse racing tracks in
Louisiana, including a racetrack situated in Bossier Parish. The legislation
limits slot machine space at each racetrack to 15,000 square feet. Within the
gaming space, however, there is no numerical limit on the number of slot
machines that can be permissibly installed.

In issuing a license, the Louisiana Gaming Control Board must find that
the applicant is a person of good character, honesty and integrity and a person
whose prior activities, criminal record, if any, reputation, habits, and
associations do not pose a threat to the public interest of the State of
Louisiana or to the effective regulation and control of gaming, or create or
enhance the dangers of unsuitable, unfair or illegal practices, methods and
activities in the conduct of gaming or the carrying on of business and
financial arrangements in connection therewith. The Louisiana Gaming Control
Board will not grant a license unless it finds that: (1) the applicant is
capable of conducting gaming operations, which means that the applicant can
demonstrate the capability, either through training, education, business
experience, or a combination of the above, to operate a gaming casino; (2) the
proposed financing of the riverboat and the gaming operations is adequate for
the nature of the proposed operation and from a source suitable and acceptable
to
the Louisiana Gaming Control Board; (3) the applicant demonstrates a proven
ability to operate a vessel of comparable size, capacity and complexity to a
riverboat so as to ensure the safety of its passengers; (4) the applicant
submits a detailed plan of design of the riverboat in its application for a
license; (5) the applicant designates the docking facilities to be used by the
riverboat; (6) the applicant shows adequate financial ability to construct and
maintain a riverboat; and (7) the applicant has a good faith plan to recruit,
train and upgrade minorities in all employment classifications.

Certain persons affiliated with a riverboat gaming licensee, including
directors and officers of the licensee, directors and officers of any holding
company of the licensee involved in gaming operations, persons holding 5% or
greater interests in the licensee, and persons exercising influence over a
licensee (Affiliated Gaming Persons), are subject to the application and
suitability requirements of the Louisiana gaming law.

The Louisiana gaming law specifies certain restrictions and conditions
relating to the operation of riverboat gaming, including the following: (1)
prior to the passage of legislation legalizing dockside gaming, effective April
1, 2001, in the 2001 Special Session of the Louisiana Legislature, gaming is
not permitted while a riverboat is docked, other than the forty-five minutes
between excursions, and during times when dangerous weather or water conditions
exist, except that the casinos operating in the Bossier City/Shreveport area
are permitted to operate exclusively at dockside pursuant to a special
exemption; (2) prior to the passage of legislation legalizing dockside gaming,
effective April 1, 2001, in the 2001 Special Session of the Louisiana
Legislature, each roundtrip riverboat cruise may not be less than three nor
more than eight hours in duration, subject to specified exceptions; (3) agents
of the Louisiana Enforcement Division and the Louisiana Gaming Control Board
are permitted on board at any time during gaming operations; (4) gaming
machines, equipment and supplies may only be purchased or leased from permitted
suppliers; (5) gaming may only take place in the designated gaming area while
the riverboat is upon a designated river or waterway; (6) gaming equipment may
not be possessed, maintained or exhibited by any person on a riverboat except
in the specifically designated gaming area, or a secure area used for
inspection, repair or storage of such equipment; (7) wagers may be received
only from a person present on a licensed riverboat; (8) persons under 21 are
not permitted in designated gaming areas; (9) except for slot machine play,
wagers may be made only with tokens, chips or electronic cards purchased from
the licensee aboard a riverboat; (10) licensees may only use docking facilities
and routes for which
they are licensed and may only board and discharge passengers at the
riverboats licensed berth; (11) licensees must have adequate protection and
indemnity insurance; (12) licensees must have

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all necessary Federal and state
licenses, certificates and other regulatory approvals prior to operating a
riverboat; and (13) gaming may only be conducted in accordance with the terms
of the license and the rules and regulations adopted by the Louisiana
Enforcement Division and the Louisiana Gaming Control Board.

An initial license to conduct riverboat gaming operations is valid for a
term of five years. The Louisiana gaming law provides that a renewal
application for each five-year period succeeding the initial five-year term of
the operators license must be made to the Louisiana Enforcement Division. The
application for renewal consists of a statement under oath of any and all
changes to the information, including financial information, provided in the
previous application. Horseshoe Entertainment (HE), the Companys subsidiary
that owns and operates Horseshoe Bossier City, was issued an initial operators
license by the Louisiana Enforcement Division on November 22, 1993, and HE
timely submitted its renewal application to the Louisiana Enforcement Division.
On October 20, 1998, the Louisiana Gaming Control Board granted HEs license
renewal subject to suitability review, and on October 19, 1999 the Louisiana
Gaming Control Board extended the license renewal subject to suitability
review. HE
is currently in the process of completing the suitability review with the
Louisiana Enforcement Division.

The transfer of a license or permit or an interest in a license or permit
is prohibited except as permitted by the Louisiana gaming law. The sale,
purchase, assignment, transfer, pledge or other hypothecation, lease,
disposition or acquisition (a Transfer) by any person of securities which
represent 5% or more of the total outstanding shares issued by a corporation
that holds a license is subject to Louisiana Gaming Control Board disapproval.
A security issued by a corporation that holds a license must disclose these
restrictions. Prior Louisiana Gaming Control Board approval is required for the
Transfer of any ownership interest of 5% or more in any non-corporate licensee
or for the Transfer of any economic interest of 5% or more in any licensee or
Affiliated Gaming Person. An economic interest is defined for purposes of a
Transfer as any interest whereby a person receives or is entitled to receive,
by agreement or otherwise, a profit, gain, thing of value, loan, credit,
security interest, ownership interest or other economic benefit.

Riverboat gaming licensees and their Affiliated Gaming Persons are
required to notify the Louisiana Enforcement Division prior to the receipt by
any such persons of any loans or extensions of credit. The Louisiana Gaming
Control Board is required to investigate the reported loan or extension of
credit and, subject to certain exemptions, to either approve or disapprove the
transaction. If disapproved, the loan or extension of credit cannot be
consummated by the licensee or Affiliated Gaming Person. The Company is an
Affiliated Gaming Person of HE. The Company and HE have submitted all required
disclosures to the Louisiana Gaming Control Board and the Louisiana Enforcement
Division. Any other advances by the Company to HE in the form of loans or other
inter-company indebtedness are subject to the disapproval power of the
Louisiana Gaming Control Board and the Louisiana Enforcement Division.

Mississippi

The Company conducts its Mississippi gaming operations through a
subsidiary, Robinson Property Group, Limited Partnership (RPG), which owns
and operates the Horseshoe Casino in the City of Robinsonville, Tunica County,
Mississippi. The ownership and operation of casino facilities in Mississippi
are subject to extensive state and local regulation, but primarily the
licensing and regulatory control of the Mississippi Gaming Commission and the
Mississippi State Tax Commission.

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The Mississippi Gaming Control Act (the Mississippi Act), which
legalized dockside casino gaming in Mississippi, was enacted on June 29, 1990.
Effective October 29, 1991, the Mississippi Gaming Commission adopted
regulations in furtherance of the Mississippi Act (the regulations).

The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming Commission seek to:



| |  |  | prevent unsavory or unsuitable persons from having any direct or indirect
involvement with gaming at any time or in any capacity;                                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | establish and maintain responsible accounting practices and procedures;                                                                                                                                                                                                                 
|
| |  |  | maintain effective control over the financial practices of licensees,
including establishing minimum procedures for internal fiscal affairs and
safeguarding of assets and revenues, providing reliable record keeping
and making periodic reports to the Mississippi Gaming Commission;
|
| |  |  | prevent cheating and fraudulent practices;                                                                                                                                                                                                                                              
|
| |  |  | provide a source of state and local revenues through taxation and
licensing fees; and                                                                                                                                                                                                   
|
| |  |  | ensure that gaming licensees, to the extent practicable, employ
Mississippi residents.                                                                                                                                                                                                  

The regulations are subject to amendment and interpretation by the
Mississippi Gaming Commission. Changes in Mississippi law or the regulations
or the Mississippi Gaming Commissions interpretations thereof may limit or
otherwise materially affect the types of gaming that may be conducted, and
could have a material adverse effect on the Company and RPGs Mississippi
gaming operations.

The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Gulf Coast or the
Mississippi River, but only if the voters in such counties have not voted to
prohibit gaming in that county. As of February 1, 2002, dockside gaming was
permissible in nine of the 14 eligible counties in the state and gaming
operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren
and Washington counties. Under Mississippi law, gaming vessels must be located
on the Mississippi River or on navigable waters in eligible counties along the
Mississippi River, or in the waters of the State of Mississippi lying south of
the state in eligible counties along the Mississippi Gulf Coast. Although there
are no legislative limitations on the number of gaming licenses which may be
issued in Mississippi, competition is limited by the availability of legal,
suitable and accessible sites.

Mississippi law permits unlimited stakes gaming on permanently moored
vessels on a continuous 24-hour basis and does not restrict the size of the
gaming area or the percentage of vessel space which may be utilized for gaming.
All types of casino games (other than bingo and race and/or sports betting)
may be offered. House credit may be extended to qualified patrons. The legal
age for gaming in Mississippi is 21.

The Company and RPG are subject to the licensing and regulatory control of
the Mississippi Gaming Commission. The Company is registered under the
Mississippi Act as a publicly traded holding company of RPG. As a registered
publicly traded corporation, the Company is required to periodically submit
detailed financial, operating and other reports to the Mississippi Gaming
Commission and furnish any other information which the Mississippi Gaming
Commission may require. If the Company is unable to satisfy the registration

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requirements of the Mississippi Act, the Company and RPG cannot own or operate
gaming facilities in Mississippi. RPG is also required to periodically submit
detailed financial, operating and other reports to the Mississippi Gaming
Commission and the Mississippi State Tax Commission and to furnish any other
information required thereby.

RPG must maintain a gaming license from the Mississippi Gaming Commission
to operate a casino in Mississippi. Gaming licenses require the periodic
payment of fees and taxes and are not transferable. Gaming licenses are issued
for a maximum term of three years and must be renewed periodically thereafter.
RPG received its Mississippi gaming operators license on October 13, 1994 and
renewals on October 14, 1996, October 15, 1998 and October 16, 2000. No person
may become a stockholder of or receive any percentage of profits from a
licensed gaming entity, including both the Company and RPG, without first
obtaining licenses and approvals from the Mississippi Gaming Commission.

Certain of the Companys officers, directors and employees and the
officers, directors and key employees of RPG who are actively and directly
engaged in the administration or supervision of gaming in Mississippi must be
found suitable or be licensed by the Mississippi Gaming Commission. On October
13, 1994, the Mississippi Gaming Commission found certain key principals of the
Company and RPG suitable, and all required findings of suitability have been
maintained and are current. The Company believes that it and RPG have applied
for all necessary findings of suitability with respect to these persons,
although the Mississippi Gaming Commission, in its discretion, may require
additional persons to file applications for findings of suitability. In
addition, any person having a material relationship or involvement with the
Company or RPG may be required to be found suitable, in which case those
persons must pay the costs and fees associated with the investigation. A
finding of suitability requires submission of detailed personal and financial
information followed by a thorough investigation. There can be no assurance
that a person who is subject to a finding of suitability will be found suitable
by the Mississippi Gaming Commission. The Mississippi Gaming Commission may
deny an application for a finding of suitability for any cause that it deems
reasonable. Findings of suitability must be periodically renewed.

Changes in certain licensed positions must be reported to the Mississippi
Gaming Commission. In addition to its authority to deny an application for a
finding of suitability, the Mississippi Gaming Commission has jurisdiction to
disapprove a change in a licensed position. The Mississippi Gaming Commission
has the power to require the Company and RPG to suspend or dismiss officers,
directors and other key employees or sever relationships with other persons who
refuse to file appropriate applications or whom the authorities find unsuitable
to act in their capacities.

Employees associated with gaming must obtain work permits that are subject
to immediate suspension. The Mississippi Gaming Commission will refuse to
issue a work permit to a person convicted of a felony and it may refuse to
issue a work permit to a gaming employee if the employee has committed various
misdemeanors or knowingly violated the Mississippi Act or for any other
reasonable cause.

At any time, the Mississippi Gaming Commission has the power to
investigate and require a finding of suitability of the Companys record or
beneficial stockholders, regardless of the percentage of ownership.
Mississippi law requires any person who acquires more than 5% of the voting
securities of a publicly traded corporation registered with the Mississippi
Gaming Commission to report the acquisition to the Mississippi Gaming
Commission, and that person may be required to be found suitable. Also, any
person who becomes a beneficial owner of more

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than 10% of the voting securities of such a company, as reported to the
Mississippi Gaming Commission, must apply for a finding of suitability by the
Mississippi Gaming Commission. An applicant for finding of suitability must
pay the costs and fees that the Mississippi Gaming Commission incurs in
conducting the investigation. The Mississippi Gaming Commission has generally
exercised its discretion to require a finding of suitability of any beneficial
owner of more than 5% of a registered public or private companys voting
securities. However, the Mississippi Gaming Commission has adopted a policy
that may permit institutional investors to own beneficially up to 10% and,
under certain circumstances, up to 15%, of a registered public or private
companys voting securities without a finding of suitability.

Under certain circumstances, an institutional investor, as defined by
the Mississippi Gaming Commissions Policy on Findings of Suitability of
Institutional Shareholders (adopted January 20, 2000 and amended June 21,
2001), which acquires more than 10% but not more than 15% of a registered
public or private companys voting securities, may apply to the Executive
Director of the Mississippi Gaming Commission for a waiver of such finding of
suitability if such institutional investor holds the voting securities for
investment purposes only. An institutional investor shall not be deemed to
hold voting securities for investment purposes unless the voting securities
were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of the registered public or private company, any change in the registered
public or private companys corporate charter, bylaws, management, policies or
operations of the registered public or private company or any of its gaming
affiliates, or any other action which the Mississippi Gaming Commission finds
to be inconsistent with holding the registered public or private companys
voting securities for investment purposes only. Activities that are not deemed
to be inconsistent with holding voting securities for investment purposes only
include:



| |  |  | voting, directly or indirectly through the delivery of a proxy furnished
by the board of directors, on all matters voted upon by the holders of
such voting securities;                                                                            
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | serving as a member of any committee of creditors or security holders;                                                                                                                                                                             
|
| |  |  | nominating any candidate for election or appointment to the board of
directors in connection with a debt restructuring;                                                                                                                            
|
| |  |  | accepting appointment or election (or having a representative accept
appointment or election) as a member of the board of directors in
connection with a debt restructuring and serving in that capacity until
the conclusion of the members term;
|
| |  |  | making financial and other inquiries of management of the type normally
made by securities analysts for informational purposes and not to cause a
change in its management, policies or operations; and                                            
|
| |  |  | such other activities as the Mississippi Gaming Commission may determine
to be consistent with such investment intent.                                                                                                                             

If a stockholder who must be found suitable is a corporation, partnership
or trust, it must submit detailed business and financial information including
a list of beneficial owners. The

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Mississippi Gaming Commission may at any time
dissolve, suspend, condition, limit or restrict a finding of suitability to own
the Companys equity interests for any cause it deems reasonable.

The Company may be required to disclose to the Mississippi Gaming
Commission, upon request, the identities of the holders of any debt or other
securities. In addition, under the Mississippi Act, the Mississippi Gaming
Commission may, in its discretion:



| |  |  | require holders of debt securities of registered corporations to file applications;
| | - |  | -----------------------------------------------------------------------------------
|
| |  |  | investigate the holders; and                                                       
|
| |  |  | require the holders to be found suitable to own the debt securities.               

Although the Mississippi Gaming Commission generally does not require the
individual holders of obligations such as notes to be investigated and found
suitable, the Mississippi Gaming Commission retains the discretion to do so for
any reason, including but not limited to a default, or where the holder of the
debt instrument exercises a material influence over the gaming operations of
the entity in question. Any holder of debt or equity securities required to
apply for a finding of suitability must pay all investigative fees and costs of
the Mississippi Gaming Commission in connection with the investigation.

Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. Any person found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the Companys securities
beyond the time that the Mississippi Gaming Commission prescribes may be guilty
of a misdemeanor. The Company and RPG will be subject to disciplinary action
if, after receiving notice that a person is unsuitable to be a stockholder, a
holder of the Companys debt securities or to have any other relationship with
the Company or RPG, the Company:



| |  |  | pays the unsuitable person any dividend, interest or other distribution
whatsoever;                                                                                                                        
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | recognizes the exercise, directly or indirectly, of any voting rights
conferred through such securities held by the unsuitable person;                                                                     
|
| |  |  | pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in limited and specific circumstances;                                                                  
|
| |  |  | makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction; or                                                                   
|
| |  |  | fails to pursue all lawful efforts to require the unsuitable person to
divest himself of the securities, including, if necessary, the immediate
purchase of the securities for cash at a fair market value.

RPG must maintain in Mississippi a current ledger with respect to the
ownership of its equity securities and the Company must maintain in Mississippi
a current list of its stockholders which must reflect the record ownership of
each outstanding share of any equity security issued by the Company. The ledger
and stockholder lists must be available for inspection by the Mississippi
Gaming Commission at any time. If any securities are held in trust by an agent
or by a nominee, the record holder may be required to disclose the identity of
the beneficial owner to the Mississippi Gaming Commission. A failure to make
that disclosure may be grounds for finding the record holder unsuitable. The
Company must also render maximum assistance in determining the identity of the
beneficial owner.

The Mississippi Act requires that the certificates representing securities
of the Company bear a legend to the general effect that the securities are
subject to the Mississippi Act and the

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regulations of the Mississippi Gaming
Commission. On October 15, 2001, the Mississippi Gaming Commission granted the
Company a waiver of this legend requirement. The Mississippi Gaming Commission
has the power to impose additional restrictions on the Company and the holders
of its securities at any time.

Substantially all loans, leases, sales of securities and similar financing
transactions by a licensed gaming subsidiary must be reported to or approved by
the Mississippi Gaming Commission. A licensed gaming subsidiary may not make a
public offering of its securities, but may pledge or mortgage casino facilities
if it obtains the prior approval of the Mississippi Gaming Commission. The
Company may not make a public offering or private placement of its securities
without the prior approval of the Mississippi Gaming Commission if any part of
the proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Mississippi or to retire or
extend obligations incurred for those purposes. The approval, if given, does
not constitute a recommendation or approval of the accuracy or adequacy of the
prospectus or the investment amounts of the securities subject to the offering.
On September 20, 2001, the Mississippi Gaming Commission granted the Company a
waiver of the prior approval requirement for the Companys securities offerings
for a period of two years, subject to certain conditions. The waiver may be
rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Executive Director of the Mississippi Gaming
Commission.

Under the regulations of the Mississippi Gaming Commission, RPG may not
guarantee a security issued by the Company pursuant to a public offering, or
pledge its assets to secure payment or performance of the obligations evidenced
by a security issued by the Company, without the prior approval of the
Mississippi Gaming Commission. Similarly, the Company may not pledge the
ownership interests of RPG, nor may the pledgee of such ownership interests
foreclose on such a pledge, without the prior approval of the Mississippi
Gaming Commission. Moreover, restrictions on the transfer of an equity
security issued by RPG and agreements not to encumber such securities granted
by the Company are ineffective without the prior approval of the Mississippi
Gaming Commission. The waiver of the prior approval requirement for the
Companys securities offerings received from the Mississippi Gaming Commission
on September 20, 2001 includes a waiver of the prior approval requirement for
such guarantees, pledges and restrictions of RPG, subject to certain
conditions.

Neither the Company nor RPG may change its control through merger,
consolidation, acquisition of assets, management or consulting agreements or
any form of takeover without the prior approval of the Mississippi Gaming
Commission. The Mississippi Gaming Commission may also require controlling
stockholders, officers, directors, and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction.

Neither the Company nor RPG may engage in gaming activities in Mississippi
while the Company, RPG and/or persons found suitable to be associated with the
gaming license of RPG conduct gaming operations outside of Mississippi without
approval of the Mississippi Gaming Commission. The Mississippi Gaming
Commission may require means for it to have access to information concerning
the Companys and its affiliates out-of-state gaming operations.

If the Mississippi Gaming Commission decides that a licensed gaming
subsidiary violated a gaming law or regulation, the Mississippi Gaming
Commission could limit, condition, suspend or revoke the license of the
subsidiary. In addition, the licensee, its registered holding company, and the
persons involved could be subject to substantial fines for each separate

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violation. A violation under any of the Companys other operating
subsidiaries gaming licenses may be deemed a violation of RPGs gaming
license. Because of a violation, the Mississippi Gaming Commission could
attempt to appoint a supervisor to operate the casino facilities. Limitation,
conditioning or suspension of RPGs gaming license or the Companys
registration as a publicly traded holding company of RPG, or the appointment of
a supervisor could, and revocation of any gaming license or registration would,
materially adversely affect the business of RPG, the Company, and the Companys
other operating subsidiaries.

A licensed gaming subsidiary must pay license fees and taxes, computed in
various ways depending on the type of gaming involved, to the State of
Mississippi and to the county or city in which the licensed gaming subsidiary
conducts operations. Depending upon the particular fee or tax involved, these
fees and taxes are payable periodically and are based upon:



| |  |  | a percentage of the gross gaming revenues received by the casino operation;
| | - |  | ---------------------------------------------------------------------------
|
| |  |  | the number of slot machines operated by the casino; and                    
|
| |  |  | the number of table games operated by the casino.                          

The license fee payable to the State of Mississippi is based upon gaming
receipts, generally defined as gross receipts less payouts to customers as
winnings, and equals:



| |  |  | 4% of gaming receipts of $50,000 or less per month;                         
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | 6% of gaming receipts over $50,000 but not exceeding
$134,000 per month; and
|
| |  |  | 8% of gaming receipts over $134,000 per month.                              

These license fees are allowed as a credit against a licensees
Mississippi income tax liability for the year paid. The gross revenue fee
imposed by the Mississippi cities and counties in which casino operations are
located is in addition to the fees payable to the State of Mississippi and
equals approximately 4% of the gaming receipts.

The Mississippi Gaming Commission adopted a regulation in 1994 requiring
as a condition of licensure or license renewal that a gaming establishments
plan include a 500-car parking facility in close proximity to the casino
complex and infrastructure facilities which will amount to at least 25% of the
casino cost. Infrastructure facilities are defined in the regulation to
include a hotel with at least 250 rooms, theme park, golf course and other
similar facilities. With the opening of its hotel and other amenities, the
Horseshoe Tunica is in compliance with this requirement. On January 21, 1999,
the Mississippi Gaming Commission adopted an amendment to this regulation which
increased the infrastructure requirement to 100% from the existing 25%;
however, the regulation grandfathers existing licensees and applies only to new
casino projects and casinos that are not operating at the time of acquisition
or purchase, and would therefore not apply to the Horseshoe Tunica. In any
event, the Horseshoe Tunica would comply with the increased requirement.

Both the local jurisdiction and the Alcoholic Beverage Control Division of
the Mississippi State Tax Commission license, control and regulate the sale of
alcoholic beverages, including beer and wine, by RPG at the Horseshoe Tunica.
The Horseshoe Tunica is in an area designated as a special resort area, which
allows casinos located therein to serve alcoholic beverages on a 24-hour basis.
The Alcoholic Beverage Control Division requires that the key officers and
managers of the Company and RPG and all owners of more than 5% of RPGs equity
submit detailed personal, and in some instances, financial information to the
Alcoholic Beverage Control Division and be investigated and licensed. All such
licenses are non-transferable. The Alcoholic Beverage Control Division must
approve changes in key positions. The Alcoholic Beverage Control Division has
the full power to limit, condition,

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suspend or revoke any license for the
service of alcoholic beverages or to place a licensee on probation with or
without conditions. Any disciplinary action could, and revocation would, have
a material adverse effect upon the operations of the Horseshoe Tunica.

Indiana

The Indiana Riverboat Gaming Act (Indiana Act) authorizes the issuance
of up to 11 riverboat gaming licenses on waterways located in Indiana counties
that are contiguous to Lake Michigan, the Ohio River and Patoka Lake. The
Indiana Act strictly regulates the facilities, persons, associations and
practices related to gaming operations pursuant to the police powers of the
State of Indiana, including comprehensive law enforcement provisions. The
Indiana Act vests the Indiana Gaming Commission with the power and duties of
administering, regulating and enforcing the system of riverboat gaming in the
State of Indiana. The Indiana Gaming Commissions jurisdiction extends to every
person, association, corporation, partnership and trust involved in riverboat
gaming operations in the State of Indiana.

The Indiana Act requires the owner of a riverboat gaming operation to hold
an owners license issued by the Indiana Gaming Commission. Each license
granted entitles the licensee to own and operate one riverboat and gaming
equipment as part of the gaming operation. A licensee may own no more than a
10% interest in any other owners license under the Indiana Act.

The Indiana Gaming Commission has issued: (i) two licenses for riverboats
operating from Gary; (ii) one license for a riverboat operating in Hammond;
(iii) one license for a riverboat operating in East Chicago; (iv) one license
for a riverboat operating in any city located in LaPorte County and (v) five
licenses for riverboats that operate upon the Ohio River from counties
contiguous thereto and with no more than one operating in any county. The
Indiana Gaming Commission has not considered applications for a license to be
sited in a county contiguous to Patoka Lake since Patoka Lake is a project of
the U.S. Army Corps of Engineers (Corps) and the Corps has determined Patoka
Lake is unsuitable for a riverboat project.

Each initial owners license runs for a period of five years. Thereafter,
the license is subject to renewal on an annual basis upon a determination by
the Indiana Gaming Commission that the licensee continues to be eligible for an
owners license pursuant to the Indiana Act and the rules and regulations
adopted thereunder. The Indiana Act requires that a licensed owner undergo a
complete investigation every three years. If for any reason the license is
terminated, the assets of the riverboat gaming operation cannot be disposed of
without the approval of the Indiana Gaming Commission. Furthermore, the Indiana
Act requires that officers, directors and employees of a gaming operation be
licensed. The Companys Hammond license was renewed on August 24, 2001. The
license was renewed until June of 2002.

Applicants for licensure must submit a comprehensive application and
personal disclosure forms and undergo an exhaustive background investigation
prior to the issuance of a license. The applicant must also disclose the
identity of every person holding an ownership interest in the applicant. Any
person holding significant interests (5%) in the applicant must undergo a
background investigation and be licensed. The Indiana Gaming Commission has
the authority to request specific information on or license anyone holding an
ownership interest.

An institutional investor which acquires 5% or more of any class of voting
securities of a holding company of a licensee is required to notify the Indiana
Gaming Commission and may be subject to a finding of suitability. Institutional
investors acquiring 15% or more must be found suitable. A person who acquires
5% or more of any class of voting securities of a holding

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company of a licensee
is required to apply to the Indiana Gaming Commission for a finding of
suitability.

A holder of a gaming license is required to post a bond with the Indiana
Gaming Commission in an amount that the Indiana Gaming Commission determines
will adequately reflect the amount that a local community will expend for
infrastructure and other facilities associated with a riverboat operation. A
license must hold insurance of the type and amount deemed necessary by the
Indiana Gaming Commission.

A riverboat owner licensee or any other person may not lease, hypothecate,
borrow money against or loan money against an owners riverboat gaming license.
An ownership interest in an owners riverboat gaming license may only be
transferred in accordance with the regulations promulgated under the Indiana
Act.

The Indiana Act does not limit the maximum bet or per patron loss. The
licensee sets minimum and maximum wagers on games. Wagering may not be
conducted with money or other negotiable currency. No person under the age of
21 is permitted to wager, and wagers may only be taken from a person present on
a licensed riverboat.

Riverboats operating in Indiana must (i) have a valid certificate of
inspection from the U.S. Coast Guard to carry at least 500 passengers; and (ii)
be at least 150 feet long. Any riverboat that operates on the Ohio River must
replicate, as nearly as possible, historic Indiana steamboat passenger vessels
of the nineteenth century. Riverboats operating on Lake Michigan need not meet
this requirement.

After consultation with the Corps, the Indiana Gaming Commission may
determine the available navigable waterways that are suitable for the operation
of riverboats under the Indiana Act. If the Corps rescinds an approval for the
operation of riverboats on a waterway, a license issued under the Indiana Act
is void and the holder may not conduct or continue gaming operations under the
Indiana Act.

Pursuant to gaming commission policy, gaming may not be conducted for more
than 21 hours each day. Gaming sessions are generally required to be at least
two hours and are limited to a maximum duration of four hours. No gaming may be
conducted while the boat is docked, except for 30-minute time periods at the
beginning and end of each cruise while the passengers are embarking and
disembarking (total gaming time is limited to four hours, however, including
the pre- and post- docking periods). Except for patron embarkation and
disembarkation periods, dockside gambling may not be conducted unless the
master of the riverboat certifies, in writing, that one of the following
conditions exist: (1) weather or water conditions present a danger to the
riverboat, its passengers and crew; (2) the vessel or docking facility is being
repaired; (3) traffic conditions present a danger to the riverboat, its
passengers and crew or other vessels; or (4) cruising would result in a
violation of Federal law. The Indiana Gaming Commission may grant extended
cruise hours in its discretion.

The Indiana Act imposes a 20% wagering tax on adjusted gross receipts from
gaming. The tax imposed is to be paid by the licensed owner to the Indiana
Department of Revenue before the close of the business day following the day
when the wagers are made. The Indiana Act also requires that licensees pay a
$3.00 admission tax for each person admitted to a gaming excursion. A riverboat
license may be suspended for failure to pay such tax as required by the Indiana
Act. Riverboats are assessed, for property tax purposes, as real property and
are taxed at rates determined by local taxing authorities. Indiana corporations
are also subject to the Indiana

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gross income tax, the Indiana adjusted gross
income tax and the Indiana Supplemental corporate net income tax.

The Indiana Gaming Commission may subject a licensee to fines, suspension
or revocation of its license for any act that is in violation of the Indiana
Act, the regulations of the Indiana Gaming Commission, or for any other
fraudulent act. In addition, the Indiana Gaming Commission may revoke an
owners license if the Indiana Gaming Commission determines that the revocation
of the license is in the best interests of the State of Indiana.

The Indiana Act places special emphasis upon minority and womens business
enterprise participation in the riverboat industry. Any person issued a
riverboat owners license must establish goals of expending at least 10% of the
total dollar value of the licensees contracts for goods and services with
minority business enterprises and 5% of the total dollar value of the
licensees contracts for goods and services with womens business enterprises.

A riverboat owner licensee may not enter into or perform any contract or
transaction in which it transfers or receives consideration which is not
commercially reasonable or which does not reflect the fair market value of the
goods and services rendered or received. All contracts are subject to
disapproval by the Indiana Gaming Commission. A riverboat owner licensee or an
affiliate may not enter into a debt transaction of $1.0 million or more without
the prior approval of the Indiana Gaming Commission. The Indiana Gaming
Commission has a rule requiring the reporting of certain currency transactions,
which is similar to that required by Federal authorities.

The Indiana Act prohibits contributions to a candidate for a state,
legislative, or local office, or to a candidates committee or to a regular
party committee by the holder of a riverboat owners license or a suppliers
license, by an officer of a licensee or by an officer of a person that holds at
least a 1% interest in the licensee. The Indiana Gaming Commission has
promulgated a rule requiring quarterly reporting by the holder of a riverboat
owners license or a suppliers license or officers of the licensee, officers
of persons that hold at least a 1% interest in the licensee, and of persons who
directly or indirectly own a 1% interest in the licensee.

The Indiana Gaming Commission prohibits a distribution (except to allow
payment of taxes) by a riverboat licensee to its partners, shareholders,
itself, or any affiliated entity, if the distribution would impair the
financial viability of the riverboat gaming operation. The Indiana Gaming
Commission also requires riverboat licensees to maintain, on a quarterly basis,
a cash reserve equal to the average amount of payouts over a three day period.
The cash reserve includes cash in the casino cage, cash in a bank account in
Indiana, or cash equivalents not committed or obligated.

Environmental Regulations

The Company is subject to Federal, state and local laws, regulations and
ordinances, or environmental laws, that: (1) govern activities or operations
that may have adverse environmental effects, such as discharges to air and
water as well as handling and disposal practices for solid and hazardous
wastes; and (2) impose liability for the costs of cleaning up, and certain
damages resulting from, past spills, disposals or other releases of hazardous
substances.

Based on our review of certain environmental assessments, the Company is
aware that there may be soil and groundwater contamination present on some of
the real property used by our Hammond casino due to past industrial activities.
In connection with the construction of a highway overpass to service Hammond,
Hammond paid for the remediation on property owned by the City of Hammond.
Hammond also agreed, subject to certain limitations, to indemnify the

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City of
Hammond for the costs of remediation related to any other future cleanup
required. The Company does not believe that the contamination discovered during
the investigations requires further investigation or cleanup under current
environmental laws. It is possible, however, that such laws will become more
stringent in the future or that additional contamination on the property will
be discovered and will need to be cleaned up. Pursuant to an agreement with
the City of Hammond, Hammond could be obligated to undertake any such cleanup
and may be required to make material expenditures with respect to such matters.

Status as an S Corporation

As an S corporation, the Company will not be subject to Federal income tax
as an entity. Instead, each stockholder generally will be subject to income
tax on his proportionate share of the Companys income (or take into account
his proportionate share of any loss). Pursuant to a stockholder agreement,
the Company intends to make distributions to its stockholders to enable them to
pay any taxes on their share of the Companys income. While the Company
believes it was properly formed and has been properly operating as an S
corporation and that its subsidiaries were properly formed and have been
properly operating as Qualified Subchapter S Subsidiaries for Federal and state
income tax purposes, if the Companys S corporation tax status or the Qualified
Subchapter S Subsidiary status of any of its subsidiaries were successfully
challenged, the Company or such subsidiary could be required to pay Federal and
certain state income taxes, plus interest and possibly penalties, on our
taxable income for all open tax years. Such payments could have a material
adverse effect on the Company.

Other Laws and Regulations

The riverboats operated by the Companys subsidiaries must comply with
U.S. Coast Guard requirements as to boat design, on-board facilities,
equipment, personnel and safety. Each riverboat must hold a Certificate of
Seaworthiness or must be approved by the American Bureau of Shipping, or ABS,
for stabilization and floatation, and may also be subject to local zoning and
building codes. Loss of a riverboats Certificate of Seaworthiness or ABS
approval would preclude its use as a floating casino.

Each of the riverboat casinos is subject to extensive Federal, state and
local regulations. These laws and regulations include, but are not limited to,
restrictions and conditions concerning alcoholic beverages, environmental
matters, employees, currency transactions, taxation, zoning and building codes,
and marketing and advertising. Such laws and regulations could change or could
be interpreted differently in the future, or new laws and regulations could be
enacted. Material changes, new laws or regulations, or material differences in
interpretations by courts or governmental authorities could adversely affect
our operating results.

Employees

As of March 13, 2002, the Company and its subsidiaries employed 7,483
persons of whom 2,572 are employed at Horseshoe Bossier City, 2,684 are
employed at Horseshoe Tunica, 2,147 are employed at Horseshoe Hammond and 80
are employed in our corporate office.

Management believes the Company and its subsidiaries maintain an excellent
relationship with their respective employees and we are not aware of any
threatened labor activity affecting its employees. Neither the Company nor any
of its subsidiaries have ever experienced a work stoppage due to a labor
dispute.

19



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##### Table of Contents






Item 2. Properties.

The Company owns and operates casinos in Bossier City, Louisiana; Tunica
County, Mississippi; and Hammond, Indiana. All of the real property and
casinos are subject to first priority liens securing the Companys credit
facility.

Horseshoe Bossier City

Horseshoe Bossier City is located on approximately 30 acres along the east
side of the Red River, directly facing downtown Shreveport, Louisiana. The
casino complex consists of an approximately 86,000 square foot, four deck
riverboat with approximately 30,000 square feet of gaming space and an
approximately 62,000 square foot dockside pavilion, including a 25-story hotel
tower, an entertainment venue and a 1,770 car parking garage.

Horseshoe Tunica

Horseshoe Tunica is located in Tunica County, Mississippi at Casino
Center, an 80-acre three-property complex. Horseshoe Tunica is approximately
360,000 square feet, with an approximately 65,000 square foot gaming area,
three specialty restaurants, a 650 seat buffet, bars, retail outlets, a
14-story hotel tower, an entertainment venue and an 1,100 car parking garage.
In addition to the parking garage, there are approximately 4,000 lighted
surface parking spaces in the Casino Center complex. The facility also includes
over 46,000 square feet of administrative space.

Horseshoe Hammond

Horseshoe Hammond, the closest casino to downtown Chicago, includes an
approximately 125,000 square foot pavilion. The real estate used by Horseshoe
Hammond is leased from the City of Hammond, Indiana and is subject to a 75-year
lease. The casino operation is located on a catamaran vessel and consists of
approximately 42,500 square feet of gaming space. The pavilion features a
steakhouse, buffet, deli, coffee shop, retail shops, a 150-seat banquet room
and two lounges. The facility also includes a 1,150 car parking garage.




Item 3. Legal Proceedings.

On June 2, 2000, a lawsuit was filed in the United States District Court
for the Northern District of Indiana, against Hammond and the Company on behalf
of current and former employees of Hammond alleging that Hammond and the
Company are responsible for damages to current and former employees as a result
of poor air quality on the gaming vessel operating in Hammond, Indiana. The
lawsuit alleges certain tort claims based on poor air quality and seeks
certification as a class on behalf of similarly situated current and former
employees of Hammond. Hammond and the Company deny the allegations in the
complaint and intend to vigorously contest this matter.

On February 13, 2001, a lawsuit was filed in the Court of Chancery of the
State of Delaware in New Castle County, by Edward T. McGowan, a former
shareholder of Empress Entertainment, Inc., against the Company and seven other
former shareholders of Empress Entertainment, Inc., challenging the validity of
the Empress Merger. The lawsuit sought injunctive relief, monetary damages and
rescission of the Empress Merger. The Company demanded indemnification for any
and all claims, losses, costs and expenses incurred as a result of, or in
connection with the defense of, such lawsuit pursuant to a Stockholder
Indemnification Agreement dated December 1, 1999 by and among the Company and
each of the former

20



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##### Table of Contents



shareholders of Empress Entertainment, Inc. other than
Edward T. McGowan. On January 11, 2002, the lawsuit against the Company was
dismissed.

On July 5, 2001, James Wellborn and Charles J. Nickel filed a lawsuit in
the 26th Judicial Court (Bossier Parish) against the Municipality of Bossier
City, Louisiana asking the Court to: (i) order the City to collect a $3.00 per
person boarding fee from Horseshoe Entertainment; (ii) invalidate a contract
fixing the amount paid by Horseshoe Entertainment to Bossier City as opposed to
a per person boarding fee; and (iii) certify the suit as a class action on
behalf of all citizens and tax payers of Bossier Parish. The Company is not
named in the suit but will seek to intervene to protect its interest. The
Company believes the suit is without merit and will vigorously defend the
validity of the contract.




Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

21



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##### Table of Contents






PART II




Item 5. Market for Registrants Common Equity and Related Stockholder Matters.

There is no established public trading market for the equity interests in
the Company. As of March 15, 2002, the number of record holders of equity
interests in the Company was 35.

The Company pays tax distributions in accordance with its debt agreements
to enable the holders of equity interests in the Company to pay state and
Federal income taxes on their proportionate share of the Companys income. The
amount of tax distributions paid during 2001, 2000 and 1999 were $69.1 million,
$38.0 million and $12.8 million, respectively. The Companys debt agreements
contain provisions which restrict the ability of the Company to make
distributions to the holders of equity interests, based on the Companys
earnings, the ability of the Company to meet certain restrictions on borrowing,
and certain other criteria.




Item 6. Selected Consolidated Financial Data.

The following table summarizes certain selected consolidated financial
data, which should be read in conjunction with the Companys Consolidated
Financial Statements and notes thereto, included elsewhere herein and with
Managements Discussion and Analysis of Financial Condition and Results of
Operations. The selected consolidated financial data as of and for the years
ended December 31, 2001, 2000, 1999, 1998, and 1997 have been derived from the
Companys audited consolidated financial statements included elsewhere herein.

|                                                                                       |                     |                                       |         |                         |          |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|-------------------------------------------------------------------------------------- | ------------------- | ------------------------------------- | ------- | ----------------------- | -------- | ---- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                       |                     |                                       |         | Year ended December 31,
|                                                                                       |                     |                                       |         |                        
|                                                                                       |                     |                                       |         | 2001(a)                 |          | 2000 |         | 1999(b) |         | 1998 |         | 1997   
|                                                                                       |                     |                                       |         |                         |          |      |         |         |         |      |         |        
|                                                                                       |                     |                                       |         | (in thousands)         
|Statement of Operations Data:                                                          |                     |                                       |         |                         |          |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Net revenues        |                                       | $       | 933,258                 |          |      | $       | 980,830 |         |      | $       | 500,316 |         |   | $       | 442,560 |         |   | $       | 321,202 |        
|                                                                                       | Operating expenses: |                                       |         |                         |          |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                                                                       |                     | Casino                                |         |                         | 528,827  |      |         |         | 523,423 |      |         |         | 247,349 |   |         |         | 229,157 |   |         |         | 161,503 | 
|                                                                                       |                     | Non-casino                            |         |                         | 37,710   |      |         |         | 45,442  |      |         |         | 26,859  |   |         |         | 26,281  |   |         |         | 20,283  | 
|                                                                                       |                     | General and administrative            |         |                         | 119,877  |      |         |         | 127,659 |      |         |         | 69,558  |   |         |         | 63,551  |   |         |         | 43,600  | 
|                                                                                       |                     | Preopening expenses                   |         |                         | 4,064    | (c)  |         |         |        |      |         |         |        |   |         |         | 653     |   |         |         | 2,964   | 
|                                                                                       |                     | Net (gain) loss on disposal of assets |         |                         | (163,845 | )    |         |         | (1,602  | )    |         |         | 10,424  |   |         |         | 12,990  |   |         |         |        | 
|                                                                                       |                     | Corporate expenses (d)                |         |                         | 22,073   |      |         |         | 46,283  |      |         |         | 8,414   |   |         |         | 12,947  |   |         |         | 24,143  | 
|                                                                                       |                     | Depreciation and amortization         |         |                         | 66,945   |      |         |         | 81,468  |      |         |         | 41,806  |   |         |         | 33,888  |   |         |         | 19,411  | 
|                                                                                       |                     |                                       |         |                         |          |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|Operating income                                                                       |                     |                                       | 317,607 |                         |          |      | 158,157 |         |         |      | 95,906  |         |         |   | 63,093  |         |         |   | 49,298  |        
|Interest expense, net                                                                  |                     |                                       | (78,749 | )                       |          |      | (96,211 | )       |         |      | (53,332 | )       |         |   | (37,672 | )       |         |   | (15,796 | )      
|Other, net                                                                             |                     |                                       | 382     |                         |          |      | (1,232  | )       |         |      | (548    | )       |         |   | (149    | )       |         |   | (429    | )      
|                                                                                       |                     |                                       |         |                         |          |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|Net income before extraordinary loss on early
retirement of debt and minority interest |                     |                                       | 239,240 |                         |          |      | 60,714  |         |         |      | 42,026  |         |         |   | 25,272  |         |         |   | 33,073  |        
|Extraordinary loss on early retirement of debt                                         |                     |                                       | (6,893  | )                       |          |      |        |         |         |      | (9,653  | )       |         |   | (787    | )       |         |   | (5,243  | )      
|Minority interest in income (loss) of subsidiaries (e)                                 |                     |                                       |        |                         |          |      |        |         |         |      |        |         |         |   | 640     |         |         |   | (420    | )      
|                                                                                       |                     |                                       |         |                         |          |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|Net income                                                                             |                     | $                                     | 232,347 |                         |          | $    | 60,714  |         |         | $    | 32,373  |         |         | $ | 25,125  |         |         | $ | 27,410  |        
|                                                                                       |                     |                                       |         |                         |          |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         | 

|                    |                                              |  |                    |           |      |  |         |           |      |  |      |           |  |  |   |         |  |  |   |         | 
|------------------- | -------------------------------------------- |  | ------------------ | --------- | ---- |  | ------- | --------- | ---- |  | ---- | --------- |  |  | - | ------- |  |  | - | ------- | 
|                    |                                              |  | As of December 31,
|                    |                                              |  |                   
|                    |                                              |  | 2001               |           | 2000 |  | 1999(b) |           | 1998 |  | 1997
|                    |                                              |  |                    |           |      |  |         |           |      |  |     
|                    |                                              |  | (in thousands)    
|Balance Sheet Data: |                                              |  |                    |           |      |  |         |           |      |  |      |           |  |  |   |         |  |  |   |        
|                    | Cash and cash equivalents                    |  | $                  | 220,817   |      |  | $       | 78,133    |      |  | $    | 118,276   |  |  | $ | 84,151  |  |  | $ | 48,710  | 
|                    | Total assets                                 |  |                    | 1,057,259 |      |  |         | 1,204,538 |      |  |      | 1,409,244 |  |  |   | 560,448 |  |  |   | 511,556 | 
|                    | Long-term debt, including current maturities |  |                    | 739,521   |      |  |         | 1,028,221 |      |  |      | 1,258,948 |  |  |   | 388,718 |  |  |   | 313,275 | 
|                    | Shareholders/members equity                |  |                    | 212,185   |      |  |         | 52,608    |      |  |      | 34,594    |  |  |   | 71,151  |  |  |   | 64,595  | 



|(a) |  | Includes the results of operations of Joliet through July 31, 2001, the
date of sale to Argosy Gaming Company.                                                                                     
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes the results of operations of Hammond and Joliet since their
acquisition on December 1, 1999.                                                                                              
|   
|(c) |  | Includes advertising and production costs of approximately $2.0 million.                                                                                                                           
|   
|(d) |  | Includes deferred compensation of ($0.4) million, $8.3 million, $0.5
million, $4.2 million, and $15.1 million for the years ended December 31,
2001, 2000, 1999, 1998, and 1997, respectively.     
|   
|(e) |  | Prior to April 1999, the Company owned less than 100% of Bossier City.
Minority interest represents the share of each subsidiarys income
attributable to those interests not owned by the Company.

22



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Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations.

The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
consolidated financial condition and results of operations of Horseshoe Gaming
Holding Corp. (the Company) and its subsidiaries. The discussion should be
read in conjunction with Selected Consolidated Financial Data and the
Consolidated Financial Statements and notes thereto included elsewhere herein.
References to 2001, 2000 and 1999 refer to the years ended December 31, 2001,
2000 and 1999, respectively.

Introduction

The Company is a leading multi-jurisdictional gaming company which owns
and operates, through its wholly owned subsidiaries, riverboat casinos under
the Horseshoe brand. These include the Horseshoe Bossier City Casino
(Bossier City) in Bossier City, Louisiana, which commenced operations on July
9, 1994, the Horseshoe Tunica Casino (Tunica) in Robinsonville, Mississippi,
which commenced operations on February 13, 1995, and the Horseshoe Casino
Hammond (Hammond) in Hammond, Indiana. Hammond, along with the Empress
Casino Joliet (Joliet) in Joliet, Illinois, were acquired (the Empress
Merger) from Empress Entertainment, Inc. (Empress) on December 1, 1999.
Hammond commenced operations on June 28, 1996. On July 31, 2001, the Company
sold Joliet pursuant to the settlement agreement discussed below.

The Joliet casino gaming license was due to be renewed by the Illinois
Gaming Board (IGB) in June 2000. On June 30, 2000, the IGB preliminarily
denied Joliets application to renew its gaming license and preliminarily found
Jack Binion (Binion), Chairman of the Board and CEO of the Company,
unsuitable to be licensed as a key person. Joliet filed a Verified Request for
Hearing of the IGBs decision. Effective January 31, 2001, the IGB approved a
settlement agreement between the IGB, the Company, Joliet and Binion. Pursuant
to the pertinent parts of the settlement agreement: (a) the Company sold Joliet
to a suitable purchaser; (b) Binion withdrew his key person application, and
(c) Joliet withdrew its Verified Request for Hearing thereby causing the
previous denial of Joliets renewal application to be moot.

Results of operations include the consolidated results of Bossier City and
Tunica, and Hammond and Joliet from the date of their acquisition on December
1, 1999. Results of operations for 2001 include Joliet through the date of its
sale on July 31, 2001.

23



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##### Table of Contents



Results of Operations

Financial Highlights

|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |     |  
|-------------------------------------------------- | ------------------------------------------------------------------- |  | ------------------------ | ------- | --------------------- |  | ---- | ------- | ----------- |  | ----------- | ------- | - |  | ------- | --- | -------- |  |  | --- | -
|                                                   |                                                                     |  | Years ended December 31, |         | % Increase/(Decrease)
|                                                   |                                                                     |  |                          |         |                      
|                                                   |                                                                     |  | 2001                     |         | 2000                  |  | 1999 |         | '01 vs. '00 |  | '00 vs. '99
|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |            
|                                                   |                                                                     |  | (dollars in thousands)   |         |                       |  |      |         |             |  |            
|Casino revenues                                    |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |    
|                                                   | Bossier City                                                        |  | $                        | 242,719 |                       |  | $    | 247,934 |             |  | $           | 226,373 |   |  |         | -2  | %        |  |  | 10  | %
|                                                   | Tunica                                                              |  |                          | 254,648 |                       |  |      | 240,643 |             |  |             | 226,313 |   |  |         | 6   | %        |  |  | 6   | %
|                                                   | Hammond(a)                                                          |  |                          | 261,414 |                       |  |      | 236,915 |             |  |             | 18,085  |   |  |         | 10  | %        |  |  | (d  | )
|                                                   | Joliet(a)(b)                                                        |  |                          | 158,174 |                       |  |      | 235,435 |             |  |             | 16,765  |   |  |         | (d  | )        |  |  | (d  | )
|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |     |  
|                                                   |                                                                     |  | $                        | 916,955 |                       |  | $    | 960,927 |             |  | $           | 487,536 |   |  |         | -5  | %        |  |  | 97  | %
|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |     |  
|Net revenues                                       |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |    
|                                                   | Bossier City                                                        |  | $                        | 250,389 |                       |  | $    | 261,130 |             |  | $           | 239,488 |   |  |         | -4  | %        |  |  | 9   | %
|                                                   | Tunica                                                              |  |                          | 253,678 |                       |  |      | 237,232 |             |  |             | 224,267 |   |  |         | 7   | %        |  |  | 6   | %
|                                                   | Hammond(a)                                                          |  |                          | 267,639 |                       |  |      | 242,165 |             |  |             | 18,931  |   |  |         | 11  | %        |  |  | (d  | )
|                                                   | Joliet(a)(b)                                                        |  |                          | 161,552 |                       |  |      | 240,303 |             |  |             | 17,630  |   |  |         | (d  | )        |  |  | (d  | )
|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |     |  
|                                                   |                                                                     |  | $                        | 933,258 |                       |  | $    | 980,830 |             |  | $           | 500,316 |   |  |         | -5  |          |  |  | 96  | %
|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |     |  
|Operating income (loss)                            |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |    
|                                                   | Bossier City(c)                                                     |  | $                        | 29,881  |                       |  | $    | 45,501  |             |  | $           | 39,912  |   |  |         | -34 | %        |  |  | 14  | %
|                                                   | Tunica(c)                                                           |  |                          | 67,869  |                       |  |      | 68,841  |             |  |             | 63,682  |   |  |         | -1  | %        |  |  | 8   | %
|                                                   | Hammond(a)(c)                                                       |  |                          | 40,887  |                       |  |      | 42,109  |             |  |             | 3,471   |   |  |         | -3  | %        |  |  | (d  | )
|                                                   | Joliet(a)(b)(c)                                                     |  |                          | 44,362  |                       |  |      | 64,126  |             |  |             | 3,295   |   |  |         | (d  | )        |  |  | (d  | )
|                                                   | Gain
(writedown) on assets held
for sale                            |  |                          | 165,485 |                       |  |      | 2,096   |             |  |             | (10,346 | ) |  |         | (d  | )        |  |  | (d  | )
|                                                   | Corporate expenses                                                  |  |                          | (22,483 | )                     |  |      | (37,945 | )           |  |             | (7,945  | ) |  |         | -41 | %        |  |  | 378 | %
|                                                   | Preopening expenses(e)                                              |  |                          | (4,064  | )                     |  |      |        |             |  |             |        |   |  |         | (d  | )        |  |  | (d  | )
|                                                   | Deferred compensation                                               |  |                          | 410     |                       |  |      | (8,338  | )           |  |             | (469    | ) |  |         | (d  | )        |  |  | (d  | )
|                                                   | Depreciation, amortization
and other related to
Empress acquisition |  |                          | (6,006  | )                     |  |      | (19,008 | )           |  |             | 833     |   |  |         | (d  | )        |  |  | (d  | )
|                                                   | Other                                                               |  |                          | 1,266   |                       |  |      | 775     |             |  |             | 3,473   |   |  |         | 63  | %        |  |  | -78 | %
|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |     |  
|                                                   |                                                                     |  | $                        | 317,607 |                       |  | $    | 158,157 |             |  | $           | 95,906  |   |  |         | 101 | %        |  |  | 65  | %
|                                                   |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |     |  
|Other information                                  |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |    
|                                                   | Interest expense, net                                               |  | $                        | 78,749  |                       |  | $    | 96,211  |             |  | $           | 53,332  |   |  |         | -18 | %        |  |  | 80  | %
|                                                   | Extraordinary loss                                                  |  | $                        | 6,893   |                       |  | $    |        |             |  | $           | 9,653   |   |  |         | (d  | )        |  |  | (d  | )
|                                                   | Net Income                                                          |  | $                        | 232,347 |                       |  | $    | 60,714  |             |  | $           | 32,373  |   |  |         | 283 | %        |  |  | 88  | %
|Operating margin (operating income/net revenue)(f) |                                                                     |  |                          |         |                       |  |      |         |             |  |             |         |   |  |         |     |          |  |  |    
|                                                   | Bossier City(c)                                                     |  |                          | 12      | %                     |  |      | 17      | %           |  |             | 17      | % |  | (5) pts |     | 0 pts.  
|                                                   | Tunica(c)                                                           |  |                          | 27      | %                     |  |      | 29      | %           |  |             | 28      | % |  | (2) pts |     | 1 pts.  
|                                                   | Hammond(a)(c)                                                       |  |                          | 15      | %                     |  |      | 17      | %           |  |             | 18      | % |  | (2) pts |     | (1) pts.
|                                                   | Joliet(a)(b)(c)                                                     |  |                          | 27      | %                     |  |      | 27      | %           |  |             | 19      | % |  | 0 pts   |     | 8 pts.  
|                                                   | Consolidated                                                        |  |                          | 34      | %                     |  |      | 16      | %           |  |             | 19      | % |  | 18 pts  |     | (3) pts.



|(a) |  | Empress Merger closed on December 1, 1999.                                                                                              
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Results for Joliet are through July 31, 2001, the date of sale to Argosy
Gaming Company.                                                
|   
|(c) |  | Before corporate allocations and other non-recurring items.                                                                             
|   
|(d) |  | Not meaningful.                                                                                                                         
|   
|(e) |  | Includes advertising and production costs of $2.0 million.                                                                              
|   
|(f) |  | The % Increase/(Decrease) for operating margin represents the absolute
difference in percentage points (pts.) between the two periods.

24



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##### Table of Contents



Years Ended December 31, 2001 and 2000

Consolidated casino revenues decreased 5% in the year ended December 31,
2001 as compared to the prior year, primarily as the result of the sale of
Joliet on July 31, 2001. 2001 results include only seven months of activity
from Joliet as compared to a full period in 2000. Excluding Joliet, the three
remaining properties averaged a 5% increase in gaming revenues, led by strong
volume increases in Hammond. Bossier City experienced a decrease in casino
revenues year over year due to the additional competition that entered that
market in December 2000. Tunica managed a 6% increase in gaming revenues in
what is considered a relatively flat market. Additional capacity in Tunica
afforded by the recent expansion which was completed in December 2000, and the
lack of construction disruption in 2001, allowed for a 5% increase in volume in
2001 as compared to 2000.

Operating income before corporate allocations and other non-recurring
items decreased in Bossier City, Tunica and Hammond in 2001 as compared to
2000. The most significant decrease occurred in Bossier City with a 34%
decline in operating income before corporate allocations and other
non-recurring items and a five percentage point reduction in operating margin.
Operating income before corporate allocations and non-recurring charges in
Tunica and Hammond decreased 1% and 3%, respectively, in 2001 as compared to
2000, with margins decreasing at both properties by two percentage points.

While experiencing a 4% decrease in net revenues, Bossier City incurred
significant marketing costs in order to combat the increased competition in
that market. In addition, the property was faced with a 37%, or $2.3 million,
increase in health care costs; a 1% increase in gaming taxes that was effective
April 1, 2001; and a $1.4 million sales tax assessment on progressive slot
machine royalty payments in 2001. Also in 2001, the property recorded
approximately $900,000 of expenses related to relicencing costs.

Increased health care costs in 2001 were most significant in Tunica, with
that property experiencing a 63%, or $3.3 million, increase. Also impacting
operating income and operating margins in Tunica in 2001 was the additional
overhead required to operate the expanded facility, including an additional
$5.5 million in depreciation and amortization expense related to the expansion.
The expansion has afforded Tunica the opportunity to maintain revenue growth
and market superiority, thus solidifying their leadership in that market.

In 2001, Hammond continued to invest significant resources towards
improving its level of customer service. While revenue continues to increase,
it has not yet offset the cost of this endeavor. In May 2001, the property
converted from the Empress to the Horseshoe brand, incurring approximately $4.1
million in pre-opening costs, including approximately $2.0 million of
advertising and production costs. In addition to the costs associated with the
ongoing improvements to the operating and service standards in Hammond, the
property experienced a 48%, or $2.6 million, increase in health care costs in
2001 as compared to 2000.

As a result of the sale of Joliet and the subsequent pay-down of debt, the
Company recorded a gain of $165.5 million and an extraordinary loss of $6.9
million related to the sale of Joliet and the loss on early retirement of debt,
respectively, in 2001.

Corporate expenses decreased $15.5 million in 2001 as compared to 2000.
The prior year includes a number of items that did not recur in 2001. These
include additional legal and professional fees incurred in 2000 related to the
regulatory challenges in Illinois; charges related to the relocation of its
corporate headquarters to Illinois; and a $6.0 million payment to the MBE

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Incubator Fund, Inc. (Incubator Fund). In addition, the prior year
includes an additional $2.0 million for benefits and severance related to
certain current and former executives. Also in 2000, the monthly consulting
payments with the former owners of Joliet, amounting to $4.0 million annually,
was included in corporate expense. In 2001, only $2.3 million was included in
corporate expense due to the sale of Joliet on July 31, 2001. The present
value of the remaining liability was accrued and charged against the gain on
sale of Joliet.

Depreciation and amortization expense decreased 18% in 2001 as compared to
2000. This is primarily the result of ceasing to depreciate and amortize
Joliet assets once Joliet became an asset held for sale on February 1, 2001,
partially offset by increased depreciation due to the expansions in Tunica and
Hammond.

Net interest expense decreased 18% in 2001 as compared to 2000 due to
reduced debt outstanding. Proceeds from the sale of Joliet have been used to
retire $288.7 million of debt since July 31, 2001.

Years Ended December 31, 2000 and 1999

A 97% increase in consolidated casino revenues for the year ended December 31, 2000 over the prior year was primarily the result of having only one month
of revenues from Hammond and Joliet in 1999. Casino revenues at Bossier City
and Tunica increased an average of 8% in the year 2000 over 1999 with slot
volume being the primary driver of those increases. Contributing to the
increase in slot volumes in Bossier City in 2000 was the addition of 200 slot
machines to the gaming floor upon the closure of the poker room in the first
quarter of 2000. Offsetting the increased slot volumes was a slight decrease in
the table game hold percentage at both Bossier City and Tunica year over year.
In addition, construction disruption in 2000 affected revenues in Tunica.

Food and beverage revenue at Bossier City and Tunica increased 5% in 2000
over 1999. This increase in food and beverage revenue has a direct correlation
with the increase in slot volumes experienced in 2000.

Consolidated hotel revenues decreased 4% in 2000 in spite of the
additional revenues from the Joliet hotel for a full year in 2000 as opposed to
one month in 1999. Hotel revenue in Bossier City decreased 15% in 2000 from
1999 primarily due to a reduction in the direct mail programs that were in
effect in the prior year. In addition, hotel revenues in Bossier City were
adversely impacted by the sale of an off-site hotel in the first half of 2000.

Operating income on a consolidated basis increased 65% in the year ended
December 31, 2000 as compared to the year ended December 31, 1999 primarily
related to the positive impact of the Empress Merger. Operating margins at
Bossier City and Tunica, excluding corporate allocations and other
non-recurring items, were flat year over year in Bossier City and increased one
percentage point in Tunica in 2000 as a result of the increase in net revenues.
Bossier City and Tunica experienced increases in gaming taxes and payroll as a
result of the increased revenues in 2000. Competitive pressures in all of the
Companys markets have impacted margins due to increases in payroll, marketing
efforts and direct mail offers. Consolidated operating margins were also
impacted in 2000 by additional expenditures necessary to increase the operating
and service standards in Hammond and Joliet to a level more consistent with the
Companys expectations.

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During 2000, the Company sold a riverboat and related equipment not
currently used, which had been written down in both 1998 and 1999 by $23.2
million, resulting in a gain on sale of $2.1 million.

Corporate expenses increased $30.0 million during the year 2000 as
compared to 1999. During 2000, the Company relocated its corporate headquarters
and doubled the size of the corporate staff in order to build the corporate
infrastructure required to accommodate the Empress Merger. Legal and
professional fees increased approximately $5.4 million primarily related to
regulatory matters in Illinois, $4.0 million was paid related to a consulting
agreement with Empress and $6.0 million of contributions were made to the
Incubator Fund. The main purpose of the Incubator Fund is to assist and foster
minority owned business enterprises in Illinois, Indiana, Louisiana and
Mississippi, which provide goods and services to the casino industry. In
addition, approximately $3.1 million was incurred for benefits and severance
related to certain current and former executives.

Deferred compensation expense increased approximately $7.9 million in 2000
over 1999. Deferred compensation expense is recorded based on the change in the
fair market value of redeemable ownership interests and stock appreciation
rights issued and the vesting schedule pursuant to these agreements.

During 2000, the Company recorded an additional $19.8 million in
acquisition related expenses as compared to 1999, primarily related to
depreciation and amortization expenses associated with the Empress Merger. On a
consolidated basis, depreciation and amortization expense increased 95% in 2000
over 1999, primarily attributable to both depreciation of the two new
properties and the amortization of goodwill associated with the Empress Merger.

Net interest expense, increased $42.9 million, or 80%, in 2000 over 1999.
This is the direct result of additional borrowings made in late 1999 to fund
the Empress Merger and to extinguish approximately $128.6 million in higher
interest debt. During 1999, the Company recorded an extraordinary loss of
approximately $9.7 million related to this early retirement of debt. During
2000, the Company recorded $1.0 million in capitalized interest related to the
expansion of the Tunica casino. Only $8,000 of capitalized interest was
recorded in 1999.

Liquidity and Capital Resources

Net cash provided by operating activities was $138.1 million, $151.1
million and $118.1 million for the years ended December 31, 2001, 2000 and
1999, respectively.

Net cash provided by/(used in) investing activities was $370.6 million,
$(68.3) million and $(488.7) million, for the years ended December 31, 2001,
2000 and 1999, respectively. Cash flows from investing activities for 2001
include the net proceeds from the sale of Joliet while 1999 includes the
acquisition costs associated with the purchase of Hammond and Joliet.

Net cash (used in)/provided by financing activities was $(366.0) million,
$(122.9) million and $404.7 million for the years ended December 31, 2001, 2000
and 1999, respectively. The borrowings in 1999 were necessary to complete the
Empress Merger. During 2001, 2000 and 1999, $351.6 million, $293.1 million and
$236.9 million, respectively, was repaid on long-term debt.

On July 31, 2001, the Company sold Joliet to Argosy Gaming Company for
$465.0 million in cash. The net proceeds from the sale, net of a deficiency in
working capital and other

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transaction costs, were $442.7 million. An
additional $38.4 million in tax distributions related to the sale were made in
the third quarter of 2001. As further described below, a portion of the
remaining proceeds was used to retire a total of $288.7 million of debt in
2001.

As of December 31, 2001, the Company had outstanding debt consisting of
$159.0 million of 9.375% Senior Subordinated Notes (the 9.375% Notes) due
2007; $533.6 million of 8.625% Senior Subordinated Notes (the 8.625% Notes)
due 2009; and various other shareholder related debt approximating $47.0
million, with due dates through 2005. Pursuant to the terms of the Companys
debt agreements, upon the sale of Joliet the remaining proceeds, as defined,
were required to be offered to the bondholders (the Asset Sale Offer). As a
result, $940,000 of the 9.375% Notes and $65.0 million of the 8.625% Notes were
tendered in an Asset Sale Offer during 2001.

In 1999, the Company completed a $375.0 million Senior Secured Credit
Facility (the Credit Facility) with a group of banks. The Credit Facility
was comprised of a $250.0 million revolver and a $125.0 million term loan. In
2001, the Company amended its Credit Facility to allow, among other things, (i)
for the sale of Joliet and (ii) the reduction of its loan commitment to $150.0
million. The Credit Facility, as amended, is permanently reduced by $28.1
million on December 31, 2003 and $40.6 million per quarter beginning March 31,
2004. Upon the sale of Joliet, the Company repaid the $122.8 million that was
outstanding on the term loan and the $100.0 million that was outstanding on the
Revolver.

The Companys debt agreements contain covenants that, among other things,
(i) limit the amount of dividends the Company can pay to its stockholders; (ii)
limit the amount of additional indebtedness which may be incurred by the
Company and its subsidiaries; (iii) prohibit any consolidation or merger of the
Company or its subsidiaries with an affiliate or third party, any sale of
substantially all of the Company or its subsidiaries assets, or any payment of
subordinated indebtedness prior to its scheduled maturity; and (iv) limit the
amount of restricted payments, as defined, the Company may make.

The Company plans to spend approximately $40.0 million for capital
expenditures in 2002 including slot product upgrades and hotel room
renovations. In addition, upon final execution of the agreement with the City
of Hammond, as further discussed below, the Company is required to commence
construction of a parking garage on or before December 31, 2002.

The first call date on the 9.375% Notes is June 15, 2002. The Company is
currently evaluating whether or not to call the bonds on that date. If the
Company calls the bonds in June 2002, the cash required, including call
premium, would be approximately $166.5 million. Cash flow from operations,
existing cash balances and amounts available on the Credit Facility would be
sufficient to cover this expenditure.

As of December 31, 2001, the Company had $220.8 million of cash and cash
equivalents and $739.5 million of long term debt outstanding, of which $9.8
million was current, and $150.0 million of availability on the Credit Facility.
The Company has no off-balance sheet financing. The Company believes that cash
and cash equivalents on hand, cash from operations and available borrowing
capacity will be adequate to meet existing debt service obligations and capital
expenditure commitments for the next twelve months.

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Hammond Commitments

In February 2002, Hammond and the City of Hammond (the City) executed
the Fourth Amendment to the Hammond Riverboat Development Agreement (Fourth
Amendment). Pursuant to the Fourth Amendment, the City agreed to allow the
expansion of the Hammond facility, to include certain amenities including, but
not limited to, a hotel, pavilion entertainment venue and additional parking
facility. The Fourth Amendment also requires Hammond to begin construction of
an above ground parking garage before December 31, 2001. These new amenities
may be located in several areas adjacent to the existing operation on real
estate which is owned or controlled by the City and other local governmental
agencies (collectively the Lessors). The Lessors would lease such real estate
to Hammond for a period of approximately 67 years (Expansion Lease). The
Fourth Amendment also provided Hammond with a ten year option to lease
additional real estate in the Hammond marina for a term equal to the balance of
the Expansion Lease (Option).

The cost of the Expansion Lease, the Option and the lease rental rate for
the parcels covered by the Expansion Lease and the Option is $14.0 million plus
one dollar per year. Hammond paid the $14.0 million to the Lessors in two
installments during the fourth quarter of 2001 and the first quarter of 2002.
In addition, Hammond will pay a security deposit to the Lessors of $3.25
million during the first half of 2002. The Fourth Amendment also requires that
Hammond relocate the existing public boat launch ramp to a permanent location.

The Lessors have until April 30, 2002, to obtain all necessary approvals
and to execute the Fourth Amendment.

Additional Factors Affecting Future Operating Income

In 2001, the Louisiana legislature passed a bill that increased the gaming
taxes paid by riverboats in the Bossier City/Shreveport market, including the
Companys Bossier City property, by 3%. The increased tax is being phased in
through April 1, 2003. The first 1% increase was effective April 1, 2001. The
second 1% increase is effective April 1, 2002 and the final increase will occur
on April 1, 2003.

Ownership Repurchase Matters

During 2001, the Company purchased redeemable ownership interests of 1.1%
of the Company for $8.0 million of notes payable. As of December 31, 2001, the
Companys remaining obligation under these purchases was $7.4 million.

During 2000, the Company purchased redeemable ownership interests of 1.5%
of the Company for $13.2 million of notes payable. Operating results for the
year ended December 31, 2000 includes an approximate $443,000 reduction in
deferred compensation expense resulting from the final valuation of these
ownership interests. As of December 31, 2001, the Companys remaining
obligation under these purchases was $9.8 million.

During 1999, the Company purchased redeemable ownership interests of 3.9%
of the Company for $23.6 million of notes payable. As of December 31, 2001,
the Companys remaining obligation under this purchase was $20.0 million.

During 1999, Horseshoe Gaming purchased redeemable ownership interests
from four current employees and five former employees representing a total of
8.5% of Horseshoe Gaming for $44.3 million. Operating results for the year
ended December 31, 1999 includes a $2.9

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million reduction in deferred
compensation expense resulting from the final valuation of these ownership
interests. As of December 31, 2001, the Companys remaining obligation under
these purchases was $9.7 million.

In January 1999, Horseshoe Gaming repurchased outstanding warrants held by
a third party which entitled such third party to purchase an approximate 6.99%
ownership interest in Horseshoe Gaming from its largest stockholder, Horseshoe
Gaming, Inc. (HGI), for an exercise price of $510,000. Upon acquisition,
Horseshoe Gaming exercised the warrants and retired the membership units
acquired from HGI. The total cost of the warrants, including fees, expenses
and the exercise price paid to HGI, was approximately $34.4 million, which was
recorded as a reduction in members equity in the first quarter of 1999.

In April 1999, the Company exercised an option to acquire the remaining
8.08% limited partnership interest in Bossier City not held by New Gaming
Capital Partnership for total consideration of $30.6 million, which included
payments for a non-compete covenant, consents and a release of claims. The
consideration for the repurchase consisted of $2.1 million cash, offsets
against the negative capital account balances of the former limited partners
and payables amounting to $26.0 million. In May 2001, the former limited
partners and the Company executed a second two-year covenant not to compete for
$7.9 million. As of December 31, 2001, the remaining amount to be paid to
these limited partners totaled $3.2 million and is included in accrued expenses
and other in the accompanying consolidated balance sheets. Included in other
assets in the accompanying consolidated balance sheets at December 31, 2001 and
2000 are notes receivable from the former limited partners totaling $1.8
million and $5.7 million, respectively.

Critical Accounting Policies

The Companys discussion and analysis of its financial condition and
results of operations are based upon the Companys consolidated financial
statements, which have been prepared in conformity with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgements that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to customer programs
and incentives, bad debts, impairment of goodwill, self insurance reserves, and
contingencies and litigation. The Company bases its estimates on historical
experience, observance of trends in the industry and on various other
assumptions that are believed to be reasonable under the circumstances. There
can be no assurance that actual results will not differ from our estimates.

Recently Issued Accounting Pronouncements

In January 2001, the Emerging Issues Task Force of the Financial
Accounting Standards Board (FASB) reached a consensus on Issue 3 of Issue
00-22 (EITF 00-22), Accounting for Points and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or Services
to Be Delivered in the Future. EITF 00-22 requires that the cash value of
points awarded under slot club programs (Points) be recorded as a reduction
of revenue. The Company had historically classified Points as operating
expenses. In accordance with the transition rules, the Company adopted EITF
00-22 in the first quarter of 2001 and now includes Points as promotional
allowances and other in the accompanying consolidated statements of operations
for all periods presented. The adoption of EITF 00-22 had no effect on the
Companys operating income.

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In June 2001, the FASB issued Statements of Financial Accounting Standards
No. 142 Goodwill and Other Intangible Assets (SFAS 142). This pronouncement
changes the accounting for goodwill and intangible assets. SFAS 142 states
that goodwill and indefinite-lived intangible assets are no longer amortized
but are reviewed for impairment annually (or more frequently if impairment
indicators arise). Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their useful lives. The
amortization provisions of SFAS 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, companies are required to adopt the
pronouncement in their fiscal year beginning after December 15, 2001. As of
January 1, 2002, the Company had unamortized goodwill and intangibles of $261.3
million that will be subject to the provisions of SFAS 142. The Company
amortized $12.3 million, $20.7 million and $3.6 million of goodwill in the
twelve months ended December 31, 2001, 2000 and 1999, respectively. The Company
is currently evaluating the provisions of SFAS 142 and the impact that adoption
will have on the Companys financial position and results of operations. While
the impairment tests have not yet been completed, it is possible that an
impairment charge will be necessary for Hammond. Such a charge, if necessary,
would likely be reported in the first quarter of 2002 as a change in accounting
principle.

Also in June 2001, the FASB issued SFAS No. 143 Accounting for Asset
Retirement Obligations (SFAS 143). SFAS 143 requires the recognition of
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or the normal
operation of the long-lived asset, as well as the disclosure of certain
information related to asset retirement obligations. Companies are required to
adopt the provisions of SFAS 143 as of the beginning of the entitys fiscal
year beginning after June 15, 2002. The Company is currently evaluating the
provisions of SFAS 143 and the impact that adoption will have on the Companys
financial position and results of operations.

In August 2001, the FASB issued SFAS No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144). This statement
establishes a single accounting model, based on the framework established by
SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, for long-lived assets to be disposed of
by sale. SFAS 144 must be adopted for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Company does not
anticipate that the adoption of SFAS 144 will materially impact the Companys
financial position or results of operations.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The Companys exposure to market risk is changes in its interest rate risk
associated with long term debt. To date, the Company has not held or issued
derivative financial instruments for trading purposes, and the Company does not
enter into derivative transactions that would be considered speculative
positions. For debt obligations, the table below presents principal cash flows
and related weighted average interest rates by expected maturity dates.

|                   |                          |   |                        |       |      |   |        |        |      |   |        |       |            |   |       |       |                |   |   |       |   |   |         |       |   |   |         |  |  |   |         |  | 
|------------------ | ------------------------ | - | ---------------------- | ----- | ---- | - | ------ | ------ | ---- | - | ------ | ----- | ---------- | - | ----- | ----- | -------------- | - | - | ----- | - | - | ------- | ----- | - | - | ------- |  |  | - | ------- |  | 
|                   |                          |   | Maturity Date         
|                   |                          |   | (dollars in thousands)
|                   |                          |   |                       
|                   |                          |   | 2002                   |       | 2003 |   | 2004   |        | 2005 |   | 2006   |       | Thereafter |   | Total |       | Fair Value (1)
|                   |                          |   |                        |       |      |   |        |        |      |   |        |       |            |   |       |       |               
|Fixed rate debt    |                          | $ | 850                    |       |      | $ | 18,847 |        |      | $ | 14,553 |       |            | $ | 3,749 |       |                | $ |  |       |   | $ | 692,550 |       |   | $ | 730,549 |  |  | $ | 763,622 | 
|                   | Average interest rate    |   |                        | 8.000 | %    |   |        | 11.337 | %    |   |        | 9.614 | %          |   |       | 9.000 | %              |   |   | 0.000 | % |   |         | 8.797 | % |   |         |  |  |   |         |  | 
|Variable rate debt |                          | $ | 8,972                  |       |      | $ |       |        |      | $ |       |       |            | $ |      |       |                | $ |  |       |   | $ |        |       |   | $ | 8,972   |  |  | $ | 8,972   | 
|                   | Average interest rate(2) |   |                        | 4.750 | %    |   |        | 0.000  | %    |   |        | 0.000 | %          |   |       | 0.000 | %              |   |   | 0.000 | % |   |         | 0.000 | % |   |         |  |  |   |         |  | 



|(1) |  | The fair values are based on the borrowing rates currently available for
debt instruments with similar terms and maturities and market quotes of
the Companys publicly traded debt.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The average interest rates were based on December 31, 2001 variable
rates. Actual rates in future periods could vary.                                                               




Item 8. Financial Statements and Supplementary Data.

See the Index to Consolidated Financial Statements and the Index to
Financial Statement Schedules included at Item 14. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K.




Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

None.

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PART III




Item 10. Directors and Executive Officers of the Registrant.

The following table sets forth information concerning the Company
executive officers, directors and other key personnel.

|                      |  |     |    |          |  |                                                                          
|--------------------- |  | --- | -- | -------- |  | -------------------------------------------------------------------------
|                      |  | Age |    | Position
|                      |  |     |    |         
|Jack B. Binion        |  |     | 65 |          |  | Chairman of the Board of Directors, Chief
Executive Officer and Secretary
|Peri N. Howard        |  |     | 41 |          |  | Vice Chairperson of the Board of Directors                               
|Leslie L. Kenny       |  |     | 46 |          |  | Director                                                                 
|Roger P. Wagner       |  |     | 54 |          |  | President and Chief Operating Officer                                    
|Kirk C. Saylor        |  |     | 45 |          |  | Senior Vice President  Treasurer and Chief
Financial Officer            
|Dominic F. Polizzotto |  |     | 36 |          |  | Senior Vice President  General Counsel                                  
|David S. Carroll      |  |     | 47 |          |  | Senior Vice President  Human Resources                                  
|Floyd B. Hannon       |  |     | 60 |          |  | Senior Vice President  Government Affairs                               
|Jon C. Wolfe          |  |     | 34 |          |  | Senior Vice President  Chief Information Officer                        
|J. Lawrence Lepinski  |  |     | 55 |          |  | General Manager of Horseshoe Bossier City                                
|Robert McQueen        |  |     | 48 |          |  | General Manager of Horseshoe Tunica                                      
|Ricky S. Mazer        |  |     | 47 |          |  | General Manager of Horseshoe Hammond                                     

Mr. Binion has served as Chairman of the Board, Chief Executive Officer
and Secretary of the Company since its formation in April 1999. From December
1992 to April 1999, Mr. Binion served as the Chief Executive Officer of various
entities including Horseshoe Gaming, Inc. (HGI), which was the former
managing member of Horseshoe Gaming, LLC, the predecessor in interest to the
Company, and Horseshoe GP, Inc., a wholly owned subsidiary of Horseshoe Gaming,
LLC, which acted as the general partner of RPG and as the general partner of
New Gaming Capital Partnership, which acted as the general partner of Horseshoe
Entertainment. From 1964 to July 1998, Mr. Binion was the President and Chief
Executive Officer of the Horseshoe Club Operating Company, which owns and
operates Binions Horseshoe Casino in Las Vegas, Nevada, which is not
affiliated with the Company.

Ms. Howard has been the Companys Vice Chairperson of the board of
directors since its inception in April 1999 and previously served as a director
of HGI since January 1997. Ms. Howard has served in various capacities with
Horseshoe Tunica since 1995. Ms. Howard is the daughter of Mr. Binions wife.

Ms. Kenny has been one of the Companys directors since its inception in
April 1999 and previously served as director of HGI since September 1998. Ms.
Kenny has been self-employed as a manicurist since 1983. Ms. Kenny is the
daughter of Mr. Binions wife.

Mr. Wagner has been the Companys President and Chief Operating Officer
since January 1, 2001. Prior thereto, he served as Senior Vice President and
Chief Operating Officer since the Companys formation in April 1999. Prior
thereto, he served as Senior Vice President and Chief Operating Officer of HGI
since November 1998. From October 1996 to March 1998, Mr. Wagner served as
President of the development company for Trump Hotel and Casino Resorts in
Atlantic City, New Jersey.

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Mr. Saylor has been the Companys Senior Vice President and Chief
Financial Officer since the Companys formation in April 1999. Prior thereto,
he served as Vice President and Chief Accounting Officer of HGI since November
1998. He has also served as HGIs Chief Financial Officer since August 1,
1998. From November 1995 to November 1998, Mr. Saylor served as HGIs
Corporate Controller.

Mr. Polizzotto has been the Companys Senior Vice President  General
Counsel since January 2001. Prior thereto he was a partner in the law firm of
Ice Miller in Indianapolis, Indiana since August 1990.

Mr. Carroll has been the Companys Senior Vice President  Human Resources
since the Companys formation in April 1999. Prior thereto, he served in the
same capacity with HGI since November 1998. From August 1997 to November 1998,
Mr. Carroll was Vice President  Human Resources of HGI. From September 1993
to November 1998, Mr. Carroll was Director of Human Resources for Harrahs
Casino in Shreveport, Louisiana.

Mr. Hannon has been the Companys Senior Vice President  Government
Affairs since the Companys formation in April 1999. Prior thereto, he served
in the same capacity with HGI since July 1999. From November 1993 to June
1999, Mr. Hannon served as Deputy Director of the Indiana Gaming Commission.

Mr. Wolfe has been the Companys Senior Vice President  Chief Information
Officer since October 2000. Prior thereto, Mr. Wolfe served as the Companys
Vice President  Chief Information Officer since the Companys formation in
April 1999. Prior thereto, he served in the same capacity with HGI since
October 1998. From October 1995 to October 1998, Mr. Wolfe was Director of
Information Systems for HGI.

Mr. Lepinski has been General Manager of the Horseshoe Bossier City since
September 1995.

Mr. McQueen has been General Manager of the Horseshoe Tunica since July
1996.

Mr. Mazer has been General Manager of the Horseshoe Hammond (formerly
Empress Hammond) since February 1996.




Item 11. Executive Compensation.

The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the four most highly compensated
executive officers (the Named Executive Officers) for the years ended
December 31, 2001, 2000 and 1999:

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Summary Compensation Table
(dollars in thousands)

|                         |                         |      |      |        |  |       |                     |                  |                       |              |           |       |  |  |              |       |  |   |       |       | 
|------------------------ | ----------------------- | ---- | ---- | ------ |  | ----- | ------------------- | ---------------- | --------------------- | ------------ | --------- | ----- |  |  | ------------ | ----- |  | - | ----- | ----- | 
|                         |                         |      |      |        |  |       |                     |                  |                       |              |           |       |  |  | Long-Term    |       |  |   |      
|                         |                         |      |      |        |  |       |                     |                  |                       |              |           |       |  |  | Compensation |       |  |   |      
|                         |                         |      |      |        |  |       | Annual Compensation |                  |                       |              |           |       | 
|                         |                         |      |      |        |  |       |                     |                  | Securities Underlying |              | All Other
|Name                     |                         | Year |      | Salary |  | Bonus |                     | Options/SARS (#) |                       | Compensation
|                         |                         |      |      |        |  |       |                     |                  |                       |             
|Jack B. Binion(1)        |                         |      | 2001 |        |  | $     | 1,000.0             |                  |                       |              |          |       |  |  |             |       |  | $ | 199.4 |      
|                         | Chairman of the Board   |      |      | 2000   |  |       | $                   | 1,000.0          |                       |              |           |      |  |  |              |      |  |   | $     | 179.8 | 
|                         | CEO and Secretary       |      |      | 1999   |  |       | $                   | 1,000.0          |                       |              |           |      |  |  |              |      |  |   | $     | 145.0 | 
|                        
|                        
|                        
|Roger P. Wagner(2)       |                         |      | 2001 |        |  | $     | 500.0               |                  |                       |              | 250.0     |       |  |  | 91.35        |       |  | $ | 100.7 |      
|                         | President  Chief       |      |      | 2000   |  |       | $                   | 295.8            |                       |              |           | 146.2 |  |  |              | 18.35 |  |   | $     | 107.0 | 
|                         | Operating Officer       |      |      | 1999   |  |       | $                   | 250.0            |                       |              |           | 125.0 |  |  |              | 18.30 |  |   | $     | 9.3   | 
|                        
|                        
|                        
|Kirk C. Saylor(3)        |                         |      | 2001 |        |  | $     | 270.0               |                  |                       |              | 135.0     |       |  |  | 57.75        |       |  | $ | 61.9  |      
|                         | Senior Vice President   |      |      | 2000   |  |       | $                   | 250.0            |                       |              |           | 123.5 |  |  |              | 18.35 |  |   | $     | 144.2 | 
|                         | Chief Financial Officer |      |      | 1999   |  |       | $                   | 222.4            |                       |              |           | 112.5 |  |  |              | 16.47 |  |   | $     | 11.3  | 
|                        
|                        
|                        
|Dominic F. Polizzotto(4) |                         |      | 2001 |        |  | $     | 270.0               |                  |                       |              | 191.2     |       |  |  | 89.83        |       |  | $ | 179.3 |      
|                         | Senior Vice President   |      |      | 2000   |  |       |                     |                 |                       |              |           |      |  |  |              |      |  |   |       |      | 
|                         | General Counsel         |      |      | 1999   |  |       |                     |                 |                       |              |           |      |  |  |              |      |  |   |       |      | 
|                        
|                        
|                        
|Floyd B. Hannon(5)       |                         |      | 2001 |        |  | $     | 267.5               |                  |                       |              | 133.8     |       |  |  | 57.45        |       |  | $ | 67.7  |      
|                         | Senior Vice President   |      |      | 2000   |  |       | $                   | 250.0            |                       |              |           | 123.5 |  |  |              | 18.35 |  |   | $     | 71.1  | 
|                         | Government Affairs      |      |      | 1999   |  |       | $                   | 125.0            |                       |              |           | 125.0 |  |  |              | 18.51 |  |   | $     | 0.8   | 



|(1) |  | All other compensation includes premiums on insurance policies of
$199,394, $179,767 and $144,960 for 2001, 2000 and 1999, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | All other compensation includes premiums on insurance policies of
$18,380, $6,370 and $4,452 for 2001, 2000 and 1999, respectively, payments
for health club membership amounting to $519 for 2001, employer match on
401(k) plan of $6,188, $4,932, and $4,800 for 2001, 2000 and 1999,
respectively, $75,592 in below market stock options issued in 2001 and
relocation payments made to, and on behalf of, Mr. Wagner amounting to
$95,697 for 2000. In the event there is a change in control, Mr. Wagner
is entitled to 2.99 times his most recent salary and bonus. Included in
the Long-Term Compensation column for 2001 are 36.50 options/SARs and
18.35 options/SARs originally issued on January 1, 2001 and 2000,
respectively. The exercise price on these options/SARs was adjusted
downward by 25% in 2001 due to the sale of Joliet. The sale prompted this
adjustment in order to more accurately set the exercise price of the
options/SARs to an amount more consistent with a pricing that would have
occurred if the Company had not owned Joliet when the options/SARs were
issued.   
|   
|(3) |  | All other compensation includes premiums on insurance policies of
$13,524, $10,914 and $7,684 for 2001, 2000 and 1999, respectively,
payments for health club membership amounting to $755 for 2001, employer
match on 401(k) plan of $6,800, $6,800, and $3,574 for 2001, 2000, and
1999, respectively, $40,799 in below market stock options issued in 2001
and relocation payments made to, and on behalf of, Mr. Saylor amounting to
$126,518 for 2000. In the event there is a change in control, Mr. Saylor
is entitled to 2.99 times his most recent salary and bonus. Included in
the Long-Term Compensation column for 2001 are 19.70 options/SARs and
18.35 options/SARs originally issued on January 1, 2001 and 2000,
respectively. The exercise price on these options/SARs was adjusted
downward by 25% in 2001 due to the sale of Joliet. The sale prompted this
adjustment in order to more accurately set the exercise price of the
options/SARs to an amount more consistent with a pricing that would have
occurred if the Company had not owned Joliet when the options/SARs were
issued.
|   
|(4) |  | All other compensation includes premiums on insurance policies of $4,149,
payments for health club membership of $570, employer match on 401(k) plan
of $6,800, $117,385 in below market stock options issued and relocation
payments made to, and on behalf of, Mr. Polizzotto amounting to $50,365
for 2001. Mr. Polizzottos employment agreement also requires a bonus in
the amount of $56,204 payable on each January 1, 2001, 2002 and 2003. In
the event there is a change in control, Mr. Polizzotto is entitled to 2.99
times his most recent salary and bonus. Included in the Long-Term
Compensation column for 2001 are 38.05 options/SARs originally issued on
January 1, 2001, that were repriced on November 26, 2001. The                                                                                                                                                                                                                                                                                                                                                                   

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|    |  | exercise price on these options/SARs was adjusted downward by 25% in 2001 due to
the sale of Joliet. The sale prompted this adjustment in order to more
accurately set the exercise price of the options/SARs to an amount more
consistent with a pricing that would have occurred if the Company had not
owned Joliet when the options/SARs were issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(5) |  | All other compensation includes premiums on insurance policies of
$11,766, $11,090 and $750 for 2001, 2000 and 1999, respectively, employer
match on 401(k) plan of $6,800 and $3,816 for 2001 and 2000, respectively,
$40,488 in below market stock options issued in 2001, relocation payments
made to, and on behalf of, Mr. Hannon amounting to $42,363 for 2000 and
use of Company automobile amounting to $8,634 and $13,840 for 2001 and
2000, respectively. In the event there is a change in control, Mr. Hannon
is entitled to 2.99 times his most recent salary and bonus. Included in
the Long-Term Compensation column for 2001 are 19.55 options/SARs and
18.35 options/SARs originally issued on January 1, 2001 and 2000,
respectively. The exercise price on these options/SARs was adjusted
downward by 25% in 2001 due to the sale of Joliet. The sale prompted this
adjustment in order to more accurately set the exercise price of the
options/SARs to an amount more consistent with a pricing that would have
occurred if the Company had not owned Joliet when the options/SARs were
issued.

No other annual compensation or long-term incentive plan payouts were paid
during the year ended December 31, 2001.

The following table sets forth certain information regarding grants of
stock options made to the Named Executive Officers during 2001, including
information as to the potential realizable value of such options at assumed
annual rates of stock price appreciation for the remaining option terms.

Option/SAR Grants in Last Fiscal Year
(dollars in thousands)

|                      |  |              |       |                |  |                   |      |            |  |    |      |                      |  |                        |          |  |  |   |    |  |  |   |     |  |  |   |     | 
|--------------------- |  | ------------ | ----- | -------------- |  | ----------------- | ---- | ---------- |  | -- | ---- | -------------------- |  | ---------------------- | -------- |  |  | - | -- |  |  | - | --- |  |  | - | --- | 
|                      |  |              |       |                |  | Individual
Grants |      |            |  |    |      | Potential
Realizable | 
|                      |  |              |       |                |  |                   |      |            |  |    |      | Value
at Assumed     | 
|                      |  | Number of    |       | Percent of     |  |                   |      |            |  |    |      |                      |  | Annual Rates
of Stock  |         
|                      |  | Securities   |       | Total
Options/ |  |                   |      |            |  |    |      |                      |  | Price
Appreciation for |         
|                      |  | Underlying   |       | SARs
Granted   |  | Exercise          |      |            |  |    |      | Option/SAR
Term (1)  | 
|                      |  | Options/SARs |       | To
Employees   |  | Or
Base           |      | Expiration |  |    |     
|Name                  |  | Granted
(2)  |       | in
2001        |  | Price
($/sh.)     |      | Date       |  | 0% |      | 5%                   |  |                        | 10%      | 
|                      |  |              |       |                |  |                   |      |            |  |    |      |                      |  |                        |          | 
|Jack B. Binion        |  |              |      |                |  |                   |     |            |  |    |     |                      |  |                        |         |  |  |   |   |  |  |   |    |  |  |   |    | 
|Roger
P. Wagner       |  |              | 36.50 |                |  |                   | 2.16 | %          |  | $  | 19.2 | (3)                  |  |                        | 1/1/2011 |  |  | $ |   |  |  | $ |    |  |  | $ |    | 
|                      |  |              | 18.35 |                |  |                   | 1.09 | %          |  | $  | 33.4 | (5)                  |  |                        | 1/1/2010 |  |  | $ |   |  |  | $ |    |  |  | $ | 43  | 
|                      |  |              | 36.50 |                |  |                   | 2.16 | %          |  | $  | 14.4 | (5)                  |  |                        | 1/1/2011 |  |  | $ | 76 |  |  | $ | 412 |  |  | $ | 907 | 
|                     
|                     
|                     
|Kirk
C. Saylor        |  |              | 19.70 |                |  |                   | 1.17 | %          |  | $  | 19.2 | (3)                  |  |                        | 1/1/2011 |  |  | $ |   |  |  | $ |    |  |  | $ |    | 
|                      |  |              | 18.35 |                |  |                   | 1.09 | %          |  | $  | 33.4 | (5)                  |  |                        | 1/1/2010 |  |  | $ |   |  |  | $ |    |  |  | $ | 43  | 
|                      |  |              | 19.70 |                |  |                   | 1.17 | %          |  | $  | 14.4 | (5)                  |  |                        | 1/1/2011 |  |  | $ | 41 |  |  | $ | 222 |  |  | $ | 489 | 
|                     
|                     
|                     
|Dominic
F. Polizzotto |  |              | 19.70 |                |  |                   | 1.17 | %          |  | $  | 19.2 | (3)                  |  |                        | 1/1/2011 |  |  | $ |   |  |  | $ |    |  |  | $ |    | 
|                      |  |              | 13.73 |                |  |                   | 0.81 | %          |  | $  | 13.7 | (4)                  |  |                        | 1/1/2009 |  |  | $ | 77 |  |  | $ | 203 |  |  | $ | 379 | 
|                      |  |              | 18.35 |                |  |                   | 1.09 | %          |  | $  | 44.5 | (3)                  |  |                        | 1/1/2010 |  |  | $ |   |  |  | $ |    |  |  | $ |    | 
|                      |  |              | 19.70 |                |  |                   | 1.17 | %          |  | $  | 14.4 | (5)                  |  |                        | 1/1/2011 |  |  | $ | 41 |  |  | $ | 222 |  |  | $ | 489 | 
|                      |  |              | 18.35 |                |  |                   | 1.09 | %          |  | $  | 33.4 | (5)                  |  |                        | 1/1/2010 |  |  | $ |   |  |  | $ |    |  |  | $ | 43  | 
|                     
|                     
|                     
|Floyd
B. Hannon       |  |              | 19.55 |                |  |                   | 1.16 | %          |  | $  | 19.2 | (3)                  |  |                        | 1/1/2011 |  |  | $ |   |  |  | $ |    |  |  | $ |    | 
|                      |  |              | 18.35 |                |  |                   | 1.09 | %          |  | $  | 33.4 | (5)                  |  |                        | 1/1/2010 |  |  | $ |   |  |  | $ |    |  |  | $ | 43  | 
|                      |  |              | 19.55 |                |  |                   | 1.16 | %          |  | $  | 14.4 | (5)                  |  |                        | 1/1/2011 |  |  | $ | 41 |  |  | $ | 221 |  |  | $ | 486 | 



|(1) |  | The dollar amount under these columns are the result of calculations at
five percent and ten percent rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation. There is no assurance that the value realized by an officer
will be at or near the value estimated above.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(2) |  | Employees vest in the right to exercise these options/SARs over a
four-year period. Options/SARs are subject to certain conditions,
including compliance with terms and conditions of the options/SARs as
approved by the Company. The executive officers listed above received
tandem SARs in conjunction with the listed options. The tandem SARs have
substantially identical terms to the options.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | The exercise price on these
options/SARs were subsequently adjusted downward by 25%
during 2001 following the sale of Joliet. The options/SARs displaying the adjusted
exercise price are listed separately in this table, and the
options/SARs with the original exercise price are no longer outstanding.                                                                                           
|   
|(4) |  | These options/SARs were issued below market value. The market value on
date of grant was $19,238 per share.                                                                                                                                                                                                                                                                                           
|   
|(5) |  | The exercise price of these
options/SARs reflect a downward adjustment by 25% due to the sale of
Joliet.                                                                                                                                                                                                                                                                                              

The following table sets forth certain information concerning stock option
exercises during 2001 by the Named Executive Officers and information
concerning option values:

Aggregated Option/SAR Exercises in 2001 and December 31, 2001 Option/SAR Values
(dollars in thousands)

|                      |  |           |      |          |  |             |      |               |  |                         |      |                           |  |  |       |  |  |  |   |  |  |   |       | 
|--------------------- |  | --------- | ---- | -------- |  | ----------- | ---- | ------------- |  | ----------------------- | ---- | ------------------------- |  |  | ----- |  |  |  | - |  |  | - | ----- | 
|                      |  |           |      |          |  |             |      |               |  | Number of Securities    |      |                           |  |  |       |  |  | 
|                      |  |           |      |          |  |             |      |               |  | Underlying Unexercised  |      | Value of Unexercised,    
|                      |  |           |      |          |  |             |      |               |  | Options/SARs Held       |      | In-the-Money Options/SARs
|                      |  |           |      |          |  |             |      |               |  | at December 31, 2001(1) |      | at December 31, 2001(1)  
|                      |  | SARs      |      | Value    |  |             |      |              
|Name                  |  | Exercised |      | Realized |  | Exercisable |      | Unexercisable |  | Exercisable             |      | Unexercisable            
|                      |  |           |      |          |  |             |      |               |  |                         |      |                          
|Jack B. Binion        |  |           |     |          |  |             |     |               |  |                         |     |                           |  |  |      |  |  |  |  |  |  |   |      | 
|Roger P. Wagner       |  |           | 4.58 |          |  | $           | 62.5 |               |  |                         | 4.59 |                           |  |  | 59.41 |  |  |  |  |  |  | $ | 101.6 | 
|Kirk C. Saylor        |  |           | 4.12 |          |  | $           | 56.3 |               |  |                         | 4.59 |                           |  |  | 41.70 |  |  |  |  |  |  | $ | 64.2  | 
|Dominic F. Polizzotto |  |           | 4.53 |          |  | $           | 61.9 | (2)           |  |                         | 4.59 |                           |  |  | 42.66 |  |  |  |  |  |  | $ | 66.9  | 
|Floyd B. Hannon       |  |           | 4.63 |          |  | $           | 63.9 |               |  |                         | 4.59 |                           |  |  | 42.57 |  |  |  |  |  |  | $ | 68.2  | 



|(1) |  | Amount represents the difference between the aggregate exercise price of
unexercised options/SARs and a $16,501 per share price as determined by
the Company pursuant to the Equity Incentive Plan. The $16,501 per share
price represents the latest available fair market price as determined
pursuant to the plan.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Pursuant to Mr. Polizzottos Senior Executive Stock Appreciation Right
Agreement, payment was deferred on this exercise until January 1, 2002.                                                                                                                                                                       

Compensation of Directors; Compensation Committee Interlocks and Insider
Participation

The Bylaws of the Company provide for a six-member Board of Directors.
There are currently three directors. Directors serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified. Vacancies on the Board of Directors may be filled by a majority of
the remaining directors. The Chairman of the Board of Directors receives no
compensation for services on the Board, Peri N. Howard receives $350,000
annually and Leslie L. Kenny receives no compensation for services on the
board. Officers serve at the discretion of the Board. The Board has no
Compensation Committee.

Employment Agreements

Jack B. Binion has provided services pursuing, developing and managing
gaming operations for the Company and its subsidiaries. There is no existing
employment agreement providing for Mr. Binion to receive compensation for his
services in the future.

Roger P. Wagner is employed as the President and Chief Operating Officer
of the Company pursuant to an employment agreement with the Company that is
terminable for cause, as defined in the agreement, or without cause with the
payment of an amount equal to one year of base compensation plus pro-rata
bonus. Mr. Wagner collaborates with Senior Management of the Company to develop
operating objectives that will achieve the Companys profitability and
development goals. He directs and oversees Company operations at each casino
and assures that

37



---



##### Table of Contents



each operating division is properly organized, staffed, and
directed to fulfill its responsibilities in accordance with Company standards.
As of January 1, 2002, Mr. Wagner earns a base salary of five hundred fifty
thousand dollars ($550,000) and a discretionary bonus.

Kirk C. Saylor is employed as the Senior Vice President  Chief Financial
Officer for the Company pursuant to an employment agreement with the Company
that is terminable for cause, as defined in the agreement, or without cause
with the payment of an amount equal to one year of base compensation plus
pro-rata bonus. Mr. Saylor is responsible for overseeing the senior accounting
operations of the Companys facilities and assisting in the opening of any
casino and hotel facilities to be developed or acquired by subsidiaries or
affiliates of the Company. As of January 1, 2002, Mr. Saylor earns compensation
of three hundred thousand dollars ($300,000) per year base salary and a
discretionary bonus.

Dominic F. Polizzotto is employed as the Senior Vice President  General
Counsel for the Company pursuant to an employment agreement with the Company
that is terminable for cause, as defined in the agreement, or without cause
with the payment of an amount equal to one year of base compensation plus
pro-rata bonus. Mr. Polizzotto is responsible for overseeing all legal issues
for the Company and its subsidiaries, and developing compliance and risk
management systems. In addition, Mr. Polizzotto is in charge of investigating
new opportunities for expansion of the Companys operations. As of January 1,
2002, Mr. Polizzotto earns compensation of three hundred thousand dollars
($300,000) per year base salary and a discretionary bonus. His employment
agreement also includes a bonus of $56,204 payable on each January 1, 2001,
2002 and 2003.

Floyd P. Hannon is employed as the Senior Vice President  Government
Affairs for the Company pursuant to an employment agreement with the Company
that is terminable for cause, as defined in the agreement, or without cause
with the payment of an amount equal to one year of base compensation plus
pro-rata bonus. Mr. Hannon is responsible for overseeing all aspects of
governmental relations, regulatory compliance and assisting in the opening of
any casino and hotel facilities to be developed or acquired by subsidiaries or
affiliates of the Company. As of January 1, 2002, Mr. Hannon earns compensation
of three hundred thousand dollars ($300,000) per year base salary and a
discretionary bonus.




Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding beneficial
ownership of common stock in the Company, as of March 15, 2002, by each person
who is known by the Company to own beneficially more than 5% of the outstanding
shares, by each director of the Company, each of the executive officers and by
all directors and executive officers of the Company as a group.

|                                                |  |                  |        |                      |  |  |        |  
|----------------------------------------------- |  | ---------------- | ------ | -------------------- |  |  | ------ | -
|Name                                            |  | Number of Shares |        | Percentage of Shares
|                                                |  |                  |        |                     
|Jack B. Binion                                  |  |                  | 23,302 | (1)                  |  |  | 100.00 | %
|Phyllis M. Cope                                 |  |                  | 1,907  | (2)                  |  |  | 8.24   |  
|Leslie L. Kenny                                 |  |                  | 1,194  | (3)                  |  |  | 5.16   |  
|Peri N. Howard                                  |  |                  | 3,642  | (4)                  |  |  | 15.73  |  
|Scott Hamilton                                  |  |                  | 1,272  | (5)                  |  |  | 5.49   |  
|Wanda Parsons                                   |  |                  | 1,907  | (6)                  |  |  | 8.24   |  
|Directors and
executive officers
as a group(12) |  |                  | 23,302 | (7)                  |  |  | 100.00 |  

38



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##### Table of Contents



The address for each of the persons or entities listed above is c/o the
Company at 18454 S. West Creek Drive, Tinley Park, IL 60477. Unless otherwise
indicated, the shares described below are shares of Class A Common Stock.



|(1) |  | Includes 9,779 shares of Class B Common Stock held by Mr. Binion as an
individual of which he has sole voting and investment power. These shares have
a preferential vote such that each share of Class B Common Stock has a vote
equivalent to five shares of Class A Common Stock. Except as
otherwise required by applicable law, the Class A Common Stock
and the Class B Common Stock vote together as one class. Mr. Binion has shared
voting power over the remaining 13,523 shares of Class A Common Stock
beneficially owned by him, which include; (a) the 1,907 shares owned by Phyllis
M. Cope; (b) the 3,642 shares owned by Peri N. Howard including 16 shares
subject to options that are currently exercisable or will become exercisable
within 60 days; (c) the 1,194 shares owned by Leslie L. Kenney; (d) the 1,272
shares owned by Scott Hamilton; (e) the 1,907 shares owned by Wanda Parsons;
(f) the 1,645 shares held by members of Mr. Binions family or trusts for the
benefit of members of Mr. Binions family; and (g) the 1,956 shares, including
141 shares subject to options that are currently exercisable or will become
exercisable within 60 days, which are held by other individuals. Mr. Binion
shares voting power of such shares pursuant to a Stockholders Agreement dated
as of April 29, 1999 among all shareholders of Horseshoe. Holders of options must
enter into the Stockholders Agreement before they receive shares of options
which they have exercised. Mr. Binion expressly disclaims beneficial ownership
of the 13,523 shares not held by him individually.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes 954 shares held by Phyllis M. Cope, as Trustee of the Ted J.
Fechser Trust, and 953 shares held by Phyllis M. Cope, as Trustee of the Fancy
Ann Fechser Trust. Phyllis M. Cope has sole investment
power over these shares and shares voting power over these shares with Mr.
Binion; however, she expressly disclaims beneficial ownership of any shares
held by her as trustee of such trusts, which are trusts established for the
benefit of certain members of the families of Mr. Binion or Phyllis M. Cope,
for purposes of Sections 13(d) and 13(g) of the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(3) |  | Includes 1,194 shares held by Leslie L. Kenny individually of which
she has sole investment power and shares voting power over these
shares with Mr. Binion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(4) |  | Includes 275 shares held by Peri N. Howard, as Trustee of the Ted J.
Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of the Fancy Ann
Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of the James
Christopher Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of the
Robert Daniel Fechser Trust, 275 shares held by Peri N. Howard, as Trustee of
the Katie ONeill Trust, 275 shares held by Peri N. Howard, as Trustee of the
Kellie ONeill Trust, 275 shares held by Peri N. Howard, as Trustee of the
Rachel Fechser Trust 275 shares held by Peri N. Howard, as Trustee of the Ben
E. Johnson Trust, 55 shares held by Peri N. Howard, as Trustee of the Bonnie
Binion Trust, and 55 shares held by Peri N. Howard, as Trustee of the Benny
Behnen Trust; 55 shares held by Peri N. Howard, as Trustee of the Jack Behnen
Trust, 1,261 shares held by Peri N. Howard as an individual and 16 shares
subject to options that are currently exercisable or will become exercisable
within 60 days. Peri N. Howard has sole investment power over these shares and
shares voting power over these shares with Mr. Binion; however, she expressly
disclaims beneficial ownership of any shares held by her as trustee of such
trusts, which are trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and
13(g) of the Exchange Act.                                                                                                                                                         
|   
|(5) |  | Includes 636 shares held by Scott Hamilton, as Trustee of the James C.
Fechser Trust, and 636 shares held by Scott Hamilton, as Trustee of the Rachel
Fechser Trust. Scott Hamilton has sole investment power over these shares and
shares voting power over these shares with Mr. Binion; however, he expressly
disclaims beneficial ownership of any shares held by him as trustee of such
trusts, which are trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and
13(g) of the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(6) |  | Includes 954 shares held by Wanda Parsons, as Trustee of the Katie ONeill
Trust, and 953 shares held by Wanda Parsons, as Trustee of the Kellie ONeill
Trust. Wanda Parsons has sole investment power over these shares and shares
voting power over these shares with Mr. Binion; however, she expressly
disclaims beneficial ownership of any shares held by her as trustee of such
trusts, which are trusts established for the benefit of certain members of the
families of Mr. Binion or Phyllis M. Cope, for purposes of Sections 13(d) and
13(g) of the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(7) |  | Includes 157 shares subject to options that are currently exercisable or
will become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

39



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##### Table of Contents






Item 13. Certain Relationships and Related Transactions.

A current owner, through an entity he owns, provides certain financial
consulting services to the Company. Amounts paid to this company for fees
totaled $350,000, $300,000 and $125,000 for the years ended December 31, 2001,
2000 and 1999, respectively. In addition, this entity received fees from
various investment banking firms related to transactions involving the sale of
Joliet and the placement of the Companys Credit Facility and 8.625% Notes.
These fees totaled $1.7 million, $222,000 and $1.8 million in 2001, 2000 and
1999, respectively.

The Company and Walter Haybert, the former Chief Financial Officer of the
Company, are parties to an agreement whereby the Company paid Mr. Haybert
$150,000 per year for each of 1999 and 2000 as advances against the purchase
price for his interest in the Company. The Company purchased Mr. Hayberts
interest in the Company in April 2000 for a total purchase price of $5.1
million. The purchase agreement required a down payment of $1.0 million in
cash with the remainder payable by a note due in April 2003. The note requires
quarterly interest payments at 9% of the outstanding principal amount.

The Company and G.A. Robinson III, a current owner of the Company, are
parties to an agreement whereby the Company agreed to purchase Mr. Robinsons
ownership interest at a price to be determined later, if and when Mr. Robinson
decides to sell. In April 2000, Mr. Robinson sold a portion of his ownership
to the Company for a total purchase price of $4.4 million. The purchase
agreement required a down payment of $700,000 in cash with the remainder
payable by a note due in April 2005. The note requires semi-annual interest
payments at 9% of the outstanding principal amount.

The Company and Kathleen Rose, a former employee of the Company, are
parties to an agreement whereby the Company purchased Ms. Roses ownership
interest on January 1, 2001 for a total purchase price of $5.6 million payable
by a note. The note is due January 2004 and requires quarterly interest
payments at 9% of the outstanding principal amount.

The Company and Jerry Howard, a former employee of the Company, are
parties to an agreement whereby the Company purchased Mr. Howards ownership
interest on October 1, 2001 for a total purchase price of $1.8 million payable
by a note. The note is due September 2003 and requires quarterly interest
payments at 9% of the outstanding principal amount.

In July 2000 the Company loaned Kirk C. Saylor, the Companys Senior Vice
President and Chief Financial Officer, $150,000 evidenced by a promissory note.
The note requires bi-weekly payments of $743 including interest at 8% and is
due July 2005. The note is secured by a second mortgage on Mr. Saylors
personal residence. The amount outstanding on December 31, 2001 was $141,000.

40



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##### Table of Contents






PART IV




Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.



|(a) |  | (1) Index to Consolidated Financial Statements:
|--- |  | -----------------------------------------------

|                              |  |       
|----------------------------- |  | ------
|                              |  | Page  
|                              |  | Number
|                              |  |       
|HORSESHOE GAMING HOLDING CORP |  | F-1   



| | (2) |  | All schedules have been omitted as the required information is
inapplicable or not present in amounts sufficient to require submission
of the schedule, or because the information is presented in the
consolidated financial statements or related notes thereto.
The exhibits listed on the accompanying Exhibit Index are filed as part
of this Form 10-K.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (3) |  | Exhibits                                                                                                                                                                                                                                                                                                                                                     

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit       |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Number        |  | Description                                                                                                                                                                                                                                                                                                                                                                                                          
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.1      (b.) |  | Agreement and Plan of Merger, dated as of September 2, 1998, by and among Horseshoe
Gaming, L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc.,
Empress Acquisition Indiana, Inc., Empress Casino Joliet Corporation, Empress Casino
Hammond Corporation and Empress Entertainment, Inc.                                                                                                   
|2.2      (c.) |  | First Amendment to Agreement and Plan of Merger, dated as of March 25, 1999, to the
Agreement and Plan of Merger, dated as of September 22, 1998, by and among Horseshoe
Gaming, L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc.,
Empress Acquisition Indiana, Inc., Empress Casino Joliet Corporation, Empress Casino
Hammond Corporation and Empress Entertainment, Inc.              
|2.3      (e.) |  | Subscription and Reorganization Agreement, dated as of April 23, 1999, by and among
Horseshoe Gaming Holding Corp., Horseshoe Gaming, L.L.C., Robinson Property Group, Inc.,
and others listed therein.                                                                                                                                                                                                              
|2.4      (f.) |  | Second Amendment to Agreement and Plan of Merger, dated as of July 23, 1999, to the
Agreement and Plan of Merger, dated as of September 22, 1998, by and among Horseshoe
Gaming, L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc.,
Empress Acquisition Indiana, Inc., Empress Entertainment, Inc., Empress Casino Joliet
Corporation and Empress Casino Hammond Corporation.             
|2.5      (h.) |  | Assumption Agreement, dated as of November 18, 1999, by and among Horseshoe Gaming
L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc., Empress
Acquisition Indiana, Inc., Empress Entertainment, Inc., Empress Casino Joliet Corporation,
Empress Casino Hammond Corporation, Horseshoe Acquisition Illinois, Inc., Horseshoe
Acquisition Indiana, Inc., and Horseshoe Gaming Holding Corp.
|2.6      (n.) |  | Agreement and Plan of Merger by and among Argosy Gaming Company, Joliet Acquisition Corporation, Empress Casino
Joliet Corporation, and Horseshoe Gaming Holding Corp. dated as of April 12, 2001.                                                                                                                                                                                                                   
|3.1      (e.) |  | Certificate of Incorporation of Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                                                                                                                       
|3.2      (e.) |  | By-laws of Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                                                                                                                                            
|4.1      (e.) |  | Indenture, dated as of May 11, 1999, by and between Horseshoe Gaming Holding Corp.
and U.S. Trust Company, National Association.                                                                                                                                                                                                                                                                                     
|4.2      (e.) |  | Second Supplemental Indenture, dated as of May 11, 1999, to Indenture, dated as of
October 10, 1995, by and between Horseshoe Gaming, L.L.C., Robinson Property Group
Limited Partnership and U.S. Trust Company, National Association.                                                                                                                                                                              
|4.3      (e.) |  | Amendment No. 1 to Second Ship Mortgage on the whole of the Horseshoe Casino &
Hotel, Tunica executed by Robinson Property Group Limited Partnership, as Owner and
Mortgagor, in favor of Horseshoe Gaming, L.L.C. and United Trust Company of New York.                                                                                                                                                             
|4.4      (a.) |  | Form of 9 3/8% Senior Subordinated Note due 2007 of Horseshoe Gaming, L.L.C.                                                                                                                                                                                                                                                                                                                                         
|4.5      (a.) |  | Indenture, dated as of June 15, 1997, by and among Horseshoe Gaming, L.L.C., U.S.
Trust Company of Texas, N.A., as Trustee, and Robinson Property Group Limited
Partnership, as guarantor, with respect to the 9 3/8% Senior Subordinated Notes due 2007.                                                                                                                                                            

41



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##### Table of Contents



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|Number         |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|4.6      (a.)  |  | Intercompany Senior Secured Note due June 15, 2007 executed by Robinson Property
Group Limited Partnership in favor of Horseshoe Gaming, L.L.C.                                                                                                                                                                                                                                                   
|4.7      (a.)  |  | Intercompany Senior Secured Note due June 15, 2007 executed by Horseshoe Entertainment
in favor of Horseshoe Gaming, L.L.C.                                                                                                                                                                                                                                                                       
|4.8      (g.)  |  | Horseshoe Gaming Holding Corp. Credit Agreement, dated as of June 30, 1999, by and
among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc.
and Canadian Imperial Bank of Commerce.                                                                                                                                                                            
|4.9      (i.)  |  | Supplemental Indenture, dated as of December 1, 1999, among Empress Casino Hammond Corporation, Empress
Residential, L.L.C. and Empress Casino Joliet Corporation (collectively, the
Subsidiary Guarantors) with respect to the unconditional guarantee of all of the Companys
obligations under Indenture covering the 9 3/8% Senior Subordinated Notes due 2007 by the
Subsidiary Guarantors.
|4.10    (i.)   |  | Supplemental Indenture dated as of December 1, 1999, between Horseshoe Gaming Holding Corp., to the 9 3/8%
Senior Subordinated Notes due 2007 and U.S. Trust Company of Texas, N.A.                                                                                                                                                                                                               
|4.11    (i.)   |  | Amendment No. 1 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 18, 1999, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.                                                                                                                                                     
|4.12    (i.)   |  | Amendment No. 2 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 30, 1999, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.                                                                                                                                                     
|4.13    (i.)   |  | Amendment No. 3 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of January 20, 2000, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and Canadian Imperial Bank
of Commerce.                                                                                                                                                      
|4.14    (p.)   |  | Amendment No. 4 to Horseshoe Gaming Holding Crop. Credit Agreement, dated as of July 20, 2001, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and Canadian Imperial
Bank of Commerce.                                                                                                                                                        
|4.15    (q.)   |  | Amendment No. 5 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of September 1, 2001, by and among
Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and Canadian Imperial
Bank of Commerce.                                                                                                                                                    
|10.1      (e.) |  | Settlement Term Sheet, dated as of May 19, 1999, by and among Jack B. Binion, Horseshoe Gaming, Inc., Horseshoe
Gaming, L.L.C., Paul R. Alanis, Loren Ostrow, John Schreiber and Cliff Kortman.                                                                                                                                                                                                   
|10.2      (e.) |  | Horseshoe Note Pledge and Security Agreement, dated as of and on May 11, 1999, by and among Horseshoe Gaming
Holding Corp., Horseshoe Gaming, L.L.C. and U.S. Trust Company, National Association.                                                                                                                                                                                                
|10.3      (e.) |  | Guarantee, dated as of May 11, 1999, by Robinson Property Group, Limited Partnership
for the benefit of Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                            
|10.4      (e.) |  | Guarantee, dated as of May 11, 1999, by Horseshoe Entertainment for the benefit of
Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                                                 
|10.5      (e.) |  | Stockholders Agreement for Horseshoe Gaming Holding Corp., dated as of April 29, 1999,
by and among Horseshoe Gaming Holding Corp. and parties listed therein.                                                                                                                                                                                                                                   
|10.6      (c.) |  | Settlement Agreement, dated as of February 3, 1999, by and among Horseshoe Gaming, Inc., Horseshoe Gaming,
L.L.C. and Mike Allen.                                                                                                                                                                                                                                                                 
|10.7      (c.) |  | Mutual General Release, dated February 23, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe Gaming, Inc.,
Horseshoe GP, Inc., Robinson Property Group Limited Partnership,
New Gaming Capital Partnership, Horseshoe Entertainment, and Nobutaka Mutaguchi.                                                                                                                                 
|10.8      (c.) |  | Exclusive License Agreement, dated July 2, 1998, by and between Horseshoe Gaming, L.L.C.
and Horseshoe License Company.                                                                                                                                                                                                                                                                           
|10.9      (d.) |  | Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe
Gaming, Inc., Horseshoe Entertainment, LP, and New Gaming Capital Partnership; Jack B.
Binion; The Robin Group, Inc. and August Robin.                                                                                                                                                                    
|10.10    (d.)  |  | Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe
Gaming, Inc., Horseshoe Entertainment, LP, and New Gaming Capital Partnership; Jack B.
Binion; Wendell Piper; Cassandra Piper; and Robert E. Piper, Jr.                                                                                                                                                   
|10.11    (f.)  |  | Consulting Agreement, dated as of July 23, 1999, by and between Horseshoe Gaming, L.L.C.
and Empress Entertainment, Inc.                                                                                                                                                                                                                                                                          
|10.12    (i.)  |  | Equity Incentive Plan dated as of January 1, 1999 by and between Horseshoe Gaming Holding
Corp. and certain employees.                                                                                                                                                                                                                                                                            
|10.13    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Alpine Associates.                                                                                                                                                                                                                                                          

42



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##### Table of Contents



|               |  |                                                                                                                                                                                         
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit        |  |                                                                                                                                                                                         
|Number         |  | Description                                                                                                                                                                             
|               |  |                                                                                                                                                                                         
|10.14    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Bear Stearns F/A/O #
2000.                                        
|10.15    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Matthewson CRUT.                                                  
|10.16    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Nobutaka Mutaguchi.                                               
|10.17    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Post Balanced Fund.                                               
|10.18    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and Robert Fechser.                                                                          
|10.19    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and Doyle Brunson.                                                                           
|10.20    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and Key Fechser.                                                                             
|10.21    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and David Reese.                                                                             
|10.22    (j.)  |  | Purchase Agreement dated April 1, 2000, between Horseshoe Gaming Holding Corp. and Walter J. Haybert.                                                                                   
|10.23    (j.)  |  | Promissory Note dated April 1, 2000, between Horseshoe Gaming Holding Corp. and Water J. Haybert.                                                                                       
|10.24    (j.)  |  | Purchase Agreement dated April 1, 2000 between Horseshoe Gaming Holding Corp. and G. A. Robinson, III.                                                                                  
|10.25    (j.)  |  | Promissory Note dated April 1, 2000 between Horseshoe Gaming Holding Corp. and G.A. Robinson, III.                                                                                      
|10.26    (o.)  |  | Purchase Agreement dated January 1, 2001 between Horseshoe Gaming Holding Corp. and Kathy Rose.                                                                                         
|10.27    (o.)  |  | Promissory Note dated January 1, 2001 between Horseshoe Gaming Holding Corp. and Kathy Rose.                                                                                            
|10.28    (l.)  |  | Empress Casino Joliet Settlement Agreement between the Illinois Gaming Board, Horseshoe Gaming Holding Corp.,
Empress Casino Joliet Corporation and Jack Binion, dated January 31, 2001.
|10.29    (q.)  |  | Purchase Agreement dated October 1, 2001, by and between Horseshoe Gaming Holding Corp. and Jerry Howard.                                                                               
|10.30    (q.)  |  | Promissory Note dated October 1, 2001 between Horseshoe Gaming Holding Corp. and Jerry Howard.                                                                                          
|10.31    (k.)  |  | Purchase Agreement dated October 1, 2000 between Horseshoe Gaming Holding Corp. and Patrick Savin.                                                                                      
|10.32    (k.)  |  | Promissory Note dated October 1, 2000 between Horseshoe Gaming Holding Corp. and Patrick Savin.                                                                                         
|10.33    (r.)  |  | Transfer Agreement dated as of November 30, 2001, by and between Patrick Savin and Post High Yield, L.P.                                                                                
|10.34    (r.)  |  | Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between Horseshoe Gaming
Holding Corp. and Roger P. Wagner.                                         
|10.35    (r.)  |  | Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between Horseshoe Gaming Holding
Corp. and Kirk C. Saylor.                                          
|10.36    (m.)  |  | Executive Severance Agreement, dated August 21, 2001, by and between Horseshoe Gaming Holding Corp. and Floyd
B. Hannon.                                                                
|10.37    (r.)  |  | Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between Horseshoe Gaming
Holding Corp. and Peri N. Howard.                                          
|10.38    (r.)  |  | Executive Severance Agreement, dated November 30, 2001 by and between Horseshoe Gaming Holding Corp. and
Dominic F. Polizzotto.                                                         
|10.39    (m.)  |  | Horseshoe Gaming Holding Corp. Retention Bonus Plan, effective August 1, 2000.                                                                                                          
|10.40    (m.)  |  | Horseshoe Gaming Holding Corp. Deferred Compensation Plan.                                                                                                                              
|10.41    (r.)  |  | First, Second, Third and Fourth Amendments of the Horseshoe Gaming Holding Corp. Deferred Compensation Plan.                                                                            
|21.1      (r.) |  | Subsidiaries of Horseshoe Gaming Holding Corp.                                                                                                                                          
|99.1      (r.) |  | Letter regarding Assurance Letter from Arthur Andersen LLP.                                                                                                                             



|     |  |                                                                                                                            
|---- |  | ---------------------------------------------------------------------------------------------------------------------------
|(a.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Registration Statement on
Form S-4 (No. 333-33145) filed on August 7, 1997.
|(b.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 8-K filed on
September 18, 1998.                                      
|(c.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the fiscal
year ended December 31, 1999.                     
|(d.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q filed on May 3,
1999.                                            
|(e.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp.s Form S-4
Registration Statement filed on June 15, 1999.            

43



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##### Table of Contents



|     |  |                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------
|(f.) |  | Filed as an Exhibit to Amendment No. 1 to Horseshoe Gaming Holding Corps
Form S-4 Registration Statement filed on July 30, 1999. 
|(g.) |  | Filed as an Exhibit to Amendment No. 2 to Horseshoe Gaming Holding
Corps Form S-4 Registration Statement filed on August 2, 1999.
|(h.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on December 16, 1999.                                              
|(i.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 30, 2000.                                                
|(j.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on May 15, 2000.                                                  
|(k.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on November 14, 2000.                                             
|(l.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on February 7, 2001.                                               
|(m.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on April 2, 2001.                                                 
|(n.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on April 19, 2001.                                                 
|(o.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on May 11, 2001.                                                  
|(p.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on August l4, 2001.                                               
|(q.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on November 14, 2001.                                             
|(r.) |  | Filed herewith.                                                                                                                   



| |                         
| | ------------------------
| | (b) Reports on Form 8-K:

None

44



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

|      |  |                |  |      |  |                                                                          
|----- |  | -------------- |  | ---- |  | -------------------------------------------------------------------------
|      |  |                |  |      |  | Horseshoe Gaming Holding Corp.
a Delaware corporation                    
|     
|Date: |  | March 20, 2002 |  | By:  |  | /s/ Jack B. Binion                                                       
|      |  |                |  |      |  |                                                                          
|      |  |                |  |      |  | Jack B. Binion                                                           
|      |  |                |  | Its: |  | Chief Executive Officer,
Secretary and Chairman of the
Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

|                                     |  |                                                                                                         |  |               
|------------------------------------ |  | ------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                            |  | Title                                                                                                   |  | Date          
|                                     |  |                                                                                                         |  |               
|/s/ Jack B. Binion

Jack B. Binion   |  | Chief Executive Officer, Secretary and
Chairman of the Board of Directors
(Principal Executive Officer) |  | March 20, 2002
|/s/ Peri N. Howard

Peri N. Howard   |  | Director                                                                                                |  | March 20, 2002
|/s/ Leslie L. Kenny

Leslie L. Kenny |  | Director                                                                                                |  | March 20, 2002
|/s/ Kirk C. Saylor

Kirk C. Saylor   |  | Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)                      |  | March 20, 2002

45



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##### Table of Contents



Supplemental Information to Be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants which have not registered Securities Pursuant
to Section 12 of the Act.

No annual report or proxy material will be provided to security holders by the
Company.

46



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##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

|                                         |                                                                                         |  |      |     | 
|---------------------------------------- | --------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                         |                                                                                         |  | Page
|                                         |                                                                                         |  |     
|Report of Independent Public Accountants |                                                                                         |  | F-2  |    
|Consolidated Financial Statements:       |                                                                                         |  |      |    
|                                         | Balance sheets as of December 31, 2001 and 2000                                         |  |      | F-3 | 
|                                         | Statements of operations for the years ended December 31, 2001, 2000 and 1999           |  |      | F-4 | 
|                                         | Statements of stockholders equity for the years ended December 31, 2001, 2000 and 1999 |  |      | F-5 | 
|                                         | Statements of cash flows for the years ended December 31, 2001, 2000 and 1999           |  |      | F-6 | 
|                                         | Notes to consolidated financial statements                                              |  |      | F-7 | 

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Horseshoe Gaming Holding Corp.:

We have audited the accompanying consolidated balance sheets of HORSESHOE
GAMING HOLDING CORP. AND SUBSIDIARIES (the Company) (a Delaware corporation)
as of December 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders equity and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Horseshoe Gaming Holding Corp.
and Subsidiaries as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

/s/ Arthur Andersen LLP

Memphis, Tennessee,
February 15, 2002.

F-2



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##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31(dollars in thousands, except share data)

|                                                |                                                                                                                                  |                             |           |         |         |      |           |           |           |  |  | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | --------- | ------- | ------- | ---- | --------- | --------- | --------- |  |  | 
|                                                |                                                                                                                                  |                             |           |         |         | 2001 |           | 2000     
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|ASSETS                                         
|Current
assets                                  |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                | Cash and cash equivalents                                                                                                        |                             | $         | 220,817 |         |      | $         | 78,133    |          
|                                                | Restricted cash                                                                                                                  |                             |           | 14,059  |         |      |           |          |          
|                                                | Accounts receivable, net of allowance for doubtful
accounts of $13,160 and $13,112, respectively                                 |                             |           | 13,516  |         |      |           | 15,847    |          
|                                                | Inventories                                                                                                                      |                             |           | 5,031   |         |      |           | 5,678     |          
|                                                | Prepaid expenses and other                                                                                                       |                             |           | 12,152  |         |      |           | 7,419     |          
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                |                                                                                                                                  | Total current assets        |           |         | 265,575 |      |           |           | 107,077   | 
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|Property and equipment, net                     |                                                                                                                                  |                             | 482,379   |         |         |      | 540,802   |          
|Goodwill, net                                   |                                                                                                                                  |                             | 254,413   |         |         |      | 479,503   |          
|Other, net                                      |                                                                                                                                  |                             | 54,892    |         |         |      | 77,156    |          
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                |                                                                                                                                  | $                           | 1,057,259 |         |         | $    | 1,204,538 |          
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY           
|Current
liabilities                             |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                | Current maturities of long-term debt                                                                                             |                             | $         | 9,823   |         |      | $         | 10,995    |          
|                                                | Accounts payable                                                                                                                 |                             |           | 13,426  |         |      |           | 14,985    |          
|                                                | Accrued expenses and other                                                                                                       |                             |           | 81,428  |         |      |           | 100,806   |          
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                |                                                                                                                                  | Total current liabilities   |           |         | 104,677 |      |           |           | 126,786   | 
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|Long-term
liabilities                           |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                | Long-term debt, less current maturities                                                                                          |                             |           | 729,698 |         |      |           | 1,017,226 |          
|                                                | Other long-term liabilities                                                                                                      |                             |           | 10,699  |         |      |           | 2,193     |          
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                |                                                                                                                                  | Total long-term liabilities |           |         | 740,397 |      |           |           | 1,019,419 | 
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|Commitments
and contingencies (Notes 13 and 14) |                                                                                                                                  |                             |           |         |         |      |           |          
|Redeemable ownership interests                  |                                                                                                                                  |                             |          |         |         |      | 5,725     |          
|Stockholders equity                            |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                | Common stock, $.01 par value, 50,000 shares authorized, 25,000
shares issued, 23,145 and 23,413 shares outstanding, respectively |                             |           |        |         |      |           |          |          
|                                                | Additional paid-in capital                                                                                                       |                             |           | 59,808  |         |      |           | 52,715    |          
|                                                | Retained earnings                                                                                                                |                             |           | 205,162 |         |      |           | 43,267    |          
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                |                                                                                                                                  |                             | 264,970   |         |         |      | 95,982    |          
|                                                | Treasury stock, at cost, 1,855 and 1,587 shares, respectively                                                                    |                             |           | (52,785 | )       |      |           | (43,374   | )        
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                |                                                                                                                                  | Total stockholders equity  |           |         | 212,185 |      |           |           | 52,608    | 
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          
|                                                |                                                                                                                                  | $                           | 1,057,259 |         |         | $    | 1,204,538 |          
|                                                |                                                                                                                                  |                             |           |         |         |      |           |          

The accompanying notes are an integral part of these
consolidated financial statements.

F-3



---



##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31(in thousands)

|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |         |         |  
|------------------------------------------------------------ | ------------------------------------- | ---------------------------- | --------- | -------- | ------- | ---- | --------- | -------- | ------- | - | ------- | ------- | ------- | -
|                                                             |                                       |                              |           | 2001     |         | 2000 |           | 1999    
|                                                             |                                       |                              |           |          |         |      |           |         
|Revenues                                                     |                                       |                              |           |          |         |      |           |          |         |   |         |        
|                                                             | Casino                                |                              | $         | 916,955  |         |      | $         | 960,927  |         |   | $       | 487,536 |        
|                                                             | Food and beverage                     |                              |           | 87,876   |         |      |           | 85,212   |         |   |         | 52,953  |        
|                                                             | Hotel                                 |                              |           | 29,697   |         |      |           | 32,169   |         |   |         | 33,494  |        
|                                                             | Retail and other                      |                              |           | 20,856   |         |      |           | 20,411   |         |   |         | 13,004  |        
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|                                                             |                                       |                              | 1,055,384 |          |         |      | 1,098,719 |          |         |   | 586,987 |        
|                                                             | Promotional allowances and other      |                              |           | (122,126 | )       |      |           | (117,889 | )       |   |         | (86,671 | )      
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|                                                             | Net revenues                          |                              |           | 933,258  |         |      |           | 980,830  |         |   |         | 500,316 |        
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|Expenses                                                     |                                       |                              |           |          |         |      |           |          |         |   |         |        
|                                                             | Casino                                |                              |           | 528,827  |         |      |           | 523,423  |         |   |         | 247,349 |        
|                                                             | Food and beverage                     |                              |           | 27,245   |         |      |           | 34,378   |         |   |         | 16,818  |        
|                                                             | Hotel                                 |                              |           | 2,963    |         |      |           | 4,146    |         |   |         | 3,220   |        
|                                                             | Retail and other                      |                              |           | 7,502    |         |      |           | 6,918    |         |   |         | 6,821   |        
|                                                             | General and administrative            |                              |           | 119,877  |         |      |           | 127,659  |         |   |         | 69,558  |        
|                                                             | Corporate expenses                    |                              |           | 22,483   |         |      |           | 37,945   |         |   |         | 7,945   |        
|                                                             | Deferred compensation                 |                              |           | (410     | )       |      |           | 8,338    |         |   |         | 469     |        
|                                                             | Preopening expenses                   |                              |           | 4,064    |         |      |           |         |         |   |         |        |        
|                                                             | Net (gain) loss on disposal of assets |                              |           | (163,845 | )       |      |           | (1,602   | )       |   |         | 10,424  |        
|                                                             | Depreciation and amortization         |                              |           | 66,945   |         |      |           | 81,468   |         |   |         | 41,806  |        
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|                                                             |                                       | Total expenses               |           |          | 615,651 |      |           |          | 822,673 |   |         |         | 404,410 |  
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|Operating income                                             |                                       |                              | 317,607   |          |         |      | 158,157   |          |         |   | 95,906  |        
|Other income (expense)                                       |                                       |                              |           |          |         |      |           |          |         |   |         |        
|                                                             | Interest expense                      |                              |           | (82,720  | )       |      |           | (98,894  | )       |   |         | (65,219 | )      
|                                                             | Interest income                       |                              |           | 3,971    |         |      |           | 2,683    |         |   |         | 11,887  |        
|                                                             | Other, net                            |                              |           | 382      |         |      |           | (1,232   | )       |   |         | (548    | )      
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|                                                             |                                       | Total other income (expense) |           |          | (78,367 | )    |           |          | (97,443 | ) |         |         | (53,880 | )
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|Income before extraordinary loss
on early retirement of debt |                                       |                              | 239,240   |          |         |      | 60,714    |          |         |   | 42,026  |        
|Extraordinary loss on early retirement of debt               |                                       |                              | (6,893    | )        |         |      |          |          |         |   | (9,653  | )      
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        
|Net income                                                   |                                       | $                            | 232,347   |          |         | $    | 60,714    |          |         | $ | 32,373  |        
|                                                             |                                       |                              |           |          |         |      |           |          |         |   |         |        

The accompanying notes are an integral part of these
consolidated financial statements.

F-4



---



##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

(in thousands)

|                                                                                             |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------------------- | ---------- | - | -------- | - | ------ | - | -------- | - | ------- | - | -------- | - | ----- | - | ------ | - |  | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                             |            |   | Members |   | Common |   | Treasury |   | Paid-in |   | Retained |   |       |  
|                                                                                             |            |   | Equity   |   | Stock  |   | Stock    |   | Capital |   | Earnings |   | Total
|                                                                                             |            |   |          |   |        |   |          |   |         |   |          |   |      
|Balance, December 31, 1998                                                                   |            | $ | 71,151   |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Cash distributions                                                                           |            |   | (10,616  | ) |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Decrease in redeemable
ownership interests                                                   |            |   | 2,181    |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Warrant repurchase                                                                           |            |   | (34,426  | ) |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Net income                                                                                   |            |   | 13,389   |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|                                                                                             |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Balance, June 30, 1999                                                                       |            |   | 41,679   |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Exchange of members ownership
interests for 25,000 shares of
common stock at $.01 par value |            |   | (41,679  | ) |        | $ |         |   |         | $ |         |   |       | $ | 41,679 |   |  | $ |        |         |   | $ | 41,679  |        
|Dividends:                                                                                   |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|                                                                                             | Cash       |   |          |  |        |   |          |  |         |   |          |  |       |   |        |  |  |   |         | (566    | ) |   |         | (566    | )
|                                                                                             | Payable    |   |          |  |        |   |          |  |         |   |          |  |       |   |        |  |  |   |         | (1,629  | ) |   |         | (1,629  | )
|Increase in redeemable
ownership interests                                                   |            |   |         |   |        |   |         |   |         |   |         |   |       |   | (294   | ) |  |   |        |         |   |   | (294    | )      
|Treasury stock purchases                                                                     |            |   |         |   |        |   |         |   |         |   | (28,832  | ) |       |   | 5,252  |   |  |   |        |         |   |   | (23,580 | )      
|Net income                                                                                   |            |   |         |   |        |   |         |   |         |   |         |   |       |   |       |   |  |   | 18,984  |         |   |   | 18,984  |        
|                                                                                             |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Balance, December 31, 1999                                                                   |            |   |         |   |        |   |         |   |         |   | (28,832  | ) |       |   | 46,637 |   |  |   | 16,789  |         |   |   | 34,594  |        
|Dividends:                                                                                   |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|                                                                                             | Cash       |   |          |  |        |   |          |  |         |   |          |  |       |   |        |  |  |   |         | (36,395 | ) |   |         | (36,395 | )
|                                                                                             | Receivable |   |          |  |        |   |          |  |         |   |          |  |       |   |        |  |  |   |         | 2,159   |   |   |         | 2,159   |  
|Increase in redeemable
ownership interests                                                   |            |   |         |   |        |   |         |   |         |   |         |   |       |   | (400   | ) |  |   |        |         |   |   | (400    | )      
|Treasury stock purchases                                                                     |            |   |         |   |        |   |         |   |         |   | (14,542  | ) |       |   | 6,478  |   |  |   |        |         |   |   | (8,064  | )      
|Net income                                                                                   |            |   |         |   |        |   |         |   |         |   |         |   |       |   |       |   |  |   | 60,714  |         |   |   | 60,714  |        
|                                                                                             |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Balance, December 31, 2000                                                                   |            |   |         |   |        |   |         |   |         |   | (43,374  | ) |       |   | 52,715 |   |  |   | 43,267  |         |   |   | 52,608  |        
|Dividends:                                                                                   |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|                                                                                             | Cash       |   |          |  |        |   |          |  |         |   |          |  |       |   |        |  |  |   |         | (71,255 | ) |   |         | (71,255 | )
|                                                                                             | Receivable |   |          |  |        |   |          |  |         |   |          |  |       |   |        |  |  |   |         | 803     |   |   |         | 803     |  
|Treasury stock purchases                                                                     |            |   |         |   |        |   |         |   |         |   | (9,411   | ) |       |   | 7,093  |   |  |   |        |         |   |   | (2,318  | )      
|Net income                                                                                   |            |   |         |   |        |   |         |   |         |   |         |   |       |   |       |   |  |   | 232,347 |         |   |   | 232,347 |        
|                                                                                             |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        
|Balance, December 31, 2001                                                                   |            | $ |         |   |        | $ |         |   |         | $ | (52,785  | ) |       | $ | 59,808 |   |  | $ | 205,162 |         |   | $ | 212,185 |        
|                                                                                             |            |   |          |   |        |   |          |   |         |   |          |   |       |   |        |   |  |   |         |         |   |   |         |        

The accompanying notes are an integral part of these
consolidated financial statements.

F-5



---



##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31(in thousands)

|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |          |        |          |  
|---------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | -------- | -------- | -------- | ------- | -------- | ------ | -------- | ------- | -------- | ------ | -------- | -
|                                               |                                                                                   |                                                                    |                                                     |          | 2001     |          | 2000    |          | 1999  
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |       
|Cash flows from operating activities           |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|                                               | Net income                                                                        |                                                                    | $                                                   | 232,347  |          |          | $       | 60,714   |        |          | $       | 32,373   |       
|                                               | Adjustments to reconcile net income to
net cash provided by operating activities: |                                                                    |                                                     |          |          |          |         |          |        |          |         |          |       
|                                               |                                                                                   | Depreciation and amortization                                      |                                                     |          | 66,945   |          |         |          | 81,468 |          |         |          | 41,806 |         
|                                               |                                                                                   | Net (gain) loss on disposal of assets                              |                                                     |          | (163,845 | )        |         |          | (1,602 | )        |         |          | 10,424 |         
|                                               |                                                                                   | Amortization of debt discounts,
deferred finance charges and other |                                                     |          | 3,964    |          |         |          | 4,468  |          |         |          | 3,631  |         
|                                               |                                                                                   | Provision for doubtful accounts                                    |                                                     |          | 7,226    |          |         |          | 7,651  |          |         |          | 4,643  |         
|                                               |                                                                                   | Deferred compensation                                              |                                                     |          | (410     | )        |         |          | 8,338  |          |         |          | 469    |         
|                                               |                                                                                   | Extraordinary loss on early retirement of debt                     |                                                     |          | 6,893    |          |         |          |       |          |         |          | 9,653  |         
|                                               |                                                                                   | Minority interest in income of subsidiary                          |                                                     |          |         |          |         |          |       |          |         |          | 311    |         
|                                               |                                                                                   | Net change in current assets and liabilities                       |                                                     |          | (14,988  | )        |         |          | (9,949 | )        |         |          | 14,774 |         
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|                                               |                                                                                   |                                                                    | Net cash provided by operating activities           |          |          | 138,132  |         |          |        | 151,088  |         |          |        | 118,084  |  
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|Cash flows from investing activities           |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|                                               | Purchases of property and equipment                                               |                                                                    |                                                     | (44,137  | )        |          |         | (74,551  | )      |          |         | (205,168 | )     
|                                               | Proceeds
from sale of property and equipment                                      |                                                                    |                                                     | 241      |          |          |         | 6,292    |        |          |         |         |       
|                                               | Net proceeds from sale of Joliet                                                  |                                                                    |                                                     | 442,662  |          |          |         |         |        |          |         |         |       
|                                               | Escrow related to Joliet sale                                                     |                                                                    |                                                     | (14,059  | )        |          |         |         |        |          |         |         |       
|                                               | Goodwill                                                                          |                                                                    |                                                     |         |          |          |         | (80      | )      |          |         | (257,928 | )     
|                                               | Net increase in other assets                                                      |                                                                    |                                                     | (14,126  | )        |          |         |         |        |          |         | (25,603  | )     
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|                                               |                                                                                   |                                                                    | Net cash provided by (used in) investing activities |          |          | 370,581  |         |          |        | (68,339  | )       |          |        | (488,699 | )
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|Cash flows from financing activities           |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|                                               | Proceeds from long-term debt                                                      |                                                                    |                                                     | 55,000   |          |          |         | 49,500   |        |          |         | 897,810  |       
|                                               | Repayments on long-term debt                                                      |                                                                    |                                                     | (351,590 | )        |          |         | (293,079 | )      |          |         | (236,895 | )     
|                                               | Decrease (increase) in restricted cash                                            |                                                                    |                                                     |         |          |          |         | 159,002  |        |          |         | (159,002 | )     
|                                               | Capital dividends                                                                 |                                                                    |                                                     | (69,096  | )        |          |         | (38,024  | )      |          |         | (12,811  | )     
|                                               | Debt issue costs and commitment fees                                              |                                                                    |                                                     | (343     | )        |          |         | (291     | )      |          |         | (30,664  | )     
|                                               | Ownership transactions                                                            |                                                                    |                                                     |         |          |          |         |         |        |          |         | (52,856  | )     
|                                               | Distributions to minority shareholders                                            |                                                                    |                                                     |         |          |          |         |         |        |          |         | (842     | )     
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|                                               |                                                                                   |                                                                    | Net cash (used in) provided by financing activities |          |          | (366,029 | )       |          |        | (122,892 | )       |          |        | 404,740  |  
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|Net change in cash and cash equivalents        |                                                                                   |                                                                    | 142,684                                             |          |          |          | (40,143 | )        |        |          | 34,125  |         
|Cash and cash equivalents, beginning of period |                                                                                   |                                                                    | 78,133                                              |          |          |          | 118,276 |          |        |          | 84,151  |         
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         
|Cash and cash equivalents, end of period       |                                                                                   | $                                                                  | 220,817                                             |          |          | $        | 78,133  |          |        | $        | 118,276 |         
|                                               |                                                                                   |                                                                    |                                                     |          |          |          |         |          |        |          |         |         

The accompanying notes are an integral part of these
consolidated financial statements.

F-6



---



##### Table of Contents



HORSESHOE GAMING HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1.   ORGANIZATION AND BASIS OF PRESENTATION

Horseshoe Gaming Holding Corp., a Delaware corporation, and subsidiaries,
(the Company), conducts casino gaming, hotel and other related operations at
riverboat casinos under the Horseshoe names in Bossier City, Louisiana;
Tunica County, Mississippi and Hammond, Indiana. In addition, the Company
owned and operated the Empress Casino Joliet in Joliet, Illinois until July 31,
2001 (see Note 4).

On April 15, 1999, the Company acquired over 90% of the aggregate
ownership of Horseshoe Gaming, LLC (Horseshoe Gaming) from Horseshoe Gamings
members in exchange for interests in the Company. The remaining ownership
interests of Horseshoe Gaming either were contributed to the Company in
exchange for interests in the Company or acquired by the Company or Horseshoe
Gaming and Horseshoe Gaming was subsequently dissolved.

A description of each principal subsidiary is as follows:



| |  |  | New Gaming Capital Partnership (NGCP) is a Nevada limited
partnership, which was formed on February 4, 1993. NGCP is 100%
owned by the Company and its subsidiary, Horseshoe GP, Inc. and is
a 91.92% owner of Horseshoe Entertainment, a Louisiana limited
partnership which owns and operates the Horseshoe Bossier City,
(Bossier City). In April 1999, the Company purchased the
remaining 8.08% limited partner interests in Horseshoe
Entertainment, (see Note 9), not held by NGCP.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Robinson Property Group, Limited Partnership (RPG) is a
Mississippi limited partnership, which was formed on June 7, 1993.
RPG owns and operates the Horseshoe Tunica (Tunica) located in
Tunica County, Mississippi, and is 100% owned by the Company and
its subsidiary, Horseshoe GP, Inc.                                                                                                                                                                                             
|
| |  |  | Horseshoe Hammond, Inc. (Hammond), formerly Empress
Casino Hammond Corporation, is an Indiana corporation, which was
formed on November 25, 1992. The Company acquired Hammond from
Empress Entertainment, Inc. on December 1, 1999 (see Note 3).
Hammond owns and operates the Horseshoe Casino in Hammond, Indiana
and is 100% owned by the Company.                                                                                                                                      
|
| |  |  | Empress Casino Joliet Corporation (Joliet or Empress
Joliet) is an Illinois Corporation, which was formed on December
26, 1990. The Company acquired Joliet from Empress Entertainment,
Inc. on December 1, 1999 (see Note 3). Joliet owns and operates
the Empress Casino and Hotel in Joliet, Illinois and was 100% owned
by the Company. The Company sold Joliet to Argosy Gaming Company
on July 31, 2001 (see Note 4).                                                               

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2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and all of its subsidiaries (see Note 1). All significant intercompany
accounts and transactions have been eliminated.

Cash and Cash Equivalents

Cash equivalents are highly liquid investments with an original maturity
of three months or less and are stated at the lower of cost or market.

Restricted Cash

Restricted cash represents net proceeds remaining in escrow to cover
future potential indemnifications related to the sale of Joliet (see Note 4).

Inventories

Inventories are stated at the lower of cost, as determined on a first-in,
first-out basis, or market value and consist primarily of food, beverage,
retail merchandise, kitchen smallwares and employee wardrobe.

Property and Equipment

Property and equipment are stated at cost. The costs of normal repairs
and maintenance are expensed as incurred while major expenditures that extend
the useful lives of assets are capitalized.

Depreciation is provided on the straight-line basis over the estimated
useful lives as follows:

|                                                                          |  |                                 
|------------------------------------------------------------------------- |  | --------------------------------
|Buildings,
boat, barge and improvements
Furniture, fixtures and equipment |  | 15 to 31.5 years
3 to 10   years

Capitalized Interest

The Company capitalizes interest for associated borrowing costs of major
construction projects. Capitalization of interest ceases when the asset is
substantially complete and ready for its intended use. During the year ended
December 31, 2001 no interest was capitalized. Interest capitalized during the
years ended December 31, 2000 and 1999 was $1.0 million and $8,000,
respectively.

Goodwill

During the years ended December 31, 2001 and prior, the Company amortized
goodwill on a straight-line basis over 25 years, which management estimated was
the related minimum benefit period (see Note 2  Recently Issued Accounting
Pronouncements).

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2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred Finance Charges

Deferred finance charges, which are included in other assets, consist of
fees and expenses incurred to obtain the Companys debt. The deferred finance
charges are being amortized over the term of the related debt using the
effective interest method (see Note 8).

Dividends and Capital Distributions

The Companys debt agreements contain covenants that limit dividends and
capital distributions to its stockholders. Dividends and capital distributions
to the stockholders are to be based upon the Companys taxable income and the
highest marginal Federal and state individual statutory tax rates in effect,
which are applicable to any stockholder. Such dividends and distributions are
to be paid quarterly based upon estimated taxable income. After filing of the
annual tax returns by the Company and its subsidiaries, each stockholder is to
reimburse the Company for overpayments of capital distributions or the Company
is to withhold such amounts from future dividends to the stockholders.

Casino Revenues

Casino revenues are the aggregate of gaming wins and losses.

Promotional Allowances and Other

Promotional allowances and other consist primarily of the retail value of
complimentary food and beverage, rooms and other services furnished to guests
without charge, which totaled approximately $93.9 million, $85.9 million and
$64.8 million for the years ended December 31, 2001, 2000 and 1999,
respectively. Such amounts are included in gross revenues and deducted as
promotional allowances and other. The estimated costs of providing such
complimentary services, which are primarily included in casino department
expenses, are as follows (in thousands):

|                         |  |                          |        |      |  |      |        |  |  |   |        | 
|------------------------ |  | ------------------------ | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                         |  | Years ended December 31,
|                         |  |                         
|                         |  | 2001                     |        | 2000 |  | 1999
|                         |  |                          |        |      |  |     
|Food and beverage        |  | $                        | 67,426 |      |  | $    | 61,555 |  |  | $ | 37,915 | 
|Hotel                    |  |                          | 8,893  |      |  |      | 8,702  |  |  |   | 8,365  | 
|Other operating expenses |  |                          | 10,844 |      |  |      | 9,475  |  |  |   | 8,414  | 
|                         |  |                          |        |      |  |      |        |  |  |   |        | 
|                         |  | $                        | 87,163 |      |  | $    | 79,732 |  |  | $ | 54,694 | 
|                         |  |                          |        |      |  |      |        |  |  |   |        | 

Advertising Costs

The Company expenses all costs associated with advertising as incurred,
and such amounts are included in general and administrative expenses in the
accompanying consolidated statements of operations.

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2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Preopening Expenses

The Company expenses all preopening costs as incurred. During 2001, the
Company incurred preopening expenses related to the rebranding of Hammond.
Included in preopening expenses are advertising and production costs related to
the name change of approximately $2.0 million for the year ended December 31,
2001.

Corporate Expenses

Expenses associated with the management of the Company are recorded as
corporate expenses and are reflected in the accompanying consolidated
statements of operations in the periods such expenses are incurred.

Deferred Compensation

Deferred compensation represents compensation expenses related to
ownership interests in the Company issued to employees pursuant to employment
agreements, the 1997 Unit Option Plan and the Equity Incentive Plan (see Note
11).

Income Taxes

The Company is organized as a corporation under Delaware laws and has
elected to be taxed as an S Corporation for Federal income tax purposes.
Accordingly, no provision is made in the accounts of the Company for Federal
income taxes, as such taxes are liabilities of the stockholders or members.

The Companys income tax returns and the amount of allocable taxable
income are subject to examination by Federal and state taxing authorities. If
an examination results in a change to taxable income, the income tax reported
by the stockholders may also change.

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of, management continually evaluates whether events or changes
in circumstances indicate that the carrying amount of long-lived assets may not
be recoverable (see Note 2  Recently Issued Accounting Pronouncements).

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

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2.   SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)Reclassifications

Certain amounts from prior years have been reclassified to conform to the
current year presentations, which have no effect on previously reported net
income.

Recently Issued Accounting Pronouncements

In January 2001, the Emerging Issues Task Force of the Financial
Accounting Standards Board (FASB) reached a consensus on Issue 3 of Issue
00-22 (EITF 00-22), Accounting for Points and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or Services
to Be Delivered in the Future. EITF 00-22 requires that the cash value of
points awarded under slot club programs (Points) be recorded as a reduction
of revenue. The Company had historically classified Points as operating
expenses. In accordance with the transition rules, the Company adopted EITF
00-22 in the first quarter of 2001 and now includes Points as promotional
allowances and other in the accompanying consolidated statements of operations
for all periods presented. The adoption of EITF 00-22 had no effect on the
Companys operating income.

In June 2001, the FASB issued Statements of Financial Accounting Standards
No. 142 Goodwill and Other Intangible Assets (SFAS 142). This pronouncement
changes the accounting for goodwill and intangible assets. SFAS 142 states
that goodwill and indefinite-lived intangible assets are no longer amortized
but are reviewed for impairment annually (or more frequently if impairment
indicators arise). Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their useful lives. The
amortization provisions of SFAS 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, companies are required to adopt the
pronouncement in their fiscal year beginning after December 15, 2001. As of
January 1, 2002, the Company had unamortized goodwill and intangibles of $261.3
million that will be subject to the provisions of SFAS 142. The Company
amortized $12.3 million, $20.7 million and $3.6 million of goodwill in the
twelve months ended December 31, 2001, 2000 and 1999, respectively. The Company
is currently evaluating the provisions of SFAS 142 and the impact that adoption
will have on the Companys financial position and results of operations. While
the impairment tests have not yet been completed, it is possible that an
impairment charge will be necessary for Hammond. Such a charge, if necessary,
would likely be reported in the first quarter of 2002 as a change in accounting
principle.

Also in June 2001, the FASB issued SFAS No. 143 Accounting for Asset
Retirement Obligations (SFAS 143). SFAS 143 requires the recognition of
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or the normal
operation of the long-lived asset, as well as the disclosure of certain
information related to asset retirement obligations. Companies are required to
adopt the provisions of SFAS 143 as of the beginning of the entitys fiscal
year beginning after June 15, 2002. The Company is currently evaluating the
provisions of SFAS 143 and the impact that adoption will have on the Companys
financial position and results of operations.

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2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In August 2001, the FASB issued SFAS No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144). This statement
establishes a single accounting model, based on the framework established by
SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, for long-lived assets to be disposed of
by sale. SFAS 144 must be adopted for fiscal years beginning after December
15, 2001, and interim periods within those fiscal years. The Company does not
anticipate that the adoption of SFAS 144 will materially impact the Companys
financial position or results of operations.

3.   EMPRESS ACQUISITION

On December 1, 1999, the Company acquired Hammond and Joliet from Empress
Entertainment, Inc. (the Empress Merger).

The following unaudited pro-forma financial information (in thousands)
assumes the Empress Merger occurred at the beginning of 1999. These results
have been prepared for comparative purposes only and do not purport to be
indicative of what would have occurred had the Empress Merger taken place at
the beginning of 1999.

|                 |  |                   |         | 
|---------------- |  | ----------------- | ------- | 
|                 |  | Year ended       
|                 |  | December 31, 1999
|                 |  |                  
|                 |  | (unaudited)      
|Net revenues     |  | $                 | 933,948 | 
|Operating income |  | $                 | 164,024 | 
|Net income       |  | $                 | 55,668  | 

4.   SALE OF EMPRESS CASINO JOLIET

On July 31, 2001, the Company sold Joliet to Argosy Gaming Company for
$465.0 million in cash. The net proceeds from the sale, net of a deficiency in
working capital and other transaction costs, were $442.7 million. An
additional $38.4 million in tax distributions related to the sale were made in
the third quarter of 2001. A gain of $165.5 million related to the sale of
Joliet is included in the net (gain) loss on disposal of assets for the year
ended December 31, 2001 in the accompanying consolidated statements of
operations.

Pursuant to the merger agreement, the Company deposited $16.3 million of
the net proceeds into escrow to cover potential future indemnifications related
to the Joliet facility. Of this amount, $2.3 million was disbursed in October
2001. The escrowed funds, including earnings, are reflected as restricted cash
in the accompanying consolidated balance sheets.

Included in the accompanying consolidated statements of operations, are
net revenues from Joliet of $161.6 million, $240.3 million and $17.6 million
for the years ended December 31, 2001, 2000 and 1999, respectively. Joliet
also contributed $44.4 million, $64.1 million and $3.3 million of operating
income before goodwill amortization, corporate allocations and other
non-recurring items for the years ended December 31, 2001, 2000 and 1999,
respectively.

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5.   ALLOWANCE FOR DOUBTFUL ACCOUNTS

Activity in the allowance for doubtful accounts consisted of the following
(in thousands):

|                                                                                         |  |                          |        |      |  |      |        |   |  |   |        |  
|---------------------------------------------------------------------------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                         |  | As of and for the       
|                                                                                         |  | Years ended December 31,
|                                                                                         |  |                         
|                                                                                         |  | 2001                     |        | 2000 |  | 1999
|                                                                                         |  |                          |        |      |  |     
|Balance, beginning of period                                                             |  | $                        | 13,112 |      |  | $    | 11,289 |   |  | $ | 10,546 |  
|Additions charged to expense                                                             |  |                          | 7,226  |      |  |      | 7,651  |   |  |   | 4,643  |  
|Deductions from reserves and uncollectable accounts
written off, net of amounts received |  |                          | (7,178 | )    |  |      | (5,828 | ) |  |   | (7,815 | )
|Other amounts assumed in Empress acquisition                                             |  |                          |       |      |  |      |       |   |  |   | 3,915  |  
|                                                                                         |  |                          |        |      |  |      |        |   |  |   |        |  
|Balance, end of period                                                                   |  | $                        | 13,160 |      |  | $    | 13,112 |   |  | $ | 11,289 |  
|                                                                                         |  |                          |        |      |  |      |        |   |  |   |        |  

6.   PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

|                                        |  |                    |          |      |  |   |          |  
|--------------------------------------- |  | ------------------ | -------- | ---- |  | - | -------- | -
|                                        |  | As of December 31,
|                                        |  |                   
|                                        |  | 2001               |          | 2000
|                                        |  |                    |          |     
|Land and land improvements              |  | $                  | 30,854   |      |  | $ | 33,357   |  
|Buildings, boat, barge and improvements |  |                    | 481,563  |      |  |   | 502,105  |  
|Furniture, fixtures and equipment       |  |                    | 140,072  |      |  |   | 135,242  |  
|Construction in progress                |  |                    | 3,084    |      |  |   | 5,842    |  
|                                        |  |                    |          |      |  |   |          |  
|                                        |  |                    | 655,573  |      |  |   | 676,546  |  
|Accumulated depreciation                |  |                    | (173,194 | )    |  |   | (135,744 | )
|                                        |  |                    |          |      |  |   |          |  
|                                        |  | $                  | 482,379  |      |  | $ | 540,802  |  
|                                        |  |                    |          |      |  |   |          |  

7.   ACCRUED EXPENSES AND OTHER

Accrued expenses and other consists of the following (in thousands):

|                                           |  |                    |        |      |  |   |         | 
|------------------------------------------ |  | ------------------ | ------ | ---- |  | - | ------- | 
|                                           |  | As of December 31,
|                                           |  |                   
|                                           |  | 2001               |        | 2000
|                                           |  |                    |        |     
|Payroll and related liabilities            |  | $                  | 22,230 |      |  | $ | 23,755  | 
|Gaming, sales, use and property taxes      |  |                    | 13,541 |      |  |   | 12,399  | 
|Progressive slot and slot club liabilities |  |                    | 10,122 |      |  |   | 10,044  | 
|Accrued interest                           |  |                    | 9,474  |      |  |   | 11,973  | 
|Insurance and guest claims payable         |  |                    | 5,338  |      |  |   | 7,342   | 
|Buyout of former limited partners          |  |                    | 3,181  |      |  |   | 12,840  | 
|Other accrued expenses                     |  |                    | 17,542 |      |  |   | 22,453  | 
|                                           |  |                    |        |      |  |   |         | 
|                                           |  | $                  | 81,428 |      |  | $ | 100,806 | 
|                                           |  |                    |        |      |  |   |         | 

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8.   LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

|                                                                                                                                                                                                                     |  |                    |         |      |  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | --------- | -
|                                                                                                                                                                                                                     |  | As of December 31,
|                                                                                                                                                                                                                     |  |                   
|                                                                                                                                                                                                                     |  | 2001               |         | 2000
|                                                                                                                                                                                                                     |  |                    |         |     
|8.625% Senior Subordinated Notes (effective interest rate
of 8.657%), due May 15, 2009, net of unamortized
discount of $1,437 and $1,831, interest payable semi-
annually on May 15 and November 15                  |  | $                  | 533,578 |      |  | $ | 598,169   |  
|9.375% Senior Subordinated Notes (effective interest of
9.384%), due June 15, 2007, net of unamortized
discount of $88 and $105, interest payable semi-annually on June 15 and December 15                           |  |                    | 158,972 |      |  |   | 159,895   |  
|Senior Secured Revolving Credit Facility, secured by
substantially all of the assets of the Company, $150
million borrowing capacity, due September 30, 2004,
with variable interest rates based upon the
Eurodollar |  |                    |        |      |  |   | 97,500    |  
|Senior Secured Credit Facility Tranche B Term Loan,
$125 million borrowing capacity, secured by substantially
all of the assets of the Company, paid in full July 31, 2001                                           |  |                    |        |      |  |   | 123,375   |  
|Notes Payable, interest ranging from 4.75% to 12%, due in
various installments through January 2005                                                                                                                  |  |                    | 46,971  |      |  |   | 49,282    |  
|                                                                                                                                                                                                                     |  |                    |         |      |  |   |           |  
|                                                                                                                                                                                                                     |  |                    | 739,521 |      |  |   | 1,028,221 |  
|Current maturities                                                                                                                                                                                                   |  |                    | (9,823  | )    |  |   | (10,995   | )
|                                                                                                                                                                                                                     |  |                    |         |      |  |   |           |  
|                                                                                                                                                                                                                     |  | $                  | 729,698 |      |  | $ | 1,017,226 |  
|                                                                                                                                                                                                                     |  |                    |         |      |  |   |           |  

In May 1999, the Company completed a private placement offering of $600.0
million of 8.625% Senior Subordinated Notes due 2009. $203.6 million of the
proceeds from the notes were used to retire outstanding debt. An extraordinary
loss on the early retirement of debt of $9.6 million was recognized in 1999 for
prepayment penalties, premium and the write-off of unamortized discounts and
deferred finance charges. The remaining proceeds of $342.3 million were placed
in a secured proceeds account of which $151.5 million was used to fund the
redemption of the Empress 8.125% Senior Subordinated Notes in January 2000 and
$190.8 million was used to partially fund the acquisition of Hammond and
Joliet.

In July 2001, $65.0 million of the Companys 8.625% Senior Subordinated
Notes and $940,000 of the Companys 9.375% Senior Subordinated Notes were
tendered in an Asset Sale Offer to its bondholders. As a result of these
retirements, the Company recorded an extraordinary loss on early retirement of
debt in the amount of $6.9 million.

In June 1999, the Company completed its $375.0 million Senior Secured
Credit Facility (the Credit Facility). The Credit Facility consisted of a
$250.0 million, five-year revolver and a $125.0 million, seven-year term loan.
On December 1, 1999, the Company borrowed $175.0 million of the revolver and
the entire $125.0 million term loan to complete the funding requirement for the
purchase of Hammond and Joliet. All of the operating subsidiaries guarantee
the obligations under the Credit Facility. In July 2001 the Company amended its
Credit Facility to allow, among other things, (i) the sale of Joliet and (ii)
the reduction of its loan commitment to

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8.   LONG-TERM DEBT (continued)

$150.0 million. Also during July 2001, the Company repaid the entire $222.8
million which was outstanding on the Credit Facility, fully retiring the term
loan. The Credit Facility, as amended, is permanently reduced by $28.1 million
on December 31, 2003 and $40.6 million per quarter beginning March 31, 2004.
As of December 31, 2001 there were no amounts outstanding under the Credit
Facility.

The Companys debt agreements contain covenants that, among other things,
(i) limit the amount of dividends the Company can pay to its stockholders; (ii)
limit the amount of additional indebtedness which may be incurred by the
Company and its subsidiaries; (iii) prohibit any consolidation or merger of the
Company or its subsidiaries with an affiliate or third party, any sale of
substantially all of the Company or its subsidiaries assets, or any payment of
subordinated indebtedness prior to its scheduled maturity; and (iv) limit the
amount of restricted payments, as defined, the Company may make.

Five year maturities of the Companys long-term debt are as follows (in
thousands):

|                       |  |   |        | 
|---------------------- |  | - | ------ | 
|Year ended December 31 |  |   |        | 
|                       |  |   |        | 
|2002                   |  | $ | 9,823  | 
|2003                   |  | $ | 18,847 | 
|2004                   |  | $ | 14,553 | 
|2005                   |  | $ | 3,748  | 
|2006                   |  | $ |       | 

At December 31, 2001 and 2000, the fair market value of the 8.625% Senior
Subordinated Notes, based on quoted market prices was $556.4 million and $580.5
million, respectively. As of December 31, 2001 and 2000, the fair market value
of the 9.375% Senior Subordinated Notes, based on quoted market prices was
$169.2 million and $160.2 million, respectively. The fair market value of the
Companys other long-term debt approximated its carrying value as of December
31, 2001 and 2000, based on the borrowing rates currently available for debt
with similar terms.

9.   OWNERSHIP REPURCHASE MATTERS

During 2001, the Company purchased redeemable ownership interests of 1.1%
of the Company for $8.0 million of notes payable. As of December 31, 2001, the
Companys remaining obligation under these purchases was $7.4 million.

During 2000, the Company purchased redeemable ownership interests of 1.5%
of the Company for $13.2 million of notes payable. Operating results for the
year ended December 31, 2000 includes an approximate $443,000 reduction in
deferred compensation expense resulting from the final valuation of these
ownership interests. As of December 31, 2001, the Companys remaining
obligation under these purchases was $9.8 million.

During 1999, the Company purchased redeemable ownership interests of 3.9%
of the Company for $23.6 million of notes payable. As of December 31, 2001,
the Companys remaining obligation under this purchase was $20.0 million.

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9.   OWNERSHIP REPURCHASE MATTERS (continued)

During 1999, Horseshoe Gaming purchased redeemable ownership interests
from four current employees and five former employees representing a total of
8.5% of Horseshoe Gaming for $44.3 million. Operating results for the year
ended December 31, 1999 includes a $2.9 million reduction in deferred
compensation expense resulting from the final valuation of these ownership
interests. As of December 31, 2001, the Companys remaining obligation under
these purchases was $9.7 million.

In January 1999, Horseshoe Gaming repurchased outstanding warrants held by
a third party which entitled such third party to purchase an approximate 6.99%
ownership interest in Horseshoe Gaming from its largest stockholder, Horseshoe
Gaming, Inc. (HGI), for an exercise price of $510,000. Upon acquisition,
Horseshoe Gaming exercised the warrants and retired the membership units
acquired from HGI. The total cost of the warrants, including fees, expenses
and the exercise price paid to HGI, was approximately $34.4 million, which was
recorded as a reduction in members equity in the first quarter of 1999.

In April 1999, the Company exercised an option to acquire the remaining
8.08% limited partnership interest in Bossier City not held by NGCP for total
consideration of $30.6 million, which included payments for a non-compete
covenant, consents and a release of claims. The consideration for the
repurchase consisted of $2.1 million cash, offsets against the negative capital
account balances of the former limited partners and payables amounting to $26.0
million. In May 2001, the former limited partners and the Company executed a
second two-year covenant not to compete for $7.9 million. As of December 31,
2001, the remaining amount to be paid to these limited partners totaled $3.2
million and is included in accrued expenses and other in the accompanying
consolidated balance sheets. Included in other assets in the accompanying
consolidated balance sheets at December 31, 2001 and 2000 are notes receivable
from the former limited partners totaling $1.8 million and $5.7 million,
respectively.

10.   TRANSACTIONS WITH RELATED PARTIES

A current owner, through an entity he owns, provides certain financial
consulting services to the Company. For the years ended December 31, 2001,
2000 and 1999, the Company paid fees of approximately $350,000, $300,000 and
$125,000, respectively, to this owner. In addition, this entity received fees
from various investment banking firms related to transactions involving the
sale of Joliet and the placement of the Companys Credit Facility and 8.625%
Senior Subordinated Notes. These fees totaled $1.7 million, $222,000 and $1.8
million in 2001, 2000 and 1999, respectively.

Notes receivable from current and former employees totaling $270,000 and
$310,000 are included in other assets in the accompanying consolidated balance
sheets as of December 31, 2001 and 2000, respectively. The notes are secured
by their ownership interests in the Company or by personal real estate and have
various due dates and interest rates ranging from 8% to 9%. One of the current
notes, with an outstanding balance as of December 31, 2001 of $141,000, is
from an officer of the Company.

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11.   EMPLOYEE COMPENSATION AND BENEFITS

Deferred compensation expense represents compensation expenses related to
ownership interests in the Company issued to employees pursuant to employment
agreements, the 1997 Unit Option Plan, and the Equity Incentive Plan as follows
(in thousands):

|                             |  |                          |      |      |  |      |       |  |  |   |      |  
|---------------------------- |  | ------------------------ | ---- | ---- |  | ---- | ----- |  |  | - | ---- | -
|                             |  | Years ended December 31,
|                             |  |                         
|                             |  | 2001                     |      | 2000 |  | 1999
|                             |  |                          |      |      |  |     
|Employee ownership interests |  | $                        |     |      |  | $    | 4,024 |  |  | $ | 125  |  
|1997 Unit Option Plan        |  |                          |     |      |  |      | 913   |  |  |   | (391 | )
|Equity Incentive Plan        |  |                          | (410 | )    |  |      | 3,401 |  |  |   | 735  |  
|                             |  |                          |      |      |  |      |       |  |  |   |      |  
|                             |  | $                        | (410 | )    |  | $    | 8,338 |  |  | $ | 469  |  
|                             |  |                          |      |      |  |      |       |  |  |   |      |  

Employee Ownership Interests

Certain former employees were issued ownership interests in the Company
pursuant to employment agreements. The employment agreements included a
put/call provision which required the Company to repurchase such employees
respective ownership interests in the Company in the event of termination at
the then fair market value based on an independent appraisal. Accordingly,
those compensation agreements were accounted for as variable stock purchase
plans. Deferred compensation expense or income was recorded each period equal
to the change in the fair market value of the ownership interest. As of
December 31, 2001, all of the put/call provisions in the employment agreements
had been exercised.

1997 Unit Option Plan

In 1997, the Company approved the 1997 Unit Option Plan, which provided
for certain employees to be granted options to purchase membership units in
Horseshoe Gaming at a fixed exercise price of $3.47 per unit. The Unit Option
Plan contained a put/call provision under the same terms as described above for
employee ownership interests. Accordingly, the Unit Option Plan was accounted
for as a variable stock purchase plan. Deferred compensation expense was
recorded each period based on vesting in an amount equal to the change in the
fair market value of the stock in the Company, provided such value exceeds the
exercise price of the options. As of December 31, 2001, all unit options had
been exercised.

Equity Incentive Plan

During 1999, the Company approved the Horseshoe Gaming Holding Corp.
Equity Incentive Plan which provides for (i) certain employees to be granted
stock options (with tandem Stock Appreciation Rights (SARs)) to purchase
stock in the Company and, (ii) certain other employees to be granted SARs to
share in the increase in the market value of the stock options and SARs as
determined in accordance with the Equity Incentive Plan. The exercise price
for the stock options/SARs is determined in accordance with the plan document
and represents managements best estimate of the fair market value at the date
of grant. The stock options/SARs vest over a period of four years and expire
in ten years.

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11. EMPLOYEE COMPENSATION AND BENEFITS (continued)

The following table represents stock option (with tandem SARs) activity
for the three years ended December 31, 2001:

|                                 |           |  |           |         |               |   |        |        | 
|-------------------------------- | --------- |  | --------- | ------- | ------------- | - | ------ | ------ | 
|                                 |           |  | Number    |         | Average Price
|                                 |           |  | of Shares |         | per Share    
|                                 |           |  |           |         |              
|Balance, December 31, 1998       |           |  |          |         |               |   |       |       
|                                 | Issued    |  |           | 145.74  |               |   | $      | 13,641 | 
|                                 | Cancelled |  |           |        |               |   |        |       | 
|                                 | Exercised |  |           |        |               |   |        |       | 
|                                 |           |  |           |         |               |   |        |       
|Balance, December 31, 1999       |           |  | 145.74    |         |               | $ | 13,641 |       
|                                 | Issued    |  |           | 157.25  |               |   | $      | 44,488 | 
|                                 | Cancelled |  |           | (34.76  | )             |   | $      | 27,488 | 
|                                 | Exercised |  |           | (32.87  | )             |   | $      | 13,637 | 
|                                 |           |  |           |         |               |   |        |       
|Balance, December 31, 2000       |           |  | 235.36    |         |               | $ | 32,211 |       
|                                 | Issued    |  |           | 568.53  |               |   | $      | 22,303 | 
|                                 | Cancelled |  |           | (348.25 | )             |   | $      | 30,842 | 
|                                 | Exercised |  |           | (38.13  | )             |   | $      | 13,641 | 
|                                 |           |  |           |         |               |   |        |       
|Balance, December 31, 2001       |           |  | 417.51    |         |               | $ | 21,557 |       
|                                 |           |  |           |         |               |   |        |       
|Exercisable at December 31, 2001 |           |  | 40.01     |         |               | $ | 33,366 |       
|                                 |           |  |           |         |               |   |        |       

The following table represents SAR activity for the three years ended
December 31, 2001:

|                                 |           |  |        |          |   |   |        |        | 
|-------------------------------- | --------- |  | ------ | -------- | - | - | ------ | ------ | 
|Balance, December 31, 1998       |           |  |       |          |   |   |       |       
|                                 | Issued    |  |        | 183.92   |   |   | $      | 13,660 | 
|                                 | Cancelled |  |        | (12.41   | ) |   | $      | 13,660 | 
|                                 | Exercised |  |        |         |   |   |        |       | 
|                                 |           |  |        |          |   |   |        |       
|Balance, December 31, 1999       |           |  | 171.51 |          |   | $ | 13,660 |       
|                                 | Issued    |  |        | 466.10   |   |   | $      | 45,203 | 
|                                 | Cancelled |  |        | (33.60   | ) |   | $      | 25,781 | 
|                                 | Exercised |  |        | (40.69   | ) |   | $      | 13,660 | 
|                                 |           |  |        |          |   |   |        |       
|Balance, December 31, 2000       |           |  | 563.32 |          |   | $ | 39,036 |       
|                                 | Issued    |  |        | 1,118.15 |   |   | $      | 21,774 | 
|                                 | Cancelled |  |        | (884.59  | ) |   | $      | 32,511 | 
|                                 | Exercised |  |        | (28.54   | ) |   | $      | 13,660 | 
|                                 |           |  |        |          |   |   |        |       
|Balance, December 31, 2001       |           |  | 768.34 |          |   | $ | 22,370 |       
|                                 |           |  |        |          |   |   |        |       
|Exercisable at December 31, 2001 |           |  | 88.25  |          |   | $ | 31,718 |       
|                                 |           |  |        |          |   |   |        |       

Options and SARs cancelled and issued during 2001 include the activity
resulting from a reduction of the exercise price of options and SARs issued in
2000 and 2001 by 25% due to the sale of Joliet. The sale prompted this
adjustment in order to more accurately set the exercise price of the options
and SARs to an amount more consistent with a pricing that would have occurred
if the Company had not owned Joliet when the options and SARs were issued. In
total,

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11.   EMPLOYEE COMPENSATION AND BENEFITS (continued)

1,044.7 options and SARs with an average exercise price of $30,964 were
adjusted to an average exercise price of $23,223. The estimated market price
on the date of adjustment was $16,500.

401(k) Savings Plan

The Company maintains a 401(k) savings plan whereby eligible employees may
contribute up to 20% of their earnings to the plan, on a pre-tax basis.
Employees are eligible to participate in the plan on the first day of the next
calendar quarter following six months of service. In addition, the Company
matches 100% of the first 2% and 50% of the next 4% of the employees
contributions. Employees vest in the Companys matching contributions over four
years. The Companys matching contributions were $4.2 million, $3.5 million
and $1.2 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

Deferred Compensation Plan

The Company maintains a nonqualified deferred compensation plan for
certain key employees. The plan allows participants to defer, on a pre-tax
basis, a portion of their salary and accumulate tax deferred earnings, plus
interest, as a retirement fund. These deferrals are in addition to those
allowed under the Companys 401(k) Savings Plan. All deferred amounts vest
immediately. There are no employer matching contributions made under this plan.
The full amount vested in a participants account will be distributed to a
participant following termination of employment, normal retirement or in the
event of disability or death.

12.   SUPPLEMENTAL CASH FLOW DISCLOSURES

The net change in current assets and liabilities consists of the following
(in thousands):

|                                                 |                                     |                                                                                  |                            |   |                          |        |        |   |         |        |        |   |        |        |  
|------------------------------------------------ | ----------------------------------- | -------------------------------------------------------------------------------- | -------------------------- | - | ------------------------ | ------ | ------ | - | ------- | ------ | ------ | - | ------ | ------ | -
|                                                 |                                     |                                                                                  |                            |   | Years ended December 31,
|                                                 |                                     |                                                                                  |                            |   |                         
|                                                 |                                     |                                                                                  |                            |   | 2001                     |        | 2000   |   | 1999   
|                                                 |                                     |                                                                                  |                            |   |                          |        |        |   |        
|                                                 | (Increase) decrease in assets:      |                                                                                  |                            |   |                          |        |        |   |         |        |        |   |       
|                                                 |                                     |                                                                                  | Accounts receivable        |   | $                        | (7,975 | )      |   | $       | (7,117 | )      |   | $      | (9,866 | )
|                                                 |                                     |                                                                                  | Inventories                |   |                          | 290    |        |   |         | (162   | )      |   |        | (671   | )
|                                                 |                                     |                                                                                  | Prepaid expenses and other |   |                          | 405    |        |   |         | (5,223 | )      |   |        | (1,730 | )
|                                                 | (Decrease) increase in liabilities: |                                                                                  |                            |   |                          |        |        |   |         |        |        |   |       
|                                                 |                                     |                                                                                  | Accounts payable           |   |                          | (3,531 | )      |   |         | 6,555  |        |   |        | 262    |  
|                                                 |                                     |                                                                                  | Accrued expenses and other |   |                          | (4,177 | )      |   |         | (4,002 | )      |   |        | 26,779 |  
|                                                 |                                     |                                                                                  |                            |   |                          |        |        |   |         |        |        |  
|                                                 |                                     | $                                                                                | (14,988                    | ) |                          | $      | (9,949 | ) |         | $      | 14,774 |  
|                                                 |                                     |                                                                                  |                            |   |                          |        |        |   |         |        |        |  
|Supplemental Cash Flow Disclosure (in thousands) |                                     |                                                                                  |                            |   |                          |        |        |   |         |        |        |  
|                                                 |                                     | Cash paid for interest, net of amounts capitalized                               |                            | $ | 80,894                   |        |        | $ | 100,044 |        |        | $ | 54,681 |       
|                                                 |                                     | Repurchase common stock for debt                                                 |                            | $ | 8,043                    |        |        | $ | 13,175  |        |        | $ | 49,200 |       
|                                                 |                                     | Increase in assets and liabilities associated
with Empress Merger                |                            | $ |                         |        |        | $ | 156,578 |        |        | $ |       |       
|                                                 |                                     | Increases in assets and liabilities
related to buyout of former limited partners |                            | $ |                         |        |        | $ |        |        |        | $ | 25,900 |       

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13.   LEASE COMMITMENTS

The Company and its subsidiaries lease both real estate and equipment used
in its operations and classifies those leases as operating leases following the
provisions of SFAS No. 13 Accounting for Leases. As of December 31, 2001,
the Company did not have any capital leases.

Hammond entered into a lease providing for the right to use the site of
the development and the parking structure, which was conveyed to the City of
Hammond upon completion. The term of the lease automatically extends for a
period equal to each renewal period of the operating license provided that the
total term will not exceed 75 years. Hammond has paid in full the rent for the
amount of $1.00 per year for the term of the lease.

Rent expense for the years ended December 31, 2001, 2000 and 1999 was
approximately $8.9 million, $8.2 million and $2.5 million, respectively.

As of December 31, 2001, the Company is obligated under non-cancelable
operating leases to make future minimum lease payments as follows (in
thousands):

|                       |       |   |       |       | 
|---------------------- | ----- | - | ----- | ----- | 
|Year ended December 31 |       |   |       |      
|                       |       |   |       |      
|2002                   |       | $ | 2,334 |      
|2003                   |       |   | 1,172 |      
|2004                   |       |   | 610   |      
|2005                   |       |   | 159   |      
|2006                   |       |   | 100   |      
|Thereafter             |       |   | 576   |      
|                       |       |   |       |      
|                       | Total |   | $     | 4,951 | 
|                       |       |   |       |      

In addition to these minimum rental commitments, certain of the Companys
operating leases provide for contingent rentals based on a percentage of
revenues in excess of specified amounts.

14.   COMMITMENTS AND CONTINGENCIES

Severance Agreements

The Company has employment agreements and executive severance agreements
with its senior executives which provide for payments to the executives in the
event of their termination after a change of control, as defined. These
agreements provide for, among other things, a payment of up to 2.99 times
executives annual salary and bonus, as defined, as well as for accelerated
vesting of stock options and SARs upon a change of control, as defined. The
estimated amount payable to the executives under these arrangements, excluding
any payments for stock options and SARs, was approximately $14.0 million as of
January 1, 2002.

Self-Insurance

The Company is partially self-insured for general liability, workers
compensation and employee medical coverage. Insurance claims and reserves
include accruals of estimated settlements for known claims, as well as accruals
of estimates of incurred but not reported claims. These amounts are included
in accrued expenses and other in the accompanying consolidated balance sheets.

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14.   COMMITMENTS AND CONTINGENCIES (continued)

Litigation

The Company and its subsidiaries are from time to time, party to legal
proceedings arising in the ordinary course of business. Except as discussed
below, the Company is unaware of any legal proceedings which, even if the
outcome were unfavorable to the Company, would have a material adverse impact
on either its financial condition or results of operations.

On June 2, 2000, a lawsuit was filed in the United States District Court
for the Northern District of Indiana, against Hammond and the Company on behalf
of current and former employees of Hammond alleging that Hammond and the
Company are responsible for damages to current and former employees as a result
of poor air quality on the gaming vessel operating in Hammond, Indiana. The
lawsuit alleges certain tort claims based on poor air quality and seeks
certification as a class on behalf of similarly situated current and former
employees of Hammond. Hammond and the Company deny the allegations in the
complaint and intend to vigorously contest this matter.

On July 5, 2001, James Wellborn and Charles J. Nickel filed a lawsuit in
the 26th Judicial Court (Bossier Parish) against the Municipality of Bossier
City, Louisiana asking the Court to: (i) order the City to collect a $3.00 per
person boarding fee from Horseshoe Entertainment; (ii) invalidate a contract
fixing the amount paid by Horseshoe Entertainment to Bossier City as opposed to
a per person boarding fee; and (iii) certify the suit as a class action on
behalf of all citizens and tax payers of Bossier Parish. The Company is not
named in the suit but will seek to intervene to protect its interest. The
Company believes the suit is without merit and will vigorously defend the
validity of the contract.

Hammond Commitments

In February 2002, Hammond and the City of Hammond (the City) executed
the Fourth Amendment to the Hammond Riverboat Development Agreement (Fourth
Amendment). Pursuant to the Fourth Amendment, the City agreed to allow the
expansion of the Hammond facility, to include certain amenities including, but
not limited to, a hotel, pavilion entertainment venue and additional parking
facility. The Fourth Amendment also requires Hammond to begin construction of
an above ground parking garage before December 31, 2001. These new amenities
may be located in several areas adjacent to the existing operation on real
estate which is owned or controlled by the City and other local governmental
agencies (collectively the Lessors). The Lessors would lease such real estate
to Hammond for a period of approximately 67 years (Expansion Lease). The
Fourth Amendment also provided Hammond with a ten year option to lease
additional real estate in the Hammond marina for a term equal to the balance of
the Expansion Lease (Option).

The cost of the Expansion Lease, the Option and the lease rental rate for
the parcels covered by the Expansion Lease and the Option is $14.0 million plus
one dollar per year. Hammond paid the $14.0 million to the Lessors in two
installments during the fourth quarter of 2001 and the first quarter of 2002.
In addition, Hammond will pay a security deposit to the Lessors of $3.25
million during the first half of 2002. The Fourth Amendment also requires that
Hammond relocate the existing public boat launch ramp to a permanent location.

The Lessors have until April 30, 2002, to obtain all necessary approvals
and to execute the Fourth Amendment.

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EXHIBIT INDEX

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  | 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit       |  |                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  | 
|Number        |  | Description                                                                                                                                                                                                                                                                                                                                                                                                           |  |  |  | 
|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  | 
|2.1      (b.) |  | Agreement and Plan of Merger, dated as of September 2, 1998, by and among Horseshoe
Gaming, L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc.,
Empress Acquisition Indiana, Inc., Empress Casino Joliet Corporation, Empress Casino
Hammond Corporation and Empress Entertainment, Inc.                                                                                                   
|2.2      (c.) |  | First Amendment to Agreement and Plan of Merger, dated as of March 25, 1999, to the
Agreement and Plan of Merger, dated as of September 22, 1998, by and among Horseshoe
Gaming, L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc.,
Empress Acquisition Indiana, Inc., Empress Casino Joliet Corporation, Empress Casino
Hammond Corporation and Empress Entertainment, Inc.              
|2.3      (e.) |  | Subscription and Reorganization Agreement, dated as of April 23, 1999, by and among
Horseshoe Gaming Holding Corp., Horseshoe Gaming, L.L.C., Robinson Property Group, Inc.,
and others listed therein.                                                                                                                                                                                                              
|2.4      f.)  |  | Second Amendment to Agreement and Plan of Merger, dated as of July 23, 1999, to the
Agreement and Plan of Merger, dated as of September 22, 1998, by and among Horseshoe
Gaming, L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc.,
Empress Acquisition Indiana, Inc., Empress Entertainment, Inc., Empress Casino Joliet
Corporation and Empress Casino Hammond Corporation.             
|2.5      (h.) |  | Assumption Agreement, dated as of November 18, 1999, by and among Horseshoe Gaming
L.L.C., Horseshoe Gaming (Midwest), Inc., Empress Acquisition Illinois, Inc., Empress
Acquisition Indiana, Inc., Empress Entertainment, Inc., Empress Casino Joliet Corporation,
Empress Casino Hammond Corporation, Horseshoe Acquisition Illinois, Inc., Horseshoe
Acquisition Indiana, Inc., and Horseshoe Gaming Holding Corp.
|2.6      (n.) |  | Agreement and Plan of Merger by and among Argosy Gaming Company, Joliet Acquisition
Corporation, Empress Casino Joliet Corporation, and Horseshoe Gaming Holding Corp. dated as of April 12, 2001.                                                                                                                                                                                                                   
|3.1      (e.) |  | Certificate of Incorporation of Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                                                                                                                       
|3.2      (e.) |  | By-laws of Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                                                                                                                                            
|4.1      (e.) |  | Indenture, dated as of May 11, 1999, by and between Horseshoe Gaming Holding Corp.
and U.S. Trust Company, National Association.                                                                                                                                                                                                                                                                                     
|4.2      (e.) |  | Second Supplemental Indenture, dated as of May 11, 1999, to Indenture, dated as of
October 10, 1995, by and between Horseshoe Gaming, L.L.C., Robinson Property Group
Limited Partnership and U.S. Trust Company, National Association.                                                                                                                                                                              
|4.3      (e.) |  | Amendment No. 1 to Second Ship Mortgage on the whole of the Horseshoe Casino &
Hotel, Tunica executed by Robinson Property Group Limited Partnership, as Owner and
Mortgagor, in favor of Horseshoe Gaming, L.L.C. and United Trust Company of New York.                                                                                                                                                             
|4.4      (a.) |  | Form of 9 3/8% Senior Subordinated Note due 2007 of Horseshoe Gaming, L.L.C.                                                                                                                                                                                                                                                                                                                                         
|4.5      (a.) |  | Indenture, dated as of June 15, 1997, by and among Horseshoe Gaming, L.L.C., U.S.
Trust Company of Texas, N.A., as Trustee, and Robinson Property Group Limited
Partnership, as guarantor, with respect to the 9 3/8% Senior Subordinated Notes due 2007.                                                                                                                                                            





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##### Table of Contents



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  | 
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit        |  |                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  | 
|Number         |  | Description                                                                                                                                                                                                                                                                                                                                                                                        |  |  |  | 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  | 
|4.6      (a.)  |  | Intercompany Senior Secured Note due June 15, 2007 executed by Robinson Property
Group Limited Partnership in favor of Horseshoe Gaming, L.L.C.                                                                                                                                                                                                                                                   
|4.7      (a.)  |  | Intercompany Senior Secured Note due June 15, 2007 executed by Horseshoe Entertainment
in favor of Horseshoe Gaming, L.L.C.                                                                                                                                                                                                                                                                       
|4.8      (g.)  |  | Horseshoe Gaming Holding Corp. Credit Agreement, dated as of June 30, 1999, by and
among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc.
and Canadian Imperial Bank of Commerce.                                                                                                                                                                            
|4.9      (i.)  |  | Supplemental Indenture, dated as of December 1, 1999, among Empress Casino Hammond
Corporation, Empress Residential, L.L.C. and Empress Casino Joliet Corporation (collectively, the
Subsidiary Guarantors) with respect to the unconditional guarantee of all of the Companys
obligations under Indenture covering the 9 3/8% Senior Subordinated Notes due 2007 by the
Subsidiary Guarantors.
|4.10    (i.)   |  | Supplemental Indenture dated as of December 1, 1999, between Horseshoe Gaming Holding Corp., to
the 9 3/8% Senior Subordinated Notes due 2007 and U.S. Trust Company of Texas, N.A.                                                                                                                                                                                                               
|4.11    (i.)   |  | Amendment No. 1 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 18,
1999, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and
Canadian Imperial Bank of Commerce.                                                                                                                                                     
|4.12    (i.)   |  | Amendment No. 2 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of November 30,
1999, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and
Canadian Imperial Bank of Commerce.                                                                                                                                                     
|4.13    (i.)   |  | Amendment No. 3 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of January 20,
2000, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, DLJ Capital Funding, Inc. and
Canadian Imperial Bank of Commerce.                                                                                                                                                      
|4.14    (p.)   |  | Amendment No. 4 to Horseshoe Gaming Holding Crop. Credit Agreement, dated as of July 20, 2001,
by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and
Canadian Imperial Bank of Commerce.                                                                                                                                                        
|4.15    (q.)   |  | Amendment No. 5 to Horseshoe Gaming Holding Corp. Credit Agreement, dated as of September 1,
2001, by and among Horseshoe Gaming Holding Corp., the Lenders listed therein, Credit Suisse First Boston and
Canadian Imperial Bank of Commerce.                                                                                                                                                    
|10.1      (e.) |  | Settlement Term Sheet, dated as of May 19, 1999, by and among Jack B. Binion, Horseshoe Gaming,
Inc., Horseshoe Gaming, L.L.C., Paul R. Alanis, Loren Ostrow, John Schreiber and Cliff Kortman.                                                                                                                                                                                                   
|10.2      (e.) |  | Horseshoe Note Pledge and Security Agreement, dated as of and on May 11, 1999, by and among
Horseshoe Gaming Holding Corp., Horseshoe Gaming, L.L.C. and U.S. Trust Company, National Association.                                                                                                                                                                                                
|10.3      (e.) |  | Guarantee, dated as of May 11, 1999, by Robinson Property Group, Limited Partnership
for the benefit of Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                            
|10.4      (e.) |  | Guarantee, dated as of May 11, 1999, by Horseshoe Entertainment for the benefit of
Horseshoe Gaming Holding Corp.                                                                                                                                                                                                                                                                                 
|10.5      (e.) |  | Stockholders Agreement for Horseshoe Gaming Holding Corp., dated as of April 29, 1999,
by and among Horseshoe Gaming Holding Corp. and parties listed therein.                                                                                                                                                                                                                                   
|10.6      (c.) |  | Settlement Agreement, dated as of February 3, 1999, by and among Horseshoe Gaming, Inc.,
Horseshoe Gaming, L.L.C. and Mike Allen.                                                                                                                                                                                                                                                                 
|10.7      (c.) |  | Mutual General Release, dated February 23, 1999, by and among Horseshoe Gaming, L.L.C.,
Horseshoe Gaming, Inc., Horseshoe GP, Inc., Robinson Property Group Limited Partnership,
New Gaming Capital Partnership, Horseshoe Entertainment, and Nobutaka Mutaguchi.                                                                                                                                 
|10.8      (c.) |  | Exclusive License Agreement, dated July 2, 1998, by and between Horseshoe Gaming, L.L.C.
and Horseshoe License Company.                                                                                                                                                                                                                                                                           
|10.9      (d.) |  | Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe
Gaming, Inc., Horseshoe Entertainment, LP, and New Gaming Capital Partnership; Jack B.
Binion; The Robin Group, Inc. and August Robin.                                                                                                                                                                    
|10.10    (d.)  |  | Agreement, dated as of April 21, 1999, by and among Horseshoe Gaming, L.L.C., Horseshoe
Gaming, Inc., Horseshoe Entertainment, LP, and New Gaming Capital Partnership; Jack B.
Binion; Wendell Piper; Cassandra Piper; and Robert E. Piper, Jr.                                                                                                                                                   
|10.11    (f.)  |  | Consulting Agreement, dated as of July 23, 1999, by and between Horseshoe Gaming, L.L.C.
and Empress Entertainment, Inc.                                                                                                                                                                                                                                                                          
|10.12    (i.)  |  | Equity Incentive Plan dated as of January 1, 1999 by and between Horseshoe Gaming Holding
Corp. and certain employees.                                                                                                                                                                                                                                                                            
|10.13    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Alpine Associates.                                                                                                                                                                                                                                                          





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|               |  |                                                                                                                                                                                          |  |  |  | 
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit        |  |                                                                                                                                                                                          |  |  |  | 
|Number         |  | Description                                                                                                                                                                              |  |  |  | 
|               |  |                                                                                                                                                                                          |  |  |  | 
|10.14    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Bear Stearns F/A/O #
2000.                                        
|10.15    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Matthewson CRUT.                                                  
|10.16    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Nobutaka Mutaguchi.                                               
|10.17    (i.)  |  | Promissory Note and Stock Purchase Agreement dated as of November
30, 1999 by and between Horseshoe Gaming L.L.C. and Post Balanced Fund.                                               
|10.18    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and Robert Fechser.                                                                          
|10.19    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and Doyle Brunson.                                                                           
|10.20    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and Key Fechser.                                                                             
|10.21    (i.)  |  | Stock Purchase Agreement dated as of August 1, 1999 by and between Horseshoe Gaming
L.L.C. and David Reese.                                                                             
|10.22    (j.)  |  | Purchase Agreement dated April 1, 2000, between Horseshoe Gaming Holding Corp. and Walter J.
Haybert.                                                                                   
|10.23    (j.)  |  | Promissory Note dated April 1, 2000, between Horseshoe Gaming Holding Corp. and Water J.
Haybert.                                                                                       
|10.24    (j.)  |  | Purchase Agreement dated April 1, 2000 between Horseshoe Gaming Holding Corp. and G. A.
Robinson, III.                                                                                  
|10.25    (j.)  |  | Promissory Note dated April 1, 2000 between Horseshoe Gaming Holding Corp. and G.A. Robinson,
III.                                                                                      
|10.26    (o.)  |  | Purchase Agreement dated January 1, 2001 between Horseshoe Gaming Holding Corp. and Kathy Rose.                                                                                         
|10.27    (o.)  |  | Promissory Note dated January 1, 2001 between Horseshoe Gaming Holding Corp. and Kathy Rose.                                                                                            
|10.28    (l.)  |  | Empress Casino Joliet Settlement Agreement between the Illinois Gaming Board, Horseshoe Gaming
Holding Corp., Empress Casino Joliet Corporation and Jack Binion, dated January 31, 2001.
|10.29    (q.)  |  | Purchase Agreement dated October 1, 2001, by and between Horseshoe Gaming Holding Corp. and
Jerry Howard.                                                                               
|10.30    (q.)  |  | Promissory Note dated October 1, 2001 between Horseshoe Gaming Holding Corp. and Jerry Howard.                                                                                          
|10.31    (k.)  |  | Purchase Agreement dated October 1, 2000 between Horseshoe Gaming Holding Corp. and Patrick
Savin.                                                                                      
|10.32    (k.)  |  | Promissory Note dated October 1, 2000 between Horseshoe Gaming Holding Corp. and Patrick Savin.                                                                                         
|10.33    (r.)  |  | Transfer Agreement dated as of November 30, 2001, by and between Patrick Savin and Post High
Yield, L.P.                                                                                
|10.34    (r.)  |  | Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between
Horseshoe Gaming Holding Corp. and Roger P. Wagner.                                         
|10.35    (r.)  |  | Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between
Horseshoe Gaming Holding Corp. and Kirk C. Saylor.                                          
|10.36    (m.)  |  | Executive Severance Agreement, dated August 21, 2001, by and between Horseshoe Gaming Holding
Corp. and Floyd B. Hannon.                                                                
|10.37    (r.)  |  | Amended and Restated Executive Severance Agreement, dated November 30, 2001, by and between
Horseshoe Gaming Holding Corp. and Peri N. Howard.                                          
|10.38    (r.)  |  | Executive Severance Agreement, dated November 30, 2001 by and between Horseshoe Gaming
Holding Corp. and Dominic F. Polizzotto.                                                         
|10.39    (m.)  |  | Horseshoe Gaming Holding Corp. Retention Bonus Plan, effective August 1, 2000.                                                                                                          
|10.40    (m.)  |  | Horseshoe Gaming Holding Corp. Deferred Compensation Plan.                                                                                                                              
|10.41    (r.)  |  | First, Second, Third and Fourth Amendments of the Horseshoe Gaming Holding Corp. Deferred
Compensation Plan.                                                                            
|21.1      (r.) |  | Subsidiaries of Horseshoe Gaming Holding Corp.                                                                                                                                          
|99.1      (r.) |  | Letter regarding Assurance Letter from Arthur Andersen LLP.                                                                                                                             





|(a.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Registration Statement on
Form S-4 (No. 333-33145) filed on August 7, 1997.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------
|    
|(b.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 8-K filed on
September 18, 1998.                                      
|    
|(c.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-K for the fiscal
year ended December 31, 1999.                     
|    
|(d.) |  | Filed as an Exhibit to Horseshoe Gaming, L.L.C. Form 10-Q filed on May 3,
1999.                                            
|    
|(e.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp.s Form S-4
Registration Statement filed on June 15, 1999.            





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##### Table of Contents





|(f.) |  | Filed as an Exhibit to Amendment No. 1 to Horseshoe Gaming Holding Corps
Form S-4 Registration Statement filed on July 30, 1999. 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------
|    
|(g.) |  | Filed as an Exhibit to Amendment No. 2 to Horseshoe Gaming Holding
Corps Form S-4 Registration Statement filed on August 2, 1999.
|    
|(h.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on December 16, 1999.                                              
|    
|(i.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on March 30, 2000.                                                
|    
|(j.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on May 15, 2000.                                                  
|    
|(k.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on November 14, 2000.                                             
|    
|(l.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on February 7, 2001.                                               
|    
|(m.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-K on April 2, 2001.                                                 
|    
|(n.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 8-K on April 19, 2001.                                                 
|    
|(o.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on May 11, 2001.                                                  
|    
|(p.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on August l4, 2001.                                               
|    
|(q.) |  | Filed as an Exhibit to Horseshoe Gaming Holding Corp. Form 10-Q on November 14, 2001.                                             
|    
|(r.) |  | Filed herewith.                                                                                                                   



|    |                     
|--- | --------------------
|(b) | Reports on Form 8-K:

None