HORSESHOE GAMING HOLDING CORP
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>6
<FILENAME>a76735ex10-3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<PAGE>

Exhibit 10.3

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.


                         HORSESHOE GAMING HOLDING CORP.

                     PROMISSORY NOTE DUE SEPTEMBER 30, 2003


$1,762,896.00                                                   October 1, 2001
                                                             New York, New York


        FOR VALUE RECEIVED, HORSESHOE GAMING HOLDING CORP., a Delaware company
(the "Company"), subject to Section 3 hereof, promises to pay, on or before
September 30, 2003 (the "Maturity Date"), to the order of Jerry Howard (the
"Holder"), at the Company's offices at 18454 S. West Creek Dr., Tinley Park,
Illinois 60477, or in accordance with such other instructions as the Holder (or
any other entity entitled to payment hereunder) may hereafter designate from
time to time in writing, the principal sum of ONE MILLION, SEVEN HUNDRED AND
SIXTY-TWO THOUSAND, EIGHT HUNDRED AND NINETY SIX DOLLARS ($1,762,896.00)) in
lawful money of the United States, with interest on the unpaid principal amount
from the date of this Promissory Note (together with all supplements, amendments
or modifications hereto and replacements or renewals hereof, this "Note") to and
including the date of payment, calculated as provided below.

        1. Purchase Agreement. This Note is issued pursuant to the terms and
conditions of a Purchase Option Agreement dated as of April 1, 2001 (the
"Purchase Agreement"), between the Company and the Holder, as consideration for
the repurchase by the Company of the Holder's shares in the Company (the
"Shares").

        2. Interest. The Company promises to pay simple interest on the
outstanding principal amount of this Note at a rate equal to 9% per annum (the
"Interest Rate") from October 1, 2001 until the Maturity Date or the earlier
acceleration of this Note pursuant to Section 6 of this Note, when all accrued
interest shall be immediately due and payable. Interest shall be computed on the
basis of a 360-day year of twelve 30-day months. Subject to the terms of (a) the
Credit Agreement dated as of June 30, 1999 (the "Credit Agreement"), among the
Company, as Borrower, the lenders listed therein, DLJ Capital Funding, Inc., as
Syndication Agent, Canadian Imperial Bank of Commerce, as Administrative Agent
and Wells Fargo Bank, National Association, as Documentation Agent; (b) the
Indenture dated as of June 15, 1997 (the "9 3/8% Indenture"), as the same shall
have been amended to date, for Horseshoe Gaming, L.L.C. (the "LLC") 9 3/8%
Senior Subordinated Notes due 2007, among the LLC, Robinson Property Group,
Limited Partnership, New Gaming Capital Partnership, Horseshoe Entertainment,
Horseshoe GP, Inc.,


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Bossier City Land Corporation and Texas Trustee; (c) the Indenture dated as of
May 11, 1999 (the "8 5/8% Indenture"), for the Company's 8 5/8% Senior
Subordinated Notes due 2009 (the "Senior Subordinated Notes"), by and between
the Company and U.S. Trust Company, National Association (the documents
described in (a), (b) and (c) above being referred to as the "Financing
Documents"); and (d) the various agreements entered into prior to the date
hereof to repurchase the interests of various former employees and members of
the Company (collectively, the "Repurchase Agreements") which, among other
things, do not permit the Company to make principal payments on the repurchase
of the Shares prior to the repayment in full of amounts due under the Repurchase
Agreements, the Company shall pay accrued interest quarterly on December 31,
March 31, June 30 and September 30 of each year, beginning on December 31, 2001.
If the Company does not pay in cash all interest due (for whatever reason,
including but not limited to, not being permitted to make interest payments
under the Financing Documents or the Repurchase Agreements), then the interest
shall accrue and be compounded at the Interest Rate until the earlier of the
date such interest is paid, the maturity date of this Note or the earlier
acceleration of this Note pursuant to Section 6 of this Note.

        3. Payment of Principal.

(1) If the Company is not permitted under the terms of the Financing Documents
or the Repurchase Agreements to pay the principal of this Note in full on the
Maturity Date, then the payment of the portion of the principal on this Note
which may not be paid may be delayed until such date as such principal payments
are permitted under the terms of the Financing Documents and the Repurchase
Agreements. However, the portion of this Note which may be paid on the Maturity
Date shall be paid on the Maturity Date and the balance shall be paid promptly
thereafter as permitted by the Financing Documents and the Repurchase
Agreements.

(2) If the Company does not pay the principal of this Note in full on the
Maturity Date (for whatever reason, including, but not limited to, not being
permitted to make principal payments under the Financing Documents or the
Repurchase Agreements), then the Company promises to pay, in cash, interest to
the Holder on the unpaid portion of the principal and accrued interest at the
rate of 12% per annum until all amounts due and owing are paid in full; the
Company must, however, pay the principal and accrued interest of this Note in
full no later than January 2, 2006.

        4. Optional Prepayment. The Company, at its option, may prepay all or
any portion of this Note, at any time, by paying an amount equal to the
outstanding principal amount of this Note, or a portion thereof, together with
interest accrued and unpaid thereon to the date of prepayment and any other
amounts due under this Note, without penalty or premium.

        5. Application of Payments. All mandatory payments under Section 3 of
this Note and all optional prepayments under Section 4 of this Note shall
include payment of accrued interest on the principal amount so paid or prepaid
and all other amounts due under this Note and shall be applied, first to all
reasonable costs, fees, and expenses incurred by the Holder in the exercise of
the Holder's rights hereunder, second to payment of other accrued interest, and
thereafter to principal.


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        6. Acceleration. At the option of the Holder, this Note may accelerate
and the outstanding principal of and all accrued interest on this Note may
become immediately due and payable, if a Change in Control (as defined in the 8
5/8% Indenture) or an Event of Default (as defined in the 8 5/8% Indenture)
occurs, which Change of Control or Event of Default results in the acceleration
and repayment of all of the Senior Subordinated Notes.

        7. Replacement Note. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Note and of a
letter of indemnity reasonably satisfactory to the Company from the Holder and
upon reimbursement to the Company of all reasonable expenses incident thereto,
and upon surrender or cancellation of this Note, if mutilated, the Company will
make and deliver a new note of like tenor in lieu of such lost, stolen,
destroyed or mutilated note.

        8. Pari Passu. This Note is pari passu with and equal in right of
payment with any and all existing and future bank debt and senior in right of
payment to any and all existing and future subordinated debt, including but not
limited to the Senior Subordinated Notes; the Holder acknowledges that bank debt
is secured debt and this Note is an unsecured obligation of the Company.

        9. Amendment. Any amendment, supplement or modification of or to any
provision of this Note shall be effective only with the express written consent
of the Company and the Holder.

        10. Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company or the Holder shall bind its successors and assigns, whether so
expressed or not.

        11. Governing Law. This Note and the rights and obligations of the
Company and the Holder hereunder shall be governed by, and shall be construed
and enforced in accordance with, the internal laws of the State of New York
(including Section 5-1401 of the General Obligations Law of the State of New
York), without regard to conflicts of laws principles.

        12. Variation in Pronouns. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.

        13. Headings. The headings in this Note are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.


                                       HORSESHOE GAMING HOLDING CORP.

                                       By: /s/ Kirk Saylor
                                          ------------------------------------
                                          Kirk Saylor, Chief Financial Officer


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