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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10/A
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
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JCC HOLDING COMPANY
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
DELAWARE 62-1650470
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or organization) No.)
512 SOUTH PETERS STREET 70130
NEW ORLEANS, LOUISIANA (Zip code)
(Address of principal
executive offices)
</TABLE>
(504) 533-6000
(Registrant's telephone number, including area code)
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COPIES OF NOTICES AND OTHER COMMUNICATIONS SHOULD BE SENT TO:
FREDERICK W. BURFORD
PRESIDENT
JCC HOLDING COMPANY
512 SOUTH PETERS STREET
NEW ORLEANS, LOUISIANA 70130
(504) 533-6000
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrants' Agent for Service)
------------------------
MICHAEL R. MCALEVEY
ALSTON & BIRD LLP
ONE ATLANTA CENTER
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3424
(404) 881-7000
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Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Class A Common Stock, par value $0.01 per
share....................................... The American Stock Exchange
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act: None
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<PAGE>
EXPLANATORY NOTE
A THIRD AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE, AS MODIFIED THROUGH SEPTEMBER 3, 1998 (THE "PLAN OF
REORGANIZATION"), OF HARRAH'S JAZZ COMPANY, HARRAH'S JAZZ FINANCE CORP. AND
HARRAH'S NEW ORLEANS INVESTMENT COMPANY HAS BEEN FILED WITH THE UNITED STATES
BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF LOUISIANA. AS OF THE DATE ON WHICH
THIS FORM 10/A REGISTRATION STATEMENT WAS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, THE PLAN OF REORGANIZATION HAD NOT BEEN CONFIRMED AND THE PLAN OF
REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED THEREBY HAD NOT BECOME
EFFECTIVE. THERE CAN BE NO ASSURANCE THAT THE PLAN OF REORGANIZATION WILL BECOME
EFFECTIVE OR AS TO THE TIMING THEREOF.
THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM 10/A
HAS BEEN PREPARED ON A PROSPECTIVE BASIS ON THE ASSUMPTION THAT, AMONG OTHER
THINGS, THE PLAN OF REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED THEREBY
WILL BE CONSUMMATED AS CONTEMPLATED BY SUCH PLAN OF REORGANIZATION. BECAUSE
THERE CAN BE NO ASSURANCE AS TO SUCH MATTERS, THE REGISTRANT WILL AMEND THIS
PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM 10/A TO THE
EXTENT NECESSARY TO REFLECT ANY MATERIAL CHANGES TO THE INFORMATION CONTAINED
HEREIN THAT MAY RESULT FROM ANY AMENDMENT OF OR CHANGE TO SUCH PLAN OF
REORGANIZATION.
------------------------
<PAGE>
ITEMS 1 AND 3. BUSINESS AND PROPERTIES.
THE COMPANY
JCC Holding Company ("JCC Holding" or the "Registrant") conducts its
business through its wholly-owned subsidiaries, Jazz Casino Company, L.L.C., a
Louisiana limited liability company ("JCC" and, together with JCC Holding, the
"JCC Entities"), JCC Development Company, L.L.C., a Louisiana limited liability
company ("JCC Development"), CP Development, L.L.C., a Louisiana limited
liability company ("CP Development"), and FP Development, L.L.C., a Louisiana
limited liability company ("FP Development" and, together with JCC Development
and CP Development, the "Development Entities" and, together with the JCC
Entities, the "Company"). JCC Holding was incorporated on August 20, 1996 under
Delaware law. Currently, JCC Holding's principal executive offices are located
at 512 South Peters Street, New Orleans, Louisiana 70130, and its telephone
number is (504) 533-6000.
DEVELOPMENT PLANS
Under the Plan of Reorganization, except for certain real property which
will vest in CP Development and FP Development, all of the assets of Harrah's
Jazz Company, a Louisiana general partnership ("HJC"), will vest in JCC on the
date that the Plan of Reorganization is consummated (the "Effective Date"),
which is expected to occur at the end of October 1998. The Company expects that
HJC will assign to JCC in accordance with Louisiana law and the agreement of the
parties thereto an amended and renegotiated casino operating contract, which
will give JCC the right to operate a land-based casino in Orleans Parish,
Louisiana (the "Casino"), and expects to succeed to HJC's interest in a
long-term lease for the site in New Orleans, Louisiana (the "City"), designated
by law for the Casino's development. JCC intends to develop, own and operate the
Casino. The Casino will be located in downtown New Orleans at the foot of Canal
and Poydras Streets on the site of the City's former convention center (the
"Rivergate").
The Casino is scheduled to open and commence operations 12 months after the
Effective Date and is expected to include 100,000 square feet of net gaming
space, a 250-seat buffet, two parking garages, an underground tunnel between the
Casino and the parking garages (the "Poydras Tunnel Area") and approximately
15,000 square feet of multi-function, special event and meeting-room space on
the first floor of the premises (collectively, the "Initial Casino Facilities").
Concurrent with construction of the Initial Casino Facilities, approximately
130,000 square feet of multipurpose non-gaming entertainment space on the second
floor of the premises is expected to be constructed to the point at which the
shell of the structure is complete and the space is suitable for tenant
build-out ("Second Floor Shell Construction," and together with the Initial
Casino Facilities, the "Casino Construction"). A group consisting of
representatives of the Rivergate Development Corporation (the "RDC"), JCC
Development and JCC will develop a master plan for the initial build-out and
leasing of the second floor for non-gaming uses (the "Master Plan"). See
"--Material Agreements--Second Floor Sublease--Master Plan." The Master Plan is
intended to establish, among other things, (i) leasing guidelines regarding
rent, termination rights and termination fees, tenant improvements and
concessions, permissible uses and brokerage fees, (ii) an initial capital
improvement budget, and (iii) an initial operating budget for the first year of
second-floor operation. JCC intends to lease the second floor to JCC Development
and JCC Development intends to manage and lease the second floor development in
a manner consistent with the Master Plan. JCC will be entitled to convert any
portion of the second floor in the future to gaming use, subject to the approval
of the Louisiana Gaming Control Board (the "LGCB") and certain rights of the
RDC. See "--Regulation." The LGCB will have approval rights over the Master Plan
based upon the terms of the Louisiana Economic Development and Gaming
Corporation Act and the Louisiana Gaming Control Act (collectively, the "Gaming
Act"). The LGCB will also have the authority to approve all subleases and uses
on the second floor to ensure that such use is consistent with the Gaming Act
and the rules and regulations promulgated thereunder (the "Rules and
Regulations"). Subject to the
1
<PAGE>
approval of the Master Plan by the LGCB, entering into tenant leases and
obtaining the necessary funding, the build-out of non-gaming tenant improvements
on the second floor of the Casino beyond the Second Floor Shell Construction is
targeted to be completed following completion of the Second Floor Shell
Construction. The Second Floor Shell Construction is scheduled to be completed
substantially concurrently with the completion of the Initial Casino Facilities.
The Company has not obtained the funding necessary to complete the build out of
non-gaming tenant improvements on the second floor of the Casino beyond the
Second Floor Shell Construction. See "--Risk Factors--Ability to Develop the
Development Properties."
The completion and opening of the Casino is subject to, among other things,
receipt of the appropriate regulatory approvals, compliance with gaming laws,
rules and regulations, and the completion of certain suitability determinations
by the State with respect to various individuals and entities, including
employees and vendors. See "--Regulation."
Under the Plan of Reorganization, title to the real property owned by HJC at
3 Canal Place in New Orleans, adjacent to the Canal Place shopping center (the
"3CP Property"), will vest in CP Development, and title to the real property
owned by HJC on Fulton and Poydras Streets in New Orleans, adjacent to the
Casino parking facilities (the "Fulton Property"), will vest in FP Development.
CP Development and FP Development will be wholly-owned by JCC Holding. JCC, JCC
Development, CP Development and FP Development expect to enter into a
development services agreement with Harrah's Operating Company, Inc. ("HOCI"), a
wholly-owned subsidiary of Harrah's Entertainment, Inc. ("HET"), pursuant to
which HOCI or an affiliate will provide certain development services with
respect to the second floor of the Casino, the 3CP Property and the Fulton
Property. See "--Material Agreements--Development Services Agreement." The
Company currently intends that CP Development and FP Development will develop
the properties, possibly with the assistance of a third party developer, for
entertainment uses supportive of the Casino. The Company has not obtained
financing to fund the development of either the 3CP Property or Fulton Property.
See "--Risk Factors--Ability to Develop the Development Properties."
RECENT REORGANIZATION
HJC is a Louisiana general partnership comprised of (i) Harrah's New Orleans
Investment Company ("HNOIC"), an indirect wholly-owned subsidiary of HET, (ii)
New Orleans/Louisiana Development Corporation ("NOLDC") and (iii) Grand Palais
Casino, Inc. ("Grand Palais" and, collectively with HNOIC and NOLDC, the
"Partners"). HJC was formed on November 29, 1993 for the purposes of developing,
owning and operating a casino at the Rivergate site. HJC entered into a contract
(the "Casino Operating Contract") with the Louisiana Economic Development and
Gaming Corporation ("LEDGC") to develop and operate the casino at the Rivergate
site and entered into a lease with the City and the RDC for the Rivergate site
(the "Ground Lease"). HJC, the RDC and the City also entered into a development
agreement which governed the design, development and construction of the casino
and certain related facilities (the "General Development Agreement") and an open
access program and open access plans adopted thereunder regarding hiring goals
and programs (collectively, the "Open Access Program and Plans"). HJC engaged
Harrah's New Orleans Management Company (the "Manager"), an indirect wholly-
owned subsidiary of HET, to manage the operations of the casino.
On November 16, 1994, HJC closed a series of transactions to finance
development of a casino at the Rivergate site (the "Initial Financing"),
including (i) a $170 million equity contribution by the Partners which consisted
of cash, fixed assets and project development expenses incurred by the Partners,
(ii) the sale of $435 million of 14 1/4% First Mortgage Notes due 2001 with
Contingent Interest (the "Old Bonds"), and (iii) bank credit facilities
providing for loans of up to $175 million aggregate principal amount (the "Old
Bank Credit Facilities"). In addition, at the time of the Initial Financing, HJC
anticipated that approximately $72 million of cash would be available from cash
flow generated by the operations of a casino (the "Basin Street Casino") to be
operated by HJC for approximately one year in the City's Municipal Auditorium on
a temporary basis until a casino at the Rivergate site was completed.
2
<PAGE>
In January 1995, HJC began construction of a casino at the Rivergate site
and on May 1, 1995, the Basin Street Casino opened with approximately 76,000
square feet of net gaming space, 3,046 slot machines and approximately 85 table
games. The Basin Street Casino was managed by the Manager and was open 24 hours
a day, seven days a week, except for approximately 65 hours from May 9 to May
11, 1995, when HJC was forced to close the Basin Street Casino because of
flooding in the New Orleans area.
HJC had originally projected that the Basin Street Casino would have gross
gaming revenues of approximately $395 million per year, or an average of
approximately $33 million per month. Instead, gross gaming revenues from the
Basin Street Casino for the months of May, June and July 1995 were $11.2
million, $13.2 million and $14.8 million, respectively, and HJC suffered net
losses of $15.2 million, $14.0 million and $14.2 million, respectively, in those
three months. In an attempt to reduce such losses, in August 1995, HJC reduced
the work force in the Basin Street Casino by approximately 15%. HJC also reduced
the number of its slot machines in the Basin Street Casino from 3,046 to 2,150.
Gross gaming revenues were not adversely affected by these changes. Gross
revenues for August, September and October 1995 were $13.3 million, $12.0
million and $14.4 million, respectively. Operating results did not improve,
however. HJC posted net losses in August, September and October 1995 of $13.5
million, $12.3 million and $12.0 million, respectively.
By November 1995, all of the Partners' equity contribution and substantially
all of the proceeds from the offering of the Old Bonds had been depleted.
Construction of the casino at the Rivergate site was approximately 60% complete
and, as a result of design modifications and project cost overruns, including
the addition of hard cost contingencies, the approved project budget for the
casino at the Rivergate site and the Basin Street Casino had increased from the
original amount of $815.0 million to $823.5 million; however, the actual cost of
constructing the casino at the Rivergate site as originally designed would
likely have exceeded this amount. In addition, as discussed above, the Basin
Street Casino had suffered significant operating losses in every month of
operation.
During a meeting on November 19, 1995, Bankers Trust Company ("BTCo"),
acting as agent for the lending banks under the Old Bank Credit Facilities,
informed HNOIC, the partner of HJC responsible for financing matters under HJC's
partnership agreement, that the lending banks would not disburse funds to HJC
under the terms of the Old Bank Credit Facilities. BTCo advised HNOIC that after
reviewing certain financial information of HJC, including HJC's forecasts of
reduced gross gaming revenues for the casino at the Rivergate site, it believed
that there was a material adverse change in the financial prospects of HJC under
the Old Bank Credit Facilities. Subsequently, HNOIC advised Grand Palais and
NOLDC of such developments. Faced with an absence of funding because of BTCo's
action, on November 21, 1995, HJC decided to close the Basin Street Casino and
suspend construction of the casino at the Rivergate site. HJC also decided to
file for bankruptcy protection. On November 21, 1995, BTCo declared the Old Bank
Credit Facilities in default, accelerated the maturity of and terminated the
bank loans, and withdrew $157 million of the cash on deposit in the banks' cash
collateral account at the collateral agent under the Old Bank Credit Facilities.
On November 22, 1995 (the "Petition Date"), HJC and Harrah's Jazz Finance
Corp. ("Finance Corp."), its wholly-owned subsidiary, filed voluntary petitions
for relief under Chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"), ceased operations of the Basin Street Casino and, on or
about the same date, suspended construction of the casino at the Rivergate site.
HJC, Finance Corp., HNOIC and HET (collectively, the "Proponents") filed a plan
of reorganization and related disclosure statement with the Bankruptcy Court for
the Eastern District of Louisiana (the "Bankruptcy Court") on April 3, 1996. As
a result of, among other things, ongoing negotiations with the City, the State
and other parties, the Proponents amended the plan of reorganization several
times during the reorganization process. The Third Amended Joint Plan of
Reorganization, As Modified Through September 3, 1998 (the "Plan of
Reorganization") is filed as an exhibit hereto.
3
<PAGE>
The effectiveness of the Plan of Reorganization is conditioned upon, among
other things, the execution and delivery of a modified casino operating contract
and all necessary approvals, if any, from the State of Louisiana (the "State").
Although the LGCB approved a modified casino operating contract on April 29,
1997, the State took the position that the State legislature must also give its
approval, which the State legislature has failed to do. On March 16, 1998 the
State Attorney General issued an opinion that the LGCB has independent authority
(without the necessity of any legislative approval) to renegotiate and execute a
renegotiated casino operating contract. On March 20, 1998, the LGCB approved an
amended and renegotiated Casino Operating Contract among HJC, JCC and the State,
by and through the LGCB (the "Amended and Renegotiated Casino Operating
Contract"), subject to, among other conditions, the condition that the Louisiana
Supreme Court render a final, non-appealable judgment that the LGCB, acting on
its own, is the proper party and has the legal authority to enter into the
Amended and Renegotiated Casino Operating Contract with HJC or JCC on behalf of
the State and the LGCB, without the specific approval of the Governor or the
State legislature. On May 15, 1998, the Louisiana Supreme Court issued a
decision confirming that the LGCB has the independent authority to renegotiate
and execute the Amended and Renegotiated Casino Operating Contract without
seeking gubernatorial or legislative approval. See "--Risk Factors--Uncertainty
Regarding Gaming Regulation and Future Changes to the Law." The LGCB's approval
of the Amended and Renegotiated Casino Operating Contract will not become final,
and the contract cannot be executed, until, among other things, the LGCB makes a
determination that certain of the owners and operators of the Casino and
officers and directors thereof are suitable under applicable rules and
regulations, and until certain regulatory rulings and approvals are received.
See "--Risk Factors--Uncertainty Regarding Gaming Regulation and Future Changes
to the Law--Suitability of JCC and Affiliated Persons" and
"--Regulation--Louisiana Gaming Act."
The Plan of Reorganization will become effective if (i) the Plan of
Reorganization receives the necessary affirmative votes from HJC's creditors
and/or otherwise meets the requirements of Section 1129 of the Bankruptcy Code,
(ii) it is confirmed by the Bankruptcy Court, and (iii) certain conditions
precedent to the effectiveness of the Plan of Reorganization are satisfied or
waived. Following a hearing on the adequacy of the disclosure statement held on
September 3, 1998, the disclosure statement was approved and a confirmation
hearing on the Plan of Reorganization is scheduled for October 13, 1998. Many of
the conditions precedent to the effectiveness of the Plan of Reorganization are
outside the control of the Company. These conditions precedent pose a material
risk that the Plan of Reorganization may not be consummated.
Under the Plan of Reorganization all the assets of HJC, except for the 3CP
Property and Fulton Property, will vest in JCC on the Effective Date. Title to
the 3CP Property and Fulton Property will vest in CP Development and FP
Development, respectively. The Plan of Reorganization provides that, for federal
income tax purposes, the vesting of assets in JCC, CP Development and FP
Development will be deemed to have occurred as a deemed exchange of the Old
Bonds by the holders of Old Bonds ("Bondholders") for such assets, and a deemed
exchange by the Bondholders of such assets for the Class A Common Stock (as
defined herein), the New Notes (as defined herein) and the New Contingent Notes
(as defined herein). Pursuant to the Plan of Reorganization, the outstanding
capital stock of JCC Holding on the Effective Date will consist of shares of
Class A Common Stock, par value $0.01 per share (the "Class A Common Stock"),
and shares of Class B Common Stock, par value $0.01 per share (the "Class B
Common Stock" and, together with the Class A Common Stock and the Unclassified
Common Stock (as defined herein), the "Common Stock"). Pursuant to the Plan of
Reorganization, Harrah's Crescent City Investment Company, a Nevada corporation,
and an indirect wholly-owned subsidiary of HET ("HCCIC") will purchase shares of
Class B Common Stock in consideration of, among other things, an equity
investment (the "New Equity Investment") in an amount equal to the difference
between $75 million and the outstanding principal amount of debtor-in-possession
financing that has been provided to HJC by HET or its affiliates, which will be
converted to equity and contributed to JCC Holding on the Effective Date. Upon,
and subject to, the occurrence of the Effective Date, the claim of HET or its
affiliates to any interest
4
<PAGE>
which has theretofore accrued on the debtor-in-possession financing provided to
HJC prior to the Effective Date will be cancelled. The Class B Common Stock
issued to HCCIC on account of the New Equity Investment and other consideration
will be 49.9% of the Common Stock issued on the Effective Date. Under certain
settlement agreements contemplated under the Plan of Reorganization, HCCIC will
transfer from its distribution (i) options to purchase a number of shares of
Class B Common Stock constituting in the aggregate up to 3.0% of the Common
Stock issued on the Effective Date to the shareholders of NOLDC, (ii) options to
purchase a number of shares of Class B Common Stock constituting in the
aggregate up to 1.5% of the Common Stock issued on the Effective Date to First
National Bank of Commerce (together with its successors and assigns, "FNBC"),
and (iii) a number of its shares constituting 3.5% of the Common Stock issued on
the Effective Date to senior secured bondholders of Grand Palais. Also pursuant
to the Plan of Reorganization, shares of Class A Common Stock which constitute
37.1% of the Common Stock issued on the Effective Date will be distributed on a
pro rata basis to the Bondholders, and shares of the Class A Common Stock which
constitute 13% of the Common Stock issued on the Effective Date will be issued
to a disbursing agent for the benefit of Bondholders who consent to releases as
provided in the Plan of Reorganization. HCCIC will contribute a number of its
shares equal to 2% of the Common Stock issued on the Effective Date to a
disbursing agent for the benefit of Bondholders who consent to certain releases
as provided in the Plan of Reorganization. In addition, the Bondholders will
receive their pro rata share of (i) $187.5 million in aggregate principal amount
of Senior Subordinated Notes with Contingent Payments due 2009 of JCC (the "New
Notes"), and (ii) Senior Subordinated Contingent Notes due 2009 of JCC (the "New
Contingent Notes" and, together with the New Notes, the "Notes"). See
"--Material Agreements--Indentures."
Also in connection with the Plan of Reorganization, JCC expects to enter
into (i) a $60 million term loan (the "A Term Loan") from a syndicate of lenders
led by BTCo (the "Bank Lenders"), (ii) a $151.5 million term loan from the Bank
Lenders (the "B Term Loan" and, together with the A Term Loan, the "Term
Loans"), (iii) a credit facility pursuant to which HET has agreed to make
available up to $22.5 million of subordinated indebtedness (the "Junior
Subordinated Credit Facility"), the proceeds from the issuance of the
Convertible Junior Subordinated Debentures (as defined herein) and the New
Equity Investment. In connection with the Plan of Reorganization, JCC expects to
issue to BTCo (and certain other banks which may elect to purchase a number of
Convertible Junior Subordinated Debentures of JCC pursuant to the Plan of
Reorganization), Salomon Smith Barney ("Salomon"), Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and BT Alex. Brown Incorporated approximately $27
million aggregate principal amount of Convertible Junior Subordinated Debentures
of JCC (the "Convertible Junior Subordinated Debentures"). JCC also expects to
have up to $25 million available for working capital purposes under a working
capital line of credit (the "Working Capital Facility" and, together with the
Term Loans, the "Bank Loans"). See "--Material Agreements--Bank Loans" and
"--Convertible Junior Subordinated Debentures." The availability of the Term
Loans and the Working Capital Facility is a condition precedent to the Effective
Date of the Plan of Reorganization. The Proponents of the Plan of Reorganization
are presently in negotiations to obtain such financing. No binding agreement,
however, has been entered into with respect to either the Term Loans or the
Working Capital Facility. There can be no assurance that the Company will be
able to obtain such financing. In addition, the Plan of Reorganization is
expected to effect amendments to the Ground Lease, the General Development
Agreement and other contracts and plans, including the Open Access Program and
Plans. See "--Material Agreements." The lease among HJC, the City and the RDC
for the Basin Street Casino (the "Basin Street Casino Lease") has already been
terminated. See "--Material Agreements--Basin Street Casino Lease Termination
Agreement." Also in connection with the Plan of Reorganization, HCCIC will
receive warrants (the "HET Warrant") entitling it to purchase additional shares
of Common Stock such that HCCIC would be entitled to own up to 50.0% of the then
outstanding shares of Common Stock, subject to certain adjustments. See
"--Material Agreements--HET Warrant."
5
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THE CASINO
When HJC filed for bankruptcy in November 1995, construction at the
Rivergate site stopped. At the time construction stopped, the Casino was
approximately 60% complete. The building shell, including the structural steel,
exterior walls and roof was approximately 76% complete, and the building
interior, including the mechanical and electrical systems and interior finishes,
was approximately 35% complete. Construction resumed on March 11, 1996 for the
limited purpose of enclosing the structure, which was completed on or about
September 6, 1996. While construction was suspended, the structure at the
Rivergate site incurred approximately $5.0 million of damage from exposure to
moisture and humidity.
As redesigned pursuant to the Plan of Reorganization, the Casino will
contain five themed areas named The Jazz Court, The Mardi Gras Court, The
Smuggler's Court, The Court of the Mansion and The Court of Good Fortune. The
remaining space will be used for additional gaming activities, a food service
area, casino support facilities, and multi-function, special event and
meeting-room space. To maintain operational efficiency and a dynamic atmosphere,
the Casino will be designed so that individual gaming areas can be opened or
closed to patrons depending on volume. The second floor of the Casino will be
initially developed for non-gaming uses. Parking for between 400 and 500 cars
and approximately 145,000 square feet of back-of-house and support areas will be
provided underneath the main gaming floor. Across Poydras Street and connected
to the Casino by the Poydras Tunnel Area will be a newly constructed parking
facility which will contain approximately 1,550 parking spaces. Under the Plan
of Reorganization and the Amended and Renegotiated Casino Operating Contract,
the Basin Street Casino will not re-open.
JCC Development intends to sublease and manage the second floor development
in a manner consistent with the Master Plan. JCC may convert any portion of the
second floor in the future to gaming use, subject to approval of the LGCB and
the Amended and Renegotiated Casino Operating Contract. If, however, such
conversion were to reduce the sublease revenue payable to the RDC, JCC would be
required to compensate the RDC for such reduction. See "--Material
Agreements--Second Floor Sublease--Rent."
The Proponents have reached an agreement with Centex Landis Construction
Co., Inc. ("Centex"), the primary contractor for the Casino prior to the filing
of HJC's bankruptcy petition, with respect to full-scale construction of the
Casino in accordance with the modified design for the Casino and the revised
opening schedule (the "Centex Settlement Agreement"). Negotiations to revise the
Centex Settlement Agreement to accommodate the construction schedule currently
contemplated by the Plan of Reorganization, the Amended and Renegotiated Casino
Operating Contract and the Amended Ground Lease (as defined herein) are in
process. There can be no assurance that an agreement on acceptable modifications
to the Centex Settlement Agreement can be reached between Centex and the
Company.
The Proponents also reached an agreement with Broadmoor, a Louisiana general
partnership and the primary contractor for the Casino's parking facilities, with
respect to construction of the Casino's parking facilities (the "Broadmoor
Settlement Agreement"). The Broadmoor Settlement Agreement provided that if the
Effective Date did not occur by July 31, 1997 (which it did not), Broadmoor
would have the right to have its contract deemed rejected and to pursue its
proof of claim, a right Broadmoor has not exercised. On September 22, 1998, the
Bankruptcy Court approved the terms of an amended settlement agreement with
Broadmoor, and authorized HJC to execute that agreement. HJC and Broadmoor are
finalizing the terms and conditions of the amended settlement agreement, and HJC
expects to execute an amended agreement shortly. On September 22, 1998, the
Bankruptcy Court also authorized HJC to re-commence construction on the Casino's
parking facilities at this time.
HJC has approximately 3,000 slot machines in inventory. Up to 1,000 of these
owned machines may not meet customer expectations and could require replacement.
JCC intends to evaluate the extent to which the owned machines will meet
customer expectations upon opening of the Casino, whether such machines will
need to be replaced, and the options available to replace such machines.
6
<PAGE>
The Initial Casino Facilities are scheduled to open and commence operations
approximately 12 months following the Effective Date (the "Opening Date"). The
Second Floor Shell Construction is scheduled to be completed substantially
concurrently with the opening of the Initial Casino Facilities.
Subject to the approval of the LGCB, all games typically available in Las
Vegas casinos except sports betting will be permitted at the Casino. Under
existing law, the Casino will be open 24 hours per day, every day of the year
and will extend credit, with no loss or wagering limits. See "--Risk
Factors--Uncertainty Regarding Gaming Regulation and Future Changes to the
Law--Uncertainty of Recent Regulation and Interpretation of Gaming Act" and
"--Regulation."
MARKETING STRATEGY
JCC's marketing strategy will be designed to attract primarily a broad
"middle market" of casino patrons. JCC does not intend to seek those casino
patrons who are most interested in discounts, but does expect to have a program
designed to attract both domestic and international premium gaming customers.
JCC expects to use marketing material emphasizing the Casino as a total
entertainment experience as well as New Orleans' unique music, food, history,
architecture and spirit. Additionally, under the terms of the Amended Ground
Lease (as defined herein), JCC will agree to pay the City $1 million per year
for the purpose of marketing and promoting the Casino as a part of the City's
destination marketing program pursuant to the guidelines therein. See
"--Material Agreements--Amended Ground Lease--Term, Fees and Impositions."
DESCRIPTION OF THE MANAGER
JCC expects to engage the Manager to manage and develop operations of the
Casino. The Manager is an indirect wholly-owned subsidiary of HET and was formed
in May 1993 for the purpose of acting as the manager of the casino at the
Rivergate site. The Manager is responsible for and has authority over, among
other things: hiring, supervising and establishing labor policies with respect
to employees working in the Casino; gaming and entertainment policies and
operations including security and internal control procedures; advertising and
public relations and promotion; Casino-level accounting, budgeting, financial
and treasury functions; maintaining, renovating and improving the Casino;
performing certain system services generally performed at casinos owned or
managed by HET or its affiliates; and performing certain other functions
identified by JCC and agreed to by the Manager.
HET's casino business commenced operations more than 60 years ago and,
through its operating subsidiaries and other affiliates, HET currently operates
casino entertainment facilities in eleven states and Sydney, Australia. Such
facilities include: casino hotels in the five traditional U.S. gaming markets of
Reno, Lake Tahoe, Las Vegas and Laughlin, Nevada and Atlantic City, New Jersey;
riverboat or dockside casinos in Joliet, Illinois, Vicksburg and Tunica,
Mississippi, Shreveport, Louisiana, North Kansas City and St. Louis, Missouri,
and East Chicago, Indiana; casinos on Indian lands near Phoenix, Arizona,
Seattle, Washington, Cherokee, North Carolina and Topeka, Kansas; and a
land-based casino in Sydney, Australia. On July 23, 1998, HET announced that it
would withdraw from management of the Indian casino near Seattle, Washington
before the end of 1998. As of July 1, 1998, HET, through its operating
subsidiaries and other affiliates, operated a total of approximately 1,102,000
square feet of casino space, 27,100 slot machines, 1,187 table games, 9,017
hotel rooms or suites, approximately 165,200 square feet of convention space, 76
restaurants, nine showrooms and four cabarets.
COMPETITION
Since the time the land-based Casino project was originally proposed in the
early 1990s, considerable competition has developed which may have an adverse
impact on the Casino's profitability. The Company believes that the Casino will
face significant competition on a national, regional and local scale from gaming
operations in Mississippi and, on a regional and local scale, from gaming
operations in the State.
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The Company believes that the Casino will also compete for patrons on a national
and international scale with large casino hotel facilities in Las Vegas, Nevada
and Atlantic City, New Jersey. Because of the large number of casinos competing
on both the local and national levels and the continued development of other
gaming markets, the attraction of a land-based casino in New Orleans has
decreased. In addition, negative publicity associated with the Company's
bankruptcy may have an adverse impact on the Casino's ability to compete.
The Gaming Act prohibits JCC from offering seated restaurant facilities with
table food service for patrons of the Casino. Although the Gaming Act permits
the Casino to offer limited cafeteria style food services for employees and
patrons, no food may be given away or subsidized within the Casino by JCC or any
licensee, and seating may not exceed 250 persons. The LGCB may, by Rule or
Regulation, allow JCC to enter into contracts with local restaurants and vendors
to provide food services at the Casino. JCC is also prohibited from offering
lodging in the Casino, or engaging in any practice or entering into any business
relationship to give any hotel, whether or not affiliated with JCC, any
advantage or preference not available to any similarly situated hotels. Unlike
the Casino, the vast majority of the Casino's competitors operate without
restrictions on lodging, food and beverage services, and entertainment. The
Company believes that the ability to provide such amenities is a considerable
competitive advantage for the Casino's competitors. See "--Risk Factors--Limits
on Restaurants, Lodging, Retail Operations and Entertainment" and
"--Competition."
MISSISSIPPI. JCC will compete on a national, regional and local scale for
visitors with existing gaming facilities in Mississippi. The Mississippi Gulf
Coast has emerged as a major gaming destination. There are currently 11 dockside
casinos operating in the Mississippi Gulf Coast which are within 100 miles of
New Orleans, and significant enlargements to many of these facilities are
underway or have been announced. Such enlargements include significant
expansions of hotel space, and additions of retail, convention space and golf
courses. Plans to build additional new dockside casinos in the Mississippi Gulf
Coast have been announced and a substantial number of applications to operate
casinos in Mississippi have been filed with the Mississippi Gaming Commission.
In addition, in early 1999 Mirage Resorts Inc. is scheduled to open Beau Rivage,
an 1,800 room hotel, resort and dockside casino in Biloxi that will be larger
than any hotel in New Orleans. Approximately $600 million is expected to be
spent to develop Beau Rivage and due to its projected size, amenities and
ownership, it is anticipated to provide significant competition to the Casino.
The Mississippi enabling legislation allows dockside gaming and does not limit
the number of casinos or the square feet of gaming space in these facilities. In
addition, unlike the Casino, gaming facilities in Mississippi operate without
restrictions on lodging, food and beverage services, and entertainment, and
several of such facilities have recently expanded to enhance such services. See
"--Risk Factors-- Competition" and "--Limits on Restaurants, Lodging, Retail
Operations and Entertainment."
LOUISIANA. On a regional and local scale, JCC will compete with gaming
operations in Louisiana. In Louisiana, 13 riverboats are operating, including
one riverboat in Orleans Parish, two other riverboats in the New Orleans
metropolitan area, two riverboats in Baton Rouge, four riverboats in Lake
Charles in western Louisiana and four dockside casinos in Shreveport/Bossier
City in northern Louisiana. One license to conduct riverboat gaming in the State
has not yet been awarded, however, the award of such license has been deferred
pending the results of an LGCB study on the effects of gaming in Louisiana. The
Louisiana Riverboat Economic Development and Gaming Control Act (the "Riverboat
Act") presently does not impose wagering or loss limits and permits all forms of
gaming with the exception of sports betting. Although the Riverboat Act permits
only dockside gaming at the facilities in the Shreveport area, the Riverboat Act
has been administered so as to allow riverboats to refrain from cruising under
certain circumstances. Riverboats that remain moored under such circumstances
are permitted to allow unlimited ingress and egress of customers. There can be
no assurance that the Riverboat Act will not be amended to permit unlimited
dockside gaming or to increase the number of permitted riverboats. JCC will also
compete with land-based gaming facilities in central Louisiana on Native
American land. The Tunica-
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Biloxi, Chitimacha and Coushatta Indian tribes have each opened a casino near
the towns of Marksville, Charenton and Kinder, respectively. Each casino is
located more than 105 miles from New Orleans.
NATIONAL AND INTERNATIONAL COMPETITION. JCC will compete for patrons on a
national and international scale with large casino hotel facilities located in
Las Vegas, Nevada and Atlantic City, New Jersey. Several new facilities have
recently opened in Las Vegas and certain existing facilities in Las Vegas and
Atlantic City have undergone major expansions. This construction and expansion
increased the number of hotel rooms and gaming positions in the Las Vegas and
Atlantic City markets and created several attractions which have enhanced the
appeal of those cities as tourist destinations. To a lesser degree, JCC will
also compete for international patrons with casinos in other parts of the world.
OTHER VENUES. Additional regional competition may be generated from
land-based or dockside casino facilities to be located in states which do not
currently allow casino gaming activities including Alabama and Texas. Bills
seeking to legalize gaming were introduced in both of these states in the past.
Although these bills were not enacted, similar bills may be introduced in future
legislative sessions.
OTHER FORMS OF LEGAL WAGERING. JCC will compete for local customers with
other forms of legal wagering, including racetracks and off-track betting
("OTB") parlors. In addition, under Louisiana law, certain parishes (including
Orleans Parish) presently permit restaurants, taverns, hotels and licensed clubs
to operate up to three video draw poker devices ("VDPs") per location,
qualifying truck stops may operate up to 50 VDPs per location, and racetracks
and OTB parlors may operate an unlimited number of VDPs per location. Louisiana
law, however, limits VDP wagering and jackpots. Other forms of wagering,
including charitable gaming and a state lottery, will provide additional local
competition. Further, in 1997, the State legislature authorized the use of slot
machines at race tracks located in three parishes in the State (but not Orleans
Parish), subject to a 15,000 square foot limitation. The authorization for this
bill was subject to a referendum in each of the parishes where the race tracks
are located to approve such use of slot machines. The voters in two of the three
parishes approved the use of slot machines at the race tracks located in those
parishes. The authorization for this bill remains subject to further legislative
action on the fees and taxes to be imposed on such slot machines. Legislation to
impose such fees and taxes was introduced in the 1998 fiscal session of the
State legislature, but failed to receive legislative approval. Future
consideration of this issue is likely by the State legislature. If slot machines
are ultimately permitted at race tracks in the two parishes that approved such
use of slot machines, the Casino would compete for patrons with slot machines at
such race tracks.
LEASE OF RIVERGATE SITE
JCC expects to enter into an amended sublease for the Rivergate site and
certain related property with the RDC and with the City, as intervenor, (the
"Amended Ground Lease"). See "--Material Agreements--Amended Ground Lease."
ENVIRONMENTAL MATTERS
Subject to all of its rights and defenses at law and equity, JCC may be
subject to various federal, state and local laws, ordinances and regulations
that impose liability for the costs of cleaning up, and certain damages
resulting from, sites of past spills, disposals or other releases of hazardous
or toxic substances or wastes (the "Cleanup Laws"), and may be subject to other
laws, ordinances and regulations that 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 or toxic wastes.
Pursuant to certain of such Cleanup Laws, current and past owners and
"operators" of real estate (including lessees) may be liable for the costs of
removal or remediation of certain hazardous substances on, in or about such
properties. Removal of such hazardous substances, in turn, may expose JCC to
potential responsibility for contamination at off-site locations. The liability
imposed by such laws is often joint and several, and without regard to whether
the owner/operator knew of, or was responsible for, the presence of such
hazardous substances. In
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addition, the presence of such substances, or the failure to properly remediate
such substances, may adversely affect the owner/operator's ability to borrow
using such real estate as collateral.
JCC will own and lease a number of properties, some of which were formerly
owned or leased by companies with operations that involved or may have involved
the use of hazardous substances. Some of the buildings on property owned or
leased by JCC contain asbestos. Asbestos abatement costs incurred by HJC in
connection with the construction of the Casino were approximately $3.7 million.
Asbestos abatement costs incurred by HJC in connection with the renovation of
the City's Municipal Auditorium were approximately $590,000. Asbestos and
lead-based paint abatement costs in connection with the Municipal Auditorium
restoration project were approximately $30,000. The Ground Lease requires HJC to
indemnify the RDC and the City for environmental liabilities with respect to
causes of action arising after the site mobilization or asbestos removal or
abatement, other than those caused by RDC or the City or their agents or
employees, or by third parties, and to assume responsibility for any
environmental cleanup on or under the Casino, regardless of when the
environmental contamination occurred, unless known by various City departments
and not disclosed to HJC. The Amended Ground Lease contains substantially the
same obligations, which become applicable on the Effective Date.
The removal and disposal of polychlorinated biphenyl ("PCB") at the
Rivergate site has been completed. In connection with that removal, HJC incurred
costs of $973,000. However, by separate indemnity agreements, the City has
agreed to indemnify HJC and JCC from and against the cost of removing PCBs at
the Rivergate site, which costs have been credited to future rents.
The Company does not anticipate that future expenditures for compliance with
environmental laws and regulations will have a material adverse effect on the
Company. No assurances can be given, however, that such matters, or that
compliance with environmental laws and regulations that may be enacted in the
future, will not have a material adverse effect on the Company. See "--Risk
Factors--Environmental Matters."
EMPLOYEES
As of the Effective Date, the Company's only employees will be Frederick W.
Burford and L. Camille Fowler. JCC, through the Manager, will recruit and train
employees to operate the Casino. To the extent permitted by law and contract,
JCC and JCC Development, in their hiring directed toward the opening of the
Casino and as practicable thereafter, will give priority to consideration of the
former employees of the Basin Street Casino in an evaluation of the candidate
qualifications. See "--Risk Factors--Lack of Experienced Personnel," "--Amended
Open Access Program and Plans," "--Material Agreements-- Amended GDA" and
"--Amended Management Agreement." The Casino's executive staff will be comprised
of employees of the Manager and JCC.
TITLE INSURANCE
JCC intends on or about the Effective Date to obtain title insurance
policies from First American Title Insurance Company ("First American") for each
of (i) the premises underlying the Casino to be leased by JCC pursuant to the
Amended Ground Lease and the related leased property (the "Casino Premises"),
(ii) the 3CP Property and (iii) the Fulton Property. With respect to each of the
foregoing, such policies will consist of lenders' title insurance policies for
the benefit of HET and HOCI as Minimum Payment Guarantors (as defined herein),
the Bank Lenders and the holders of the Notes and owners' title insurance
policies for the benefit of JCC, CP Development and FP Development,
respectively.
The owners' title insurance policy with respect to the Casino Premises will
provide coverage in the amount of $527.5 million. The lenders' title insurance
policy with respect to the Casino Premises will provide coverage equal to (i)
$100 million in favor of HET and HOCI the Minimum Payment Guarantors, (ii) the
total amount of indebtedness under the Bank Loans in favor of the Administrative
Agent (as
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defined herein), and (iii) the aggregate principal amount of the Notes in favor
of the Trustee (as defined herein).
By endorsement, the title policies will provide that the computation of loss
or damage under such policies with respect to the Casino Premises will be
measured by the use or uses to which the land and improvements are put at the
time of loss, or, if not then in use, as intended to be used pursuant to the
Amended Ground Lease. Actual loss has been generally construed to mean the
diminution in value of an insured mortgage resulting from an insured title
defect, not to exceed the value of the mortgagor's estate or interest in the
land and improvements. There has been no judicial construction of the
endorsement providing that such loss will be measured by the intended or actual
use of the mortgaged property. Actual loss will be determined either by
voluntary agreement with the title insurer or judicially. Due to uncertainty
regarding the method for valuing any loss and depending upon the nature and
extent of an insured title defect and its effect upon the use of the land and
improvements, and because a significant portion of the funds will not be used
for improvements and changes in the value of the land and improvements, the
amount of any recovery for such other title losses under the lenders' title
policies with respect to the Casino Premises cannot be predicted and there can
be no assurance that any recovery as a result of such title loss will not be in
an amount substantially less than (i) $100 million in the case of HET and HOCI
as Minimum Payment guarantors, (ii) the total amount of indebtedness under the
Bank Loans in the case of the Administrative Agent, and (iii) the aggregate
principal amount of the Notes in the case of the Trustee. The owners' and
lenders' title insurance policies with respect to each of the 3CP Property and
the Fulton Property will provide coverage equal to the estimated fair market
value of such property. It is currently anticipated that the 3CP Property will
be insured for $4 million and that the Fulton Property will be insured for $14
million.
The title insurance policies with respect to the Casino Premises will be,
and the title insurance policies with respect to each of the 3CP Property and
the Fulton Property may be, reinsured through various title insurance companies
throughout the United States. The ability to successfully recover under the
policies is dependent on the creditworthiness of the title company and its
reinsurers at the time of the claim and the existence and validity of any
defenses that the title insurers and its reinsurers may have. There can be no
assurance that the title insurers will be able to fulfill their financial
obligations under the title insurance policies. See "--Risk Factors--Title
Insurance." For a description of certain claims that have been made challenging
HJC's title to the site for the Casino and related real estate, see Item 8.
"Legal Proceedings-- McCall Litigation."
In December 1996, HJC and First American reached agreement on the terms of a
settlement agreement providing for the issuance of new blanket owner's and
lender's title insurance policies for the Casino Premises, the 3CP Property and
the Fulton Property (the "First American Settlement Agreement"), the form of
which the Bankruptcy Court subsequently approved on January 21, 1997. Bankruptcy
Court approval of the First American Settlement Agreement was appealed by
Messrs. Harry McCall, Henry McCall and Thomas Tucker to the Civil District Court
for the Parish of Orleans. The appeal is now pending. The McCall Settlement
Agreement (as defined herein) contemplates that this appeal will be withdrawn.
See "--Risk Factors--Title Insurance" and "Item 8. Legal Proceedings--McCall
Litigation." If the First American Settlement Agreement becomes effective, it
will resolve certain of the parties' claims against each other, cause the
cancellation of the existing owner's title insurance policy and provide for the
issuance of new title insurance to JCC and its lenders at reduced "re-issue"
rates. HJC is currently discussing the scope and terms of the exceptions and
endorsements to the new title insurance policies with respect to the Casino
Premises, and the separate title insurance policies insuring the interests in
the 3CP Property and the Fulton Property (which are covered by the existing
owner's title insurance policy) that will be transferred to CP Development and
FP Development, respectively, on the Effective Date.
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS REGISTRATION STATEMENT
BEFORE MAKING AN INVESTMENT IN THE CLASS A COMMON STOCK. THIS REGISTRATION
STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. DISCUSSIONS CONTAINING SUCH
FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "ITEMS 1
AND 3. BUSINESS AND PROPERTIES," "ITEM 2. FINANCIAL INFORMATION," AND "ITEM 13.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA," AS WELL AS WITHIN THE REGISTRATION
STATEMENT GENERALLY. IN ADDITION, WHEN USED IN THIS REGISTRATION STATEMENT, THE
WORDS "BELIEVES," "ANTICIPATES," "INTENDS," "EXPECTS," "ESTIMATES," "SCHEDULED,"
"CONTEMPLATED," "LIKELY," "TARGETS," "FORECASTED" AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES
THAT THE EXPECTATIONS IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN
GIVE NO ASSURANCE THAT ANY FORWARD-LOOKING STATEMENTS WILL PROVE TO BE CORRECT.
SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND OTHER FACTORS. ACTUAL RESULTS IN THE FUTURE COULD DIFFER MATERIALLY FROM
THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE "RISK
FACTORS" SET FORTH BELOW AND THE MATTERS SET FORTH IN THE REGISTRATION STATEMENT
GENERALLY. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULT
OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT
ANY FUTURE EVENTS OR CIRCUMSTANCES. THE COMPANY CAUTIONS THE READER, HOWEVER,
THAT THIS LIST OF RISK FACTORS MAY NOT BE EXHAUSTIVE.
UNCERTAINTY REGARDING GAMING REGULATION AND FUTURE CHANGES TO THE LAW
UNCERTAINTY OF AND IMPACT OF FUTURE LEGISLATION. Because legalized gaming
is a relatively new industry in the State of Louisiana, there has been
significant attention by the State legislature over the past few years to gaming
related bills dealing with a wide range of subjects that could impact the Casino
project. At various times, bills have been introduced to, among other things,
constitutionally and/or legislatively repeal all forms of gaming (including the
land-based casino), increase taxes on casinos, limit credit that may be extended
by casinos and limit days and hours of operations. There is no assurance that
future legislation will not be enacted by the State legislature that would
impose obligations, restrictions or costs that could interfere with JCC's casino
operations, cause JCC to violate agreements to which it is a party or otherwise
have a material adverse effect on the Company.
In the spring of 1996, a special session of the State legislature was
convened to consider, among other things, certain legislation proposed by the
Governor that impacted the gaming industry and, in certain instances, had
material adverse impacts on HJC. One such law called for a parish-by-parish
referenda during the November 5, 1996 election (the "Local Option Election") to
decide, on an item-by-item basis, whether riverboat gaming, video poker gaming
and in Orleans Parish, the land-based casino, should be permitted to operate in
the parish. The local option bill purported to provide that in the event voters
in Orleans Parish voted not to allow the operation of land-based casino gaming
in that parish, the "operation of land based casino gaming existing in the
parish shall be discontinued." On November 5, 1996, voters in Orleans Parish
elected by approximately a two-to-one margin to permit land-based casino gaming
in that parish. At the same time, voters in Orleans Parish elected to authorize
both riverboat gaming and video poker gaming in Orleans Parish. There can be no
assurance, however, that similar legislation will not be enacted in the future
that could lead to the suspension or cessation of gaming operations at the
Casino. Although voters in Orleans Parish voted to permit land-based casino
gaming in that parish, the law providing for the Local Option Election had a
material adverse effect on HJC even prior to voter action by impairing HJC's
ability to obtain financing for the Plan of Reorganization and by increasing
costs related to the Plan of Reorganization.
The Amended and Renegotiated Casino Operating Contract has been negotiated
based on the current terms of the Gaming Act. There can be no assurance that the
State will not amend or repeal the Gaming Act. Bills and resolutions to repeal
the authorization for a land-based casino or to instruct or urge the LGCB not to
execute the Amended and Restated Casino Operating Contract were introduced in
the State House of Representatives and the State Senate during 1998. Although
none of the bills or resolutions
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relating to the Casino has been enacted, there can be no assurance that the
State will not subsequently enact new legislation that modifies or revokes JCC's
right to conduct gaming activities or otherwise materially adversely affects the
Company's business and operations, including legislation increasing competition
by authorizing additional riverboats or other forms of gaming or authorizing
dockside gaming or other land-based casinos in Orleans Parish or elsewhere in
the State. In 1997, the State legislature authorized the use of slot machines at
race tracks in three parishes in the State (but not Orleans Parish) subject to a
referendum in each such parish to approve such use of slot machines. Two
parishes approved the use of slot machines at race tracks, but the State
legislature's authorization is subject to further legislative action on fees and
taxes. Legislation to impose such fees and taxes was introduced in the 1998
fiscal session of the State legislature, but failed to receive legislative
approval. Future consideration of this issue is likely by the State legislature.
There can be no assurance that these authorizations if enacted will not
negatively impact JCC should slot machines ultimately be permitted at these race
tracks. See "--Competition--Other Forms of Legal Wagering."
Additionally, two bills were pre-filed in the State House of Representatives
for consideration during the State legislature's 1999 regular session which
begins March 1999. If passed, the first bill would repeal the Gaming Act in its
entirety and the second would amend the Gaming Act to broaden the food service
restrictions applicable to the Casino and all parts of any connecting structure
or building. See "--Limits on Restaurants, Lodging, Retail Operations and
Entertainment." There can be no assurance that the Company will be successful in
preventing such legislative changes or that the Company will be able to recover
damages as a result thereof. The repeal of the Gaming Act would have a material
adverse effect on the Company, and other legislative changes that affect the
Company's business and operations could have a material adverse effect on the
Company.
UNCERTAINTY REGARDING REGULATION AND INTERPRETATION OF THE GAMING ACT. In
May 1996, a bill was enacted by the State legislature that, among other things,
transferred regulatory authority over the Casino from the LEDGC to the LGCB and
provided that the LGCB would have the assistance of the State Police. See
"--Regulation--Louisiana Gaming Act--LGCB." Although the existing Rules and
Regulations promulgated by LEDGC remain in force and effect at this time, the
LGCB is empowered to repeal such Rules and Regulations and to promulgate its own
Rules and Regulations. This law also authorizes the State Police to, among other
things, conduct investigations and audits of gaming license applicants and to
assist the LGCB in determining compliance with gaming laws and regulations. The
Company and the Manager have little operational or other experience with the
LGCB or the State Police and the regulatory framework established by the State
legislature in 1996. JCC has been advised that the LGCB intends to promulgate a
number of its own Rules and Regulations after the Effective Date. There is no
assurance that the adoption of new Rules and Regulations or the repeal of
existing Rules and Regulations will not impose obligations, restrictions or
costs that could interfere with JCC's casino operations, cause JCC to violate
agreements to which it is a party or that otherwise have a material adverse
effect on the Company. There is also no assurance that the interpretation and
implementation of the Gaming Act and the Rules and Regulations by the LGCB and
the State Police will not impose obligations, restrictions or costs that could
interfere with JCC's casino operations, that could cause JCC to violate
agreements to which it is a party or that could otherwise have a material
adverse effect on the Company.
In addition, state laws generally requiring riverboats to sail in accordance
with their schedules and safety conditions are frequently unenforced. Another
law enacted as a result of the special session of the State legislature in the
spring of 1996, among other things, purports to retroactively amend the Gaming
Act: (i) to state that the conduct of gaming operations upon riverboats in
accordance with the provisions of the Riverboat Act or otherwise while upon a
designated waterway while temporarily at dockside does not constitute the
authorization of additional land-based casino gaming operations which relieves
the operator of the Casino of the obligation to pay compensation to the LGCB;
and (ii) to provide that governmental inaction which results in the operation of
another land-based casino in Orleans Parish will not relieve the operator of the
Casino of the obligation to pay compensation to the LGCB. This law also purports
to
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provide that in the event of litigation between the operator of the Casino and
the State or any of its political subdivisions (including the LGCB), the
operator of the Casino must continue to make all payments to the State and any
of its political subdivisions (including the LGCB) as required by law during the
pendency of such litigation, and that any failure to make the required payments
will render the operator of the Casino unsuitable. See "--Regulation --Louisiana
Gaming Act." The failure of the riverboats to sail in accordance with their
schedules and/or governmental inaction which results in the operation of another
land-based casino in Orleans Parish could have a material adverse effect on the
Company. The Company's remedies and the limitations thereon if a riverboat
conducts dockside gaming in material violation of the Riverboat Act or the
Gaming Act are also addressed in the Amended and Renegotiated Casino Operating
Contract. See "--Limited Remedies For Additional Land-Based Casinos" and
"--Material Agreements--Amended and Renegotiated Casino Operating Contract."
The interpretation of certain provisions of the Gaming Act, and the
authority of the LGCB thereunder, has also been the subject of multiple
lawsuits. The Gaming Act provides that the LGCB has the right, but is not
required, to set aside or renegotiate the provisions of a casino operating
contract if the casino operator is voluntarily or involuntarily placed in
bankruptcy, receivership, convservatorship or similar status. A law enacted
during the State legislature's special session in spring in 1996 purports to
authorize the Governor by executive order, subject to legislative approval, or
the State Legislature by act or resolution, to set aside or order renegotiation
or revocation of a casino operating contract when the casino operator is either
voluntarily or involuntarily placed in bankruptcy, receivership,
conservatorship, or some similar status.
On March 16, 1998, the State Attorney General issued an opinion that the
LGCB has independent authority (without the necessity of any legislative
approval) to renegotiate and execute a renegotiated casino operating contract.
On March 20, 1998, the LGCB approved the Amended and Renegotiated Casino
Operating Contract, subject to the rendition of a final, non-appealable judgment
of the State Supreme Court that the LGCB, acting on its own, is the proper party
and has the legal authority to enter into the Amended and Renegotiated Casino
Operating Contract with HJC and JCC on behalf of the State and the LGCB, without
the specific approval of the Governor or the State legislature.
On March 18, 1998, two separate petitions were filed seeking a declaratory
judgment and injunctive relief to preclude the LGCB from executing a casino
operating contract without the approval of the State legislature. In a lawsuit
captioned Jordan vs. Louisiana Gaming Control Board and Murphy J. Foster (19th
Judicial District Court, State of Louisiana, Parish of East Baton Rouge)
("Jordan"), the plaintiff, a Louisiana State Senator, sought a declaratory
judgment and injunctive relief seeking, among other things, to preclude the LGCB
from executing a casino operating contract without the approval of the State
legislature. In a lawsuit captioned Bean vs. Louisiana Gaming Control Board and
Rivergate Development Corporation (19th Judicial District Court, State of
Louisiana, Parish of East Baton Rouge) ("Bean"), the plaintiff, also a member of
the State Senate, sought declaratory and injunctive relief seeking, among other
things, to preclude the LGCB from entering into a casino operating contract with
JCC without the approval of the State legislature. HJC and the Bondholders
Committee filed separate petitions of intervention in that litigation.
The two cases were consolidated and HJC intervened in the Bean litigation
and the Bondholders Committee intervened in both the Bean and Jordan
litigations. After a trial, the district court on April 9, 1998, entered
judgment rejecting the plaintiffs' claims and declaring, among other things,
that the LGCB has the independent authority to renegotiate and execute a casino
operating contract without seeking gubernatorial or legislative approval. In
reaching its decision, the district court made a number of written findings of
fact and conclusions of law, including the conclusion that insofar as the
provisions of La. R.S. 27:224(D) and La. R.S. 27:224(E) subject the acts of the
LGCB or the governor to legislative approval or authorize the State legislature
to take executive action, those provisions are unconstitutional as violative of
Article II, Section 2 of the Louisiana Constitution, which establishes the
principle of separation of powers between the branches of government in
Louisiana.
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The consolidated cases were heard by the First Circuit Court of Appeal which
issued a decision on April 22, 1998, affirming in part and reversing in part the
judgment of the district court. The court of appeal affirmed the district
court's determination that the LGCB had the authority independently to
renegotiate the casino operating contract, but reversed what it perceived to be
the district court's conclusion that the State legislature had no right to
participate in the process of renegotiating the casino operating contract of a
casino operator in bankruptcy and concluded the State legislature may set aside
or order the LGCB to renegotiate the provisions of the casino operating contract
of a casino operator in bankruptcy.
The parties filed applications for various writs for review in the Louisiana
Supreme Court, which were subsequently granted and on May 15, 1998 the Louisiana
Supreme Court issued a decision affirming in part and reversing in part the
judgment of the court of appeal. The opinion of the Louisiana Supreme Court
affirmed the court of appeal's determination that the LGCB has the independent
authority to renegotiate and execute the casino operating contract without
seeking gubernatorial or legislative approval, and reversed that portion of the
court of appeal's decision that purported to interpret La. R.S. 27:224(D) to
grant the State legislature the power to set aside or order the LGCB to
renegotiate the provisions of the casino operating contract of a casino operator
in bankruptcy on the basis that such holdings by the court of appeal and the
district court were impermissible advisory opinions. The decision of the
Louisiana Supreme Court has since become final and non-appealable.
Although the consolidated suits were decided favorably for HJC, the suits
adversely affected HJC by delaying HJC's ability to consummate the Plan of
Reorganization and by increasing costs related to the Plan of Reorganization.
There can be no assurance that additional litigation will not be filed
challenging the authority of the LGCB and its actions. Any such litigation could
have a material adverse effect on the Company. Additionally, since the Louisiana
Supreme Court reversed the portion of the Court of Appeal's decision that
purported to interpret La. R.S. 27:224(D) on the basis that such holdings by the
Court of Appeal and the District Court were impermissible advisory opinions, the
State legislature's power to set aside or order the LGCB to renegotiate the
provisions of a casino operating contact of a casino operator in bankruptcy has
not been judicially determined. If the State legislature is determined to have
and/or attempts to exercise such power, it could have a material adverse effect
on the Company.
REGULATORY ENFORCEMENT ACTIONS. The ownership and operation of the Casino
is subject to pervasive regulation by the LGCB and the State Police under the
Gaming Act and the Rules and Regulations. The LGCB is empowered to sanction JCC
and all persons that hold permits, licenses or are required to be found
suitable, for violations of the Gaming Act and the Rules and Regulations.
Failure of JCC and its employees, JCC Holding or the Manager to comply with the
Gaming Act, the Rules and Regulations or regulatory requirements in the Amended
and Renegotiated Casino Operating Contract could have a material adverse effect
on the Company, including the imposition of fines, the suspension of rights
granted by the Amended and Renegotiated Casino Operating Contract and, under
certain circumstances, the revocation or termination of the Amended and
Renegotiated Casino Operating Contract. See "-- Regulation--Louisiana Gaming
Act" and "--Material Agreements--Amended and Renegotiated Casino Operating
Contract."
SUITABILITY OF JCC AND AFFILIATED PERSONS. JCC cannot operate the Casino
unless and until certain persons required to be found suitable are found
suitable by the LGCB. Such persons include, without limitation, JCC, JCC
Holding, the Manager and certain members, officers and directors of such
companies. See "--Regulation--Louisiana Gaming Act." Although HJC, the Manager
and certain of their respective partners, shareholders, officers and directors
were previously found suitable after extensive background investigations by
LEDGC (the regulatory body that previously maintained jurisdiction over the
Casino), the LGCB (and its investigatory arm, the State Police) has not issued
any suitability findings. The suitability process has commenced and the Chairman
of the LGCB has stated that the process is targeted to conclude in October of
1998. There can be no assurance that the State Police will complete its
investigations and that the LGCB will find all such entities and persons
suitable in a timely fashion or that
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such findings will be issued. Failure to timely receive all required suitability
findings could have a material adverse effect on the Company.
JCC, JCC Holding and the Manager and all other persons and entities required
to be found suitable, once found suitable, have an ongoing obligation to
maintain their suitability throughout the term of the Amended and Renegotiated
Casino Operating Contract. The failure of such entities and persons to maintain
their suitability could result in a finding of unsuitability of JCC or the
Manager and in the revocation of the Amended and Renegotiated Casino Operating
Contract. The suitability of JCC and the Manager may be adversely affected by
persons associated with them and their respective affiliates, over whom JCC and
the Manager have no control. See "--Material Agreements--Amended and
Renegotiated Casino Operating Contract," and "--Regulation--Louisiana Gaming
Act." A finding that JCC or the Manager is unsuitable, and the revocation of the
Amended and Renegotiated Casino Operating Contract would have a material adverse
effect on the Company.
Furthermore, the Gaming Act, the Rules and Regulations, and the Amended and
Renegotiated Casino Operating Contract impose certain suitability requirements
with respect to the holders of Notes and holders of equity in JCC and its
affiliates, including JCC Holding. To the extent that any holder of Notes or
Common Stock is required to be suitable and fails to be so found, such holder
may be required to divest such Notes or Common Stock at substantially
below-the-market prices for such securities. To the extent such holder fails to
divest, JCC Holding will have the right to redeem the Common Stock and JCC will
have the right to redeem the Notes, and prior to such redemption, such holder
will forfeit all benefits of ownership. See "--Repurchase of Class A Common
Stock Relating to Gaming Matters" and "Item 11. Description of Registrant's
Securities to be Registered--Redemption Provisions." Any failure to obtain
required qualifications or approvals may, by virtue of requirements imposed on
JCC or JCC Holding, subject such holders to certain requirements, limitations or
prohibitions, including a requirement that such holders liquidate their Notes or
Common Stock at a time or at a cost that is otherwise unfavorable for such
holders. There can be no assurance that the Gaming Act will not be interpreted,
that additional Rules and Regulations will not be implemented or that new
legislation will not be enacted to impose additional restrictions on, or
otherwise prohibit, certain persons from holding securities of JCC or JCC
Holding, including the Common Stock and the Notes, or cause such holders to
liquidate such securities at a time or at a cost that is otherwise unfavorable
for such holders. See "--Regulation--Louisiana Gaming Act."
LICENSING AND PERMITTING OF EMPLOYEES AND VENDORS. Under the Gaming Act and
the Rules and Regulations, employees of JCC are required to obtain certain
licenses and permits from the LGCB and the State Police before they may commence
employment at the Casino. Such licensing and permitting requires the submission
of an application, the payment of related fees and appropriate investigation by
the regulatory authorities. See "--Regulation--Louisiana Gaming Act." There can
be no assurances that such licenses or permits will be obtained. Failure to
obtain the licenses and/or permits for employees of JCC necessary to operate the
Casino on a timely basis could have a material adverse effect on the Company.
Under the Gaming Act and the Rules and Regulations, certain manufacturers,
distributors and suppliers of gaming devices, junkets, goods or services to the
Casino, as well as any person furnishing services or property to JCC in exchange
for payments based on earnings, profits or receipts from gaming operations, and
other persons deemed necessary by the LGCB, may be required to obtain a license
or permit from the LGCB or the State Police in order to conduct business with
JCC. See "--Regulation-- Louisiana Gaming Act." There can be no assurance that
such licenses or permits will be obtained by such vendors. The failure of any
such vendors to obtain any required licenses or permits on a timely basis could
have a material adverse effect on the Company.
STATE IMMUNITY FOR BREACH OF CONTRACT. The Company expects that the Amended
and Renegotiated Casino Operating Contract will create certain material rights
in JCC with respect to the Casino. See "--Material Agreements--Amended and
Renegotiated Casino Operating Contract." Under the Amended and Renegotiated
Casino Operating Contract, the Company expects that JCC will be entitled to
bring an
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action to compel specific performance or any other remedy permitted or provided
by law in the event the LGCB breaches the contract and fails to cure such
breach. See "--Material Agreements--Amended and Renegotiated Casino Operating
Contract--Exclusive Contract." In the spring of 1996, however, a special session
of the State legislature enacted a bill that purports to amend the Gaming Act to
provide the State and all of its subdivisions (including the LGCB) with immunity
from suit and liability for any action or failure to act on the part of the
State or any of its political subdivisions (including the LGCB). See
"--Regulation--Louisiana Gaming Act." There can be no assurance that in the
event JCC seeks to enforce its rights under the Amended and Renegotiated Casino
Operating Contact, that a court would allow the suit to proceed. Failure of the
LGCB to comply with the Amended and Renegotiated Casino Operating Contract could
have a material adverse effect on the Company, which effect would be exacerbated
if a court applied the immunity statute and precluded JCC from seeking recourse
in a judicial forum.
POSSIBLE FEDERAL LEGISLATION. In August 1996, the President signed into law
a bill that creates a federal commission to examine the rapid growth of the
gambling industry and its impact on American society. The law creates a
nine-member National Gambling Impact and Policy Commission (the "National
Commission") to study the economic and social impact of gaming and report its
findings to Congress and the President. The National Commission is required by
the enabling legislation to issue a report containing its findings and
conclusions, together with recommendations of the National Commission for
legislation and administrative actions, within two years after the date on which
it held its first meeting, which occurred on June 20, 1997. Any recommendations
which may be made by the National Commission could result in the enactment of
new laws or the adoption of new regulations which could adversely impact the
gaming industry in general and the Company in particular. The Company is unable
at this time to determine what recommendations, if any, the National Commission
will make, or the ultimate disposition of any recommendations the National
Commission may make.
POLITICAL ENVIRONMENT
The development and construction of the Casino has been and will continue to
be, and the operation of the Casino may be, affected by the State and local
political environments, both of which are uncertain. There is considerable
opposition to gaming among a segment of the population in Louisiana. The
enactment and implementation of gaming legislation in Louisiana and the
development of the Casino have been the subject of lawsuits, claims and delays
brought about by various anti-gaming and preservationist groups and competitors
of the Casino. To date, these lawsuits and claims, as well as contract
negotiations with State and City governmental entities, have significantly
delayed development of the Casino. See "--Litigation" and "Item 8. Legal
Proceedings." Additional lawsuits and the uncertain political environment may
result in further delays, all of which could have a material adverse effect on
the Company.
The State and City have used, and may in the future use, the additional
governmental approvals required to be obtained by JCC to develop, construct and
open the Casino as an opportunity to request additional funds and other
obligations from JCC and thereby create funding shortfalls and/or delay the
development and opening of the Casino. No assurance can be given that the State
and the City governments will not seek to raise additional funds from or impose
additional obligations on JCC or the Casino or that these factors will not have
a material adverse effect on the Company. See "--Taxation."
The Company is subject to being adversely affected by all of the foregoing
problems or investigations which directly affect its operations and it is also
subject to being adversely affected by investigations or disputes which may only
tangentially relate to the construction or operation of the Casino but which
cause those who are opposed to the Casino in particular or gaming in general to
increase their opposition. For example, on August 8, 1997, HJC was served with a
subpoena by the Committee on Rules and Administration of the United States
Senate which was investigating the contest of the election of Mary Landrieu to
the United States Senate and the role, if any, that gaming interests may have
played in her election. HJC
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complied with the subpoena and HJC representatives testified before the
Committee during September 1997. Although the Committee has completed its
investigation into the contested election, it has not yet issued a report, and
the Company cannot presently assess the degree to which this investigation had
or may have an impact on the Company.
NON-RENEWAL OF MINIMUM PAYMENT GUARANTY
Under the terms of the Amended and Renegotiated Casino Operating Contract,
JCC is required to obtain a guaranty in favor of the State by and through the
LGCB of the $100 million annual payment due to the State under the Amended and
Renegotiated Casino Operating Contract (the "Minimum Payment Guaranty") to
assure payment of such minimum payment. JCC expects to enter into an agreement
(the "HET/JCC Agreement") with HET and its wholly-owned subsidiary, HOCI,
pursuant to which HET and HOCI will provide an initial Minimum Payment Guaranty,
subject to renewal, early termination or expiration in accordance with the terms
of the HET/JCC Agreement (HET and HOCI or any successor or substitute party
providing a Minimum Payment Guaranty are referred to herein as the "Minimum
Payment Guarantors"). See "--Material Agreements--Amended and Renegotiated
Casino Operating Contract" and "HET/JCC Agreement."
By entering into the HET/JCC Agreement and providing an initial Minimum
Payment Guaranty, HET and HOCI are not obligated to provide a Minimum Payment
Guaranty for each fiscal year of the entire term of the Amended and Renegotiated
Casino Operating Contract, but rather have proposed only to provide it for the
period and on terms and conditions specified in the HET/JCC Agreement. See
"--Material Agreements--HET/JCC Agreement." HET and HOCI have expressly informed
JCC, the State, the LGCB and the City, among others, that they have not agreed
to renew a Minimum Payment Guaranty beyond March 31, 2004, or in any prior year
in which HET's and HOCI's obligation to furnish a Minimum Payment Guaranty does
not renew by the express terms of the HET/JCC Agreement. HET and HOCI have
informed HJC, Finance Corp., HNOIC (collectively, the "Debtors"), JCC, the
State, the LGCB and the City, among others, that any decision HET and HOCI make
concerning whether to renew any Minimum Payment Guaranty or the HET/JCC
Agreement will be made in their sole discretion, and have informed JCC and the
Debtors that such decision will be made acting only in HET's and HOCI's best
interests. Various agreements expected to be executed on the Effective Date will
require JCC Holding, JCC, the State, LGCB and the City to acknowledge that (i)
HET and HOCI are not obligated to and have not given any assurances to the
Debtors, JCC, the State, the LGCB or the City, among others, that they will
renew the HET/JCC Agreement beyond March 31, 2004, or renew any Minimum Payment
Guaranty for any earlier COC Fiscal Year (as defined herein) in which HET's and
HOCI's obligation to furnish a Minimum Payment Guaranty does not renew under the
express terms of the HET/JCC Agreement, (ii) HET and HOCI have the right to make
any such renewal decision in their sole discretion, and (iii) HET and HOCI need
not consider the interests of any other parties in making any such renewal
decision, notwithstanding that HET and HOCI are involved in a number of
capacities in respect of JCC and JCC Holding. Upon termination of the HET/JCC
Agreement on March 31, 2004 or at any earlier time pursuant to the terms of the
HET/JCC Agreement, JCC will be required to obtain a substitute guarantor to
provide a Minimum Payment Guaranty or the Casino will be unable to remain open
under the terms of the Amended and Renegotiated Casino Operating Contract. Such
substitute guarantor may or may not be HET and/or HOCI and there can be no
assurance that JCC will be able to locate a substitute guarantor on satisfactory
terms. See "Material Agreements--HET/JCC Agreement." A failure by JCC to cause
to be provided a Minimum Payment Guaranty before the first day of a new COC
Fiscal Year would result in a termination (with no cure period) of the Amended
and Renegotiated Casino Operating Contract. Consequently, JCC's failure to
locate a substitute guarantor on satisfactory terms in accordance with the
Amended and Renegotiated Casino Operating Contract would have a material adverse
effect on the Company.
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LACK OF PROFITABILITY
In connection with the Initial Financing, HJC projected that revenues for
the 12 months that the Basin Street Casino was scheduled to operate would be
approximately $395 million, or an average of approximately $33 million per
month, and that revenues for the first 12 months of operations of HJC's casino
at the Rivergate site would be approximately $618 million. The actual results of
the Basin Street Casino proved to be significantly less than HJC's projections
for the Basin Street Casino. Gross revenues for the Basin Street Casino's six
full months of operations averaged approximately $13.2 million per month and,
for those six months, the Basin Street Casino posted significant negative
operating cash flows, and net losses in every month, averaging approximately
$13.5 million per month. See "Item 2. Financial Information--Management's
Discussion and Analysis of Financial Conditions and Results of
Operations--Results of Operations." As evidenced by the results of the Basin
Street Casino, the success of land based gaming in a market which has never
supported significant land based gaming operations, such as New Orleans, cannot
be accurately predicted. The number of visitors to a casino in a new gaming
jurisdiction and their propensity to wager cannot be predicted with any degree
of certainty.
Further, even if the Casino's construction is completed in accordance with
the Company's construction schedule and budget, the Company expects that it will
sustain substantial net losses in the first two years of operation of the
Casino. There can be no assurance that JCC will ever be able to operate the
Casino in a profitable manner or generate positive net earnings. See "--Minimal
Operating History," "--Limitations on Working Capital," "--Limits on
Restaurants, Lodging, Retail Operations and Entertainment," "--Competition" and
"--Leverage and Ability to Meet Fixed Charge and Other Payment Obligations."
LEVERAGE AND ABILITY TO MEET FIXED CHARGES AND OTHER PAYMENT OBLIGATIONS
Upon the Effective Date of the Plan of Reorganization, JCC's total long-term
indebtedness will be approximately $284.1 million. Through the opening of the
Casino, JCC is expected to borrow $22.5 million under the Junior Subordinated
Credit Facility and an additional $141.5 million under the Term Loans. In
addition, JCC will have $25 million of availability under the Working Capital
Facility. Upon the opening of the Casino, JCC's total long-term indebtedness is
expected to be approximately $448.1 million. JCC will also have payment
obligations to the RDC, a public benefit corporation formed for the purpose of
subleasing the site on which the Casino will be located, and the LGCB. Upon the
opening of the Casino, JCC will have an annual payment obligation to the LGCB of
the greater of $100 million and a percentage of gross gaming revenues. See
"--Material Agreements--Amended and Renegotiated Casino Operating Contract." In
addition, upon the opening of the Initial Casino Facilities, JCC will have an
annual minimum rent payment obligation of $14.2 million, $1.9 million of other
general annual payments under the Amended Ground Lease and will be required
under the Amended Ground Lease to make significant payments into a marketing
fund and a capital replacement fund for refurbishments to the Casino. See
"--Material Agreements--Amended Ground Lease."
In addition, the Company's total long-term indebtedness may increase if
fixed interest on the New Notes is paid in kind, if interest on the Convertible
Junior Subordinated Debentures is paid in kind, if payments are made by the
Completion Guarantors (as defined herein) under the Completion Guarantees (as
defined herein), or if the Company obtains financing to fund the build-out of
the non-gaming tenant improvements on the second floor of the Casino beyond the
Second Floor Shell Construction or the development of the 3CP Property or Fulton
Property. See "--Ability to Commence Operations as Scheduled," "--Availability
of Financing For the Development Properties," "--Material Agreements--
Indentures," "--Convertible Junior Subordinated Debentures" and "--Amended
Completion Loan Agreement."
There is no assurance that the Casino will achieve the level of gaming
activity and operating cash flow necessary to satisfy JCC's obligations under
the Notes, the Convertible Junior Subordinated Debentures,
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the Term Loans, the Junior Subordinated Credit Facility, any additional
indebtedness the Company may incur, and JCC's obligations to the RDC, the LGCB
and the City and its related subdivisions. Future operating results are subject
to significant business, economic, regulatory, political and competitive
uncertainties and contingencies, many of which are outside JCC's control. While
JCC expects that operating cash flow will be sufficient to cover expenses,
including interest costs, JCC may be required to reduce or delay planned capital
expenditures, sell assets, restructure debt or raise additional equity to meet
principal repayment and other obligations in later years. There is no assurance
that any of these alternatives could be effected on satisfactory terms, if at
all, because of, among other things, the special purpose nature of the Casino.
Alternative financings could impair the Casino's competitive position and reduce
its cash flow. See "Item 2. Financial Information--Management's Discussion and
Analysis of Financial Condition and Results of Operations."
AVAILABILITY OF WORKING CAPITAL
HET and HOCI (collectively, the "Completion Guarantors") have agreed to fund
JCC's working capital shortfalls until the Termination of Construction Date (as
defined herein) and have agreed to guarantee that, at such time, JCC will have
available for working capital $5 million of cash and the Working Capital
Facility Maximum Amount (as defined herein) of availability for immediate
drawdown(s) under the Working Capital Facility. See "--Material
Agreements--Completion Guarantees" and "--Amended Completion Loan Agreement."
Upon the Termination of Construction Date, the Completion Guarantors' obligation
to fund JCC's working capital shortfalls will cease and JCC's sources of working
capital will be limited to the $5 million of cash, availability under the
Working Capital Facility and any cash flow from operations in excess of its
fixed charges and other payment obligations. See "--Leverage and Ability to Meet
Fixed Charges and Other Payment Obligations." The Bank Loans require a portion,
or in some instances all, of the cash flow of the Company from operations in
excess of fixed charges and other payment obligations to be allocated to
repayment of the Bank Loans. See "--Material Agreements--Bank Loans." There can
be no assurance that the above sources of working capital will be sufficient for
JCC to operate the Casino and, if such sources are not sufficient, there can be
no assurance that JCC will be able to obtain new sources of working capital on
satisfactory terms, if at all. The inability to obtain sufficient working
capital would have a material adverse effect on the Company.
COMPLETION GUARANTEES
Pursuant to separate completion guarantees (the "Completion Guarantees") in
favor of each of (i) the RDC and the City, (ii) the LGCB, (iii) the holders of
the Notes, and (iv) the Bank Lenders (collectively, the "Beneficiaries"), the
Completion Guarantors have agreed to guarantee the Completion Obligations (as
defined herein), the Carry Obligations (as defined herein) and the Preservation
Obligations (as defined herein). See "--Material Agreements--Completion
Guarantees." The Completion Guarantees are subject to a number of important
exceptions and qualifications. The Completion Guarantors' obligation to complete
the Casino does not take effect until and unless JCC fails or neglects to
complete any phase of the Casino, fails in any other manner to prosecute with
diligence and continuity the Completion Obligations, fails timely to pay any of
the Carry Obligations, or files or has filed against it a petition for
bankruptcy or similar relief. In addition, the Completion Guarantors'
obligations under the Completion Guarantees are suspended during the pendency of
any Force Majeure events. In general, "Force Majeure" events are defined as: (a)
strikes, lockouts, labor disputes, inability to procure materials (for which
there is no suitable substitute or alternative that can be timely obtained on
reasonable commercial terms), failure of power; (b) material and adverse changes
in governmental requirements applicable to the construction of the Casino first
effective after the Effective Date and after the submission and approval of the
design, and any material and adverse changes after the Effective Date in the
orders of any governmental authority having jurisdiction over a party, the
project area, or the development (not including stop work orders due to a
building, safety or other code violation); (c) material and adverse changes in
governmental requirements first effective after the Effective Date; (d) breach
by the LGCB of
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the Amended and Renegotiated Casino Operating Contract (not caused or created by
the Company, the Completion Guarantors or any affiliate of a Completion
Guarantor); (e) acts of God, tornadoes, hurricanes, floods, sinkholes, fires and
other casualties, landslides, earthquakes, epidemics, quarantine, pestilence,
abnormal inclement weather; (f) acts of a public enemy, acts of war, terrorism,
effects of nuclear radiation, blockades, insurrections, riots, civil
disturbances, governmental preemption in connection with a national emergency,
or national or international calamities; (g) any judgment, directive, ruling or
order that substantially restrains or substantially interferes with completion
of Casino Construction. A suspension for a Force Majeure event may not extend
beyond 18 months from the date JCC knew or should have known of such Force
Majeure event, except that if the items in (b) through (g) above or a national
or general strike render performance impossible during such 18 months, the
suspension will continue until such time as performance is no longer impossible.
The Completion Guarantees terminate upon the occurrence of any of the
following: (i) the termination of the Amended Ground Lease or the Amended GDA
(as defined herein) other than as a result of a breach by JCC, (ii) casino
gaming operations are no longer permitted to be conducted at the Casino or are
modified, restricted or limited in a manner that materially diminishes the
benefits afforded to JCC or the gaming activities permitted to be conducted at
the Casino pursuant to the Gaming Act by reason of a change of law or the
enactment of a new law or by reason of JCC's rights under the Amended and
Renegotiated Casino Operating Contract having been terminated in any material
respect, other than as a result of a breach by JCC or the Completion Guarantors;
provided that, upon the occurrence of any of the events described in this clause
(ii) prior to the Termination of Construction Date, the Completion Guarantors
are nevertheless obligated to complete the parking area and bus staging area for
the Casino plus commercial space at the street level (collectively, the "Poydras
Street Support Facility"), the Poydras Tunnel Area, exterior site and street
work, and certain improvements which may be required under the Amended Ground
Lease; (iii) only as to the Carry Obligations but not as to the Completion
Obligations, a Force Majeure shall have continued for more than one year from
the receipt of a notice from any of the Beneficiaries to the Completion
Guarantors that the Completion Guarantors' obligation to complete the Casino has
taken effect, notwithstanding the Completion Guarantors' actual and continuous
best efforts to remove such Force Majeure; provided, however, that the
Completion Guarantors will remain liable for all Carry Obligations that actually
come due through the expiration of such one year period to the extent not
satisfied by JCC; and, provided further, that the Completion Guarantors will
have used their best efforts to remove such Force Majeure within such one year
period; or (iv) as to the Carry Obligations, as of and upon the Termination of
Construction Date and as to the Completion Obligations upon the date on which
all such payments or satisfactory provisions for all such payments have been
made, all lien periods with respect to the Casino Construction have expired and
no liens or privileges arising from the furnishing of labor, materials, supplies
or equipment for the Casino Construction affecting or purporting to affect the
Casino remain of record in Orleans Parish. See "--Material
Agreements--Completion Guarantees." JCC expects to obtain a surety bond (the
"Surety Bond") from a surety for the benefit of the Beneficiaries for
construction of the Casino Construction. The Completion Guarantees are not for
the benefit of, and may not be enforced by, holders of equity of JCC Holding,
including holders of Class A Common Stock. Nevertheless, if the Completion
Guarantors are required to perform under the Completion Guarantees and such
performance is suspended as the result of a Force Majeure event, such suspension
could significantly delay the completion and opening of the Casino. The failure
to complete and open the Casino on schedule would have a material adverse effect
on the Company.
ABILITY TO COMMENCE OPERATIONS AS SCHEDULED
DEVELOPMENT AND CONSTRUCTION. Construction projects, such as the Casino,
can entail significant development and construction risks including, but not
limited to, labor disputes, shortages of material and skilled labor, weather
interference, unforeseen engineering problems, environmental problems (including
asbestos, PCB, lead and waste removal), geological problems (including those
resulting from construction activities below sea level), construction,
demolition, excavation, zoning or equipment problems and
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unanticipated cost increases, any of which could give rise to delays or cost
overruns. Adverse developments in any of these areas could delay the project or
increase its cost, or both. Since HJC's bankruptcy filing, the Company has
materially increased its estimate of the cost to complete construction of the
Casino Construction, primarily as a result of (i) increases in general
construction costs in the region, (ii) physical deterioration of the
partially-completed Casino structure and parking lot structures, (iii) the need
to redesign the Casino's interior due to the dedication of the second floor of
the Casino building to non-gaming uses and by other changes in the configuration
of the Casino contemplated by the Amended and Renegotiated Casino Operating
Contract, and (iv) the need to upgrade the interior of the Casino in order to
compete effectively with casinos in the Mississippi Gulf Coast.
JCC intends to complete construction of the Casino Construction utilizing an
accelerated construction schedule which includes the use of multiple shifts,
early ordering of materials, fast tracking, and a seven-day work week (when
feasible). An accelerated construction schedule may cause actual construction
costs to exceed budgeted amounts. If the costs of developing, constructing,
equipping and opening the Casino exceed the proceeds from the Term Loans, the
Junior Subordinated Credit Facility, the Convertible Junior Subordinated
Debentures and the New Equity Contribution, JCC could be forced to draw upon the
Completion Guarantees, which are subject to important qualifications and
exceptions in the event certain Force Majeure or termination events occur. See
"Material Agreements--Completion Guarantees." In addition, drawings on the
Completion Guarantees would have the effect of increasing the Company's
outstanding indebtedness. See "--Material Agreements--Completion Guarantees" and
"--Amended Completion Loan Agreement."
The anticipated costs and opening date for the Casino are based on budgets,
conceptual design documents and schedule estimates prepared by JCC with the
assistance of contractors. The final amounts would be subject to modification
based upon the occurrence of certain events, such as certain design change
orders and costs associated with certain types of construction delays,
including, in certain cases, Force Majeure events. There is no assurance that
the Casino will commence operations on schedule or that construction costs for
the Casino will not exceed budgeted amounts. Failure to complete the Casino on
budget or on schedule would have a material adverse effect on the Company.
Depending on the cause of any delay, a failure to complete construction of the
Casino Construction within 12 months after the Effective Date may constitute an
event of default under the Amended and Renegotiated Casino Operating Contract
and constitute a "deemed opening" resulting in liability for the minimum daily
payment due under the Amended and Renegotiated Casino Operating Contract. See
"--Material Agreements-- Amended and Renegotiated Casino Operating Contract."
Any such event of default would have a material adverse effect on the Company.
CONSTRUCTION OBLIGATIONS, PERMITS AND APPROVALS. An amended General
Development Agreement (the "Amended GDA") to be entered into among JCC, the RDC
and the City, as intervenor, and to be effective upon the Effective Date,
targets December 31, 1999 or 12 months after the Effective Date, subject to
extension for Force Majeure, as the date JCC will complete the Casino
Construction and open the Initial Casino Facilities. Under the Amended GDA,
failure to complete the Casino Construction within the required time (subject to
Force Majeure) will result in liquidated damages of (i) $2,500 per day for the
first 30 day period after the completion deadline set forth in the Amended GDA,
(ii) $5,000 per day for the second 30 day period thereafter, (iii) $7,500 per
day for the third 30 day period thereafter, and (iv) $10,000 per day for each
day thereafter during which the Casino Construction is not complete. See
"--Material Agreements--Amended GDA." Failure to complete the Casino
Construction by June 30, 2000 and/or failure to diligently proceed with
construction of the Casino (subject to a 30 day cure period) would each
constitute an event of default under the Amended Ground Lease. See "--Cross
Defaults," "--Political Environment," "--Uncertainty Regarding Gaming
Regulations and Future Changes to the Law," "--Litigation," "--Applicability of
Public Works Act," "--Material Agreements--Amended GDA," "--Amended Ground
Lease," and "--Amended and Renegotiated Casino Operating Contract." Difficulties
in obtaining any of the requisite licenses, permits (including building
permits), allocations and
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authorizations from regulatory authorities could increase the cost of, or delay
the construction or opening of the Casino or otherwise affect its design and
could oblige JCC to make the payments referred to above under the Amended GDA.
Furthermore, there is no assurance that the necessary approvals or permits will
be obtained to permit the construction or occupancy of the Casino. See
"--Political Environment."
ZONING AND LAND USE. The Proponents have obtained certain conditional use
approvals from the City for the Casino and the parking facilities for the
Casino. Certain of such approvals, however, are subject to further review and
additional approvals may be required. Although JCC expects to obtain all
required conditional use approvals for the Casino and its operations, no
assurances can be given that JCC will receive the required approvals. The
failure to obtain required approvals could have a material adverse effect on the
Company. See "--Uncertain Political Environment."
Because the Casino does not comply with all requirements of the City's
zoning ordinance (the "Zoning Ordinance"), the Proponents have requested and
received a number of waivers from the City Council. Some uncertainty exists,
however, as to the City Council's authority to grant such waivers. In addition,
the Zoning Ordinance may be subject to differing interpretations and, depending
upon the interpretation, certain required waivers may not be requested or
granted. Accordingly, no assurances can be given that the Casino will comply
with the Zoning Ordinance in all material respects. Failure to comply with the
Zoning Ordinance could delay or prevent the construction or opening of the
Casino or cause the Casino to cease operations once opened and therefore would
have a material adverse effect on the Company.
ABILITY TO DEVELOP THE DEVELOPMENT PROPERTIES
Subject to, among other things, the approval of the Master Plan, entering
into tenant leases and obtaining the necessary financing, the build-out of the
non-gaming tenant improvements on the second floor of the Casino beyond the
Second Floor Shell Construction (together with the 3CP Property and the Fulton
Property, the "Development Properties") is targeted to be completed following
completion of the Second Floor Shell Construction. Subject to, among other
things, obtaining the necessary financing, the 3CP Property and Fulton Property
are potentially available for development for entertainment uses supportive of
the Casino. The Company, however, has not made any plans for disposition or
development of such properties. There can be no assurance that the Company will
be able to obtain the necessary financing and satisfy the other conditions to
development of the Development Properties. The failure to develop the
Development Properties could have a material adverse effect on the Company.
CONDITIONS TO DISBURSEMENT UNDER BANK LOANS
JCC expects to enter into the Bank Loans to finance development of the
Casino and to provide working capital. The $10 million Tranche A-1 (as defined
herein) and $30 million Tranche A-3 (as defined herein) of the A Term Loan and
the $30 million Tranche B-1 (as defined herein) of the B Term Loan will fund on
the Effective Date. The $20 million Tranche A-2 (as defined herein) of the A
Term Loan and the $121.5 million Tranche B-2 (as defined herein) of the B Term
Loan will be funded as required for construction of the Casino. The failure of
the Bank Lenders under Tranche A-2 or Tranche B-2 to disburse funds will not
terminate the Completion Guarantors' obligations under the Completion Guarantees
nor will such failure constitute a Force Majeure thereunder. The Bank Loans will
provide that after the Effective Date, prior to each disbursement of funds, the
following conditions, among others, must be met: (i) there exists no default
under the Completion Guarantees or the HET Loan Guaranty (as defined herein) or
under the Bank Loans with respect to payments thereunder or due to the
occurrence of bankruptcy or insolvency events, and (ii) that all representations
under the HET Loan Guaranty remain true and correct in all material respects. If
such conditions are unable to be met, JCC would be deprived of its primary
source of construction and working capital financing. There can be no assurance
that such conditions will be able to be met for the duration of the Bank Loans,
and the inability of JCC to obtain
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funds under the Bank Loans would have a material adverse effect on the Company.
See "--Material Agreements--Bank Loans."
CERTAIN LIMITATIONS ON CORPORATE CONTROL
Prior to the Transition Date (as defined herein), except upon the occurrence
of certain events, and after the requisite gaming regulatory agencies have made
the necessary suitability determinations, the board of directors of JCC Holding
will consist of six directors, with three directors elected by the holders of
Class A Common Stock ("Class A Directors") and three directors elected by the
holders of shares of Class B Common Stock ("Class B Directors"). See "Item 11.
Description of Registrant's Securities to be Registered--Board of Directors."
With the exception of certain significant transactions, the Class B Directors,
as members of the Gaming Committee of the board of directors, will generally
supervise the day-to-day activities of the Company. See "Item 11. Description of
Registrant's Securities to be Registered--Committees of the Board." Prior to the
Transition Date, HET has agreed to own 51% of the outstanding shares of Class B
Common Stock (but HET may own such lesser percentage as may be approved by the
Class A Directors and the Class B Directors). See "Item 11. Description of
Registrant's Securities to be Registered--Common Stock." Consequently, prior to
the Transition Date, it is likely that HET will be able to elect all of the
directors who will exercise day-to-day control over the Company. Also, if the
HET Warrant is exercised in its entirety, HET and its subsidiaries could own up
to 50.0% of the then outstanding shares of Common Stock, subject to certain
adjustments. See "--Material Agreements--HET Warrant." In addition, JCC has
engaged the Manager, an indirect wholly-owned subsidiary of HET, to manage the
operations of the Casino. See "--Material Agreements--Amended Management
Agreement." As a result of HET's ability to elect the Class B Directors and the
engagement of the Manager to operate the Casino, the ability of holders of Class
A Common Stock to influence the day-to-day operations of the Company may be
limited.
DEPENDENCE OF VALUES ON ESTIMATES OF FUTURE PERFORMANCE
The Company's pro forma unaudited condensed consolidated financial
statements have been prepared in accordance with the requirements of AICPA
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"). SOP 90-7 requires a determination of
the Company's reorganization value, which is the estimated fair value of the
reorganized entity as a going concern at the time it emerges from bankruptcy.
The Company's estimate of its reorganization value was based on a number of
assumptions, including the assumptions upon which the Company's estimates of
future operating results are based. The valuation necessarily assumes that the
Company will achieve the estimates of future operating results in all material
respects. If these results are not achieved, the resulting values could be
materially different. See "Item 13. Financial Statements and Supplementary
Data-- Unaudited Pro Forma Condensed Consolidated Financial Information."
LACK OF HISTORICAL FINANCIAL INFORMATION FOR THE COMPANY
Prior to the Effective Date, the Company has not (i) conducted any
operations, (ii) generated any revenues or (iii) issued any capital stock.
Accordingly, separate financial statements and other disclosures with respect to
the Company are omitted as such separate financial statements and other
disclosure are not deemed material. The Company expects that upon the Effective
Date of the Plan of Reorganization, JCC will succeed to all of the assets of HJC
except the 3CP Property and Fulton Property which will vest in CP Development
and FP Development, respectively. Therefore the historical financial statements
included herein are the historical financial statements of HJC. The historical
financial statements of HJC, however, do not purport to represent what the
financial position or results of operations of the Company would have been if
the Plan of Reorganization had in fact been consummated on the dates indicated
or at the beginning of the period indicated or to project the financial position
or results of operations for any future date or period. Due to, among other
things, the application of "Fresh Start" reporting on the Effective
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Date, the future financial position and results of operations of the Company is
expected to be materially different from the financial position and results of
operations of HJC. There can be no assurance, however, that the future financial
position and results of operations of the Company will be materially different
from the financial position and results of operations of HJC. See "Item 2.
Financial Information--Management's Discussion and Anaylsis of Financial
Condition and Results of Operations--Fresh Start Reporting."
LIMITS ON RESTAURANTS, LODGING, RETAIL OPERATIONS AND ENTERTAINMENT
The Gaming Act and the Rules and Regulations prohibit JCC from directly
offering seated restaurant facilities with table food service for patrons of the
Casino. The Gaming Act and the Rules and Regulations do permit JCC to offer
limited cafeteria style food services for employees and patrons, although no
food may be given away or subsidized within the Casino by JCC or any licensee,
and seating may not exceed 250 persons. The Gaming Act and the Rules and
Regulations also permit JCC, under certain circumstances, to contract with local
restaurant owners to provide food at designated areas within the Casino. The
Gaming Act and the Rules and Regulations do not prohibit JCC from serving liquor
and other alcoholic beverages to patrons. JCC is also prohibited from offering
lodging in the Casino, or engaging in any practice or entering into any business
relationships to give any hotel, whether or not affiliated with JCC, any
advantage or preference not available to any similarly situated hotels. See
"--Regulation--Louisiana Gaming Act." In addition, the Second Floor Sublease (as
defined herein) prohibits facilities, the principal business purpose of which is
a restaurant, on the second floor of the Casino. See "--Material
Agreements--Second Floor Sublease." Further, a bill was pre-filed in the State
House of Representatives for consideration during the State legislature's 1999
regular session which would amend the Gaming Act to broaden the food service
restrictions applicable to the Casino to all parts of any connecting structure
or building. Neither JCC, the Manager nor HET has operated a land-based casino
of the size of the Casino without associated hotel and full-service food
operations. Unlike the Casino, the vast majority of the Casino's competitors
operate without restrictions on lodging, food and beverage services, and
entertainment, and the Company believes that the ability to provide such
amenities is a considerable competitive advantage for the Casino's competitors.
See "--The Company--Competition." There is no assurance that JCC and the Manager
will be able to operate and manage the Casino on a profitable basis without such
amenities.
COMPETITION
The gaming industry is characterized by intense competition among companies
which, in many instances, have greater resources than will JCC. Additionally,
since the time the land-based Casino project was originally proposed in the
early 1990s, considerable competition has developed which may have an adverse
impact upon the Casino's profitability. The Company believes that the Casino
will face significant competition on a national, regional and local scale from
gaming operations in Mississippi and, on a regional and local scale, from gaming
operations in Louisiana. The Company believes that the Casino will also compete
for patrons on a national and international scale with large casino hotel
facilities in Las Vegas, Nevada and Atlantic City, New Jersey. Because of the
large number of casinos competing on both the local and national levels and the
continued development of other gaming markets, the attraction of a land-based
casino in New Orleans has decreased. In addition, negative publicity associated
with the Company's bankruptcy may have an adverse impact on the Casino's ability
to compete. Further, unlike the Casino, the vast majority of the Casino's
competitors operate without restrictions on lodging, food and beverage services,
and entertainment. The Company believes that the ability to provide such
amenities is a considerable competitive advantage for the Casino's competitors.
See "Limits on Restaurants, Lodging, Retail Operations and Entertainment" and
"--The Company--Competition."
MISSISSIPPI. JCC will compete for visitors on a national, regional and
local scale with existing gaming facilities in Mississippi. The Mississippi Gulf
Coast has recently emerged as a major gaming destination.
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There are currently 11 dockside casinos operating in the Mississippi Gulf Coast
which are within 100 miles of New Orleans, and significant enlargements to many
of these facilities are underway or have been announced. Such enlargements
include significant expansions of hotel space, and additions of retail
convention space and golf courses. Plans to build additional new dockside
casinos in the Mississippi Gulf Coast have been announced, a substantial number
of applications to operate casinos in Mississippi have been filed with the
Mississippi Gaming Commission. In addition, in early 1999 Mirage Resorts Inc. is
scheduled to open Beau Rivage, an 1,800 room hotel, resort and dockside casino
in Biloxi that will be larger than any hotel in New Orleans. Approximately $600
million is expected to be spent to develop Beau Rivage and due to its projected
size, amenities and ownership, is anticipated to provide significant competition
to the Casino. The Mississippi enabling legislation allows dockside gaming and
does not limit the number of casinos or the square feet of gaming space in these
facilities. In addition, unlike the Casino, gaming facilities in Mississippi
operate without restrictions on lodging, food and beverage services, and
entertainment, and several of such facilities have recently expanded to enhance
such services. See "--The Company--Competition."
LOUISIANA. On a regional and local scale, JCC will compete with gaming
operations in Louisiana. In Louisiana, thirteen riverboats are operating,
including one riverboat in Orleans Parish, two other riverboats in the New
Orleans metropolitan area, two riverboats in Baton Rouge, four riverboats in
Lake Charles in western Louisiana and four dockside casinos in
Shreveport/Bossier City in northern Louisiana. One license to conduct riverboat
gaming in the State has not yet been awarded, however, the award of such license
has been deferred pending the results of an LGCB study on the effects of gaming
in Louisiana. The Riverboat Act does not impose wagering or loss limits and
permits all forms of gaming with the exception of sports betting. Although the
Riverboat Act permits only dockside gaming at the facilities in the Shreveport
area, the Riverboat Act has been administered so as to allow riverboats to
refrain from cruising under certain circumstances. Riverboats that remain moored
under such circumstances are permitted to allow unlimited ingress and egress of
customers. There can be no assurance that the Riverboat Act will not be amended
to permit unlimited dockside gaming or to increase the number of permitted
riverboats. JCC will also compete with land-based gaming facilities in central
Louisiana on Native American land. The Tunica-Biloxi, Chitimacha and Coushatta
Indian tribes have each opened a casino near the towns of Marksville, Charenton
and Kinder, respectively. Each casino is located more than 105 miles from New
Orleans.
NATIONAL AND INTERNATIONAL COMPETITION. JCC will also compete nationally
with established and proposed casino hotel operations in Las Vegas, Nevada and
Atlantic City, New Jersey. Several new facilities have opened in Las Vegas and
certain existing facilities in Las Vegas and Atlantic City have undergone major
expansions. This construction and expansion increased the number of hotel rooms
and gaming positions in the Las Vegas and Atlantic City markets and created
several attractions which have enhanced the appeal of those cities as tourist
destinations. To a lesser degree, JCC will also compete for international
patrons with casinos in other parts of the world.
OTHER VENUES. Additional regional competition may be generated from
land-based or dockside casino facilities to be located in states which do not
currently allow casino gaming activities including Alabama and Texas. Bills
seeking to legalize gaming were introduced in both of these states in the past.
Although these bills were not enacted, similar bills may be introduced in future
legislative sessions.
OTHER FORMS OF LEGAL WAGERING. JCC will compete for local customers with
other forms of legal wagering, including OTB parlors. In addition, under
Louisiana law, certain parishes (including Orleans Parish) presently permit
restaurants, taverns, hotels and licensed clubs to operate up to three VDPs per
location, qualifying truck stops may operate up to 50 VDPs per location, and
racetracks and OTB parlors may operate an unlimited number of VDPs per location.
Louisiana law, however, limits VDP wagering and jackpots. Other forms of
wagering, including charitable gaming and a state lottery, will provide
additional local competition. Further, in 1997, the State legislature authorized
the use of slot machines at race tracks
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located in three parishes in the State (but not Orleans Parish), subject to a
15,000 square foot limitation. The authorization for this bill was subject to a
referendum in each of the parishes where the race tracks are located to approve
such use of slot machines. The voters in two of the three parishes approved the
use of slot machines at the race tracks located in those parishes. The
authorization for this bill remains subject to further legislative action on the
fees and taxes to be imposed on such slot machines. Legislation to impose such
fees and taxes was introduced in the 1998 fiscal session of the State
legislature, but failed to receive legislative approval. Future consideration of
this issue is likely by the State legislature. If slot machines are ultimately
permitted at race tracks in the two parishes that approved such use of slot
machines, the Casino would compete for patrons with slot machines at such race
tracks.
In the Company's opinion, its principal competitors will be the gaming
facilities located on the Mississippi Gulf Coast as well as the riverboats
located in Orleans Parish and in the New Orleans metropolitan area, with the
riverboats in other areas of the State and the casinos operated by Indian tribes
affording less significant competition.
LIMITED REMEDIES FOR ADDITIONAL LAND-BASED CASINOS
The Gaming Act presently restricts land-based casino gaming to the Rivergate
site. However, there can be no assurance that the State will not enact
legislation to permit competing land-based casinos at other sites or in parishes
other than Orleans Parish, including other parishes in the New Orleans
metropolitan area, the operation of which could have a material adverse effect
on JCC's operations. As to Orleans Parish, the Gaming Act provides that, if at
any time while the Amended and Restated Casino Operating Contract is in effect,
a "land-based casino gaming establishment" in addition to the Casino is
authorized to operate in Orleans Parish, JCC would be relieved of the obligation
to remit to the LGCB the compensation required under the provisions of the
Amended and Renegotiated Casino Operating Contract (but such obligation may
resume pursuant to the terms of the Amended and Renegotiated Casino Operating
Contract). The Gaming Act further provides that, among other things, gaming
operations upon riverboats in accordance with the Riverboat Act shall not
constitute the authorization of additional land-based casino gaming operations
which relieves the casino gaming operator of payment of compensation to the
LGCB. However, state laws generally requiring riverboats to sail in accordance
with their schedules and safety conditions are frequently unenforced.
Under the Amended and Renegotiated Casino Operating Contract, if the State
or the LGCB permits any riverboat to conduct dockside gaming in material
violation of the Riverboat Act or the Gaming Act after notice from JCC and an
opportunity to cure, JCC will be entitled to seek specific performance by the
LGCB and/or the State under the exclusivity provisions of the Amended and
Renegotiated Casino Operating Contract and/or mandamus against the LGCB or any
other appropriate governmental authority not to permit such violations. JCC's
obligation to pay the Gross Gaming Revenue Share Payments (as defined herein)
will continue during the pendency of any judicial action through final
non-appealable judgment and at all times thereafter will not relieve JCC of the
obligation to pay the Gross Gaming Revenue Share Payments even if the court
finds that the LGCB permitted a riverboat to conduct dockside gaming. This
circumstance could have a material adverse effect on JCC's operations. The
Amended and Renegotiated Casino Operating Contract further limits the remedies
available to JCC in the event that a Permitted Riverboat (as defined herein) in
Orleans Parish violates a Permitted Amendment (as defined herein) to the Gaming
Act. See "--Material Agreements--Amended and Renegotiated Casino Operating
Contract--Exclusive Contract." The Amended and Renegotiated Casino Operating
Contract contemplates a possible change in the Gaming Act to allow only one
Permitted Riverboat on Lake Pontchartain in Orleans Parish to conduct dockside
gaming subject to, among other things, certain restaurant and hotel limitations
on such Permitted Riverboat. If LGCB allows a violation of the Permitted
Amendment to occur by a Permitted Riverboat, JCC may seek relief in the court by
way of specific performance and/or mandamus but is not relieved of its
obligation to pay the Gross Gaming Revenue Share Payments. See "--Material
Agreements--Amended and Renegotiated Casino Operating Contract."
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In addition, a state law enacted in 1996 purports to, among other things,
retroactively amend the Gaming Act: (i) to provide that the conduct of gaming
operations upon riverboats in accordance with the provisions of the Riverboat
Act or otherwise while upon a designated waterway while temporarily at dockside
does not constitute the authorization of additional land-based casino gaming
operations which relieves the operator of the Casino of the obligation to pay
compensation to the LGCB in accordance with the Amended and Restated Casino
Operating Contract; and (ii) to provide that governmental inaction which results
in the operation of another land-based casino in Orleans Parish will not relieve
the operator of the Casino of the obligation to pay compensation to the LGCB in
accordance with the Amended and Restated Casino Operating Contract. This law
also purports to provide that in the event of litigation between the operator of
the Casino and the LGCB or the State or any of its political subdivisions, the
operator of the Casino must continue to make all payments to the LGCB and to the
State and any of its political subdivisions as required by law and the Amended
and Restated Casino Operating Contract during the pendency of such litigation,
and that any failure to make the required payments will render the operator of
the Casino unsuitable. See "--Regulation--Louisiana Gaming Act." There is no
assurance that JCC will not face the prospect of competing against dockside
riverboat gaming operations in Orleans Parish without being relieved of its
obligation to remit to the LGCB the compensation required under the Amended and
Renegotiated Casino Operating Contract, a circumstance that could have a
material adverse effect on JCC's operations. See "--Uncertainty Regarding Gaming
Regulation and Future Changes to the Law--Uncertainty Regarding Regulation and
Interpretation of the Gaming Act" and "--The Company-- Competition."
UNCERTAINTY REGARDING PRE-OPENING DATE RENT
HJC has been making rent payments to the City and RDC at a rate of $736,000
per month. See "--Material Agreements--Amended Ground Lease--Terms, Fees and
Impositions." The City and RDC contend that HJC is required to pay rent at an
escalated rate from November 1, 1997 through the opening of the Casino, as a
result of the delay in consummating an HJC plan of reorganization and the
resulting delay in opening the Casino. The Company believes there is no legal
basis for such contention. The City and RDC have not waived any claim to payment
of escalated rent, and have requested that HJC and JCC make specified payments
to the City and RDC in lieu of the escalated rent. The City, RDC and HJC are
currently negotiating these and related issues. There can be no assurance that
such negotiations will not result in additional payments to the City which could
have a material adverse effect on the Casino's profitability.
MINIMAL OPERATING HISTORY
Although HJC and the Manager were involved in construction of the Casino and
operated the Basin Street Casino for approximately six months, JCC has no
operating history and has never been involved in constructing or operating a
casino. Although certain of JCC Holding's expected board members and certain
officers of the Manager have experience operating casinos, none of these
individuals have operated a land-based casino of the size of the Casino without
associated hotel and full-service food operations. JCC will rely on the Manager
to manage the Casino and will grant it a significant degree of independence in
operating matters, including day-to-day financial control. See "Material
Agreements--Amended Management Agreement." There can be no assurance that JCC
and the Manager can operate the Casino on a profitable basis.
CROSS DEFAULTS
Certain events of default under the Amended and Renegotiated Casino
Operating Contract, the Amended Ground Lease, the Amended Management Agreement
(as defined herein), the indentures for the New Notes and New Contingent Notes
(the "Indentures") or the Bank Loans will constitute an event of default under
certain of the other of such agreements (subject, in certain circumstances, to
the cure
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periods set forth in such agreements). For example, a default under the Amended
Management Agreement results in cross defaults under the Amended and
Renegotiated Casino Operating Contract and the Amended Ground Lease, and a
default under the Amended GDA or the revocation or termination of the Amended
and Renegotiated Casino Operating Contract results in a cross default under the
Amended Ground Lease. The occurrence of an event of default under any of such
agreements and the effect of any resulting cross-defaults would have a material
adverse effect on the Company.
NO PRIOR MARKET FOR THE CLASS A COMMON STOCK
JCC Holding will use its best efforts to cause the Class A Common Stock to
be listed on The American Stock Exchange upon the Effective Date, or to be
listed on such other national securities exchange or quoted on the National
Association of Securities Dealers, Inc. Automated Quotations System as it deems
appropriate. There can be no assurance that JCC Holding will be successful in
causing the Class A Common Stock to be so listed or quoted.
The shares of Class A Common Stock are an issue of new securities, have no
established trading market and may not be widely distributed. There can be no
assurance that a trading market for the Class A Common Stock will develop. If a
trading market does develop, the prices of the Class A Common Stock may be
volatile and liquidity may be limited. If a market for the Class A Common Stock
does not develop, holders of Class A Common Stock may be unable to resell the
Class A Common Stock for an extended period of time, if at all. Future trading
prices of the Class A Common Stock will depend upon many factors, including,
among other things, JCC's operating results, competitive factors, prevailing
interest rates and the markets for similar securities which are subject to
various pressures.
COMMON STOCK ELIGIBLE FOR FUTURE SALE
Pursuant to the Plan of Reorganization, JCC Holding has agreed that, (i)
upon the request of any holder of shares of Class A Common Stock who is
reasonably required by law to register public resales of such shares, JCC
Holding will file with the SEC and cause to become effective as soon as
practicable after the Effective Date a registration statement relating to such
public resales, and (ii) upon the request of HCCIC (which request may not be
made until the second anniversary of the opening of the Casino), JCC Holding
will file with the SEC and cause to become effective as soon as reasonably
practicable thereafter a registration statement relating to all shares of Class
B Common Stock held by HCCIC, HET and HET's subsidiaries (provided, however,
that prior to the Transition Date, HET and/or its subsidiaries are required to
own at least 51% of the outstanding shares of Class B Common Stock, unless a
lesser percentage is approved by the Class A Directors and the Class B
Directors). See "Item 11. Description of Registrant's Securities to be
Registered--Common Stock" and "--Agreements with Certain Stockholders." Such
shares of Class B Common Stock convert to shares of Class A Common Stock if they
are transferred to entities other than former Partners of HJC, their affiliates
and FNBC. See "Item 11. Description Registrant's Securities to be
Registered--Common Stock." In addition, the Convertible Junior Subordinated
Debentures will be convertible at the option of the holders, in whole or in
part, at any time after October 1, 2002, into Class A Common Stock at a
conversion price of $25.00. See "--Material Agreements--Convertible Junior
Subordinated Indentures." Sales of or offers to sell a substantial number of
shares of Class A Common Stock, or the perception by investors, investment
professionals and securities analysis of the possibility of such sales, could
adversely affect the market for and prevailing prices with respect to the Class
A Common Stock.
RELIANCE ON SINGLE MARKET
Because JCC has no present intention to have operations other than the
Casino and will be dependent upon visitors to New Orleans and New Orleans area
residents, a downturn in the local or regional economy, a decline in tourism in
New Orleans, a decline in the New Orleans gaming market or an increase in
competition could have a material adverse effect on the Company. In addition, a
reduction or cessation of activities at the Casino due to flooding, severe
weather, natural disaster or otherwise could have a material adverse effect on
the Company.
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UNCERTAINTY REGARDING TAX TREATMENT OF THE NOTES AND THE CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES
The Notes and the Convertible Junior Subordinated Debentures will have legal
and other economic terms typically associated with indebtedness and have been
intended to create a debtor-creditor relationship between JCC and the holders
thereof. Consequently, JCC intends to treat the Notes and the Convertible Junior
Subordinated Debentures as debt for federal income tax purposes, and the
discussion herein assumes such treatment. Nevertheless, the Internal Revenue
Service ("IRS") may assert that, because all payments on the New Contingent
Notes (and certain payments on the New Notes) are contingent upon future
positive cash flows being generated by JCC, the New Contingent Notes (or,
possibly, both series of Notes) should be classified as equity, rather than
debt, for federal income tax purposes. In addition, it is possible that the IRS
may assert that the Convertible Junior Subordinated Debentures should be
classified as equity because of the debentures' conversion, redemption and other
features. Moreover, even if the Convertible Junior Subordinated Debentures are
treated as debt for federal income tax purposes, amendments made to the Internal
Revenue Code of 1986, as amended, in 1997 may prohibit JCC Holding from
deducting interest payments made thereon due to the debentures' conversion and
redemption features. It is unclear whether the debentures will qualify for a
transition rule or "grandfather" exception to these amendments. There can be no
assurance that the IRS will not challenge the characterization of the Notes or
the Convertible Junior Subordinated Debentures as debt or that a court would not
sustain such a challenge. If it were determined that any such instrument
constitutes equity for federal income tax purposes, or if JCC Holding is
prohibited from deducting interest paid on the Convertible Junior Subordinated
Debentures due to the amendments to the Internal Revenue Code of 1986, as
amended, such a recharacterization or treatment, as the case may be, would
result in the loss of substantial interest deductions and other tax benefits for
JCC. The loss of such deductions and other tax benefits could have a material
adverse effect on the Company.
TAXATION
Gaming companies are typically subject to significant taxes and fees, both
of which are subject to increases at any time. Federal and state legislatures
have from time to time considered imposing federal and additional state taxes on
all gaming establishments. Any material increase in taxes, or the imposition of
any additional taxes or fees on JCC, could have a material adverse effect on the
Company.
The City currently imposes a 5% "amusement" tax on the gross receipts
representing admission charges to, among other things, "any game of skill and
chance as well as all mechanical devices operated for pleasure or skill where a
fee is charged for admission or entrance or for the purpose of playing them or
whether there is any charge whatever for them or in connection with them either
directly or indirectly." "Admission" is broadly defined to include "all amounts
paid for admission, season tickets, refreshments, service and merchandise" and
"any charge or fee for the purpose of self-participation in any amusement
activity." The City Attorney opined that, as applied to riverboat gaming,
riverboat cruises are "excursions" subject to the amusement tax and that
admission charges include all activities within the riverboat, including money
spent on wagers. To the Company's knowledge, the City has not levied or
collected the amusement tax on money spent on wagers on riverboats. In addition,
the City Attorney subsequently issued an opinion that the amusement tax may not
legally be levied on gaming revenues derived from the Casino because these
revenues do not constitute taxable "admission." Opinions of the City Attorney
are not binding on the City or any other person. There can be no assurance that
the City will not attempt to levy the tax on the operations of the Casino, and
the Company cannot predict, if this tax were to be so levied, whether it would
be levied on wagers, gaming revenues or some other measure. The Amended Ground
Lease will provide that, in the event a court of competent jurisdiction in a
final non-appealable judgment determines that the amusement tax is applicable to
JCC's receipts (other than from special events), JCC is entitled to set off the
amount of the amusement tax collected and remitted (other than with respect to
special events) against substantially all payments required to be made under the
Amended
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Ground Lease. However, there can be no assurance that the amount of the tax, if
successfully levied, would not exceed the amount of such offset. If the
amusement tax were to be successfully imposed on wagers at the Casino, JCC could
be unable to make payments on its indebtedness, which could have a material
adverse effect on the Company.
TITLE INSURANCE
JCC intends on or about the Effective Date to obtain title insurance
policies from First American for each of (i) the premises underlying the Casino
Premises, (ii) the 3CP Property and (iii) the Fulton Property. With respect to
each of the foregoing, such policies will consist of lenders' title insurance
policies for the benefit of HET and HOCI as Minimum Payment Guarantors, the Bank
Lenders and the holders of the Notes and owners' title insurance policy for the
benefit of JCC, CP Development and FP Development, respectively.
The owners' title insurance policy with respect to the Casino Premises will
provide coverage in the amount of $527.5 million. The lenders' title insurance
policy with respect to the Casino Premises will provide coverage equal to (i)
$100 million in favor of HET and HOCI as Minimum Payment Guarantors, (ii) the
total amount of indebtedness under the Bank Loans in favor of the Administrative
Agent, and (iii) the aggregate principal amount of the Notes in favor of the
Trustee.
By endorsement, the title policies with respect to the Casino Premises will
provide that the computation of loss or damage compensable under such policies
will be measured by the use or uses to which the land and improvements are put
at the time of loss, or, if not then in use, as intended to be used pursuant to
the Amended Ground Lease. Actual loss has been generally construed to mean the
diminution in value of an insured mortgage resulting from an insured title
defect, not to exceed the value of the mortgagor's estate or interest in the
land and improvements. There has been no judicial construction of the
endorsement providing that such loss will be measured by the intended or actual
use of the mortgaged property. Actual loss will be determined either by
voluntary agreement with the title insurer or judicially. Due to uncertainty
regarding the method for valuing any loss and depending upon the nature and
extent of an insured title defect and its effect upon the use of the land and
improvements, and because a significant portion of the funds will not be used
for improvements and changes in the value of the land and improvements, the
amount of any recovery for such other title losses under the lenders' title
policies with respect to the Casino Premises cannot be predicted and there can
be no assurance that any recovery as a result of such title loss will not be in
an amount substantially less than (i) $100 million in the case of HET and HOCI
as Minimum Payment Guarantors, (ii) the total amount of indebtedness under the
Bank Loans in the case of the Administrative Agent, and (iii) the aggregate
principal amount of the Notes in the case of the Trustee. The owners' and
lenders' title insurance policies with respect to each of the 3CP Property and
the Fulton Property will provide coverage equal to the estimated fair market
value of such property. It is currently anticipated that the 3CP Property will
be insured for $4 million and that the Fulton Property will be insured for $14
million.
The title insurance policies with respect to the Casino Premises will be,
and the title insurance policies with respect to each of the 3CP Property and
the Fulton Property may be, reinsured through various title insurance companies
throughout the United States. The ability to successfully recover under the
policies is dependent on the creditworthiness of the title company and its
reinsurers at the time of the claim and the existence and validity of any
defenses that the title insurers and its reinsurers may have. There can be no
assurance that the title insurers will be able to fulfill their financial
obligations under the title insurance policies. See "--The Company--Title
Insurance" and "Item 8. Legal Proceedings."
In December 1996, HJC and First American entered into the First American
Settlement Agreement providing for, among other things, the issuance of new
blanket owner's and lender's title insurance policies for the Casino Premises,
and the 3CP Property and the Fulton Property. Bankruptcy Court approval of the
First American Settlement Agreement was appealed by Messrs. Harry McCall, Henry
McCall and Thomas
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Tucker to the Civil District Court for the Parish of Orleans. This appeal is now
pending. The McCall Settlement Agreement contemplates that this appeal will be
withdrawn. If the First American Settlement Agreement becomes effective, it will
resolve certain of the parties' claims against each other, cause the
cancellation of the existing owner's title insurance policy and provide for the
issuance of new title insurance to JCC and its lenders at reduced "re-issue"
rates. See "--The Company--Title Insurance." HJC is currently discussing the
scope and terms of the exceptions and endorsements to the new title insurance
policies with respect to the Casino Premises, and the separate title insurance
policies insuring the interests in the 3CP Property and the Fulton Property
(covered by the existing owner's title insurance policy) that will be
transferred to CP Development and FP Development, respectively, on the Effective
Date. There can be no assurance that the First American Settlement Agreement
will become effective, that the parties will reach agreement regarding the terms
of the exceptions and endorsements to the new title insurance policies with
respect to the Casino Premises or that separate title insurance policies
insuring the real property to be transferred to CP Development or FP Development
will be issued, and the failure of any of the foregoing to occur could have a
material adverse effect on the Company.
APPLICABILITY OF PUBLIC WORKS ACT
Certain groups of business owners, including contractors, have claimed that
the State's Public Works Act, which requires competitive bidding on public works
contracts, should apply to HJC's contracts in connection with the construction
of the Casino (the "Casino Contracts"). Although such groups have previously
threatened to litigate their claims, the Company has no knowledge that any such
litigation is pending. The Company believes that the Casino Contracts are not
governed by the Public Works Act and are not subject to its bidding
requirements. If the Public Works Act were to apply to the Casino Contracts, the
Public Works Act would nullify any Casino Contracts which are not made in
compliance with the bidding requirements thereof. Such nullification would
result in construction delay and potential damage claims from contractors and
may have a material adverse effect on the Company. Although the State Attorney
General has opined that the Public Works Act did not apply to the Casino
Contracts, opinions of the State Attorney General are not binding on the State
or any other person and no assurances can be given that such contracts are not
subject to the Public Works Act or that litigation concerning the applicability
of that act to the Casino Contracts will not cause material delays in the
construction of the Casino or otherwise adversely affect the Company.
ENVIRONMENTAL MATTERS
JCC expects to own and lease certain properties, some of which were formerly
owned or leased by companies with operations that involved or may have involved
the use of hazardous substances or wastes and which could subject JCC to
liability for the cleanup of such hazardous substances or wastes or may
adversely affect the owner/operator's ability to borrow in the future using the
real estate as collateral. In addition to all of its rights under the Bankruptcy
Code as successor to HJC under the Plan of Reorganization, JCC expects to obtain
certain indemnifications for past activities, operations or occurrences at such
properties that it believes will be sufficient to cover the costs of any
potential liability related thereto. At the present time, the Company does not
anticipate that such liability or conditions will have a material adverse effect
on the Company. However, no assurances can be given that such matters will not
have a material adverse effect on the Company. See "--The Company--Environmental
Matters."
RESTRICTIVE COVENANTS
The Amended Ground Lease and the Amended and Renegotiated Casino Operating
Contract will limit the amount of secured indebtedness JCC may incur and from
whom such indebtedness may be obtained without consent. These restrictions could
limit JCC's ability to effect future financings or otherwise restrict JCC's
activities. The Company's operating and financing options will be subject to
covenants contained in the Indentures, the Bank Loans, related collateral
documents, and agreements with
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the LGCB and the RDC, which covenants include, among others, restrictions on
restricted payments, the granting of liens, the incurrence of additional
indebtedness, the payment of management fees, subsidiary dividend restrictions,
asset sales, transactions with affiliates, mergers and consolidations. See
"--Material Agreements--Indentures," "--Bank Loans," "--Amended Ground Lease,"
and "--Amended and Renegotiated Casino Operating Contract."
CONFLICTS OF INTEREST
Under the Amended Management Agreement, the Manager, a wholly-owned
subsidiary of HET, will be exclusively responsible for supervising and managing
the Casino. However, HET has also , through its operating subsidiaries and other
affiliates, developed and currently operates dockside casinos in Vicksburg and
Tunica, Mississippi and Shreveport, Louisiana and HET may develop other casinos
that may compete with the Casino (collectively, the "Competing Casinos"). Due to
the Competing Casinos' proximity to the Casino, they will compete directly with
the Casino for patrons. HET, through its operating subsidiaries, also operates
casinos in the five major Nevada and New Jersey gaming markets and such casinos
will also compete with the Casino on a national basis.
In addition, Colin V. Reed, Executive Vice President and Chief Executive
Officer of HET, is presently the sole director as well as Chairman of the Board
of JCC Holding. On the Effective Date, if the requisite gaming regulatory
agencies have made the necessary determinations, Colin V. Reed is expected to be
a Class B Director and Chairman of the Board of JCC Holding. Currently,
Frederick W. Burford, a paid consultant to HET, is the President of JCC Holding,
JCC, JCC Development, CP Development and FP Development. As of the Effective
Date of the Plan of Reorganization, Frederick W. Burford is expected to continue
to serve as the President of JCC Holding, JCC, JCC Development, CP Development
and FP Development, but is expected to cease to be a paid consultant to HET.
Additionally, L. Camille Fowler, the Vice President-Finance, Treasurer and
Secretary of JCC Holding, JCC, JCC Development, CP Development and FP
Development is also the Director of Finance, Vice President, Secretary and
Treasurer of the Manager. As of the Effective Date of the Plan of
Reorganization, L. Camille Fowler is expected to continue to serve as the Vice
President-Finance, Treasurer and Secretary of JCC Holding, JCC, JCC Development,
CP Development and FP Development but is expected to cease to serve as the
Director of Finance, Vice President, Secretary and Treasurer of the Manager. See
"Item 5. Directors and Executive Officers." Sometime after the Effective Date,
if the requisite gaming regulatory agencies have made the necessary
determinations, one or two other officers of HET are expected to be Class B
Directors of JCC Holding. As a result of HET's ownership of the Competing
Casinos, and the fact that these HET officers hold or are expected to hold such
positions with JCC Holding, a conflict of interest may be deemed to exist by
reason of such persons' access to information and business opportunities
possibly useful to any or all of the Competing Casinos. No specific procedures
have been devised for resolving conflicts of interest confronting, or which may
confront the Company.
REPURCHASE OF CLASS A COMMON STOCK RELATING TO GAMING MATTERS
The Gaming Act, the Rules and Regulations thereunder, and the Amended and
Renegotiated Casino Operating Contract impose certain suitability requirements
with respect to the holding of any securities of JCC Holding and JCC. To the
extent any holder of such securities fails to satisfy such requirements, such
holder may be required to obtain certain qualifications or approvals from the
LGCB to continue to hold such securities. Any failure to obtain such
qualifications or approvals may, by virtue of requirements imposed on JCC,
subject such securityholders to certain requirements, limitations or
prohibitions, including a requirement that such securityholders liquidate their
securities at a time or at a cost that is otherwise unfavorable for such
securityholders. There can be no assurance that the Gaming Act will not be
interpreted, that additional rules and regulations will not be implemented, or
that new legislation will not be enacted to impose additional restrictions on,
or otherwise prohibit, certain persons from holding the Class A Common Stock, or
cause such securityholders to liquidate their Class A Common Stock at a time
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or at a cost that is otherwise unfavorable for such securityholders. See
"--Uncertainty Regarding Gaming Regulation and Future Changes to the Law,"
"--Regulation--Louisiana Gaming Act" and "--Material Agreements--Amended and
Renegotiated Casino Operating Contract." The Certificate of Incorporation of JCC
Holding provides that the shares of Class A Common Stock may, under certain
circumstances, be redeemed by JCC Holding if JCC Holding, or certain affiliates
thereof, believes such action is required to prevent the loss or impairment of a
material gaming license of JCC or such affiliate. See "Item 11. Description of
Registrant's Securities to be Registered--Redemption Provisions."
CERTAIN BANKRUPTCY CONSIDERATIONS
The RDC leases the Rivergate site from the City pursuant to a lease
agreement with the City (the "City Lease"). JCC expects the RDC to sublease the
site to JCC pursuant to the Amended Ground Lease. The commencement of a
bankruptcy case by or against the City or RDC could adversely affect JCC's
rights under the Amended Ground Lease, if the City and/or the RDC should elect
to "reject" the City Lease and/ or the Amended Ground Lease under Section 365(a)
of the Bankruptcy Code. Under Section 365(h) of the Bankruptcy Code, a lessee
may elect either to treat the rejected lease as terminated or to remain in
possession. In the event of the City's bankruptcy, the RDC is obligated under
the Amended Ground Lease to assert a right under Section 365(h) to remain in
possession to protect the Company's rights and the securityholders' interest in
the premises. If the RDC does assert such right, JCC's right to remain in
possession should be unaffected by the City's bankruptcy. Some courts have held
that Section 365(h) does not provide continuing possessory rights to a sublessee
when the lessee-sublessor rejects its master lease with its lessor. Thus, if the
City Lease or the Amended Ground Lease was terminated as between the City and
RDC as a result of such rejection by the RDC, JCC might lose its rights under
the Amended Ground Lease. JCC's loss of its rights under the Amended Ground
Lease would have a material adverse effect on the Company.
LACK OF EXPERIENCED PERSONNEL
A shortage of skilled and licensed labor exists in the gaming industry,
which may make it more difficult and expensive to attract and retain qualified
employees. While JCC believes that it will be able to attract and train
qualified individuals to staff the Casino, there is no assurance that it will be
able to do so. In addition, the Gaming Act requires that at least 50% of the
individuals employed at the Casino be Louisiana residents for at least one year
prior to employment. The Amended Ground Lease requires that not less than 55% of
the employees of JCC and JCC Development live and reside in Orleans Parish
(subject to reduction to comply with applicable law). The minimum percentage of
JCC and JCC Development employees that are required under the Amended Ground
Lease to be Orleans Parish residents will increase by 2% on the anniversary of
the Opening Date until the residency requirement reaches 65% (subject to
reduction to comply with applicable law). JCC has agreed to use its best efforts
to maximize hiring in Orleans Parish with the goal being that 80% of employees
of JCC and JCC Development, in the aggregate, live and reside in Orleans Parish.
There is no assurance that JCC will be able to hire qualified individuals
satisfying these criteria. If JCC is able to hire qualified individuals
satisfying these criteria, the cost of hiring such individuals could be
significantly higher than if JCC was not required to hire individuals satisfying
such criteria. If JCC does not satisfy these criteria and does not pursue
curative actions, it is possible that the default could result in revocation of
the Amended Ground Lease. See "--Material Agreements--Amended Ground
Lease--Residency Requirements" and "--Risk Factors-- Cross Defaults."
AMENDED OPEN ACCESS PROGRAM AND PLANS
The Amended GDA and the Amended Ground Lease will obligate JCC to comply
with a revised and updated open access program and will require JCC to adopt
amended and restated open access plans pursuant thereto (collectively, the
"Amended Open Access Program and Plans") to facilitate participation
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by minorities, women, and disadvantaged persons and business enterprises in
developing, constructing and operating the Casino. The Amended Open Access
Program and Plans are expected to contain various provisions which permit the
City's Mayor and the City Council to impose penalties on JCC if it fails to
comply with the provisions of the Amended Open Access Program and Plans. These
penalties include fines, a default under the Amended Ground Lease under certain
circumstances and the right of the City's Mayor to request a review of hiring
and contracting practices. Imposition of the fines could have a material adverse
effect on the Company. In addition, JCC is required to indemnify the City and
the RDC against certain damage awards arising out of lawsuits related to the
Amended Open Access Program and Plans. See "Material Agreements--Amended GDA."
Although an amended open access program establishing minority hiring goals
for the construction and operation of the Casino, was submitted to the City and
the RDC on December 18, 1997, this program has not yet been approved. In
addition, the provisions of the amended and restated open access plans are being
negotiated by the parties and have not yet been submitted to the City and the
RDC for approval. The Amended Open Access Program and Plans may establish goals
for the employment of minorities at the Casino in a proportion greater than the
population of the State. Under the Gaming Act, JCC is required, as nearly as
practicable, to employ minorities in proportions consistent with the population
of the State. JCC interprets these provisions in a manner that would not
prohibit JCC from employing a workforce with a percentage of minorities in
excess of the percentage of minorities of the population of the State. There can
be no assurance that the Gaming Act or the Amended and Renegotiated Casino
Operating Contract will be applied in a manner which permits compliance with the
Amended Open Access Program and Plans. If such provisions were not applied in
such a manner, there may be a conflict between the Gaming Act, the Amended and
Renegotiated Casino Operating Contract and the Amended Open Access Program and
Plans since the percentage minority population of the State may be less than the
percentage minority hiring goals under the Amended Open Access Program and
Plans. JCC intends to comply with the Amended Open Access Program and Plans
unless they are found to be preempted by the Gaming Act. If the conflict
discussed above exists and JCC nevertheless complies with the minority hiring
goal under the Amended Open Access Program and Plans, JCC may be in violation of
the Gaming Act and the provisions of the Amended and Renegotiated Casino
Operating Contract. Such a violation could result in a material adverse effect
on the Company.
YEAR 2000 RISKS
The Year 2000 issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates that have been
stored as two digits rather than four (e.g., "98" for 1998). On January 1, 2000,
any clock or date recording mechanism, including date sensitive software, which
uses only two digits to represent the year may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices or perform similar
tasks.
The Company has not yet fully evaluated its state of readiness with respect
to Year 2000 problems, the costs that may be incurred to address any Year 2000
issues which may arise or the effect on the Company of any Year 2000 issue which
may arise. The Company will not be able to fully evaluate its readiness until
after the occurrence of the Effective Date, the completion of a material portion
of the construction of the Casino (specifically, the installation of computer
hardware and software in the Casino) and the negotiation and execution of
contracts with significant suppliers.
It is anticipated that JCC and the Manager will enter into a side letter
agreement pursuant to which the Manager is expected to agree to be responsible
for assuring that certain to be agreed upon computer systems used in the
operation of the Casino will appropriately interpret the year 2000 and beyond.
It is expected that the slot management system for the Casino will be licensed
from a third party. The Company has no information on the status of the
compliance of the slot management or any other system licensed from a third
party or in equipment owned by JCC or otherwise on which the operation of the
Casino may
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depend, and will not be able to obtain such information until the relevant
contracts are negotiated and executed.
Because the business activities of JCC Holding, JCC Development, CP
Development and FP Development, will be limited, and because many of the
business activities of JCC Development, CP Development and FP Development likely
will not commence until after January 1, 2000, the Company is not presently
aware of the existence of any material Year 2000 compliance risks with respect
to those entities.
Should the Company and/or its significant suppliers fail to timely identify,
address and correct material Year 2000 issues, such failure could have a
material adverse impact on the Company's ability to operate. In addition, if
corrections made by such suppliers to address Year 2000 issues are incompatible
with the Company's systems, the Year 2000 issue could have a material adverse
impact on the Company's ability to operate. The Company does not currently have
contingency plans designed to minimize the impact of a Year 2000 problem, but
expects to develop plans following the Effective Date. There can be no
assurance, however, that such plans will be successful. The impact on the
Company's operating results of the Company's and/or its significant suppliers'
failure to timely address and correct material Year 2000 issues and of any
contingency plans to be designed to address such issues cannot be determined at
this time.
DIVIDEND POLICY
JCC Holding does not intend to pay cash dividends on the Common Stock,
including the Class A Common Stock, in the foreseeable future. Further, pursuant
to the terms of the Bank Loans, for as long as there are amounts outstanding
under the Bank Loans no dividends will be paid. See "--Material Agreements--Bank
Loans." In addition, the terms of the Indentures prohibit payment of cash
dividends unless certain conditions are met, including the condition that no
dividend shall be paid unless JCC has paid the maximum contingent payments with
respect to the New Notes and the New Contingent Notes for certain periods of
time. See "--Material Agreements--Indentures." The payment of cash dividends, if
any, will be made only from assets legally available for that purpose, and will
depend on JCC Holding's financial condition, results of operations, current and
anticipated capital requirements, restrictions under then existing debt
instruments and other factors deemed relevant by the board of directors of JCC
Holding.
Certain institutional investors may only invest in dividend-paying equity
securities or may operate under other restrictions which prohibit or limit their
ability to invest in the Class A Common Stock.
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MATERIAL AGREEMENTS
The following discussion summarizes the material terms of certain material
agreements to which the Company is a party, but this summary does not purport to
be complete and is qualified in its entirety by reference to the relevant
agreements, which are filed as exhibits to this Registration Statement. Readers
are urged to obtain and review such agreements.
BANK LOANS
JCC is seeking to obtain a construction financing commitment from the Bank
Lenders to provide JCC with up to $211.5 million under the Term Loans and up to
$25 million under the Working Capital Facility. The Term Loans and the Working
Capital Facility will be a single combined credit facility. Although the
following is a summary of the expected terms of the Bank Loans, there can be no
assurance that JCC will be able to enter into a credit agreement (the "Credit
Agreement") for the Bank Loans with the Bank Lenders on the terms described
herein.
The A Term Loan is expected to be approximately a six and one-half year term
loan, the B Term Loan is expected to be approximately a seven year term loan and
the Working Capital Facility is expected to be a $25 million revolving line of
credit for a period of approximately seven years. There is no assurance,
however, that JCC will be able to obtain the Bank Loans on these terms.
The A Term Loan will consist of a $60 million term loan which generally will
rank senior to all existing and future indebtedness of JCC except certain
obligations of JCC under the HET/JCC Agreement. The A Term Loan will consist of
three tranches: (i) a $10 million tranche ("Tranche A-1"); a $20 million tranche
("Tranche A-2"); and (iii) a $30 million tranche ("Tranche A-3"). The B Term
Loan will consist of two tranches: (i) a $30 million tranche ("Tranche B-1");
and (ii) a $121.5 million tranche ("Tranche B-2"). The Working Capital Facility
will provide JCC with up to $25 million of availability to meet short-term
working capital requirements, including up to $10 million of availability for
letters of credit. The Bank Loans will be secured on a second priority basis
(junior only to a lien securing certain obligations of JCC under the HET/ JCC
Agreement) and will be subject to certain internal priorities among the Term
Loan and Working Capital Facility as more fully described herein.
The interest rate on Tranche A-1 and Tranche A-3 is LIBOR plus 1.0%. The
interest rate on Tranche A-2 is equal to the sum of (i) LIBOR plus 2.5%, plus,
if applicable, (ii) any increase, not to exceed 1.0%, in the applicable interest
rate charged under HET's existing senior bank credit facility (the "HET interest
rate") above the HET interest rate in effect on the Effective Date. The interest
rate on Tranche B-1 is LIBOR plus 2.5%. The interest rate on Tranche B-2 is
equal to (i) to the extent the aggregate principal amount of such loans so
outstanding at any time exceeds $10 million, the sum of (a) LIBOR plus 2.5%
plus, if applicable, (b) any increase, not to exceed 1.0%, in the applicable HET
interest rate above the HET interest rate in effect on the Effective Date and
(ii) in the case of the first $10 million of Tranche B-2 at any time
outstanding, the rate will be the applicable HET interest rate. The interest
rate on the Working Capital Facility is (i) so long as the Carry Obligations
under the Completion Guarantees remain guaranteed pursuant to the terms of such
Completion Guarantees and in accordance with the terms thereof (with the first
date upon which such Carry Obligations are no longer so guaranteed being herein
called the "Carry Obligation Termination Date"), at the applicable HET interest
rate and (ii) at all times from and after the Carry Obligation Termination Date,
at a rate equal to the sum of (a) LIBOR plus 2.50%, plus, if applicable, (b) any
increase, not to exceed 1.0%, in the HET interest rate above the HET interest
rate in effect on the Effective Date. All of the immediately preceding interest
rates are per annum. Notwithstanding the above, default interest rates will
apply to past due amounts under the Bank Loans.
The combined amortization required under Tranche A-1 and Tranche A-2 is
quarterly installments of principal, commencing July 31, 2000, in the amount of
$400,000 per year, with a $27.8 million lump sum payment due at maturity. The
amortization required under Tranche A-3 is quarterly installments of principal,
commencing December 31, 1999, in the amount of $4 million the first year, $6
million the second
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and third years and $7.0 million the fourth and fifth years, with no lump sum
payment due at maturity. The amortization required under the B Term Loan is
quarterly installments of principal, commencing July 31, 2000, in the amount of
$6.0 million the first year, $10.0 million the second, third, fourth and fifth
years, and $8.5 million the sixth year, with a $97.0 million lump sum payment
due at maturity. All scheduled amortization and other payments made in respect
of the Bank Loans (excluding payments pursuant to any payment guarantees or put
agreements) will first be allocated to the A Term Loan and Tranche B-1 and, only
after the A Term Loan and Tranche B-1 have been repaid in full, to Tranche B-2
and the Working Capital Facility. The Bank Loans require all excess cash flow of
JCC to first be allocated to repayment of Tranche A-1 and Tranche A-2 on a pro
rata basis. After Tranche A-1 and Tranche A-2 are repaid, mandatory prepayments
resulting from application of excess cash flow and other proceeds (excluding
scheduled amortization) include (i) if any principal amortization has been
deferred (as set forth in the subsequent paragraph), 75% of excess cash flow and
certain additional proceeds will be applied first to Tranche B-1 and second to
Tranche A-3 to the extent of the total of all such deferred principal
amortization, and (ii) thereafter, 50% of excess cash flow and certain
additional proceeds will be applied pro rata to Tranche A-3, Tranche B-1 and
Tranche B-2 until an agreed threshold amount (determined based on projected cash
flow) for the respective fiscal year has been so applied. At such time as an
aggregate amount equal to the agreed threshold amount has been so applied in any
fiscal year, excess cash flow and other mandatory prepayments will be applied
first to Tranche B-1, second to Tranche A-3 and third to Tranche B-2.
The scheduled quarterly amortization payments under the Term Loans will be
deferred for any of the first six semi-annual interest payment periods if (i)
Fixed Interest (as defined herein) on the New Notes is paid in kind for the
period ending prior to such quarterly amortization date, (ii) the Manager has
deferred Base Fees (as defined herein) for the corresponding interest payment
period, (iii) the Manager has deferred Incentive Fees (as defined herein) for
the corresponding interest payment periods, and (iv) HET and HOCI have deferred
their fees under the HET/JCC Agreement. Starting with the fourth year after the
Effective Date, if Consolidated EBITDA (as defined herein) for JCC is not in
excess of $28.5 million for the 12 months ending one month prior to each
semi-annual interest payment date, amortization under the Term Loans will be
deferred.
HET and HOCI will provide a payment guarantee or a "put" agreement with
respect to Tranche A-2, Tranche B-2 and the Working Capital Facility
(collectively, the "HET Loan Guaranty"); provided, however, that any payments by
HET or HOCI under the Completion Guarantees will be made pursuant to the
Completion Guarantees. In exchange for providing the HET Loan Guaranty, BTCo
will pay to HET an annual credit support fee (the "BTCo Credit Support Fee")
equal to 2%, and JCC will pay to HET an annual credit support fee (the "JCC
Credit Support Fee") equal to 0.75%, of the average aggregate principal amount
of loans and/or stated amount of letters of credit outstanding from time to time
under Tranche A-2, Tranche B-2 and the Working Capital Facility (in the case of
Tranche B-2, only to the extent of the aggregate outstanding principal amount
thereof from time to time is in excess of $10 million); provided, however, that
(i) HET will not receive credit support fees based on amounts outstanding, or
stated amounts of letters of credit relating to project costs of the Casino,
under the Working Capital Facility until the Carry Obligations of HET and HOCI
under the Completion Guarantees have terminated, (ii) the BTCo Credit Support
Fee will be payable only to the extent such fee is actually received by BTCo
from JCC as interest under Tranche A-2, Tranche B-2 and the Working Capital
Facility, and so long as HET and HOCI are not in default under the HET Loan
Guaranty, (iii) for any time period in which the applicable HET interest rate
increases by more than 1.0% per annum above the HET interest rate in effect on
the Effective Date, the BTCo Credit Support Fee will decrease by .01% for each
such .01% increase in the applicable HET interest rate (in excess of 1.0% over
the HET interest rate in effect on the Effective Date) until such BTCo Credit
Support Fee is reduced to zero, (iv) for any time period in which the applicable
HET interest rate decreases below the HET interest rate in effect on the
Effective Date, the BTCo Credit Support Fee will increase by .01% for each such
.01% decrease in the applicable HET interest rate (below the HET interest rate
in effect on the Effective Date), and (v) for any time period in
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which the applicable HET interest rate increases by more than .25% per annum
above the applicable HET interest rate in effect on the Effective Date, the JCC
Credit Support Fee will decrease by .01% for each such .01% increase in the
applicable HET interest rate (in excess of .25% over the applicable HET interest
rate in effect on the Effective Date) until the JCC Credit Support Fee is
reduced to zero. To the extent the applicable HET interest rate increases up to
1%, the .75% JCC credit support fee is reduced down to zero. The net effect of
JCC's payment of the credit support fee combined with the applicable interest
rate for Tranche A-2, Tranche B-2 and the Working Capital Facility is that JCC
would pay in credit support fees and interest a sum equal to LIBOR plus 3.25%
which could increase to LIBOR plus 3.50% if the HET applicable rate increases by
more than .75% up to 1.00%. Also in consideration of the HET Loan Guaranty,
HCCIC will receive the HET Warrant. See "--HET Warrant."
The $10 million Tranche A-1, the $30 million Tranche A-3 and the $30 million
Tranche B-1 will be funded on the Effective Date. The $121.5 million Tranche B-2
and the $20 million Tranche A-2 will be funded as required for the construction
of the Casino with Tranche B-2 to be drawn prior to Tranche A-2. The $22.5
million Junior Subordinated Credit Facility will be funded prior to Tranche A-2.
If any amount of Tranche B-2 remains undrawn upon completion of the construction
of the Casino, it will be drawn to pay down Tranche A-1. The failure of the
lenders under Tranche A-2 or Tranche B-2 to disburse funds will not terminate
the Completion Guarantors' obligations under the Completion Guarantees.
The Bank Loans will be secured by liens on substantially all of the assets
of JCC (excluding the Amended and Renegotiated Casino Operating Contract, the
Casino's bankroll and the Gross Gaming Revenue Share Payments), JCC Holding, JCC
Development, CP Development and FP Development (junior only to a lien securing
certain obligations of JCC under the HET/JCC Agreement). Within the Bank Loans,
the A Term Loan and related Senior Permitted Refinancings (as defined herein)
will be senior to the Working Capital Facility; the Working Capital Facility and
related Senior Permitted Refinancings will be senior to the B Term Loan. The B
Term Loan and the Senior Subordinated Permitted Refinancings (as defined herein)
will be PARI PASSU with the New Notes and the New Contingent Notes. The "Senior
Permitted Refinancings" include any refinancings of the A Term Loan and the
Working Capital Facility which do not increase the principal amount of
indebtedness outstanding and available thereunder (except to the extent (x)
accrued and unpaid interest and/or other amounts owing with respect to the
refinanced indebtedness are refinanced and/or (y) of the fees and expenses
incurred in connection with the refinanced indebtedness) or decrease the
weighted-average maturity thereof. The "Senior Subordinated Permitted
Refinancings" include any refinancings of the B Term Loan which do not increase
the principal amount of indebtedness outstanding and available thereunder
(except to the extent (x) accrued and unpaid interest and/or other amounts owing
with respect to the refinanced indebtedness are financed and/or (y) of the fees
and expenses incurred in connection with the refinanced indebtedness) or
decrease the weighted-average maturity thereof.
Drawings under the Bank Loans are subject to the following conditions, among
others, (i) that there exists no default under the Bank Loans with respect to
payments thereunder or certain bankruptcy or insolvency events or under the
Completion Guarantees or the HET Loan Guaranty at the time of each draw, and
(ii) that all representations under the HET Loan Guaranty remain true and
correct in all material respects at the time of each draw.
The Bank Loans contain affirmative covenants with respect to, among other
things, the maintenance of certain leverage ratios, coverage ratios and levels
of tangible net worth, limitations on indebtedness, changes in JCC's business,
the sale of all or substantially all of JCC's assets, mergers, acquisitions,
reorganizations and recapitalizations, liens, guarantees, the payment of
management fees, dividends and other distribution, investments, debt
prepayments, sale-leasebacks, capital expenditures, lease expenditures and
transactions with affiliates, and financial reporting.
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JUNIOR SUBORDINATED CREDIT FACILITY
On the Effective Date, JCC will enter into the Junior Subordinated Credit
Facility pursuant to which HET has agreed to make available up to $22.5 million
of subordinated indebtedness to fund project costs to the extent that such costs
exceed amounts available under the Term Loans (excluding Tranche A-1 and Tranche
A-3), the proceeds from the sale of the Convertible Junior Subordinated
Debentures and the Harrah's New Equity Investment. The Junior Subordinated
Credit Facility will be applied to project costs prior to amounts under Tranche
A-1 and Tranche A-3, will be unsecured, and amounts outstanding thereunder will
be subordinated in right of payment to certain obligations of JCC under the
HET/JCC Agreement, the Term Loans, the New Notes, the New Contingent Notes, the
Working Capital Facility, Senior Permitted Refinancings and Senior Subordinated
Permitted Refinancings. The terms of the Junior Subordinated Credit Facility
will be no less favorable to JCC than the terms of the obligation of JCC to
repay amounts advanced by the Completion Guarantors under the Completion
Guarantees and the Amended Completion Loan Agreement. See "--Amended Completion
Loan Agreement."
CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
On the Effective Date, the Company will issue to (i) BTCo and any other bank
which elects to be treated as a participating bank under the Plan of
Reorganization (collectively, the "Participating Banks") approximately $11.637
million aggregate principal amount of the Convertible Junior Subordinated
Debentures, and (ii) Salomon, DLJ and BT Alex. Brown Incorporated (collectively,
the "Underwriters") approximately $15 million aggregate principal amount of the
Convertible Junior Subordinated Debentures. The aggregate principal amount of
Convertible Junior Subordinated Debentures may increase if banks in addition to
BTCo elect to become Participating Banks and under a certain settlement
agreement with FNBC pursuant to the Plan of Reorganization.
The Convertible Junior Subordinated Debentures will be due six months
following the scheduled maturity of the New Notes. The Convertible Junior
Subordinated Debentures will bear interest at a rate of 8% per annum payable
semi-annually in cash; provided, however, that JCC will have the option of
paying the interest on the Convertible Junior Subordinated Debentures, in whole
or in part, in kind rather than in cash (i) at any time during the first five
full years following the issuance of the Convertible Junior Subordinated
Debentures, and (ii) at any time thereafter during any Semiannual Period (as
defined herein) which was immediately preceded by a Semiannual Period in which
no contingent interest was paid on the New Notes and New Contingent Notes. See
"--Indentures."
The Convertible Junior Subordinated Debentures will be unsecured obligations
of JCC and will be subordinated in right of payment to certain obligations of
JCC under the HET/JCC Agreement, the Term Loans, the New Notes, the New
Contingent Notes, the Working Capital Facility, Senior Permitted Refinancings
and Senior Subordinated Permitted Refinancings. The Convertible Junior
Subordinated Debentures will be convertible at the option of the holders, in
whole or in part, at any time after October 1, 2002, into Common Stock of JCC
Holding at a conversion price of $25.00 per share (the "Conversion Price"),
subject to dilution and other appropriate adjustments. The Convertible Junior
Subordinated Debentures will be redeemable at the option of the Company (i) at
any time at par plus accrued interest in cash, or (ii) at any time during the 12
months prior to the maturity of the Convertible Junior Subordinated Debentures,
at par, in whole or in part, in shares of Common Stock at the Conversion Price
if the Conversion Price per share is greater than the Current Market Price per
share. The "Current Market Price" of the Common Stock on any trading day will be
the volume-weighted average of the closing trading or bid price of the Common
Stock for the 10 consecutive trading days preceding such date. Upon the request
of the initial recipients of the Convertible Junior Subordinated Debentures in
an amount no less than $5.0 million, which request may be made only once and may
not be made prior to October 1, 2002, JCC will promptly file with the SEC and
cause to become effective as soon as reasonably practicable
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thereafter, a registration statement on the appropriate form relating to the
Convertible Junior Subordinated Debentures or the Common Stock issued upon
conversion of the Convertible Junior Subordinated Debentures.
INDENTURES
In connection with the Plan of Reorganization, JCC will issue (i) $187.5
million aggregate principal amount of New Notes maturing in 2009 pursuant to an
indenture, dated as of the Effective Date, by and among JCC, as obligor, JCC
Holding, JCC Development, CP Development and FP Development, as guarantors, and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), and
(ii) New Contingent Notes pursuant to an indenture, dated as of the Effective
Date, by and among JCC, as obligor, JCC Holding, JCC Development, CP Development
and FP Development, as guarantors, and the Trustee. See "--The Company--Recent
Reorganization."
Fixed interest on the New Notes accrues at a rate of 5.867% per annum
increasing over the first three years to a rate of 6.214% per annum in the
fourth and fifth years and increasing to 8% per annum after the first five years
("Fixed Interest") and is payable semiannually in arrears on each six-month and
one year anniversary of the Effective Date (each a "Semiannual Period").
Interest on the New Notes begins to accrue on the Effective Date. JCC will have
the option to pay the first six semi-annual payments of Fixed Interest on the
New Notes in kind rather than in cash; provided, however, that JCC must pay the
first four semi-annual payments of Fixed-Interest in kind if Tranche A-1 and/or
Tranche A-2 is outstanding when such payments are due. JCC will have the option
to pay the fifth and sixth semi-annual payments of Fixed Interest in kind and
may be required to do so by the Credit Agreement under certain circumstances;
provided, however, that JCC may not pay the fifth and sixth semi-annual payments
of Fixed Interest in kind if (i) Tranches A-1 and A-2 have been fully repaid,
(ii) there are no outstanding drawings under the Working Capital Facility, other
than letters of credit as permitted pursuant to the Credit Agreement, and (iii)
JCC has accumulated cash availability of at least $20 million.
If Consolidated EBITDA for JCC is less than $28.5 million for the 12 months
ending one month prior to each semi-annual interest payment date starting with
the fourth year after the Effective Date, Fixed Interest on the New Notes must
be paid in kind. Payments of Fixed Interest not made in kind are payable in
cash.
Contingent payments with respect to the New Notes, to the extent they are
due and owing, are payable on each semi-annual interest payment date in an
aggregate amount equal to 75% of the Contingent Payment Measurement Amount (as
defined herein) in excess of $65 million and less than $85 million, calculated
on an annual basis. "Contingent Payment Measurement Amount" means an amount
equal to (a) JCC's Consolidated EBITDA plus (b) an amount equal to the aggregate
cash distribution to JCC Holding from CP Development and FP Development. If the
Contingent Payment Measurement Amount for any year is less than $65 million, no
contingent payments in respect of the New Notes will be paid for such year.
Contingent payments with respect to the New Contingent Notes, to the extent they
are due and owing, are payable on each interest payment date in an aggregate
amount equal to 75% of the Contingent Payment Measurement Amount in excess of
$85 million and less than $109,425,380, calculated on an annual basis. If the
Contingent Payment Measurement Amount for any year is less than $85 million, no
contingent payments in respect of the New Contingent Notes will be paid for such
year. If, and to the extent that, the Contingent Payment Measurement Amount
results for any year is less than the amount required to cause the maximum
contingent payments for such year to become due, such payments will never be
made. The aggregate amount of contingent payments payable in any Semiannual
Period will be reduced pro rata for reductions in the outstanding principal
amount of New Notes or New Contingent Notes prior to the close of business on
the record date immediately preceding such payment of contingent payments.
"Consolidated EBITDA" means, with respect to any person, for any period, the
consolidated net income of such person for such period adjusted (A) to add
thereto (to the extent deducted from net revenues in determining consolidated
net income), without duplication, the sum of (i) income tax expense
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(whether or not payable during such period) of such person and its consolidated
subsidiaries, (ii) consolidated depreciation and amortization expense, (iii)
consolidated fixed charges, (iv) aggregate contingent interest payments, whether
paid or accrued, (v) amortization expense with respect to deferred refinancing
fees, (iv) preopening expenses, (vii) any extraordinary loss reflected in the
calculation of consolidated net income, (viii) other non-cash charges, and (ix)
solely for the purposes of calculating contingent payments under the Notes, if
any, and the Incentive Fee, if any, the proceeds, if any, from the exercise of
the HET Warrant, and (B) to subtract therefrom any extraordinary gain reflected
in the calculation of consolidated net income.
The New Notes and the New Contingent Notes will be secured on an equal and
ratable basis, junior to the liens securing certain obligations of JCC Holding,
JCC, JCC Development, CP Development and FP Development under the HET/JCC
Agreement, the A Term Loan, the Working Capital Facility and the Senior
Permitted Refinancings, and pari passu with the liens securing the B Term Loan
and the Senior Subordinated Permitted Refinancings. The liens will be secured by
substantially all of the assets of JCC (excluding the Amended and Renegotiated
Casino Operating Contract, the Casino's bankroll and the Gross Revenue Share
Payments (as defined herein)), JCC Holding, JCC Development, CP Development and
FP Development (the priority of which is described above). Certain of the
collateral will be subject to release in accordance with the applicable security
documents and the Indentures. With the exception of the Term Loans, the Working
Capital Facility, Senior Permitted Refinancings, Senior Subordinated Permitted
Refinancings, and certain special purpose indebtedness, any other indebtedness
for borrowed money of JCC must be subordinated to the Notes. The Notes also
contain provisions such that, in the event of a payment default or bankruptcy,
the holders will be made whole for any accelerated maturity (which, with respect
to the New Contingent Notes, will consist solely of contingent payments that are
due but have not yet been paid), accrued and unpaid interest, all Fixed Interest
and contingent payments in respect of future periods and any other costs and
expenses; provided, however, that the amount of future contingent payments under
the Notes will be subordinated in right of payment to certain obligations of JCC
under the HET/JCC Agreement, the Bank Loans, the Senior Permitted Refinancings
and the Senior Subordinated Permitted Refinancings.
JCC Holding, JCC Development, CP Development and FP Development irrevocably
and unconditionally guarantee to each holder of New Notes the payment of
principal, premium, if any, and interest on the New Notes. JCC Holding, CP
Development and FP Development irrevocably and unconditionally guarantee to each
holder of New Contingent Notes the payment of contingent payments in respect of
the New Contingent Notes.
Upon a change in the manager of the Casino or other similar events, each
holder of the New Notes will have the right, at such holder's option, to require
JCC to purchase such holder's New Notes at 101% of the principal amount thereof
plus accrued and unpaid interest. Due to the highly leveraged nature of JCC, JCC
may not have sufficient financing to purchase the New Notes and satisfy other
obligations which may become due upon such an event. The New Notes and the New
Contingent Notes will not be redeemable or subject to mandatory prepayment prior
to maturity. The New Notes and New Contingent Notes are subject to redemption
based on gaming regulatory considerations.
The Indentures will each contain certain restrictions on, among other
things, change of control, restricted payments, liens, incurrence of additional
indebtedness, payment of management fees, subsidiary dividend restrictions,
asset sales, transactions with affiliates, mergers and consolidations.
HET WARRANT
In consideration of the HET Loan Guaranty, HCCIC will receive, among other
things, the HET Warrant entitling it to purchase additional shares of JCC
Holding Common Stock such that, upon exercise of the HET Warrant in its
entirety, HET and its affiliates, including HCCIC, would own in the aggregate
50.0% of the then outstanding shares of Common Stock, subject to certain
adjustments. The number of
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shares issuable upon exercise of the HET Warrant will be calculated and/or
adjusted as necessary to reflect, among other things, the transfer of shares
upon exercise of the options held by FNBC and the NOLDC shareholders to purchase
Common Stock from HET or its affiliates and the issuance of shares of Common
Stock upon conversion of any of the Convertible Junior Subordinated Debentures.
The HET Warrant will be exercisable at any time after the Transition Date until
the sixth anniversary of the Opening Date, in whole or in part at a price of
$15.00 per share of Common Stock. HET and its affiliates will not be permitted
to exercise the HET Warrant with respect to that number of shares which would
cause HET and its affiliates to own more than 50.0% of the Common Stock until
such time as such exercise would not cause HET and its affiliates to own more
than 50.0% of the then outstanding shares of Common Stock. If at any time after
the Transition Date the closing bid price of the Common Stock has exceeded
$20.00 per share for 60 consecutive trading days, JCC Holding's board of
directors may elect to give written notice to HCCIC of an election to redeem 75%
of the warrants at $0.05 per warrant unless HCCIC exercises the warrants within
forty-five days after the date of such notice. If (i) an election to redeem
warrants is made by JCC Holding, and (ii) HCCIC exercises warrants with respect
to that number of shares which at the time of exercise would cause HET and its
affiliates to own in the aggregate 50.0% of the then outstanding shares of
Common Stock, then none of the then existing warrants which were called for
redemption shall be redeemed.
AMENDED GDA
JCC expects to enter into the Amended GDA, to be effective upon execution
and delivery by the parties thereto and the occurrence of the Effective Date,
with the RDC, and with the City as intervenor. The Amended GDA sets forth the
obligations of the parties and the procedures to be followed relating to the
design, development and construction of the Casino and certain related
facilities (the "Casino Development"). The Amended GDA imposes responsibility on
JCC for the location, identification and condition of all utilities serving the
Casino Development and obligates JCC to provide certain traffic signalization
and intersection improvements as a part of the cost of the project. No other
transportation or roadway improvements will be required of JCC and the RDC. The
Amended GDA also obligates JCC to reimburse the RDC for reasonable fees and
expenses of the RDC commencing on the date as of which the Amended GDA is
executed and delivered by the parties and the Effective Date has occurred, for
the services of the project manager and his or her staff. Project manager and
staff reimbursement amounts vary depending on the status of construction and
certain other timing conditions.
The Amended GDA establishes scheduling parameters for the construction and
completion of the Casino Development. The Amended GDA contains the RDC's
approval and acceptance of the commencement and completion schedule set forth
therein for the recommencement and completion of construction. The Amended GDA
provides for additional schedules, including a working development schedule, a
development schedule and a construction schedule, as the design documents for
each component and phase of the Casino Construction are prepared and approved
and as construction planning evolves, and updated versions thereof as necessary.
If JCC fails to complete the Casino Construction and open the Casino for
business on or before the earlier of December 31, 1999 or 12 months after the
Effective Date, subject to extension for Force Majeure, JCC will be required to
pay as liquidated damages to the RDC the sum of (i) $2,500 per day for the first
30 day period after such completion deadline, (ii) $5,000 per day for the second
30 day period thereafter, (iii) $7,500 per day for the third 30 day period
thereafter, and (iv) $10,000 per day for each day thereafter during which the
Casino Construction is not complete. Failure to complete the Casino Construction
by June 30, 2000, subject to extension for Force Majeure, will be an event of
default under the Amended Ground Lease.
The Amended GDA also grants certain approval rights to the RDC with respect
to the selection of architects, contractors and other consultants. Under the
Amended GDA, JCC is responsible for applying for and obtaining all necessary
permits, licenses, approvals, consents and other government authorizations
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(collectively "Permits"). Provided the RDC has approved the construction
documents for a component or phase of the Casino Development, and provided there
is no outstanding event of default under the Amended Ground Lease, the RDC is
obligated to issue and deliver to JCC a notice to proceed for each component or
phase of the Casino Development within ten days following its approval of the
construction documents for such component or phase of the Casino Development.
Work by JCC on that component or phase of the Casino Development must then
commence within 14 days after JCC's receipt of both the notice to proceed and
the required Permits, but in no event will commencement of work on the Casino
Construction be required sooner than the Site Reactivation Date. For purposes of
the Amended GDA, the "Site Reactivation Date" means the first day after the
execution of the Amended GDA and the occurrence of the Effective Date when
personnel and/or equipment first enter the development for the purpose of
preparing the property for construction of the improvements required by the
Amended GDA; provided, however, preliminary or preparatory work will not be
considered site reactivation activities. The Site Reactivation Date will be no
later than 30 days after the execution of the Amended GDA and the occurrence of
the Effective Date.
Under the Amended GDA, JCC is obligated to take reasonable precautions to
protect from damage and preserve all adjacent public and private properties from
damage caused by the construction, as well as restore and repair any properties
damaged by the work. If JCC fails to perform the repair or restoration, the RDC
may do so and recover the cost and expense incurred from JCC.
Except as otherwise permitted by the Amended GDA, JCC must obtain or cause
its general contractors to obtain performance and payment bonds with qualified
corporate sureties for the full value of the contract for the construction of
each component or phase of the Casino Development before commencing construction
of such component or phase of the Casino Development. The initial construction
bonds executed by HJC and certain qualified corporate sureties in late 1994 (as
modified, the "Initial Bonds") were submitted to the City and the RDC on
December 18, 1997 as exhibits to and as part of the Amended GDA. JCC expects
that the Initial Bonds will remain in effect (notwithstanding changes in the
scope of work bonded thereunder, including, without limitation, any increase in
the amount of the bonded obligations) and does not anticipate the negotiation of
any new or additional bonds. JCC is currently negotiating a supplement to the
Initial Bonds requiring, among other things, that (i) the sureties thereunder
acknowledge and consent to changes in the scope of work bonded thereunder,
including, without limitation, any change in the amount of the bonded
obligations, and the succession of JCC to the rights and obligations of HJC
under the Initial Bonds, (ii) the parties reaffirm that the Initial Bonds (as so
supplemented) remain in full force and effect and (iii) JCC be added as an
additional obligee under the Initial Bonds (as so supplemented).
Subject to certain limitations, JCC is permitted to make minor changes in
the work up to a specified amount without RDC approval. All other changes
require the RDC's prior approval.
The Amended GDA requires JCC to obtain financing as described in the Plan of
Reorganization. The Amended GDA obligates the Completion Guarantors to provide a
completion guarantee in favor of the RDC and the City and in connection
therewith, JCC will cause the Surety Bond to be issued by a company and in a
form acceptable to the City Council. The amount of the Surety Bond is subject to
the approval of RDC's project manager and will be determined as of the date of
delivery of such Surety Bond, but will not be less than the remaining hard
construction costs of the Casino Construction, which generally comprise the
costs and expenses of developing, designing and constructing the Casino
(excluding financing costs, legal fees and pre-opening and related marketing or
advertising expenses). Pursuant to the completion guarantee, if JCC fails to
complete the Casino Construction, the Completion Guarantors, subject to a number
of important exceptions and qualifications, are obligated to complete the Casino
Construction. See "--Completion Guarantees." Forms of the Surety Bond and such
completion guarantee were submitted to the City and the RDC for approval in
connection with the December 18, 1997 submission of the Amended Ground Lease and
Amended GDA.
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The Amended GDA will terminate upon the earlier of (i) the last of the final
completion dates of all components and phases of the Casino or (ii) the
termination of the Amended Ground Lease, whether by default or otherwise. If the
Amended GDA is terminated upon termination of the Amended Ground Lease as a
result of the occurrence of an event of default by JCC thereunder, the RDC may,
under certain circumstances, have the work completed, repaired or replaced at
the expense of JCC.
The Amended GDA and the Amended Ground Lease obligate JCC to comply with the
Amended Open Access Program and Plans. See "--Risk Factors--Amended Open Access
Program and Plans."
AMENDED GROUND LEASE
TERM; RENT AND ADDITIONAL CHARGES. JCC expects to enter into the Amended
Ground Lease for the Rivergate site with the RDC and the City, as intervenor, to
be effective on the date the Amended Ground Lease is executed and delivered by
the parties and the Effective Date has occurred. The Amended Ground Lease will
have an initial term of 30 years plus the amount of time between April 27, 1993
and the Effective Date, and three consecutive ten-year renewal options. The
Amended Ground Lease entitles JCC to possess the Rivergate site and obligates
JCC to construct, build and operate the Casino, the support facilities, and the
other improvements in accordance with the terms of the Amended Ground Lease and
the Amended GDA.
The RDC and the City have been paid $736,000 per month since January 1, 1997
as pre-opening day rent (the "Pre-Opening Date Rent"). See "--Risk
Factors--Uncertainty Regarding Pre-Opening Day Rent." HJC initially deposited
$2,208,000 in escrow to secure this rental obligation through May 31, 1997, all
of which has been paid to the RDC and the City. The Pre-Opening Date Rent has
been paid to the RDC and the City each month thereafter through and including
August 1998. Under the Amended Ground Lease, the Pre-Opening Date Rent will
continue to be paid until the Opening Date, although the RDC, the City and HJC
remain in negotiations as to whether any additional amounts will be required.
Notwithstanding, under the Amended Ground Lease if the Opening Date has not
occurred by October 31, 1999, beginning on November 1, 1999, the Pre-Opening
Date Rent will increase to an amount equal to the monthly Amended Ground Lease
Minimum Payments (as defined herein).
The Amended Ground Lease provides that the minimum of all: (i) Rent (as
defined herein) payments; (ii) Gross Gaming Payments (as defined herein), (iii)
Audubon Payments (as defined herein), (iv) Gross Non-Gaming Payments (as defined
herein) (collectively, the "Amended Ground Lease Minimum Payments"), must equal
$12.5 million per year to be payable in monthly installments. Beginning on the
first quarter following the first anniversary of the Opening Date, JCC is
obligated to pay to the RDC an aggregate of $500,000 in four equal quarterly
installments. JCC is also obligated to pay to the RDC rent ("Rent") of $5
million per year for each of the first five years after the Opening Date. On the
fifth anniversary of the Opening Date and on each fifth anniversary thereafter
during the term of the Amended Ground Lease, the Rent will be increased by $2.5
million provided, however, that if the increase would cause the yearly Rent to
exceed 3% of gross gaming revenue for the fiscal year immediately preceding the
rental adjustment date, the yearly Rent for the five year period commencing with
such rental adjustment date will be the greater of: (a) the yearly Rent for the
preceding fiscal year; or (b) 3% of gross gaming revenue for the preceding
fiscal year. The Rent is payable monthly in advance as part of the Amended
Ground Lease Minimum Payments. Commencing on the Opening Date, JCC is obligated
to make gross gaming payments ("Gross Gaming Payments") to the RDC equal to the
amount by which the Gross Gaming Percentage Amount exceeds the Rent for that
fiscal year. The "Gross Gaming Percentage Amount" in any fiscal year is
determined as follows: $100,000 plus (a) 3.0% of gross gaming revenues for
increments of gross gaming revenues from $0 to $350 million; (b) 3.5% of gross
gaming revenue for increments of gross gaming revenue from $350 million to $375
million; and (c) a percentage of gross gaming revenue starting at 4.0% for
increments of gross gaming revenue above $375 million and increasing by
five-tenths of 1% for each additional $25 million of gross gaming revenue up a
maximum of 8%. A portion of the Gross Gaming Payments is payable monthly in
advance as part of the Amended Ground
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Lease Minimum Payment. In addition, commencing with the month in which gross
gaming revenue for a given fiscal year exceeds $350 million, JCC is obligated to
pay additional Gross Gaming Payments then due for such month and for each month
thereafter.
JCC will also be obligated to pay additional sums pursuant to the Amended
Ground Lease, including but not limited to: (i) an annual contribution of $2
million throughout the lease term, including any extensions, to be allocated by
the City Council to the Orleans Parish School Board (the "School Board
Payment"), with the first payment to be made within six months of opening the
Casino and subsequent payments to occur on each anniversary thereof; (ii) an
annual contribution of $200,000, payable monthly as part of the Amended Ground
Lease Minimum Payments, to be allocated to the Audubon Park Commission, for and
on behalf of the City (the "Audubon Payment"); (iii) in each of the first two
years after the opening of the Casino, the sum of $875,000; and (iv) an annual
payment to the RDC of $1.7 million, payable in monthly installments as part of
the Amended Ground Lease Minimum Payments, plus 6% of all gross non-gaming
revenues in excess of approximately $28.33 million payable commencing with the
month (and for each month thereafter) in which gross non-gaming revenue exceeds
$28.33 million ("Gross Non-Gaming Payments"). Gross non-gaming revenue includes,
among other things, revenue derived from parking, the sale of food, beverages,
services and merchandise, income from non-gaming-related tenants, operation of
any business or enterprise owned by JCC or its affiliates and operated on the
Casino Development, and income received by JCC from the use of any trade name of
JCC or HET in connection with the Casino in the greater New Orleans area. Gross
non-gaming revenue does not include any revenue derived from sales (other than
sales by JCC or its affiliates) within the premises covered by the Second Floor
Sublease (as defined herein). Under the Amended Ground Lease, JCC also waives
any right to credits or offsets against Rent arising prior to the date the
Amended Ground Lease is executed and delivered by the parties and the Effective
Date has occurred, including any credit for renovation work at the Basin Street
Casino conducted by HJC.
Commencing on the Opening Date, JCC will be required to pay to the City a
payment (the "City Payments") in the amount of $1.25 million for each fiscal
year during the term of the Amended Ground Lease in which JCC receives gross
gaming revenue in the amount of $350 million or more. The City Payments are
payable in monthly installments in the amount of $104,167 each. On the Effective
Date the City will release and return undrawn the letter of credit in the amount
of $1.5 million issued by BTCo in favor of the City securing the payment of City
Payments. No such security will thereafter be required with respect to the City
Payments.
The RDC will have, at any time during the term of the Amended Ground Lease,
a one-time right, with the prior written consent of the City Council and upon 30
days prior written notice to JCC specifying the RDC's exercise of its right (the
"MAR Exercise Notice") to receive a payment of additional rent (the "MAR
Payment") equal to 4.99% of the amount, if any (the "Net Market Appreciation"),
by which the weighted average closing trading price of the Common Stock issued
by JCC Holding in connection with the Plan of Reorganization over the 20 days of
trading immediately prior to delivery of the MAR Exercise Notice times the
number of outstanding shares of such Common Stock, is greater than $320 million.
Upon JCC's payment of the MAR Payment to the RDC, the RDC will have no further
right to receive the 4.99% contingent payments described above or any additional
market appreciation payments.
JCC is also required to make: (i) contingent payments to the RDC equal to
4.99% of certain sums dividended or distributed by JCC to the stockholders of
JCC Holding, (ii) in the event that JCC pays a Termination Fee (as defined
herein) to the Manager, JCC must pay to the RDC an amount equal to 2.5% of such
fee; and (iii) if the City adopts parking programs for certain neighborhoods
adjacent to the Casino, $60,000 for the first year of Casino operations to
administer such programs, payable within 30 days after Opening Date. If JCC
fails to pay, when due, any of the payments under the Amended Ground Lease, JCC
could be forced to pay the outstanding balance plus interest thereon from the
due date of the payment to the delivery date of the payment at a default rate
equal to the greater of: (a) the prime rate quoted by Citibank, N.A., plus 4%
per annum; or (b) 14% per annum. Furthermore, JCC may be required to pay
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certain additional default penalties if any default by JCC results in the
termination of the Amended Ground Lease.
Commencing on the execution date of the Amended Ground Lease and on each
anniversary of the execution date of the Amended Ground Lease thereafter during
the term of the Amended Ground Lease, JCC will contribute $1 million to the
destination marketing program of the City for the joint benefit of the City and
JCC in order to promote New Orleans and the Casino as destinations. The City,
upon receipt of such annual contributions, will promptly transfer said funds
directly to the entity or agency that the City is utilizing during that year for
the majority of the tourism marketing conducted by or on behalf of the City. JCC
will exercise control, with certain exceptions, over the spending of such $1
million annual contribution. If at the end of the first year after the execution
date of the Amended Ground Lease or the end of any year thereafter ending on an
anniversary of the execution date, JCC fails to designate the content for any
portion of its destination marketing, such portion of the destination marketing
for such year will thereafter not be subject to JCC's control. The City will
cause the entity undertaking the destination marketing for the City to designate
$1 million of such entity's budget on an annual basis, which budget is presently
funded through designated tax revenues, for use in a destination marketing plan
which will include promotion of the Casino. With respect to such $1 million of
marketing expenditure, the City will exercise control over the content of said
destination marketing. No person will be considered a third party beneficiary of
the agreement by JCC to contribute $1 million annually to the destination
marketing program of the City. Failure of JCC to contribute annually as provided
above within 15 days after receipt of notice of such failure is an event of
default under the Amended Ground Lease.
The City will agree, under the Amended Ground Lease, to take all necessary
actions to move the Joan of Arc statue to a location other than the Rivergate
site promptly after the execution date of the Amended Ground Lease and the
Effective Date. JCC will make a payment to the City to assist in the relocation
as provided in the City's conditional use ordinance for the Casino.
GRANT OF SERVITUDE RIGHTS. Under the Amended Ground Lease a portion of the
parking facility premises leased from the RDC by HJC will be surrendered to the
City and the RDC and certain access rights over such portion of the parking
facilities surrendered to the City will be retained. In addition to such access
rights, the City and the RDC will grant JCC certain servitude rights in portions
of the employee and bus parking facility premises pursuant to the Amended Ground
Lease. JCC will be required to maintain the servitude areas granted pursuant to
the Amended Ground Lease.
DEFAULT; TERMINATION. The occurrence of an event of default by JCC under
the Amended Ground Lease could result in injunctive relief, fines, acceleration
of rent, or termination of the Amended Ground Lease, subject to the rights of
leasehold mortgagees. An event of default under the Amended Ground Lease by JCC
includes (subject, in certain circumstances, to cure), among other things: (i)
the failure to make the payments described above; (ii) the making of an
assignment for the benefit of creditors or the filing of a bankruptcy petition;
(iii) the unauthorized sale, assignment, pledge, mortgage or transfer of the
Amended Ground Lease or interest in JCC; (iv) the failure to comply with certain
material terms of the Amended Ground Lease, the Second Floor Sublease or the
Amended GDA; (v) the amendment of the Amended Management Agreement in a manner
that materially and adversely affects any interests of the RDC or, under certain
circumstances, the termination thereof; (vi) the hiring of a casino
manager/operator without the approval and prior written consent of the RDC;
(vii) the revocation or termination of the Amended and Renegotiated Casino
Operating Contract; (viii) the failure to comply with a final non-appealable
judgment establishing a violation of the Amended Open Access Program; (ix) the
failure continually to operate the Casino in accordance with the terms of the
Amended Ground Lease; (x) the failure to commence the Casino Construction within
the time periods set forth in the Amended GDA (subject to Force Majeure and
certain cure rights under the completion guarantee for the benefit of the RDC
and the City); and (xi) the failure of the Casino Construction to have been
completed by June 30, 2000 (subject to Force Majeure). Additionally, if the
initial term of the Amended and Renegotiated Casino Operating Contract expires
prior to the expiration of the initial term of the Amended Ground Lease or the
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Amended and Renegotiated Casino Operating Contract is not renewed or extended
following due application, then JCC and the RDC each have the right to terminate
the Amended Ground Lease and upon such termination the parties thereto will have
no further rights or obligations thereunder. If the RDC or JCC elects not to
terminate the Amended Ground Lease in such circumstance, JCC is obligated to pay
only the Rent, Impositions, School Board Payments, and contingent payments (or
the MAR Payment, if applicable) and JCC shall be excused from complying with all
obligations of the Amended Ground Lease which directly or indirectly require
operation of the development for casino gaming operations until such time as a
casino operating contract is re-acquired by JCC.
CHANGE OF USE. The Amended Ground Lease provides that if: (i) a change of
law or the enactment of a new law causes the prohibition, modification,
restriction, or limitation of gaming operations at the Rivergate site in a
manner which materially diminishes the benefits afforded JCC or the gaming
activities permitted to be conducted at the Casino in the manner contemplated by
current law; or (ii) the term of the Amended and Renegotiated Casino Operating
Contract is limited, or cannot be extended following its expiration because of
statutory restrictions in the Gaming Act, then JCC and the RDC will renegotiate
the terms of the Amended Ground Lease in order to establish the highest and best
use permitted by then-current law or, alternatively, in the case of (ii), JCC
will have the right to terminate the Amended Ground Lease. In such event, JCC
and the RDC will negotiate to establish a new rent and other additional charges
payable under a revised ground lease. If the parties are unable to agree on the
new rent and additional charges, the Amended Ground Lease imposes an appraisal
procedure to resolve the dispute.
LIMITATION OF WARRANTIES BY THE RDC AND THE CITY. In the Amended Ground
Lease, the City and the RDC represent and warrant that the City is the owner of
the Rivergate site subject to certain exceptions and that the City and the RDC
bind themselves to maintain JCC in actual possession of the Rivergate site. The
City and the RDC will have no liability, however, if either (i) the laws
permitting the operation of the Casino are repealed or modified or (ii) a court
of competent jurisdiction determines that the law permitting the operation of
the Casino is unconstitutional, illegal, or unenforceable. Additionally, if one
or more of the following should occur: (a) a determination that the Amended
Ground Lease is invalid, illegal, void, or unenforceable by a court of competent
jurisdiction; (b) the RDC is unable to grant and convey the leasehold rights
provided for under the Amended Ground Lease; (c) a determination or declaration
that the RDC does not have the right, power, and authority to enter into the
Amended Ground Lease; (d) the RDC does not have clear title to the Rivergate
site which would materially interfere with or prevent the construction and
operation of the Casino; or (e) the RDC is unable to maintain JCC in actual
possession of the Rivergate site, and, in any of such events, a final,
non-appealable judgment is rendered on the issue of possession, then the Amended
Ground Lease will terminate and the liability of the City and the RDC to JCC
will be (i) limited to JCC's actual damages (specifically excluding
consequential damages, such as loss of future profits), (ii) reduced by
collateral source payments, and (iii) limited to future proceeds received by the
City or the RDC from the sale, lease, or other disposition of the Rivergate site
for 10 years from the date of such occurrence, or such lesser time as remains
under the Amended Ground Lease. The Amended Ground Lease obligates the RDC to
use reasonable best efforts to maintain the validity of the Amended Ground
Lease, to maintain JCC's actual possession, and to perfect the City's good and
merchantable title. The Amended Ground Lease further provides that if the
Amended Ground Lease is terminated due to the failure of the RDC and the City to
maintain JCC in possession of the leased premises and JCC elects to seek damages
against the RDC or the City, JCC may relinquish the right it would otherwise
have to re-lease the Rivergate site if the City and the RDC regain the ability
to lease such site.
INDEMNIFICATION. JCC is required to indemnify the RDC and the City against
all liabilities arising out of or relating to, among other things: (i) the
ownership, possession and use of the leased premises or any improvements
thereon; (ii) the operation or management of the Casino Development; (iii)
noncompliance by JCC with any terms of the Amended Ground Lease, the Amended GDA
or the Second Floor Sublease; or (iv) noncompliance by JCC Development with any
terms of the Second Floor Sublease. JCC's obligation to indemnify will not
apply: (a) to liabilities caused by the intentional acts or omissions or the
sole
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negligence of the RDC or the City, or their respective employees, agents, or
contractors; or (b) where the RDC or the City or their respective employees,
agents or contractors are liable with third parties other than JCC, its
employees, agents or contractors. In addition, JCC has also agreed to indemnify
the RDC or the City for environmental liabilities with respect to causes of
action arising after the possession date, other than those caused by third
parties, and to assume responsibility for the cleanup of certain environmental
contamination arising prior to the possession date.
LIMITATIONS ON SECURED INDEBTEDNESS. After substantial completion of all
components and all phases of the development as required by the Amended GDA, JCC
may encumber its leasehold interest only after first obtaining the RDC's
consent. The RDC's consent is not required if the lender is a "suitable lender"
and the financing secured by such encumbrance satisfies certain objective
criteria described in the Amended Ground Lease. For purposes of any subsequent
financings, HET and entities controlled by, under common control with, or
controlling HET will be suitable lenders. Under the Amended Ground Lease, the
meaning of "suitable lender" is substantially similar to the definition of
"suitable lender" in the Amended and Renegotiated Casino Operating Contract. See
"--Amended and Renegotiated Casino Operating Contract--Financing." Any leasehold
mortgages to be delivered in connection with the financing contemplated by the
Plan of Reorganization are required to be consistent with the leasehold
mortgages provisions of the Amended Ground Lease. HET and HOCI will each be
treated as a suitable lender as to any loan made pursuant to the HET/JCC
Agreement, the Amended and Restated Completion Loan documents (as defined
herein), the Amended and Restated Construction Lien Indemnity Obligation
Agreement (as defined herein), the HET Loan Guaranty, the indemnity by HET or
HOCI to the provider of the Surety Bond, and the Junior Subordinated Credit
Facility; provided that such treatment will not allow HET or HOCI to have any
additional or longer cure period than is provided to leasehold mortgagees
pursuant to the Amended Ground Lease. See "--Amended and Renegotiated Casino
Operating Contract--Financing" and "Terms, Fees and Impositions."
LOAN DEFAULT RENT. If as a result of a default by JCC on an obligation owed
to a leasehold mortgagee, the Amended Ground Lease is transferred to a new
tenant, then: (i) the aggregate amount of Rent, Gross Gaming Payments, Gross
Non-Gaming Payments and the Second Floor Sublease rent for each full or partial
fiscal year after such transfer must be at least 80% of the amounts paid with
respect to the same period for the immediately preceding full or corresponding
year (but no less than the Amended Ground Lease Minimum Payments), and (ii) all
Rent increases must be suspended. These adjustments will no longer apply as soon
as the aggregate amount of the payments for a full or partial fiscal year exceed
80% of the aggregate amount of the payments made with respect to the immediately
preceding full or corresponding partial fiscal year.
RESTRICTIONS ON ASSIGNMENT AND SUBLEASING. The Amended Ground Lease may not
be assigned, sold or transferred, nor may JCC enter into a sublease or any space
lease of any portion of the leased premises, without the prior written consent
of the RDC and the City, which may be conditioned on, among other things, the
proposed assignee's satisfaction of certain qualifications regarding net worth,
gaming experience, and other matters and, in the case of a sublessee,
qualifications regarding the type of business contemplated and the size of space
and term of sublease, provided, however, that the RDC has consented to and
approved the terms of the Second Floor Sublease, and space leases in accordance
with such Second Floor Sublease and the Master Plan will not require the prior
written approval or consent of the RDC. See "--Second Floor Sublease--Master
Plan." These restrictions do not apply to leasehold mortgagees under certain
specified circumstances. The Amended Ground Lease provides that either the RDC
or the City Council may, for any reason, refuse to consent or financially
condition any assignment, sale or transfer of JCC's interest in the Amended
Ground Lease, the Second Floor Sublease or the Amended Management Agreement to
any entity (including a subsidiary or affiliate thereof) that has previously
operated a licensed gaming establishment (including a riverboat) within Orleans
Parish.
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RESTRICTIONS ON MANAGEMENT AND OPERATING CONTRACTS. The Amended Ground
Lease prohibits JCC from entering into any management or operating contract with
any person without the prior written consent of the RDC and the City.
RESTRICTIONS ON EQUITY TRANSFERS. The Amended Ground Lease prohibits
certain types of transfers of equity interests in JCC and certain affiliated
entities without the prior written consent of the RDC; provided, however, that
the RDC is limited to seeking an injunction against transferees' participation
in management. Certain transfers of membership interests in JCC result in the
obligation of such entity effectuating such transfer to pay RDC 2.5% of the
profit realized by such entity from such transfer; provided that no such
transfer payment will be due in the case of any transfer of Class A Common Stock
or other publicly traded common stock of JCC Holding issued pursuant to the Plan
of Reorganization.
NON-COMPETE PROVISIONS. The Amended Ground Lease prohibits JCC, JCC
Holding, and certain affiliated entities from operating another land-based
casino in the State or within 200 miles of the Casino Development during the
term of the Amended Ground Lease without the prior written consent of the RDC.
LIMITATION ON USES OF DEVELOPMENT REVENUES. JCC and JCC Development are
prohibited from using revenues generated at the Casino Development to subsidize
persons or entities that will compete unfairly with the businesses located in
Orleans Parish, such as restaurants, hotels or other commercial enterprises and
is also prohibited from operating any form of ground transportation, except
shuttle buses for both customers and employees, to the metropolitan New Orleans
area. Notwithstanding the foregoing, JCC is permitted to (i) offer shuttle bus
service to and from the Casino for employees and shuttle bus service to and from
the Casino and hotels for its customers except in areas where the operation of
buses is prohibited by City traffic ordinances of general application in effect
as of the execution date of a certain agreement with the City; (ii) offer food
service at the Casino to the extent permitted under State law in effect as of
the execution of the Amended Ground Lease; (iii) permit live entertainment on
the first floor of the Casino; (iv) permit exterior signs on the leased premises
in appropriate locations, sizes, numbers and appearance identifying performers;
(v) permit charges for boxing or other specialty events not normally conducted
by businesses in the immediate vicinity of the Casino, as more particularly
agreed to in the conditional use application, subject to the application of any
special event charges in accordance with the Amended Ground Lease; (vi) permit
retail space on the first floor of the Casino in an area not to exceed 5,000
square feet; and (vii) permit tenants of the premises subject to the Second
Floor Sublease to occupy and use such premises for the purposes permitted by the
Second Floor Sublease.
RESIDENCY REQUIREMENTS. The Amended Ground Lease requires that not less
than 55% of the employees of JCC and JCC Development live and reside in Orleans
Parish (subject to reduction to comply with applicable law). The minimum
percentage of JCC and JCC Development employees that are Orleans Parish
residents will increase by 2% on the anniversary of the Opening Date until the
residency requirement reaches 65% (subject to reduction to comply with
applicable law). JCC agrees to use its best efforts to maximize hiring in
Orleans Parish with the goal being that 80% of employees of JCC and JCC
Development, in the aggregate, live and reside in Orleans Parish.
AMENDED MANAGEMENT AGREEMENT. The Amended Ground Lease requires JCC to
implement and abide by the terms of the Amended Management Agreement. Further,
JCC may not amend the Amended Management Agreement in a manner that materially
and adversely affects the interest of the RDC without the prior written consent
of the RDC and the New Orleans City Council. JCC must give the RDC at least six
months advance notice of any termination of the Amended Management Agreement.
Amendment of the Amended Management Agreement in a manner that materially and
adversely affects any interest of the RDC, or the hiring or retaining of a
casino manager/operator without the prior written consent of the RDC constitutes
an event of default under the Amended Ground Lease.
TRANSITION AND MANAGER SUBORDINATION AGREEMENT. In the event the Amended
Management Agreement is terminated, JCC is required to submit a written plan
providing for the continuous operation of the
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Casino without material interruption, including but not limited to provisions
for the transition of control of the development and of the funds in the house
bank maintained at the Casino (the "House Bank") and the capital replacement
fund described below. In connection with any termination of the Amended Ground
Lease due to JCC's default, JCC is required to pay the RDC the sum of $5 million
(subject to annual increases in the Consumer Price Index) to be used to
facilitate the transition of the Casino to a new trade name, service mark, or
other identification, unless the RDC has received Rent and other payments
totaling at least $25 million (subject to annual increases in the Consumer Price
Index) during the previous 12 month period. In the event of early termination of
the Amended Ground Lease, the RDC also has the option to lease from JCC owned or
leased gaming equipment at fair market rent and on customary terms.
The Manager, the RDC and the City have negotiated a subordination agreement
(the "Manager Subordination Agreement (RDC/City)") providing for the
subordination of fees owing by JCC to the Manager pursuant to the Amended
Management Agreement to the prior payment in full of all Rent and other payments
due the City and the RDC under the Amended Ground Lease. In addition, the
Manager Subordination Agreement (RDC/City) provides that, during the Transition
Period (as defined herein), the Manager will, among other things, undertake to
remove (and, under certain circumstances, replace) certain property and marks
owned by the Manager from the Casino, the improvements or other property, as the
case may be. For purposes of the Manager Subordination Agreement (RDC/City), the
"Transition Period" generally refers to a forty-five day period beginning on the
date on which (i) the RDC or its receiver is placed in ownership or possession
of the development or (ii) an event of default has occurred and not been cured
under the Amended Ground Lease as a result of the termination of the Amended
Management Agreement and, with respect to either of the foregoing, (A) the
Manager terminates the Amended Management Agreement or fails to give proper
notice of such termination or (B) the RDC is unable, for any reason, to use
certain marks owned by the Manager.
LIMITATIONS ON ALTERATIONS TO CASINO DEVELOPMENT. The Amended Ground Lease
prohibits JCC from making any alteration to the Casino Development other than
non-structural alterations without the prior written approval of the RDC and the
City. Approval of the City is not necessary for non-structural alterations
except to the extent required by applicable laws and regulations. Further, the
consent of the RDC is required if the total costs of the non-structural
alterations exceeds $250,000, provided that the RDC may not unreasonably
withhold its consent. JCC is not required to seek the consent of the City or the
RDC to a non-structural alteration costing less than $250,000, but JCC is
required to give the RDC copies of the as built plans and specifications on
completion of the nonstructural alterations if any such plans or specifications
have been prepared for JCC.
PROVISIONS REGARDING CASUALTY LOSS. The Amended Ground Lease requires all
insurance proceeds in excess of $500,000 payable following a casualty loss at
the Casino to be paid to an insurance trustee, who will disburse the funds to
pay for the cost of restoring the Casino, subject to specific procedures and
approvals set forth in the Amended Ground Lease. If the insurance proceeds are
insufficient to pay for the restoration of the Casino, JCC is obligated to
complete the work at its own expense. No destruction of, or damage to, the
Casino or any portion thereof will permit JCC to terminate the Amended Ground
Lease, nor will such circumstances give rise to a rent abatement, except under
certain circumstances during the last five years of the term of the Amended
Ground Lease.
PROVISIONS REGARDING CONDEMNATION. If there is a taking by eminent domain
or condemnation of the entirety of the Casino Development, or of so much thereof
that it would be imprudent or unreasonable to continue Casino operations even
after making all reasonable repairs and restorations (a "Major Condemnation")
the Amended Ground Lease will terminate. Thereupon, no party to the Amended
Ground Lease will have any further claims against the other parties thereto, and
each party to the Amended Ground Lease may seek to recover (unless the City or
its agencies are the condemnor) compensation from the condemning authority,
subject to the right of the leasehold mortgagees to be paid in full if such
Major Condemnation occurs during the first ten years of the Amended Ground Lease
and thereafter to be paid in accordance with a declining scale. If a Major
Condemnation occurs by the City or its agencies, JCC has
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the right to receive compensation from the condemning authority subject to the
right of leasehold mortgagees to be paid in full. If any taking or condemnation
other than a Major Condemnation occurs, the Amended Ground Lease will remain in
full force and effect, the Rent and additional charges payable thereunder may be
adjusted, and JCC will be obligated to restore the Casino as early as possible
to its prior condition. The proceeds of any condemnation award will be held by
an escrow agent selected by JCC and the RDC, to be disbursed in the manner set
forth in the Amended Ground Lease. If the amount of the condemnation award or
awards is insufficient to pay for restoring the Casino, JCC is obligated to
complete the restoration work at its own expense.
CAPITAL REPLACEMENT FUND. The Amended Ground Lease requires JCC to
establish and make monthly deposits into a capital replacement fund. Beginning
on the first full calendar month after the Opening Date of the Casino, JCC is
required to fund monthly payments into the capital replacement fund in an
aggregate amount equal to $3 million for the first 12 months following the
Opening Date, $4 million for the second 12 months following the Opening Date,
and $5 million for the third 12 months following the Opening Date. For each
successive 12 month period thereafter, JCC is required to contribute to the
capital replacement fund 2.0% of Gross Gaming Revenue and Gross Non-Gaming
Revenue. The Amended Ground Lease specifies the purposes for which sums in the
capital replacement fund may be used and sets forth rules for carrying forward,
retaining, withdrawing from and replenishing the capital replacement fund, as
well as the use of such funds upon the termination of the Amended Ground Lease.
The capital replacement fund referred to above is the same as that required
pursuant to the Amended Management Agreement and the Amended and Restated Casino
Operating Contract and is not meant to duplicate the capital replacement
obligations of JCC under the Amended Management Agreement and the Amended and
Restated Casino Operating Contract. See "--Amended and Renegotiated Casino
Operating Contract--Capital Replacement Fund" and "Amended Management
Agreement--Capital Replacement Fund."
SAVINGS AND RETIREMENT PLAN. Subject to restrictions under applicable law
and any changes therein that may from time to time be elected by JCC, JCC
Development or the Manager, employees of the Casino premises will be given the
opportunity to participate in a JCC savings and retirement plan (the "JCC S&RP")
no less favorable than the savings and retirement plan of HET and its affiliates
in effect on the Effective Date (the "Harrah's S&RP"), as thereafter substituted
or amended, or if the Manager or an HET affiliate is no longer the Casino
manager, on terms no less favorable than the savings and retirement plan of the
successor entity, as may be approved by the City and the RDC. Changes or
modifications to the JCC S&RP will not be a default under the Amended Ground
Lease or in any way actionable by the City or RDC as long as such modified JCC
S&RP is no less favorable than the Harrah's S&RP or the savings and retirement
plan of any such approved successor entity, as may be applicable, and is not
discriminatory against JCC's employees.
DISPOSITION OF EXCESS PROCEEDS FOLLOWING FORECLOSURE. The Amended Ground
Lease provides that a mortgagee who forecloses upon the Casino Development and
subsequently receives proceeds from the sale of the Casino property in excess of
the unpaid indebtedness plus costs shall pay 50% of such excess proceeds to the
RDC, subject to any rights of JCC to such excess proceeds. The RDC and the City
acknowledge and agree in the Amended Ground Lease that the Bank Lenders, the
holders of the New Notes, the New Contingent Notes, the Junior Subordinated
Credit Facility and the Convertible Junior Subordinated Debentures have not
received excess proceeds in connection with the transactions contemplated by the
Plan of Reorganization and the RDC is entitled to no additional compensation
under the Amended Ground Lease in connection therewith.
AMENDED OPEN ACCESS PROGRAM. As additional consideration for the Amended
Ground Lease, JCC is obligated to comply with the terms of the Amended Open
Access Program and Plans and agrees to use the efforts specified therein and all
due diligence to achieve the goals and objectives and to satisfy the commitments
stated in the Amended Open Access Program and Plans under the penalties stated
therein. JCC covenants to require the Manager to comply with the Amended Open
Access Program in all hiring,
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employment and contracting decisions. See "--Amended GDA" and "--Risk
Factors--Open Access Program and Plans."
IMPOSITIONS; AMUSEMENT TAX. JCC will be required, commencing on the Opening
Date and throughout the term of the Amended Ground Lease, to pay or cause to be
paid, on a timely basis, any other non-discriminatory tax, duty, charge, fee or
payment imposed by any governmental, quasi-governmental or public authority,
utility or entity which arises in connection with the ownership, use, occupancy
or possession of the Casino Development (collectively, "Impositions"). The
Amended Ground Lease further requires JCC voluntarily to pay ad valorem taxes to
the City in the event that any local and special state legislation is
subsequently enacted which relieves JCC of its obligation to pay the tax.
The City imposes an amusement tax on certain receipts. The Amended Ground
Lease also provides that JCC will be obligated to collect and remit to the City
an amusement tax only with respect to certain special events and that the
amusement tax need not be collected or remitted with respect to wagers or gross
gaming revenues. If, however, a court determines in a final non-appealable
judgment that the amusement tax is applicable to JCC's receipts other than
receipts from special events, JCC may set off the amount of the amusement tax
collected against future Rents, future Gross Gaming Payments and future Gross
Non-Gaming Payments. See "--Risk Factors--Taxation."
AMENDED AND RENEGOTIATED CASINO OPERATING CONTRACT
Pursuant to the Casino Operating Contract, which commenced on July 15, 1994,
the LEDGC granted HJC the right to conduct gaming operations at the Casino.
Under the Plan of Reorganization, the Company expects that all of HJC's right,
title and interest in and to the Casino Operating Contract will revest in HJC on
the Effective Date, which Casino Operating Contract will then be modified by the
Amended and Renegotiated Casino Operating Contract and assigned to JCC in
accordance with applicable State law and the agreement of the parties thereto.
Although the following is a summary of the expected terms of the Amended and
Renegotiated Casino Operating Contract, which was approved by the LGCB on March
20, 1998, the LGCB has not yet executed the Amended and Renegotiated Casino
Operating Contract. Consequently, there can be no assurance that JCC will be
able to enter into the Amended and Renegotiated Casino Operating Contract on the
terms described herein. See "Risk Factors--Uncertainty Regarding Gaming
Regulation and Future Changes to the Laws."
TERM, FEES AND IMPOSITIONS. Pursuant to the Amended and Renegotiated Casino
Operating Contract, JCC will have the right to conduct gaming operations at the
Casino. Under the Amended and Renegotiated Casino Operating Contract, the Casino
is required to be located at the site of the former Rivergate Convention Center.
The Amended and Renegotiated Casino Operating Contract is revocable in
accordance with the terms thereof. The term of the Amended and Renegotiated
Casino Operating Contract will be 20 years from July 1994 with one automatic ten
year renewal option.
Under the Casino Operating Contract, HJC paid the LEDGC an initial payment
of $125 million (the "Initial Payment") in installments as well as 25% of the
gross gaming revenues from the Basin Street Casino during the period that it
operated. During the operation of the Basin Street Casino HJC overpaid the LEDGC
approximately $4.8 million and is, therefore, entitled to a credit or return of
this amount from the LEDGC. Under the Amended and Renegotiated Casino Operating
Contract, JCC will be entitled to an offset of $4,812,477 against payments owed
to the LGCB during the second fiscal year of the Casino's operations to take
into account such overpayments by HJC to LEDGC.
Under the Amended and Renegotiated Casino Operating Contract, JCC is
required to pay to the State, by and through the LGCB, an amount equal to the
greater of (i) $100 million or (ii) the sum of the following percentages of
gross gaming revenue from the Casino in a fiscal year: (A) 18.5% of gross gaming
revenue up to and including $600 million; plus (B) 20% of gross gaming revenue
in excess of $600 million up to and including $700 million; plus (C) 22% of the
gross gaming revenue in excess of $700 million up to and including $800 million;
plus (D) 24% of gross gaming revenue in excess of $800 million up to and
including $900; plus 25% of gross gaming revenue in excess of $900 million (the
"Gross Gaming Revenue
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Share Payments"). JCC will be required to make a daily payment to the LGCB equal
to $100 million divided by 365 days with an end of year settling up, if any, of
Gross Gaming Revenue Share Payments in excess of $100 million.
Any unpaid portion due to the State in any one COC Fiscal Year (including
any short COC Fiscal Year for the period immediately following opening of the
Casino) in which (x) JCC ceases operations other than for an Excusable Temporary
Cessation of Operations (as defined herein), (y) an event of default occurs
causing termination of the Amended Ground Lease, or (z) an event of default
occurs under the Amended and Renegotiated Casino Operating Contract as a result
of failure to pay Gross Gaming Revenue Share Payments (the "Minimum Payments")
will be guaranteed by a Minimum Payment Guaranty. For purposes of JCC's Minimum
Payment obligations, the Amended and Renegotiated Casino Operating Contract uses
a fiscal year beginning April 1 (a "COC Fiscal Year"). A failure by JCC to cause
to be provided a Minimum Payment Guaranty before the first day of a new COC
Fiscal Year will result in a termination of the Amended and Renegotiated Casino
Operating Contract with no cure period.
For the partial COC Fiscal Year of operation ending March 31, 2000 and,
subject to the terms and conditions set forth in the HET/JCC Agreement, for the
four subsequent full COC Fiscal Years, HET and HOCI have proposed to provide a
Minimum Payment Guaranty. See "--HET/JCC Agreement." The obligations of JCC, HET
and HOCI under the HET/JCC Agreement will be secured by a first priority lien on
substantially all the assets of JCC Holding, JCC, CP Development and FP
Development (excluding the Amended and Renegotiated Casino Operating Contract
and the Gross Revenue Share Payments). Pursuant to the terms of the HET/JCC
Agreement, commencing with the COC Fiscal Year beginning April 1, 2001, JCC may
terminate the HET/JCC Agreement by providing notice of its intent to terminate
to HET and HOCI. If JCC elects to terminate the HET/JCC Agreement for the COC
Fiscal Year beginning April 1, 2001, JCC will be required to pay a termination
fee of $1.0 million to HET. For a termination in the COC Fiscal Years beginning
April 1, 2002 and April 1, 2003, no such fee will be payable. A Minimum Payment
Guaranty will guarantee JCC's obligations to pay the Minimum Payments only for
the duration of the COC Fiscal Year during which JCC (i) abandons operations of
the Casino, (ii) fails to make daily payments to the LGCB, or (iii) files for
bankruptcy and ceases casino operations (each a "Minimum Payment Default"). A
Minimum Payment Guaranty will not secure any obligations during, or otherwise
apply to, any subsequent COC Fiscal Year. In the event a non-renewal condition
under the HET/JCC Agreement has occurred or upon termination of the HET/JCC
Agreement on March 31, 2004, JCC will be required to secure a substitute
guarantor acceptable to the LGCB to provide a Minimum Payment Guaranty. Such
guarantor may or may not be HET, HOCI or any affiliate thereof. In the Amended
and Renegotiated Casino Operating Contract, the State and the LGCB will
acknowledge that HET and HOCI have no legal obligation or duty, express or
implied, to provide a Minimum Payment Guaranty (i) for any COC Fiscal Year
following a fiscal year in which a Minimum Payment Default occurs or any other
non-renewal condition under the HET/JCC Agreement occurs, (ii) for any COC
Fiscal Year after March 31, 2004, or (iii) if the HET/JCC Agreement has
otherwise terminated pursuant to its terms.
Under the Amended and Renegotiated Casino Operating Contract, the State will
own that portion of the daily collections from gaming operations equal to the
amount of the daily payment. JCC is prohibited from entering into any contract
or other agreement that permits or purports to permit JCC or any other person to
claim a right or interest in or to the Gross Gaming Revenue Share Payments,
which include the daily payments. The daily payments are required to be
deposited directly into a State account by the next business day after
collection.
Under the Amended and Renegotiated Casino Operating Contract, subject to
certain regulatory approvals, JCC is permitted to grant to one or more leasehold
mortgagees a security interest in the funds owned by JCC if the instrument
granting the security interest provides that the security instrument does not
extend to the State's ownership interest in the Gross Gaming Revenue Share
Payments, including the daily payments. The leasehold mortgagee is required to
acknowledge that its mortgage does not extend to the State's ownership interests
in the Gross Gaming Revenue Share Payments.
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If JCC fails to pay as and when due any amount due the State under the
Amended and Renegotiated Casino Operating Contract, in addition to other
consequences of default, the amount past due bears interest at a default
interest rate equal to the greater of the prime rate of Citibank N.A. or its
successor plus 5% or 15% per annum.
EXCLUSIVE CONTRACT. The Amended and Renegotiated Casino Operating Contract
is exclusive in Orleans Parish. The Amended and Renegotiated Casino Operating
Contract provides that if another land-based casino is authorized to operate in
Orleans Parish during the term of the Amended and Renegotiated Casino Operating
Contract, JCC is afforded certain specified relief described below, however, JCC
is not relieved of the obligation to pay additional charges or to perform its
non-monetary obligations under the Amended and Renegotiated Casino Operating
Contract, including construction and operation of the Casino.
The Amended and Renegotiated Casino Operating Contract provides that if (i)
there are material violations of the exclusivity provisions by (a) a change in
State law (adopted by statute, regulation or rule) from that in effect January
1, 1997 permitting any game or gaming device at another land-based facility in
the Parish of New Orleans (not otherwise legal and offered for play under
existing law at such facility) or permitting riverboats (other than a Permitted
Riverboat) to conduct gaming beyond the scope permitted by statute in effect
January 1, 1997, (b) a failure by the State to enforce the State law regarding
land-based gaming (other than riverboat dockside issues), or (c) permitting
riverboats to conduct gaming if the riverboats do not meet the requirements of
La.R.S. 27:44(4) and 27:44(23) (c) and (d), as those statutes are in effect
January 1, 1997, or (d) Indian gaming, and (ii) which material violations
continue after notice from JCC and 60 days opportunity to cure by the LGCB or
the State, and (iii) a court of competent jurisdiction renders a final
non-appealable judgment holding that such material violations did occur and were
not timely cured within 60 days after receipt by the LGCB of notice from JCC,
JCC will be relieved of the obligation to make the Gross Gaming Revenue Share
Payments from the date of such final non-appealable judgment, subject to the
additional cure provisions described below, and JCC will be entitled to an
offset against future obligations to the LGCB and/or the State with respect to
any amounts paid to the LGCB and/or the State during the judicially determined
period of any such violation. During the judicial action referred to above, JCC
is required to continue to pay the Gross Gaming Revenue Share Payments while the
action is pursued to a final non-appealable judgment, with a reservation of all
JCC's legal rights.
With respect to clause (a) of the immediately preceding paragraph, a change
in State law which would cause a violation of the exclusivity provisions of the
Amended and Restated Casino Operating Contract will not include a "Permitted
Amendment." A "Permitted Amendment" is a change in State law authorizing one or
more licensed riverboats to remain dockside and conduct dockside gaming beyond
the scope of permitted by statute as in effect January 1, 1997; provided that,
with respect to Orleans Parish, such authorization must be limited to one
licensed riverboat at any time (a "Permitted Riverboat") which must be located
on Lake Pontchartrain in Orleans Parish, and provided, further, that the (A) the
Permitted Riverboat's gaming area must not exceed 30,000 square feet in the
aggregate; (B) the owner or operator of the Permitted Riverboat may not
participate directly or indirectly in the ownership, construction, operation or
subsidization of any hotel of a size exceeding 399 guest rooms within a distance
of one mile from the berthing area of a Permitted Riverboat; and (C) the
Permitted Riverboat may not maintain or offer for patron or public use on the
vessel and at its terminal, berthing area and any hotel referred to above, more
than 8,000 square feet of restaurant facilities in the aggregate (exclusive of
food preparation and handling areas).
Notwithstanding the terms of any final non-appealable judgment rendered by
the court in any action brought pursuant to the procedures described in the
immediately preceding paragraph, the LGCB and the State will have 24 months from
the date that any such final non-appealable judgment is rendered to cure the
material violation and to file a declaratory judgment action seeking a
declaration from a court of competent jurisdiction confirming that the cure has,
in fact, been made and the date and duration of any one or more periods of cure.
If the LGCB and the State obtain such declaration, the Gross Gaming
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Revenue Share Payments will be paid to the State for all periods during the
course of the litigation that the court determines by final judgment were
periods of "cure."
The Amended and Renegotiated Casino Operating Contract also provides: (a)
that the State will covenant that it will not permit riverboats (any vessel
meeting the requirements of La.R.S. 27:44(4) and 27:44(23)(a-e), as those
statutes are in effect on the date of the Amended and Renegotiated Casino
Operating Contract) to conduct illegal dockside gaming (provided that it will
not include such gaming if the riverboat conducts sailing or cruising materially
in accordance with the requirements of La.R.S. 27:65(B)(1) in effect as of
January 1, 1997, and (b) that if there are any material violations of the
covenant which continue after notice from JCC and 60 days opportunity to cure by
the LGCB or the State, and (c) that if a court of competent jurisdiction renders
a judgment (subject to applicable appellate rights) holding that material
violations did occur and were not timely cured within 60 days after receipt by
the LGCB of notice from JCC, JCC will be entitled to seek only (i) specific
performance by the LGCB and/or the State of the obligations contained in the
covenant and/or (ii) mandamus against the LGCB or the appropriate governmental
authority. Notwithstanding the relief from the Gross Gaming Revenue Share
Payments set forth in the Gaming Act, no monetary remedy is authorized under the
Amended and Renegotiated Casino Operating Contract. During the pendency of any
such judicial action seeking specific performance and/or mandamus, through final
non-appealable judgment, JCC will not be relieved of its obligation to pay the
Gross Gaming Revenue Share Payments. The finding of the violation complained of
in such action will not at that time or at any time thereafter relieve JCC from
its obligation to pay the Gross Gaming Revenue Share Payments.
The Amended and Renegotiated Casino Operating Contract provides that JCC
will not initiate any action for judicial relief concerning any exclusivity
violations until the expiration of 18 months after the Opening Date, although
the notice and cure provisions regarding both parties will be in force during
such eighteen month period and subsequent years. In no event will JCC be
restricted during such eighteen month period from asserting any exclusivity
violations as a defense or in any other procedural manner required under the
circumstances properly to seek relief as described above in response to any
action initiated by LGCB: (a) to terminate the Amended and Renegotiated Casino
Operating Contract; or (b) to challenge the financial suitability of JCC caused
substantially by the exclusivity violation asserted as a defense thereto; all
subject to the clarification that the provisions contained in this sentence are
not intended to apply to routine operational regulatory interactions between the
parties.
RULES AND REGULATIONS. Under the Amended and Renegotiated Casino Operating
Contract, JCC acknowledges and consents to the LGCB's rule and regulation making
authority.
CASINO MANAGER. Under the Amended and Renegotiated Casino Operating
Contract, JCC cannot amend the casino management contract between JCC and the
Manager or enter into a new casino management contract without the LGCB's
approval. The acts and omissions of the Manager are deemed to be the acts and
omissions of JCC for purposes of the Amended and Renegotiated Casino Operating
Contract.
FINANCIAL STABILITY. Under the Amended and Renegotiated Casino Operating
Contract, JCC must remain financially stable. JCC is deemed to be financially
stable if JCC: (i) maintains an adequate casino bankroll; (ii) has the ability
to satisfy its operating expenses; (iii) has the ability to pay its debts that
will mature or otherwise become due and payable during the next 12 month period;
and (iv) has made all required payments to the capital replacement fund. If, at
any time, JCC is unable to demonstrate that it is financially stable, JCC will
have a specified time period after notice of a financial stability default from
the LGCB to cure such default. During the existence of a financial stability
default, the LGCB may impose orders or regulatory conditions, necessary to
protect the public interest, including the appointment of a fiscal agent.
SUITABILITY. Under the Amended and Renegotiated Casino Operating Contract,
JCC and the Manager are required to remain "suitable" (as that term is defined
in the Gaming Act), which requires findings with respect to certain equity and
debt holders as well as certain officers and directors of JCC, the
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Manager and their affiliates. See "--Regulation--Louisiana Gaming Act." The LGCB
may terminate the Amended and Renegotiated Casino Operating Contract if the LGCB
determines that JCC or the Manager is not suitable. If the LGCB determines that
JCC or a holder of a debt or equity interest in JCC or any of their respective
affiliates is not suitable, the LGCB must provide notice of this determination
to JCC. If JCC pursues certain remedial actions designed to insulate itself from
the unsuitable person, it may protect itself against regulatory action if
certain requirements are met. The safe harbor requirements obligate JCC or its
affiliates to take immediate good faith action to cause the unsuitable person to
dispose of the person's interest in JCC or its affiliates and, pending the
disposition, JCC or its affiliates, as the case may be, must ensure that the
unsuitable person: (i) does not receive dividends or interest on the securities
of JCC or its affiliates; (ii) does not exercise, directly or indirectly,
including through a trustee or nominee, any right conferred by the securities of
JCC or its affiliates; (iii) does not receive any remuneration from JCC or its
affiliates; (iv) does not receive any economic benefit from JCC or its
affiliates; and (v) subject to the disposition requirements, does not continue
in an ownership or economic interest in JCC or its affiliates or remain as a
manager, officer, director, partner, employee, consultant or agent of JCC or its
affiliates. This safe harbor does not apply if JCC or its affiliates, as the
case may be (a) had actual or constructive knowledge or should have had
knowledge of the facts that are the basis of the regulatory action and failed to
take appropriate action; (b) is so tainted by the unsuitable person to affect
the suitability of JCC or its affiliates; or (c) cannot meet the suitability
standards contained in the Gaming Act and the Rules and Regulations.
Under the Amended and Renegotiated Casino Operating Contract, JCC is
required to advance the LGCB up to $3.5 million to reimburse the LGCB for its
actual personnel costs (to include LGCB, State Police and Attorney General
personnel and contract staff appropriate to the suitability process) that are
incurred in connection with the suitability findings necessary for the execution
of the Amended and Renegotiated Casino Operating Contract and the opening of the
Casino (the "Initial Costs"). HJC will be required to pay $500,000 of this
amount prior to the Effective Date and JCC will be required to advance $3
million on or before the Effective Date. Six months after the Effective Date,
the LGCB will provide JCC with a full accounting of amounts spent to date and
projections of anticipated additional Initial Costs. The LGCB also may notify
JCC that the Initial Costs have exceeded the $3.5 million advanced to the LGCB,
in which case JCC may be required by the LGCB and/or State to pay such
additional amounts within 15 days of demand. There can be no assurance that the
Initial Costs will not exceed $3.5 million, and in the event that the Initial
Costs do exceed $3.5 million, it is likely that the LGCB and/or State will
require JCC to pay such additional amounts to them.
DAYS AND HOURS OF OPERATION. With certain limited exceptions, the Amended
and Renegotiated Casino Operating Contract requires JCC to operate the Casino 24
hours a day, seven days a week.
TIMETABLES AND OUTSIDE DATES. Under the Amended and Renegotiated Casino
Operating Contract, JCC has a duty to complete the Casino Construction within 12
months of the Effective Date, adjusted for Force Majeure events, but only for
the number of days due to such Force Majeure events and only to the extent that
such Force Majeure events actually delay the completion of the Casino
Construction.
RESTAURANT, LODGING AND RETAIL RESTRICTIONS. The Amended and Renegotiated
Casino Operating Contract incorporates the restrictions in the Gaming Act
prohibiting certain restaurant, lodging and retail operations, subject to the
LGCB's rule making powers with respect to leasing space to third-party
restaurateurs and venders. See "--Risk Factors--Limits on Restaurants, Lodging,
Retail Operations and Entertainment."
CAPITAL REPLACEMENT FUND. The Amended and Renegotiated Casino Operating
Contract obligates JCC to maintain a capital replacement fund. The capital
replacement fund is the same as that required pursuant to the Amended Ground
Lease and Amended Management Agreement and is not meant to duplicate the capital
replacement fund obligations under the Amended Ground Lease and Amended
Management Agreement. See "--Amended Ground Lease--Capital Replacement Fund" and
"Management Agreement--Capital Replacement Fund."
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OTHER COVENANTS AND CONDITIONS. The Amended and Renegotiated Casino
Operating Contract contains a number of other covenants on the part of JCC,
including adherence to nondiscrimination policies and practices; giving
preference to Louisiana residents in obtaining goods and services; employment of
minorities at least consistent with the minority population of the State;
production of documentation on the holders of notes or indentures or other
evidences of indebtedness; performance of obligations under the Amended Ground
Lease, the Amended GDA and the Amended Management Agreement; limiting
accessibility to the areas of the Casino where gaming occurs by persons under
the age of 21; and maintaining the Casino in a clean, safe and first-class
condition. JCC also cannot amend the Amended Management Agreement without the
LGCB's approval.
DESIGN AND CONSTRUCTION. JCC is required to obtain prior approval from the
LGCB of any material change to the design development documents or the
construction documents with respect to the Casino and for any subsequent
alterations that would constitute a material change.
INDEMNIFICATION. Under the Amended and Renegotiated Casino Operating
Contract, JCC is required to indemnify the LGCB against all liabilities arising
out of or relating to, among other things: (i) the failure of JCC, the Manager
or a lessee to comply with the terms of the Amended and Renegotiated Casino
Operating Contract; (ii) the construction or remodeling of the Casino or the
performance of any work thereon; (iii) the failure of JCC, the Manager or a
lessee to comply with the terms of the Amended Ground Lease, the Amended GDA,
the Amended Management Agreement or any other agreement affecting the Casino to
which JCC, the Manager or a lessee is a party; (iv) any personal injury, death
or property damage suffered or alleged to have been suffered in, on or about the
Casino; (v) any act, omission or other negligence of JCC, the Manager, any
lessee or their respective employees, agents or servants; or (vi) any failure of
JCC, the Manager or a lessee to comply with applicable law. JCC's obligation to
indemnify the LGCB will not apply with respect to claims that are based upon:
(a) the sole negligence or intentional fault of the LGCB; (b) a finding of
unsuitability that has been adjudicated by a proper court to have been arbitrary
and capricious; (c) the joint or solitary fault of the LGCB, the State or any
person for whom either is vicariously liable with a third party or parties other
than JCC, the Manager or their respective affiliates, or (d) a breach of the
Amended and Renegotiated Casino Operating Contract by the LGCB. JCC is required
to indemnify the State in the event a judgment is rendered against the State as
a result of the actions of JCC or its agents.
DEFAULT; TERMINATION. The occurrence of a default of a material obligation
by JCC could result in the termination of the Amended and Renegotiated Casino
Operating Contract, subject, under certain circumstances, to the rights of
leasehold mortgagees. Such default includes, among other things: (i) the failure
to pay the installments of the Gross Revenue Share Payments or any other
payment; (ii) financial instability of JCC; (iii) unsuitability of JCC or the
Manager; (iv) unsuitability of certain other persons required to be found
suitable if JCC does not satisfy the safe harbor requirements; (v) conviction of
JCC of conduct that, in the applicable jurisdiction, is punishable as a felony
or equates to a felony in the State; (vi) adjudication of JCC as being in
default under the Amended Ground Lease, the Amended GDA or the Amended
Management Agreement and, in the LGCB's opinion, the default materially affects
JCC's ability to perform its obligations under the Amended and Renegotiated
Casino Operating Contract; (vii) the Amended and Renegotiated Casino Operating
Contract, or any right created thereby, is taken, seized or attached and the
execution, seizure or attachment is not released within five days; (viii) JCC
makes a general assignment for the benefit of creditors; admits in writing its
insolvency or inability to pay its debts; is adjudged to be insolvent; files a
petition or other request for relief seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief; files an
answer or other pleading admitting or not contesting the material allegations
of, or stipulating to the relief sought in, a petition filed against it in any
such proceeding; seeks or consents or acquiesces in the appointment of a
trustee, administrator or liquidator for JCC or a material part of its assets;
or if JCC voluntarily liquidates or dissolves; (ix) JCC fails to perform or
comply with any other material obligation in the Amended and Renegotiated Casino
Operating Contract; or (x) other than as a result of certain excusable causes,
JCC
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closes or abandons Casino operations; or (xi) JCC does not cause to be provided
and continuously maintain a Minimum Payment Guaranty. The LGCB is required to
provide notice and an opportunity to cure a default. Subject to the rights of
the leasehold mortgagees, if JCC does not cure a default within the time period
provided in the Amended and Renegotiated Casino Operating Contract, the LGCB may
terminate the Amended and Renegotiated Casino Operating Contract, enforce the
obligation in default and exercise any other right or remedy available to the
LGCB, including the imposition of fines.
The Amended and Renegotiated Casino Operating Contract will be immediately
terminated, with no right to cure, if either (i) JCC, other than as a result of
an Excusable Temporary Cessation of Operations, closes the Casino or ceases
gaming operations and fails to reopen the Casino and resume gaming operations
within seven days, or (ii) JCC fails to post the Minimum Payment Guaranty at
least one day prior to the first day of each COC Fiscal Year (either of (i) or
(ii) above, a "Termination Event").
FINANCING. All financing must be approved by the LGCB and is required to be
obtained from suitable lenders. The following lenders are presumed to be
suitable: (i) an insurance company regulated by any state of the United States;
(ii) an investment company registered under the Investment Company Act of 1940;
(iii) a plan established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political subdivisions, for
the benefit of its employees; (iv) a trust fund the trustee of which is a bank
or trust company and the participants of which are exclusively plans of the type
identified in clause (iii) above; (v) an investment adviser registered under the
Investment Adviser's Act of 1940; (vi) a real estate investment trust registered
under the Investment Adviser's Act of 1940; (vi) a real estate investment trust
registered with the SEC; (vii) a dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; (viii) a qualified institutional buyer as
defined in Rule 144A under the Securities Act of 1933 and any entity, all of the
equity owners of which are qualified institutional buyers, acting for their own
accounts or the accounts of other qualified institutional buyers; (ix) a bank as
defined in Section 3(a)(2) of the Securities Act of 1933, a savings and loan
association or other institution as referenced in Section 3(a)(5)(A) of the
Securities Act of 1933, or any foreign bank or savings and loan association or
equivalent institution or an investment fund that participates in a bank
syndication (and any purchaser that takes an assignment interest in the bank
syndication); (x) any business development company as defined in Section
2(a)(48) of the Investment Company Act of 1940; (xi) any business development
company as defined in Section 202(a)(22) of the Investment Adviser's Act of
1940; (xii) investors purchasing debt securities of JCC (or a subsidiary of JCC)
in a public offering registered pursuant to the Securities Act of 1933 or
through a private placement, and any investor purchasing such debt securities in
a subsequent sale, provided, however, that such debt securities are widely held
and freely traded (and the investor holds no more than 20% of JCC's total debt
or 50% of a material debt issue) so as not to give an investor the ability to
control JCC or the Manager; and (xiii) HET or HOCI and their wholly owned
subsidiaries with respect to certain loans contemplated by the Plan of
Reorganization. The LGCB may at any time determine that the presumption of
suitability no longer exists for a lender if either (a) the lender exercises
control or intends to exercise control over JCC or the Manager, or (b) the LGCB
receives information indicating that the lender may not meet the suitability
requirements. If the presumption of suitability no longer exists, the lender is
required to demonstrate its suitability in accordance with the terms of the
Gaming Act.
JCC is not required to obtain the LGCB's approval for financings if the
lenders are suitable and: (i) the principal amount of the new debt does not
exceed the sum of the debt refinanced, capital improvements funded from proceeds
of the additional financing and transaction costs related to the financing; (ii)
the pre-tax cash flow of JCC is not less than 1.25 times the amount of annual
interest payable with respect to the debt incurred in the financing; or (iii)
the financing is permitted by the LGCB's Rules and Regulations.
The Amended and Renegotiated Casino Operating Contract provides protections
to the leasehold mortgagees, including notice of a default and, unless a
Termination Event occurs, 45 business days within which to cure the default
after the expiration of the casino operator's cure period. The leasehold
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mortgagees also have the right to seek the appointment of a receiver unless a
Termination Event occurs. Upon the appointment of a receiver and the posting of
a bond by the receiver, the receiver is issued a one time, nonrenewable
provisional contract by the LGCB to continue operation of the Casino until the
receivership is terminated. The leasehold mortgagee provoking the appointment of
a receiver is required to pay the cost of the receiver's bond and the cost of
operating the Casino during the term of the receivership to the extent that
costs exceed available revenues. If the leasehold mortgagee that provoked the
receivership provides notice of its intent to withdraw financial support of the
receivership, upon 90 days notice, the leasehold mortgagee will not be
responsible for any costs or expenses of the receivership after the date
specified in its notice. The Amended and Renegotiated Casino Operating Contract
provides for the effects of termination of the receivership, which may result in
the Amended and Renegotiated Casino Operating Contract being terminated and the
right to operate the Casino being rebid.
TRANSFER RESTRICTIONS. Under the Amended and Renegotiated Casino Operating
Contract, JCC cannot transfer or encumber the Amended and Renegotiated Casino
Operating Contract, the Amended Management Agreement, the Amended Ground Lease
or the Amended GDA, or any interest therein, without the approval of the LGCB.
The LGCB may in all cases impose conditions to its approval. The LGCB is
required to give notice and an opportunity to cure a violation of the transfer
restrictions. With respect to a transfer or encumbrance by someone other than
JCC in violation of the transfer restrictions, the transfer or encumbrance will
not be a default by JCC if JCC complies with the safe harbor requirements and
insulates itself in the manner required by the Amended and Renegotiated Casino
Operating Contract. Notwithstanding the foregoing, the transfer restrictions are
not intended to restrict the transfer of publicly traded securities that are
traded on a national exchange, provided that the LGCB maintains the power to
require the holder of any such securities subsequently to be found suitable. See
"--Regulation--Louisiana Gaming Act."
COMPLETION GUARANTEE. Pursuant to the Amended and Renegotiated Casino
Operating Contract, the Completion Guarantors must provide to the LGCB a
guarantee of the completion of construction of the Casino, subject to the terms
of such completion guarantee. See "--Completion Guarantees."
AMENDED MANAGEMENT AGREEMENT
GENERAL. JCC and the Manager expect to enter into a second amended and
restated management agreement (the "Amended Management Agreement") granting the
Manager the sole and exclusive right to manage and operate the Casino. The
Manager is responsible for and has authority over, among other things: (a)
hiring, supervising, and establishing labor policies with respect to employees
working in the Casino; (b) gaming and entertainment policies and operations
including security and internal control procedures; (c) advertising, public
relations and promotions; (d) Casino-level accounting, budgeting, financial and
treasury functions; (e) maintaining, renovating and improving the Casino; (f)
performing certain system services generally performed at casinos owned or
managed by HET and its affiliates; and (g) performing certain other obligations
of JCC identified by JCC and agreed to by the Manager. During the term of the
Amended Management Agreement, JCC is required to fund the cost of operating the
Casino and is responsible for constructing, equipping and furnishing the Casino,
maintaining JCC's leasehold estate and obtaining and maintaining licenses and
permits to conduct business.
The Manager will be required to operate the Casino (at JCC's expense) in
accordance with the operational standards applied at the casino operated by an
affiliate of HET in Atlantic City, New Jersey, as well as in accordance with
applicable law and the applicable provisions of the Amended and Renegotiated
Casino Operating Contract and the Amended Ground Lease. If HET or its affiliates
cease to operate its Atlantic City casino, then the Manager must operate the
Casino in the same manner in which HET operates a casino designated by the
Manager with similar operations and market characteristics. The Casino's
physical plant will be gauged based on its condition following completion as
described by the plans and specifications, together with any capital
improvements required by the Manager for all casinos of similar market
characteristics, or, in the absence of such similar casinos, then HET's Atlantic
City casino, if
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managed by HET or any affiliate of HET and if not, then by reference to another
casino, designated by the Manager, operated by HET or its affiliates similar in
physical character.
TERM. The Amended Management Agreement has an initial term expiring 20
years after the date of the Amended Management Agreement and may be extended for
four consecutive terms of ten years each, provided the Manager is not in default
under the Amended Management Agreement at the time any such extension term is to
commence. The Amended Management Agreement will terminate without any further
action of JCC or the Manager immediately upon the occurrence of the termination
of the Amended Ground Lease by the RDC as a result of JCC's failure timely to
complete construction of the Casino.
CAPITAL REPLACEMENT FUND. Under the Amended Management Agreement, the
Manager on behalf of JCC will make monthly deposits into a fund for capital
replacements and improvements totaling $3 million for the first 12 month period
following completion of the Casino Construction, $4 million for the second 12
month period following completion of the Casino Construction, $5 million for the
third 12 month period following completion of the Casino Construction, and 2% of
gross revenues of the Casino for each fiscal month thereafter. Any expenditures
for capital replacements or improvements which have been budgeted in an annual
plan may be paid from the reserve fund. Upon expiration or termination of the
Amended Management Agreement, all amounts then held in a reserve fund will be
distributed to JCC after compliance with JCC's obligations under the Amended
Ground Lease which must be satisfied from the reserve fund and after payment of
any amounts owed to the Manager under the Amended Management Agreement. The
capital replacement fund referred to above is the same as that required pursuant
to the Amended Ground Lease and Amended and Restated Casino Operating Contract,
and is not meant to duplicate the capital replacement fund obligations of JCC
under the Amended Ground Lease and Amended and Restated Casino Operating
Contract. See "Amended Ground Lease--Capital Replacement Fund" and "--Amended
and Renegotiated Casino Operating Contract--Capital Replacement Fund."
BOOKS AND RECORDS; BUDGET. The Manager is responsible for maintaining the
books and records of the Casino. A certified audit will be performed within 90
days after the end of each fiscal year and upon termination or expiration of the
Amended Management Agreement. The audit of the Casino's gross gaming revenues
will be performed by Deloitte & Touche or such other accounting firm as may be
selected by JCC and approved by the Manager. The Manager will also be
responsible for preparing an annual plan for JCC's review and approval. The
annual plan will consist of a statement of the estimated income and expenses for
the coming fiscal year, including estimates as to gross revenues, operating
costs and capital replacements; a business and marketing plan for the upcoming
fiscal year; and a projection of the minimum balance which must remain in the
bank account in the "house bank" as of the end of each month to assure
sufficient monies for working capital purposes, the "house bank" and other
expenditures authorized under the annual plan. Within 20 days from the date the
proposed annual plan is delivered to JCC, the Manager and JCC will conduct an
in-depth review of the plan including comparisons with the prior year's
performance. The Amended Management Agreement requires the Manager and JCC to
resolve all disputes regarding the proposed budget through arbitration. The
Amended Management Agreement also grants the Manager the discretion to
reallocate part or all of the amount budgeted with respect to any line item to
another line item in the same department and to make expenditures not authorized
under the applicable annual plan under certain circumstances. The Manager may,
from time to time during the fiscal year, submit a revised annual plan to JCC
for approval. If the revised annual plan is not approved, the Manager may submit
the revised annual plan to arbitration. JCC must establish a bank account with a
minimum balance of $10 million at the time of the Casino's opening and a "house
bank" in the amount of $5 million. Subject to the requirements of the Gaming Act
and the Rules and Regulations, the minimum balance and the "house bank" may be
adjusted jointly by JCC or the Manager at any time following the opening of the
Casino. The Manager has absolute control of the bank accounts and the "house
bank" and all gross revenues of the Casino will pass through the bank accounts
and Casino funds will not be commingled with any funds of the Manager or any of
the Manager's affiliates. The Manager will provide JCC with copies of bank
statements with respect to the Casino's bank accounts upon receipt and
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will also provide a reconciliation of such statements to the books and records
relating to Casino operations within 20 days of the Manager's receipt of such
bank statements.
FEES. The Manager is entitled to receive a management fee having two
components. The first component (the "Base Fee") will equal 3% of gross revenues
of the Casino. The second component (the "Incentive Fee" and, together with the
Base Fee, the "Management Fees") will equal 7% of Consolidated EBITDA of JCC
above (i) $40 million for the six month period ending on the date which is six
months after the Opening Date and each anniversary of such date, and (ii) $75
million for the 12 month period ending on the date which is 12 months after the
Opening Date and each anniversary of such date, less the Incentive Fee paid to
the Manager for the prior six months; provided, however, that the Manager will
refund to JCC all fees paid by JCC under subsection (i) hereof if Consolidated
EBITDA does not exceed $75 million for the 12 month period ending on the date
which is 12 months after the opening of the Initial Casino Facilities and each
anniversary of such date, with appropriate proration of such threshold for any
partial year following the Opening Date and preceding the termination of the
Amended Management Agreement, as the case may be. The Base Fee will be payable
to the Manager monthly. The Incentive Fee, if any, will be payable to the
Manager at six month intervals on the next business day following actual cash
payment of all accrued Fixed Interest and contingent payments, if any, on the
Notes pursuant to the Plan of Reorganization. No Base Fee will be paid, and no
Incentive Fee will be accrued or paid, during or with respect to any period in
which JCC is in default with respect to interest or principal payments under the
Notes or the Bank Loans. Any unpaid Base Fees will be deferred and payable to
the Manager at such time as any such default is cured. In addition, the Manager
is entitled to receive a travel fee equal to $100,000 per year, subject to
adjustment by the Consumer Price Index, and a "marketing contribution" equal to
0.4% of the Casino's net revenues which may be used for advertising services,
special promotions, public relations and other marketing services. HET's
affiliates may pool this marketing contribution with contributions made by other
participating casinos owned or managed by HET's affiliates.
The New Notes provide for six elections by JCC to pay semi-annual Fixed
Interest in kind rather than in cash for the first three years of the New Notes
and requires JCC to pay semi-annual Fixed Interest in kind thereafter if JCC's
Consolidated EBITDA for the prior 12 months has not exceeded $28.5 million. If
JCC pays Fixed Interest in kind on any of the first four semi-annual interest
payment dates, the Manager will defer its Base Fees to the extent that the cash
saving from paying Fixed Interest in kind is needed for cash flow deficiencies
other than for repayment of Tranche A-1 and Tranche A-2. If JCC is required to
pay Fixed Interest in kind with respect to the third, fourth, fifth or sixth
semi-annual interest payment periods, because of the terms of the Term Loans or
if JCC elects to pay Fixed Interest in kind during such Semiannual Period, the
Incentive Fees payable to the Manager will be deferred during such corresponding
Semiannual Period. If Consolidated EBITDA for JCC is less than $28.5 million for
the 12 months ending one month prior to each semi-annual interest payment date
for the New Notes starting with the fourth year after the Effective Date, the
Base and Incentive Fees will be deferred. Any such election or elections will be
by written notice from JCC to the Manager specifying the amount, if any,
required to be deferred under the Indenture and/or Credit Agreement (the
"Deferral Amount"). Such Deferral Amount will first be applied to offset any
Base Fees then unpaid and thereafter accruing during the applicable six month
period. To the extent any such Deferral Amount exceeds the projected amount of
any unpaid and thereafter accruing Base Fees for the applicable six month period
or if such six month deferral period has already elapsed, the Manager will repay
to JCC the remaining amount of such Deferral Amount not to exceed the amount of
any Base Fees previously paid to the Manager with respect to any portion of the
applicable six month period accruing prior to JCC's election to pay Fixed
Interest in kind. To the extent the Manager is required to refund to JCC any
deferred Management Fees as described above, HET will guarantee the Manager's
obligation to make such refund.
Any deferred Management Fees will bear interest at 8.0%, which will accrue
until such deferred Management Fees are repaid. At such time and to the extent
that JCC's Consolidated EBITDA exceeds $65 million for the preceding 12 month
period, any deferred Base Management Fees together with interest thereon will be
payable to the Manager pro rata with any deferred guaranty fees payable to HET
or HOCI
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pursuant to the HET/JCC Agreement, out of excess cash flow (remaining after
application of the excess cash flow sweep required by the Credit Agreement). See
"--HET/JCC Agreement" and "--Bank Loans." At such time and to the extent that
JCC's Consolidated EBITDA exceeds $75 million for the preceding 12 month period,
any deferred Incentive Management Fees together with interest thereon will be
payable to the Manager, after repayment of any deferred Base Management Fees and
such deferred guaranty fees, out of excess cash flow (remaining after
application of the excess cash flow sweep required by the Credit Agreement).
During the continuance of any uncured payment default under the New Notes
indenture or any default which results in an acceleration under the New Notes
indenture, or during the continuance of any uncured default under certain
provisions of the Amended Management Agreement, any accrued but unpaid Base
Management Fees or Incentive Management Fees will be subordinated to payments
pursuant to the New Notes in the following order: (a) Fixed Interest; (b)
principal amounts under the New Notes; (c) Base Management Fees; (d) contingent
payments with respect to the New Notes; (e) Completion Guarantees and (f)
Incentive Management Fees. See "--HET/JCC Agreement" and "--Bank Loans."
INDEMNITY. JCC is required to indemnify and hold the Manager harmless from
any Claims (as defined herein) and must reimburse the Manager for any money
damages to property which the Manager is required or authorized to pay for any
reason. JCC's indemnity excludes any liability not covered by insurance which
results solely from the proven gross negligence or willful misconduct of any of
the "Key Casino Personnel" or certain of HET's corporate officers if and to the
extent that their proven gross negligence or willful misconduct involves
directing the activity in the operation of the Casino or in the Manager's
performance of its obligations under the Amended Management Agreement that
results in a liability and the liability is proximately caused by such
direction. For purposes of the Amended Management Agreement, "Claims" include
any action or actions, cause or causes of action, in law or in equity, suits,
debts, liens, liabilities, claims, demands, damages, punitive damages, losses,
costs or expenses, and reasonable attorneys' fees of any nature whatsoever
(including, without limitation, claims based upon legal fault, negligence,
offense, quasi-offense, contract, quasi-contract, or any other theory) whether
fixed or contingent, and "Key Casino Personnel" include, among others, the
Casino's general manager, vice president of operations, and vice president of
marketing and certain other direct reports to the general manager. The Manager
is required to indemnify and hold JCC harmless from any liability not covered by
insurance which results solely from the gross negligence or willful misconduct
of any of the Key Casino Personnel if and to the extent that their proven gross
negligence or willful misconduct involves directing activity in the operation of
the Casino or in the Manager's performance of its obligations under the Amended
Management Agreement that results in a liability proximately caused by the
direction.
TERMINATION OF AMENDED MANAGEMENT AGREEMENT. In the event the Rivergate
site is destroyed or substantially destroyed by casualty, or title to the
Rivergate site becomes impaired, and the cost of restoring or curing the title
impairment exceeds the insurance proceeds, JCC and the Manager may terminate the
Amended Management Agreement. Upon such termination, the Manager will be
entitled to receive from JCC any amounts due or owing with respect to events
occurring prior to or in connection with such termination, but the Manager will
not be entitled to receive a Termination Fee.
In the event the Rivergate site is condemned or the Amended and Renegotiated
Casino Operating Contract is revoked through no fault of JCC, then the Amended
Management Agreement will be terminated and the Manager will receive from JCC
any amounts due or owing, but the Manager will not be entitled to receive a
Termination Fee; provided, however, the Manager will be entitled to seek a
recovery from the condemning or revoking authority for the Manager's economic
loss in respect of the Amended Management Agreement. If the Manager or any of
its affiliates is determined by the LGCB to be unsuitable to conduct gaming, JCC
shall be entitled to terminate the Amended Management Agreement upon 30 days'
prior notice to the Manager. Following the Transition Date, if a Change of
Control (as defined herein) occurs and the Board of Directors of JCC Holding
does not consist of Continuing Directors (as defined herein), the Manager will
be entitled to terminate the Amended Management Agreement upon 90 days' written
notice to JCC, but will not be entitled to receive a Termination Fee.
"Continuing Directors" means the directors of JCC Holding on the Effective Date
and each other
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director, if such director's nomination for election to the Board of Directors
of JCC Holding is recommended by a majority of the then Continuing Directors. In
addition, following the Transition Date, if JCC sells, assigns or transfers any
of its direct or indirect legal or beneficial interest in the Casino, to any
person other than a Qualified Purchaser (as defined herein) approved by the
Manager and which assumes and agrees to perform the obligations of JCC under the
Amended Management Agreement, the Manager will be entitled to terminate the
Amended Management Agreement upon the closing of such sale, assignment or
transfer, but will not be entitled to receive a Termination Fee. "Qualified
Purchaser" means any person or entity that is duly licensed or otherwise
authorized to own and operate the Casino and that: (i) is not a Conflicted
Entity (as defined herein), and (ii) would not, if affiliated with the Manager,
in the reasonable judgment of the Manager or any licensing authority, impair or
cause the denial, suspension or revocation of any gaming registration, permit,
license, right or entitlement or alcoholic beverage registration, permit,
license, right or entitlement held or applied for by the Manager or an affiliate
of the Manager. Other than as described herein, JCC has no right to terminate
the Amended Management Agreement in the absence of a default by the Manager.
In addition, upon the happening of certain events, the Manager may declare
an event of default by JCC, entitling it to terminate the Amended Management
Agreement and receive the Termination Fee. These events include: (i) a breach of
the Amended Management Agreement by JCC which is not cured within the agreed
cure period; (ii) failure by JCC timely to reconstruct the Casino following
casualty or partial condemnation at any time the board of directors of JCC
Holding does not consist of Continuing Directors; (iii) dissolution or
bankruptcy of JCC or the Manager or any person directly or indirectly
controlling them or a general assignment for the benefit of its creditors; (iv)
passing of title by JCC to the Casino or any part thereof in lieu of foreclosure
or institution of an action to foreclose any mortgage in the Casino against JCC
and which is not dismissed within 30 days thereafter; or (v) acquisition by any
person or entity that would, if associated with JCC, any of JCC's affiliates or
the Manager, impair or cause the denial, suspension or revocation of any gaming
or alcoholic beverage registration, permit, license, right or entitlement held
by or applied for by JCC, the Manager or their respective affiliates (a
"Non-Qualified Person") of any legal or beneficial interest in JCC or its
affiliates, or any indebtedness of JCC or its affiliates, that has not been
cured within 45 days following notice to JCC by the Manager of such acquisition.
The "Termination Fee" payable to the Manager is equal to three times the average
amount of annual Management Fees earned in the 24 fiscal months preceding
termination, but, until the end of the third full fiscal year following the
opening of the Casino, not less than $44 million adjusted by increases in the
Consumer Price Index. Notwithstanding the foregoing, if any default or event
giving rise to a termination by the Manager results solely from an action or
omission of HET, or its affiliates, in its capacity as a member of JCC, the
Manager will not in any such event receive a Termination Fee in connection with
such event of default or resulting termination.
In addition to the Manager's right to terminate the Amended Management
Agreement as described in the immediately preceding paragraph, if (i) the
Amended Ground Lease or the Amended and Renegotiated Casino Operating Contract
are subject to the imminent risk of termination, or (ii) any mortgage created
pursuant to the Credit Agreement or any other mortgage securing repayment of
indebtedness, the proceeds of which are used solely to construct, improve,
restore or repair the Casino, or to refinance any indebtedness incurred in
connection with such mortgage, is subject to the imminent risk of foreclosure,
JCC shall be entitled to terminate the Amended Management Agreement by giving 60
days' advanced written notice to the Manager, without payment of the Termination
Fee.
NON-COMPETE. Neither the Manager nor JCC nor any affiliate of the Manager
or JCC that is controlled by the Manager's ultimate parent or JCC's ultimate
parent, as the case may be, may develop, own, finance or manage casino or other
gaming operations in Orleans, Plaquemines, St. Charles, St. Tammany, Jefferson
or St. Bernard Parishes, Louisiana, except for the Casino.
SUCCESSORS AND ASSIGNS. The Manager is not required to seek JCC's consent
to the following, none of which would constitute an event of default under the
Amended Management Agreement: (i) any
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assignment by the Manager of its obligations, rights or interests under the
Amended Management Agreement to an affiliate of the Manager that is controlled
by the Manager's ultimate parent; (ii) any transfer of all or substantially all
of the Manager's and its affiliates' gaming business; (iii) any corporate
reorganization of the Manager and its affiliates; or (iv) any transfer of
publicly-held stock in the Manager or any of its affiliates. In the event of
such an assignment, the Manager may be released from its obligations under the
Amended Management Agreement, and the Amended Management Agreement contains no
provisions that prohibit assignment to a financially unstable entity. The
Manager may not in any manner, voluntary or involuntarily, directly or
indirectly, partition (or seek the partition of), sell, assign or transfer any
of its legal or beneficial interest in the Casino or the Amended Management
Agreement without prior written consent of JCC (which consent may be withheld
for any reason). Notwithstanding the foregoing, the immediately preceding
sentence does not restrict, limit or effect in any manner the sale, assignment
or transfer of any legal or beneficial interest in JCC's ultimate parent.
MISCELLANEOUS. If there is a conflict between the terms of the Amended
Management Agreement and the terms of the Amended Ground Lease, the terms of the
Amended Ground Lease will control.
LICENSING AGREEMENT
The Company expects the Manager to enter into a licensing agreement with
Harrah's Las Vegas, Inc., a subsidiary of HET which owns the mark "Harrah's"
pursuant to which the Manager will obtain a license to use "Harrah's" in the
name of the Casino and on its signage and advertising. The Amended Management
Agreement gives JCC certain rights to the use of the "Harrah's" name.
COMPLETION GUARANTEES
The Company expects that pursuant to the Completion Guarantees in favor of
the Beneficiaries, the Completion Guarantors will agree to guarantee the
Completion Obligations, the Carry Obligations and the Preservation Obligations.
The "Completion Obligations" mean the obligations of JCC to commence and
complete the construction of and timely and fully pay for all costs and expenses
of completion when due for the Casino Construction, to equip the Casino with the
required furniture, fixtures and equipment so that the Casino is ready to open
to the public (subject to any necessary regulatory approvals from the LGCB or
any other State regulatory authorities) as a casino gaming operation,
respectively, in accordance with the terms of the Amended Ground Lease, the
Amended GDA, the Indentures and any applicable requirement of the LGCB, these
obligations include, but are not limited to, (i) the payment of any and all
costs of completing the Casino Construction, including without limitation all
labor, materials, supplies and equipment related thereto, to be paid and
satisfied when due including, without limitation, all cost overruns not paid by
JCC; (ii) the payment, satisfaction or discharge of liens arising from injuries
or damages to persons or property in connection with the Casino Construction and
all liens, charges and claims, other than permitted liens, arising from the
furnishing of labor, material, supplies or equipment for the Casino
Construction, that are or may be imposed upon or asserted against the Casino or
any portion thereof; and (iii) the defense and indemnification of the
Beneficiaries against all such liens arising from injuries or damages to persons
or property in connection with the Casino Construction, and all such liens,
charges and claims, other than permitted liens, arising from the furnishing of
labor, materials, supplies or equipment for the Casino Construction.
The "Carry Obligations" mean the full and complete payment and performance
of all obligations of JCC to pay on a timely basis all amounts due from or
incurred by or otherwise payable by JCC to any person, including without
limitation, any rent, liquidated damages or other amounts payable to the City
and the RDC under the Amended Ground Lease or the Amended GDA (including but not
limited to JCC Development's obligation, if any, to pay rent directly to the
City and the RDC under the Second Floor Sublease prior to completion of the
Casino Construction), and all project costs (other than any costs which are
included as a part of the Completion Obligations), including without limitation,
the payment of interest and scheduled principal payments (excluding principle on
the Notes), taxes (prior to delinquency), amounts owing to the LGCB under the
Amended and Renegotiated Casino Operating Contract, amounts
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owing to the City and the RDC under the Amended Ground Lease, assessments,
utilities, insurance, maintenance expenses and amounts arising from injuries or
damages to person or property or amounts due pursuant to contracts or agreements
to be funded, paid and satisfied on or prior to the Termination of Construction
Date (as defined herein); provided that the Completion Guarantors in no event
guarantee payment pursuant to the Completion Guarantees of any Minimum Payment
under the Amended and Renegotiated Casino Operating Contract. The Carry
Obligations will include, without limitation, (i) the obligation of JCC upon the
Termination of Construction Date to have available for working capital at least
$5.0 million of cash and the Working Capital Facility Maximum Amount of
availability for immediate drawdown(s) under the Working Capital Facility,
subject to the terms thereof (which may require the Completion Guarantors to
contribute working capital directly to JCC or to pay down the Working Capital
Facility), and (ii) the obligation of JCC to repay the Working Capital Facility
upon an event of default under the Working Capital Facility prior to the
completion of the Casino Construction. The "Working Capital Facility Maximum
Amount" equals $25 million reduced by the amount of funds, if any, not to exceed
$2.0 million, available under any letter of credit sub-facility under the
Working Capital Facility for purposes other than those relating to project costs
of the Casino and a drawing of up to $10.0 million to fund a certain Casino bank
account on or before the Termination of Construction Date.
The "Preservation Obligations" include the Completion Guarantors'
obligations, after notices of failure of JCC to fulfill the Completion
Obligations in a timely manner, to pay any of the Carry Obligations or to be the
subject of a voluntary or involuntary bankruptcy proceeding, to take all
necessary steps to maintain insurance coverage and to secure the Casino to
prevent deterioration and unauthorized access. The "Termination of Construction
Date" means the date by which all of the following have occurred: (i) a
temporary certificate of occupancy has been issued for the Initial Casino
Facilities by the building department and other relevant agencies; (ii) all
required permits with respect to the Casino Construction have been received by
JCC; (iii) a notice of completion has been recorded with respect to the Casino
Construction; (iv) an officer's certificate of the Completion Guarantors has
been delivered to the Beneficiaries certifying that the Termination of
Construction Date has occurred; (v) the Casino is equipped with the required
furniture, fixtures and equipment and ready to open for business as a casino
gaming operation; (iv) a certificate has been delivered by the general
contractor and the project architect to the Beneficiaries for the Casino
Construction certifying that the Casino Construction has been substantially
completed in accordance with the plans and specifications therefor and all
applicable building laws, ordinances and regulations; and (vii) the Initial
Casino Facilities have opened for business as a casino gaming operation so long
as any necessary regulatory approvals from the LGCB or any other State
regulatory authorities have been received, or, if such approvals have not been
received, even though timely receipt of any such approvals has been diligently
pursued by or on behalf of JCC in accordance with the Rules and Regulations for
such approvals, the Initial Casino Facilities are in a condition to receive
customers in the ordinary course of business.
The Completion Guarantees are subject to a number of important exceptions
and qualifications. The Completion Guarantors' obligation to complete the Casino
does not take effect until and unless JCC fails or neglects timely to commence
or complete the Casino Construction, fails in any other manner to prosecute with
diligence and continuity the Completion Obligations, fails timely to pay any of
the Carry Obligations, or files or has filed against it a petition for
bankruptcy or similar relief. See "--Material Agreements--Amended Completion
Loan Agreement." In addition, the Completion Obligations (but not the Carry
Obligations) under the Completion Guarantees are suspended during the pendency
of any Force Majeure. See "--Risk Factors--Completion Guarantees." The
Completion Guarantees are not for the benefit of, and are not enforceable by,
the holders of equity interests in JCC Holding, including holders of Class A
Common Stock.
The Completion Guarantees terminate upon the occurrence of any of the
following: (i) the termination of the Amended Ground Lease or the Amended GDA
other than as a result of a breach by JCC; (ii) casino gaming operations are no
longer permitted to be conducted at the Casino or are modified, restricted or
limited in a manner that materially diminishes the benefits afforded to JCC or
the gaming
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activities permitted to be conducted at the Casino pursuant to the Gaming Act by
reason of a change of law or the enactment of a new law after the Effective Date
or by reason of JCC's rights under the Amended and Renegotiated Casino Operating
Contract having been terminated in any material respect, other than as a result
of a breach by JCC or the Completion Guarantors; provided that, upon the
occurrence of any of the events described in this clause (ii) prior to the
Termination of Construction Date, the Completion Guarantors are nevertheless
obligated to complete the Poydras Street Support Facility, the Poydras Tunnel
Area, exterior site and street work, and certain improvements which may be
required under the Amended Ground Lease; (iii) only as to the Carry Obligations
but not as to the Completion Obligations, a Force Majeure continues for more
than one year from the receipt of a notice from any of the Beneficiaries to the
Completion Guarantors that the Completion Guarantors' obligation to complete the
Casino has taken effect, notwithstanding the Completion Guarantors' actual and
continuous best efforts to remove such Force Majeure; provided, however, that
the Completion Guarantors will remain liable for all Carry Obligations that
actually come due through the expiration of such one year period to the extent
not satisfied by JCC; and, provided further, that the Completion Guarantors used
their best efforts to remove such Force Majeure within such one year period; or
(iv) as to the Carry Obligations, as of and upon the Termination of Construction
Date and as to the Completion Obligations upon the date on which all such
payments or satisfactory provisions for all such payments have been made, all
lien periods with respect to the Casino Construction have expired and no liens
or privileges arising from the furnishing of labor, materials, supplies or
equipment for the Casino Construction affecting or purporting to affect the
Casino remain of record in Orleans Parish. JCC expects to obtain the Surety Bond
from a surety for the benefit of the Beneficiaries for completion of the Casino
Construction.
The remedy of specific performance and the remedies described below are not
intended to be exclusive of remedies that Beneficiaries may have against JCC
under any other documents or agreements. If, after notice and opportunity to
cure, the Completion Guarantors fail timely to pay the Carry Obligations (a
"Carry Obligation Default") or if, after notice and an opportunity to cure, the
Completion Guarantors fail to commence and diligently thereafter continue to
perform the Completion Obligations through the date of completion (a "Completion
Obligation Default"), or if after notice and an opportunity to cure, the
Completion Guarantors fail to perform the Preservation Obligations (a
"Preservation Obligation Default"), then the Beneficiaries, subject to certain
provisions, may elect to require specific performance by the Completion
Guarantors of any or all of the Carry Obligations after a Carry Obligation
Default, the Completion Obligations after a Completion Obligation Default and
the Preservation Obligations after a Preservation Obligation Default. After a
Completion Obligation Default or a Preservation Obligation Default, the
Beneficiaries, at their option, have the right, but have no obligation, to
require the surety to perform the Completion Obligations or the Preservation
Obligations pursuant to the Surety Bond. The Beneficiaries' election to require
the surety to perform the Completion Obligations will not release, diminish or
extinguish the liability of JCC or the Completion Guarantors to the extent the
surety fails to perform the Completion Obligations or the Preservation
Obligations. The Completion Guarantors will remain obligated to perform the
Carry Obligations notwithstanding any such election and notwithstanding the
surety's performance of the Completion Obligations or the Preservation
Obligations. In addition to the Beneficiaries' right to require specific
performance by the Completion Guarantors of any and/or all of the Completion
Obligations after a Completion Obligation Default, the Carry Obligations after a
Carry Obligation Default or the Preservation Obligations after a Preservation
Obligation Default, and whether or not the Beneficiaries have called on the
surety pursuant to the surety bond, (i) the Beneficiaries have the right to
recover from the Completion Guarantors all unreimbursed costs and expenses,
including but not limited to attorneys' fees, incurred by the Beneficiaries in
protecting, preserving, enforcing or defending their interests both as against
JCC and as against the Completion Guarantors under the Completion Guarantees,
(ii) after a Carry Obligation Default, the Completion Guarantors will be liable
for the joint benefit of the Beneficiaries as their interests may appear for any
interest or delinquency costs arising from such Carry Obligation Default;
provided that the Completion Guarantors will not be liable for more than one
payment of any such interest or delinquency costs of JCC regardless of whether
multiple demands are made by any or all of the Beneficiaries; (iii) after a
Completion Obligation
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Default, the Completion Guarantors will be liable for the joint benefit of the
Beneficiaries as their interests may appear for damages to pay for the costs of
performance of the Completion Obligations arising from such Completion
Obligation Default or otherwise available at law or in equity; and (iv) after a
Preservation Obligation Default, the Completion Guarantors will be liable for
the joint benefit of the Beneficiaries as their interests may appear for damages
to pay for the costs of performance of the Preservation Obligations arising from
such Preservation Obligation Default; provided that in no event will the
Completion Guarantors be liable for duplicate payments in respect of damages nor
for more than one performance of the Preservation Obligations.
In the event that the Completion Guarantors enter into any completion
guarantee agreement in favor of the RDC and the City (the "RDC Completion
Guarantee"), completion guarantee agreement in favor of the LGCB and the State
(the "LGCB Completion Guarantee"), completion guarantee agreement in favor of
the holders of the Notes (the "Notes Completion Guarantee"), or completion
guarantee agreement in favor of the Bank Lenders (the "Bank Completion
Guarantee"), or any amendment or supplemental agreement with respect thereto,
and such amendment or supplemental agreement provides rights or remedies to any
Beneficiary (the "Favored Beneficiary") under its completion guarantee agreement
that are more favorable in any respect than the rights and remedies granted to
the other Beneficiaries (the "Other Beneficiaries") under their respective
completion guarantee agreements, then the Other Beneficiaries will be deemed to
have available to them, at their option, the benefit of the more favorable
rights and remedies implemented by such amendment or supplemental agreement and
will not under any circumstances be deemed to have agreed to or become subject
to any alterations in the completion guarantee agreement of the Favored
Beneficiary, or any provisions of a supplemental agreement among the Completion
Guarantors and the Favored Beneficiary, that are less favorable than the rights
and remedies granted to the Other Beneficiaries under their respective
completion guarantee agreements.
AMENDED COMPLETION LOAN AGREEMENT
JCC and the Completion Guarantors expect to enter into an amended completion
loan agreement (the "Amended Completion Loan Agreement"), under which any
expenditures made by the Completion Guarantors under the Completion Guarantees
which are not also expenditures under the Amended and Restated Construction Lien
Indemnity Agreement (as defined herein) are deemed unsecured limited recourse
indebtedness (the "Completion Loans") of JCC due and payable six months
following the maturity of the New Notes and New Contingent Notes. The Completion
Loans will bear annual interest at the rate of 8%. Subject to meeting certain
restricted payment tests contained in the Indentures for the Notes and pursuant
to the Bank Loan documents, the Completion Loans will be repaid from the cash
flow or proceeds of major capital events of JCC available for distribution by
JCC to its member. Subject to meeting certain restricted payment tests contained
in the Indentures for the Notes and pursuant to the Bank Loan documents, early
repayment of the Completion Loans is permitted. Any Completion Loan not paid at
maturity will bear annual interest at the foregoing rate plus 4.0%. The
Completion Loans will be junior in right of payment to the Bank Loans, the Notes
(including principal, interest and contingent payments due and payable), Senior
Permitted Refinancings, Senior Subordinated Permitted Refinancings and will rank
PARI PASSU with the Junior Subordinated Credit Facility. Repayments are
generally treated as restricted payments under the Indentures and Bank Loan
documents. Payments in excess of those permitted to be paid under the Indentures
or Bank Loan documents will be subordinate to the repayment of the Notes and the
Bank Loans.
At such time that there is a demand, call, notice or requirement for
performance of any Completion Guarantee, the Completion Guarantors will be
entitled to control the disbursement and use of, and apply toward the cost to
complete the Casino, all available funds of JCC without any further action or
consent by JCC, including, without limitation, drawing and using any such
portion of the Term Loans the Junior Subordinated Credit Facility, or the
proceeds from the Convertible Junior Subordinated Debentures up to
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the total amount available thereunder, until all obligations of the Completion
Guarantors in respect of the Completion Guarantees have been fully satisfied
(subject to the obligation to provide certain minimum cash and working capital
availability as described in the Completion Guarantees). The Amended Completion
Loan Agreement will also provide that JCC will use all of its available funds,
including all equity contributions made to JCC and amounts received from Term
Loans, the Junior Subordinated Credit Facility and the Convertible Junior
Subordinated Debentures for the construction and development of the Casino.
Under the Amended Completion Loan Agreement, JCC and the Completion
Guarantors agree that (i) separate books and records will be kept for funds
related to operations of the Casino and funds related to construction of the
Casino, and such funds will not be commingled, and (ii) within 45 days following
the completion of construction of the Casino Construction, JCC will have its
accountants audit such books and records and all amounts expended to construct
the Casino. To the extent such audit determines that the amounts in the
aggregate expended for construction were in excess of the costs budgeted for
such construction, the Completion Guarantors will reimburse to JCC any such
excess and such amounts reimbursed will be a Completion Loan.
Pursuant to the Amended Completion Loan Agreement, HET, HOCI, JCC, the RDC
and the City expect to enter into an entry agreement under which the Completion
Guarantors are granted the right to enter and take control of construction of
the Casino, provided that the Completion Guarantors will be liable for actual
damages resulting from their willful misconduct or gross negligence in the
exercise of its entry rights. If the Completion Guarantors exercise their rights
as a result of: (i) any demand, call, notice or requirement for performance
under any Completion Guarantee; or (ii) the Completion Guarantors having
determined in good faith that the cost of completing the Casino will materially
exceed the project budget for the Casino or delay the timely completion of the
Casino, the Completion Guarantors' liability will be limited to actual damages
suffered by JCC not to exceed $2.0 million unless such damages arise from the
Completion Guarantors' willful misconduct or gross negligence. A good faith
determination may be based on, among other things: (a) the occurrence of certain
delays in the construction schedule; (b) certain project cost overruns; (c)
defaults on any Completion Loan; or (d) default under the Amended and
Renegotiated Casino Operating Contract, Amended GDA or the Amended Ground Lease.
Following the occurrence of any such circumstance, the Completion Guarantors
have the right to act in the place of JCC in respect of the construction
contracts, architects, agreements, payment and performance bonds and the plans
and specifications relating to the Casino.
The Completion Loan Agreement imposes certain covenants, representations,
warranties and events of default on JCC.
SECOND FLOOR SUBLEASE
GENERAL. JCC expects to enter into a sublease (the "Second Floor Sublease")
with JCC Development, under which JCC will sublease to JCC Development the
portion of the second floor of the Casino available for non-gaming uses.
SUBLEASE. The entire second floor of the Casino initially is available for
non-gaming uses upon the completion of the Second Floor Shell Construction. JCC
may convert any portion of the second floor space in the future to a gaming use
subject to approval of the LGCB; provided that if such conversion would result
in less sublease revenue to the RDC, the RDC will be compensated for such
reduction in sublease revenue in accordance with the terms of the Second Floor
Sublease. In the event that such a conversion of second floor space to gaming
use occurs, such space will be removed from the Second Floor Sublease and
thereafter be subject to the terms of the Amended Ground Lease as applied to the
first floor.
MASTER PLAN. A group composed of representatives of JCC, JCC Development
and the RDC is expected to develop the Master Plan for the initial build out and
leasing of the second floor for non-gaming uses. The Master Plan must be
approved by the RDC, JCC and JCC Development and will, among
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other things, establish leasing guidelines regarding rent, termination rights
and termination fees, tenant improvements and concessions, permissible uses,
brokerage fees, an initial capital improvement budget and an initial operating
budget for the first year of operations. JCC and the RDC will sponsor and
support at the required times the necessary steps to gain regulatory and
municipal approvals and conditional use ordinance modifications consistent with
the Master Plan. The Amended Ground Lease prohibits any waiver of or
modification to the Second Floor Sublease or the Master Plan which would have a
material adverse effect on the RDC, the City or the City Council without the
prior written consent of the RDC, the City and the City Council, such consent
not to be financially conditioned, unreasonably withheld or delayed.
BUILD OUT. The second floor of the Casino is anticipated to be available
for leasing following the opening of the Casino and approval of the Master Plan.
The tenant improvement build out and development of the non-gaming uses on the
second floor of the Casino is scheduled to begin, subject to entering into
tenant leases, following the opening of the Casino and approval of the Master
Plan. Such initial non-gaming tenant improvement build out and development must
be consistent with the Master Plan. The Second Floor Sublease prohibits
facilities, the principal business purpose of which is a restaurant, on the
second floor of the Casino.
MANAGEMENT AND LEASING. JCC Development will manage and lease the second
floor development consistent with the Second Floor Sublease and the Master Plan.
JCC Development may hire a leasing agent and project manager for the second
floor non-gaming leasing and operations. The leasing of the second floor will be
consistent with the leasing parameters set forth in the Master Plan. JCC
Development will submit to the RDC on or before July 15 of each year a proposed
cash flow and operating budget for the second floor non-gaming development for
the following year.
RENT. JCC Development will pay directly to the RDC rent in respect of the
second floor equal to 50% of the net operating income from the second floor
development, which shall be net of all costs of development, construction,
leasing, operating and managing the second floor non-gaming project to the
extent such costs are not inconsistent with the Master Plan. The remaining 50%
of the net operating income will be paid by JCC Development to JCC as rent under
the Second Floor Sublease. Such construction costs will be consistent with the
Master Plan and will be the incremental costs necessary to make the second floor
suitable for non-gaming tenants and to attract such tenants, and such costs will
be amortized over a cost recovery period of ten years. JCC may convert any
portion of the second floor in the future to a gaming use, subject to the
approval of LGCB; provided, that if such conversion would result in less
sublease revenue to the RDC, JCC will compensate the RDC for such reduction in
the sublease revenue. In the event that such a conversion to gaming use takes
place, such space will be removed from the Second Floor Sublease and will
thereafter be subject to the terms of the Amended Ground Lease that apply to the
first floor of the Casino.
BASIN STREET CASINO LEASE TERMINATION AGREEMENT
On January 15, 1997, HJC entered into a Basin Street Casino Lease
Termination Agreement with the RDC and the City, as intervenor (the "Termination
Agreement"). The LGCB has approved the termination of the Basin Street Casino
Lease. Pursuant to the Termination Agreement the Basin Street Casino Lease
automatically terminated on the date the LGCB approved the termination of the
Basin Street Casino Lease. Possession of the Basin Street Casino premises has
been transferred to the City. The RDC and the City, on the one hand, and HJC, on
the other hand, have mutually released all rights and obligations under the
Basin Street Casino Lease; provided that such release does not affect any rights
or obligations of the parties under the Termination Agreement in respect of the
Municipal Auditorium or the restoration work specifically set forth in the
Termination Agreement. The RDC and the City have no claim for damages as a
result of the termination of the Basin Street Casino Lease.
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The Termination Agreement required HJC to restore the Municipal Auditorium
to its previous use whether or not the Effective Date occurred. In accordance
with the terms of the Termination Agreement, HJC deposited $3,475,399 into
escrow on October 3, 1996 to fund the restoration work and commenced and
substantially performed the restoration work. Pursuant to an assignment and
assumption agreement dated as of September 9, 1997, HJC assigned, and the City
and the RDC assumed, all of HJC's rights regarding performance of all remaining
restoration work under the Termination Agreement, thus releasing HJC from any
obligation under the Termination Agreement to complete and fund the remaining
restoration work at the Municipal Auditorium. In addition, in connection with
such assignment and assumption, certain funds on deposit in the escrow account
were returned to HJC and all remaining rights and obligations of HJC with
respect to the escrow account were assigned and transferred to the City and the
RDC.
AMENDED AND RESTATED CONSTRUCTION LIEN INDEMNITY AGREEMENT
JCC and HOCI expect to enter into the Amended and Restated Construction Lien
Indemnity Obligation Agreement (the "Amended and Restated Construction Lien
Indemnity Agreement") pursuant to which any expenditures made by HOCI under any
indemnity agreement as may be required to be delivered to the title insurers
regarding mechanic's liens claiming priority to the Bank Loans, the New Notes or
the New Contingent Notes, will be deemed unsecured limited recourse indebtedness
("Indemnity Obligations") of JCC due and payable on demand. The Indemnity
Obligations will bear interest at the rate of 8%. The repayment of the Indemnity
Obligations will generally be treated as a restricted payment under the
Indentures and payments in excess of those permitted to be paid under the
Indentures or the Bank Loans will be subordinate to the repayment of the Notes
and the Bank Loans. HOCI will not receive a fee for entering into the Amended
and Restated Construction Lien Indemnity Obligation Agreement.
HET/JCC AGREEMENT
JCC expects to enter the JCC/HET Agreement with HET and HOCI, to be
effective upon execution and delivery by the parties thereto and the occurrence
of the Effective Date of the Plan of Reorganization, under which HET and HOCI
will provide a Minimum Payment Guaranty for the benefit of the LGCB to assure
payment of the Minimum Payment, subject to renewal or early termination in
accordance with the terms of the HET/JCC Agreement. Any drawing on a Minimum
Payment Guaranty provided by HET or HOCI will bear interest at the Tranche A-3
interest rate. See "--Bank Loans."
HET and HOCI will commit to provide a Minimum Payment Guaranty through the
COC Fiscal Year ending March 31, 2004; provided that a Minimum Payment Guaranty
will not renew for any of the COC Fiscal Years beginning April 1, 2000, 2001,
2002 or 2003 if: (i) there has been a JCC bankruptcy or a cessation of Casino
operations; (ii) there are any unpaid guarantee fees (other than fees deferred
as agreed in the HET/JCC Agreement); (iii) there has been a failure to pay the
Minimum Payment; (iv) in the case of the renewal of the Minimum Payment Guaranty
for the COC Fiscal Year beginning April 1, 2000, the project has failed to
generate positive Consolidated EBITDA for the period of operations ending
January 31, 2000, provided, however there will be no Consolidated EBITDA test
for the period of operations ending January 31, 2000 if such period of
operations commenced after August 1, 1999; (v) in the case of the renewal of the
Minimum Payment Guaranty for the COC Fiscal Years beginning April 1, 2001, 2002
and 2003, the project has failed to generate positive Consolidated EBITDA as of
the 12 month period ending November 30 of the prior calendar year in an amount
equal to $15 million as of the 12 month period ending November 30, 2000, $20
million as of the 12 month period ending November 30, 2001, and $25 million as
of the 12 month period ending November 30, 2002; (vi) HET, HOCI or the Manager
or any of HET's affiliates has been determined to be unsuitable; (vii) the
Manager has been removed as manager of the Casino; (viii) the Amended and
Renegotiated Casino Operating Contract has been terminated (ix) JCC has breached
certain covenants in the HET/JCC Agreement; or (x) an Excusable Temporary
Cessation of Operations has occurred and is continuing. For purposes of clauses
(iv) and
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(v) above Consolidated EBITDA will mean operating income determined according to
generally accepted accounting principles, but will not include any extraordinary
non-cash items such as the write down of assets or pre-opening expenses.
With respect to clause (iv) of the preceding paragraph regarding the renewal
of the Minimum Payment Guaranty for the COC Fiscal Year beginning April 1, 2000,
if an Excusable Temporary Cessation of Operations occurs, the Minimum Payment
Guaranty will automatically renew if the Casino's failure to generate positive
EBITDA for the period of operations ending January 31, 2000 is solely the result
of an Excusable Temporary Cessation of Operations and but for the Excusable
Temporary Cessation of Operations the applicable EBITDA test would have been
met. To determine whether the Casino would have generated positive EBITDA in the
absence of an Excusable Temporary Cessation of Operations for the period of
operations ending January 31, 2000, it will be assumed that the Casino would
have generated EBITDA for each day of any period of time the Casino was closed
due to an Excusable Temporary Cessation of Operations in an amount equal to the
average daily EBITDA generated during the 30 days prior to such period of time
the Casino was closed due to an Excusable Temporary Cessation of Operations.
With respect to clause (v) of the second preceding paragraph regarding the
renewal of the Minimum Payment Guaranty for the COC Fiscal Years beginning April
1, 2001, 2002, and 2003 if an Excusable Temporary Cessation of Operations
occurs, the Minimum Payment Guaranty will automatically renew if the Casino's
failure to generate EBITDA for the 12 month period ending November 30 of the
prior calendar year in an amount equal to $15 million as of the 12 month period
ending November 30, 2000, $20 million as of the 12 month period ending November
30, 2001, and $25 million as of the 12 month period ending November 30, 2002 is
solely the result of an Excusable Temporary Cessation of Operations; provided
that (i) such $15 million, $20 million and $25 million, EBITDA tests,
respectively, will be reduced pro rata for any period of time the Casino was
closed due to an Excusable Temporary Cessation of Operations during the
applicable 12 month period and (ii) the Minimum Payment Guaranty will
automatically expire and not renew if any such reduced EBITDA tests are not met.
An "Excusable Temporary Cessation of Operations" occurs if any of the
following circumstances occurs, to the extent and only for such time that it
causes temporary closure or temporary cessation of operations of the Casino
beyond the reasonable control of JCC, and further provided that the Casino
Operator diligently and in good faith seeks to reopen the Casino and to
recommence Casino operations: (a) strikes, lockouts, inability to procure
materials or failure of power; (b) arbitrary or capricious State, local or
municipal governmental action (but in no event will an Excusable Temporary
Cessation of Operations pursuant to this clause (b) exceed a period of six
months); (c) acts of God, hurricanes, floods, sinkholes, fires and other
casualties, earthquakes, epidemics, or quarantine; (d) acts of a public enemy,
acts of war, terrorism, blockades, insurrections, riots, civil disturbances,
governmental preemption in connection with a national emergency, or national or
international calamities; (e) the entry of a judgment, order or ruling in
litigation not filed by JCC or any affiliates of JCC and which judgment, order
or ruling was not entered substantially as the result of the fault of JCC or any
affiliates of JCC and which judgment, order or ruling restrains or substantially
interferes with operations of the Casino; (f) any action by the legislature or
any governmental agency the result of which is that gaming as currently proposed
to be conducted at the Casino is materially diminished; (g) any other causes
related to or arising out of the causes stated in subsections (a) through (g)
above beyond the reasonable control of JCC (excluding any bankruptcy of JCC or
failure of JCC to obtain financing or to pay its financial obligations as they
come due) and not substantially the result of the fault of JCC; and (h) any
other cause which the LGCB in its sole discretion formally determines to be an
Excusable Temporary Cessation of Operations.
Commencing with the COC Fiscal Year beginning April 1, 2001, upon 90 days
written notice prior to the first day of the respective COC Fiscal Year, JCC may
cancel the commitment of HET and HOCI to renew the HET/JCC Agreement for the COC
Fiscal Year beginning April 1, 2001 upon payment of a termination fee of $1
million in cash and may cancel the commitment of HET and HOCI to renew the
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HET/JCC Agreement for the COC Fiscal Years beginning April 1, 2002 and 2003
without any fee. Notwithstanding any other provision hereof, JCC will be
restricted from terminating the HET/JCC Agreement unless JCC has obtained a
replacement guaranty or letter of credit which meets the requirements of the
Amended and Renegotiated Casino Operating Contract and which does not result in
increased cost to JCC (after giving effect to payment to HET and HOCI of the
termination fee, if applicable), the Amended and Renegotiated Casino Operating
Contract no longer requires JCC to provide a guaranty or letter of credit, or
the LGCB waives the requirement that JCC provide a guaranty or letter of credit.
HET and HOCI, collectively, will receive a $6 million per annum guaranty fee
for the COC Fiscal Years ending March 31, 2000 and 2001 and a $5 million per
annum guaranty fee for the COC Fiscal Years ending March 31, 2002, 2003 and
2004, all payable quarterly. HET and HOCI, collectively, will receive a pro rata
fee based on an annual fee of $6 million for any partial COC Fiscal Year ending
March 31, 1999 or for the COC Fiscal Year ending March 31, 2000 if it is a
partial COC Fiscal Year. HET and HOCI will not receive a guaranty fee for any
COC Fiscal Year in which a Minimum Payment Guaranty is not provided and will
repay to JCC any guaranty fee previously advanced to it in respect of such COC
Fiscal Year. If Consolidated EBITDA is less than $28.5 million for the 12 month
reporting period ending one month prior to each semi-annual New Note interest
payment date beginning with the fourth year after the Effective Date, the
guaranty fee to HET and HOCI will be deferred, Fixed Interest on the New Notes
will be paid in kind, Management Fees will be deferred and bank principal
amortization will be deferred. JCC's obligation to pay the per annum guaranty
fee and any termination fee to HET and HOCI and to reimburse HET and HOCI for
any drawings (including interest thereon) by the State under any Minimum Payment
Guaranty will be secured by a first lien on substantially all the assets of JCC
(except the Amended and Renegotiated Casino Operating Contract and the Gross
Revenue Share Payments), JCC Holding, JCC Development, CP Development and FP
Development.
Pursuant to the HET/JCC Agreement, JCC will execute a mortgage, security
agreement and assignment of rents providing HET and HOCI a first priority lien
on substantially all of the assets of JCC (except the Amended and Renegotiated
Casino Operating Contract and the Gross Revenue Share Payments), JCC Holding,
JCC Development, CP Development and FP Development. The HET/JCC Agreement will
contain covenants in favor of HET and HOCI (i) requiring JCC to maintain
insurance, pay taxes and impositions, repair and maintain the Casino, and keep
the lease in effect, and (ii) on terms and conditions to be agreed by the
parties, restricting indebtedness and liens by JCC and restricting dividends,
merger and asset disposition. Any successor guarantor in respect of the Minimum
Payment Guaranty may be secured by the first lien position of HET and HOCI,
subject to payment of any unpaid fees or obligations to HET and HOCI in respect
of the HET/JCC Agreement.
As explained above, by entering into the HET/JCC Agreement and providing a
Minimum Payment Guaranty, HET and HOCI are not obligated to provide a Minimum
Payment Guaranty for the entire term of the Amended and Renegotiated Casino
Operating Contract, but rather have proposed only to provide it for the period
and on terms and conditions specified in the HET/JCC Agreement. HET and HOCI
have expressly informed JCC, the State and the LGCB that they have not agreed to
renew a Minimum Payment Guaranty beyond March 31, 2004, or in any prior year in
which HET's and HOCI's obligation to furnish a Minimum Payment Guaranty does not
renew by the express terms of the HET/JCC Agreement. HET and HOCI have informed
the Debtors, JCC, the State and the LGCB that any decision HET and HOCI make
concerning whether to renew any Minimum Payment Guaranty or the HET/JCC
Agreement will be made in their sole discretion, and have informed JCC and the
Debtors that such decision will be made acting only in HET on HOCI's best
interests. The State and the LGCB, JCC and JCC Holding will acknowledge that (i)
HET and HOCI are not obligated to and have not given any assurances to the
Debtors, JCC, the State or the LGCB that they will renew the HET/JCC Agreement
beyond March 31, 2004, or renew any Minimum Payment Guaranty for any earlier
fiscal year in which HET's and HOCI's obligation to furnish a Minimum Payment
Guaranty does not renew under the express terms of the HET/JCC Agreement, (ii)
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HET and HOCI have the right to make any such renewal decision in their sole
discretion, and (iii) HET and HOCI need not consider the interests of any other
parties in making any such renewal decision, notwithstanding that HET and HOCI
are involved in a number of capacities in respect of JCC and JCC Holding. Upon
termination of the HET/JCC Agreement, JCC will be required to secure a
substitute guarantor to provide a Minimum Payment Guaranty or the Casino will be
unable to open under the terms of the Amended and Renegotiated Casino Operating
Contract. Such substitute guarantor may or may not be HET and/or HOCI or an
affiliate thereof and there can be no assurance that JCC will be able to locate
a substitute guarantor on satisfactory terms. A failure by JCC to cause to be
provided a Minimum Payment Guaranty before the first day of a new fiscal year
will result in a termination with no cure period of the Amended and Renegotiated
Casino Operating Contract. See "--Risk Factors--Non-Renewal of Minimum Payment
Guaranty."
DEVELOPMENT SERVICES AGREEMENT
DEVELOPMENT SERVICES FOR DEVELOPMENT PROPERTIES. JCC, JCC Development, CP
Development and FP Development expect to enter into a development services
agreement with HOCI (the "Development Services Agreement") pursuant to which
HOCI or an affiliate of HOCI will provide certain development services with
respect to the second floor of the Casino, the 3CP Property and the Fulton
Property (previously defined herein as the Development Properties), if requested
by JCC, JCC Development, CP Development, or FP Development and agreed to by
HOCI. The services which JCC, JCC Development, CP Development and FP Development
may request that HOCI or an affiliate of HOCI perform are: (i) researching and
investigating potential uses for the Development Properties; (ii) identifying
and exploring the professional qualifications of individuals and companies who
may be capable of performing services in connection with designing, determining
appropriate uses for and developing the Development Properties; (iii) assisting
in the evaluation of options as to the Development Properties; and (iv)
providing any other pre-development or development services or otherwise
assisting in or coordinating activities involved in the development of the
Development Properties (collectively the "Development Services").
FEES AND EXPENSES. If JCC, JCC Development, CP Development or FP
Development request that HOCI or an affiliate of HOCI perform any Development
Services and HOCI accepts such request, they will pay to HOCI or its affiliate
development service fees or reimbursements of costs and expenses at market rates
as agreed between the parties from time to time prior to HOCI or its affiliate
undertaking any Development Services.
INSURANCE AND INDEMNITY. JCC, JCC Development, CP Development and FP
Development are required to procure and maintain, at their sole expense,
insurance coverage as may be reasonably required by HOCI. JCC, JCC Development,
CP Development and FP Development will permit HOCI, at no expense to HOCI, to be
a named insured in all liability insurance carried by or on behalf of JCC, JCC
Development, CP Development and FP Development related to the Development
Properties, and to be a named or additional insured in all property insurance
carried in relation to physical loss or damage to all or any portion of any of
the Development Properties. JCC, JCC Development, CP Development and FP
Development are required to defend, indemnify and hold harmless HOCI and all
affiliates of HOCI from any liability in connection with the performance by HOCI
or any affiliates of HOCI of any and all of its obligations under the
Development Services Agreement.
TERM AND TERMINATION. Unless earlier terminated upon the written consent of
each of JCC, JCC Development, CP Development and FP Development and HOCI, the
term of the Development Services Agreement will end on the earlier of: (i) 30
days after written notice of termination from HOCI to JCC, JCC Development, CP
Development and FP Development; (ii) after the Transition Date, 30 days after
written notice of termination from JCC, JCC Development, CP Development and FP
Development to HOCI; or (iii) following a Flip Event (as defined herein), 30
days after written notice of termination from JCC, JCC Development, CP
Development and FP Development to HOCI.
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MANAGER SUBORDINATION AGREEMENTS
In addition to the Manager Subordination Agreement (RDC/City), the Manager
expects to enter into separate subordination agreements (the "Manager
Subordination Agreements") in favor of each of: (i) BTCo, as administrative
agent for the Bank Lenders (the "Administrative Agent"), and (ii) the Trustee
under the Indentures (collectively, the "Subordination Beneficiaries"). See
"--Amended Ground Lease--Amended Management Agreement" for a description of the
Manager Subordination Agreement (RDC/City).
SUBORDINATION. Pursuant to the subordination agreement between the Manager
and the Administrative Agent (the "Bank Lenders Subordination Agreement"),
payment by JCC of the Subordinated Obligations (as defined herein) is
subordinated to the prior payment in full in cash of all Senior Indebtedness (as
defined herein). "Subordinated Obligations" mean, without limitation, the
payment of any Management Fees or Termination Fees owing by JCC to the Manager
pursuant to the Amended Management Agreement and the right to receive or collect
any or all: (a) proceeds of condemnation awards, (b) compensation for revocation
of the Amended and Renegotiated Casino Operating Contract, (c) proceeds of JCC's
title insurance, property or hazard insurance, or other insurance proceeds, (d)
fair market value or other proceeds of JCC's assets, (e) damages or compensation
paid by the State, the LGCB, or any other government entity in connection with
prohibition of use for gaming purposes of the Casino, and (f) any and all other
payments and proceeds under the Amended Management Agreement; provided, however,
that the Lenders Subordinated Obligations do not include system fees, travel
fees and accounting fees, certain tax and insurance fees and other similar fees
and reimbursable expenses of the Manager, in each case to the extent that the
foregoing fees and expenses do not constitute compensation to the Manager for
managing the Casino. "Senior Indebtedness" means all obligations of JCC (1)
under the Credit Agreement and certain other credit documents, and (2) in
respect of any interest rate protection agreements with the Bank Lenders.
Pursuant to the subordination agreement between the Manager and the Trustee
under the Indenture for the Notes (the "Notes Subordination Agreement"), payment
by JCC of the Subordinated Obligations is subordinated to the prior payment in
full in cash of all Notes Obligations (as defined herein). "Notes Obligations"
means (a) the principal of, and premium, if any, and interest on the Notes, and
(b) all other obligations and indebtedness of JCC to the holders of the Notes
and/or to the Trustee or the collateral agent under that certain Intercreditor
Agreement entered into pursuant to the Plan of Reorganization between the
Company, JCC, the Bank Lenders and the Administrative Agent (the "Intercreditor
Agreement").
FORECLOSURE. Under the Bank Lenders and Notes Subordination Agreements, as
of the date (the "Succession Date") that (i) a Subordination Beneficiary takes
possession of or acquires a leasehold interest in the Casino, or succeeds to the
interests of JCC under the Amended Management Agreement or (ii) a receiver,
keeper or conservator (collectively, a "Receiver") of the Casino is appointed,
and at any time during a period ending on the date that is 180 days after the
Succession Date (the "Termination Date"), the Subordination Beneficiary will
have the right to terminate the Amended Management Agreement upon at least 120
days' prior written notice (the "Termination Notice") to the Manager and whether
or not any default then exists on the part of the Manager under the Amended
Management Agreement.
In addition to the termination right set forth in the immediately preceding
paragraph, on any date following (i) the Succession Date or (ii) the filing of
any foreclosure proceeding by a Subordination Beneficiary with respect to the
Casino, and at any time thereafter during the pendency of such foreclosure
(whether or not a Termination Date has occurred), such Subordination Beneficiary
will have the right to terminate the Amended Management Agreement by written
notice to the Manager to be effective as of the date of such notice and without
any other action on the part of such Subordination Beneficiary if an event of
default under the Amended Management Agreement has occurred, the applicable cure
periods have
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expired, and JCC has the right to terminate the Amended Management Agreement;
provided that such termination will not be effective for 45 days unless certain
conditions are met. A Subordination Beneficiary will also have the right to
terminate the Amended Management Agreement by written notice to the Manager to
be effective as of the date of such notice (i) if any time the Manager ceases to
be authorized to manage the Casino under the law and regulations of Louisiana
applicable to land-based gaming, (ii) if a casino management company other than
the Manager is appointed as Receiver, or (iii) if a casino management company
other than the Manager is appointed to manage the Casino as a result of any
order, decree, judgment or ruling of any court of competent jurisdiction;
provided that such termination will not be effective for 45 days unless certain
conditions are met.
If at the time of the giving of any Termination Notice or any termination
without notice pursuant to the immediately preceding paragraph, no default
exists on the part of the Manager under the Amended Management Agreement, the
Manager will be entitled to payment from JCC of the Termination Fee; provided
that (i) such payment will be subordinated to the prior payment in full of all
Senior Indebtedness and Notes Obligations, and (ii) non-payment of such
Termination Fee will have no effect on the effectiveness of any termination of
the Amended Management Agreement under the Bank Lenders or Notes Subordination
Agreements.
CURE PERIOD. Under the Bank Lenders and Notes Subordination Agreements, if
the Manager becomes aware of the existence of any event, act or omission by JCC
under the Amended Management Agreement which would give the Manager the right to
terminate the Amended Management Agreement, the Manager is required to give
written notice of such event, act or omission to the Subordination Beneficiaries
within five days after the Manager becomes aware of the existence of such event,
act or omission. Furthermore, the Manager is required to give the Subordination
Beneficiaries at least 45 business days' (the "Cure Period") prior written
notice of any proposed termination by the Manager of the Amended Management
Agreement, which notice must specify the basis for the termination and any
defaults then existing pursuant to the Amended Management Agreement. During the
Cure Period, JCC and/or the Subordination Beneficiaries may remedy the defaults
specified in the notice delivered pursuant to the preceding sentence and, if all
such defaults are cured during the Cure Period, the termination will not take
effect. Furthermore, (in the case of any non-monetary defaults) if any such
default is capable of being cured and a Subordination Beneficiary notifies the
Manager that such Subordination Beneficiary is proceeding to remedy the
defaults, but that the remedy will take longer than the Cure Period, the
termination will be delayed for so long as such Subordination Beneficiary is
proceeding to cure the default and such termination will not occur if the
defaults are cured. In the event that a default under the Management Agreement
cannot be cured without obtaining the legal right to possession of the Casino,
the Subordination Beneficiaries will cooperate with JCC and the Manager to the
extent reasonably feasible to enable JCC and the Manager to cure such default
and, upon request of a Subordination Beneficiary, the Manager will cooperate
with such Subordination Beneficiary to the extent reasonably feasible to enable
the Subordination Beneficiaries to cure such default.
TERMINATION. The Bank Lenders Subordination Agreement will terminate on the
first to occur of (i) the termination of the Credit Agreement and satisfaction
of all obligations to the Administrative Agent and the Lenders thereunder or
(ii) the termination of the Amended Management Agreement and satisfaction of all
obligations to JCC and the Manager under the Amended Management Agreement and
the obligations of the Manager under the Bank Lenders Subordination Agreement.
The Notes Subordination Agreement will terminate on the first to occur of
(i) the termination of the Indenture and satisfaction of all obligations to the
Note holders thereunder or (ii) the termination of the Amended Management
Agreement and satisfaction of all obligations to JCC and the Manager under the
Amended Management Agreement and all obligations of the Manager under the Notes
Subordination Agreement.
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REGULATION
LOUISIANA GAMING ACT
PERVASIVE GOVERNMENTAL REGULATION. The ownership and operation of the
Casino are subject to pervasive governmental regulation, including regulation by
the LGCB in accordance with the terms of the Gaming Act, the Rules and
Regulations, and prior to the Effective Date, the Casino Operating Contract, and
on and after the Effective Date, the Amended and Renegotiated Casino Operating
Contract (collectively, the "Casino Operating Contracts"). The LGCB is empowered
to regulate a wide spectrum of gaming and non-gaming related activities.
The Gaming Act and the Rules and Regulations, all of which are subject to
amendment or revision from time to time, establish significant regulatory
requirements with respect to gaming activities and the casino operator,
including, without limitation, requirements with respect to minimum accounting
and financial practices, standards for gaming devices and surveillance,
licensure requirements for vendors and employees, standards for credit extension
and collection, and permissible food services. Failure to comply with the Gaming
Act and the Rules and Regulations could result in disciplinary action, including
fines and suspension or revocation of a license or suitability. Certain
regulatory violations could also constitute an event of default under the Casino
Operating Contracts.
LGCB. The Gaming Act initially established the LEDGC as a special public
purpose corporation to regulate land-based gaming in Louisiana. In May 1996, a
law transferred responsibility for regulation of riverboat gaming and land-based
casino gaming from separate boards, one of which was the LEDGC, and substituted
in their place the LGCB. This single board, consisting of nine voting members
and two EX OFFICIO members, is empowered to regulate most forms of gambling in
the State, including the Casino. This law also authorizes the State Police to,
among other things, conduct investigations and audits of gaming license
applicants and to assist the LGCB in determining compliance with gaming laws and
regulations.
AUTHORITY TO ENTER INTO CASINO OPERATING CONTRACTS. The Gaming Act
authorized the LEDGC, among other things, to enter into a casino operating
contract with a casino operator for the conduct of casino gaming operations at a
single land-based gaming establishment, having at least 100,000 square feet of
usable space, to be located at a facility at the Rivergate site. The term of the
contract under the Gaming Act is not to exceed a total of 20 years with one
ten-year renewal option. The Gaming Act requires the Gross Gaming Revenue Share
Payments as minimum compensation payable to the LGCB by the casino operator from
gaming operations at the land-based casino. For a discussion of the compensation
arrangements in the Amended and Renegotiated Casino Operating Contract, see
"--Material Agreements-- Amended and Renegotiated Casino Operating
Contract--Terms, Fees and Impositions."
Under the Gaming Act, the gaming activities that may be conducted at the
official gaming establishment, subject to the rule-making authority of the LGCB,
include any banking or percentage game that is played with cards, dice or any
electronic, electrical or mechanical device or machine for money, property or
any thing of value, but exclude lottery, bingo, charitable games, raffles,
electronic video bingo, pull tabs, cable television bingo, wagering on dog or
horse races, sports betting or wagering on any type of sports contest or event.
Under the Plan of Reorganization and subject to certain approvals from the
LGCB, HJC and JCC expect to enter into the Amended and Renegotiated Casino
Operating Contract which will provide for alterations of the size and scope of
the Casino and a revised opening schedule for the Casino. See "--Material
Agreements--Amended and Renegotiated Casino Operating Contract." The Gaming Act
provides that the LGCB has the right but is not required to set aside or
renegotiate the provisions of a casino operating contract if the casino
operation is voluntarily or involuntarily placed in bankruptcy, receivership,
conservatorship or similar status. A law enacted during the State legislature's
special session in spring of 1996, purports to authorize the Governor by
executive order, subject to legislative approval, or the State legislature by
act or resolution, to set aside or order renegotiation or revocation of a casino
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operating contract when the casino operator is either voluntarily or
involuntarily placed in bankruptcy, receivership, conservatorship, or some
similar status. On March 16, 1998 the State Attorney General issued an opinion
that the LGCB has independent authority (without the necessity of any
legislative approval) to renegotiate and execute a renegotiated casino operating
contract. On March 20, 1998, the LGCB approved the Amended and Renegotiated
Casino Operating Contract, subject to, among other conditions, the condition
that the Louisiana Supreme Court render a final, non-appealable judgment that
the LGCB, acting on its own, is the proper party and has the legal authority to
enter into the Amended and Renegotiated Casino Operating Contract with HJC or
JCC on behalf of the State and the LGCB, without the specific approval of the
Governor or the State legislature. On May 15, 1998, the Louisiana Supreme Court
issued a decision confirming that the LGCB has the independent authority to
renegotiate and execute the Amended and Renegotiated Casino Operating Contract
without seeking gubernatorial or legislative approval. See "Risk
Factors--Uncertainty Regarding Gaming Regulation and Future Changes to the
Law--Uncertainty Regarding Regulation and Interpretation of the Gaming Act."
RULES AND REGULATIONS. Under the Gaming Act, the LGCB has broad
discretionary authority to regulate all aspects of the casino operator's
operations, including the power to adopt administrative rules and regulations
(previously defined herein as Rules and Regulations) as may be necessary to
carry out and implement its powers and duties, the conduct of gaming operations,
and any other matters necessary or desirable for the efficient and effective
operation of casino gaming or public convenience. The Gaming Act gives the LGCB
the power, among other things, to (i) investigate the qualifications of any
proposed gaming operator and each applicant for a license or permit, (ii)
investigate violations of the Gaming Act and any rules and regulations
promulgated thereunder, and any other incidents or transactions which it deems
appropriate, (iii) conduct hearings and proceedings concerning, and reviews and
inspections of, gaming operations and related activities, (iv) inspect and
examine all premises, and all equipment or supplies thereon, where gaming
activities are conducted or gaming devices or equipment are manufactured, sold,
distributed, and summarily seize and remove from such premises and impound any
equipment or supplies for the purpose of examination and inspection, (v) audit
the records of applicants and gaming operators respecting all revenues produced
by any gaming operations, (vi) issue interrogatories and subpoenas, and (vii)
monitor the conduct of all casino operators, licensees, permittees and other
persons having a material involvement directly or indirectly with a casino
operator.
ISSUANCE OF LICENSES AND PERMITS. Under the Gaming Act, the LGCB is
required to issue licenses or permits to certain persons associated with gaming
operations, including: (i) certain employees of the casino operator; (ii)
certain manufacturers, distributors and suppliers of gaming devices; (iii)
certain suppliers of goods or services; (iv) any person who furnishes services
or property to the casino operator under an arrangement pursuant to which the
person receives payments based on earnings, profits or receipts from gaming
operations; and (v) any other persons deemed necessary by the LGCB.
The securing of the requisite licenses and permits under the Gaming Act is a
prerequisite for conducting, operating or performing any activity regulated by
the LGCB or the Gaming Act. The Gaming Act provides that the LGCB has full and
absolute power to deny an application, or to limit, condition, restrict, revoke
or suspend any license, permit or approval, or to fine any person licensed,
permitted or approved for any cause specified in the Gaming Act or rules
promulgated by the LGCB. The Rules and Regulations provide that the LGCB may
take any of the foregoing actions with respect to any person licensed,
permitted, or approved, or any person registered, found suitable, or holding a
contract, for any cause deemed reasonable.
The Gaming Act provides that it is the express intent, desire and policy of
the legislature that no holder of the casino operating contract, applicant for a
license, permit, contract or other thing existing, issued or let as a result of
the Gaming Act shall have any right or action to obtain any license, permit,
contract or the granting of the approval sought except as provided for and
authorized by the Gaming Act. Any license, permit, contract, approval or thing
obtained or issued pursuant to the provisions of the Gaming Act has been
expressly declared by the legislature to be a pure and absolute revocable
privilege
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and not a right, property or otherwise, under the constitutions of the United
States or of the State. The Gaming Act also provides that no holder acquires any
vested right therein or thereunder.
SUITABILITY. Under the Gaming Act, no person is eligible to receive a
license or enter into a contract to conduct casino gaming operations unless,
among other things, the LGCB is satisfied the applicant is suitable. The Gaming
Act and the Rules and Regulations also require suitability findings for, among
others, the casino manager, anyone with a direct ownership interest or the
ability to control the casino operator or casino manager (as well as their
intermediary and holding companies), certain officers and directors of such
companies, and certain employees of the casino operator. Suitability requires a
demonstration by each applicant, by clear and convincing evidence, that, among
other things, (i) the applicant is a person of good character, honesty and
integrity; (ii) the applicant's prior activities, criminal record, if any,
reputation, habits and associations do not pose a threat to the public interest
of the State or the regulation and control of casino 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 the business and financial
arrangements incidental thereto; and (iii) the applicant is capable of and is
likely to conduct the activities for which a license or contract is sought. In
addition, to be found suitable for purposes of the Casino Operating Contracts,
the casino operator must demonstrate by clear and convincing evidence that: (i)
it has or guarantees acquisition of adequate business competence and experience
in the operation of casino gaming operations; (ii) the proposed financing is
adequate for the proposed operation and is from suitable sources; and (iii) it
has or is capable of and guarantees the obtaining of a bond or satisfactory
financial guarantee of sufficient amount, as determined by the LGCB, to
guarantee successful completion of and compliance with the Casino Operating
Contracts or such other projects that are regulated by the LGCB.
Under the Gaming Act and Rules and Regulations, the LGCB can also require
that the holder of debt securities issued by the casino operator or its
affiliated companies and the holders of equity interests in holding companies of
the casino operator be found suitable. Any person holding or controlling a five
percent or more equity interest in a non-publicly traded, direct or indirect,
holding company of the casino operator or casino manager or ten percent or more
equity interest in a publicly traded direct or indirect holding company of the
casino operator or casino manager, is presumed to have the ability to control
the casino operator or casino manager, as the case may be, requiring a finding
of suitability, unless, among other things: (i) the presumption is rebutted by
clear and convincing evidence; or (ii) the holder is one of several specified
passive institutional investors holding a stated minimum amount of assets and,
upon request, such institution files a certification stating that it does not
have an intention to influence the affairs of the casino operator or casino
manager. To the extent any holder of the securities of the Company fails to
satisfy such requirement, such holder may be required to obtain certain
qualifications or approvals from the LGCB to continue to hold such securities.
Any failure to obtain such qualifications or approvals may, by virtue of the
requirements imposed on the Company, subject such security holders to certain
requirements, limitations or prohibitions, including a requirement that such
security holders liquidate their securities at a time or at a cost that is
otherwise unfavorable to such security holders.
Under the Gaming Act and Rules and Regulations, the LGCB has the authority
to deny, revoke, suspend, limit, condition, or restrict any finding of
suitability. Under the Rules and Regulations, the LGCB also has the authority to
take further action on the grounds that the person found suitable is associated
with, or controls, or is controlled by, or is under common control with, an
unsuitable or disqualified person. Under the Rules and Regulations and the
Casino Operating Contracts, if at any time the LGCB finds that any person
required to be and remain suitable has failed to demonstrate suitability, the
LGCB may, consistent with the Gaming Act and the Casino Operating Contracts,
take any action that the LGCB deems necessary to protect the public interest.
Under the Rules and Regulations, however, if a person associated with the casino
operator or an affiliate, intermediary, or holding company thereof has failed to
be found or remain suitable, the LGCB shall not declare the casino operator or
its affiliate, intermediary, or holding company, as the case may be, unsuitable
as a result if such companies comply with the conditional licensing provisions,
take immediate good faith action and comply with any order of the LGCB
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to cause such person to dispose of its interest, and, before such disposition,
ensure that the disqualified person does not receive any ownership benefits. The
above safe harbor protections do not apply if: (i) the casino manager has failed
to remain suitable, (ii) the casino operator is engaged in a relationship with
the unsuitable person and had actual or constructive knowledge of the wrongdoing
causing the LGCB's action, (iii) the casino operator is so tainted by such
person that it affects the suitability of the casino operator under the
standards of the Gaming Act, or (iv) the casino operator cannot meet the
suitability standard contained in the Gaming Act and the Rules and Regulations.
On July 15, 1994, the LEDGC entered into the Casino Operating Contract with
HJC, which sets forth the general parameters of, among other things, the
location and design and construction requirements of the Basin Street Casino and
the Casino, the agreed upon compensation requirements due to the LEDGC from
gaming operations, the requirements for financing the Casino, and other
contractual and regulatory requirements. In connection with the execution of the
Casino Operating Contract, the LEDGC found HJC, HNOIC and certain related
intermediary and holding companies and certain of their officers and directors
to be suitable. In addition, at the time of the issuance of the Old Bonds, the
LEDGC issued certain orders concerning the suitability of the holders thereof.
Since the filing of the Chapter 11 cases, neither the LEDGC nor the LGCB has
informed HJC or any other person required to be found suitable that it is taking
action to revoke any finding of suitability in accordance with the Gaming Act or
Rules and Regulations, nor has the LEDGC or the LGCB given any notice of default
under the Casino Operating Contract.
JCC cannot operate the Casino unless and until certain persons and entities
required to be found suitable are found suitable by the LGCB. Such persons and
entities include, without limitation, JCC Holding, JCC, the Manager and certain
members, officers and directors of such companies and any other persons having
the ability to significantly affect the affairs of thereof. See "Risk
Factors--Uncertainty Regarding Gaming Regulation and Future Changes to the
Law--Suitability of JCC and Affiliated Persons." Although HJC, the Manager and
certain of their respective partners, shareholders, officers and directors were
previously found suitable after extensive background investigations by the
LEDGC, the LGCB (and its investigatory arm, the State Police), has not issued
any suitability findings. The suitability process has commenced and the Chairman
of the LGCB has stated that the process is targeted to conclude in October 1998.
JCC Holding, JCC, the Manager and all other persons and entities required to be
found suitable, including those already found suitable, will have an ongoing
obligation to maintain their suitability throughout the term of the Amended and
Renegotiated Casino Operating Contract. In addition, certain rulings, approvals
and findings of suitability, including, findings of suitability with respect to
any directors or officers of JCC Holding, JCC the Manager and any persons having
the ability to significantly affect the affairs thereof, and certain other
approvals relating to the modified design of the Casino and the revised opening
schedule are conditions precedent to the occurrence of the Effective Date of the
Plan of Reorganization.
TRANSFERS. The sale, transfer, assignment, or alienation of a casino
operating contract, or an interest therein, in violation of the Gaming Act is
prohibited. The LGCB may approve the sale, transfer, assignment, or any grant
the approval subject to conditions imposed by the LGCB.
Under the Gaming Act, the sale, transfer, assignment, pledge, alienation,
disposition, public offering, or acquisition of securities that results in one
person's owning 5% or more of the total outstanding shares issued by the casino
operator is void as to such person without prior approval of the LGCB. Failure
to obtain prior approval by the LGCB of a person acquiring 5% or more of the
total outstanding shares of a licensee or 5% or more economic interest in the
casino operator is grounds for cancellation of the casino operating contract or
license suspension or revocation. For a discussion of certain transfer
restrictions with respect to certain interests in the casino operator, the
Casino Manager, or certain affiliates, see "Material Agreements--Amended and
Renegotiated Casino Operating Contract--Transfer Restrictions" and
"--Financing."
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PRIORITY TO LOUISIANA RESIDENTS AND BUSINESSES; MINORITY EMPLOYMENT The
Gaming Act obligates the casino operator to give preference and priority to
Louisiana residents, laborers, vendors and suppliers, except when not reasonably
possible to do so without added expense, substantial inconvenience or sacrifice
in operational efficiency. The Gaming Act further obligates the casino operator
to give preference and priority to Louisiana residents in considering applicants
for employment and requires that no less than 80% of the persons employed by the
casino operator be Louisiana residents for at least one year immediately prior
to employment. The Gaming Act provides that if any contract or other agreement
to which the casino operator is a party contains a provision or clause
establishing a different percentage or requiring more than 50% of the persons
employed to be residents of any one parish, any such provision or clause shall
be null and void and unenforceable as against public policy.
The Gaming Act requires that the casino operator and/or LGCB adopt written
policies, procedures, and regulations to allow the participation of businesses
owned by minorities in all design, engineering, and construction contracts
and/or projects to the maximum extent practicable. The Rules and Regulations
provide that the casino operator and the casino manager must take the foregoing
actions with respect to all design, engineering, construction, banking and
maintenance contracts and any other projects initiated by the casino operator or
casino manager. The Gaming Act further requires the casino operator, as nearly
as practicable, to employ minorities consistent with the population of the
State. The Rules and Regulations extend this obligation to the casino manager as
well. The Rules and Regulations provide that if at any time the LGCB shall
conclude that the casino operator or the casino manager is conducting itself in
a manner inconsistent with the requirements of State law or the Rules and
Regulations, the LGCB may take enforcement action, including fines and the
imposition of a plan that the LGCB determines meets the objectives of the Gaming
Act and the Rules and Regulations.
LIMITS ON RESTAURANT, LODGING, RETAIL OPERATIONS. The Gaming Act provides
that the casino operator shall not: (i) offer seated restaurant facilities with
table food service for patrons, but may offer limited cafeteria style food
services for employees and patrons as provided by rule of the LGCB, provided,
however, that no food may be given away or subsidized within the official gaming
establishment by the casino operator or any licensee, and no facility for food
service shall exceed seating for 250 persons (by rule and regulation, LGCB is
empowered to allow the Casino operator to contract with local food preparers to
provide food at the restaurants at the Casino); (ii) offer lodging in the
official gaming establishment, nor engage in any practice or enter into any
business relationships to give any hotel, whether or not affiliated with the
casino operator, any advantage or preference not available to all similarly
situated hotels; (iii) engage in such activities as are prohibited by the casino
operating contract; (iv) engage in the sale of products that are not directly
related to gaming; or (v) cash or accept in exchange for the purchase of tokens,
chips or electronic cards an identifiable employee payroll check. Any contract
between the casino operator and any hotel or lodging facilities must be
submitted to the LGCB for approval prior to entering into the contract.
PUBLIC RECORDS. The Gaming Act provides that all records of the LGCB are
public records and available for public inspection, subject to certain
exceptions, and may, in any event, be made available to other governmental
entities or regulators, under certain circumstances.
CASINO SUPPORT SERVICES CONTRACT. The Gaming Act provides that the LGCB
shall annually enter into a casino support services contract with the City of
New Orleans in order to compensate it for the cost to it for providing support
services resulting from the operation of the official gaming establishment and
the activities therein. The amount of the contract is to be determined by
negotiation and agreement between the LGCB and the City of New Orleans, subject
to approval by the State legislature.
RIGHTS OF HOLDERS OF SECURITY INTERESTS. The Gaming Act authorizes the LGCB
to provide for the protection of the rights of holders of security interests in
both immovable property and movable property used in or related to casino gaming
operations ("Gaming Collateral") and to provide for the continued operation of
the official gaming establishment during the period of time that a lender, as a
holder of a
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security interest, seeks to enforce its security interest in such property. In
connection therewith, the Gaming Act provides that the holder of a security
interest in Gaming Collateral may receive payments from the owner or lessee of
such property out of the proceeds of casino gaming operations received by the
owner or lessee, and, the holder of the security interest may be exempt from the
licensing requirements of the Gaming Act with respect to such payments if the
transaction(s) giving rise to such payments have been approved in advance by the
LGCB and complies with all rules and regulations of the LGCB and the LGCB
determines the holder to be suitable.
Under the Gaming Act, a holder of a security interest in a gaming device who
asserts the right to ownership or possession of the encumbered property may be
granted a one-time, nonrenewable, provisional contract for a maximum of 90 days
for the sole purpose of acquiring ownership or possession for resale to a
licensed or approved person, all in accordance with rules and regulations to be
promulgated by the LGCB. The Rules and Regulations do not yet include a rule and
regulation on this provision. The license or contract shall not authorize the
holder to operate the gaming device or to utilize the property in gaming
activities.
If the holder of a security interest in immovable property comprising the
official gaming establishment wishes to continue the operation of the official
gaming establishment during and after the filing of a suit to enforce the
security interest, the Gaming Act provides that the holder of the security
interest must name the LGCB as a nominal defendant in such suit and request the
appointment of a receiver from among the persons on a list maintained by the
LGCB. Upon proof of the debtor's default under the security instrument and the
holder's right to enforce the security interest, the court shall appoint a
person from the LGCB's list as a receiver of the official gaming establishment.
Upon appointment of the receiver, the Gaming Act requires the receiver to
furnish a fidelity bond in favor of the security interest holder, the owner or
lessee of the official gaming establishment and the LGCB in an amount to be set
by the court after consultation with the LGCB and all parties. The Gaming Act
requires the LGCB to issue to the receiver a one-time, nonrenewable, provisional
contract to continue gaming operations until the receivership is terminated. The
receiver is considered to have all the rights and obligations of the casino
operator under the casino operating contract. The holder of the security
interest provoking the appointment of a receiver under the Gaming Act is
required to pay the cost of the receiver's bond and the cost of operating the
official gaming establishment or gaming operator during the term of receivership
to the extent that such costs exceed available revenues, in accordance with the
rules and regulations of the LGCB. The Gaming Act further provides that the fees
of the receiver and the authority for expenditures of the receiver are to be
established by rules and regulations of the LGCB.
The Gaming Act provides that a receivership must terminate upon: (i) the
sale of the property subject to receivership to a duly approved or authorized
person; (ii) the payment in full of all obligations due to the holder of the
security interest in the property subject to the receivership; (iii) an
agreement for termination of the receivership signed by the holder of the
security interest and the debtor, and approved by the LGCB and the court; or,
(iv) the lapse of five years from the date of the initial appointment of the
receiver. Under the Gaming Act, a receivership may also be terminated by notice
from the holder of the security interest who provoked the receivership addressed
to the court and the LGCB of its intention to withdraw its financial support of
the receivership at a specified time not less than 90 days from the date of the
notice. In the event of such notice, the Gaming Act provides that the holder of
the security interest giving the notice will not be responsible for any costs or
expenses of the receivership after the date specified in the notice; except for
reasonable costs and fees of the receiver in concluding the receivership, and
the costs of a final accounting.
The Gaming Act provides that no rule or regulation and no provision in a
contract executed by the LGCB pursuant to its authority to protect the holders
of security interests in Gaming Collateral shall be the basis for any cause of
action in contract or in tort against the State or the LGCB, its board of
directors or its agents, attorneys or employees.
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STATE LEGISLATION
Because legalized gaming is a relatively new industry in the State, there
has been significant attention by the State legislature over the past few years
to gaming related bills dealing with a wide range of subjects that could impact
the Casino project. At various times, bills have been introduced to, among other
things, constitutionally and/or legislatively repeal all forms of gaming
(including the land-based casino), increase taxes on casinos, limit credit that
may be extended by casinos and limit days and hours of operations. See "--Risk
Factors--Uncertainty Regarding Gaming Regulation and Future Changes to the Law."
In March 1996, the Governor of the State called a special session of the
State legislature to consider a number of topics, including topics relating to
the Casino. Several laws were enacted as a result of the special session which
have affected the formulation of the Plan of Reorganization and the rights to
operate the Casino under the Gaming Act and the Casino Operating Contracts.
One such law called for the Local Option Election to decide, on an
item-by-item basis, whether riverboat gaming, video poker gaming and in Orleans
Parish, the land-based casino, should be permitted to operate in the parish. On
November 5, 1996, voters in Orleans Parish elected by approximately a two-to-one
margin to permit land-based casino gaming in that parish. At the same time,
voters in Orleans Parish elected to authorize both riverboat gaming and video
poker gaming in Orleans Parish. See "Risk Factors-- Uncertainty Regarding Gaming
Regulation and Future Changes to the Law--Uncertainty and Impact of Future
Legislation."
Another such law purports to amend the Gaming Act to provide the State and
all of its subdivisions (including the LGCB) with immunity from suit and
liability for any action or failure to act on the part of the State or any of
its political subdivisions (including the LGCB). See "--Risk Factors--State
Immunity for Breach of Contract." It also purports to authorize the Governor by
executive order, subject to legislative approval, or the State legislature by
act or resolution, to set aside or order renegotiation or revocation of a casino
operating contract when the casino operator is either voluntarily or
involuntarily placed in bankruptcy, receivership, conservatorship, or some
similar status. See "Risk Factors--Uncertainty Regarding Gaming Regulation and
Future Changes to the Law--Uncertainty Regarding Regulation and Interpretation
of the Gaming Act."
Another law, among other things, purports to retroactively amend the Gaming
Act: (i) to state that the conduct of gaming operations upon riverboats in
accordance with the provisions of the Riverboat Act or otherwise while upon a
designated waterway while temporarily at dockside does not constitute the
authorization of additional land-based casino gaming operations which relieves
the operator of the Casino of the obligation to pay compensation to the LGCB;
and (ii) to provide that governmental inaction which results in the operation of
another land-based casino in Orleans Parish will not relieve the operator of the
Casino of the obligation to pay compensation to the LGCB. This law also purports
to provide that in the event of litigation between the operator of the Casino
and the State or any of its political subdivisions (including the LGCB), the
operator of the Casino must continue to make all payments to the State and any
of its political subdivisions (including the LGCB) as required by law during the
pendency of such litigation, and that any failure to make the required payments
will render the operator of the Casino unsuitable. See "Risk
Factors--Uncertainty Regarding Gaming Regulation and Future Changes to the
Law--Uncertainty Regarding Regulation and Interpretation of the Gaming Act."
Because the Amended and Renegotiated Casino Operating Contract will create
material rights in JCC with respect to the Casino, it is important that JCC be
clearly entitled to bring an action to compel specific performance or any other
remedy permitted or provided by law in the event the LGCB breaches the contract
and fails to cure such breach. However, because of the legislation described
above, there can be no assurance that in the event JCC seeks to enforce its
rights under the Amended and Renegotiated Casino Operating Contract, a court
would allow the suit to proceed.
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In May 1996, a law transferred responsibility for regulation of riverboat
gaming and land-based casino gaming from separate boards, one of which was the
LEDGC, and substituted in their place the LGCB. This single board, consisting of
nine voting members and two EX OFFICIO members, is empowered to regulate most
forms of gambling in the State, including the land-based casino. Although the
existing Rules and Regulations promulgated by LEDGC remain in force and effect
at this time, the LGCB is empowered to repeal such Rules and Regulations and to
promulgate its own Rules and Regulations. This law also authorizes the State
Police to, among other things, conduct investigations and audits of gaming
license applicants and to assist the LGCB in determining compliance with gaming
laws and regulations. JCC has been advised that the LGCB intends to promulgate a
number of its own Rules and Regulations after the Effective Date. See "Risk
Factors--Uncertainty Regarding Gaming Regulation and Future Changes to the
Law--Uncertainty Regarding Regulation and Interpretation of the Gaming Act."
In 1997, the State legislature authorized the use of slot machines at race
tracks in three parishes in the State (but not Orleans Parish) subject to a
referendum in each such parish to approve such use of slot machines. Two
parishes approved the use of slot machines at race tracks, but the State
legislature's authorization is subject to further legislative action on fees and
taxes. Legislation to impose such fees and taxes was introduced in the 1998
fiscal session of the State legislature, but failed to receive legislative
approval. Future consideration of this issue is likely by the State legislature.
Bills and resolutions to repeal the authorization for a land-based casino or
to instruct or urge the LGCB not to execute the Amended and Restated Casino
Operating Contract were introduced in the State House of Representatives and the
State Senate during 1998 but were not enacted. Additionally, two bills were
pre-filed in the State House of Representatives for consideration during the
State legislature's 1999 regular session which begins March 1999. If passed, the
first bill would repeal the Gaming Act in its entirety and the second would
amend the Gaming Act to broaden the food service restrictions applicable to the
Casino and all parts of any connecting structure or building. See "--Risk
Factors--Uncertainty Regarding Gaming Regulation and Future Changes to the
Law--Uncertainty of and Impact of Future Legislation" and --Limits on
Restaurants, Lodging, Retail Operations and Entertainment."
FEDERAL REGULATION
In August 1996, the President signed into law a bill that creates a federal
commission to examine the rapid growth of the gambling industry and its impact
on American society. The law creates a nine-member National Commission to study
the economic and social impact of gaming and report its findings to Congress and
the President. The National Commission is required by the enabling legislation
to issue a report containing its findings and conclusions, together with
recommendations of the National Commission for legislation and administrative
actions, within two years after the date on which it held its first meeting,
which occurred on June 20, 1997. Any recommendations which may be made by the
National Commission could result in the enactment of new laws or the adoption of
new regulations which could adversely impact the gaming industry in general and
the Company in particular. The Company is unable at this time to determine what
recommendations, if any, the National Commission will make, or the ultimate
disposition if any recommendations the National Commission may make.
BANK SECRECY ACT
Similar to banks and other financial institutions, casinos are required to
monitor and report currency receipts and disbursements in excess of a certain
limit to the United States Department of the Treasury. Under amendments recently
adopted by the Treasury, casinos must obtain and document customer
identification data for all currency transactions above $10,000. These
requirements impose record keeping requirements on the Company which may
increase its overall cost of operations.
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ZONING AND LAND USE
The Proponents have obtained certain conditional use approvals from the City
for the Casino and the parking facilities for the Casino. Certain of such
approvals, however, are subject to further review and additional approvals may
be required. Although JCC expects to obtain all required conditional use
approvals for the Casino and its operations, no assurances can be given that JCC
will receive the required approvals.
Because the Casino does not comply with all requirements of the City's
Zoning Ordinance, the Proponents have requested and received a number of waivers
from the City Council. Some uncertainty exists, however, as to the City
Council's authority to grant such waivers. In addition, the Zoning Ordinance may
be subject to differing interpretations and, depending upon the interpretation,
certain required waivers may not be requested or granted. Accordingly, no
assurances can be given that the Casino will comply with the Zoning Ordinance in
all material respects. Failure to comply with the Zoning Ordinance could delay
or prevent the construction or opening of the Casino or cause the Casino to
cease operations once opened and therefore would have a material adverse effect
on the Company. See "--Risk Factors-- Ability to Commence Operations as
Scheduled--Zoning and Land Use."
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ITEM 2. FINANCIAL INFORMATION
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data for HJC has
been derived from the historical financial information of HJC. The selected
unaudited pro forma consolidated financial data for JCC Holding illustrate the
estimated effects of the proposed Plan of Reorganization. The pro forma
consolidated results of operations are based on the HJC historical statement of
operations for the applicable period and assume the Plan of Reorganization was
consummated on October 31, 1998. The pro forma consolidated balance sheet data
is based on the June 30, 1998 balance sheet of HJC and assumes the Plan of
Reorganization was consummated on that date. The unaudited pro forma
consolidated financial data do not purport to represent the Company's results of
operations or financial position had the Company's reorganization been effective
for any periods indicated and do not purport to project the Company's results of
operations and financial position for any future periods. The selected
historical and pro forma consolidated financial data should be read in
conjunction with the related notes, HJC's historical consolidated financial
statements and related notes, the Unaudited Pro Forma Condensed Consolidated
Financial Information and related notes, and other information contained
elsewhere in the Registration Statement, including information set forth herein
under "--Management's Discussion and Analysis of Financial Condition and Results
of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL HISTORICAL
------------------------------------------------------- PRO FORMA --------------------
1993(A) 1994 1995 1996 1997 1997 1997 1998
----------- --------- --------- --------- --------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS
Revenues.................... $ 50 $ 91 $ 95,257 $ 1,661 $ 1,679 $ 1,679 $ 32 $ 50
Net loss.................... (6,302) (29,201) (301,560) (20,900) (21,244) (36,029) (8,290) (12,057)
Loss per share.............. N/A N/A N/A N/A N/A $ (3.60) N/A N/A
BALANCE SHEET
Total assets................ 87 665,391 364,480 359,469 354,417 354,669 354,569
Long-term debt.............. -- 510,000 -- -- -- -- --
Liabilities subject to
compromise................ -- -- 519,360 523,483 523,468 523,476 523,468
<CAPTION>
<S> <C>
PRO FORMA
1998
-----------
(IN THOUSANDS, EXCEPT PER SHAR
RESULTS OF OPERATIONS
Revenues.................... $ 50
Net loss.................... (20,048)
Loss per share.............. $ (2.00)
BALANCE SHEET
Total assets................ 331,000
Long-term debt.............. 210,464
Liabilities subject to
compromise................ --
</TABLE>
- ------------------------
(a) Includes operations for the period of November 29, 1993 (date of inception
of HJC) through December 31, 1993. HJC's financial statements for this
period include significant amounts for transactions incurred by its partners
prior to November 29, 1993.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In connection with the Plan of Reorganization, on the Effective Date, except
for the 3CP Property and the Fulton Property (which properties are not needed
for development and operation of the Casino), all the assets of HJC will vest in
JCC. Title to the 3CP Property and the Fulton Property will vest in CP
Development and FP Development, respectively. JCC, JCC Development, CP
Development and FP Development will be wholly-owned by JCC Holding. The Company
expects that all of HJC's rights in the Casino Operating Contract to operate a
land-based casino in Orleans Parish, Louisiana will revest in HJC on the
Effective Date, which Casino Operating Contract will then be modified by the
Amended and Renegotiated Casino Operating Contract and assigned to JCC in
accordance with applicable State law and the agreement of the parties thereto.
The Company also expects to succeed to HJC's interest in a long-term lease for
the site in the City designated by law for the Casino's development.
Pursuant to the Plan of Reorganization, the Class B Common Stock issued to
HCCIC on account of the New Equity Investment and other consideration will be
49.9% of the Common Stock issued on the Effective Date. Under certain settlement
agreements contemplated under the Plan of Reorganization, HCCIC will transfer
from its distribution (i) options to purchase a number of shares of Class B
Common Stock constituting in the aggregate 3.0% of the Common Stock issued on
the Effective Date to the shareholders of NOLDC, (ii) options to purchase a
number of shares of Class B Common Stock constituting in the aggregate up to
1.5% of the Common Stock issued on the Effective Date to FNBC, and (iii) a
number of its shares constituting 3.5% of the Common Stock issued on the
Effective Date to senior secured bondholders of Grand Palais. Also pursuant to
the Plan of Reorganization, shares of Class A Common Stock which constitute
37.1% of the Common Stock issued on the Effective Date will be distributed on a
pro rata basis to the Bondholders, and shares of the Class A Common Stock which
constitute 13% of the Common Stock issued on the Effective Date will be issued
to a disbursing agent for the benefit of Bondholders who consent to releases as
provided in the Plan of Reorganization. HCCIC will contribute a number of its
shares equal to 2.0% of the Common Stock issued on the Effective Date to a
disbursing agent for the benefit of Bondholders who consent to certain releases
as provided in the Plan of Reorganization. In addition, the Bondholders will
receive their pro rata share of (i) $187.5 million in aggregate principal amount
of the New Notes, and (ii) the New Contingent Notes. See "Items 1 and 3.
Business and Properties--Material Agreements--Indentures."
Also in connection with the Plan of Reorganization, JCC expects to enter
into the $60 million A Term Loan, the $151.5 million B Term Loan, the $25
million Working Capital Facility and the $22.5 million Junior Subordinated
Credit Facility. See "Items 1 and 3. Business and Properties--Material
Agreements-- Bank Loans" and "--Junior Subordinated Credit Facility." JCC will
also issue to the Participating Banks and the Underwriters approximately $27
million aggregate principal amount of the Convertible Junior Subordinated
Debentures. See "Items 1 and 3. Business and Properties--Material
Agreements--Convertible Junior Subordinated Debentures." In addition, the Plan
of Reorganization is expected to effect amendments to the Ground Lease, the
General Development Agreement, the Basin Street Casino Lease, and other
contracts and plans, including the Open Access Program. Also in connection with
the Plan of Reorganization, HCCIC will receive the HET Warrant entitling it to
purchase additional shares of Common Stock such that, upon exercise of the HET
Warrant in its entirety, HET and its affiliates, including HCCIC would own 50.0%
of the then outstanding shares of Common Stock, subject to certain adjustments.
See "Items 1 and 3. Business and Properties--Material Agreements."
Also in connection with the Plan of Reorganization, JCC expects to enter
into the HET/JCC Agreement with HET and HOCI, pursuant to which HET and HOCI
will provide a guaranty of the $100 million annual payment due to the State
under the Amended and Renegotiated Casino Operating Contract for the benefit of
the LGCB to assure payment of such minimum payment until March 31, 2004, subject
to renewal or early termination in accordance with the terms of the HET/JCC
Agreement. See "Items 1 and 3. Business and Properties--Material
Agreements--HET/JCC Agreement."
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FRESH-START REPORTING
On the Effective Date of the Plan of Reorganization, the Company, among
other things, will restructure its capitalization in accordance with the Plan of
Reorganization and the transactions contemplated thereby. Additionally, the
application of "fresh start" reporting as of the Effective Date will include
adjustments, which may aggregate approximately $100 million, to certain
noncurrent assets that will result in substantially lower depreciation and
amortization expense in the future related to such assets. See "Item 13.
Financial Statements and Supplementary Data--Unaudited Pro Forma Condensed
Consolidated Financial Information." As a result, the financial condition and
results of operations of the Company after giving effect to the Plan of
Reorganization and the transactions contemplated thereby will not be comparable
to the financial condition and results of operations of the Company as of any
dates and for any periods prior to the Effective Date.
As a result of the complexity of the transactions occurring in connection
with the implementation of the Plan of Reorganization, the recording of all
transactions related to the Company's emergence from chapter 11 may not be
complete as of the Effective Date. The Unaudited Pro Forma Condensed
Consolidated Financial Information is based on the assumptions and preliminary
estimates described in the notes thereto. The actual consolidated financial
information as of the Effective Date may vary. See "Item 13. Financial
Statements and Supplementary Data--Unaudited Pro Forma Condensed Consolidated
Financial Information."
DEVELOPMENT ACTIVITIES
As redesigned pursuant to the Plan of Reorganization, the Casino will
contain five themed areas named The Jazz Court, The Mardi Gras Court, The
Smuggler's Court, The Court of the Mansion and The Court of Good Fortune. The
remaining space will be used for additional gaming activities, a food service
area, casino support facilities, and multi-function, special event and
meeting-room space. The Jazz Court will have a raised domed ceiling and occupy
the center of the Casino. The Casino will be designed so that individual gaming
areas can be opened or closed to patrons depending on volume. Parking for
between 400 and 500 cars and approximately 145,000 square feet of back-of-house
and support areas will be provided underneath the main gaming floor. Across
Poydras Street and connected to the Casino by the Poydras Tunnel Area will be a
newly constructed parking facility which will contain approximately 1,550
parking spaces.
The Initial Casino Facilities are scheduled to open and commence operations
within 12 months following the Effective Date and will include 100,000 square
feet of net gaming space, a 250-seat buffet, two parking garages, the Poydras
Tunnel Area and approximately 15,000 square feet of multi-function, special
event, food service and meeting-room space on the first floor of the premises.
The Second Floor Shell Construction, scheduled to be completed substantially
concurrently with the opening of the Initial Casino Facilities, will consist of
approximately 130,000 square feet of multipurpose non-gaming entertainment space
on the second floor of the premises constructed to the point at which the shell
of the structure is complete and the space is suitable for tenant build-out. See
"Items 1 and 3. Business and Properties-- The Company--Development Plans," and
"--The Casino."
LIQUIDITY AND CAPITAL RESOURCES
The Company estimates that from the date HJC filed for bankruptcy, the hard
costs of completing construction of the Casino will be approximately $140.7
million. This amount includes approximately $15.6 million for construction work
at the Casino, and $4.2 million for restoration of the Municipal Auditorium,
which already have been expended and paid. The total construction and other
costs required to complete and open the Initial Casino Facilities and the Second
Floor Shell Construction are estimated to be approximately $335.0 million. This
amount includes, among other things, hard costs of completing construction of
the Casino, gaming equipment and supplies, initial working capital,
reorganization costs,
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payments to unsecured creditors and cure payments in connection with the
assumption of certain contracts. The above estimate of total construction and
other costs does not include costs associated with the build-out of non-gaming
tenant improvements on the second floor of the Casino and the development of the
3CP Property and Fulton Property. See "Items 1 and 3. Business and
Properties--Risk Factors-- Ability to Develop the Development Properties."
The funds necessary to complete the development and construction of the
Casino (including the installation of certain gaming equipment and other
furniture, fixtures and equipment, but excluding the build-out of the non-gaming
improvements on the second floor of the Casino beyond the Second Floor Shell
Construction and the development of the 3CP Property and Fulton Property) are
expected to be funded from a combination of the $75 million New Equity
Investment from HCCIC, the $211.5 million Term Loans, the $22.5 million Junior
Subordinated Credit Facility and the issuance of approximately $27 million
aggregate principal amount of Convertible Junior Subordinated Debentures. In
addition, the Company expects to have $25 million of availability under the
Working Capital Facility to meet short-term working capital requirements. Funds
provided by a combination of these sources are expected to be sufficient to
develop and commence operations of the Casino up through the opening of the
Initial Casino Facilities and the completion of the Second Floor Shell
Construction, assuming no delays or construction cost overruns. In addition, the
Completion Guarantors have entered into the Completion Guarantees with respect
to the completion of the Casino and the payment of project costs owing prior to
such completion. See "Items 1 and 3. Business and Properties--Material
Agreements--Completion Guarantees." The availability of the Bank Loans is a
condition precedent to the Effective Date of the Plan of Reorganization. The
Proponents of the Plan of Reorganization are presently in negotiations to obtain
such financing, however, currently no binding agreement has been entered into
with respect to either the Term Loans or the Working Capital Facility. There can
be no assurance that the Company will be able to obtain such financing. The
Company has not obtained financing to fund the build-out of the non-gaming
improvements on the second floor of the Casino beyond the Second Floor Shell
Construction and the development of the 3CP Property and Fulton Property and
there can be no assurance the Company will obtain such financing. See "Items 1
and 3. Risk Factors--Ability to Develop the Development Properties." The Company
expects that the capital expenditures necessary to operate the Casino after the
Opening Date will be funded by the capital replacement fund JCC is required to
establish pursuant to the Amended Ground Lease, the Amended Management Agreement
and the Amended and Restated Casino Operating Contract. See "Items 1 and 3.
Business and Properties--Amended Ground Lease--Capital Replacement Fund,"
"Amended Management Agreement--Capital Replacement Fund" and "Amended and
Renegotiated Casino Operating Contract--Capital Replacement Fund." JCC will be
required to fund monthly payments into the capital replacement fund in an
aggregate amount equal to $3 million for the first 12 months following the
Opening Date, $4 million for the second 12 months following the Opening Date, $5
million for the third 12 months following the Opening Date, and 2% of the gross
revenues of the Casino for each fiscal month thereafter. The Company expects,
but there can be no assurance that, the capital replacement fund will be
adequate to met capital expenditures after the Opening Date.
Until the opening of the Initial Casino Facilities, the Company expects to
fund its working capital needs, as presently contemplated, from the New Equity
Investment, the $211.5 million Term Loans, the $22.5 million Junior Subordinated
Credit Facility and the issuance of approximately $27 million aggregate
principal amount of Convertible Junior Subordinated Debentures. After the
opening of the Initial Casino Facilities, JCC expects that its working capital
needs will be funded by a combination of the Working Capital Facility and any
operating cash flows remaining after application of the excess cash flow sweep
required by the Credit Agreement for the Bank Loans. See "Items 1 and 3.
Business and Properties-- Material Agreements--Bank Loans." In addition, the
Completion Guarantors have agreed to ensure that, upon the completion of the
Casino Construction, JCC will have $5.0 million in cash and the Working Capital
Facility Maximum Amount of availability for immediate drawdown(s) under the
Working Capital Facility. See "Items 1 and 3. Business and Properties--Material
Agreements--Completion Guarantees." In addition, JCC intends to establish
initial working capital reserves to provide for reasonably anticipated
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short-term liquidity needs. There can be no assurance that additional financing,
if needed, will be available to JCC, or that, if available, the financing will
be on terms favorable to the Company. There is no assurance that JCC's estimate
of its reasonably anticipated liquidity needs is accurate or that new business
developments or other unforeseen events will not occur resulting in the need to
raise additional funds.
RESULTS OF OPERATIONS.
On May 1, 1995, HJC opened the Basin Street Casino in the New Orleans
Municipal Auditorium. The Basin Street Casino, when first opened, had
approximately 76,000 square feet of gaming space with 3,046 slot machines and
approximately 85 table games. The Basin Street Casino was open 24-hours a day,
seven days a week, except for approximately 65 hours from May 9 to May 11, 1995,
when HJC was forced to close the Basin Street Casino due to a flood in the New
Orleans area.
HJC had originally projected that the Basin Street Casino would have gross
gaming revenues of approximately $395 million per year, which would result in an
average of approximately $33 million a month. Instead, gross gaming revenues
from the Basin Street Casino for the months of May, June and July, 1995 were
$11.2 million, $13.2 million and $14.8 million, respectively, and HJC suffered
net losses of $15.2 million, $14.0 million and $14.2 million in those three
months. In an attempt to reduce such losses, in August 1995 HJC reduced the
workforce in the Basin Street Casino by approximately 15% and reduced the Basin
Street Casino's gaming space from 76,000 to 62,000 square feet. HJC also reduced
the number of its slot machines in the Basin Street Casino from 3,046 to 2,150.
Gross gaming revenues were not adversely affected by these changes. Gross
revenues for August, September and October 1995 were $13.3 million, $12.0
million and $14.4 million, respectively. Operating results did not improve,
however. HJC posted net losses in August, September and October 1995 of $13.5
million, $12.3 million and $12.0 million, respectively.
The Company believes that the Basin Street Casino's results were principally
impacted by the location of the Basin Street Casino (which, unlike the Rivergate
site, is outside the traditional area of entertainment activity and tourist
visitation in New Orleans), the competition from the established Mississippi
Gulf Coast gaming marketplace and a slower than usual summer tourist season in
New Orleans. The Company also believes that the Basin Street Casino's gaming
revenues were adversely affected by the availability of dockside riverboat
gaming in Louisiana. The Company believes that such riverboats, when permitted
to remain moored to their docks and allow continuous ingress and egress of
customers, provide enhanced and direct competition with the Basin Street Casino
as land-based casinos. Competition from the established Mississippi Gulf Coast
gaming marketplace and the availability of dockside riverboat gaming in
Louisiana are material known trends or uncertainties which could have an impact
upon the performance of the Casino. See "Items 1 and 3. Business and
Properties--Risk Factors--Competition" and "--Limited Remedies for Additional
Land-Based Casinos."
On November 22, 1995, HJC and Finance Corp., its wholly-owned subsidiary,
filed for reorganization under Chapter 11 of the Bankruptcy Code, ceased
operation of the Basin Street Casino and suspended construction of the casino at
the Rivergate site. Since the Petition Date, HJC's activities have consisted of
administering the bankruptcy case, preparing the Plan of Reorganization and
related Disclosure Statement, negotiating with interested parties with respect
to the Plan of Reorganization, and related issues. HJC's primary source of
operating funds has been debtor-in-possession financing provided by HET and its
affiliates and its largest expenses have been general and administrative
expenses and reorganization costs.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates that have been
stored as two digits rather than four (e.g., "98" for 1998). On January 1, 2000,
any clock or date recording mechanism, including date sensitive software, which
uses only two digits to represent the year may recognize a date using "00" as
the year 1900 rather than the year 2000.
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This could result in system failures or miscalculations causing disruption of
operations, including, among other things, a temporary inability to process
transactions, send invoices or perform similar tasks.
The Company has not yet fully evaluated its state of readiness with respect
to Year 2000 problems, the costs that may be incurred to address any Year 2000
issues which may arise or the effect on the Company of any Year 2000 issues
which may arise. The Company will not be able to fully evaluate its readiness
until after the occurrence of the Effective Date, the completion of a material
portion of the construction of the Casino (specifically, the installation of
computer hardware and software in the Casino) and the negotiation and execution
of contracts with significant suppliers.
It is anticipated that JCC and the Manager will enter into a side letter
agreement pursuant to which the Manager is expected to agree to be responsible
for assuring that certain to be agreed upon computer systems used in the
operation of the Casino will appropriately interpret the year 2000 and beyond.
It is expected that the slot management system for the Casino will be licensed
from a third party. The Company has no information on the status of the
compliance of the slot management system or any other system licensed from a
third party or in equipment owned by JCC or otherwise on which the operation of
the Casino may depend, and will not be able to obtain such information until the
relevant contracts are negotiated and executed.
Because the business activities of JCC Holding, and three of its
subsidiaries, JCC Development, CP Development and FP Development, will be
limited, and because many of the business activities of JCC Development, CP
Development and FP Development likely will not commence until after January 1,
2000, the Company is not presently aware of the existence of any material Year
2000 compliance risks with respect to those entities.
Should the Company and/or its significant suppliers fail to timely address
and correct material Year 2000 issues, such failure could have a material
adverse impact on the Company's ability to operate. In addition, if corrections
made by such suppliers to address Year 2000 issues are incompatible with the
Company's systems, the Year 2000 issue could have a material adverse impact on
the Company's ability to operate. The Company does not currently have
contingency plans designed to minimize the impact of a Year 2000 problem, but
expects to develop plans following the Effective Date. The impact on the
Company's operating results of the Company's and/or its significant suppliers'
failure to timely address and correct material Year 2000 issues and of any
contingency plans to be designed to address such issues cannot be determined at
this time.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the beneficial
ownership of JCC Holding's Class A Common Stock and Class B Common Stock as of
the Effective Date of the Plan of Reorganization by each person believed by JCC
Holding to own beneficially more than 5% of the outstanding shares of either
Class A Common Stock or Class B Common Stock, the only classes of voting
securities which will be issued and outstanding on the Effective Date. Unless
noted otherwise, the holders listed below have sole voting power and dispositive
power over the shares beneficially held by them. On the Effective Date of the
Plan of Reorganization, JCC Holding will issue 10 million shares of Common
Stock. JCC Holding expects that at the time of issuance approximately 5,210,000
of such shares will be shares of Class A Common Stock and approximately
4,790,000 of such shares will be shares of Class B Common Stock.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------------------------- --------------------------------------
AMOUNT AND AMOUNT AND
NATURE OF PERCENTAGE NATURE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OF CLASS A BENEFICIAL OF CLASS B
OF BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK OWNERSHIP COMMON STOCK
- ------------------------------------ ---------------------- -------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Harrah's Entertainment, Inc......... -- -- 4,440,000(2) 92.7%(2)
1023 Cherry Road
Memphis, TN 38117
Merrill Lynch Corporate Fund,
Inc.--High Income
Portfolio......................... 730,526(1) 14.0%(1) -- --
800 Scudders Mill Road
Plainsboro, NJ 08536
</TABLE>
- ------------------------
(1) Includes an estimated number of shares of Class A Common Stock to be issued
to Merrill Lynch Corporate Fund, Inc.--High Income Portfolio on account of
the release to be executed by Merrill Lynch Corporate Fund, Inc.--High
Income Portfolio. See "Item 8. Legal Proceedings--Bondholders Class Action."
(2) Upon the Effective Date of the Plan of Reorganization, HET, by and through
its wholly-owned subsidiary, HCCIC, will own beneficially more than 5% of
the outstanding shares of Class B Common Stock. The exact number of shares
owned by HET upon the Effective Date, however, will depend upon whether FNBC
or the NOLDC Shareholders exercise options with respect to an aggregate of
450,000 shares of Class B Common Stock from HCCIC. The above number and
percentage (i) assumes neither FNBC nor the NOLDC Shareholders have
exercised such options on the Effective Date and (ii) does not include
shares issuable upon exercise of the HET Warrant. See "Items 1 and 3. The
Company--Recent Reorganization."
The directors and executive officers of JCC Holding do not beneficially own
any shares of Common Stock of JCC Holding.
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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain information with respect to the
current executive officers and directors of JCC Holding.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND PRINCIPAL
NAME AND AGE OCCUPATIONS OR EMPLOYMENT DURING PAST FIVE YEARS
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Colin V. Reed (51)..................... Director of JCC Holding since February 1998. Chairman of the Board of
JCC Holding since April 1998. He is also Executive Vice President and
Chief Financial Officer of HET. He is also a director of Sodak Gaming,
Inc. He is a member of the Executive Committee of HJC and a director and
Senior Vice President of Finance Corp., both of which filed petitions
under Chapter 11 of the Bankruptcy Code in November 1995. He is a
director and Senior Vice President of HNOIC which filed a petition under
Chapter 11 of the Bankruptcy Code in December 1995. He is also Senior
Vice President of the Manager. He served as Chief Executive Officer and
President of JCC Holding from August 1996 to April 1998. He served as
President of Jazz Casino Corporation and JCC Development Corporation
from May 1997 to March 1998.
Frederick W. Burford (48).............. President of JCC Holding and JCC since April 1998 and President of JCC
Development, CP Development and FP Development since September 1998.
Secretary and Treasurer of JCC Holding from December 1997 until
September 1998. Mr. Burford has been a consultant to HET since 1997 and
served as Vice President of JCC Holding from December 1997 to April
1998. From 1991 until 1997 Mr. Burford served as a director and the
Executive Vice President and Chief Financial Officer of TPI Enterprises,
Inc., from 1990 to 1991 Mr. Burford served as the Vice President,
Controller and Treasurer of The Promus Companies, Inc. and from 1977
until 1990 Mr. Burford held various positions with the Holiday
Corporation, including most recently, Vice President and Treasurer.
L. Camille Fowler (43)................. Vice President-Finance, Treasurer and Secretary of JCC Holding, JCC, JCC
Development, CP Development and FP Development since September 1998. Ms.
Fowler has also served as Director of Finance of the Manager since April
1996, Vice President and Secretary of the Manager since January 1998 and
Treasurer of the Manager since February 1998. From October 1993 until
April 1996, Ms. Fowler served as the Director of Financial Reporting of
the Manager.
</TABLE>
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The following table sets forth certain information with respect to the
expected executive officers and directors of JCC Holding on the Effective Date
of the Plan of Reorganization.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD AND PRINCIPAL
NAMEAND AGE OCCUPATIONS OR EMPLOYMENT DURING PAST FIVE YEARS
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Colin V. Reed (51)..................... Class B Director of JCC Holding. Chairman of the Board of JCC Holding
since April 1998. He is also Executive Vice President and Chief
Financial Officer of HET. He is also a director of Sodak Gaming, Inc. He
is a member of the Executive Committee of HJC and a director and Senior
Vice President of Finance Corp., both of which filed petitions under
Chapter 11 of the Bankruptcy Code in November 1995. He is a director and
Senior Vice President of HNOIC which filed a petition under Chapter 11
of the Bankruptcy Code in December 1995. He is also Senior Vice
President of the Manager. He served as Chief Executive Officer and
President of JCC Holding from August 1996 to April 1998. He served as
President of Jazz Casino Corporation and JCC Development Corporation
from May 1997 to March 1998.
Seth E. Lemler (40).................... Class A Director of JCC Holding. He is also a Managing Director in the
Corporate Finance Department of Ladenburg Thalmann & Co. Inc.
Frederick W. Burford (48).............. President of JCC Holding and JCC since April 1998 and President of JCC
Development, CP Development and FP Development since September 1998.
Secretary and Treasurer of JCC Holding from December 1997 until
September 1998. Mr. Burford has been a consultant to HET since 1997 and
served as Vice President of JCC Holding from December 1997 to April
1998. From 1991 until 1997 Mr. Burford served as a director and the
Executive Vice President and Chief Financial Officer of TPI Enterprises,
Inc., from 1990 to 1991 Mr. Burford served as the Vice President,
Controller and Treasurer of The Promus Companies, Inc. and from 1977
until 1990 Mr. Burford held various positions with the Holiday
Corporation, including most recently, Vice President and Treasurer.
L. Camille Fowler (43)................. Vice President-Finance, Treasurer and Secretary of JCC Holding , JCC,
JCC Development, CP Development and FP Development since September 1998.
Ms. Fowler has also served as Director of Finance of the Manager since
April 1996, Vice President and Secretary of the Manager since January
1998 and Treasurer of the Manager since February 1998. From October 1993
until April 1996, Ms. Fowler served as the Director of Financial
Reporting of the Manager.
</TABLE>
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ITEM 6. EXECUTIVE COMPENSATION
The current named executive officer and the director of JCC Holding have
earned no compensation from JCC Holding and have been granted no stock options,
stock appreciation rights or any other form of remuneration. The Company does
not intend to provide any such remuneration to its named executive officers and
directors prior to the Effective Date. Colin V. Reed, a member of the Executive
Committee of HJC, has not received any compensation from HJC during the last
three fiscal years. Compensation arrangements for certain executive officers and
directors after the Effective Date are expected to be negotiated in connection
with the Plan of Reorganization and such arrangements will be described in an
amendment to this Registration Statement.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon the Effective Date of the Plan of Reorganization, HET, through HCCIC,
an indirect wholly-owned subsidiary of HET, will own a number of shares of Class
B Common Stock such that HET will beneficially own a majority of the Class B
Common Stock and more than 5% of all outstanding shares of Common Stock. See
"Item 4. Security Ownership of Certain Beneficial Owners and Management."
Accordingly, HET, through HCCIC, will be able to elect all of the Class B
Directors, which will, prior to the Transition Date, generally supervise the
day-to-day activities of the Company. See "Item 11. Description of Registrant's
Securities to be Registered--Board of Directors." The Company expects JCC and
the Manager, an indirect wholly-owned subsidiary of HET, to enter into the
Amended Management Agreement. See "Items 1 and 3. Business and
Properties--Material Agreements--Amended Management Agreement." The Company also
anticipates that JCC, JCC Development, CP Development and FP Development will
enter into the Development Services Agreement with HOCI, a wholly-owned
subsidiary of HET, pursuant to which HOCI or an affiliate of HOCI will provide
Development Services with respect to the Development Properties. See "Items 1
and 3. Business and Properties--Material Agreements-- Development Services
Agreement." In addition, the Company expects that JCC will enter into the JCC/
HET Agreement with HET and HOCI, to be effective upon execution and delivery by
the parties thereto and the occurrence of the Effective Date of the Plan of
Reorganization, under which HET and HOCI will provide a Minimum Payment Guaranty
for the benefit of the LGCB to assure payment of the Minimum Payment, subject to
renewal or early termination in accordance with the terms of the HET/JCC
Agreement. See "Items 1 and 3. Business and Properties--Material
Agreements--JCC/HET Agreement." The Company expects that HET and HOCI will also
provide the HET Loan Guaranty with respect to Tranche A-2, Tranche B-2 and the
Working Capital Facility. See "Items 1 and 3. Business and Properties--Material
Agreements--Bank Loans." Pursuant to the Completion Guaranties, HET and HOCI
have also agreed to (i) fund JCC's working capital shortfalls until the
Termination of Construction Date and (ii) to guarantee that, at such time, JCC
will have available for working capital $5 million of cash and the Working
Capital Facility Maximum Amount of availability for immediate drawdown(s) under
the Working Capital Facility pursuant to the Completion Guarantees. In addition,
HET and HOCI have agreed to guarantee the Completion Obligations and the
Preservation Obligations. See "Items 1 and 3. Business and Properties-- Material
Agreements--Completion Guarantees" and "--Completion Loan Agreement." In
addition, the Company expects HET and HOCI to provide up to $22.5 million under
the Junior Subordinated Credit Facility. See "Items 1 and 3. Business and
Properties--Material Agreements--Junior Subordinated Credit Facility."
Currently, JCC Holding's sole director and Chairman of the Board, Colin V.
Reed is also Executive Vice President and Chief Financial Officer of HET and
Senior Vice President of the Manager. As of the Effective Date of the Plan of
Reorganization, Colin V. Reed is expected to serve as JCC Holding's Class B
Director and Chief Executive Officer while also serving as Executive Vice
President and Chief Financial Officer of HET and Senior Vice President of the
Manager. Currently, Frederick W. Burford, a paid consultant to HET, is the
President, of JCC Holding, JCC, JCC Development, CP Development and FP
Development. As of the Effective Date of the Plan of Reorganization, Frederick
W. Burford is expected to
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continue to serve as president of JCC Holding, JCC, JCC Development, CP
Development and FP Development, and is expected to cease to be a paid consultant
to HET. In addition, L. Camille Fowler, the Vice President-Finance, Treasurer
and Secretary of JCC Holding, JCC, JCC Development, CP Development and FP
Development is also the Director of Finance, Vice President, Secretary and
Treasurer of the Manager. As of the Effective Date of the Plan of
Reorganization, L. Camille Fowler is expected to continue to serve as the Vice
President-Finance, Treasurer and Secretary of JCC Holding, JCC, JCC Development,
CP Development and FP Development and is expected to cease to serve as the
Director of Finance, Vice President, Secretary and Treasurer of the Manager. See
"Item 5. Directors and Executive Officers." After the Effective Date, if the
requisite gaming regulatory agencies have made the necessary suitability
determinations, one or two other officers of HET are expected to be Class B
Directors of JCC Holding. As a result of HET's ownership of the Competing
Casinos, and the fact that these HET officers hold or are expected to hold such
positions with JCC Holding, a conflict of interest may be deemed to exist by
reason of such persons' access to information and business opportunities
possibly useful to any or all of the Competing Casinos. No specific procedures
have been devised for resolving conflicts of interest confronting, or which may
confront the Company. See "Items 1 and 3. Business and Properties--Risk
Factors--Conflicts of Interest."
ITEM 8. LEGAL PROCEEDINGS
MCCALL LITIGATION. On April 26, 1993, a lawsuit was filed in the Civil
District Court for the Parish of Orleans captioned McCall v. McCall, et al. (the
"McCall Litigation"). Plaintiffs asserted an ownership interest in certain land
underlying the Rivergate site and also sought permanent injunctive relief
prohibiting the use of such land for the Casino. The lawsuit also challenged the
manner in which the RDC was formed and its authority to enter into the Ground
Lease and the Basin Street Casino Lease. HJC intervened in the lawsuit and
aligned itself with the City and the RDC. On February 22, 1994, the Civil
District Court granted the motion for summary judgment filed by the City, the
RDC and HJC, thereby dismissing all claims. On February 23, 1995, the state
appellate court unanimously affirmed the Civil District Court's ruling that the
plaintiffs did not have an ownership interest in any land underlying the
Rivergate site and remanded the case to the Civil District Court to determine
whether the plaintiffs have standing to assert the other claims concerning the
authority of the RDC to enter into the Ground Lease and the Basin Street Casino
Lease. On April 28, 1995, all parties to the litigation applied to the Louisiana
Supreme Court for writs of certiorari. On June 30, 1995, the Louisiana Supreme
Court unanimously denied all writ applications. The property claims in this
litigation have been finally resolved in favor of HJC, the City and the RDC. In
December 1995, the Civil District Court granted the exception of no right of
action submitted by the City and RDC and held that the plaintiffs lack standing
to challenge the constitutionality of the RDC. Harry McCall, one of the
claimants in the McCall Litigation, then filed a notice of appeal. On October
10, 1996, the Fourth Circuit Court of Appeals for the State of Louisiana voted
2-1 to reverse the trial court's dismissal for lack of standing. Under the
Louisiana Constitution, this non-unanimous decision required that the appeal be
heard before a five-judge panel of the same court. That panel also reversed the
Civil District Court's dismissal for lack of standing with respect to the cause
of action challenging the constitutionality of the RDC. The City, the RDC and
HJC applied for a writ of certiorari with the Louisiana Supreme Court, which was
denied without comment.
In addition, on April 6, 1994, Harry McCall, one of the claimants in the
McCall Litigation, filed a motion in Civil District Court for the Parish of
Orleans to enforce an agreement Mr. McCall claims to have entered into with HJC
to settle the McCall Litigation, asserting that he was entitled to receive
settlement proceeds based upon that agreement. HJC does not believe that a
binding settlement agreement was reached with that claimant. On July 8, 1994,
the Civil District Court ruled that Mr. McCall's motion was procedurally
defective. The plaintiff failed to cure the deficiency, and on September 12,
1994, the district court in New Orleans dismissed Mr. McCall's motion to enforce
the alleged agreement. A notice of appeal was filed by Mr. McCall and on October
12, 1995, the Fourth Circuit Court of Appeals for the State of Louisiana
reversed the district court's ruling, allowing Mr. McCall to pursue his claim.
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On March 12, 1996, Harry and Henry McCall filed a proof of claim against HJC
in the amount of $2.0 million which appeared to be based upon the purported
settlement that was the subject of the April 1994 motion in Civil District
Court. They also filed an adversary proceeding in the Bankruptcy Court in late
May of 1996 seeking to enforce the purported settlement agreement. HJC filed an
objection to the McCalls' claim on May 2, 1996. The Bankruptcy Court ordered
that HJC's objection to the proof of claim and the adversary proceeding be
consolidated for purposes of trial and discovery. At a hearing on September 16,
1996, the Bankruptcy Court ruled that Thomas Tucker, attorney for the McCalls,
could not be both a witness and attorney in the matter. The trial was adjourned
to give Mr. Tucker time to decide which role he would take. On September 26,
1996, the McCalls filed a motion seeking an interlocutory appeal on this
decision of the Bankruptcy Court. At that time, the Bankruptcy Court stayed the
underlying action pending a decision on the appeal. On October 16, 1996, the
District Court denied the motion for an interlocutory appeal. The McCalls'
motion for reconsidering of the decision was also denied. Subsequently, Mr.
Tucker elected to be a witness.
On April 18, 1997, HJC, Finance Corp. and Thomas Tucker, Harry McCall, Henry
McCall and Susan LaFaye (an attorney who claims an interest in proceeds of the
McCall Litigation) (the "McCall Claimants") reached the McCall Settlement
Agreement, a tentative agreement to settle various litigation and other legal
claims, demands and causes of action (the "McCall Settlement Agreement"). The
McCall Settlement Agreement provides, among other things, that:
(i) The McCall Claimants and the law firm of Tucker & West will withdraw
and dismiss with prejudice any and all proofs of claim and other demands for
payment filed by and one or more of them in the Chapter 11 cases.
(ii) The McCall Claimants will file in HJC's case an amended proof of
claim in which they will jointly assert against HJC an unsecured claim in
the amount of $145,500, which HJC will recognize as a valid and enforceable
general, unsecured claim against HJC.
(iii) On the latter of (a) the Effective Date or (b) the date on which a
court of competent jurisdiction enters judgments dismissing all of the
litigation described in (iv) below with prejudice, HJC will deliver payment
of the amended claim to an escrow agent designated in the McCall Settlement
Agreement. Thereafter, the escrow agent will distribute to Ms. LaFaye the
sum of $9,500, and will distribute to the other McCall Claimants, as their
interest may appear, the sum of $87,985. The balance, or $48,015, will be
held in escrow, and will be disbursed together with any accrued interest on
the earlier of (a) the first anniversary of the Effective Date or (b) the
date of commencement of gaming at the Casino. If, however, prior to the date
of commencement of gaming at the Casino, HJC advises the escrow agent that
there has been a default under the McCall Settlement Agreement, there will
be no distribution from escrow until the escrow agent receives an
appropriate order or judgment from the Bankruptcy Court authorizing
distribution and identifying the recipients.
(iv) The McCall Claimants will dismiss with prejudice their adversary
proceeding in HJC's bankruptcy proceeding and all the actions they have
filed relating to HJC and the Casino.
(v) The McCall Claimants and Tucker & West will not, individually or
collectively, take any action, whether directly or acting through any other
person or entity, to oppose the conducting of casino gaming operations
including, but not limited to (a) filing of any suits, actions or other
proceedings against HJC and its successors, (b) seeking to retard, delay or
deny the issuance to HJC and its successors of any licenses, orders, grants
or other awards by any governmental entity or (c) assisting any other person
with respect to the foregoing.
(vi) Each of the McCall Claimants and Tucker & West will release any and
all claims, demands, suits and causes of action of any type they have
against HJC and other persons identified in the McCall Settlement Agreement.
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The parties to the McCall Settlement Agreement are currently engaged in the
preparation of a definitive agreement to resolve their disputes, which will then
be executed and submitted to the Bankruptcy Court for its approval. Although a
considerable amount of time has passed since the terms of the McCall Settlement
Agreement were announced, counsel to the parties have indicated a continued
willingness to proceed with the settlement and have recently exchanged revised
and updated drafts of the McCall Settlement Agreement.
The McCall Settlement Agreement contemplates that Harry McCall will dismiss
the McCall Litigation with prejudice on the Effective Date.
TUCKER LITIGATION. A lawsuit captioned Tucker v. City of New Orleans was
filed on October 5, 1994, against the City (the "Tucker Litigation") in the
Civil District Court for the Parish of Orleans by a resident of the Parish
challenging the validity of three casino-related ordinances adopted by the City
Council on September 23, 1994, which authorized, among other things, amendments
to the Ground Lease. The lawsuit also challenges the constitutionality of a
clarifying amendment to the Gaming Act. The clarifying amendment addresses a
provision of the Ground Lease which requires at least 80% of the persons
employed by the Casino to be residents of Orleans Parish ("Residency
Requirement"). The effects of the ordinances and the amendment to the Gaming Act
were, among other things, (i) to clarify the intent of the Gaming Act that a
provision of a contract (to which the gaming operator is a party) that requires
more than 50% of the persons employed to be residents of any one parish is void,
but that the contract as an entirety is not be void under the Gaming Act, and
(ii) to reduce the Residency Requirement in the Ground Lease if necessary to
comply with applicable law. In the event that the plaintiff ultimately prevails,
it is possible that the Ground Lease could be declared void. On November 18,
1994, the City filed preliminary exceptions contending that the plaintiff had
failed to name indispensable and necessary parties as defendants. On March 13,
1995 and August 17, 1995, the plaintiff filed supplemental amended petitions. On
September 22, 1995, the City requested that the plaintiff consider its prior
filed exceptions as applicable. There has been no activity in this case since
that time.
Mr. Tucker and the law firm of Tucker & West filed proofs of claims against
the estates of HJC and HNOIC for amounts which they allege were owed to them
with respect to the Tucker Litigation and other litigation, including the McCall
Litigation. HJC and HNOIC filed objections to these proofs of claims.
Subsequently, on August 13, 1996, these claimants consented to disallowance of
these claims.
The McCall Settlement Agreement contemplates that the Tucker Litigation will
be dismissed with prejudice as of the Effective Date.
LANDMARKS LITIGATION (JOAN OF ARC). On December 6, 1994, a lawsuit
captioned Louisiana Landmarks Society, Inc. v. City of New Orleans, Rivergate
Development Corporation, and Harrah's Jazz Company (the "Landmarks Litigation")
was filed against the City, the RDC and HJC in the United States District Court
for the Eastern District of Louisiana seeking to prevent, among other things,
HJC from moving the Joan of Arc statue or using any part of the Place de France
without the approval of the Secretary of the United States Department of the
Interior. The Place de France is located adjacent to the Casino. The original
design plans for the Casino contemplated locating the main access areas for the
Casino in the area currently in use as the Place de France. The plaintiff
alleged that the Place de France was developed with federal funds for historic
purposes and that therefore the statue cannot be relocated and the Place de
France cannot be converted to another use without the approval of the United
States Secretary of the Interior. The plaintiff also alleged a pendent state law
claim that the Place de France had been dedicated as a park by the City and that
the conversion of the Place de France to another use requires the approval of
the State Legislature. On January 27, 1995, the United States District Court for
the Eastern District of Louisiana issued an order permanently restraining the
City, the RDC and HJC from removing the Joan of Arc statue or using any part of
the Place de France without the approval of the Secretary of the Interior. The
City, the RDC and HJC filed notices of appeal. On June 7, 1996, the United
States Court of Appeals for the Fifth Circuit reversed the decision of the
district court, vacated the
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permanent injunction entered by the district court, rendered a judgment of
dismissal against the plaintiff for failure to state a cause of action on the
grounds that there is no implied right of action under the applicable federal
statute, and dismissed the plaintiff's cross-appeal regarding the scope of the
injunction as moot. On July 12, 1996, the Fifth Circuit denied the plaintiffs'
petition for rehearing.
The original design plans for the Casino contemplated locating the main
access areas for the Casino in the area currently in use as the Place de France.
Because of this litigation, HJC had to redesign the southern part of the Casino
at substantial cost so as to allow the Place de France to remain adjacent to the
Casino subject to certain alterations. As a result of the modification, the
expected size of the Casino was decreased by approximately 2,400 square feet.
The City has requested the written approval of the United States Secretary
of the Interior to remove the Joan of Arc statue from the Place de France. The
Secretary's approval has not yet been received and may not be forthcoming. If
the Secretary's approval is received and the Joan of Arc statue is removed, the
Company may decide to make further modifications to the entrance to the Casino.
Louisiana Landmarks Society, Inc., James Logan and the law firm of Tucker
and West filed proofs of claims against the estates of HJC and HNOIC for amounts
they alleged were owed to them as a result of the Landmarks Litigation. HJC and
HNOIC filed objections to these claims. On August 13, 1996 Louisiana Landmarks
Society, Inc. and the others consented to disallowance of their claims.
TUCKER V. CITY OF NEW ORLEANS AND RIVERGATE DEVELOPMENT CORPORATION. On
July 24, 1996, Mr. Tucker filed a lawsuit captioned Tucker v. City of New
Orleans and Rivergate Development Corporation against the City and RDC in the
United States District Court for the Eastern District of Louisiana seeking to
enjoin alteration of the Place de France absent the express written approval of
the Secretary of Interior. The City and RDC have been made defendants; HJC is
not named, although the lawsuit could affect the development of the Casino. Mr.
Tucker characterized his claim as one for purported violation of his rights of
due process and equal protection pursuant to 42 U.S.C. Section 1983. The factual
allegations of the complaint are virtually identical to those previously
asserted in the Landmarks Litigation and rejected in the recent Fifth Circuit
decision described above. Mr. Tucker served as counsel of record for Louisiana
Landmarks, and he is both a member and trustee of the non-profit corporation. On
October 14, 1996, Tucker filed an amended complaint naming First American Title
Insurance Company as an additional defendant. Upon information and belief, all
the defendants were thereafter served with the complaint. HJC sought and
received permission to intervene in the action on January 21, 1997.
The McCall Settlement Agreement contemplates that this suit will be
dismissed with prejudice on the Effective Date.
WARN ACT LITIGATION. On December 13, 1995 a lawsuit captioned Russell M.
Swody, et al. v. Harrah's New Orleans Management Company and Harrah's
Entertainment, Inc. ("Swody"), was filed against the Manager and HET in the
Civil District Court for the Parish of Orleans and subsequently amended. Swody
is a class action under the WARN Act and seeks damages for the alleged failure
to give timely notice to workers laid off at the time of HJC's bankruptcy.
Plaintiffs seek unspecified damages, as well as costs of legal proceedings, for
themselves and all members of the class. An answer was filed denying all of
plaintiff's allegations. HET and the Manager answered numerous document requests
and interrogatories. After a hearing, the Civil District Court certified the
class on April 22, 1996.
Early in 1996, Swody was consolidated with Susan N. Poirier, Darlene A.
Moss, et al. v. Harrah's Entertainment, Inc., Harrah's New Orleans Management
Company, and Harrah's Operating Company ("Poirier") which was filed in the Civil
District Court for the Parish of Orleans on January 17, 1996, and subsequently
amended. The Poirier class was certified with Swody on April 22, 1996, and the
consolidated Poirier and Swody cases were set for trial on May 5, 1997.
Similar complaints were filed by Ms. Poirier in the Bankruptcy Court in the
bankruptcy cases of HJC, HNOIC and Finance Corp. The Poirier adversary
proceedings purport to be class actions asserting claims
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under the WARN Act and ERISA. On or about February 23, 1996, HJC and HNOIC each
filed a motion in its respective adversary proceeding to dismiss the Poirier
litigation. A hearing on such motions to dismiss was held on March 19, 1996.
Later, Finance Corp. also filed a similar motion. The Bankruptcy Court granted
the motions to dismiss with respect to each of HJC, HNOIC and Finance Corp. on
or about June 28, 1996.
Proofs of claims on behalf of individual, alleged, terminated employees and
purportedly on behalf of all alleged former employees, were filed in the Chapter
11 cases. The plaintiffs in the litigation (the "WARN Act Claimants") moved to
certify three classes on whose behalf the plaintiffs sought to act as a class
representatives for purposes of the proofs of claims. The Bankruptcy Court
denied the motions by Memorandum Opinion and Order dated October 10, 1996.
However, in order to facilitate a proposed settlement reached with the WARN Act
Claimants (discussed below), the WARN Act Claimants filed motions to reconsider
that ruling. On December 10, 1996, the Bankruptcy Court certified classes for
settlement purposes only.
The WARN Act Claimants contend that HJC, Finance Corp. and HNOIC and the
defendants in the Swody and Poirier cases operated as a single business
enterprise with respect to operations in New Orleans and contend that, under
this alleged arrangement, HJC may be liable to the claimants under the WARN Act
along with the defendants in Swody and Poirier. The Company believes that such
claims have no merit. However, in order to avoid the expense, delay and risks
associated with additional litigation, HJC, Finance Corp., HNOIC and the WARN
Act Claimants agreed to compromise and settle all of the WARN Act Claimants'
claims on the terms summarized below.
Under the settlement, JCC will pay to those individuals laid off on or about
November 22, 1995 the sum of $2,265,000, which amount includes the fees and cost
of the Warn Act Claimants' attorneys and certain taxes attributable to the WARN
Act settlement. The amounts paid to these individual WARN Act Claimants will be
based upon instructions from the WARN Act Claimants' attorneys. The individual
awards will be based upon information obtained through the payroll records for
the time period of October 1 thorough November 22, 1995. In addition to this
monetary settlement, the individuals laid off on or about November 22, 1995 will
be offered preferential re-employment to their former positions or, if their
former positions no longer exist or are not presently available, to substantial
equivalent portions to the extent that such jobs are or become available.
"Preferential re-employment" means that they will be offered employment before
employment is offered to any person who was not laid off on or about November
22, 1995. WARN Act Claimants who were laid off in August of 1995 will not
receive a monetary award, but will be placed on a secondary preferential re-hire
list. The claimants will be offered re-employment after those employees laid off
on or about November 22, 1995 and employees laid off by the Flamingo Casino.
They will remain on the secondary preferential re-hire list for one year
following the date of the opening of the Casino. A final hearing on the
settlement took place on February 3, 1997, at which time the Bankruptcy Court
approved the settlement subject to the occurrence of the Effective Date. This
settlement is contingent upon consummation of the Plan of Reorganization.
SAPIR LITIGATION. On June 6, 1997, Eddie L. Sapir, a member of the city
counsel of New Orleans, and the Eddie L. Sapir Inter Vivos Trust filed a civil
action captioned Eddie L. Sapir and The Eddie L. Sapir Inter Vivos Trust versus
Grand Palais Enterprises, Inc., in the Civil District Court for the Parish of
Orleans. In that action, plaintiffs allege, among other things, that one of
HJC's three general partners, Grand Palais, through its principal Christopher B.
Hemmeter ("Hemmeter") and its former counsel Cezar M. Froelich ("Froelich"), has
negotiated or is negotiating a compromise with HET and others which improperly
benefits Hemmeter and Froelich to the detriment of the creditors and
shareholders of Grand Palais. Plaintiff sought and obtained an ex parte
temporary restraining order prohibiting the disposition of any property of Grand
Palais, including prohibition of Grand Palais' execution of the releases and
other agreements among Grand Palais, HET and others described in the Plan of
Reorganization. Plaintiffs also moved for the ex parte appointment of a
temporary receiver for Grand Palais, among others, which was granted by the
District Court.
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On June 18, 1997, Grand Palais filed a notice of removal of the litigation
to the Bankruptcy Court. On July 1, 1997, plaintiffs filed a motion in the
Bankruptcy Court to remand the litigation to District Court. On July 2, 1997,
the Bankruptcy Court granted HJC leave to intervene in the litigation and
continued plaintiff's motion to remand the litigation to District Court. The
Bankruptcy Court's order also included provisions by which one of the plaintiffs
and/or the receiver could participate in HJC's weekly "steering committee"
conferences and present objections to the Bankruptcy Court with respect to any
significant decision requiring the approval of HJC's general partners.
Thereafter, plaintiffs filed a motion to reconsider the Bankruptcy Court's order
permitting HJC to intervene in the litigation. On October 6, 1997, the
Bankruptcy Court remanded the litigation to District Court. On that date, the
Bankruptcy Court also reconsidered its order permitting HJC to intervene in the
litigation and rescinded without prejudice its order permitting HJC to
intervene. Settlement discussions between the parties are underway, although the
parties have not yet reached any definitive agreement.
On November 21, 1997, Eddie L. Sapir and the Eddie L. Sapir Inter Vivos
Trust filed a civil action captioned Eddie L. Sapir and the Eddie L. Sapir Inter
Vivos Trust v. Banker's Trust Company, Cezar M. Froelich, ABC Insurance Company,
First National Bank of Commerce, Harrah's Entertainment Incorporated, Shefsky &
Froelich, Ltd., DEF Insurance Company, GHI Insurance Company, JKL Insurance
Company, The Boatmen's National Bank of St. Louis, Merrill Lynch Senior High
Income Fund, Merrill Lynch Senior High Income II Fund, Merrill Lynch Senior
Strategic Fund, Prime Income Trust, and Van Kampen Meritt Prime Rate Income
Trust, No. 97-20643, in the Civil District Court for the Parish of Orleans. In
that action, plaintiffs allege, among other things, that defendants committed
breaches of contract and fiduciary duty with respect to actions taken in
connection with the Chapter 11 cases. Plaintiffs have never served the suit on
any defendant, no answers have been filed by any defendant and no discovery has
been taken. HET has removed the case to the United States District Court for the
Eastern District of Louisiana. After several status calls, that court put the
matter on "administrative hold."
As a result of the litigation described above, the receiver in this
litigation has the authority to take certain actions on behalf of Grand Palais.
The impact the litigation might have on the HJC's reorganization efforts is
uncertain. In addition, subsequent to commencement of this litigation, Hemmeter
filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code,
and a Chapter 7 trustee has been appointed in that bankruptcy case. There can be
no assurance that the litigation between plaintiffs and Grand Palais or
Hemmeter's Chapter 7 filing will not materially impair the Debtor's ability to
consummate the Plan of Reorganization, or that the litigation will be resolved
on terms that will permit consummation of the Plan of Reorganization. Although
HET, the receiver, plaintiffs in the above-captioned cases, Hemmeter and
Hemmeter's Chapter 7 bankruptcy trustee are engaged in negotiations, to date no
settlements have been reached with any of these parties.
HNOIC/NOLDC LITIGATION. On September 26, 1995, HNOIC brought a lawsuit
against NOLDC in the United States District Court for the Eastern District of
Louisiana seeking a declaratory judgment that (i) HNOIC was a 52.93% owner of
HJC, (ii) the 1994 option agreement with NOLDC had expired, and (iii) NOLDC was
not a "material partner" of HJC. This lawsuit is pending.
On September 28, 1995, NOLDC brought a lawsuit against, among other parties,
HNOIC and HJC in the Civil District Court for the Parish of Orleans seeking (i)
a temporary restraining order enjoining the expiration of the 1994 option
agreement and removal of NOLDC from its status as a material partner of HJC,
(ii) a rescission of the fourth amendment to HJC's partnership agreement
(governing, among other matters the dilution of the NOLDC interest in HJC and
NOLDC's status as a material partner of HJC), (iii) restoration of NOLDC to a
full 33.3% ownership in HJC, and (iv) unspecified damages against all defendants
except HJC.
On September 29, 1995, NOLDC obtained a temporary restraining order from the
Civil District Court for the Parish of Orleans, directing HNOIC and HJC to treat
NOLDC as a material partner until a hearing on an injunction could be held on
October 9, 1995. On October 5, 1995, the defendants removed
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NOLDC's state court complaint to the United States District Court for the
Eastern District of Louisiana, where it is now pending. On October 6, 1995,
NOLDC sought to obtain an extension of its temporary restraining order from the
District Court. NOLDC's request was denied, and no date for any further hearing
was set. Following the filing of bankruptcy by NOLDC, the litigation was placed
on inactive status by the court. At the time of the filing of NOLDC's
bankruptcy, no discovery on the merits had been taken.
It is contemplated that, pursuant to the terms of a settlement agreement
between the NOLDC Shareholders, HET, HOCI and the Manager, all of the litigation
among NOLDC, HNOIC and HJC will be dismissed on the Effective Date.
BONDHOLDERS CLASS ACTION. Beginning on November 28, 1995, eight separate
class action suits were filed against HET and various of its corporate
affiliates, officers and directors in the United States District Court for the
Eastern District of Louisiana. They were Ben F. D'Angelo, Trustee for Ben F.
D'Angelo Revocable Trust v. Harrah's Entertainment Corp., Michael D. Rose,
Philip G. Satre and Ron Lenczycki; Max Fenster v. Harrah's Entertainment, Inc.,
Harrah's New Orleans Investment Company, Grand Palais Casino, Inc., Philip G.
Satre, Colin V. Reed, Michael N. Regan, Christopher B. Hemmeter, Donaldson,
Lufkin & Jenrette Securities Corporation, Salomon Brothers, Inc, and BT
Securities Corp.; Goldie Rosenbloom v. Harrah's Entertainment Corp., Michael D.
Rose, Philip G. Satre and Ron Lenczycki; Barry Ross v. Harrah's New Orleans
Investment Company, Philip G. Satre, Colin V. Reed, Lawrence L. Fowler, Michael
N. Regan, Cezar M. Froelich, Ulric Haynes, Jr., Wendell Gauthier, T. George
Solomon, Jr., Duplain W. Rhodes, III, Harrah's Entertainment, Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, Salomon Brothers Inc, and BT
Securities Corp.; Louis Silverman v. Harrah's Entertainment, Inc., Harrah's New
Orleans Investment Company, Grand Palais Casino, Inc., Philip G. Satre, Colin V.
Reed, Michael N. Regan, Christopher B. Hemmeter, and Donaldson, Lufkin &
Jenrette Securities Corporation; Florence Kessler v. Philip G. Satre, Colin V.
Reed, Charles A. Ledsinger, Jr., Michael N. Regan, Lawrence L. Fowler,
Christopher B. Hemmeter, Cezar M. Froelich, Ulric Haynes, Jr., Wendell H.
Gauthier, T. George Solomon, Jr., Duplain W. Rhodes, III, Donaldson, Lufkin &
Jenrette Securities Corporation, Salomon Brothers Inc, and BT Securities
Corporation; Warren Zeiller and Judith M. R. Zeiller v. Harrah's Entertainment
Corp., Michael D. Rose, Philip G. Satre, and Ron Lenczycki; and Charles Zwerving
and Helene Zwerving v. Harrah's Entertainment Corp., Philip G. Satre, Colin V.
Reed, Christopher B. Hemmeter, and Donaldson, Lufkin & Jenrette Securities
Corporation. Pursuant to a District Court order of January 26, 1996, plaintiffs,
on May 24, 1996, filed a consolidated complaint entitled In re Harrah's
Entertainment, Inc. Securities Litigation (the "Bondholders Class Action").
The plaintiffs in the Bondholders Class Action (who purport to represent all
persons, other than defendants and their affiliates, who purchased Old Bonds
between November 9, 1994 and November 21, 1995) have characterized their
complaint as alleging violations of Sections 11 and 12(2) of the Securities Act
of 1933, 15 U.S.C. SectionSection 77k and 77l(2); Section 10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. Section 78j(b); and Rule 10b-5
promulgated thereunder by the Securities and Exchange Commission, 17 C.F.R.
Section 240.10b-5. The complaint asserts that the registration statement and
prospectus filed in connection with the offering of the Old Bonds contained
untrue statements of material fact and omitted to state material facts necessary
in order to make the statements made therein not misleading. The complaint also
alleges that the defendants engaged in a scheme to defraud plaintiffs and the
alleged class by knowingly or recklessly releasing false and misleading
information that was designed to and did (i) deceive the investing public,
including plaintiffs and other members of the alleged class, regarding HJC's
financial condition and future business prospects, (ii) artificially inflate the
market price of the Old Bonds during the relevant period, and (iii) cause
plaintiffs and other alleged class members to purchase or otherwise acquire the
Old Bonds at inflated prices.
Certain of the individuals named as defendants in the Bondholders Class
Action are officers and directors of the Debtors or of other entities and have
claimed or may claim defense, indemnification and/ or contribution rights
against the Debtors.
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Proofs of claim, purportedly on behalf of the plaintiffs in the Bondholders
Class Action, have been filed in the Chapter 11 cases. Such proofs of claim
assert claims based upon damages caused by alleged violations of federal
securities laws in connection with the purchase and sale of the Old Bonds. The
Debtors have objected to such proofs of claim. Under the Plan of Reorganization,
if any of such claims are allowed, then to the extent that they are allowed,
they will fall within the classes of penalty claims under the Plan of
Reorganization and will receive no distributions on account of such claims.
Plaintiffs in the Bondholders Class Action filed motions in the Chapter 11
cases seeking the appointment of an examiner. A hearing on the motions was held
on November 6, 1996. On November 20, 1996, the Bankruptcy Court denied the
motion to appoint an examiner. In denying the motion, the Bankruptcy Court found
that the request for an examiner was both untimely and for an improper purpose.
HJC has supported the settlement of the Bondholders Class Action negotiated
between counsel for the class and the defendants named in the litigation, whose
basic terms are as follows:
(1) in accordance with the Plan of Reorganization, HCCIC, HET and/or any
affiliates of HET as holders of Common Stock issued under the Plan of
Reorganization will contribute 200,000 shares of Class A Common Stock to a
pool (the "Release Pool"), to be distributed as set forth in the Plan of
Reorganization to those members of the settlement class who are current
Bondholders;
(2) the sum of $3.8 million in cash will be contributed by the
defendants and/or their insurance carriers toward the settlement, which
funds will be distributed as determined by plaintiffs' counsel and approved
by the District Court to members of the settlement class who do not provide
releases to HJC in exchange for a distribution from the Release Pool, as
well as for the payment of costs and fees;
(3) plaintiffs will provide releases to the defendants, dismiss the
Bondholders Class Action with prejudice, and support the Plan of
Reorganization.
The parties to the Bondholders Class Action entered into a stipulation
effectuating the basic terms of the settlement on April 16, 1997. On June 26,
1997, the District Court conducted a fairness hearing to determine whether to
approve the proposed settlement. No member of the settlement class opted out of
the settlement. On July 31, 1997, the District Court approved the settlement,
which is contingent on the occurrence of the Effective Date or the effective
date of a plan of reorganization supported by HET in the Chapter 11 cases (which
would include the Plan of Reorganization).
FILING OF CERTAIN LAWSUITS BY DEBTORS AND NOLDC. In view of the fact that
certain two-year statutes of limitations under Sections 108 and 546 of the
Bankruptcy Code and applicable state law were to expire on November 22, 1997,
HJC has filed certain complaints against multiple defendants on or before such
date to preserve the Debtors' claims. In the event that the Effective Date
occurs, virtually all of such claims will be settled and released pursuant to
the Plan of Reorganization. Although the Debtors have indicated that no valid
claims for avoidance as preferential or fraudulent transfers may exist because
the Debtors may not have been insolvent at the time such transfers were made
and, to the extent such avoidance claims may exist, there may be defenses such
as that the transfers were made in the ordinary course of business, other
parties in interest have expressed contrary views and contended that the Debtors
were or may have been insolvent at the time transfers to creditors were made and
that the transferees may not have valid defenses to avoidance actions.
HJC and Finance Corp. sought and obtained an order directing them to abandon
and not pursue recovery of charitable donations and small preferences. As a
result of said order, HJC is not required to pursue the recovery or avoidance of
charitable donations and small preferences (under $5,000). However, HJC has
preserved for the estate in the event the Plan of Reorganization is not
consummated avoidance actions of $5,000 and more. Since the Plan of
Reorganization provides for the release of virtually all of such claims and to
avoid the expense to all concerned of pursuing and defending such claims, the
Debtors requested and obtained orders excusing service of the complaints and
staying the adversary proceedings
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pending confirmation and consummation of the Plan of Reorganization at which
time those claims which are settled or released by the Plan of Reorganization
(virtually all of the claims) will be dismissed.
NOLDC, which is the subject of its own Chapter 11 case, in order to preserve
its right to do so before the lapsing of statutes of limitations, has filed a
lawsuit, captioned New Orleans Louisiana Development Corporation v. Bankers
Trust Company, First National Bank of Commerce, Inc., Harrah's Entertainment,
Harrah's New Orleans Investment Company, Harrah's New Orleans Management Company
and Harrah's Operating Company, Inc., No. 97-1176, in the Bankruptcy Court,
alleging breach of fiduciary duty and other causes of action. NOLDC, however,
states in its complaint that it is "actively pursuing confirmation and
consummation of a plan of reorganization" and upon occurrence of these events
"expects to waive, release or otherwise resolve" these claims.
There is no other material litigation or arbitration pending which affects
the Company which will not be resolved by the Plan of Reorganization.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER
MATTERS.
The shares of Class A Common Stock are an issue of new securities, have no
established trading market and may not be widely distributed. As of the date
hereof, there are no holders of the Company's Common Stock. On the Effective
Date of the Plan of Reorganization, JCC Holding will issue (i) 10 million shares
of Common Stock, (ii) the HET Warrant entitling HCCIC to purchase additional
shares of Common Stock such that HCCIC would be entitled to own up to 50.0% of
the then outstanding shares of Common Stock, subject to certain adjustments, and
(iii) the Convertible Junior Subordinated Debentures, which will be convertible
at the option of the holders, in whole or in part, at any time after October 1,
2002, into shares of Common Stock at a conversion price of $25.00.
Pursuant to the Plan of Reorganization, JCC Holding has agreed that, (i)
upon the request of any holder of shares of Class A Common Stock who is
reasonably required by law to register public resales of such shares, JCC
Holding will file with the SEC and cause to become effective as soon as
practicable after the Effective Date a registration statement relating to such
public resales, and (ii) upon the request of HCCIC (which request may not be
made until the second anniversary of the opening of the Casino), JCC Holding
will file with the SEC and cause to become effective as soon as reasonably
practicable thereafter a registration statement relating to all shares of Class
B Common Stock held by HCCIC, HET and HET's subsidiaries (provided, however,
that prior to the Transition Date, HET and/or its subsidiaries are required to
own at least 51% of the outstanding shares of Class B Common Stock, unless a
lesser percentage is approved by the Class A Directors and the Class B
Directors). See "Item 11. Description of Registrant's Securities to be
Registered--Common Stock" and "--Agreements with Certain Stockholders." In
addition, upon the request of the initial recipients of the Convertible Junior
Subordinated Debentures in an amount no less than $5.0 million, which request
may be made only once and may not be made prior to October 1, 2002, JCC will
promptly file with the SEC and cause to become effective as soon as reasonably
practicable thereafter, a registration statement on the appropriate form
relating to the Convertible Junior Subordinated Debentures or the Common Stock
issued upon conversion of the Convertible Junior Subordinated Debentures. See
"Items 1 and 3. Business and Properties--Material Agreements--Convertible Junior
Subordinated Debentures" and "Item 11. Description of Registrant's Securities to
be Registered--Agreements with Certain Stockholders."
JCC Holding does not intend to pay cash dividends on the Common Stock,
including the Class A Common Stock, in the foreseeable future. Further, pursuant
to the expected terms of the Bank Loan agreements, for as long as there are
amounts outstanding under the Bank Loans, no dividends will be paid. See
"--Material Agreements--Bank Loans." In addition, the terms of the Indentures
prohibit payment of cash dividends unless certain conditions are met, including
the condition that no dividend will be paid unless JCC has paid the maximum
contingent payments with respect to the New Notes and the New
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Contingent Notes for four consecutive Semiannual Periods. See "--Material
Agreements--Indentures." The payment of cash dividends, if any, will be made
only from assets legally available for that purpose, and will depend on JCC
Holding's financial condition, results of operations, current and anticipated
capital requirements, restrictions under then existing debt instruments and
other factors deemed relevant by the board of directors. See "Items 1 and 3.
Business and Properties--Risk Factors--Dividend Policy."
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
JCC Holding has not issued any securities within the past three years.
Pursuant to the Plan of Reorganization, (i) JCC Holding intends to issue shares
of Common Stock, the HET Warrant, guarantees with respect to the New Notes and
the New Contingent Notes, and guarantees of JCC Development's, CP Development's
and FP Development's guarantees with respect to the New Notes and the New
Contingent Notes, (ii) JCC intends to issue New Notes, New Contingent Notes and
Convertible Junior Subordinated Debentures, and (iii) each of JCC Development,
CP Development and FP Development intend to issue guarantees with respect to the
New Notes and the New Contingent Notes to the persons, in each case, in the
amounts and on the terms summarized under "Item 11. --Description of
Registrant's Securities to be Registered," and "Items 1. and 3. Business and
Properties--Material Agreements--Indentures," "-- Convertible Junior
Subordinated Debentures," "--HET Warrant" and "--Recent Reorganization," without
registration under the Securities Act, or state or local law, in reliance on the
exemptions provided for in Section 1145 of Title 11 of the Bankruptcy Code and
Section 4(2) of the Securities Act.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The following brief description of JCC Holding's capital stock and related
corporate governance matters does not purport to be complete and is subject in
all respects to applicable Delaware law and to the provisions of JCC Holding's
Restated Certificate of Incorporation, Bylaws, and agreements with certain
stockholders referred to below, copies of which have been filed as exhibits to
this Registration Statement.
The authorized capital stock of JCC Holding is expected to consist of
20,000,000 shares of Class A Common Stock, par value $0.01 per share, 20,000,000
shares of Class B Common Stock, par value $0.01 per share, and 40,000,000 shares
of unclassified Common Stock, par value $0.01 per share (the "Unclassified
Common Stock"). Prior to the Transition Date, JCC Holding will not have the
power to issue any shares of Unclassified Common Stock. Upon and after the
Transition Date, the Corporation will not have the power to issue any shares of
Class A Common Stock or Class B Common Stock.
COMMON STOCK
JCC Holding expects to issue 10,000,000 shares of Common Stock on the
Effective Date of the Plan of Reorganization. The Common Stock is expected to
consist of shares of Class A Common Stock and shares of Class B Common Stock.
With certain exceptions, including the election of directors, each share of
Common Stock (including, prior to the Transition Date, each share of Class A
Common Stock and Class B Common Stock) will have identical rights and
privileges, and will rank equally, share ratably and be identical in every
respect and as to all matters, including rights in liquidation, and will be
entitled to vote upon all matters submitted to a vote of the common
stockholders, shall be entitled to one vote for each share of Common Stock held,
and, except as otherwise required by law, the holders of shares of Common Stock
will vote together as one class on all matters submitted to a vote of
stockholders. Shares of Class B Common Stock may be held only by (i) HET and any
direct or indirect wholly-owned subsidiaries of HET (collectively, "Harrah's
Entities"), (ii) Grand Palais and any Controlled Affiliate of Grand Palais,
(iii) shareholders of Grand Palais who receive shares of Class B Common Stock in
connection with the Plan of Reorganization ("Grand Palais Shareholders"), (iv)
any spouse, immediate family member, or other relative who has the same
principal residence of any Grand Palais Shareholder (collectively, "Grand Palais
Family Members"), (v) any trust in which any Grand Palais Shareholder or any
Grand Palais Family
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Member has a beneficial interest, (vi) any Controlled Affiliate of Grand Palais
Shareholders or Grand Palais Family Members, (vii) shareholders of NOLDC ("NOLDC
Shareholders"), including, without limitation, all NOLDC Shareholders as of the
Effective Date, (viii) any spouse, immediate family member, or other relative
who has the same principal residence of any NOLDC Shareholder (collectively,
"NOLDC Family Members"), (ix) any trust in which any NOLDC Shareholder or any
NOLDC Family Member has a beneficial interest, (x) any Controlled Affiliate of
NOLDC Shareholders or NOLDC Family Members, and (xi) FNBC (the entities and
persons referred to in clauses (i) through (xi) referred to herein as "Class B
Entities"). Shares of Class A Common Stock are held by entities other than Class
B Entities. Shares of Class B Common Stock convert to shares of Class A Common
Stock if a Class B Entity transfers such shares to another entity other than
another Class B Entity, and, subject to certain exceptions upon a Change of
Control, shares of Class A Common Stock convert to shares of Class B Common
Stock if an entity that is not a Class B Entity transfers such shares to a Class
B Entity. Any shares of Class A Common Stock transferred from any entity to a
Class B Entity (subject to certain exceptions upon a Change of Control) and any
shares of Class B Common Stock transferred from a Class B Entity to an entity
other than another Class B Entity, will not be entitled to vote upon any matters
submitted to a vote of the holders of Common Stock of JCC Holding until at such
time as the Class B Entity involved with such transfer has complied with certain
notice requirements required by the Restated Certificate of Incorporation.
Shares of Class A Common Stock and Class B Common Stock are freely transferable.
Notwithstanding the preceding sentence, prior to the Transition Date, the
Harrah's Entities will at all times own at least 51% of the issued and
outstanding shares of Class B Common Stock; provided, however, that the Harrah's
Entities may own such lesser percentage of the issued and outstanding shares of
Class B Common Stock as shall be approved by a majority of Class A Directors
then in office and a majority of Class B Directors then in office. On the
Transition Date, each share of Class A Common Stock and each share of Class B
Common Stock will automatically convert into and become one share of
Unclassified Common Stock. With certain important exceptions summarized below,
holders of the Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders of JCC Holding.
REDEMPTION PROVISIONS
Outstanding shares of Common Stock are subject to redemption by JCC Holding,
by action of the board of directors, if, in the judgment of the board of
directors or on an affiliates' board of directors, any holder of Common Stock is
determined by any gaming regulatory agency to be unsuitable, has an application
for a license or permit rejected, or has a previously issued license or permit
rescinded, suspended, revoked or not renewed, as the case may be, whether or not
any of the foregoing is final and nonappealable, or if such action otherwise
should be taken, pursuant to Section 151(b) of the Delaware General Corporation
Law or any other applicable provision of law, to the extent necessary to avoid
any regulatory sanctions against, or to prevent the loss of or secure the
reinstatement of any license, franchise or entitlement from any governmental
agency held by, JCC Holding, any Affiliate of JCC Holding (including, but not
limited to, HET and its Affiliates) or any entity in which JCC Holding or such
Affiliate is an owner, which license, franchise or entitlement is (i)
conditioned upon some or all of the holders of JCC Holding's stock of any class
or series possessing prescribed qualifications, or (ii) needed to allow the
conduct of any portion of the business of JCC Holding or any such Affiliate or
other entity. The terms and conditions of such redemption shall be as follows:
(1) the redemption price of the shares to be redeemed will be equal to the Fair
Market Value of such shares (excluding any dividends thereon not entitled to be
received) or such other redemption price as required by any applicable law,
regulation, rule or resolution or order of a gaming regulatory agency; (2) the
redemption price of such shares may be paid in cash, Redemption Securities or
any combination thereof; (3) if less than all the shares held by Disqualified
Holders are to be redeemed, the shares to be redeemed will be selected in such
manner as will be determined by the board of directors, which may include
selection first of the most recently purchased shares thereof, selection by lot
or selection in any other manner determined by the board of directors; (4) at
least 30 days' written notice of the Redemption Date will be given to the record
holders of the shares
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selected to be redeemed (unless waived in writing by any such holder), provided
that the Redemption Date may be the date on which written notice will be given
to record holders if the cash or Redemption Securities necessary to effect the
redemption has been deposited in trust for the benefit of such record holders
and subject to immediate withdrawal by them upon surrender of the stock
certificates for their shares to be redeemed; (5) from and after the Redemption
Date or such earlier date as mandated by any applicable law, regulation, rule or
resolution or order of a gaming regulatory agency, any and all rights of
whatever nature, which may be held by the owners of shares selected for
redemption (including without limitation any rights to vote or participate in
dividends declared on stock of the same class or series as such shares), will
cease and terminate and they will thenceforth be entitled only to receive the
cash or Redemption Securities payable upon redemption; and (6) such other terms
and conditions as the board of directors shall determine.
BOARD OF DIRECTORS
PRIOR TO THE TRANSITION DATE. Prior to the Transition Date, the following
provisions will be in effect: except as set forth below, the total number of
authorized directors will be six, and the directors will consist of three Class
A Directors elected by the affirmative vote of a plurality of the issued and
outstanding shares of Class A Common Stock, and three Class B Directors elected
by the affirmative vote of a plurality of the issued and outstanding shares of
Class B Common Stock. The board of directors will be divided into three groups,
designated Group I, Group II and Group III. Except as described below, each
group shall consist of one Class A Director and one Class B Director. The
initial directors in Group I, listed below, will be elected for a term expiring
on the date of the annual meeting of stockholders occurring in 1999. Subject to
the provisions of the immediately following paragraph, directors in Group II
will be elected for a term expiring on the date of the annual meeting of
stockholders occurring in 2000 and directors in Group III will be elected for a
term expiring on the date of the annual meeting of stockholders occurring in
2001. At each succeeding annual meeting of stockholders, successors to the group
of directors whose term expires at that annual meeting will be elected for a
three-year term. If the number of directors increases due to the occurrence of
an Extraordinary Flip Event or a Change of Control, such additional director(s)
will be members of the group whose term is next to expire. A director will
generally hold office until such director's term expires or until his successor
is elected and qualified, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
Initially there will be two directors consisting of one Class A Director and
one Class B Director who will collectively comprise Group I. See "Item 5.
Directors and Executive Officers." The total number of authorized directors will
increase by two, for a total of four, with such directors comprising Group II,
only at such time as (i) a second Class A Director has been elected by a
majority of the Class A Directors then in office (or, if only one Class A
Director is then in office, by such Class A Director), (ii) a second Class B
Director has been elected by a majority of the Class B Directors then in office
(or, if only one Class B Director is then in office, by such Class B Director),
and (iii) the requisite gaming regulatory agencies have made the determinations
necessary to allow both of such directors to serve on the Board of Directors.
The total number of authorized directors will again increase by two, for a total
of six, with such directors comprising Group III, only at such time as (i) a
third Class A Director has been elected by a majority of the Class A Directors
then in office (or, if only one Class A Director is then in office, by such
Class A Director), (ii) a third Class B Director has been elected by a majority
of the Class B Directors then in office (or, if only one Class B Director is
then in office, by such Class B Director), and (iii) the requisite gaming
regulatory agencies have made the determinations necessary to allow both of such
directors to serve on the Board of Directors.
Notwithstanding the foregoing, upon the occurrence of an Extraordinary Flip
Event, the authorized number of Class A Directors will increase by one (the
"Additional Class A Director") and the authorized number of Class B Directors
shall remain the same. The Additional Class A Director will be elected by a
majority of Class A Directors in office when the Extraordinary Flip Event giving
rise to such Additional
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Class A Director occurs. If a Cure Event occurs, the term of the Additional
Class A Director will immediately expire, and the authorized number of Class A
Directors will be reduced by one. Notwithstanding the foregoing, upon the
occurrence of a Change of Control, the authorized number of Class B Directors
will increase by one (the "Additional Class B Director") and the authorized
number of Class A Directors will remain the same; provided, however, that the
number of Class B Directors will not be increased to include the Additional
Class B Director if, prior to or upon the occurrence of a Change of Control, an
Extraordinary Flip Event has occurred and no corresponding Cure Event has
occurred; and provided, further, however, that the term of office of the
Additional Class B Director will immediately expire and the number of Class B
Directors will be reduced by one if an Extraordinary Flip Event occurs after the
Change of Control, or the percentage of the outstanding shares of Class A Common
Stock owned by the Conflicted Entity whose acquisition of shares of Class A
Common Stock effected the Change of Control is reduced such that such Conflicted
Entity owns less than 20% of the outstanding shares of Class A Common Stock. The
Additional Class B Director will be elected by a majority of Class B Directors
then in office when the change of control giving rise to such Additional Class B
Director occurs.
Any vacancy on the Board of Directors of a Class A Director position may
only be filled by a majority of Class A Directors then in office (or, if only
one Class A Director is then in office, by such Class A Director). Any vacancy
on the Board of Directors of a Class B Director position may only be filled by a
majority of Class B Directors then in office (or, if only one Class B Director
is then in office, by such Class B Director). If there are no directors of one
class then in office, the holders of a majority of the shares of the class of
common stock that elected such class of directors will have the right to elect
directors to fill such vacancies in a special meeting of stockholders called for
such purpose.
At all meetings of the Board of Directors, a majority of the entire Board of
Directors will be required to constitute a quorum for the transaction of
business. Except as provided in the following sentence or as otherwise provided
by law, no action shall be taken by the Board of Directors at a meeting of the
Board of Directors on behalf of JCC Holding unless (i) such action is authorized
by the affirmative vote of a majority of the directors then in office, (ii) such
action is authorized by at least one Class B Director, and (iii) such action is
authorized by at least one Class A Director; provided, however, that if an
Extraordinary Flip Event has occurred and no related Cure Event has occurred,
clause (ii) will not be applicable. Notwithstanding the previous sentence, no
Significant Transaction shall be authorized unless such Significant Transaction
(x) is authorized by the affirmative vote of a majority of the directors then in
office, (y) is authorized by the affirmative vote of a majority of the Class A
Directors then in office and (z) is authorized by the affirmative vote of a
majority of the Class B Directors; provided, however, that if an Extraordinary
Flip Event has occurred and no related Cure Event has occurred, (A) except with
respect to any amendment to the Certificate of Incorporation or Bylaws of JCC
Holding, clause (z) shall not be applicable, and (B) no action of the Board of
Directors shall affect the holders of the Class A Common Stock and the holders
of the Class B Common Stock disproportionately without the separate approval of
such action by a majority of the Class A Directors then in office and a majority
of the Class B Directors then in office.
Any Class A Director may be removed from the Board of Directors, without
cause, by the affirmative vote of the holders of a majority of the outstanding
shares of Class A Common Stock. Any Class B Director may be removed from the
Board of Directors, without cause, by the affirmative vote of the holders of a
majority of the outstanding shares of Class B Common Stock. In the event that
any director of JCC Holding is found unsuitable by the LGCB or any other gaming
regulatory agency with proper jurisdiction over such director, such director
will no longer be deemed to be a Qualified Person, and no further remuneration
of any kind will be paid to such director.
AFTER THE TRANSITION DATE. Upon the Transition Date and thereafter, the
above provisions regarding the Board of Directors will terminate and will no
longer be applicable, and the following provisions shall be in effect: As soon
as practicable after the Transition Date, the Board of Directors will call a
special meeting of stockholders to elect new directors. All directors in office
on the Transition Date, except an Additional
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Class A Director or Additional Class B Director then in office, if any, will
continue to hold office until such special meeting is held. The Board of
Directors will consist of not less than three or more than seventeen directors,
the exact number of directors to be determined from time to time by resolution
adopted by the affirmative vote of a majority of the Board of Directors. The
Board of Directors will be divided into three classes, designated Class I, Class
II and Class III. Each class will consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire board of
directors. At the first annual meeting of stockholders following the Transition
Date the terms of all Class A Directors and Class B Directors will expire, and
new directors will be elected as follows: Class I directors will be elected for
a one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders,
successors to the class of directors whose term expires at that annual meeting
will be elected for a three-year term. If the number of directors is changed,
any increase or decrease will be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class will hold office for a term that will coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director will hold
office until the annual meeting for the year in which his term expires and until
his successor will be elected and will qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors that results from an increase in the
number of directors will be filled only by a majority of the Board of Directors
then in office, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors will only be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors will have the same remaining term as that of his
predecessor.
Directors will be elected at annual meetings of stockholders by the
affirmative vote of the holders of a plurality of the shares of Common Stock
present in person or represented by proxy at such meeting and entitled to vote
on the election of directors. Directors may be removed from the Board of
Directors, with or without cause, at any regular meeting or at any special
meeting of stockholders by the affirmative vote of holders of a majority of the
shares of Common Stock entitled to vote at an election of directors.
NOMINATION OF DIRECTORS. Nominations of persons for election to the board
of directors at the annual meeting may be made at such meeting by or at the
direction of the board of directors, by any committee or persons appointed by
the board of directors or by any stockholder entitled to vote for the election
of directors at the meeting who complies with the notice procedures set forth
below; provided, however, that prior to the Transition Date, holders of shares
of Class A Common Stock may only nominate persons for election as Class A
Directors, and holders of shares of Class B Common Stock may only nominate
persons for election of Class B Directors. Such nominations by any stockholder
must be made pursuant to timely notice in writing to the Secretary of JCC
Holding. To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of JCC Holding not less than 60 days
nor more than 90 days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that less than 70 days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder, to be timely, must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. Such stockholder's notice to the Secretary must set
forth (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, (a) the name, age, business address and
residence address of the person, (b) the principal occupation or employment of
the person, (c) the class and number of shares of capital stock of JCC Holding
which are beneficially owned by the person, and (d) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to the Rules and Regulations of the
SEC under Section 14 of the Securities Exchange Act of 1934, as amended;
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and (ii) as to the stockholder giving the notice (a) the name and record address
of the stockholder, (b) the class and number of shares of capital stock of JCC
Holding which are beneficially owned by the stockholder and (c) whether the
stockholder intends or is part of a group which intends to solicit proxies from
other stockholders in support of any person whom the stockholder proposes to
nominate for election or reelection as a director. JCC Holding may require any
proposed nominee to furnish such other information as may reasonably be required
by JCC Holding to determine the eligibility of such proposed nominee to serve as
a director. No person will be eligible for election as a director of JCC Holding
unless nominated in accordance with the procedures set forth above.
COMMITTEES OF THE BOARD
Prior to the Transition Date, the Certificate of Incorporation provides that
the following committees of the board shall exist: Audit Committee, the Gaming
Committee, the Compensation Committee, the Class A Director Nomination
Committee, the Class B Director Nomination Committee and the Capital Committee.
The Audit Committee will consist of the Class A Directors and will be empowered
to undertake and complete an audit or investigation, at any time, into the
business affairs of JCC Holding or a subsidiary, including JCC. The Gaming
Committee will supervise the day-to-day activities of JCC Holding and, except
with respect to Significant Transactions, shall have and may exercise, in such
manner as it shall deem to be in the best interests of JCC Holding, all of the
powers of the board of directors in the management or direction of the business
and affairs of JCC Holding, not inconsistent, however, with such specific
direction as to the conduct of the business and affairs as shall have been given
by the board of directors. The Gaming Committee will consist of the Class B
Directors; provided, however, that upon the occurrence of a Flip Event, the
Class B Directors will be removed from the Gaming Committee and replaced on the
Gaming Committee by the Class A Directors. The Compensation Committee will
consist of the Class A Directors and will be empowered to act on behalf of JCC
Holding with respect to all matters regarding the compensation of officers and
directors of JCC Holding. The nominating committees will consist of the
directors of each class and their purpose shall be to select the person(s) to
stand for election as director nominee(s) at any meeting of stockholders. The
Capital Committee will consist of one Class A Director and one Class B Director.
After the date on which the Completion Guarantees have been terminated, the
Capital Committee will be empowered to act on behalf of JCC Holding with respect
to all changes to the capital budgets of JCC Holding and JCC between $250,000
and $2 million. Prior to the Transition Date, upon the affirmative vote of the
majority of the Class A Directors then in office and the affirmative vote of a
majority of the Class B Directors then in office JCC Holding will have the power
to form or maintain committees of the Board of Directors other than those
described above.
DIVIDENDS
Prior to the Transition Date, holders of Common Stock will be entitled to
receive such dividends and other distributions in cash, property or shares of
capital stock as may be declared thereon by the board of directors from time to
time; provided, however, that no dividend or distribution, including without
limitation, dividends or distributions of cash, shares of capital stock of JCC
Holding, other securities, or any other property, may be declared or paid on the
outstanding shares of either the Class A Common Stock or the Class B Common
Stock unless an identical per share dividend or distribution is simultaneously
declared and paid on all of the outstanding shares of Common Stock; provided,
further, however, that a dividend of shares of Common Stock may be declared and
paid in Class A Common Stock to holders of Class A Common Stock and in Class B
Common Stock to holders of Class B Common Stock if the number of shares paid per
share to holders of Class A Common Stock and to holders of Class B Common Stock
is the same. Under no circumstance will a dividend of shares be declared and
paid in Class A Common Stock to anyone other than holders of Class A Common
Stock, and under no circumstance will a dividend of shares be declared and paid
in Class B Common Stock to anyone other than holders of Class B Common Stock. If
JCC Holding in any manner subdivides, combines or reclassifies the outstanding
shares of Class A Common Stock or Class B Common Stock, the outstanding shares
of the other such class of common stock
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must be subdivided, combined or reclassified proportionally in the same manner
and on the same basis as the outstanding shares of Class A Common Stock or Class
B Common Stock, as the case may be, have been subdivided, combined or
reclassified. Upon and after the Transition Date, subject to any other
provisions of the Certificate of Incorporation, holders of Common Stock will be
entitled to receive such dividends and other distributions in cash, property or
shares of capital stock of JCC Holding as may be declared thereon by the board
of directors from time to time.
AMENDMENTS TO CERTIFICATE AND BYLAWS
Stockholders may not make, adopt, alter, amend, change or repeal the Bylaws
except upon the affirmative vote of a majority of the votes entitled to be cast
by the holders of outstanding shares of Common Stock, voting together as a
single class; provided, however, that prior to the Transition Date, in addition
to such vote, any amendment to the Bylaws which in any way adversely affects the
rights of holders of Class A Common Stock or Class A Directors will also require
the affirmative vote of the holders of a majority of the outstanding shares of
Class A Common Stock, and any amendment to the Bylaws which in any way adversely
affects the rights of holders of Class B Common Stock or Class B Directors will
also require the affirmative vote of the holders of a majority of the
outstanding shares of Class B Common Stock. Prior to the Transition Date, the
board of directors is authorized to make, adopt, alter, amend, change or repeal
the Bylaws only if such action is approved as a Significant Transaction pursuant
to the Certificate of Incorporation.
The Certificate of Incorporation may not be altered, amended, changed or
repealed in any respect, and no provision inconsistent with any provision of the
Certificate of Incorporation or imposing cumulative voting in the election of
directors may be added to the Certificate of Incorporation, unless such action
is approved by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock. Prior to the Transition Date, in addition to
the requirements of the immediately preceding sentence, any amendment to the
Certificate of Incorporation which in any way affects the rights of holders of
Class A Common Stock or Class A Directors will also require the affirmative vote
of the holders of a majority of the outstanding shares of Class A Common Stock,
and any amendment to the Certificate of Incorporation which in any way affects
the rights of holders of Class B Common Stock or Class B Directors will also
require the affirmative vote of the holders of a majority of the outstanding
shares of Class B Common Stock.
Prior to the Transition Date, JCC Holding will cause the certificate of
incorporation and bylaws of each Subsidiary of JCC Holding which is a
corporation, to be substantially identical to the Certificate of Incorporation
and Bylaws of JCC Holding; provided, however, that (i) if a Subsidiary is
incorporated in a state other than the State of Delaware, the certificate of
incorporation and bylaws of such Subsidiary may differ from the Certificate of
Incorporation and Bylaws of JCC Holding to the extent such differences are
reasonably necessary due to such Subsidiary's state of incorporation, (ii) the
certificate of incorporation and bylaws of a Subsidiary may differ from the
Certificate of Incorporation and Bylaws of JCC Holding if the certificate of
incorporation and bylaws of such Subsidiary are approved or ratified by the
affirmative vote of a majority of the Class A Directors then in office and the
affirmative vote of a majority of Class B Directors then in office, (iii) the
certificate of incorporation and bylaws of a Subsidiary may differ from the
Certificate of Incorporation and Bylaws of JCC Holding to the extent such
differences are reasonably necessary to comply with laws or regulations
applicable to gaming or to prevent the loss, failure to obtain or material
impairment of, or to secure the reinstatement of, any gaming license, and (iv)
for any Subsidiary in existence on the Effective Date, the certificate of
incorporation and bylaws of such Subsidiary may be as in effect on the Effective
Date.
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STOCKHOLDER MEETINGS
The annual meeting of stockholders will be held each year, on such date and
at such time as may be fixed by the board of directors and stated in the notice
of the meeting, for the purpose of electing directors and for the transaction of
only such other business as is properly brought before such meeting in
accordance with the Bylaws. Special meetings of the stockholders, for any
purpose or purposes, may be called by either the Chairman or the President and
(i) prior to the Transition Date, by the affirmative vote of a majority of the
Class A Directors then in office or the affirmative vote of a majority of the
Class B Directors then in office, and (ii) upon and after the Transition Date,
by a majority of the entire board of directors. At any meeting of the
stockholders at which the holders of Common Stock are entitled to vote, no
action may be taken unless a quorum of the holders of a majority of shares of
Common Stock is present, except a vote to adjourn such meeting; provided,
however, that prior to the Transition Date, a quorum will consist of a majority
of the holders of shares of Class A Common Stock and a majority of the holders
of shares of Class B Common Stock. Except as provided by law, the presence, in
person or by proxy, of the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote at such meeting will constitute a quorum
of the holders of shares of Common Stock, and the presence, in person or by
proxy, of the holders of a majority of the issued and outstanding shares of each
class of Common Stock entitled to vote at such meeting will constitute a quorum
of such class.
To be properly brought before the annual meeting, business must be either
(i) specified in the notice of annual meeting (or any supplement or amendment
thereto) given by or at the direction of the board of directors, (ii) otherwise
brought before the annual meeting by or at the direction of the board of
directors, or (iii) otherwise properly brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of JCC Holding not less than 60 days nor more than
90 days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that less than 70 days notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by a stockholder, to be timely, must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs. A stockholder's notice to the Secretary of JCC
Holding shall set forth (a) as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, and (ii) any material interest of the stockholder in such
business, and (b) as to the stockholder giving the notice (i) the name and
record address of the stockholder, (ii) the class, series and number of shares
of capital stock of JCC Holding which are beneficially owned by the stockholder,
and (iii) whether the stockholder intends or is part of a group which intends to
solicit proxies from other stockholders in support of any matter the stockholder
proposes to bring before the annual meeting. Notwithstanding anything in the
Bylaws of JCC Holding to the contrary, no business shall be conducted at the
annual meeting except in accordance with these procedures.
AGREEMENTS WITH CERTAIN STOCKHOLDERS
REGISTRATION AND LISTING OF CLASS A COMMON STOCK. Pursuant to the Plan of
Reorganization, JCC Holding must use its best efforts to cause the Class A
Common Stock to be listed on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. Automated Quotations System
upon the Effective Date. In addition, to the extent that it is reasonably
determined that the registration of public resales by any holder of Old Bonds of
any securities received by such holder under the Plan of Reorganization is
required by law, the Company will file a registration statement (the "33 Act
Registration Statement") with respect to such resales promptly after the
Effective Date. If such 33 Act Registration Statement is not effective within
120 days after it is filed, then the Company will pay to the holders of such
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securities an amount equal to $.05 per week for each $1,000 of securities to be
registered, which amount will increase by $.05 every 45 days to a maximum of
$.30 per week. For purposes of calculating the amount, if any, owed to holders
of shares of Class A Common Stock, the value of a share of Class A Common Stock
will be deemed to be the greater of (i) the market price of a share of Class A
Common Stock and (ii) $15 per share. In addition, upon the request of the
initial purchasers of the Convertible Junior Subordinated Debentures in an
amount no less than $5.0 million, which request may be made only once and may
not be made prior to October 1, 2002, JCC will promptly file with the SEC and
cause to become effective as soon as reasonably practicable thereafter, a
registration statement on the appropriate form relating to the Convertible
Junior Subordinated Debentures or, prior to the Transition Date, the Class A
Common Stock, or on or after the Transition Date, the Unclassified Common Stock
issued upon conversion of the Convertible Junior Subordinated Debentures. See
"Items 1 and 3. Business and Properties--Material Agreements--Convertible Junior
Subordinated Debentures."
REGISTRATION OF CLASS B COMMON STOCK. On the Effective Date, JCC Holding
and HCCIC will enter into a Registration Rights Agreement (the "Class B
Registration Rights Agreement") containing such terms and conditions as are
customary under the circumstances, including the following: (i) upon the request
of HCCIC, which request may not be made prior to the second anniversary of the
opening of the Casino, the Company will promptly file with the SEC and cause to
become effective as soon as reasonably practicable thereafter a registration
statement on the appropriate form (the "Class B Registration Statement")
relating to all shares of Class B Common Stock held by HCCIC including any
shares of Class B Common Stock obtained by HCCIC pursuant to exercise of the HET
Warrant; and (ii) the Company shall cause such Class B Registration Statement to
be continually effective, subject to customary exceptions, through the third
anniversary of the date on which the Class B Registration Statement first
becomes effective.
POTENTIAL EFFECT OF CERTAIN PROVISIONS UPON AN ATTEMPT TO ACQUIRE CONTROL OF JCC
HOLDING
Certain of the foregoing provisions of the Certificate of Incorporation and
Bylaws may discourage or make more difficult the acquisition of control of JCC
Holding by means of a tender offer, open market purchase, proxy fight or
otherwise, including certain types of coercive takeover practices and inadequate
takeover bids. These provisions are intended to encourage persons seeking to
acquire control of JCC Holding first to negotiate with JCC Holding. JCC Holding
believes the foregoing measures provide benefits by enhancing JCC Holding's
potential ability to negotiate with the proponent of any unfriendly or
unsolicited proposal to take over or restructure JCC Holding and outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals could result in an improvement of their terms.
TRANSFER AGENT
The transfer agent for the Common Stock is Norwest Bank Minnesota, National
Association.
CERTAIN DEFINITIONS
"AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the term "registrant" in said
Rule 12b-2 meaning, in this case, JCC Holding).
"CHANGE OF CONTROL" shall mean the acquisition of at least 20% of the
outstanding shares of Class A Common Stock by a Conflicted Entity.
"CLOSING PRICE" on any day means the reported closing sales price or, in
case no such sale takes place, the closing bid price on the principal United
States securities exchange registered under the Securities Exchange Act of 1934
on which such security is listed, or, if such security is not listed on any such
exchange, the highest closing sales price or bid quotation for such security on
the National Association of Securities Dealers, Inc. Automated Quotations System
or any other system then in use, or if no such prices or
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<PAGE>
quotations are available for such day, then the highest closing sales price or
bid quotation for the most recent day within the 10 prior business days for
which such a price or quotation is available, or if no such prices or quotations
are available within 10 business days prior to such day, the fair market value
on the day in question as determined, prior to the Transition Date, upon the
affirmative vote of a majority of the Class A Directors then in office and the
affirmative vote of a majority of the Class B Directors then in office and, on
and after the Transition Date, by the Board of Directors in good faith.
"CONFLICTED ENTITY" shall mean an entity (including any Controlled
Affiliates of such entity and any entity of which such entity is a Controlled
Affiliate) which (i) controls or operates, or, as of the Effective Date, is
licensed or qualified to control or operate in any of the states of Illinois,
Indiana, Louisiana, Mississippi, Missouri, Nevada or New Jersey, a casino or
casino hotel facility, or (ii) has been, within the five years prior to the
Effective Date, involved in litigation with HET which HET has disclosed in an
Annual Report on Form 10-K on or prior to the Effective Date, or which HET would
be required to disclose in its next Annual Report on Form 10-K following the
Effective Date.
"CONTROLLED AFFILIATE" with respect to any Person shall mean (i) a
corporation (a) a majority of whose capital stock with voting power, under
ordinary circumstances, to elect directors is at the time, directly or
indirectly, owned by such Person, by such Person and one or more of such
Person's Controlled Affiliates or by one or more of such Person's Controlled
Affiliates, or (b) in which such Person, one or more of such Person's Controlled
Affiliates, or such Person and one or more of such Person's Controlled
Affiliates possesses the power to direct the management and policies of such
corporation, (ii) a partnership in which such Person is a general partner and in
which such Person possesses the power to direct the management and policies of
such partnership, or (iii) any other entity (other than a corporation or
partnership) in which such Person, one or more of such Person's Controlled
Affiliates, or such Person and one or more of such Person's Controlled
Affiliates, (a) directly or indirectly, at the date of determination thereof,
owns at least a majority ownership interest in such entity, and (b) possesses
the power to direct the management and policies of such entity.
"CURE EVENT" shall mean, with respect to a corresponding Flip Event (except
for Flip Events occurring pursuant to clause (h) under the definition of Flip
Event), that (A) all of the parties to the contract(s) under which a default or
event of default has occurred, and which default or event of default has given
rise to a Flip Event, have consented in writing that the default or event of
default giving rise to such Flip Event has been waived or cured, (B) the
President of JCC Holding has provided to the Board of Directors written notice
that the written consent(s) referred to in clause (A) have been received, and
(C) the Board of Directors has in good faith accepted such notice.
"DISQUALIFIED HOLDER" shall mean any holder of shares of stock of JCC
Holding of any class (or classes) or series who, either individually or when
taken together with any other holders of shares of stock of JCC Holding of any
class (or classes) or series, in the judgment of the Board of Directors, is
determined by any gaming regulatory agency to be unsuitable, or has an
application for a license or permit rejected, or has a previously issued license
or permit rescinded, suspended, revoked or not renewed, as the case may be,
whether or not any of the foregoing is final and nonappealable, or whose holding
of such stock, either individually or when taken together with the holding of
shares of stock of JCC Holding of any class (or classes) or series by any other
holders, may result, in the judgment of the Board of Directors, in any
regulatory sanctions against, or the loss of or the failure to secure the
reinstatement of any license, franchise or entitlement from any governmental
agency held by, JCC Holding, any Affiliate of JCC Holding or any entity in which
JCC Holding or such Affiliate is an owner.
"EXCLUDED TRANSACTIONS" shall mean any transaction or transactions (i)
authorized by the affirmative vote of a majority of the Class A Directors then
in office and the affirmative vote of a majority of the Class B Directors then
in office, or (ii) pursuant to or in connection with agreements or plans
(including, without limitation, any business plans, operating plans, financing
plans or marketing plans) (a) approved by the Bankruptcy Court in connection
with the Plan of Reorganization, (b) entered into by JCC Holding
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prior to, on, or substantially concurrently with, the Effective Date, or (c)
authorized by the affirmative vote of a majority of the Class A Directors then
in office and the affirmative vote of a majority of the Class B Directors then
in office.
"EXTRAORDINARY FLIP EVENT" shall mean a Flip Event (including a Flip Event
resulting from Manager bankruptcy events, but excluding a Flip Event resulting
from HET bankruptcy events) which occurs as a result of a willful action or
failure to act by the Class B Directors, HET, the Manager or a Controlled
Affiliate of HET as determined in a Speedy Arbitration.
"FAIR MARKET VALUE" of a share of JCC Holding's stock of any class or series
shall mean the average Closing Price for such share for each of the 45 most
recent days of which shares of stock of such class or series shall have been
traded preceding the day on which notice of redemption shall be given; provided,
however, that if shares of stock of such class or series are not traded on any
securities exchange or in the over-the-counter market, Fair Market Value shall
be determined by the Board of Directors in good faith; and provided further,
however, that Fair Market Value as to any stockholder who purchased any stock of
the class (or classes) or series subject to redemption within 120 days of a
Redemption Date need not (unless otherwise determined by the Board of Directors)
exceed the purchase price paid by him for any stock of such class (or classes)
or series of JCC Holding.
"FLIP EVENT" shall mean any of the following: (a) an event of default has
occurred under the Bank Loans or any other financing agreement pursuant to which
JCC Holding, the Development Entities or JCC is a borrower and under which the
aggregate amount outstanding exceeds $2.5 million and such default by JCC
Holding or JCC is caused by HET or Manager Related Events; (b) an event of
default has occurred under the New Notes or the New Contingent Notes and such
default by JCC Holding or JCC is caused by HET or Manager Related Events; (c) an
event of default in respect of payments due and owing by JCC under the Amended
Ground Lease, or any other material event of default under the Amended Ground
Lease in response to which any other party to the Amended Ground Lease would be
entitled to terminate, rescind, or otherwise deprive JCC of the benefits of, the
Amended Ground Lease and such default by JCC Holding or JCC is caused by HET or
Manager Related Events; (d) an event of default in respect of payments due and
owing by JCC under the Casino Operating Contract, or any other material event of
default under the Casino Operating Contract in response to which any other party
to the Casino Operating Contract would be entitled to terminate, rescind, or
otherwise deprive JCC of the benefits of, the Casino Operating Contract and such
default by JCC Holding or JCC is caused by HET or Manager Related Events; (e) a
material event of default has occurred under the Amended Management Agreement
and HET or the Manager is the defaulting party and in response to which event of
default any party to the Amended Management Agreement would be entitled to
terminate or rescind the Amended Management Agreement; (f) HET or an Affiliate
of HET has not fulfilled its obligations, or is in default, under any of the
Completion Guarantees or under any material agreement relating to the Casino
between HET or any such affiliate and the City or State or any agency or
instrumentality of the foregoing; (g) JCC Holding is in violation of its
certificate of incorporation or bylaws in any material respect and such default
by JCC Holding or JCC is caused by HET or Manager Related Events; or (h) HET,
the Manager, any Controlled Affiliate of either, or any entity of which HET or
the Manager is a Controlled Affiliate makes a general assignment for the benefit
of creditors; admits in writing its inability to pay its debts as they become
due; files a voluntary petition in bankruptcy; is adjudged bankrupt or
insolvent; files a voluntary petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
present or future statute, law or regulation; files an answer admitting or not
contesting the material allegations of a petition filed against it in any such
proceeding; seeks or consents to or acquiesces in the appointment of a trustee
or liquidator of such entity or a material part of its properties; or
voluntarily liquidates or dissolves; provided, however, that the actions
described in clause (h) of this definition with respect to a Controlled
Affiliate of HET shall only constitute a "Flip Event" if such action is
reasonably likely to have an adverse effect on JCC Holding, JCC, the Casino, or
the suitability of any director or officer of JCC Holding or JCC or any other
employee thereof required to be found suitable
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under any Louisiana gaming law, regulation, rule, or order of a gaming
regulatory agency; or (i) the LGCB, or any successor thereto, makes a
determination in accordance with the laws of the State and the Rules and
Regulations that HET is unsuitable to own an equity interest in JCC Holding.
"HET OR MANAGER RELATED EVENTS" shall mean an event or events which directly
result from a reckless or intentional act (or a reckless or intentional failure
to act if there was an affirmative obligation to act and proper notice given to
HET or the Manager, as appropriate, of such obligation) of directors, officers
or employees of either HET or the Manager who were authorized to act on behalf
of HET or the Manager with respect to such event or events.
"MINIMUM MARKET VALUE" shall mean, for each trading day, the sum of (i) the
Closing Price of a share of Class A Common Stock multiplied by the aggregate
number of such shares issued to holders of Old Bonds on the Effective Date in
connection with the Plan of Reorganization, plus (ii) the Closing Price per
$1,000 of New Notes and New Contingent Notes, divided by $1,000, and multiplied
by the aggregate principal amount of such notes outstanding.
"PERSON" shall mean both natural persons and legal entities, unless
otherwise specified.
"QUALIFIED PERSON" shall mean any natural person found suitable by the LGCB
(or any other gaming regulatory agency with proper jurisdiction) to serve as a
director of JCC Holding, or, if such a finding is not required, any natural
person that otherwise meets all the requirements of the LGCB (or any other
gaming regulatory agency with proper jurisdiction).
"REDEMPTION DATE" shall mean the date fixed by the Board of Directors for
the redemption of any shares of stock of JCC Holding.
"REDEMPTION SECURITIES" shall mean any debt or equity securities of JCC
Holding, any Subsidiary or any other corporation, or any combination thereof,
having such terms and conditions as shall be approved by the Board of Directors
and which, together with any cash to be paid as part of the redemption price, in
the opinion of any nationally recognized investment banking firm selected by the
Board of Directors (which may be a firm which provides other investment banking,
brokerage or other services to JCC Holding), has a value, at the time notice of
redemption is given, at least equal to the Fair Market Value of the shares to be
redeemed (assuming, in the case of Redemption Securities to be publicly traded,
such Redemption Securities were fully distributed and subject only to normal
trading activity), or such other redemption price as required by any applicable
law, regulation, rule or resolution or order of a gaming regulatory agency.
"SIGNIFICANT TRANSACTIONS" shall mean: (i) any amendment of the Certificate
of Incorporation or the Bylaws of JCC Holding or the corporate governance or
organizational documents of any wholly-owned subsidiary of JCC Holding; (ii) any
merger, consolidation, lease or sale of a material portion of the Company's
business or assets; (iii) any transaction or transactions, except Excluded
Transactions, during a single fiscal year with HET or its Affiliates which in
the aggregate involve consideration to either party in excess of a threshold to
be determined by the Board of Directors (including, without limitation, any
decisions regarding the exercise, waiver or modification of rights or
obligations, or the determination of fees with respect to project development
services, under the Amended Management Agreement); (iv) any declaration of
dividends; (v) any amendment of the Amended and Restated Casino Operating
Contract, the Amended Ground Lease, the Amended GDA or any other material
contract between JCC Holding and the State or City or any agency or
instrumentality of the foregoing; (vi) any voluntary filing for protection under
Title 11 of the United States Code or any other present or future federal or
state law, statute or regulation for the relief of debtors, any general
assignment for the benefit of creditors, any admission in writing of JCC
Holding's inability to pay its debts as they become due, any filing of an answer
admitting or not contesting the material allegations of a petition filed against
it in any bankruptcy or any similar proceedings, any seeking, consenting to or
acquiescence in the appointment of a trustee or liquidator for JCC Holding or a
material portion of its properties, or any voluntary liquidation or
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dissolution; (vii) any incurrence of, or assumption of liability for,
indebtedness for borrowed money, other than indebtedness incurred pursuant to
the Plan of Reorganization, the amendment of the terms of any indebtedness for
borrowed money or any modification, determination, consent or waiver thereunder;
(viii) any issuance of securities of the Company other than issuances pursuant
to the Plan of Reorganization; (ix) any repurchase of securities of the Company;
(x) any change in the independent auditors; (xi) the approval of JCC's annual
operating plan and annual capital budget; and (xii) any change to the Minimum
Balance (as defined in the Amended Management Agreement) pursuant to Section
8.03(a) of the Amended Management Agreement.
"SPEEDY ARBITRATION" shall mean an arbitration in which a single arbitrator
is selected by HCCIC and the Class A Directors, the arbitration is binding, and
the arbitration occurs on an expeditious schedule as determined by the
arbitrator.
"SUBSIDIARY" shall mean (i) any corporation more than 50% of whose
outstanding stock entitled to vote generally in the election of directors is
owned by JCC Holding, by one or more Subsidiaries or by JCC Holding and one or
more Subsidiaries or (ii) any limited liability company of which JCC Holding or
any of its subsidiaries is the sole member or of which JCC Holding and its
subsidiaries collectively hold more than 50% of the membership interests.
"TRANSFER" shall mean any type of transfer of shares of Class A Common Stock
or Class B Common Stock prior to the Transition Date, including, without
limitation, transfers by sale, exchange, gift, merger, operation of law, pledge,
devise, testamentary disposition or interspousal disposition pursuant to a
domestic relations proceeding or any transfer of the power to vote such shares
by proxy or by transferring any proxy.
"TRANSITION DATE" shall mean the date upon which the earliest of the
following events occur: (i) the third anniversary of the date the Casino is open
to customers, (ii) the end of two consecutive 12-month periods in each of which
the contingent payments under the New Notes and the New Contingent Notes equals
or exceeds $15 million, (iii) the end of a period consisting of 30 consecutive
trading days during which the average daily closing Minimum Market Value equals
or exceeds $435 million (as adjusted by the Board of Directors in good faith to
account for purchases of Common Stock by JCC Holding or issuance of additional
Common Stock by JCC Holding).
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware empowers JCC Holding
to indemnify, subject to the standards set forth therein, any person who is a
party in any action in connection with any action, suit or proceeding brought or
threatened by reason of the fact that the person was a director, officer,
employee or agent of such company, or is or was serving as such with respect to
another entity at the request of such company. The General Corporation Law of
Delaware also provides that JCC Holding may purchase insurance on behalf of any
such director, officer, employee or agent.
Article VI of the Restated Certificate of Incorporation of JCC Holding
provides for indemnification of the directors, officers, employees or agents of
JCC Holding to the full extent permitted by the Delaware General Corporation
Law.
Section 102(b)(7) of the Delaware General Corporation Law enables a Delaware
corporation to provide in its certificate of incorporation for the elimination
or limitation of the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any such provision cannot eliminate or limit director's liability (1) for any
breach of the director's duty of loyalty to the corporation or its stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (3) under Section 174 of the Delaware
General Corporation Law (which imposes liability on directors for unlawful
payment of dividends or unlawful stock purchase or redemption); or (4) for any
transaction from which the director derived an
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improper personal benefit. Article VI of the Certificate of Incorporation of JCC
Holding eliminates the liability of a director of JCC Holding to JCC Holding or
its stockholders for monetary damages for breach of fiduciary duty as a director
to the full extent permitted by the Delaware General Corporation Law.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Prior to the Effective Date, the Company has not (i) conducted any
operations, (ii) generated any revenues or (iii) issued any capital stock.
Accordingly, separate financial statements and other disclosures with respect to
the Company are omitted as such separate financial statements and other
disclosure are not deemed material. The Company expects that upon the Effective
Date, JCC will succeed to all the assets of HJC except the 3CP Property and
Fulton Property which will vest in CP Development and FP Development,
respectively. Therefore, the following historical financial statements include
Audited Financial Information and Unaudited Interim Condensed Consolidated
Financial Information for HJC. For financial statements relating to JCC Holding,
see "--Unaudited Pro Forma Condensed Consolidated Financial Information."
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AUDITED FINANCIAL INFORMATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO HARRAH'S JAZZ COMPANY:
We have audited the accompanying consolidated balance sheets of Harrah's
Jazz Company (a Louisiana general partnership) and subsidiary as of December 31,
1997 and 1996, and the related consolidated statements of operations, partners'
capital and cash flows for each of the three years ended in the period December
31, 1997. These financial statements are the responsibility of HJC's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 Harrah's Jazz Company and
subsidiary as of December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that HJC
will continue as a going concern. HJC has experienced significant losses and has
a net capital deficiency of $212,207,000 at December 31, 1997. In addition, as
described in Note 1 to the financial statements, HJC filed a voluntary petition
for relief under Chapter 11 of the U.S. Bankruptcy Code on November 22, 1995,
and suspended its principal business operations on that date. As discussed in
Note 2, on January 29, 1998, the Bankruptcy Court confirmed HJC's Third Amended
Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, as
Modified through January 29, 1998 (the "Modified Plan"). The outcome of the
bankruptcy proceedings is uncertain. The Modified Plan (either in its current
form or as modified by subsequent amendments proposed by HJC) will not become
effective unless the validity of the action of the Louisiana Gaming Control
Board ("LGCB") in approving the Amended and Renegotiated Operating Contract is
upheld by the Louisiana courts in time to permit the Modified Plan to be
successfully consummated. In addition, the City Council of the City of New
Orleans must execute and deliver the amended Canal Street Casino Lease and
certain other agreements. Further, there are other conditions precedent to the
occurrence of the Effective Date of the Modified Plan, which are beyond the
control of HJC. These matters, among others, raise substantial doubt about HJC's
ability to continue as a going concern. In the event the approval of the Amended
and Renegotiated Operating Contract by the LGCB is upheld by the Louisiana
courts, the City Council approves the amended Street Casino Lease and certain
other agreements, and all other conditions precedent to the occurrence of the
Effective Date of the Modified Plan are satisfied, continuation of the business
thereafter is dependent on the Casino's ability to achieve successful future
operations. The financial statements do not include any additional adjustments
relating to the adoption of fresh-start accounting (see Note 3) or the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should HJC be unable to
continue as a going concern.
Arthur Andersen LLP
New Orleans, Louisiana
March 27, 1998
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (includes restricted cash of $3,335 and $9,195 Note 4)...... $ 3,755 $ 10,114
Other................................................................................. 561 769
----------- -----------
Total current assets.............................................................. 4,316 10,883
----------- -----------
Land, buildings and equipment
Property held for development......................................................... 13,200 13,200
Construction in progress.............................................................. 157,475 155,350
Furniture, fixtures and equipment, net of accumulated depreciation of $6,598 and
$6,033.............................................................................. 24,857 25,467
----------- -----------
195,532 194,017
Deferred assets, net of amortization
Deferred operating contract costs (Notes 3 and 9)..................................... 122,222 122,222
Lease prepayments (Notes 3 and 8)..................................................... 30,263 30,263
Other................................................................................. 2,084 2,084
----------- -----------
$ 354,417 $ 359,469
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities not subject to compromise
Accounts payable...................................................................... $ 1,170 $ 1,266
Accrued expenses...................................................................... 9,756 8,501
Debtor-in-possession loans (Note 7)................................................... 32,230 17,182
----------- -----------
Total liabilities not subject to compromise....................................... 43,156 26,949
Liabilities subject to compromise (Note 6).............................................. 523,468 523,483
Commitments and contingencies (Notes 5, 8 and 9)
Partners' deficit (Notes 1 and 5)
Partners' capital contributions....................................................... 167,000 167,000
Accumulated deficit................................................................... (379,207) (357,963)
----------- -----------
Total partners' deficit........................................................... (212,207) (190,963)
----------- -----------
$ 354,417 $ 359,469
----------- -----------
----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES:
Casino..................................................................... $ -- $ -- $ 92,028
Food and beverage.......................................................... -- -- 4,860
Other...................................................................... 1,679 1,661 2,241
Less: Promotional allowances................................................. -- -- (3,872)
---------- ---------- -----------
Net revenues........................................................... 1,679 1,661 95,257
OPERATING EXPENSES:
Direct
Casino................................................................... -- -- 72,847
Food and beverage........................................................ -- -- 2,270
General and administrative................................................. 14,703 17,459 35,206
Management and consulting.................................................. -- -- 7,647
Depreciation............................................................... 610 612 44,978
Asset valuation provision (Note 3)......................................... -- -- 69,579
Preopening expenses (Note 3)............................................... -- -- 15,017
Other...................................................................... -- -- 124
---------- ---------- -----------
Total operating expenses............................................... 15,313 18,071 247,668
---------- ---------- -----------
Loss from operations................................................... (13,634) (16,410) (152,411)
---------- ---------- -----------
REORGANIZATION ITEMS:
Costs and expenses (Note 3)................................................ (6,569) (8,117) (102,554)
Recovery of accounts receivable............................................ 683 3,832 --
Interest income............................................................ 251 416 --
---------- ---------- -----------
Total reorganization items............................................. (5,635) (3,869) (102,554)
---------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net of capitalized interest (Notes 3 and 7).............. (1,975) (621) (61,601)
Interest income............................................................ -- -- 15,006
---------- ---------- -----------
Total other income (expense)........................................... (1,975) (621) (46,595)
---------- ---------- -----------
NET LOSS..................................................................... $ (21,244) $ (20,900) $ (301,560)
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
PARTNERS' CONTRIBUTIONS TOTAL PARTNERS'
CAPITAL DUE FROM ACCUMULATED CAPITAL
CONTRIBUTIONS PARTNERS DEFICIT (DEFICIT)
------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Balance--December 31, 1994........................... 167,000 -- $ (35,503) $ 131,497
Net loss............................................. -- -- (301,560) (301,560)
------------- ------------- ------------ ---------------
Balance--December 31, 1995........................... 167,000 -- (337,063) (170,063)
Net loss............................................. -- -- (20,900) (20,900)
------------- ------------- ------------ ---------------
Balance--December 31, 1996........................... 167,000 -- (357,963) (190,963)
Net loss............................................. -- -- (21,244) (21,244)
------------- ------------- ------------ ---------------
Balance--December 31, 1997........................... $ 167,000 -- $ (379,207) $ (212,207)
------------- ------------- ------------ ---------------
------------- ------------- ------------ ---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss................................................................... $ (21,244) $ (20,900) $ (301,560)
Adjustments to reconcile net loss to net cash used in operations
Asset valuation provision................................................ -- -- 69,579
Reorganization costs/reserves............................................ -- -- 102,554
Provision for uncollectible accounts..................................... -- -- 1,041
Depreciation............................................................. 610 612 44,978
Amortization of deferred financing costs................................. -- -- 6,083
Decrease (Increase) in other current assets.............................. 208 1,423 (19,186)
Increase (Decrease) in accounts payable and accrued expenses............. 1,159 (5,146) 2,649
(Decrease) Increase in accounts payable and accrued expenses prior to
Petition Date.......................................................... (15) 4,123 60,467
Other.................................................................... (10) (253) --
---------- ---------- -----------
Cash flows used in operating activities................................ (19,292) (20,393) (33,395)
---------- ---------- -----------
Cash flows from investing activities
Net maturities of marketable securities.................................... -- -- 305,514
Purchase of land, buildings and equipment.................................. (2,125) (9,631) (192,320)
Proceeds from sale of property............................................. 10 -- --
Payments for leasehold costs and other assets.............................. -- -- (125,999)
---------- ---------- -----------
Cash flows used in investing activities................................ (2,115) (9,631) (12,778)
---------- ---------- -----------
Cash flows from financing activities
Proceeds received from Debtor-in-Possession borrowings..................... 15,048 17,182 --
Proceeds received from borrowings, net of underwriting fees................ -- -- 70,000
Debt retirements........................................................... -- -- (145,000)
---------- ---------- -----------
Cash flows provided by (used in) financing activities.................. 15,048 17,182 (75,000)
---------- ---------- -----------
Net decrease in cash and cash equivalents.................................... (6,359) (12,842) (121,173)
Cash and cash equivalents, beginning of period............................... 10,114 22,956 144,129
---------- ---------- -----------
Cash and cash equivalents, end of period..................................... $ 3,755 $ 10,114 $ 22,956
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION
ORGANIZATION
Harrah's Jazz Company (together with its subsidiary, "HJC") is a Louisiana
general partnership that was formed on November 29, 1993 for the purposes of
developing, owning and operating the exclusive land-based casino entertainment
facility (the "Casino") in New Orleans, Louisiana, on the site of the former
Rivergate Convention Center. HJC operated a temporary casino in the Municipal
Auditorium (the "Basin Street Casino" and, together with the Casino, the "Gaming
Facilities") from May 1, 1995 to November 22, 1995.
HJC was in the development stage until May 1, 1995, when it commenced
operation of the Basin Street Casino. Development stage activities consisted of
construction, organizational activities related to arranging construction and
financing contracts, and negotiating various other agreements to develop the
Gaming Facilities. These agreements included (i) the lease between HJC and the
Rivergate Development Corporation (the "RDC") and the City of New Orleans (the
"City"), as Intervenor, with respect to the site of the Casino (the "Canal
Street Casino Lease"); (ii) the lease between HJC and the RDC and the City, as
Intervenor, with respect to the Basin Street Casino (the "Basin Street Casino
Lease"); (iii) the Casino Operating Contract between HJC and the Louisiana
Economic Development and Gaming Corporation ("LEDGC"), a special public purpose
corporation established to regulate land-based gaming in Louisiana (the "Casino
Operating Contract"); and (iv) the General Development Agreement between HJC,
the RDC, and the City, as Intervenor (the "GDA").
PETITION FOR RELIEF UNDER CHAPTER 11
On November 22, 1995 (the "Petition Date"), HJC (which is sometimes referred
to herein as the "Debtor") and its subsidiary Harrah's Jazz Finance Corp.
("Finance Corp.") (sometimes referred to collectively herein as the "Debtors")
filed petitions for relief under Chapter 11 of Title 11 of the United States
Code ("Chapter 11"). The case is currently pending in the United States
Bankruptcy Court for the Eastern District of Louisiana (the "Bankruptcy Court"
or the "Court").
Under Chapter 11, the prosecution of certain claims against the Debtor in
existence prior to the Petition Date is stayed under federal bankruptcy law
while the Debtor attempts to reorganize. These claims are reflected in the
December 31, 1997 and December 31, 1996 consolidated balance sheets as
"liabilities subject to compromise." Additional claims (also included in the
account "liabilities subject to compromise") may arise subsequent to the filing
date from rejection of executory contracts, including leases, and from the
determination by the Court (or agreement by the parties in interest) with
respect to allowed claims for contingencies and other disputed amounts. The
prosecution of claims secured by the Debtors' assets also is stayed, although
the holders of such claims have the right to move the Court for relief from the
stay. Secured claims are collateralized primarily by substantially all of the
Debtors' assets.
On February 28, 1997, the Debtors filed their Third Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code (the "Original Plan") and
their Third Amended Joint Disclosure Statement Pursuant to Section 1125 of the
Bankruptcy Code (the "Original Disclosure Statement"), both dated as of February
26, 1997. The Original Plan was voted upon by all affected parties entitled to
vote and, as modified in connection with the hearing on confirmation of the
Original Plan, was confirmed by the Bankruptcy Court on April 28, 1997. The
Original Plan as so modified and confirmed is referred to herein as the
"Original Confirmed Plan." The commencement of implementation (or
"consummation") of the
124
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION (CONTINUED)
Original Confirmed Plan, however, was conditioned upon (among other things) the
execution and delivery of a casino operating contract (the "April 29, 1997
Casino Operating Contract") between Jazz Casino Corporation, a newly formed
company which was to succeed to HJC's rights to develop the Casino ("JCC Co."),
and the Louisiana Gaming Control Board ("LGCB") and all necessary approvals, if
any, from the LGCB. The LGCB approved the April 29, 1997 Casino Operating
Contract on April 29, 1997, but conditioned its approval upon the further
approval of the legislature of the State of Louisiana ("State"). The State
legislature failed to give its approval of the April 29, 1997 Casino Operating
Contract during its regular session, which adjourned on June 23, 1997.
Following negotiations with various parties in interest in the
reorganization, the Debtors prepared a new set of modifications to the Original
Confirmed Plan (the Original Confirmed Plan, as so modified and confirmed by the
Bankruptcy Court on January 29, 1998, is referred to herein as the "Modified
Plan"). The Modified Plan contemplates consummation of a plan of reorganization
with the consent and agreement of the State and the LGCB. Significant
differences between the Original Confirmed Plan and the Modified Plan include
(i) provisions that Harrah's Entertainment, Inc. ("HET") and Harrah's Operating
Company, Inc. ("HOCI") will supply the Minimum Payment Guaranty required by the
Amended and Renegotiated Casino Operating Contract (as defined below) for the
fiscal years ending March 31, 1999 and March 31, 2000, which guaranty will be
renewable (subject to certain non-renewal conditions) through the fiscal year
ending March 31, 2004 pursuant to a guaranty agreement (the "HET/JCC
Agreement"), in consideration for which HET and HOCI will receive annual
payments from Jazz Casino Company, L.L.C., a newly-formed Louisiana limited
liability company which is to succeed to HJC's interests pursuant to the
Modified Plan ("JCC"), as well as a first priority lien on substantially all
property of JCC, (ii) modifications to the terms of the Senior Subordinated
Notes with Contingent Interest to be issued by JCC under the Modified Plan (the
"New Bonds") to the holders of HJC's 14 1/4% First Mortgage Notes with
Contingent Payments due 2001 (the "Old Bonds"), and (iii) modifications to the
credit facilities to be provided to JCC. The Bankruptcy Court confirmed the
Modified Plan on January 29, 1998.
The Debtors also have negotiated further amendments to the Casino Operating
Contract (as so modified, the "December 9, 1997 Casino Operating Contract"). The
LGCB conditionally approved the December 9, 1997 Casino Operating Contract on
December 9, 1997, but conditioned its approval of the December 9, 1997 Casino
Operating Contract upon the further approval of the State legislature. The
Governor indicated that he would call a special session of the state legislature
commencing in the latter part of March 1998 which would consider, among other
things, approval of the December 9, 1997 Casino Operating Contract. However,
after receiving an opinion from the State Attorney General that the LGCB has
independent authority (without the necessity of any legislative approval) to
renegotiate and execute a renegotiated casino operating contract, the Governor
did not include approval of the December 9, 1997 Casino Operating Contract on
the call for the special session. Instead, on March 20, 1998, the LGCB approved
the Amended and Renegotiated Casino Operating Contract, subject to a suspensive
condition of the rendition of a final, non-appealable judgment of the State
Supreme Court that the LGCB, acting on its own, is the proper party and has the
legal authority to enter into the Amended and Renegotiated Casino Operating
Contract with HJC and JCC on behalf of the State and the LGCB, without the
specific approval of the State Governor or the State legislature. As described
in Note 9 below, two State senators have filed lawsuits challenging the LGCB's
authority to enter into the Amended and Renegotiated Casino Operating Contract,
and those lawsuits are now pending.
125
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION (CONTINUED)
There are significant differences between the April 29, 1997 Casino
Operating Contract conditionally approved by the LGCB on April 29, 1997 but not
approved by the State legislature, and the Amended and Renegotiated Casino
Operating Contract conditionally approved by the LGCB on March 20, 1998. These
include: (i) a requirement that for each fiscal year JCC will provide a guaranty
by a third party of JCC's annual minimum payment obligation of $100 million to
the LGCB (the "Minimum Payment Guaranty") pursuant to the Amended and
Renegotiated Casino Operating Contract, and a failure to do so will result, at
the option of the LGCB, in termination of the Amended and Renegotiated Casino
Operating Contract and closure of the Casino; (ii) a provision expressly stating
that the LGCB is authorized to license or permit any business which seeks to
make use of the non-gaming space to be made available on the second floor of the
Casino to ensure, among other things, that any desired use of the non-gaming
space is allowed by the State's gaming law and the regulations adopted pursuant
to it, as well as to make clear that the operator of the Casino may not lease
space to any business that would target persons under the age of 21 to come to
the non-gaming space; (iii) a provision precluding the operator of the Casino
from directly offering its own restaurant facilities in the non-gaming space on
the second floor; (iv) a provision that makes all documents submitted to the
LGCB subject to the public records laws of the State, subject only to the
statutory and other exemptions established under the law; and (v) a requirement
that all unsecured creditors be paid their allowed claims in accordance with the
Modified Plan.
Throughout most of the period in which HJC has been in reorganization, it
has been able to continue in existence because of loans (the "DIP Financing")
from Harrah's Entertainment or one of its affiliates (the "DIP Lender"). On
November 4, 1997, HET announced that the DIP Lender would continue to provide
debtor in possession financing to HJC, subject to the occurrence of certain
specified "milestones" related to the progress of HJC's Chapter 11 case.
Under the terms of the latest order approving DIP Financing entered on
February 27, 1998 (the "Seventh DIP Loan Order"), HJC is authorized to borrow
from the DIP Lender (in addition to the $35.5 million for which the Debtor was
authorized and qualified to borrow under the terms of the previous orders
approving DIP Financing: (1) up to an additional $1.5 million (for a cumulative
total of up to $37.0 million) on or after February 1, 1998, provided, that on or
prior to such date: (a) the Governor had publicly committed to the legislature's
consideration of the Amended and Renegotiated Casino Operating Contract during a
Note 1. Organization, Bankruptcy and Basis of Presentation special legislative
session to commence in March, 1998 and (b) the Modified Plan had been confirmed;
(2) up to an additional $1.5 million (for a cumulative total of up to $38.5
million) on or after March 1, 1998, provided, that on or prior to such date: (a)
the State had commenced and was actively pursuing the process required under the
Amended and Renegotiated Casino Operating Contract and State law of determining
the suitability of various persons proposed to be associated with the Casino to
serve in their respective capacities (the "Suitability Process"), and (b) a vote
by the City Council on the amended Canal Street Casino Lease, the amended GDA,
and related documents to be entered into pursuant to the Modified Plan had been
scheduled; and (3) up to an additional $1.5 million (for a cumulative total of
up to $40 million) on or after April 1, 1998, provided, that on or prior to such
date: (a) the State is continuing active pursuit of the Suitability Process; (b)
the State legislature has begun its session for purposes of considering the
Amended and Renegotiated Casino Operating Contract; and (c) the City Council has
approved and adopted the amended Canal Street Casino Lease, the amended GDA, and
related documents to be entered into pursuant to the Modified Plan.
126
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION (CONTINUED)
Under the Seventh DIP Loan Order, if any financing milestone set forth
therein is not timely achieved but the DIP Lender in its sole discretion
determines that such financing milestone may be achieved in the following 30
days, the DIP Lender in any month (and again in any subsequent months) may elect
to continue to provide funding under the terms of the Seventh DIP Loan Order, up
to the increased cumulative totals authorized as of February 1, March 1 or April
1, 1998, and any unachieved financing milestone shall thereupon become a
financing milestone required to be achieved as a condition to further funding.
HJC expects that on March 30, 1998, the DIP Lender will elect to waive the
financing milestones requiring legislative consideration of the December 9, 1997
Casino Operating Contract and City Council approval of the amended Casino Canal
Street Casino Lease and the amended GDA on or prior to April 1, 1998. There is
no assurance that the April 30, 1998 maturity date or any later maturity date
under the DIP Loans will be waived or that additional DIP Financing will be
available. In the event that the State Legislature disapproves the December 9,
1997 Casino Operating Contract, all debtor-in-possession financing shall
immediately terminate, and no unfunded portion (if any) of the existing DIP Loan
shall thereafter be requested or borrowed by HJC for any purpose. For additional
information regarding these matters, see Items 1 and 2. "Business and
Properties--Chapter 11 Proceedings--Debtor-in-Possession Financing" in HJC's
Annual Report on Form 10-K for the year ended December 31, 1997.
As of March 27, 1998, HJC had borrowed $36.3 million from the DIP Lender.
NOTE 2. STATUS OF REORGANIZATION PLANS AND RELATED RISKS
The Bankruptcy Code gives the debtor-in-possession the exclusive right to
file a reorganization plan within 120 days after the bankruptcy filing (the
"Exclusive Filing Period") and, if a plan is filed during the Exclusive Filing
Period, the first 180 days of the case within which to obtain acceptance of a
plan (the "Exclusive Solicitation Period"). Thus, the Exclusive Filing Period
for HJC and Finance Corp. was originally scheduled to expire on March 21, 1996.
However, prior to that date, HJC and Finance Corp. sought extensions of (i) the
Exclusive Filing Period through April 3, 1996, the date by which HJC had agreed
with the City and the RDC under the March 6 Agreement to file a plan of
reorganization, and (ii) the Exclusive Solicitation Period through June 30,
1996. At a hearing held on March 19, 1996, the Bankruptcy Court extended the
Exclusive Filing Period and the Exclusive Solicitation Period for HJC and
Finance Corp. through April 4, 1996 and June 30, 1996, respectively. By
subsequent orders of the Bankruptcy Court, HJC's and Finance Corp.'s Exclusive
Solicitation Period was extended through April 30, 1997. Prior to that date, the
Bankruptcy Court confirmed the Original Confirmed Plan.
On October 6, 1997, the United States Trustee filed a motion to convert the
debtors' Chapter 11 cases to cases under Chapter 7 of the bankruptcy Code, or
alternatively to dismiss the Chapter 11 cases. That motion was presented to the
Bankruptcy Court on November 5, 1997. On that date, after HJC informed the
Bankruptcy Court that an agreement in principle had been reached involving a
number of interested parties and that HJC would be filing the Modified Plan and
Modified Disclosure Statement shortly, and with the agreement and consent of the
United States Trustee, the Bankruptcy Court continued the hearing on the United
States Trustee's motion until December 10, 1997, and by subsequent order has
further continued the hearing on the United States Trustee's motion until May 5,
1998.
On January 29, 1998, the Bankruptcy Court confirmed the Modified Plan. Under
the Modified Plan, on the effective date of the Modified Plan (the "Effective
Date") HJC shall assume the Casino Operating Contract and enter into the Amended
and Renegotiated Casino Operating Contract, which will thereafter
127
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. STATUS OF REORGANIZATION PLANS AND RELATED RISKS (CONTINUED)
be assigned to JCC. Further, on the Effective Date, the assets and business of
HJC will vest in JCC, which will succeed to HJC's right to operate a land-based
casino in Orleans Parish, Louisiana and to HJC's interest in a long-term lease
for the site in the City designated by law for the Casino's development. JCC is
a wholly-owned subsidiary of JCC Holding Company, a newly formed Delaware
corporation ("JCC Holding"). JCC will complete construction of the Casino. Under
the Plan, the Old Bonds (See Note 7) would be canceled. An indirect, wholly
owned subsidiary of HET (the "Harrah's Investor") would receive 49.9% of the
equity in JCC Holding in exchange for an additional equity investment by the
Harrah's Investor, the holders of the Old Bonds (the "Bondholders") would
receive, on a PRO RATA basis, 37.1% of the equity in JCC Holding, and the
Bondholders who have executed certain releases under the Plan would receive the
remaining 13.0% of the equity in JCC Holding. Under the Modified Plan, the
Harrah's Investor would also contribute 2.0% of the equity in JCC Holding to
Bondholders who have executed certain releases under the Plan. In addition,
Bondholders would receive (i) the New Bonds, which will pay fixed interest
semi-annually at a rate of 5.867% per annum increasing over the first three
years to a rate of 6.214% per annum in the third through fifth years, and
increasing to 8% per annum after the first five years, and contingent payments
based on EBITDA of JCC, and (ii) a PRO RATA share of Senior Subordinated
Contingent Notes due 2007 of JCC. Up to six semi-annual fixed interest payments
on the New Bonds may be made in additional New Bonds in a principal amount equal
to the interest payment rather than in cash and, if JCC's earnings do not exceed
certain minimum levels, additional semi-annual fixed interest payments on the
New Bonds may be made in kind rather than in cash. The Modified Plan provides
also that HET and HOCI will supply the Minimum Payment Guaranty required by the
Amended and Renegotiated Casino Operating Contract for JCC's fiscal years ending
March 31, 1999 and March 31, 2000, and that the Harrah's Investor will receive
warrants entitling it to purchase enough additional shares of common stock of
JCC Holding so that, upon exercise of all of the warrants, Harrah's Investor
would own 50.0% of the common stock of JCC Holding, subject to certain
adjustments.
On March 26, 1998, HJC filed a Motion to Modify Debtors' Confirmed Plan and
to Authorize HJC's Execution of the Amended and Renegotiated Casino Operating
Contract, in which HJC seeks court approval of further modifications to the
Modified Plan to take into account the LGCB's conditional approval of the
Amended and Renegotiated Casino Operating Contract, the execution of the Amended
and Renegotiated Casino Operating Contract by HJC (as opposed to execution of
the December 9, 1997 Casino Operating Contract by JCC), and HJC's assignment of
the Amended and Renegotiated Casino Operating Contract to JCC on the Effective
Date in accordance with state law and with the agreement of the parties. The
motion is set to be heard by the Bankruptcy Court on April 6, 1998.
HJC has identified certain factors that may impact the ability of HJC to
consummate the Modified Plan, the development of the Casino or HJC's (or its
successor's) ability to achieve successful future operations:
a. On December 9, 1997, the LGCB, among other things, unanimously
approved the December 9, 1997 Casino Operating Contract for submission to
the Governor of the State with the request that he submit the December 9,
1997 Casino Operating Contract to the State legislature for its approval.
The Governor indicated that he would call a special session of the state
legislature commencing in the latter part of March 1998 which would
consider, among other things, approval of the December 9, 1997 Casino
Operating Contract. However, after receiving an opinion from the State
Attorney General that the LGCB has independent authority (without the
necessity of any legislative
128
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. STATUS OF REORGANIZATION PLANS AND RELATED RISKS (CONTINUED)
approval) to renegotiate and execute a renegotiated casino operating
contract, the Governor did not include approval of the December 9, 1997
Casino Operating Contract on the call for the special session. Instead, on
March 20, 1998, the LGCB approved the Amended and Renegotiated Casino
Operating Contract, subject to a suspensive condition of the rendition of a
final, non-appealable judgment of the State Supreme Court that the LGCB,
acting on its own, is the proper party and has the legal authority to enter
into the Amended and Renegotiated Casino Operating Contract with HJC and JCC
on behalf of the State and the LGCB, without the specific approval of the
State Governor or the State legislature. As described in Note 9 below, two
State Senators have filed lawsuits challenging the LGCB's authority to enter
into the Amended and Renegotiated Casino Operating Contract, and those
lawsuits are now pending.
b. HJC anticipates, prior to the Effective Date, that it will submit to
the City Council further revisions of the amended Canal Street Casino Lease
and the amended GDA and certain of the exhibits thereto with respect to the
revised construction schedule. There can be no assurance that the City
Council will approve these amended agreements.
c. The size of the gaming market in New Orleans is uncertain. The
success of a land-based casino in this market, including the number of
visitors to the casino and their propensity to wager, cannot be accurately
predicted. No accurate prediction can be made as well concerning the impact
of HJC's bankruptcy on the Casino's business. For these and other reasons,
there is no assurance that even a reorganized Casino will be able to be
operated in a successful manner.
d. There is a risk that the actual costs to complete construction of
the Casino will exceed cost estimates and that the construction will not be
completed on schedule.
e. Although the Casino is the only land-based casino currently
permitted by law in Orleans Parish, Louisiana, no assurance can be given
that the City of New Orleans or the State of Louisiana will not amend or
enact legislation permitting other land-based casinos in the New Orleans
metropolitan area. Such legislative changes could have a material adverse
effect on HJC's (or its successor's) future operations.
f. The Casino cannot be operated unless and until certain persons
required to be found suitable are found suitable by LGCB, including, without
limitation, the Casino operator and certain affiliates, the Manager (as
defined herein) and certain officers and directors of such companies. While
HJC, the Manager and certain of their respective partners, shareholders,
officers and directors were previously found suitable after extensive
background investigations by LEDGC, the LGCB (and its investigatory arm, the
State Police) has not issued any suitability findings in connection with the
above stated entities and persons (as contemplated by the Modified Plan).
There can be no assurance that the State Police will complete its
investigations and that LGCB will find all such entities and persons
suitable in a timely fashion or that such findings will be issued. Failure
to timely receive all required suitability findings could have material
adverse consequences.
g. The Casino will have substantial leverage and be committed to make
substantial payments to the City of New Orleans and the LGCB. There is no
assurance that the Casino will achieve the level of gaming activity and
operating cash flow necessary to meet these obligations. Future operating
results are subject to significant business, economic, regulatory,
political, and competitive uncertainties and contingencies, many of which
are outside of the Casino's control.
129
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. STATUS OF REORGANIZATION PLANS AND RELATED RISKS (CONTINUED)
h. The development and construction of the Casino has been and will
continue to be, and the operation of the Casino may be, affected by the
state and local political environments, both of which are uncertain. The
State and City governments may have differing political objectives and
constituencies, and each of them has sought to control the process of
governing the development of the Casino. In so doing, the State and City
governments have, in some instances, imposed obligations on the operation of
the Casino or its operator which may be mutually inconsistent. Although JCC
will seek to comply with all applicable requirements that are imposed, its
inability to comply with inconsistent requirements may have a material
adverse effect on the Casino.
The accompanying financial statements have been prepared assuming that HJC
will continue as a going concern. HJC has experienced significant losses and has
a net capital deficiency of $212,207,000 at December 31, 1997. The outcome of
the bankruptcy proceedings is uncertain. The Modified Plan will not become
effective unless the validity of the action of the LGCB in approving the Amended
and Renegotiated Operating Contract is upheld by the Louisiana Courts in time to
permit the Modified Plan to be successfully consummated. In addition, the City
Council of the City of New Orleans must execute and deliver the amended Canal
Street Casino Lease and certain other agreements. Further, there are other
conditions precedent to the occurrence of the effective date of the Modified
Plan, which are beyond the control of HJC. These matters, among others, raise
substantial doubt about HJC's ability to continue as a going concern.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PERVASIVENESS OF ESTIMATES--CERTAIN SIGNIFICANT ESTIMATES
Financial statements prepared in accordance with generally accepted
accounting principles require the use of management estimates. The most
significant estimates with regard to these financial statements are related to
the future recoverability, assuming a going concern, of buildings and equipment,
property held for development, deferred operating contract costs, and lease
prepayments, as discussed below. Realization of buildings and equipment,
deferred operating contract costs and lease prepayments is dependent upon
consummation of the Modified Plan and HJC's ability to achieve successful future
operations, as discussed in Note 2 above. The amount of buildings and equipment,
deferred operating contract costs and lease prepayments considered realizable
could be significantly reduced, if in HJC's judgment or a change in
circumstances, the likelihood of confirming a plan of reorganization and
achieving successful future operations becomes remote.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows and consolidated
balance sheets, cash and cash equivalents include highly liquid investments with
original maturities of three months or less. All cash is collateral for the Old
Bonds pursuant to the Indenture (see Notes 4 and 7); however, the Court has
authorized HJC to use such funds to pay approved post Petition Date costs.
130
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROVISION FOR UNCOLLECTIBLE ACCOUNTS
HJC records bad debt expense when the collection of casino or other
receivables becomes doubtful. During 1995, HJC recorded bad debt expense and an
allowance for doubtful accounts of $1 million, which was reduced by write-offs
of $300,000.
LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment are stated at cost. Improvements and
extraordinary repairs that extend the life of the asset are capitalized.
Maintenance and repairs are expensed as incurred.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets or related lease terms, whichever is shorter, as
follows:
<TABLE>
<S> <C>
Buildings and improvements............................................ 30 years
Furniture, fixtures and equipment..................................... 3-15 years
</TABLE>
See discussion below under Reorganization Costs and Impairment of Asset
Carrying Values.
HJC has property held for future development which has been valued at the
lower of cost or estimated fair value, net of a valuation allowance of $5.1
million provided in 1995. The amount HJC will ultimately realize from the
property could differ materially from the estimated fair value.
CAPITALIZED INTEREST
Interest is capitalized on internally constructed assets at HJC's overall
weighted average rate of interest. Interest was also capitalized on deferred
operating contract costs, through the opening of the Basin Street Casino, as
these costs represent an integral part of the Casino. No interest was
capitalized during 1996 and 1997. Interest of $8.6 million was capitalized in
1995, based upon HJC's overall average rate of interest of 14.25%.
OTHER ASSETS
DEFERRED OPERATING CONTRACT COST
Deferred operating contract cost consists of payments to the LEDGC (see Note
9) required by the Casino Operating Contract, and will be amortized over the
30-year life of the contract. The 30-year life is comprised of the 20-year
initial term plus the 10-year extension provided for in the contract.
LEASE PREPAYMENTS
Lease prepayments include non-refundable initial payments required under
HJC's leases (see Note 8) and will be amortized on a straight-line basis over
the life of the related lease. See discussion below under Reorganization Costs
and Impairment of Asset Carrying Values.
REORGANIZATION COSTS AND IMPAIRMENT OF ASSET CARRYING VALUES
Reorganization costs are segregated from normal operations in the
accompanying consolidated statements of operations and reflect the costs
incurred associated with the reorganization of HJC.
131
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reorganization costs and expenses consisted primarily of professional fees
for the years ended December 31, 1997 and 1996.
HJC periodically evaluates whether events and circumstances have occurred
that indicate that certain assets may not be recoverable. When factors indicate
that long-lived assets should be evaluated for impairment, HJC uses an estimate
of undiscounted net cash flow over the remaining life of the related lease or
contract, as applicable, in determining whether the assets are recoverable. Due
to the filing of the bankruptcy petition, during 1995 HJC evaluated all
long-lived assets in accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for Long-Lived Assets and
Long-Lived Assets to be Disposed Of." Also in 1995, the recoverability of all
current assets was assessed in light of the filing of the bankruptcy petition.
Based on management's evaluations, the following asset writedowns/reserves and
reorganization costs/reserves, respectively, were recorded in the accompanying
Consolidated Statement of Operations for the year ended December 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
ASSET
WRITEDOWNS/ REORGANIZATION
RESERVES COSTS/RESERVES
----------- --------------
<S> <C> <C>
Leasehold costs.................................................. $ 64,471 $ --
Deferred financing costs......................................... -- 27,062
Leasehold improvements........................................... -- 19,388
Capitalized interest............................................. -- 17,404
Lease exit costs--Basin Street Casino (Note 8)................... -- 12,321
Organizational costs............................................. -- 8,999
Receivables and prepayments...................................... -- 14,813
Property held for development.................................... 5,108 --
----------- --------------
Other current assets............................................. -- 2,354
69,579 102,341
Other reorganization costs--professional fees.................... -- 213
$ 69,579 $ 102,554
----------- --------------
----------- --------------
</TABLE>
The $17.2 million related to receivables and prepayments and other current
assets, which, as adjusted for subsequent recoveries (see below), are included
in other current assets in the accompanying balance sheet, and the $5.1 million
related to property held for development, are valuation allowances to reduce
these accounts to an estimated net realizable value. During 1997 and 1996,
$683,000 and $3.8 million, respectively, of these accounts were recovered.
During 1997 and 1996, management's evaluation of events and circumstances
led to the conclusion that no further writedowns or reserves were necessary
under SFAS No. 121.
Realization of buildings and equipment, deferred operating contract costs
and lease prepayments is dependent upon consummation of the Modified Plan and
HJC's ability to achieve successful future operations, as discussed in Note 2
above. The amount of buildings and equipment, deferred operating contract costs
and lease prepayments considered realizable could be significantly reduced, if
in HJC's judgment or a change in circumstances, the likelihood of confirming a
plan of reorganization and achieving successful future operations becomes
remote. In addition, the application of fresh-start accounting by HJC
132
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
or its successor as of the Effective Date will include downward adjustments,
which may aggregate approximately $100 million, to certain non-current assets.
INCOME TAXES
No provision is made in the accounts of HJC for federal and state income
taxes, as such taxes are the responsibility of the individual partners. HJC's
tax returns and amounts of its allocable revenues and expenses are subject to
examination by federal and state taxing authorities. If such examinations occur
and result in changes, the portion of HJC's income or loss reported by the
individual partners would also change.
NOTE 4. RESTRICTED CASH
ESCROWED AMOUNTS
In connection with some of the agreements entered into in the course of
HJC's bankruptcy proceeding, HJC has been required to establish escrow accounts,
pursuant to escrow agreements, at Hibernia National Bank, escrow agent. A
description of each escrow account is set forth below.
HARRAH'S JAZZ COMPANY/CITY OF NEW ORLEANS/HIBERNIA NATIONAL BANK RESTORATION
ESCROW
Funds in the approximate amount of $3.5 million were set aside in this
escrow account to complete the restoration of the Municipal Auditorium as
required in the Basin Street Casino Lease Termination Agreement ("Basin Street
Termination Agreement") among the City, the RDC and HJC, dated January 15, 1997.
On September 9, 1997, HJC, City and RDC entered into an agreement whereby
responsibility for the restoration work was assigned to the City and the RDC,
and the escrow agreement was terminated. Note 4. Restricted Cash Interest earned
on the escrow account in the amount of $118,000 was transferred to HJC. The
principal balance then remaining in the account, $174,000, was transferred to
the City.
HARRAH'S JAZZ COMPANY/CENTEX LANDIS CONSTRUCTION COMPANY, INC./HIBERNIA NATIONAL
BANK ESCROW
This escrow account was established pursuant to the Close In Agreement
between HJC and Centex Landis Construction Company, Inc. ("Centex"), dated March
5, 1996, to contain retainage payments for Centex, the contractor for the
close-in work. Funds representing retainage earned were deposited weekly during
the close in. Escrowed funds have been distributed to Centex when a written
request for disbursement has been accepted by HJC. As of December 31, 1997, HJC
continued to hold in retainage approximately $117,000 relating to a dispute
regarding the close in work on the Casino.
RIVERGATE DEVELOPMENT CORPORATION/HARRAH'S JAZZ COMPANY/CITY OF NEW
ORLEANS/HARRAH'S OPERATING COMPANY/HIBERNIA NATIONAL BANK ESCROW
Pursuant to an agreement entitled "An Agreement Regarding Modifications and
Related Agreements in Respect of Amended and Restated Canal Street Casino Lease,
Termination of Basin Street Casino Lease, Amended and Restated General
Development Agreement, the Conditional Use Ordinances and other Regulatory
Matters" (the "City Agreement"), this escrow account was established to satisfy
HJC's rent payment obligations to the City. Funds deposited in this escrow
account are to be used exclusively for payment of HJC's rent obligations under
the City Agreement. Under the City Agreement, HJC was
133
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. RESTRICTED CASH (CONTINUED)
obligated to pay the RDC rent of $736,000 per month commencing on January 1,
1997 through June 30, 1997. HJC deposited $2,208,000 in escrow to secure this
rental obligation and paid rent each month from the escrow account. As of
December 31, 1997, $149,000 remained in the escrow account representing interest
earned on these funds.
OTHER AMOUNTS HELD AS SECURITY
In addition to the amounts held in the escrow accounts described above, $3.1
million in cash is being held as security for expenses and possible claims of
the trustee and former trustee under the Indenture dated as of November 15, 1994
(the "Indenture"), between the Debtors and First National Bank of Commerce, as
trustee ("FNBC"). Approximately $3.0 million is being held by Norwest Bank
Minnesota, N.A. ("Norwest") as successor trustee to FNBC, and $104,000 is being
held by FNBC.
Pursuant to a settlement agreement between FNBC and HJC (the "FNBC
Settlement Agreement"), which is reflected in the Modified Plan and would take
effect on the Effective Date, all of FNBC's claims or other rights to indemnity
and/or reimbursement (and all liens securing the same) under the Indenture, the
agreements pursuant to which HJC's Old Bonds were issued (the "Old Bond
Documents") and the agreements pursuant to which HJC's bank financing was
secured (the "Old Bank Credit Documents") would be canceled and extinguished,
subject to certain exceptions. JCC, which is to succeed to HJC's rights and
obligations relating to the Casino under the Modified Plan, would assume, on an
unsecured basis, HJC's obligation under the Old Bond Documents and/or the Old
Bank Credit Documents to indemnify FNBC for attorneys' fees or other costs
incurred in connection with certain claims against FNBC.
JCC would also assume any other indemnity obligation of HJC under the Old
Bond Documents and the Old Bank Credit Documents as an in rem obligation limited
in recourse to, and secured solely by, $100,000 plus interest (the "FNBC Cash
Collateral") accruing from the Effective Date. As security for such
indemnification obligations, FNBC is authorized to retain the FNBC Cash
Collateral until the later of the first anniversary of the Effective Date or the
resolution of any litigation filed against FNBC within one year after the
Effective Date. Thereafter, the remaining balance of the FNBC Cash Collateral
would be released to JCC.
The amount held by Norwest, less amounts dedicated to payment of
professional fees, would be returned to JCC on the Effective Date.
134
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. TRANSACTIONS WITH PARTNERS
PARTNERS' CAPITAL
The Partners contributed total capital of $170 million prior to the closing
of the debt financing discussed in Note 7. The capital contributions consisted
of (in millions):
<TABLE>
<S> <C>
Cash................................................................ $ 107.5
Partnership debt satisfied by Grand Palais on November 16, 1994..... 33.3
Net assets and expenses paid by the Partners on behalf of the
Company........................................................... 29.2
---------
$ 170.0
---------
---------
</TABLE>
Cash contributions to capital included $5.3 million the Partners paid
directly to third parties for amounts incurred by HJC.
The Partnership Agreement provides that certain assets acquired, net of
related debt, and expenses incurred by the Partners on behalf of HJC would be
contributed capital. The principle followed in determining the net value of such
assets and expenses was on the Partners' original cost, except for the ground
lease for the Casino site which was acquired at a price negotiated among the
Partners. The Partners believe that such price represented the fair market value
of the ground lease.
Included in the amounts incurred are $4.2 million of legal fees to the law
firm of a member of HJC's Executive Committee, who is also a director of an
affiliate of Grand Palais Casino, Inc. ("Grand Palais"), and $500,000 of legal
fees to the law firm of a member of HJC's Executive Committee, who is also a
shareholder of NOLDC.
The agreements discussed in the remainder of this Note are executory
contracts (see discussion in Note 2). The Modified Plan contemplates that
certain of these agreements will be amended and assumed, or rejected.
MANAGEMENT AGREEMENT
The operations of the Casino were to be managed by Harrah's New Orleans
Management Company ("Harrah's Management" or "Manager"), an affiliate of
Harrah's New Orleans Investment Company ("HNOIC"), pursuant to a management
agreement executed on March 15, 1994. The management agreement expires 20 years
after the opening of the Basin Street Casino, but may be renewed four times in
ten-year increments at the option of Harrah's Management. Harrah's Management
was to receive a base management fee equal to 4% of Basin Street Casino gross
revenues. For managing the Casino, Harrah's Management was to receive a base
management fee equal to 3% of annual gross revenues up to $750 million; 4% of
annual gross revenues in excess of $750 million up to $1 billion; and 5% of
annual gross revenues in excess of $1 billion. In addition, Harrah's Management
was entitled to receive an incentive fee equal to 7% of the Casino's Net
Operating Revenue, as defined, in excess of $75 million, as well as other system
fees and contributions, including a marketing fund contribution of 0.4% of the
Basin Street Casino and Casino revenues. As of the Petition Date, HJC had paid
Harrah's Management $1.7 million and an additional $2.1 million was owed
Harrah's Management pursuant to a management agreement executed on March 15,
1994 for management fees related to 1995 operations.
135
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. TRANSACTIONS WITH PARTNERS (CONTINUED)
At December 31, 1997 and 1996, Due to Manager consisted of non-interest
bearing current payables for payroll and other similar costs and management
fees. At December 31, 1997 and 1996, the Due to Manager balance for these pre
Petition Date costs was $29.5 million and is classified as a liability subject
to compromise (Note 6).
CONSULTING AGREEMENTS
Pursuant to consulting agreements dated March 15, 1994, NOLDC and Grand
Palais Management Company, L.L.C., an affiliate of Grand Palais, each received
an annual consulting fee from HJC equal to 2% of gross revenues of the Basin
Street Casino and 1% of gross revenues of the Casino. As of the Petition Date,
HJC had paid $848,000 to each entity and an additional $1,064,000 was owed to
each entity for consulting fees related to 1995 operations.
OTHER AGREEMENTS
On November 16, 1994, HJC paid Embassy Suites, Inc. (which was subsequently
renamed Harrah's Operating Company, Inc.) $3 million for services related to the
arrangement of financing for the development and construction of the Gaming
Facilities and $500,000 for indemnifying the title insurers for certain
construction liens which might have arisen prior to recording of the mortgages
granted the lenders in connection with the financing completed on November 16,
1994. HJC was also obligated to pay HOCI $12.2 million upon the opening of the
Casino pursuant to a completion guarantee agreement whereby HOCI was to provide
loans to HJC if additional funds were necessary to complete the development of
the Gaming Facilities, subject to certain important exceptions and limitations.
Since the filing of HJC's Chapter 11 proceeding, HET has stated that the failure
of HJC to obtain all funds under the bank credit agreement and the acceleration
of the maturity of the bank loans terminated HET's obligations under the
completion guarantees. On December 29, 1995, the City filed a lawsuit against
HET and HOCI, among others, which alleged that HET and HOCI have failed to
perform their obligations under the completion guarantees. Pursuant to the
settlement agreement between the City and HJC (Note 8), all discovery and
pending litigation between the City and HJC or any of its partners, including
this lawsuit against HET, has been stayed. On January 23, 1996, the LEDGC also
filed a lawsuit to compel HET and HOCI either to complete construction of the
Casino or pay damages. No discovery has been taken. An answer and a cross-claim
have been filed in this litigation.
DEBTOR-IN-POSSESSION FINANCING
See Note 7.
OTHER TRANSACTIONS
During 1995, HJC sold computer equipment to HET for $495,000, which
approximated the equipment's carrying value on the date of sale. At December 31,
1997 and 1996, a receivable from HET in the amount of $495,000 is included in
other current assets on the accompanying balance sheet.
136
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. LIABILITIES SUBJECT TO COMPROMISE
Payment or other disposition of the secured and unsecured liabilities of HJC
existing as of the date of the bankruptcy proceedings is deferred until a plan
of reorganization has been consummated (see Note 2). As of December 31, 1997 and
1996, HJC's books and records reflected unsecured and undersecured liabilities
subject to settlement under Chapter 11 proceedings as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
First Mortgage Notes.................................................. $ 435,000 $ 435,000
Construction Accounts Payable......................................... 37,039 37,039
Due to Manager........................................................ 29,513 29,513
Consulting fees payable to related parties............................ 2,128 2,128
Harrah's Entertainment, Inc., and affiliates.......................... 2,281 2,281
WARN Act Settlement................................................... 2,265 2,265
Others, individually less than $1,000,000............................. 15,242 15,257
---------- ----------
$ 523,468 $ 523,483
---------- ----------
---------- ----------
</TABLE>
The full amount of the Old Bonds (First Mortgage Notes) has been included in
Liabilities Subject to Compromise since they are an undersecured liability and
the ultimate value of the security is dependent upon future events, the outcomes
of which are uncertain at this time.
As part of the bankruptcy process, creditors are allowed to file proofs of
claim with the Court specifying their position on amounts owed to them.
Creditors often include estimates of penalties, interest and damages in proofs
of claim. These amounts are subject to upward or downward adjustments and
approval by the debtors and the Court.
NOTE 7. DEBT
On November 16, 1994, HJC issued $435 million of Old Bonds bearing interest
at a rate of 14.25% per annum, plus contingent interest equal to 7.25% of HJC's
consolidated earnings before interest, taxes, depreciation and amortization, due
2001, which are secured by substantially all assets of HJC.
The Old Bonds are redeemable, in whole or in part, any time on or after
November 15, 1999, initially at 114.00% of the principal amount thereof for one
year and then declining to 107.25% until maturity on November 15, 2001. In
addition, upon the occurrence of a change in control, as defined, holders of the
Old Bonds may elect to require HJC and Finance Corp. to repurchase all or any
part of such holder's Old Bonds at a purchase price equal to 101% of the
principal amount thereof, together with accrued interest to the purchase date.
There are no sinking fund requirements under the Indenture; however, as
discussed in Note 8, HJC's lease agreement for the Casino site calls for sinking
fund payments or debt retirements commencing two years following the issuance of
secured debt.
The Old Bonds were issued pursuant to the Indenture which provides that an
event of default occurs when HJC or Finance Corp. files a voluntary bankruptcy
petition under Chapter 11, and that if such an event of default occurs, all of
the principal of, premium applicable to, and accrued interest on, the Old Bonds
will be immediately due and payable on all outstanding Old Bonds without any
declaration or other act on the part of the Indenture Trustee or the holders of
the Old Bonds. In accordance with the provisions
137
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. DEBT (CONTINUED)
of the Bankruptcy Code, payment on HJC's pre-petition debt has been suspended
and reclassified as "Liabilities Subject to Compromise." HJC believes that all
of its secured creditors are undersecured; therefore, HJC stopped accruing
interest on unsecured and undersecured debt as of November 22, 1995. For 1997,
1996 and 1995, contractual interest on those obligations amounted to $62.0
million, $62.0 million and $68.2 million, respectively, which is $62.0 million,
$62.0 million and $6.6 million, respectively, in excess of reported interest
expense in those years.
Based on market quotes of its publicly traded first mortgage notes, the fair
value of HJC's long-term debt was approximately $134.9 million at December 31,
1997.
Additionally, HJC entered into a credit agreement with a group of banks
which provided Bank Credit Facilities aggregating $175 million (the "Bank Credit
Facilities"). At December 31, 1994, $75 million was outstanding under one of the
term loan commitments with interest at 9.625% through March 21, 1995. On
November 19, 1995, representatives of HJC's bank syndicate informed HJC that the
bank syndicate would not disburse funds to HJC under the terms of the bank
credit facility. As of November 20, 1995, $145 million was outstanding, although
not available to HJC, under the Bank Credit Facilities. The bank credit facility
was accelerated and terminated by the bank lenders on November 21, 1995 and all
amounts outstanding at that date were recovered by the group of banks.
Accordingly, no amounts were outstanding under the Bank Credit Facilities at
December 31, 1997 or 1996.
As discussed in Note 1, HJC has obtained DIP Financing. Under the terms of
the Seventh DIP Loan Order, the DIP Lender agreed to extend the maturity of all
DIP Loans to the earlier of: (i) April 30, 1998, or such later date to which the
DIP Lender consents; (ii) the Effective Date of the Modified Plan; (iii) the
date on which the Modified Plan is revoked or is otherwise no longer in full
force and effect; (iv) the dismissal of HJC's Chapter 11 case; (v) the
conversion of HJC's Chapter 11 case to a case under Chapter 7 of the Bankruptcy
Code; (vi) the appointment of a trustee for HJC; (vii) any stay, reversal,
modification or other amendment in any respect (except to the extent acceptable
to the DIP Lender) or termination or expiration of the Seventh DIP Loan Order or
the Confirmation Order (as defined herein); (viii) any of the Milestone Dates if
one or more of the Financing Milestones (each as defined in the final order
approving the Seventh DIP Loan) required to be achieved on or before such date,
after giving effect to any extension, has not been achieved to the satisfaction
of the DIP Lender in its sole discretion; or (ix) the State legislature's
disapproval of the December 9, 1997 Casino Operating Contract. HJC expects that
on March 30, 1998, the DIP Lender will elect to waive the financing milestones
requiring legislative consideration of the December 9, 1997 Casino Operating
Contract and City Council approval of the amended Canal Street Casino Lease and
the amended GDA on or prior to April 1, 1998. There is no assurance that the
April 30, 1998 maturity date under the DIP Loans will be waived or that
additional DIP Financing will be available.
Interest on all existing DIP Loans is accruing at the rate of 8% per annum,
payable upon maturity. As "adequate protection" for the existing DIP Loans, the
DIP Lender has been granted (i) administrative priority status for all of the
existing DIP Loans, with priority equivalent in priority to a claim under
Section 364(c)(1) of the Bankruptcy Code, and in a priority over all other costs
and expenses of administration of the kinds specified in Sections 105, 326,
503(b), 507(a) or 507(b) of the Bankruptcy Code; and (ii) a first priority,
non-avoidable, valid, enforceable and automatically perfected lien and security
interest on and in all of HJC's assets, subject only to (a) all non-avoidable,
valid, enforceable and perfected liens and security interests in HJC's property
(other than personal property, certain parcels of real estate and cash and cash
138
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. DEBT (CONTINUED)
equivalents) that existed on the Petition Date other than the prepetition and
postpetition liens and security interest in favor of the Bondholders, the
Indenture Trustee, the predecessor Indenture Trustee, the prepetition bank
lenders or their collateral agent, predecessor collateral agent or
administrative agent on any of HJC's property, (b) any and all non-avoidable,
valid, enforceable and perfected liens, security interests and/or rights of
setoff in favor of the Indenture Trustee and the predecessor Indenture Trustee
on $1.5 million previously deposited with them (subject to reduction for fees
and expenses of the predecessor indenture trustee), (c) any and all postpetition
liens and security interests in favor of any or all of the Bondholders and the
Indenture Trustee on any causes of action of HJC against any "insiders" (as
defined in Section 101(31) of the Bankruptcy Code) arising under Sections
544(b), 547, 548, 550 or 553 of the Bankruptcy Code, (d) certain, specified
allowed administrative expense claims for the fees, expenses and costs of
professionals retained by HJC and the Committees, and (e) any existing or future
rights of setoff, compensation and/or recoupment in favor of the City, the RDC,
the State and/or the LEDGC. The Seventh DIP Loan Order further provides that no
claims or liens of the DIP Lender shall have priority over any amounts paid
prior to the maturity of the existing DIP Loans to third parties pursuant to any
budget approved by the DIP Lender.
HJC will require additional funds prior to the Effective Date, and HJC
presently has no source of funding other than the DIP Lender. There can be no
assurance that the DIP Lender (or any other lender) will be willing to lend
additional amounts to HJC. At December 31, 1997 and 1996, HJC had no long-term
post Petition Date debt.
NOTE 8. LEASES
HJC leases both real estate and equipment for use in its business through
operating leases. In addition to minimum rentals, certain leases provide for
contingent rents based on percentages of revenue and certain payments to
Partners out of cash flow, as defined. Rent payments with escalation provisions
are amortized so as to achieve level rent expense, except for the impact of
contingent rentals, over the life of the lease. Real estate operating leases
range from 21 months to 30 years with options for extensions up to an additional
30 years. The average remaining term for non-real estate leases extends
approximately one year.
HJC's operating leases, including HJC's property leases, are executory
contracts. Under the Bankruptcy Code, a company in reorganization can choose to
accept or reject executory contracts.
The aggregate contractual future minimum rental commitments, excluding
contingent rentals as of December 31, 1997, were as follows (in thousands):
<TABLE>
<S> <C>
1998.............................................................. $ 9,567
1999.............................................................. 16,092
2000.............................................................. 15,191
2001.............................................................. 15,154
2002.............................................................. 15,116
Thereafter........................................................ 364,932
---------
$ 436,052
---------
---------
</TABLE>
139
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. LEASES (CONTINUED)
THE CASINO SITE
On March 15, 1994, HJC entered into a lease with the RDC and the City for
the Rivergate site on which the Casino was being constructed, all pursuant to an
assignment, dated as of March 15, 1994, from Grand Palais. The initial term,
from March 15, 1994, is 30 years, with three ten-year renewal options.
As of December 31, 1995, the required lease prepayment of $30 million and
mobilization payment of $8.75 million had been paid. Annual payments after
opening are subject to a minimum annual aggregate amount of approximately $15.4
million subject to escalation beginning in 2001, and 4.99% of certain payments
to Partners out of cash flows and proceeds of major capital events, as defined.
The lease also requires sinking fund payments or debt retirements of the
lesser of 2% of the original principal amount of HJC's secured debt or 25% of
net income, escalating to 20% of such original principal amount in each of the
two years ending one year prior to maturity, commencing two years following the
issuance of secured debt. In addition, maintenance of a capital replacement fund
to be funded by a percentage of gross gaming and non-gaming revenues of 1.5% the
first year, 1.75% the second year and 2.0% each succeeding year is required.
Costs of capital replacements may be paid from this fund. Amounts in excess of
$25 million, adjusted upwards by the Consumer Price Index ("CPI"), may be
withdrawn by HJC. Upon termination of the lease, the balance of the funds will
be available to restore the facilities.
THE BASIN STREET CASINO SITE
On March 15, 1994, HJC entered into a lease with the RDC and the City of New
Orleans for use of the Municipal Auditorium as the Basin Street Casino site
during the development of the Casino. The initial term, commencing March 15,
1994, was two years with nine two-year extension options, except that the lease
was to terminate on the date the Casino opened to the general public.
Annual rent and other payments due under the lease after opening were
subject to a minimum annual aggregate amount of approximately $3.4 million and
4.99% of certain payments to Partners out of cash flow and proceeds of major
capital events, as defined. Rent payments were due equal to 6% of gross non-
gaming revenues, and the amount by which 5% of gross gaming revenues for each
fiscal year exceeds the base rent of $200,000 per month.
Upon the opening of the Casino, the Basin Street Casino was to be closed and
the premises restored to its previous use as a civic auditorium. Further,
additional improvements or replacements were to be made at a cost not to exceed
$1.2 million plus annual CPI increases.
HJC has entered into the Basin Street Termination Agreement. Under the Basin
Street Termination Agreement, the RDC and the City, on the one hand, and HJC, on
the other, mutually released all rights and obligations under the Basin Street
Casino Lease, except that the release does not affect any rights or obligations
of the parties under the City Agreement in respect of the Municipal Auditorium
or the restoration work as set forth therein. The RDC and the City will have no
claim for damages as a result of such termination. Pursuant to the Basin Street
Termination Agreement, the Basin Street Casino Lease automatically terminated on
February 20, 1997, the date on which the LGCB approved the termination of the
Basin Street Casino Lease, with no further action required by the RDC, JCC or
the City.
140
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES
HJC is involved in various inquiries and administrative proceedings arising
in the normal course of business. While any proceeding has an element of
uncertainty, HJC believes that the final outcome of these matters will not have
a material adverse effect upon HJC's consolidated financial position or its
results of operations.
See Items 1 and 2 "Business and Properties" in HJC's Annual Report on Form
10-K for the year ended December 31, 1997 for a discussion of anticipated
modifications to the agreements discussed in the balance of this note as a
result of the Modified Plan.
OPERATING CONTRACT
HJC has entered into the Casino Operating Contract with the LEDGC to operate
the Gaming Facilities for 20 years, with a 10-year extension option. The Casino
Operating Contract requires HJC to pay a total of $125 million in installments
to the LEDGC, with payments due at various times prior to the opening of the
Basin Street Casino, with the final payment due within ten days after
commencement of Basin Street Casino operations (which was paid during 1995),
plus annual compensation, as follows:
Basin Street Casino--During the period of the Basin Street Casino's
operation, HJC paid the LEDGC payments equal to 25% of the Gross Gaming Revenue,
as defined.
The Casino--After the Casino opens, HJC is required to pay the LEDGC
payments in daily installments, calculated on an annualized basis, equal to the
greater of $100 million and a percentage of Gross Gaming Revenues, as defined,
as set forth below:
- 19% of the first $600 million; plus
- 20% of the next $100 million; plus
- 22% of the next $100 million; plus
- 24% of the next $100 million; plus
- 25% of the amount over $900 million.
The Casino Operating Contract also requires HJC to pay the LEDGC $11,364 per
month during the construction of the Gaming Facilities and to comply with
various covenants and conditions, including completing construction by specified
dates.
The Casino Operating Contract specifies the circumstances under which LEDGC
may revoke the contract. The Casino Operating Contract provides that, subject to
the rights of leasehold mortgagees, the occurrence of a default of a material
obligation by HJC could result in the termination of the contract. Such defaults
under the Casino Operating Contract include, among other things: (i) HJC's
failure to pay the LEDGC payments or any other payment, (ii) financial
instability of HJC, (iii) unsuitability of HJC, (iv) adjudication of HJC as
being in default under certain leases and agreements if, in LEDGC's opinion, the
default materially affects HJC's ability to perform its obligations under the
Casino Operating Contract, (v) HJC's filing of a petition or other request for
relief seeking any reorganization, liquidation, dissolution or similar relief,
or (vi) HJC's failure to perform continued or comply with any other material
obligation in the Casino Operating Contract. In the event of a default, LEDGC is
required to provide notice to HJC of the default and to provide HJC with an
opportunity to cure the default. If HJC does not cure the default
141
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
within the time period provided in the Casino Operating Contract, LEDGC is
permitted to terminate the Casino Operating Contract, enforce the obligation in
default and exercise any other right or remedy available to LEDGC, including the
imposition of fines. Neither LEDGC nor LGCB have provided notice to HJC of any
defaults under the Casino Operating Contract. HJC believes that some of the
default provisions in the Casino Operating Contract may be unenforceable
pursuant to the Bankruptcy Code, so long as HJC cures all other defaults. There
is, however, no assurance that HJC can prevent a revocation of the Casino
Operating Contract by the LGCB or the Louisiana State legislature or recover
damages as a result of the revocation. Revocation of the Casino Operating
Contract would have a material adverse effect on HJC.
GENERAL DEVELOPMENT AGREEMENT
The GDA entered into with the RDC requires HJC to pay up to $2 million for
transportation and roadway improvements to mitigate the impact of the Casino
development on the city's traffic and transportation network. HJC is also
obligated to reimburse the RDC for certain costs incurred during the
construction of the Gaming Facilities, not to exceed an aggregate amount of $1.6
million. As of the Petition Date, HJC had paid $3.4 million related to these
obligations.
OPEN ACCESS PROGRAM AND PLANS
The Open Access Program requires HJC to form a special purpose corporation
to interface with new and existing businesses owned and controlled by
minorities, women and disadvantaged persons. HJC is required to capitalize this
corporation with $500,000 and underwrite its operations at a minimum of $250,000
per year for five years. HJC must also contribute an additional $500,000 per
year for five years to similar public efforts, in accordance with standards to
be established by HJC. As of the Petition Date, HJC had paid $883,000 towards
this obligation.
OTHER CITY AGREEMENTS
On October 5, 1994, HJC and the City entered into an agreement obligating
HJC to pay the City $4 million shortly after closing the debt financing
discussed in Note 7, which was paid on November 28, 1994, and make an annual
payment of $1.25 million for each year during the term of the Casino lease in
which HJC receives gross gaming revenues in an amount of $400 million or more.
HJC has delivered to the City a $1.5 million irrevocable letter of credit to
secure these payments.
CONSTRUCTION CONTRACTS
The Court has extended HJC's time to assume or reject executory contracts,
including construction contracts, until the time provided for in the Modified
Plan. HJC has entered into agreements with certain of its major contractors,
including Centex, pursuant to which such contractors have agreed to modify the
terms of their executory contracts with HJC.
LITIGATION
DECLARATORY JUDGMENT ACTIONS. On March 18, 1998, two separate petitions
were filed seeking a declaratory judgment and injunctive relief in the wake of
the Attorney General's opinion to the effect that
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the LGCB could execute the Amended and Renegotiated Casino Operating Contract
without further action by the State legislature. In JORDAN VS. LOUISIANA GAMING
CONTROL BOARD AND MURPHY J. FOSTER, Case No. 448192 (19th Judicial District
Court, State of Louisiana, Parish of East Baton Rouge), the plaintiff, a
Louisiana State Senator, sought a declaratory judgment and injunctive relief to
preclude the LGCB from executing a casino operating contract without the
approval of the State legislature. Joseph B. Boucree, Sr., former president of
the LEDGC, has filed a petition of intervention in the JORDAN litigation,
alleging that the LEDGC (rather than LGCB) retains the power to renegotiate
HJC's Casino Operating Contract, and that the LGCB's actions in approving the
Amended and Renegotiated Casino Operating Contract are invalid.
In BEAN VS. LOUISIANA GAMING CONTROL BOARD AND RIVERGATE DEVELOPMENT
CORPORATION, No. 448218 (19th Judicial District Court, State of Louisiana,
Parish of East Baton Rouge), the plaintiff, also a member of the Louisiana State
Senate, sought declaratory and injunctive relief precluding the LGCB from
entering into a casino operating contract with JCC without the approval of the
Louisiana legislature. HJC and the Bondholders Committee filed separate
petitions of intervention in that litigation. On March 25, 1998, the plaintiff
in JORDAN filed a petition of intervention and motion for consolidation of BEAN
with JORDAN. On March 25, 1998, the Court hearing the BEAN litigation entered
orders (1) directing that applications to the Louisiana Supreme Court for
supervisory writs be filed in the Louisiana Supreme Court on or before March 26,
1998, and (2) staying all proceedings in BEAN pending action by the Louisiana
Supreme Court on such writ applications. On March 25, 1998, HJC filed an
application for supervisory writs in the Louisiana Supreme Court, which has been
assigned Case No. 98CD0787. On that same date, Senator Bean, the LGCB and the
RDC filed a joint application for supervisory writs in the Louisiana Supreme
Court, which has been assigned Case No. 98CD0786. On March 27, 1998, Supreme
Court entered an order denying all writ petitions to the extent they sought an
immediate hearing before the Louisiana Supreme Court prior to a decision on the
merits by the 19th Judicial District Court, and directed that the BEAN
litigation be consolidated with the JORDAN litigation. The Supreme Court also
directed that the judge hearing the JORDAN litigation render judgment on the
merits no later than Friday, April 3, 1998, and reserved for further
consideration the applicants' requests that the intermediate court of appeals be
bypassed until after judgment is rendered by the 19th Judicial District Court.
On March 27, 1998, the judge hearing the Jordan litigation directed that all
parties in the consolidated litigation file pre-trial briefs no later than noon
on Sunday, March 29, 1998, and scheduled a trial to commence on Monday, March
30, 1998.
There can be no assurance that the validity of the action of the LGCB in
approving the Amended and Renegotiated Casino Operating Contract will be upheld
by the Louisiana courts or that the Louisiana courts will rule upon these
challenges in time to permit the Proposed Modified Plan to be successfully
consummated. In the event that the courts fail to uphold the validity of the
execution of the Amended and Renegotiated Casino Operating Contract by the State
in a timely fashion, the Proposed Modified Plan cannot be consummated, and HJC's
Chapter 11 case likely would be converted to a liquidation case under Chapter 7
of the Bankruptcy Code.
WARN ACT LITIGATION. RUSSELL M. SWODY, ET AL. V. HARRAH'S NEW ORLEANS
MANAGEMENT COMPANY AND HARRAH'S ENTERTAINMENT, INC., Civil No. 95-4118, was
filed against HET on December 13, 1995 in the District Court and subsequently
amended. Swody is a class action under the WARN Act and ERISA and seeks damages,
INTER ALIA, for the alleged failure to timely notify workers laid off by HJC.
Plaintiffs seek
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unspecified damages, as well as costs of legal proceedings, for themselves and
all members of the class. After a hearing, the District Court certified the
class on April 22, 1996.
Early in 1996, SWODY was consolidated with SUSAN N. POIRIER, DARLENE A.
MOSS, ET AL. V. HARRAH'S ENTERTAINMENT, INC., HARRAH'S NEW ORLEANS MANAGEMENT
COMPANY, and Harrah's Operating Company, Civil No. 96-0215, which was filed in
the United States District Court for the Eastern District of Louisiana on
January 17, 1996, and subsequently amended. The POIRIER class was certified with
Swody on April 22, 1996, and the consolidated POIRIER and SWODY cases were set
for trial on May 5, 1997.
Similar complaints were filed by Ms. Poirier in the Bankruptcy Court in HJC,
HNOIC and Finance Corp. bankruptcy cases (Adversary Nos. 96-1015, 96-1014, and
96-1013). The POIRIER adversary proceedings purported to be class actions,
asserting claims under the WARN Act, as well as ERISA. On or about February 23,
1996, HJC and HNOIC each filed a motion in its respective adversary proceeding
to dismiss the POIRIER adversary proceeding on procedural grounds. A hearing on
such motions to dismiss was held on March 19, 1996. Later, Finance Corp. also
filed a similar motion. The Bankruptcy Court granted the motions to dismiss with
respect to each of the Debtors on or about June 28, 1996.
Proofs of claims, on behalf of individual, alleged, terminated employees and
purportedly on behalf of all alleged former employees, were filed in HJC's
Chapter 11 case. The plaintiffs in the litigation (the "WARN Act Claimants")
moved to certify three classes on whose behalf the plaintiffs seek to act as
class representatives for purposes of the proofs of claims. The Bankruptcy Court
heard arguments on such motions on July 11, 1996, and denied the motions by
Memorandum Opinion and Order dated October 10, 1996. However, in order to
facilitate a proposed settlement reached by the Debtors and the WARN Act
Claimants (discussed below), the WARN Act Claimants filed motions to reconsider
that ruling. On December 10, 1996, the Bankruptcy Court certified classes for
settlement purposes only.
The WARN Act Claimants contend that the Debtors and the defendants in the
District Court cases operated as a single business enterprise with respect to
operations in New Orleans and contend that, under this alleged arrangement, HJC
may be liable to the claimants under the WARN Act along with the defendants in
the District Court cases.
In order to avoid the expense, delay and risks associated with additional
litigation, the Debtors and the WARN Act Claimants agreed to compromise and
settle all of the WARN Act Claimants' claims on the terms summarized below,
which settlement is reflected in the Modified Plan. Under the settlement, JCC
will pay to those individuals laid off on or about November 22, 1995 the sum of
$2,265,000, which amount includes the fees and costs of the WARN Act Claimants'
attorneys and certain taxes attributable to the WARN Act settlement. The amounts
paid to these individual WARN Act Claimants will be based upon instructions from
the WARN Act Claimants' attorneys. The individual awards will be based upon
information obtained through the payroll records for the time period of October
1 through November 22, 1995. In addition to this monetary settlement, the
individuals laid off on or about November 22, 1995 will be offered preferential
re-employment to their former positions or, if their former positions no longer
exist or are not presently available, to substantially equivalent positions to
the extent that such jobs are or become available. "Preferential re-employment"
means that they will be offered employment before employment is offered to any
person who was not laid off on or about November 22, 1995. WARN Act Claimants
who were laid off in August of 1995 will not receive a monetary award, but will
be placed on a secondary preferential re-hire list. These claimants will be
offered re-employment after those employees
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laid off on or about November 22, 1995 and employees laid off by the Flamingo
Casino. They will remain on the preferential re-hire list for one year following
the date of the opening of the Casino. A motion seeking approval of this
compromise and settlement was filed and the Bankruptcy Court preliminarily
approved the settlement on December 10, 1996. A final hearing on the settlement
took place on February 3, 1997, at which time the Bankruptcy Court approved the
settlement subject to the occurrence of the Effective Date. This settlement is
contingent upon consummation of the Modified Plan.
The WARN Act Claimants also filed a motion requesting that the Bankruptcy
Court order HJC to amend its schedules of creditors to include all alleged,
former employees and to extend the deadline for such alleged, former employees
to file proofs of claims. As part of the settlement described above, the WARN
Act Claimants have withdrawn such motion.
MCCALL LITIGATION. On April 26, 1993, a lawsuit was filed in the Civil
District Court for the Parish of Orleans (the "Civil District Court") captioned
MCCALL V. MCCALL, ET AL. (the "McCall Litigation"). Plaintiffs asserted an
ownership interest in certain land underlying the Rivergate site and also sought
permanent injunctive relief prohibiting the use of such land for the Casino. The
lawsuit also challenged the manner in which the RDC was formed and its authority
to enter into the Canal Street Casino Lease and the Basin Street Casino Lease.
HJC intervened in the lawsuit and aligned itself with the City and the RDC. On
February 22, 1994, the Civil District Court granted the motion for summary
judgment filed by the City, the RDC and HJC, thereby dismissing all claims. On
February 23, 1995, the state appellate court unanimously affirmed the Civil
District Court's ruling that plaintiffs did not have an ownership interest in
any land underlying the Rivergate site and remanded the case to the Civil
District Court to determine whether plaintiffs had standing to assert the other
claims concerning the authority of the RDC to enter into the Canal Street Casino
Lease and the Basin Street Casino Lease. On April 28, 1995, all parties to the
litigation applied to the Louisiana Supreme Court for writs of certiorari. On
June 30, 1995, the Louisiana Supreme Court unanimously denied all writ
applications. The property claims in this litigation have been resolved in favor
of, the City and the RDC. On December 5, 1995, the Civil District Court
dismissed the cause of action challenging the constitutionality of the RDC for
lack of standing. Harry McCall then filed a notice of appeal.
On March 12, 1996, Harry McCall, one of the claimants in the McCall
Litigation, filed a motion in the Bankruptcy Court seeking relief from the
automatic stay in bankruptcy to pursue this appeal. A hearing on Mr. McCall's
motion for relief from the stay was held on April 2, 1996, following which the
Bankruptcy Court modified the automatic stay to permit the McCall Litigation to
proceed. On April 18, 1996, HJC, the City and the RDC filed a joint motion
asking the Bankruptcy Court to amend and restate its order granting Mr. McCall's
motion for relief from the automatic stay. A hearing on the joint motion was
held on May 13, 1996, and the Bankruptcy Court granted the joint motion.
Specifically, the Bankruptcy Court amended the order granting relief from the
stay to clarify that the automatic stay did not apply, and had never applied, to
the McCall Litigation or any appeal taken therefrom. On October 10, 1996, the
Fourth Circuit Court of Appeals for the State of Louisiana voted 2-1 to reverse
the trial court's dismissal for lack of standing. Under the Louisiana
Constitution, this non-unanimous decision required that the appeal be heard
before a five-judge panel of the same court. Oral argument before the five-judge
panel took place on October 29, 1996 and that panel also reversed the trial
court's dismissal for lack of standing with respect to the cause of action
challenging the constitutionality of the RDC. The City, the RDC and HJC each
applied for a writ of certiorari with the Louisiana Supreme Court, which was
denied without comment.
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In addition, on April 6, 1994, Harry McCall filed a motion in Civil District
Court to enforce a purported settlement agreement of the McCall Litigation
entered into with HJC, asserting that he was entitled to receive settlement
proceeds based upon a settlement agreement. HJC does not believe that a binding
settlement agreement was reached with Mr. McCall. On July 8, 1994, the Civil
District Court ruled that Mr. McCall's motion was procedurally defective. He
subsequently failed to cure the deficiency and, on September 12, 1994, the court
dismissed Mr. McCall's motion to enforce the settlement. Mr. McCall filed a
notice of appeal and, on October 12, 1995, the Fourth Circuit Court of Appeals
for the State of Louisiana reversed the district court's ruling, allowing Mr.
McCall to pursue his claim.
On March 12, 1996, Harry and Henry McCall filed a proof of claim against HJC
in the amount of $2,000,000 which appeared to be based upon the purported
settlement that was the subject of the April 1994 motion in Civil District
Court. They also filed an adversary proceeding in the Bankruptcy Court in May,
1996 seeking to enforce the purported settlement agreement. HJC filed an
objection to the McCalls' proof of claim on May 2, 1996. The Bankruptcy Court
ordered that HJC's objection to the proof of claim and the adversary proceeding
be consolidated for purposes of trial and discovery. At a hearing on September
16, 1996, the Bankruptcy Court ruled that Thomas Tucker, attorney for the
McCalls, could not be both a witness and attorney in the matter. The trial was
adjourned to give Mr. Tucker time to decide which role he would take. On
September 26, 1996, the McCalls filed a motion seeking an interlocutory appeal
on this decision of the Bankruptcy Court. At that time, the Bankruptcy Court
stayed the underlying action pending a decision on the appeal. On October 16,
1996, the District Court denied the motion for an interlocutory appeal. The
McCalls' motion for reconsideration of the decision was also denied.
Subsequently, Mr. Tucker elected to be a witness.
On April 18, 1997, the Debtors and Thomas Tucker, Harry McCall, Henry McCall
and Susan LaFaye (an attorney who claims an interest in proceeds of the McCall
Litigation) (the "McCall Claimants") reached a tentative agreement to settle
various litigation and other legal claims, demands and causes of action (the
"McCall Settlement Agreement"). The McCall Settlement Agreement contemplates,
among other things, that:
(i) The McCall Claimants and the law firm of Tucker & West will withdraw
and dismiss with prejudice any and all proofs of claim and other demands for
payment filed by any one or more of them in the Chapter 11 Cases, including
any adversary proceedings, and also will release any and all claims,
demands, suits and causes of action of any type they have against HJC and
other persons identified in the McCall Settlement Agreement.
(ii) The McCall Claimants will file in HJC's case an amended proof of
claim in which they will jointly assert against HJC an unsecured claim in
the amount of $145,500, which HJC will recognize as a valid and enforceable
general, unsecured claim against HJC.
(iii) On the later of (a) the Effective Date or (b) the date on which a
court of competent jurisdiction enters judgments dismissing all of the
litigation described in (iv) below with prejudice, HJC will deliver payment
of the amended claim to an escrow agent designated in the McCall Settlement
Agreement. Thereafter, the escrow agent will distribute to Ms. LaFaye the
sum of $9,500, and will distribute to the other McCall Claimants, as their
interests may appear, the sum of $87,985. The balance, or $48,015, will be
held in escrow, and will be disbursed together with any accrued
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interest on the earlier of (a) the first anniversary of the Effective Date
or (b) the date of commencement of gaming at the Casino. If, however, prior
to the date of commencement of gaming at the Casino, HJC advises the escrow
agent that there has been a default under the McCall Settlement Agreement,
there will be no distribution from escrow until the escrow agent receives an
appropriate order or judgment from the Bankruptcy Court authorizing
distribution and identifying the recipients.
(iv) The McCall Claimants will dismiss with prejudice their adversary
proceeding in HJC's bankruptcy proceeding and all the actions they have
filed relating to HJC and the Casino.
(v) The McCall Claimants and Tucker & West will not, individually or
collectively, take any action, whether directly or acting through any other
person or entity, to oppose the conducting of casino gaming operations
including, but not limited to (a) filing of any suits, actions or other
proceedings against HJC and its successors, (b) seeking to retard, delay or
deny the issuance to HJC and its successors of any licenses, orders, grants
or other awards by any governmental entity or (c) assisting any other person
with respect to the foregoing.
The parties to the McCall Settlement Agreement are currently engaged in the
preparation of a definitive agreement to resolve their disputes, which will then
be executed and submitted to the Bankruptcy Court for its approval. The McCall
Settlement Agreement contemplates that Harry McCall will dismiss the McCall
Litigation with prejudice on the Effective Date.
TUCKER LITIGATION (CITY). A lawsuit captioned TUCKER V. CITY OF NEW ORLEANS
was filed on October 5, 1994 against the City (the "Tucker Litigation") in the
Civil District Court for the Parish of Orleans by a resident of the Parish
challenging the validity of three casino-related ordinances adopted by the City
Council on September 23, 1994 which authorized, among other things, amendments
to the Canal Street Casino Lease. The lawsuit also challenges the
constitutionality of a clarifying amendment to the Louisiana Gaming Act. The
clarifying amendment addresses a provision of the Canal Street Casino Lease
which requires at least 80% of the persons employed by the Casino to be
residents of Orleans Parish. The effects of the ordinances and the amendment to
the Louisiana Gaming Act were, among other things, (i) to clarify the intent of
the Louisiana Gaming Act that a provision of a contract (to which the gaming
operator is a party) that requires more than 50% of the persons employed to be
residents of any one parish is void, but that the contract as an entirety would
not be void under the Louisiana Gaming Act, and (ii) to reduce the residency
requirement in the Canal Street Casino Lease if necessary to comply with
applicable law. On November 18, 1994, the City filed preliminary exceptions
contending that the plaintiff had failed to name indispensable and necessary
parties as defendants. On March 13, 1995 and August 17, 1995, the plaintiff
filed supplemental amended petitions. On September 22, 1995, the City requested
the plaintiff consider its prior filed exceptions as applicable. There has been
no activity in the case since that time.
Mr. Tucker and the law firm of Tucker & West filed proofs of claims against
the estates of HJC and HNOIC for amounts which they allege were owed to them
with respect to the Tucker Litigation and other litigations, including the
McCall Litigation. HJC and HNOIC filed objections to these proofs of claims.
Subsequently, on August 13, 1996, the claimants consented to disallowance of
these claims.
The McCall Settlement Agreement contemplates that the Tucker Litigation will
be dismissed with prejudice as of the Effective Date.
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LANDMARKS LITIGATION (JOAN OF ARC). On December 6, 1994, a lawsuit
captioned LOUISIANA LANDMARKS SOCIETY, INC. V. CITY OF NEW ORLEANS, RIVERGATE
DEVELOPMENT CORPORATION, AND HARRAH'S JAZZ COMPANY (the "Landmarks Litigation")
was filed seeking to prevent, among other things, HJC from moving the Joan of
Arc statue or using any part of the Place de France without the approval of the
Secretary of the United States Department of the Interior. The Place de France
is located adjacent to the Casino. The original design plans for the Casino
contemplated locating the main access areas for the Casino in the area currently
in use as the Place de France. The plaintiff alleged that the Place de France
was developed with federal funds for historic purposes and that, therefore, the
statue could not be relocated and that the Place de France could not be
converted to another use without the approval of the Secretary of the Interior.
The plaintiff also alleged a pendent state law claim that the Place de France
had been dedicated as a park by the City and that the conversion of the Place de
France to another use would require the approval of the Louisiana State
Legislature. On January 27, 1995, the United States District Court for the
Eastern District of Louisiana issued an order permanently restraining the City,
the RDC and HJC from removing the Joan of Arc statue or using any part of the
Place de France without the approval of the United States Secretary of the
Interior. The City, the RDC and HJC filed notices of appeal. The plaintiff filed
a cross-appeal regarding the scope of the injunction. Oral argument on the
appeal took place on February 7, 1996 after HJC sought, and received, relief
from the automatic stay to proceed with the appeal. On June 7, 1996, the United
States Court of Appeals for the Fifth Circuit reversed the decision of the
District Court, vacated the permanent injunction entered by the District Court,
rendered a judgment of dismissal against the plaintiff for failure to state a
cause of action on the grounds that there is no implied private right of action
under the applicable federal statute, and dismissed the plaintiff's cross-appeal
regarding the scope of the injunction as moot. On July 12, 1996, the Fifth
Circuit denied plaintiff's petition for rehearing.
Because of this litigation, HJC had to redesign the southern part of the
Casino, at substantial cost. As a result of the modification, the size of the
Casino was decreased by approximately 2,400 square feet.
The City has requested the written approval of the United States Secretary
of the Interior to remove the Joan of Arc statue from the Place de France. Such
approval has not yet been received and may not be forthcoming. If such approval
is received and the Joan of Arc statue is removed, HJC may decide to make
further modifications to the entrance to the Casino.
Louisiana Landmarks Society, Inc., James Logan and the law firm of Tucker &
West filed proofs of claims against the estates of HJC and HNOIC for amounts
they alleged were owed to them as a result of the Landmarks Litigation. HJC and
HNOIC filed objections to these proofs of claims. On August 13, 1996, Louisiana
Landmarks Society, Inc. and the other claimants consented to disallowance of
their claims.
TUCKER LITIGATION (JOAN OF ARC). On July 24, 1996, Thomas Tucker filed
another lawsuit entitled, TUCKER V. CITY OF NEW ORLEANS AND RIVERGATE
DEVELOPMENT CORPORATION, seeking to enjoin alteration of the Place de France
absent the express written approval of the United States Secretary of the
Interior. HJC has not been named as a defendant. The lawsuit, however, could
affect the development of the Casino. Mr. Tucker has characterized his claim as
one based upon section 1983 of title 42 of the United States Code for purported
violations of his rights of due process and equal protection. The factual
allegations of the complaint are virtually identical to those asserted in the
Landmarks Litigation. Mr. Tucker served as counsel of record for the plaintiff
in the Landmarks Litigation, and he is both a member and trustee of that
plaintiff. On October 14, 1996, Tucker filed an amended complaint naming First
American Title Insurance Company as an additional defendant. Upon information
and belief, all the defendants were thereafter
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served with the complaint. HJC sought and received permission to intervene in
the action on January 21, 1997.
The McCall Settlement Agreement contemplates that this suit will be
dismissed with prejudice on the Effective Date.
HNOIC/NOLDC LITIGATION. On September 26, 1995, HNOIC brought a lawsuit
against New Orleans/Louisiana Development Corp. ("NOLDC") in the District Court
seeking a declaratory judgment that (i) HNOIC was a 52.93% owner of HJC, (ii)
the 1994 option agreement with NOLDC had expired, and (iii) NOLDC was not a
"material partner" of HJC. This lawsuit is pending as Civil Action No. 95-3165.
On September 28, 1995, NOLDC brought a lawsuit against, among other parties,
HNOIC and HJC in the Civil District Court for the Parish of Orleans seeking (i)
a temporary restraining order enjoining the expiration of the 1994 option
agreement and removal of NOLDC from its status as a material partner of HJC,
(ii) a rescission of the fourth amendment to HJC's partnership agreement
(governing, among other matters the dilution of the NOLDC interest in HJC and
NOLDC's status as a material partner of HJC), (iii) restoration of NOLDC to a
full 33.3% ownership in HJC, and (iv) unspecified damages against all defendants
except HJC. This lawsuit was filed as Civil Action No. 95-14653.
On September 29, 1995, NOLDC obtained a temporary restraining order from the
Louisiana Civil District Court, directing HNOIC and HJC to treat NOLDC as a
material partner until a hearing on an injunction could be held on October 9,
1995. On October 5, 1995, the defendants removed NOLDC's state court complaint
to the District Court, where it is now pending as Civil Action No. 95-3272. On
October 6, 1995, NOLDC sought to obtain an extension of its temporary
restraining order from the District Court. NOLDC's request was denied, and no
date for any further hearing was set. Following the filing of bankruptcy by
NOLDC, the litigation was placed on inactive status by the court. At the time of
the filing of NOLDC's bankruptcy, no discovery on the merits had been taken.
It is contemplated that, pursuant to the NOLDC Shareholders/HET Settlement
Agreement (as defined in the Modified Plan), all of the litigation among NOLDC,
HNOIC and HJC will be dismissed on the Effective Date.
SAPIR LITIGATION. On June 6, 1997, Eddie L. Sapir and the Eddie L. Sapir
Inter Vivos Trust filed a civil action captioned EDDIE L. SAPIR AND THE EDDIE L.
SAPIR INTER VIVOS TRUST VERSUS GRAND PALAIS ENTERPRISES, INC., in the Civil
District Court. In that action, plaintiffs allege, among other things, that one
of HJC's three general partners, Grand Palais, through its principal Christopher
B. Hemmeter ("Hemmeter") and its former counsel Cezar M. Froelich ("Froelich"),
has negotiated or is negotiating a compromise with HET and others which
improperly benefits Hemmeter and Froelich to the detriment of the creditors and
shareholders of Grand Palais. Plaintiffs sought and obtained an EX PARTE
temporary restraining order prohibiting the disposition of any property of Grand
Palais, including prohibition of Grand Palais's execution of the releases and
other agreements among Grand Palais, HET and others contemplated under the
Modified Plan. Plaintiffs also moved for the EX PARTE appointment of a temporary
receiver for Grand Palais, among others, which was granted by the Civil District
Court.
On June 18, 1997, Grand Palais filed a notice of removal of the litigation
to the Bankruptcy Court. On July 1, 1997, plaintiffs filed a motion in the
Bankruptcy Court to remand the litigation to Civil District Court. On July 2,
1997, the Bankruptcy Court granted HJC leave to intervene in the litigation and
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continued plaintiff's motion to remand the litigation to Civil District Court.
The Bankruptcy Court's order also included provisions by which one of the
plaintiffs and/or the receiver could participate in HJC's weekly "steering
committee" conferences and present objections to the Bankruptcy Court with
respect to any significant decision requiring the approval of HJC's general
partners. Thereafter, plaintiffs filed a motion to reconsider the Court's order
permitting HJC to intervene in the litigation. On October 6, 1997, the
Bankruptcy Court remanded the litigation to Civil District Court. On that date,
the Bankruptcy Court also reconsidered its order permitting HJC to intervene in
the litigation and rescinded without prejudice its order permitting HJC to
intervene.
On November 21, 1997, Eddie L. Sapir and the Eddie L. Sapir Inter Vivos
Trust filed a civil action captioned EDDIE L. SAPIR AND THE EDDIE L. SAPIR INTER
VIVOS TRUST V. BANKER'S TRUST COMPANY, CEZAR M. FROELICH, ABC INSURANCE COMPANY,
FIRST NATIONAL BANK OF COMMERCE, HARRAH'S ENTERTAINMENT INCORPORATED, SHEFSKY &
FROELICH, LTD., DEF INSURANCE COMPANY, GHI INSURANCE COMPANY, JKL INSURANCE
COMPANY, THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, MERRILL LYNCH SENIOR HIGH
INCOME FUND, MERRILL LYNCH SENIOR HIGH INCOME II FUND, MERRILL LYNCH SENIOR
STRATEGIC FUND, PRIME INCOME TRUST, AND VAN KAMPEN MERITT PRIME RATE INCOME
TRUST, No. 97-20643, in the Civil District Court. In that action, the plaintiffs
allege, among other things, that defendants committed breaches of contract and
fiduciary duty with respect to actions taken in connection with the Chapter 11
Cases.
As a result of the litigation described above, it is unclear who has the
authority to take certain actions on behalf of Grand Palais and the impact the
litigation might have on HJC's reorganization efforts. In addition, subsequent
to commencement of this litigation, Hemmeter filed a voluntary petition for
relief under Chapter 7 of the Bankruptcy Code, and a Chapter 7 trustee has been
appointed in that bankruptcy case. There can be no assurance that the litigation
between plaintiffs and Grand Palais or Hemmeter's Chapter 7 filing will not
materially impair the Debtor's ability to consummate the Modified Plan, or that
the litigation will be resolved on terms that will permit consummation of the
Modified Plan.
BONDHOLDERS CLASS ACTION. Beginning on November 28, 1995, eight separate
class action suits were filed against HET and various of its corporate
affiliates, officers and directors in the United States District Court for the
Eastern District of Louisiana. They were BEN F. D'ANGELO, TRUSTEE FOR BEN F.
D'ANGELO REVOCABLE TRUST V. HARRAH'S ENTERTAINMENT CORP., MICHAEL D. ROSE,
PHILIP G. SATRE AND RON LENCZYCKI; MAX FENSTER V. HARRAH'S ENTERTAINMENT, INC.,
HARRAH'S NEW ORLEANS INVESTMENT COMPANY, GRAND PALAIS CASINO, INC., PHILIP G.
SATRE, COLIN V. REED, MICHAEL N. REGAN, CHRISTOPHER B. HEMMETER, DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION, SALOMON BROTHERS, INC, AND BT
SECURITIES CORP.; GOLDIE ROSENBLOOM V. HARRAH'S ENTERTAINMENT CORP., MICHAEL D.
ROSE, PHILIP G. SATRE AND RON LENCZYCKI; BARRY ROSS V. HARRAH'S NEW ORLEANS
INVESTMENT COMPANY, PHILIP G. SATRE, COLIN V. REED, LAWRENCE L. FOWLER, MICHAEL
N. REGAN, CEZAR M. FROELICH, ULRIC HAYNES, JR., WENDELL GAUTHIER, T. GEORGE
SOLOMON, JR., DUPLAIN W. RHODES, III, HARRAH'S ENTERTAINMENT, INC., DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION, SALOMON BROTHERS INC, AND BT
SECURITIES CORP.; LOUIS SILVERMAN V. HARRAH'S ENTERTAINMENT, INC., HARRAH'S NEW
ORLEANS INVESTMENT COMPANY, GRAND PALAIS CASINO, INC., PHILIP G. SATRE, COLIN V.
REED, MICHAEL N. REGAN, CHRISTOPHER B. HEMMETER, AND DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION; FLORENCE KESSLER V. PHILIP G. SATRE, COLIN V.
REED, CHARLES A. LEDSINGER, JR., MICHAEL N. REGAN, LAWRENCE L. FOWLER,
CHRISTOPHER B. HEMMETER, CEZAR M. FROELICH, ULRIC HAYNES, JR., WENDELL H.
GAUTHIER, T. GEORGE SOLOMON, JR., DUPLAIN W. RHODES, III, DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION, SALOMON BROTHERS INC, AND BT SECURITIES
CORPORATION; WARREN ZEILLER AND JUDITH M. R. ZEILLER V. HARRAH'S ENTERTAINMENT
CORP., MICHAEL D. ROSE, PHILIP G. SATRE, AND RON
150
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(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LENCZYCKI; AND CHARLES ZWERVING AND HELENE ZWERVING V. HARRAH'S ENTERTAINMENT
CORP., PHILIP G. SATRE, COLIN V. REED, CHRISTOPHER B. HEMMETER, AND DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION. Pursuant to a District Court order of
January 26, 1996, plaintiffs, on May 24, 1996, filed a consolidated complaint in
the action numbered 95-3925, entitled IN RE HARRAH'S ENTERTAINMENT, INC.
SECURITIES LITIGATION (the "Bondholders Class Action").
The plaintiffs in the Bondholders Class Action (who purport to represent all
persons, other than defendants and their affiliates, who purchased Old Bonds
between November 9, 1994 and November 21, 1995) have characterized their
complaint as alleging violations of Sections 11 and 12(2) of the Securities Act
of 1933, 15 U.S.C. SectionSection 77k and 77l(2); Section 10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. Section 78j(b); and Rule 10b-5
promulgated thereunder by the Securities and Exchange Commission, 17 C.F.R.
Section 240.10b-5. The complaint asserts that the registration statement and
prospectus filed in connection with the offering of the Old Bonds contained
untrue statements of material fact and omitted to state material facts necessary
in order to make the statements made therein not misleading. The complaint also
alleges that the defendants engaged in a scheme to defraud plaintiffs and the
alleged class by knowingly or recklessly releasing false and misleading
information that was designed to and did (i) deceive the investing public,
including plaintiffs and other members of the alleged class, regarding HJC's
financial condition and future business prospects, (ii) artificially inflate the
market price of the Old Bonds during the relevant period, and (iii) cause
plaintiffs and other alleged class members to purchase or otherwise acquire the
Old Bonds at inflated prices.
Certain of the individuals named as defendants in the Bondholders Class
Action are officers and directors of the Debtors or of other entities and have
claimed or may claim defense, indemnification and/ or contribution rights
against the Debtors.
Proofs of claim, purportedly on behalf of the plaintiffs in the Bondholders
Class Action, have been filed in the Chapter 11 cases. Such proofs of claim
assert claims based upon damages caused by alleged violations of federal
securities laws in connection with the purchase and sale of the Old Bonds. The
Debtors have objected to such proofs of claim. Under the Modified Plan, if any
of such claims are allowed, then to the extent that they are allowed, they will
fall within the classes of Penalty Claims under the Modified Plan and will
receive no distributions on account of such claims.
Plaintiffs in the Bondholders Class Action filed motions in the Chapter 11
cases seeking the appointment of an examiner. A hearing on the motions was held
on November 6, 1996. On November 20, 1996, the Bankruptcy Court denied the
motion to appoint an examiner. In denying the motion, the Bankruptcy Court found
that the request for an examiner was both untimely and for an improper purpose.
HJC has supported the settlement of the Bondholders Class Action negotiated
between counsel for the class and the defendants named in the litigation, whose
basic terms are as follows:
(1) in accordance with the Modified Plan, Harrah's Investor will
contribute 200,000 shares of Class A New Common Stock to the Release Pool
(as defined in the Modified Plan) to be distributed as set forth in the
Modified Plan to those members of the settlement class who are current
Bondholders;
(2) the sum of $3.8 million in cash will be contributed by the
defendants and/or their insurance carriers toward the settlement, which
funds will be distributed as determined by plaintiffs' counsel and
151
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(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
approved by the District Court to members of the settlement class who do not
provide releases to HJC in exchange for a distribution from the Release
Pool, as well as for the payment of costs and fees;
(3) plaintiffs will provide releases to the defendants, dismiss the
Bondholders Class Action with prejudice, and support the Modified Plan.
The parties to the Bondholders Class Action entered into a stipulation
effectuating the basic terms of the settlement on April 16, 1997. On June 26,
1997, the District Court conducted a fairness hearing to determine whether to
approve the proposed settlement. No member of the settlement class opted out of
the settlement. On July 31, 1997, the District Court approved the settlement,
which is contingent on the occurrence of the Effective Date of the Original
Confirmed Plan or the effective date of a plan of reorganization supported by
HET in the Chapter 11 Cases (which would include the Modified Plan).
STATUS OF LITIGATION IF NO REORGANIZATION
The settlement agreements described above are contingent on the occurrence
of the Effective Date of the Modified Plan. If the required contingency is not
satisfied, the claimants may proceed with their claims against HJC and/or its
affiliates.
OTHER CONTINGENCIES
The enactment and implementation of gaming legislation in Louisiana and the
development of the Gaming Facilities have been the subject of lawsuits, claims
and delays brought about by various parties. Additional lawsuits and the
uncertain political environment may result in further delays, all of which could
have a material adverse effect on HJC or JCC as its successor and operator of
the Casino. For additional information regarding these matters, see Items 1 and
2. "Business and Properties--Risk Factors" in HJC's Annual Report on Form 10-K
for the year ended December 31, 1997.
152
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited condensed consolidated financial statements of
HJC and subsidiary, have been prepared in accordance with the instructions to
Form 10, and therefore do not include all information and notes necessary for
complete financial statements prepared in conformity with generally accepted
accounting principles. The results for the periods indicated are unaudited, but
reflect all adjustments (consisting only of normal recurring adjustments) which
management considers necessary for a fair presentation of operating results.
Results of operations for interim periods are not necessarily indicative of a
full year of operations. These consolidated financial statements and related
notes should be read in conjunction with the financial statements and related
notes included in "--Audited Financial Information."
Separate financial statements and other disclosures with respect to HJC's
subsidiary, Harrah's Jazz Finance Corp., are omitted as such separate financial
statements and other disclosures are not deemed material.
153
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (includes restricted cash of $3,410 and $3,335,
respectively)..................................................................... $ 3,724 $ 3,755
Other............................................................................... 560 561
----------- ------------
Total current assets............................................................ 4,284 4,316
----------- ------------
Land, buildings and equipment
Property held for development....................................................... 13,200 13,200
Construction in progress............................................................ 157,952 157,475
Furniture, fixtures and equipment, net of accumulated depreciation of $6,891 and
$6,598, respectively.............................................................. 24,564 24,857
----------- ------------
Total land, buildings and equipment............................................. 195,716 195,532
----------- ------------
Deferred assets, net of amortization
Deferred operating contract costs................................................... 122,222 122,222
Lease prepayments................................................................... 30,263 30,263
Other............................................................................... 2,084 2,084
----------- ------------
$ 354,569 $ 354,417
----------- ------------
----------- ------------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities not subject to compromise
Accounts payable.................................................................... $ 374 $ 1,170
Accrued expenses.................................................................... 14,890 9,756
Debtor-in-possession loans.......................................................... 40,101 32,230
----------- ------------
Total liabilities not subject to compromise..................................... 55,365 43,156
----------- ------------
Liabilities subject to compromise..................................................... 523,468 523,468
----------- ------------
Commitments and contingencies
Partners' deficit
Partners' capital contributions..................................................... 167,000 167,000
Accumulated deficit................................................................. (391,264) (379,207)
----------- ------------
Total partners' deficit......................................................... (224,264) (212,207)
----------- ------------
$ 354,569 $ 354,417
----------- ------------
----------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
154
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
-------------------- ---------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
MISCELLANEOUS REVENUES.............................................. $ 26 $ 14 $ 50 $ 32
--------- --------- ---------- ---------
OPERATING EXPENSES:
Depreciation and amortization..................................... 144 153 293 306
General and administrative........................................ 5,036 3,410 7,918 6,732
--------- --------- ---------- ---------
Total operating expenses........................................ 5,180 3,563 8,211 7,038
--------- --------- ---------- ---------
Loss from operations............................................ (5,154) (3,549) (8,161) (7,006)
--------- --------- ---------- ---------
REORGANIZATION ITEMS:
Costs and expenses................................................ (1,927) (815) (2,537) (1,013)
Recovery of accounts receivable................................... -- 63 2 480
Interest income................................................... 42 36 76 67
--------- --------- ---------- ---------
Total reorganization items...................................... (1,885) (716) (2,459) (466)
--------- --------- ---------- ---------
OTHER INCOME (EXPENSE):
Interest expense.................................................. (761) (449) (1,437) (818)
--------- --------- ---------- ---------
NET LOSS............................................................ $ (7,800) $ (4,714) $ (12,057) $ (8,290)
--------- --------- ---------- ---------
--------- --------- ---------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
155
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net loss................................................................................ $ (12,057) $ (8,290)
Adjustments to reconcile net loss to net cash used in operations
Depreciation and amortization......................................................... 293 306
Decrease in other current assets...................................................... 1 165
Increase (decrease) in accounts payable and accrued expenses.......................... 4,338 (3,291)
Decrease in accounts payable and accrued expenses prior to Petition Date.............. -- (7)
---------- ----------
Cash flows used in operating activities............................................... (7,425) (11,117)
---------- ----------
Cash flows from investing activities
Purchase of land, buildings and equipment............................................... (477) (1,827)
---------- ----------
Cash flows from financing activities
Proceeds received from Debtor-in-Possession borrowings.................................. 7,871 6,788
---------- ----------
Decrease in cash and cash equivalents..................................................... (31) (6,156)
Cash and cash equivalents, beginning of period............................................ 3,755 10,114
---------- ----------
Cash and cash equivalents, end of period.................................................. $ 3,724 $ 3,958
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
156
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION
ORGANIZATION
Harrah's Jazz Company (together with its subsidiary, "HJC"), a Louisiana
general partnership consisting of Harrah's New Orleans Investment Company
("HNOIC"), a subsidiary of Harrah's Entertainment, Inc. ("HET"), New
Orleans/Louisiana Development Corporation ("NOLDC"), and Grand Palais Casino,
Inc. ("Grand Palais"), was formed on November 29, 1993 for the purposes of
developing, owning and operating the exclusive land-based casino entertainment
facility (the "Casino") in New Orleans, Louisiana, on the site of the former
Rivergate Convention Center. HJC operated a temporary casino in the Municipal
Auditorium (the "Basin Street Casino" and, together with the Casino, the "Gaming
Facilities") from May 1, 1995 to November 22, 1995.
HJC was in the development stage until May 1, 1995, when it commenced
operation of the Basin Street Casino. Development stage activities consisted of
construction, organizational activities related to arranging construction and
financing contracts, and negotiating various other agreements to develop and
operate the Gaming Facilities. These agreements included (i) the lease between
HJC and the Rivergate Development Corporation (the "RDC") and the City of New
Orleans (the "City"), as Intervenor, with respect to the site of the Casino (the
"Canal Street Casino Lease"); (ii) the lease between HJC, the RDC and the City,
as Intervenor, with respect to the Basin Street Casino (the "Basin Street Casino
Lease"); (iii) the casino operating contract between HJC and the Louisiana
Economic Development and Gaming Corporation ("LEDGC"), a special public purpose
corporation established to regulate land-based gaming in Louisiana (the "Casino
Operating Contract"); (iv) a general development agreement between HJC, the RDC,
and the City, as Intervenor (the "General Development Agreement") and (v) a
management agreement between HJC and Harrah's New Orleans Management Company
(the "Manager").
BANKRUPTCY
On November 22, 1995 (the "Petition Date"), HJC (which is sometimes referred
to herein as the "Debtor") and its subsidiary Finance Corp. (sometimes referred
to collectively herein as the "Debtors") filed petitions for relief under
Chapter 11 of Title 11 of the United States Code ("Chapter 11"). The case is
currently pending in the United States Bankruptcy Court for the Eastern District
of Louisiana (the "Bankruptcy Court").
Under Chapter 11, certain claims against the Debtor in existence prior to
the Petition Date are stayed while the Debtor attempts to reorganize. These
claims are reflected in the June 30, 1998 and December 31, 1997 consolidated
balance sheets as "liabilities subject to compromise." Additional claims (also
included in the account "liabilities subject to compromise") may arise
subsequent to the filing date from rejection of executory contracts, including
leases, and from the determination by the Court (or agreement by the parties in
interest) with respect to allowed claims for contingencies and other disputed
amounts. Claims secured by the Debtors' assets also are stayed, although the
holders of such claims have the right to move the Court for relief from the
stay. Secured claims are collateralized primarily by substantially all of the
Debtors' assets.
On February 28, 1997, the Debtors and HNOIC, together with HET (the
"Proponents"), filed their Third Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code dated as of February 26, 1997. That plan, as
voted upon by all affected parties entitled to vote and as modified in
157
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION (CONTINUED)
connection with the hearing on confirmation, was confirmed by the Bankruptcy
Court on April 28, 1997, and as so modified and confirmed is referred to herein
as the "Original Plan."
Implementation of the Original Plan was conditioned upon (among other
things) the execution and delivery of a casino operating contract (the "April
29, 1997 Casino Operating Contract") by Jazz Casino Corporation, a newly formed
company which was to succeed to HJC's rights to develop the Casino, and the
Louisiana Gaming Control Board (the "LGCB") and all necessary approvals, if any,
from the LGCB and the State of Louisiana (the "State"). The LGCB approved the
April 29, 1997 Casino Operating Contract, but conditioned its execution of the
April 29, 1997 Casino Operating Contract upon the further approval of the State
legislature. The State legislature failed to give its approval of the April 29,
1997 Casino Operating Contract during its 1997 regular session, which adjourned
on June 23, 1997.
In light of the State legislature's adjournment without action on the April
29, 1997 Casino Operating Contract, on June 26, 1997, the Proponents sought
Bankruptcy Court approval to modify the Original Plan to provide, among other
things, for the assumption of HJC's existing Casino Operating Contract without
any amendments requiring the approval of the LGCB or the State. The State and
the LGCB vigorously opposed these proposed modifications.
Following negotiations with various parties in interest in the
reorganization, including the official committee of bondholders appointed in
HJC's Chapter 11 case (the "Bondholders Committee") and Bankers Trust Company
("Bankers Trust"), HJC's primary lender, the Proponents prepared a new set of
modifications to the Original Plan (The Original Plan, as so modified and
confirmed by the Bankruptcy Court on January 29, 1998, is referred to herein as
the "Modified Plan.") For a discussion of the significant differences between
the Original Plan and the Modified Plan, see Items 1 and 2. "Business and
Properties--Plan of Reorganization--Modified Plan of Reorganization--Summary of
the Modified Plan" in HJC's Annual Report on Form 10-K for the year ended
December 31, 1997. The Modified Plan was filed as an exhibit to HJC's Annual
Report on Form 10-K for the year ended December 31, 1997.
The Modified Plan abandoned the changes to the Original Plan initially
proposed by the Proponents following the State legislature's adjournment in June
1997, and instead provided, among other things, for further amendments to the
Casino Operating Contract (as so modified, the "December 9, 1997 Casino
Operating Contract") and a guarantee of certain of the amounts due thereunder.
The LGCB conditionally approved the December 9, 1997 Casino Operating Contract,
but conditioned its execution of the December 9, 1997 Casino Operating Contract
upon the further approval of the State legislature. For a Note 1. Organization,
Bankruptcy and Basis of Presentation discussion of the significant differences
between the April 29, 1997 Casino Operating Contract and the December 9, 1997
Casino Operating Contract, see Items 1 and 2. "Business and Properties--Overview
of Business--Contract Rights--Amended and Renegotiated Casino Operating
Contract" in HJC's Annual Report on Form 10-K for the year ended December 31,
1997.
The governor indicated that he would call a special session of the State
legislature commencing in March 1998 to consider, among other things, approval
of the December 9, 1997 Casino Operating Contract. However, after receiving an
opinion from the State attorney general that the LGCB has independent authority
(without the necessity of any legislative approval) to renegotiate and execute a
renegotiated casino operating contract, the governor did not include
consideration of the December 9, 1997 Casino Operating Contract in the call for
the 1998 special session. Instead, on March 20, 1998, the
158
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION (CONTINUED)
LGCB approved an amended Casino Operating Contract between HJC and the LGCB (the
"Amended and Renegotiated Casino Operating Contract"), subject to a number of
conditions, including that the Louisiana Supreme Court render a final,
non-appealable judgment that the LGCB, acting on its own, is the proper party
and has the legal authority to enter into the Amended and Renegotiated Casino
Operating Contract, without the specific approval of the governor or the State
legislature.
The right of the LGCB to execute the Amended and Renegotiated Casino
Operating Contract without the approval of the governor or the legislature of
the State was then challenged in court. On May 15, 1998, the Louisiana Supreme
Court rendered a final decision holding that the LGCB is in fact the proper
party and has the legal authority to enter into the Amended and Renegotiated
Casino Operating Contract, without the approval of the governor or the State
legislature. The decision of the Louisiana Supreme Court has since become final
and non-appealable. For more information on this litigation, see Note 6.
"Commitments and Contingencies--Litigation--Declaratory Judgment Actions."
As a result of, among other things, the LGCB's conditional approval of the
Amended and Renegotiated Casino Operating Contract, on March 26, 1998, the
Proponents filed with the Bankruptcy Court a motion to approve further
modifications to the Modified Plan (the Modified Plan, as so modified and
confirmed by the Bankruptcy Court on April 6, 1998 is referred to herein as the
"Confirmed Plan"). The Confirmed Plan was filed as an exhibit to HJC's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998.
The effectiveness of the Confirmed Plan, as with its predecessors, is
conditioned upon, among other things, the execution and delivery of an amended
casino operating contract and all necessary approvals, if any, from the State.
While the LGCB has given its approval to the Amended and Renegotiated Casino
Operating Contract, that approval will not become final, and the contract cannot
be executed, until, among other things, the LGCB makes a determination that the
owners and operators of the Casino are suitable under applicable rules and
regulations. In order to make this determination, the LGCB requires that the
successors to HJC, the Manager and certain of their respective shareholders,
members, officers and directors undergo extensive investigation and review by
the LGCB and State Police, including character and financial responsibility
review, to be found suitable and qualified under applicable State law and to
obtain the requisite authorizations, permits and licenses. That process has
commenced. The Chairman of the LGCB has stated that this process is targeted to
conclude in October of 1998, although there can be no assurance that the
suitability process will be completed by such time. Based upon these statements,
HJC is targeting the end of October 1998 for an Effective Date.
In the meantime, and in connection with preparations for consummation of the
Confirmed Plan, a review of the partially-constructed Casino and adjoining
parking lot structure was conducted to determine (i) what redesign of the Casino
interior will be necessitated by the dedication of the second floor of the
Casino building to non-gaming uses and by the other changes in the configuration
of the Casino contemplated by the Amended and Renegotiated Casino Operating
Contract, (ii) whether to upgrade the Casino design and gaming equipment to meet
more intense competition from other gaming facilities such as those located on
the Mississippi Gulf Coast, (iii) the extent to which the Casino structure and
adjoining parking facilities have deteriorated during the three year
reorganization process, and (iv) the extent to which increased costs resulting
from proposed modifications and additions might be offset by changes to the
Casino design. In addition, HJC obtained estimates for the costs of the various
modifications to the
159
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HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION, BANKRUPTCY AND BASIS OF PRESENTATION (CONTINUED)
Casino project under consideration, and also determined what costs have and will
be occasioned by the delay in the reorganization process resulting from the
developments described above.
Upon determining what modifications and additions to the Casino project are
reasonably necessary to its success, what other changes to the Casino design
should be made to partially offset the increased costs occasioned by such
modifications and the delay in the reorganization process, and after
negotiations with the Bondholders Committee and Bankers Trust, HJC revised its
budget for completion and operation of the Casino. HJC's revised budget for
completion of the Casino project contemplates, among its elements, $25 million
in additional new financing and the cancellation of all accrued interest on the
DIP Loan. For these and other reasons, HJC proposes to modify the Confirmed
Plan, which modifications are incorporated in HJC's proposed Third Amended Joint
Plan of Reorganization, As Modified Through August 12, 1998 (the "Proposed
Plan"). A copy of the Proposed Plan was filed as an exhibit to HJC's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998. The Proposed Plan was
filed with the Bankruptcy Court on August 13, 1998. At the same time forms of a
summary disclosure statement and a full disclosure statement were filed with the
Bankruptcy Court pursuant to Sections 1125 and 1127 of the Bankruptcy Code. The
adequacy of those forms of disclosure statement will be considered by the
Bankruptcy Court at a hearing on September 3, 1998, at 10:00 a.m.
NOTE 2. RESTRICTED CASH
ESCROWED AMOUNTS
In connection with some of the agreements entered into in the course of
HJC's bankruptcy proceeding, HJC has been required to establish escrow accounts,
pursuant to escrow agreements, at Hibernia National Bank, as escrow agent. A
description of each currently funded escrow account is set forth below.
HARRAH'S JAZZ COMPANY/CENTEX LANDIS CONSTRUCTION CO., INC./HIBERNIA NATIONAL
BANK ESCROW
This escrow account was established pursuant to the Close-In Agreement
between HJC and Centex Landis Construction Co. Inc. ("Centex"), dated March 5,
1996, to contain retainage payments for Centex, the contractor for the close-in
work. Funds representing retainage earned were deposited weekly during the
close-in. Escrowed funds have been distributed to Centex when a written request
for disbursement has been accepted by HJC. As of June 30, 1998, HJC continued to
hold in retainage approximately $120,000 relating to a dispute regarding the
close-in work on the Casino.
RIVERGATE DEVELOPMENT CORPORATION/HARRAH'S JAZZ COMPANY/CITY OF NEW
ORLEANS/HARRAH'S OPERATING COMPANY/HIBERNIA NATIONAL BANK ESCROW
As contemplated under an agreement entitled "An Agreement Regarding
Modifications and Related Agreements in Respect of Amended and Restated Canal
Street Casino Lease, Termination of Basin Street Casino Lease, Amended and
Restated General Development Agreement, the Conditional Use Ordinances and other
Regulatory Matters" (the "City Agreement"), this escrow account was established
to satisfy HJC's rent payment obligations to the City. Funds deposited in this
escrow account are to be used exclusively for payment of HJC's rent obligations
under the City Agreement. Under the City Agreement, HJC was obligated to pay the
RDC rent of $736,000 per month commencing on January 1, 1997 through June 30,
1997. HJC deposited $2,208,000 in escrow to secure this rental obligation, and
paid rent each
160
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. RESTRICTED CASH (CONTINUED)
month from the escrow account until the principal amount deposited into escrow
($2,208,000) was depleted. As of June 30, 1998, $151,000 remained in the escrow
account representing interest earned on these funds.
OTHER AMOUNTS HELD AS SECURITY
In addition to the amounts held in the escrow accounts described above,
approximately $3.1 million in cash is being held as security for expenses and
possible claims of the trustee and former trustee under the Indenture dated as
of November 15, 1994 (the "Indenture"), between the Debtors and First National
Bank of Commerce, as trustee ("FNBC"). Approximately $3 million is being held by
Norwest Bank Minnesota, N.A. ("Norwest") as successor trustee to FNBC, and
$110,000 is being held by FNBC.
Pursuant to a settlement agreement between FNBC and HJC (the "FNBC
Settlement Agreement"), which is reflected in the Proposed Plan and would take
effect on the date the Proposed Plan is consummated (the "Effective Date"), all
of FNBC's claims or other rights to indemnity and/or reimbursement (and all
liens securing the same) under the Indenture, the agreements pursuant to which
HJC's Old Bonds were issued (the "Old Bond Documents") and the agreements
pursuant to which HJC's bank financing was secured (the "Old Bank Credit
Documents") would be canceled and extinguished, subject to certain exceptions.
Jazz Casino Company, L.L.C. ("JCC"), which is to succeed to HJC's rights and
obligations relating to the Casino under the Proposed Plan, would assume, on an
unsecured basis, HJC's obligation under the Old Bond Documents and/or the Old
Bank Credit Documents to indemnify FNBC for attorneys' fees or other costs
incurred in connection with certain claims against FNBC.
JCC would also assume any other indemnity obligation of HJC under the Old
Bond Documents and the Old Bank Credit Documents as an IN REM obligation limited
in recourse to, and secured solely by, $100,000 plus interest (the "FNBC Cash
Collateral") accruing from the Effective Date. As security for such
indemnification obligations, FNBC is authorized to retain the FNBC Cash
Collateral until the later of the first anniversary of the Effective Date or the
resolution of any litigation filed against FNBC within one year after the
Effective Date. Thereafter, the remaining balance of the FNBC Cash Collateral
would be released to JCC.
The amount held by Norwest, less amounts dedicated to payment of
professional fees, would be returned to JCC on the Effective Date.
161
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. LIABILITIES SUBJECT TO COMPROMISE
Even though the Bankruptcy Court has approved the Confirmed Plan, payment or
other disposition of most secured and unsecured liabilities of HJC existing as
of the Petition Date continues to be deferred until on or after the Effective
Date. As of June 30, 1998, HJC's books and records reflected unsecured and
undersecured liabilities subject to compromise in the Chapter 11 proceedings as
follows (in thousands):
<TABLE>
<S> <C>
First Mortgage Notes.............................................. $ 435,000
Construction Accounts Payable..................................... 37,039
Due to Manager.................................................... 29,513
Consulting fees payable to related parties........................ 2,128
WARN Act Settlement............................................... 2,265
Harrah's Entertainment, Inc., and affiliates (other than
Manager)........................................................ 2,281
Others, individually less than $1,000,000......................... 15,242
---------
$ 523,468
---------
---------
</TABLE>
The full amount of the Old Bonds has been included in liabilities subject to
compromise since they are an undersecured liability and the ultimate value of
the security is dependent upon future events, the outcome of which is uncertain
at this time. See Part II, Item 5. "Other Information--Conditions Precedent to
the Effective Date" and "--Other Potential Obstacles to Consummation and
Implementation of the Proposed Plan" in HJC's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998.
As part of the bankruptcy process, creditors were allowed until the claims
bar date set by the Bankruptcy Court to file proofs of claim with the Bankruptcy
Court specifying their positions on amounts owed to them. Creditors often
include estimates of penalties, interest and damages in proofs of claim. These
amounts are subject to upward or downward adjustments and approval by the
Debtors and the Bankruptcy Court.
NOTE 4. DEBT
As of June 30, 1998, HJC had borrowed an aggregate of $40.1 million in
debtor-in-possession loans ("DIP Financing") from HET or one of its affiliates
(the "DIP Lender"). Pursuant to the most recent order approving HJC's DIP
Financing, entered by the Bankruptcy Court on June 17, 1998, HJC is authorized
to borrow up to $46.0 million to fund its current reorganization efforts. All of
these borrowings have been granted secured and administrative priority status.
The DIP Lender has agreed to extend the maturity date of the DIP Financing until
August 26, 1998, and HJC has filed a motion seeking an additional $14 million in
DIP Financing (for a cumulative total of up to $60 million in DIP Financing)
which is scheduled to be heard on August 25, 1998 and which contemplates a
further extension of the maturity date for the DIP Financing until October 31,
1998. For more information on these borrowings, see Item 2. "Management's
Discussion and Analysis of Financial Condition and Results of Operation--
Liquidity" in HJC's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
NOTE 5. LEASES
HJC entered into the City Agreement with the RDC, which agreement was
declared effective by the Bankruptcy Court on September 12, 1996. The City
Agreement provides for the amendment of the Canal Street Casino Lease and the
General Development Agreement, and for the termination of the Basin Street
162
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. LEASES (CONTINUED)
Casino Lease, and also amends or provides for several additional agreements.
These amendments and additional agreements include (i) modification of the rent
and other amounts payable under the Canal Street Casino Lease, (ii) permission
for an affiliate of JCC to develop the second floor of the Casino for non-gaming
purposes, and (iii) adoption by the City of certain conditional use ordinances
to permit the Casino, within defined limits, to offer food, entertainment,
shuttle bus service, and certain other amenities previously not permitted. Each
of the City, the RDC and HJC has the right to terminate the City Agreement,
although no party has done so to date. In addition, the amendments to the Canal
Street Casino Lease (as amended, the "Amended Canal Street Casino Lease") have
not been approved by the City Council or the Mayor. For additional information
regarding the status of the Amended Canal Street Casino Lease and the City
Agreement, see Part II, Item 5. "Other Information--Other Potential Obstacles to
Consummation and Implementation of the Proposed Plan--Agreements with City and
RDC" in HJC's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
NOTE 6. COMMITMENTS AND CONTINGENCIES
LITIGATION
DECLARATORY JUDGMENT ACTIONS. On March 18, 1998, two separate petitions
were filed seeking declaratory judgments and injunctive relief in the wake of
the State attorney general's opinion to the effect that the LGCB could execute
the Amended and Renegotiated Casino Operating Contract without further action by
the State legislature. In JORDAN V. LOUISIANA GAMING CONTROL BOARD AND MURPHY J.
FOSTER, Case No. 448192 (19th Judicial District Court, State of Louisiana,
Parish of East Baton Rouge), the plaintiff, a State senator, sought a
declaratory judgment and injunctive relief to preclude the LGCB from executing a
casino operating contract without the approval of the State legislature. Joseph
B. Boucree, Sr., former president of the LEDGC, filed a petition of intervention
in the JORDAN litigation, alleging that the LEDGC (rather than the LGCB) retains
the power to renegotiate HJC's Casino Operating Contract, and that the LGCB's
actions in approving the Amended and Renegotiated Casino Operating Contract are
invalid. That petition for intervention was denied on March 30, 1998, and Mr.
Boucree was not permitted to intervene in the JORDAN litigation.
In BEAN V. LOUISIANA GAMING CONTROL BOARD AND RIVERGATE DEVELOPMENT
CORPORATION, Case No. 448218 (19th Judicial District Court, State of Louisiana,
Parish of East Baton Rouge), the plaintiff, also a member of the State senate,
sought declaratory and injunctive relief precluding the LGCB from entering into
a casino operating contract with JCC without the approval of the State
legislature. HJC and the Bondholders Committee filed separate petitions for
intervention in that litigation. On March 25, 1998, plaintiff in JORDAN filed a
petition for intervention and motion for consolidation of BEAN with JORDAN. On
March 25, 1998, the district court hearing the BEAN litigation entered orders
(1) directing that applications for supervisory writs be filed in the Louisiana
Supreme Court on or before March 26, 1998, and (2) staying all proceedings in
BEAN pending action by the Louisiana Supreme Court on such writ applications. On
March 25, 1998, HJC, Senator Bean, the LGCB and the RDC filed applications for
supervisory writs in the Louisiana Supreme Court. On March 27, 1998, the Supreme
Court entered an order denying all writ petitions to the extent they sought an
immediate hearing before the Louisiana Supreme Court prior to a decision on the
merits by the district court, and directed that the BEAN litigation be
consolidated with the JORDAN litigation. The Louisiana Supreme Court also
directed that the judge hearing the JORDAN litigation render judgment on the
163
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
merits no later than Friday, April 3, 1998, and reserved for further
consideration the applicants' requests that the intermediate court of appeal be
bypassed until after judgment was rendered by the district court.
On March 30, 1998, a trial was held in the consolidated BEAN and JORDAN
cases, and on April 9, 1998, the district court entered judgment rejecting the
plaintiffs' claims and declaring the rights of the parties as follows: (1)
pursuant to La. R.S. 27:210B and 27:245A, the LGCB has independent authority to
negotiate and execute the Amended and Renegotiated Casino Operating Contract,
without the approval of the State legislature or the governor; (2) pursuant to
La. R.S. 27:31 and effective May 1, 1996, the LGCB assumed all powers, duties,
functions, responsibilities and obligations of the LEDGC; (3) the provisions of
La. R.S. 27:245A have not been impliedly repealed by the enactment of La. R.S.
27:224D and E; (4) the State legislature is neither required nor authorized to
approve the Amended and Renegotiated Casino Operating Contract, either prior or
subsequent to its execution and implementation; (5) authority to execute a
casino operating contract has specifically been delegated to the LGCB, and the
governor has no authority to execute a casino operating contract independently;
and (6) the Amended and Renegotiated Casino Operating Contract approved by the
LGCB on March 20, 1998 is not a new contract within the meaning of La. R.S.
27:224E. In reaching its decision, the district court also made a number of
written findings of fact and conclusions of law, including the conclusion that
insofar as the provisions of La. R.S. 27:224D and E subject the acts of the LGCB
or the governor to legislative approval or authorize the State legislature to
take executive action, those provisions violate Article II, Section 2 of the
Louisiana Constitution, which establishes the principle of separation of powers
between the branches of government.
Thereafter, Senator Bean, HJC and the Bondholders Committee filed
supplemental writ applications in the Louisiana Supreme Court requesting that it
directly hear their appeals. On April 9, 1998, the Louisiana Supreme Court
denied the applicants' request to bypass the intermediate court of appeal, but
ordered that the court of appeal hear the matter EN BANC within five days of the
filing of the petition for appeal and that it decide the appeal within ten days
thereafter. On April 22, 1998, the First Circuit Court of Appeal, sitting EN
BANC, issued a decision affirming in part and reversing in part the judgment of
the district court. The opinion of the court of appeals affirmed the district
court's determination (1) that La. R.S. 27:31 transferred the power and
authority of the LEDGC to the LGCB; (2) that La. R.S. 27:245A was not impliedly
repealed by La. R.S. 27:224D and E; (3) that La. R.S. 27:224D and La. R.S.
27:245A can be read together harmoniously; (4) that the Amended and Renegotiated
Casino Operating Contract approved by the LGCB on March 20, 1998 is a
renegotiated contract; and (5) that the LGCB had the authority independently to
renegotiate the Casino Operating Contract. The opinion reversed what it
perceived to be the district court's conclusion that the legislature had no
"right to participate in the process" of renegotiating the casino operating
contract of a casino operator in bankruptcy, and concluded that the legislature
may set aside or order that the LGCB renegotiate the provisions of the casino
operating contract of a casino operator in bankruptcy. The court of appeal
reserved to the Louisiana Supreme Court any ruling on the constitutionality of
La. R.S. 27:224D and La. R.S. 27:224E. There were a number of opinions, both
concurring and dissenting, in addition to the opinion of the majority of the
members of the court of appeal.
The parties filed applications for various writs of review in the Louisiana
Supreme Court, which were subsequently granted, and on May 15, 1998 the
Louisiana Supreme Court issued a decision affirming in part and reversing in
part the judgment of the court of appeal, a copy of which was attached to HJC's
Current Report on Form 8-K filed on May 19, 1998. The opinion of the Louisiana
Supreme Court affirmed
164
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
the court of appeal's determination that the LGCB has the independent authority
to renegotiate and execute the Casino Operating Contract without seeking
gubernatorial or legislative approval, and reversed the portion of the court of
appeal's decision that purported to interpret the State legislature's power
under La. R.S. 27:224D to set aside or order the LGCB to renegotiate the
provisions of the casino operating contract of a casino operator in bankruptcy
on the basis that such holdings by the court of appeal and the district court
were impermissible advisory opinions because the State legislature had not
purported to take any such actions. The decision of the Louisiana Supreme Court
has since become final and non-appealable.
It is always possible that there may be other challenges to the process by
which the Proponents seek to achieve consummation of the Proposed Plan, and
completion and operation of the Casino. Such challenges could delay or prevent
the occurrence of the Effective Date, or completion and operation of the Casino.
WARN ACT LITIGATION. RUSSELL M. SWODY, ET AL. V. HARRAH'S NEW ORLEANS
MANAGEMENT COMPANY AND HARRAH'S ENTERTAINMENT, INC., Civil No. 95-4118, was
filed against HET on December 13, 1995, in the United States District Court for
the Eastern District of Louisiana (the "Federal District Court") and
subsequently amended. Swody is a class action under the Worker Adjustment and
Retraining Notification Act. Early in 1996, SWODY was consolidated with SUSAN N.
POIRIER, DARLENE A. MOSS, ET AL. V. HARRAH'S ENTERTAINMENT, INC., HARRAH'S NEW
ORLEANS MANAGEMENT COMPANY, AND HARRAH'S OPERATING COMPANY, Civil No. 96-0215,
which was filed in the Federal District Court on January 17, 1996, and
subsequently amended. Similar complaints were filed by Ms. Poirier in the
Bankruptcy Court in HJC, HNOIC and Finance Corp. bankruptcy cases (Adversary
Nos. 96-1015, 96-1014, and 96-1013). In addition, proofs of claims, on behalf of
individual, alleged, terminated employees and purportedly on behalf of all
alleged former employees, were filed in the Bankruptcy Court in HJC's Chapter 11
case.
This litigation and a compromise tentatively resolving this litigation are
more fully described in HJC's 1997 Annual Report on Form 10-K, Item 3. "Legal
Proceedings." There have been no material developments in this litigation since
the filing of HJC's Annual Report.
MCCALL LITIGATION. On April 26, 1993, a lawsuit was filed in the Civil
District Court for the Parish of Orleans (the "Civil District Court") captioned
MCCALL V. MCCALL, ET AL. That litigation and a compromise tentatively resolving
it are more fully described in HJC's 1997 Annual Report on Form 10-K, Item 3.
"Legal Proceedings." There have been no material developments in this litigation
since the filing of HJC's Annual Report.
TUCKER LITIGATION (CITY). On October 5, 1994, a lawsuit captioned TUCKER V.
CITY OF NEW ORLEANS was filed by Thomas Tucker against the City in the Civil
District Court. In addition, Mr. Tucker and the law firm of Tucker & West filed
proofs of claims in HJC's Chapter 11 case for amounts which they allege were
owed to them with respect to this and other litigation. This litigation and a
compromise tentatively resolving it are more fully described in HJC's 1997
Annual Report on Form 10-K, Item 3. "Legal Proceedings." There have been no
material developments in this litigation since the filing of HJC's Annual
Report.
LANDMARKS LITIGATION (JOAN OF ARC). On December 6, 1994, a lawsuit
captioned LOUISIANA LANDMARKS SOCIETY, INC. V. CITY OF NEW ORLEANS, RIVERGATE
DEVELOPMENT CORPORATION, AND HARRAH'S JAZZ COMPANY was filed in Federal District
Court. This litigation and a compromise tentatively resolving it are more fully
165
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
described in HJC's 1997 Annual Report on Form 10-K, Item 3. "Legal Proceedings."
There have been no material developments in this litigation since the filing of
HJC's Annual Report.
TUCKER LITIGATION (JOAN OF ARC). On July 24, 1996, Thomas Tucker filed
another lawsuit entitled TUCKER V. CITY OF NEW ORLEANS AND RIVERGATE DEVELOPMENT
CORPORATION in Federal District Court, seeking to enjoin alteration of the Place
de France and the relocation of the statue of St. Joan of Arc absent the express
written approval of the United States Secretary of the Interior. This litigation
and a compromise tentatively resolving it are more fully described in HJC's 1997
Annual Report on Form 10-K, Item 3. "Legal Proceedings." There have been no
material developments in this litigation since the filing of HJC's Annual
Report.
HNOIC/NOLDC LITIGATION. On September 26, 1995, HNOIC brought a lawsuit
against NOLDC in the Federal District Court seeking a declaratory judgment that
(i) HNOIC was a 52.93% owner of HJC, (ii) the 1994 option agreement with NOLDC
had expired, and (iii) NOLDC was not a "material partner" of HJC. This lawsuit
pends as Civil Action No. 95-3165. On September 28, 1995, NOLDC brought a
lawsuit against, among other parties, HNOIC and HJC in the Civil District Court
seeking (i) a temporary restraining order enjoining the expiration of the 1994
option agreement and removal of NOLDC from its status as a material partner of
HJC, (ii) a rescission of the fourth amendment to HJC's partnership agreement
(governing, among other matters, the dilution of the NOLDC interest in HJC and
NOLDC's status as a material partner of HJC), (iii) restoration of NOLDC to a
full 33.3% ownership in HJC, and (iv) unspecified damages against all defendants
except HJC. On October 5, 1995, the defendants removed NOLDC's Civil District
Court action to the Federal District Court, where it is now pending as Civil
Action No. 95-3272.
This litigation is more fully described in HJC's 1997 Annual Report on Form
10-K, Item 3. "Legal Proceedings." There have been no material developments in
this litigation since the filing of HJC's Annual Report.
SAPIR LITIGATION. On June 6, 1997, Eddie L. Sapir and the Eddie L. Sapir
Inter Vivos Trust filed a civil action captioned EDDIE L. SAPIR AND THE EDDIE L.
SAPIR INTER VIVOS TRUST V. GRAND PALAIS ENTERPRISES, INC., in the Civil District
Court. On November 21, 1997, Eddie L. Sapir and the Eddie L. Sapir Inter Vivos
Trust filed a civil action captioned EDDIE L. SAPIR AND THE EDDIE L. SAPIR INTER
VIVOS TRUST V. BANKER'S TRUST COMPANY, CEZAR M. FROELICH, ABC INSURANCE COMPANY,
FIRST NATIONAL BANK OF COMMERCE, HARRAH'S ENTERTAINMENT INCORPORATED, SHEFSKY &
FROELICH, LTD., DEF INSURANCE COMPANY, GHI INSURANCE COMPANY, JKL INSURANCE
COMPANY, THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, MERRILL LYNCH SENIOR HIGH
INCOME FUND, MERRILL LYNCH SENIOR HIGH INCOME II FUND, MERRILL LYNCH SENIOR
STRATEGIC FUND, PRIME INCOME TRUST, AND VAN KAMPEN MERITT PRIME RATE INCOME
TRUST, No. 97-20643, in the Civil District Court. In addition, Christopher
Hemmeter, the Chairman of Grand Palais, filed a voluntary petition for relief
under Chapter 7 of the Bankruptcy Code, and a Chapter 7 trustee has been
appointed in that bankruptcy case.
On June 6, 1997, the Civil District Court entered an EX PARTE order in the
EDDIE L. SAPIR AND THE EDDIE L. SAPIR INTER VIVOS TRUST V. GRAND PALAIS
ENTERPRISES, INC. litigation appointing a receiver for Grand Palais, and also
entered an EX PARTE restraining order prohibiting the disposition of any
property of Grand Palais, including prohibition of Grand Palais's execution of
the releases and other agreements among Grand Palais, HET and others
contemplated under the Proposed Plan. Since that time, plaintiffs and/or the
receiver have had the opportunity to participate in HJC's weekly Steering
Committee meetings. It is
166
<PAGE>
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
unclear who has the authority to take certain actions on behalf of Grand Palais
and the impact the litigation might have on HJC's reorganization efforts. There
can be no assurance that the litigation between plaintiffs and Grand Palais will
not materially impair the Debtors' ability to consummate the Proposed Plan, or
that the litigation will be resolved on terms that will permit consummation of
the Proposed Plan.
This litigation and its relevance to HJC is more fully described in HJC's
1997 Annual Report on Form 10-K, Item 3. "Legal Proceedings." HET, plaintiffs in
the above-captioned litigation, Mr. Hemmeter and Mr. Hemmeter's Chapter 7
trustee presently are involved in settlement negotiations, but to date no
compromise of the above-captioned litigation has been reached.
BONDHOLDERS CLASS ACTION. Beginning on November 28, 1995, eight separate
class action suits were filed against HET and various of its corporate
affiliates, officers and directors. Pursuant to a Federal District Court order
of January 26, 1996, plaintiffs filed a consolidated complaint in the Federal
District Court entitled IN RE HARRAH'S ENTERTAINMENT, INC. SECURITIES LITIGATION
(the "Bondholders Class Action"). Proofs of claim, purportedly on behalf of the
plaintiffs in the Bondholders Class Action, have been filed in Bankruptcy Court
in HJC's Chapter 11 case.
This litigation and a compromise tentatively resolving this litigation are
more fully described in HJC's 1997 Annual Report on Form 10-K, Item 3. "Legal
Proceedings." There have been no material developments in this litigation since
the filing of HJC's Annual Report.
STATUS OF LITIGATION IF NO REORGANIZATION
The litigation settlements referred to above are contingent on the
occurrence of the effective date of the Original Plan or, in some circumstances,
an effective date of some other plan in the Chapter 11 case. Because none of the
parties has notified HJC that it does not support, or will not be bound by, the
Proposed Plan, HJC believes that these contingencies will be satisfied by the
occurrence of the Effective Date of the Proposed Plan. If the required
contingencies are not satisfied, the claimants are likely to proceed with their
claims against HJC or its affiliates, or both.
OTHER CONTINGENCIES
The enactment and implementation of gaming legislation in Louisiana and the
development of the Gaming Facilities have been the subject of lawsuits, claims
and delays brought about by various parties. Additional lawsuits and the
uncertain political environment may result in further delays, all of which could
have a material adverse effect on HJC or JCC as its successor and operator of
the Casino. For additional information regarding the uncertain political
environment, see Part II, Items 1 and 2. "Business and Properties--Risk Factors"
in HJC's 1997 Annual Report on Form 10-K.
167
<PAGE>
JCC HOLDING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Consolidated Financial Information of the
Company has been prepared giving effect to the consummation of the Plan of
Reorganization, including the costs thereto (collectively, the "Pro Forma
Adjustments"), to AICPA Statement of Position 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code ("SOP 90-7"). Pursuant to
SOP 90-7, the total reorganization value of the reorganized Company's assets was
determined using several factors and by reliance on various valuation methods,
including discounting cash flow, as well as by analyzing market cash flow
multiples applied to the Company's pro forma cash flows. The factors considered
by the Company included: (i) forecasted cash flow results which gave effect to
the estimated impact of the restructuring; (ii) the discounted residual value at
the end of the forecast period; (iii) competition and general economic
considerations; and (iv) future potential profitability. Based on this analysis,
the Company, after consultation with an independent firm specializing in
reorganizations, established the Company's reorganization value. Such value is
subject to potential further changes. Under the principles of "fresh start"
accounting, the Company's total net assets were recorded at this assumed
reorganization value, which was then allocated to identifiable tangible assets
on the basis of their estimated fair value. In accordance with "fresh start"
accounting, the difference between the assumed reorganization value and the
aggregate fair value of the identifiable tangible assets resulted in a reduction
in the value assigned to intangible deferred operating contract costs and
prepaid lease costs.
The unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1998 was prepared as if the Pro Forma Adjustments had occurred on June 30, 1998.
The unaudited Pro Forma Condensed Consolidated Statement of Operations for the
six months ended June 30, 1998, and the unaudited Pro Forma Condensed
Consolidated Statement of Operations for the year ended December 31, 1997, were
prepared as if the Pro Forma Adjustments had occurred January 1, 1997. The Pro
Forma Adjustments are based upon available information and upon certain
assumptions that the Company's management believes are reasonable in the
circumstances.
No changes in revenues or expenses have been made to reflect the results of
any modifications to operations that might have been made had the Plan of
Reorganization been confirmed on the assumed effective dates of the confirmation
of the Plan of Reorganization for presenting pro forma results. The Pro Forma
Condensed Consolidated Financial Data of the Company does not purport to
represent what the financial position or results of operations of the Company
would have been if the Plan of Reorganization had in fact been consummated on
such date or at the beginning of the period indicated or to project the
financial position or results of operations for any future date or period.
168
<PAGE>
JCC HOLDING COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA JCC
HJC ADJUSTMENTS HOLDING
HISTORICAL (NOTE 2) PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................... $ 3,724 $ 34,899(c) $ 65,413
(69,810)(e)
96,600(f)
Other................................................................... 560 -- 560
----------- ----------- -----------
Total current assets................................................ 4,284 61,689 65,973
Land, buildings and equipment............................................. 195,716 (8,964)(g) 186,752
Deferred operating contract costs......................................... 122,222 (61,152)(g) 61,070
Lease prepayments......................................................... 30,263 (15,142)(g) 15,121
Other..................................................................... 2,084 -- 2,084
----------- ----------- -----------
$ 354,569 $ (23,569) $ 331,000
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND EQUITY
Liabilities not subject to compromise
Accounts payable........................................................ $ 374 $ 54,546(b) $ --
(54,920)(e) --
Debtor-in-possession loans.............................................. 40,101 (40,101)(c) --
Accrued expenses........................................................ 14,890 (14,890)(e) --
----------- ----------- -----------
55,365 (55,365) --
----------- ----------- -----------
Liabilities subject to compromise......................................... 523,468 (523,468)(b) --
----------- ----------- -----------
Long-term debt
8% Senior Subordinated Notes with Contingent Payments due 2009.......... -- 187,500(b) 187,500
Discount on 8% Notes.................................................. -- (73,636)(b) (73,636)
Senior Subordinated Contingent Notes due 2009........................... -- --
A Term Loan............................................................. -- 40,000(f) 40,000
B Term Loan............................................................. -- 30,000(f) 30,000
Convertible Junior Subordinated Debentures.............................. -- 26,600(f) 26,600
----------- ----------- -----------
Total long-term debt................................................ -- 210,464 210,464
----------- ----------- -----------
Partners' capital/stockholders' equity
Partners' capital contributions......................................... 167,000 (167,000)(a) --
Accumulated deficit..................................................... (391,264) 167,000(a) --
279,757(b) --
-- (55,493)(d) --
----------- ----------- -----------
Total partners' capital............................................. (224,264) 224,264 --
----------- ----------- -----------
Common stock
Class A............................................................... -- 75,301(b) 75,301
Class B............................................................... -- 75,000(c) 75,000
Paid-in capital......................................................... -- 55,493(d) (29,765)
-- (85,258)(g) --
----------- ----------- -----------
Total stockholders' equity.......................................... -- 120,536 120,536
----------- ----------- -----------
$ 354,569 $ (23,569) $ 331,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
169
<PAGE>
JCC HOLDING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA JCC
HJC ADJUSTMENTS HOLDING
HISTORICAL (NOTE 3) PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Total revenues............................................................................... $ 50 $ -- $ 50
---------- ----------- ---------
Operating expenses
Depreciation and amortization.............................................................. 293 -- 293
General and administrative................................................................. 7,918 -- 7,918
Reorganization costs....................................................................... 2,535 (2,535)(a) --
---------- ----------- ---------
Total operating expenses............................................................... 10,746 (2,535) 8,211
---------- ----------- ---------
Operating loss............................................................................... (10,696) 2,535 (8,161)
---------- ----------- ---------
Other income (expenses)
Interest expense........................................................................... (1,437) 1,437(b) (11,963)
(5,949)(c)
(2,100)(d)
(3,914)(e)
Interest and other income.................................................................. 76 -- 76
---------- ----------- ---------
Total other income (expenses).......................................................... (1,361) (10,526) (11,887)
---------- ----------- ---------
Loss before income taxes..................................................................... (12,057) (7,991)(f) (20,048)
Income tax benefit........................................................................... -- -- (f) --
---------- ----------- ---------
Net loss..................................................................................... $ (12,057) $ (7,991) $(20,048)
---------- ----------- ---------
---------- ----------- ---------
Loss per common share........................................................................ N/A $ (2.00)
---------- ---------
---------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
170
<PAGE>
JCC HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998
NOTE 1. PRESENTATION
The following notes set forth the explanations and assumptions used in
preparing the unaudited Pro Forma Condensed Consolidated Financial Statements.
JCC Holding is the successor to HJC, the prior owner of the Casino and the
owner and operator of the Basin Street Temporary Casino. Upon the Effective Date
of the Plan of Reorganization, except for certain property which will vest in CP
Development and FP Development, all of the assets of HJC will vest in JCC.
For purposes of the accompanying pro forma financial information, pursuant
to SOP 90-7, the total reorganization value of the reorganized Company's assets
was determined using several factors and by reliance on various valuation
methods, including discounting cash flow, as well as by analyzing market cash
flow multiples applied to the Company's pro forma cash flows. The factors
considered by the Company included: (i) forecasted cash flow results which gave
effect to the estimated impact of the restructuring; (ii) the discounted
residual value at the end of the forecast period; (iii) competition and general
economic considerations; and (iv) future potential profitability. Based on this
analysis, the Company, after consultation with an independent firm specializing
in reorganizations, established the Company's reorganization value. Under the
principles of "fresh start" accounting, the Company's total net assets were
recorded at this assumed reorganization value, which was then allocated to
identifiable tangible assets on the basis of their estimated fair value. In
accordance with "fresh start" accounting, the difference between the assumed
reorganization value and the aggregate fair value of the identifiable tangible
assets resulted in a reduction in the value assigned to intangible deferred
operating contract costs and prepaid lease costs.
Loss per common share was calculated using 10,000,000 shares of Common
Stock, which represents the number of shares expected to be issued in connection
with the Plan of Reorganization.
NOTE 2. BALANCE SHEET PRO FORMA ADJUSTMENTS
(a) Records the offset of the partners' capital contributions balance
against the accumulated deficit on the books of HJC.
(b) Records the discharge of HJC's liabilities and debt upon the Effective
Date of the Plan of Reorganization, including the exchange of HJC's $435 million
of 14 1/4% First Mortgage Notes due 2001 for the following equity and debt
securities to be issued by JCC Holding and its subsidiaries:
1) Class A Common Stock of JCC Holding, representing a 50.1% ownership
interest in JCC Holding at an estimated fair value of $75.3 million,
2) $187.5 million of New Notes issued by JCC, discounted to net present
value at a 16% discount rate, and
3) New Contingent Notes.
This transaction also records as accounts payable those liabilities subject
to compromise which will be settled in cash on the Effective Date.
The gain arising from the discharge of this debt of $279.7 million is
recorded as a reduction of HJC's accumulated deficit.
The stated interest rate on the New Notes is considered by the Company to be
lower than prevailing interest rates for debt with similar terms and credit
ratings. The New Notes were valued based on discounting concepts to approximate
their fair value. No value was assigned the New Contingent Notes as their fair
value is estimated to be nominal.
171
<PAGE>
JCC HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
AS OF JUNE 30, 1998
NOTE 2. BALANCE SHEET PRO FORMA ADJUSTMENTS (CONTINUED)
The following table reflects the effect on the pro forma balance sheet and
results of operations of a 1% fluctuation in the 16% discount rate used in
calculating the net present value of the New Notes: (in thousands)
<TABLE>
<CAPTION>
DISCOUNT RATE DISCOUNT ON 8% NOTES PAID IN CAPITAL INTEREST EXPENSE
- ------------- -------------------- --------------- ----------------
<S> <C> <C> <C>
15% $72,075 $(31,326) $3,363
16% $73,636 $(29,765) $3,434
17% $76,363 $(27,038) $3,563
</TABLE>
The Notes and the Convertible Junior Subordinated Debentures will have legal
and other economic terms typically associated with indebtedness and have been
intended to create a debtor-creditor relationship between JCC and the holders
thereof. Consequently, JCC intends to treat the Notes and the Convertible Junior
Subordinated Debentures as debt for federal income tax purposes, and the
discussion herein assumes such treatment. The IRS may assert that the New Notes,
the New Contingent Notes and the Convertible Junior Subordinated Debentures
should be classified as equity rather than debt for federal income tax purposes.
If it were determined that either the Notes or the Convertible Junior
Subordinated Debentures constitutes equity for federal income tax purposes, or
if JCC Holding is prohibited from deducting interest paid on the Convertible
Junior Subordinated Debentures due to certain recent amendments to the Internal
Revenue Code of 1986, as amended, such a recharacterization or treatment, as the
case may be, would result in the loss of substantial interest deductions and
other tax benefits for JCC. The Company believes that the New Notes are properly
classified as debt for federal income tax purposes and that the
recharacterization of the New Contingent Notes and/or the Convertible Junior
Subordinated Debentures as equity for federal income tax purposes would not
impact the pro forma balance sheet or the pro forma statement of operations.
(c) Records the purchase for $75 million of a 49.9% equity interest in JCC
Holding by the HJC Entities. A portion of the $75 million contribution is funded
through the conversion to equity of debtor-in-possession loans previously
extended to HJC by the HJC Entities.
(d) Records the reduction of net partners' capital balance to zero in
recognition of the vesting of the assets and business of HJC in JCC under the
Plan of Reorganization. The Plan of Reorganization provides that, for federal
income tax purposes, such vesting shall be deemed to have occurred as a deemed
exchange by the Bondholders of the Old Bonds for such assets and business and
deemed exchanges by the Bondholders of such assets and business for the Class A
Common Stock, the New Notes and the New Contingent Notes. Also records the
creation of paid-in capital on the books of the Company arising from JCC's
assumption of the assets of HJC.
(e) Records the payment of certain HJC liabilities pursuant to the terms of
the Plan of Reorganization.
(f) Records the funding of loans anticipated to be incurred on the Effective
Date as follows: $40 million of the A Term Loan; $30 million of the B Term Loan;
and $26.6 million of Convertible Junior Subordinated Debentures.
(g) To record the adjustments to state assets and liabilities at fair value
and adjust for the difference between the assumed reorganization value and fair
value of the identifiable tangible assets by reducing the value assigned to
intangible deferred operating contract costs and lease prepayments.
172
<PAGE>
JCC HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
AS OF JUNE 30, 1998
NOTE 3. STATEMENT OF OPERATIONS PRO FORMA ADJUSTMENTS
(a) To reverse expenses recorded during the period related to the bankruptcy
filing and reorganization of HJC.
(b) To reverse the interest expense incurred during the period in connection
with debtor-in-possession financing obtained by HJC.
(c) To record interest expense on the New Notes. This calculation does not
include any contingent interest expense, nor do the financials include the pro
forma effect on interest expense, net loss and related per share amounts.
The Notes and the Convertible Junior Subordinated Debentures will have legal
and other economic terms typically associated with indebtedness and have been
intended to create a debtor-creditor relationship between JCC and the holders
thereof. Consequently, JCC intends to treat the Notes and the Convertible Junior
Subordinated Debentures as debt for federal income tax purposes, and the
discussion herein assumes such treatment. The IRS may assert that the New Notes,
the New Contingent Notes and the Convertible Junior Subordinated Debentures
should be classified as equity rather than debt for federal income tax purposes.
If it were determined that either the Notes or the Convertible Junior
Subordinated Debentures constitutes equity for federal income tax purposes, or
if JCC Holding is prohibited from deducting interest paid on the Convertible
Junior Subordinated Debentures due to certain recent amendments to the Internal
Revenue Code of 1986, as amended, such a recharacterization or treatment, as the
case may be, would result in the loss of substantial interest deductions and
other tax benefits for JCC. The Company believes that the New Notes are properly
classified as debt for federal income tax purposes and that the
recharacterization of the New Contingent Notes and/or the Convertible Junior
Subordinated Debentures as equity for federal income tax purposes would not
impact the pro forma balance sheet or the pro forma statement of operations.
(d) To record as interest expense the amortization of the discount on the
New Notes. This amortization is calculated using the interest method.
Amortization for the first five years is as follows (in thousands):
<TABLE>
<S> <C>
Year 1...................................................................................................................... $3,434
Year 2...................................................................................................................... $4,198
Year 3...................................................................................................................... $5,298
Year 4...................................................................................................................... $6,596
Year 5...................................................................................................................... $6,596
</TABLE>
(e) To record interest expense on the loans anticipated to be funded on the
Effective Date. This interest is calculated based on approximately $70 million
in term loans at rates ranging between 7.5% and 9.0%, and approximately $26.6
million in Convertible Junior Subordinated Debentures at an 8% rate.
(f) As a result of its structure as a partnership, no provisions for federal
or state income taxes were made on the books of HJC, as such taxes were the
responsibility of the individual partners. JCC Holding will be a corporation
subject to the income taxes. However, no provision or benefit is provided for
such taxes due to the incurrence of a pro forma net loss for the period and the
uncertainty of the ability to utilize the net operating loss carry forward in
future periods.
173
<PAGE>
JCC HOLDING COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA JCC
HJC ADJUSTMENTS HOLDING
HISTORICAL (NOTE 2) PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
Total revenues............................................................ $ 1,679 $ -- $ 1,679
---------- ----------- -----------
Operating expenses
Depreciation and amortization........................................... 610 -- 610
General and administrative.............................................. 14,703 -- 14,703
Reorganization costs.................................................... 5,886 (5,886)(a) --
---------- ----------- -----------
Total operating expenses............................................ 21,199 (5,886) 15,313
---------- ----------- -----------
Operating loss............................................................ (19,520) 5,886 (13,634)
---------- ----------- -----------
Other income (expenses)
Interest expense........................................................ (1,975) 1,975(b) (22,398)
(11,220)(c)
(3,350)(d)
(7,828)(e)
Interest and other income............................................... 251 (251)(b) --
---------- ----------- -----------
Total other income (expenses)....................................... (1,724) (20,674) (22,398)
---------- ----------- -----------
Loss before income taxes.................................................. (21,244) (14,788) (36,032)
Income tax benefit........................................................ -- -- (f) --
---------- ----------- -----------
Net loss.................................................................. $ (21,244) $ (14,788) $ (36,032)
---------- ----------- -----------
---------- ----------- -----------
Loss per common share..................................................... N/A $ (3.60)
---------- -----------
---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997.
174
<PAGE>
JCC HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
NOTE 1. PRESENTATION
The following notes set forth the explanations and assumptions used in
preparing the unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1997.
JCC Holding is the successor to HJC, the prior owner of the Casino and the
owner and operator of the Basino Street Temporary Casino. Upon the Effective
Date of the Plan of Reorganization, except for certain property which will vest
in CP Development and FP Development, all of the assets of HJC will vest in JCC.
For purposes of the accompanying pro forma financial information, pursuant
to SOP 90-7, the total reorganization value of the reorganized Company's assets
was determined using several factors and by reliance on various valuation
methods, including discounting cash flow, as well as by analyzing market cash
flow multiples applied to the Company's pro forma cash flows. The factors
considered by the Company included: (i) forecasted cash flow results which gave
effect to the estimated impact of the restructuring; (ii) the discounted
residual value at the end of the forecast period; (iii) competition and general
economic considerations; and (iv) future potential profitability. Based on this
analysis, the Company, after consultation with an independent firm specializing
in reorganizations, established the Company's reorganization value. Under the
principles of "fresh start" accounting, the Company's total net assets were
recorded at this assumed reorganization value, which was then allocated to
identifiable tangible assets on the basis of their estimated fair value. In
accordance with "fresh start" accounting, the difference between the assumed
reorganization value and the aggregate fair value of the identifiable tangible
assets resulted in a reduction in the value assigned to intangible deferred
Operating Contract Costs and prepaid lease costs.
Loss per common share was calculated using 10,000,000 shares of Common
Stock, the number of shares expected to be issued in connection with the Plan of
Reorganization.
NOTE 2. PRO FORMA ADJUSTMENTS
(a) To reverse expenses recorded during the period related to the bankruptcy
filing and reorganization of HJC.
(b) To reverse the interest expense incurred during the period in connection
with debtor-in-possession financing obtained by HJC, and the recorded interest
income earned on some required escrow accounts.
(c) To record interest expense on the New Notes. This calculation does not
include any contingent interest expense, nor do the financials include the pro
forma effect on interest expense, net loss and related per share amounts.
The Notes and the Convertible Junior Subordinated Debentures will have legal
and other economic terms typically associated with indebtedness and have been
intended to create a debtor-creditor relationship between JCC and the holders
thereof. Consequently, JCC intends to treat the Notes and the Convertible Junior
Subordinated Debentures as debt for federal income tax purposes, and the
discussion herein assumes such treatment. The IRS may assert that the New Notes,
the New Contingent Notes, and the Convertible Junior Subordinated Debentures
should be classified as equity rather than debt for federal income tax purposes.
If it were determined that either the Notes or the Convertible Junior
Subordinated Debentures constitutes equity for federal income tax purposes, or
if JCC Holding is prohibited from deducting interest paid on the Convertible
Junior Subordinated Debentures due to certain recent amendments to the Internal
Revenue Code of 1986, as amended, such a recharacterization or treatement,
175
<PAGE>
JCC HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
as the case may be, would result in the loss of substantial interest deductions
and other tax benefits for JCC. The Company believes that the New Notes are
properly classified as debt for federal income tax purposes and that the
recharacterization of the New Contingent Notes and/or the Convertible Junior
Subordinated Debentures as equity for federal income tax purposes would not
impact the pro forma balance sheet or the pro forma statement of operations.
(d) To record as interest expense the amortization of the discount on the
New Notes. This amortization is calculated using the interest method.
Amortization for the first five years is as follows (in thousands):
<TABLE>
<S> <C>
Year 1.............................................. $ 3,434
Year 2.............................................. $ 4,198
Year 3.............................................. $ 5,298
Year 4.............................................. $ 6,596
Year 5.............................................. $ 6,596
</TABLE>
(e) To record interest expense on the loans anticipated to be funded on the
Effective Date. This interest is calculated based on approximately $70 million
in term loans at rates ranging between 7.5% and 9.0%, and approximately $26.6
million in Convertible Junior Subordinated Debentures at an 8% rate.
(f) As a result of its structure as a partnership, no provisions for federal
or state income taxes were made on the books of HJC, as such taxes were the
responsibility of the individual partners. JCC Holding will be a corporation
subject to the income taxes. However, no provision or benefit is provided for
such taxes due to the incurrence of a pro forma net loss for the period and the
uncertainty of the ability to utilize the net operating loss carry forward in
future periods.
176
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF HJC
Report of Independent Public Accountants
Consolidated Balance Sheets, As of December 31, 1997 and 1996
Consolidated Statements of Operations For the Years Ended December 31,
1995, 1996 and 1997
Consolidated Statements of Partners' Capital (Deficit) For the Years
Ended December 31, 1995,
1996 and 1997
Consolidated Statements of Cash Flows For the Years Ended December 31,
1995, 1996 and 1997
Notes to Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31,
1997
Condensed Consolidated Statements of Operations for the Second Quarter Ended
June 30, 1998 and
June 30, 1997 and the Six Months Ended June 30, 1998 and June 30, 1997
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1998 and
June 30, 1997
Notes to Condensed Consolidated Financial Statements
FINANCIAL STATEMENTS OF JCC HOLDING
Pro Forma Condensed Consolidated Balance Sheet As of June 30, 1998
Pro Forma Condensed Consolidated Statement of Operations For the Six Months
Ended June 30,
1998
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements As
of June 30, 1998
Pro Forma Condensed Consolidated Statement of Operations For the Year Ended
December 31, 1997
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year
Ended December 31, 1997
177
<PAGE>
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
2.01 -- Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code of Harrah's Jazz Company,
Harrah's Jazz Finance Corp. and Harrah's New Orleans Investment Company (collectively "Debtors"),
dated April 3, 1996(1)
2.02 -- First Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated June 17,
1996(2)
2.03 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated February 26,
1997(3)
2.04 -- Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as Modified and
Confirmed, dated as of February 26, 1997(4)
2.05 -- Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as Modified Pre-
and Post-Confirmation, dated as of July 24, 1997(5)
2.06 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as Modified
Through November 14, 1997, dated November 14, 1997(6)
2.07 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as Modified
Through January 29, 1998, dated January 29, 1998(3)
2.08 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as Modified
Through April 6, 1998(7)
2.09 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as Modified
Through August 12, 1998(8)
2.10 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as Modified
Through September 3, 1998
+3.01 -- Certificate of Incorporation of JCC Holding Company
*3.02 -- Form of Restated Certificate of Incorporation of JCC Holding Company
+3.03 -- Bylaws of JCC Holding Company
3.04 -- Amended and Restated Bylaws of JCC Holding Company
*3.05 -- Form of Second Amended and Restated Bylaws of JCC Holding Company
*4.01 -- Form of Indenture, dated as of , 1998, among Jazz Casino Company, L.L.C., as Issuer, JCC
Holding Company, JCC Development Company, L.L.C., CP Development, L.L.C. and FP Development L.L.C.,
as Guarantors and Norwest Bank Minnesota, National Association, as Trustee, with respect to the
Senior Subordinated Notes with Contingent Payments due 2009
*4.02 -- Form of Indenture, dated as of , 1998, among Jazz Casino Company, L.L.C., as Issuer, JCC
Holding Company, JCC Development Company, L.L.C., CP Development, L.L.C. and FP Development L.L.C.,
as Guarantors, and Norwest Bank Minnesota, National Association, as Trustee, with respect to the
Senior Subordinated Contingent Notes
*4.03 -- Form of Notes Completion Guarantee among Harrah's Entertainment, Inc., Harrah's Operating Company,
Inc. and Norwest Bank Minnesota, National Association, as Trustee, dated , 1998
</TABLE>
178
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
4.04 -- Form of Indenture, dated as of 1998, among Jazz Casino Company, L.L.C., JCC Holding
Company and Norwest Bank Minnesota, National Association, as Trustee, with respect to the 8%
Convertible Junior Subordinated Debentures due 2009(9)
*4.05 -- Form of Registration Rights Agreement among Jazz Casino Company, L.L.C., JCC Holding Company, Salomon
Smith Barney, Donaldson, Lufkin & Jenrette, BT Alex. Brown Incorporated and Bankers Trust Company,
dated , 1998
*4.06 -- Form of Registration Rights Agreement between JCC Holding Company and Harrah's Crescent City
Investment Company, dated , 1998
*4.07 -- Form of Warrant Agreement between JCC Holding Company and Harrah's Crescent City Investment Company,
dated , 1998
*4.08 -- Form of HET/JCC Agreement between Harrah's Entertainment, Inc., Harrah's Operating Company, Inc. and
Jazz Casino Company, L.L.C., dated , 1998
*4.09 -- Form of Intercreditor Agreement among Harrah's Entertainment, Inc., Harrah's Operating Company, Inc.,
Bankers Trust Company, as Administrative Agent, and Norwest Bank Minnesota, National Association, as
Trustee, dated , 1998
*4.10 -- Form of Credit Agreement among JCC Holding Company, Jazz Casino Company, L.L.C., and Bankers Trust
Company, as Administrative Agent, dated , 1998
*10.01 -- Form of Amended and Restated Lease Agreement between Rivergate Development Corporation, as Landlord,
and Jazz Casino Company, L.L.C., as Tenant, and the City of New Orleans, as Intervenor, dated
, 1998
*10.02 -- Form of Amended and Restated General Development Agreement between Jazz Casino Company, L.L.C.,
Rivergate Development Corporation and the City of New Orleans, as Intervenor, dated ,
1998
10.03 -- Basin Street Casino Lease Termination Agreement between the City of New Orleans, the Rivergate
Development Corporation and Harrah's Jazz Company, dated January 15, 1997(3)
10.04 -- Casino Operating Contract between the Louisiana Economic Development and Gaming Corporation and
Harrah's Jazz Company, dated March 14, 1994(10)
*10.05 -- Form of Amended and Renegotiated Casino Operating Contract among the Louisiana Gaming Control Board,
Harrah's Jazz Company, and Jazz Casino Company, L.L.C., dated , 1998
*10.06 -- Form of Second Amended and Restated Management Agreement between Harrah's New Orleans Management
Company and Jazz Casino Company, L.L.C., dated , 1998
*10.07 -- Form of Second Floor Non-Gaming Sublease between Jazz Casino Company, L.L.C., as Sublessor, and JCC
Development Company, L.L.C., as Sublessee, dated , 1998
*10.08 -- Form of City/RDC Completion Guarantee among Harrah's Entertainment, Inc., Harrah's Operating Company,
Inc., the Rivergate Development Corporation and the City of New Orleans, dated , 1998
</TABLE>
179
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
*10.09 -- Form of LGCB Completion Guarantee among Harrah's Entertainment, Inc., Harrah's Operating Company,
Inc., the State of Louisiana and the Louisiana Gaming Control Board, dated , 1998
*10.10 -- Form of Commitment for Owner's and Lender's Title Insurance Policies issued , 1998 by
First American Title Company to Harrah's Jazz Company
*10.11 -- Form of Amended and Restated Completion Loan Agreement among Jazz Casino Company, L.L.C., Harrah's
Entertainment, Inc. and Harrah's Operating Company, Inc., dated , 1998
*10.12 -- Form of Amended and Restated Construction Lien Indemnity Obligation Agreement between Jazz Casino
Company, L.L.C. and Harrah's Operating Company, Inc., dated , 1998
*10.13 -- Form of Bank Completion Guarantee among Harrah's Entertainment, Inc., Harrah's Operating Company,
Inc. and the Bank Lenders, dated , 1998
*10.14 -- Form of Development Services Agreement between Jazz Casino Company, L.L.C., JCC Development Company,
L.L.C., CP Development, L.L.C., FP Development, L.L.C. and Harrah's Operating Company, Inc., dated
, 1998
*10.15 -- Form of Completion Guarantor Subordination Agreement among Jazz Casino Company, L.L.C., Harrah's
Entertainment, Inc. and Harrah's Operating Company, Inc., dated , 1998
*10.16 -- Form of Manager Subordination Agreement among Harrah's New Orleans Management Company and the
Rivergate Development Corporation, dated , 1998
*10.17 -- Form of Manager Subordination Agreement among Harrah's New Orleans Management Company and Bankers
Trust Company, dated , 1998
*10.18 -- Form of Manager Subordination Agreement among Jazz Casino Company, L.L.C., Harrah's New Orleans
Management Company, and Norwest Bank Minnesota, National Association, as Trustee, dated ,
1998
*10.19 -- Form of HET Subordinated Lender Subordination Agreement among Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc. and Bankers Trust Company, as Administrative Agent under the Credit
Agreement, dated , 1998
*10.20 -- Form of Management Fee Guarantee Agreement among Harrah's Entertainment, Inc., Harrah's Operating
Company, Inc. and Jazz Casino Company, L.L.C., dated , 1998
*10.21 -- Form of Performance Bond among Jazz Casino Company, L.L.C. and Reliance Insurance Company and United
States Fidelity and Guarantee Company, as Sureties, dated , 1998
*10.22 -- Form of Licensing Agreement among Harrah's New Orleans Management Company and Harrah's Las Vegas,
Inc. dated , 1998
21.01 -- List of Subsidiaries of JCC Holding Company
27.01 -- Financial Data Schedule(11)
99.01 -- Opinion of New Orleans City Attorney regarding Home Rule Charter(12)
99.02 -- Opinion of New Orleans City Attorney regarding Amusement Tax(12)
</TABLE>
180
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
99.03 -- Opinion of Richard P. Ieyoub, Louisiana State Attorney General, regarding the Powers of the Louisiana
Gaming Control Board(3)
99.04 -- JORDAN VS. LOUISIANA GAMING CONTROL BOARD and MURPHY J. FOSTER AND BEAN VS. LOUISIANA GAMING CONTROL
BOARD AND RIVERGATE DEVELOPMENT CORPORATION, Nos. 98-C-1122, 98-C-1133 and 98-C-1134, (La. S. Ct.,
May 15, 1998)(13)
</TABLE>
- ------------------------
+ Previously filed.
* To be filed by amendment.
(1) Incorporated by reference to Harrah's Jazz Company Annual Report on Form
10-K for the year ended December 31, 1995, File No. 33-73370.
(2) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended June 30, 1996, filed August 14, 1996, File No.
33-73370.
(3) Incorporated by reference to Harrah's Jazz Company Annual Report on Form
10-K for the year ended December 31, 1997, File No. 33-73370.
(4) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended March 30, 1997, filed May 15, 1997, File No.
33-73370.
(5) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, filed August 14, 1997, File No.
33-73370.
(6) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, filed November 14, 1997, File
No. 33-73370.
(7) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, filed May 15, 1998, File No.
33-73370.
(8) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended June 30, 1998, filed August 14, 1998, File No.
33-73370.
(9) Incorporated by reference to the Form T-3 of the Jazz Casino company,
L.L.C., filed December 16, 1997, File No. 022-22293.
(10) Incorporated by reference to Amendment No. 3 to the Registration Statement
on Form S-1 of Harrah's Jazz Company and Harrah's Jazz Finance Corp., filed
August 4, 1994, File No. 33-73370.
(11) Not required pursuant to Item 601(c)(1)(ii) of Regulation S-K.
(12) Incorporated by reference to Amendment No. 4 to the Registration Statement
on Form S-1 of Harrah's Jazz Company and Harrah's Jazz Finance Corp., filed
October 12, 1994, File No. 33-73370.
(13) Incorporated by reference to Harrah's Jazz Company Current Report on Form
8-K, filed May 19, 1998, File No. 33-73370.
181
<PAGE>
INDEX
The following is an index of certain defined terms which are used in this
Registration Statement on Form 10. The following index does not include those
defined terms which are set forth in the financial statements included in this
Registration Statement:
<TABLE>
<S> <C>
33 Act Registration Statement.......... 112
3CP Property........................... 2
A Term Loan............................ 5
Additional Class A Director............ 107
Additional Class B Director............ 108
Administrative Agent................... 75
Admission.............................. 30
Affiliate.............................. 113
Amended and Renegotiated Casino
Operating Contract................... 4
Amended and Restated Construction Lien
Indemnity Agreement.................. 71
Amended Completion Loan Agreement...... 68
Amended GDA............................ 22
Amended Ground Lease................... 9
Amended Ground Lease Minimum
Payments............................. 45
Amended Management Agreement........... 60
Amended Open Access Program and Plans.. 35
Audubon Payment........................ 46
B Term Loan............................ 5
Bank Completion Guarantee.............. 68
Bank Lenders........................... 5
Bank Lenders Subordination Agreement... 75
Bank Loans............................. 5
Bankruptcy Code........................ 3
Bankruptcy Court....................... 3
Base Fee............................... 62
Basin Street Casino.................... 2
Basin Street Casino Lease.............. 5
Bean................................... 14
Beneficiaries.......................... 20
Bondholders............................ 4
Bondholders Class Action............... 102
Broadmoor Settlement Agreement......... 6
BTCo................................... 3
BTCo Credit Support Fee................ 38
Carry Obligation Default............... 67
Carry Obligation Termination Date...... 37
Carry Obligations...................... 65
Casino................................. 1
Casino Construction.................... 1
Casino Contracts....................... 32
Casino Development..................... 43
Casino Operating Contract.............. 2
Casino Operating Contracts............. 77
Casino Premises........................ 10
Centex................................. 6
Centex Settlement Agreement............ 6
Change of Control...................... 113
City................................... 1
City Lease............................. 34
City Payments.......................... 46
Claims................................. 63
Class A Common Stock................... 4
Class A Directors...................... 24
Class B Common Stock................... 4
Class B Directors...................... 24
Class B Entities....................... 106
Class B Registration Rights
Agreement............................ 113
Class B Registration Statement......... 113
Cleanup Laws........................... 9
Closing Price.......................... 113
COC Fiscal Year........................ 54
Common Stock........................... 4
Company................................ 1
Competing Casinos...................... 33
Completion Guarantees.................. 20
Completion Guarantors.................. 20
Completion Loans....................... 68
Completion Obligation Default.......... 67
Completion Obligations................. 65
Conflicted Entity...................... 114
Consolidated EBITDA.................... 41
Contingent Payment Measurement Amount.. 41
Continuing Directors................... 63
Controlled Affiliate................... 114
Conversion Price....................... 40
Convertible Junior Subordinated
Debentures........................... 5
CP Development......................... 1
Credit Agreement....................... 37
Cure Event............................. 114
Cure Period............................ 76
Current Market Price................... 40
Debtors................................ 18
Deferral Amount........................ 62
Development Entities................... 1
Development Properties................. 23
Development Services................... 74
</TABLE>
182
<PAGE>
<TABLE>
<S> <C>
Development Services Agreement......... 74
Disqualified Holder.................... 114
DLJ.................................... 5
Effective Date......................... 1
Excluded Transactions.................. 114
Excusable Temporary Cessation of
Operations........................... 72
Extraordinary Flip Event............... 115
Fair Market Value...................... 115
Favored Beneficiary.................... 68
Finance Corp........................... 3
First American......................... 10
First American Settlement Agreement.... 11
Fixed Interest......................... 41
Flip Event............................. 115
FNBC................................... 5
Force Majeure.......................... 20
FP Development......................... 1
Froelich............................... 100
Fulton Property........................ 2
Gaming Act............................. 1
Gaming Collateral...................... 81
General Development Agreement.......... 2
Grand Palais........................... 2
Grand Palais Family Members............ 105
Grand Palais Shareholders.............. 105
Gross Gaming Payments.................. 45
Gross Gaming Percentage Amount......... 45
Gross Gaming Revenue Share Payments.... 53
Gross Non-Gaming Payments.............. 46
Ground Lease........................... 2
Harrah's Entities...................... 105
Harrah's S&RP.......................... 52
HCCIC.................................. 4
Hemmeter............................... 100
HET.................................... 2
HET interest rate...................... 37
HET Loan Guaranty...................... 38
HET or Manager Related Events.......... 116
HET Warrant............................ 5
HET/JCC Agreement...................... 18
HJC.................................... 1
HNOIC.................................. 2
HOCI................................... 2
House Bank............................. 51
Impositions............................ 53
Incentive Fee.......................... 62
Indemnity Obligations.................. 71
Indentures............................. 28
Initial Bonds.......................... 44
Initial Casino Facilities.............. 1
Initial Costs.......................... 57
Initial Financing...................... 2
Initial Payment........................ 53
Intercreditor Agreement................ 75
IRS.................................... 30
JCC.................................... 1
JCC Credit Support Fee................. 38
JCC Development........................ 1
JCC Entities........................... 1
JCC Holding............................ 1
JCC S&RP............................... 52
Jordan................................. 14
Junior Subordinated Credit Facility.... 5
Key Casino Personnel................... 63
Landmarks Litigation................... 98
LEDGC.................................. 2
LGCB................................... 1
LGCB Completion Guarantee.............. 68
Local Option Election.................. 12
Major Condemnation..................... 51
Management Fees........................ 62
Manager................................ 2
Manager Subordination Agreement (RDC/
City)................................ 51
Manager Subordination Agreements....... 75
MAR Exercise Notice.................... 46
MAR Payment............................ 46
Master Plan............................ 1
McCall Claimants....................... 97
McCall Litigation...................... 96
McCall Settlement Agreement............ 97
Minimum Market Value................... 116
Minimum Payment Default................ 54
Minimum Payment Guarantors............. 18
Minimum Payment Guaranty............... 18
Minimum Payments....................... 54
National Commission.................... 17
Net Market Appreciation................ 46
New Contingent Notes................... 5
New Equity Investment.................. 4
New Notes.............................. 5
NOLDC.................................. 2
NOLDC Family Members................... 106
NOLDC Shareholders..................... 106
Non-Qualified Person................... 64
Notes.................................. 5
Notes Completion Guarantee............. 68
Notes Obligations...................... 75
Notes Subordination Agreement.......... 75
Old Bank Credit Facilities............. 2
Old Bonds.............................. 2
</TABLE>
183
<PAGE>
<TABLE>
<S> <C>
Open Access Program and Plans.......... 2
Opening Date........................... 7
OTB.................................... 9
Other Beneficiaries.................... 68
Participating Banks.................... 40
Partners............................... 2
PCB.................................... 10
Permits................................ 43
Permitted Amendment.................... 55
Permitted Riverboat.................... 55
Person................................. 116
Petition Date.......................... 3
Plan of Reorganization................. 3
Poirier................................ 99
Poydras Street Support Facility........ 21
Poydras Tunnel Area.................... 1
Pre-Opening Date Rent.................. 45
Preferential re-employment............. 100
Preservation Obligation Default........ 67
Preservation Obligations............... 66
Proponents............................. 3
Qualified Person....................... 116
Qualified Purchaser.................... 64
RDC.................................... 1
RDC Completion Guarantee............... 68
Receiver............................... 75
Redemption Date........................ 116
Redemption Securities.................. 116
Registrant............................. 1
Release Pool........................... 103
Rent................................... 45
Residency Requirement.................. 98
Riverboat Act.......................... 8
Rivergate.............................. 1
Rules and Regulations.................. 1
Salomon................................ 5
School Board Payment................... 46
Second Floor Shell Construction........ 1
Second Floor Sublease.................. 69
Semiannual Period...................... 41
Senior Indebtedness.................... 75
Senior Permitted Refinancings.......... 39
Senior Subordinated Permitted
Refinancings......................... 39
Significant Transactions............... 116
Site Reactivation Date................. 44
SOP 90-7............................... 24
Speedy Arbitration..................... 117
State.................................. 4
Subordinated Obligations............... 75
Subordination Beneficiaries............ 75
Subsidiary............................. 117
Succession Date........................ 75
Surety Bond............................ 21
Swody.................................. 99
Term Loans............................. 5
Termination Agreement.................. 70
Termination Date....................... 75
Termination Event...................... 59
Termination Fee........................ 64
Termination Notice..................... 75
Termination of Construction Date....... 66
Tranche A-1............................ 37
Tranche A-2............................ 37
Tranche A-3............................ 37
Tranche B-1............................ 37
Tranche B-2............................ 37
Transfer............................... 117
Transition Date........................ 117
Transition Period...................... 51
Trustee................................ 41
Tucker Litigation...................... 98
Unclassified Common Stock.............. 105
Underwriters........................... 40
VDPs................................... 9
WARN Act Claimants..................... 100
Working Capital Facility............... 5
Working Capital Facility Maximum
Amount............................... 66
Zoning Ordinance....................... 23
</TABLE>
184
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
JCC HOLDING COMPANY
By: /s/ FREDERICK W. BURFORD
-----------------------------------------
Title: President
------------------------------------------
</TABLE>
Date September 25, 1998
185
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------- -------------
<C> <C> <S> <C>
2.01 -- Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code of Harrah's Jazz
Company, Harrah's Jazz Finance Corp. and Harrah's New Orleans Investment Company
(collectively "Debtors"), dated April 3, 1996(1)
2.02 -- First Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated
June 17, 1996(2)
2.03 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated
February 26, 1997(3)
2.04 -- Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as
Modified and Confirmed, dated as of February 26, 1997(4)
2.05 -- Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as
Modified Pre- and Post-Confirmation, dated as of July 24, 1997(5)
2.06 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as
Modified Through November 14, 1997, dated November 14, 1997(6)
2.07 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as
Modified Through January 29, 1998, dated January 29, 1998(3)
2.08 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as
Modified Through April 6, 1998(7)
2.09 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as
Modified Through August 12, 1998(8)
2.10 -- Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code as
Modified Through September 3, 1998
+3.01 -- Certificate of Incorporation of JCC Holding Company
*3.02 -- Form of Restated Certificate of Incorporation of JCC Holding Company
+3.03 -- Bylaws of JCC Holding Company
3.04 -- Amended and Restated Bylaws of JCC Holding Company
*3.05 -- Form of Second Amended and Restated Bylaws of JCC Holding Company
*4.01 -- Form of Indenture, dated as of , 1998, among Jazz Casino Company, L.L.C., as
Issuer, JCC Holding Company, JCC Development Company, L.L.C., CP Development, L.L.C. and
FP Development L.L.C., as Guarantors and Norwest Bank Minnesota, National Association,
as Trustee, with respect to the Senior Subordinated Notes with Contingent Payments due
2009
*4.02 -- Form of Indenture, dated as of , 1998, among Jazz Casino Company, L.L.C., as
Issuer, JCC Holding Company, JCC Development Company, L.L.C., CP Development, L.L.C. and
FP Development L.L.C., as Guarantors, and Norwest Bank Minnesota, National Association,
as Trustee, with respect to the Senior Subordinated Contingent Notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------- -------------
<C> <C> <S> <C>
*4.03 -- Form of Notes Completion Guarantee among Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc. and Norwest Bank Minnesota, National Association, as Trustee,
dated , 1998
4.04 -- Form of Indenture, dated as of 1998, among Jazz Casino Company, L.L.C., JCC
Holding Company and Norwest Bank Minnesota, National Association, as Trustee, with
respect to the 8% Convertible Junior Subordinated Debentures due 2009(9)
*4.05 -- Form of Registration Rights Agreement among Jazz Casino Company, L.L.C., JCC Holding
Company, Salomon Smith Barney, Donaldson, Lufkin & Jenrette, BT Alex. Brown Incorporated
and Bankers Trust Company, dated , 1998
*4.06 -- Form of Registration Rights Agreement between JCC Holding Company and Harrah's Crescent
City Investment Company, dated , 1998
*4.07 -- Form of Warrant Agreement between JCC Holding Company and Harrah's Crescent City
Investment Company, dated , 1998
*4.08 -- Form of HET/JCC Agreement between Harrah's Entertainment, Inc., Harrah's Operating
Company, Inc. and Jazz Casino Company, L.L.C., dated , 1998
*4.09 -- Form of Intercreditor Agreement among Harrah's Entertainment, Inc., Harrah's Operating
Company, Inc., Bankers Trust Company, as Administrative Agent, and Norwest Bank
Minnesota, National Association, as Trustee, dated , 1998
*4.10 -- Form of Credit Agreement among JCC Holding Company, Jazz Casino Company, L.L.C., and
Bankers Trust Company, as Administrative Agent, dated , 1998
*10.01 -- Form of Amended and Restated Lease Agreement between Rivergate Development Corporation,
as Landlord, and Jazz Casino Company, L.L.C., as Tenant, and the City of New Orleans, as
Intervenor, dated , 1998
*10.02 -- Form of Amended and Restated General Development Agreement between Jazz Casino Company,
L.L.C., Rivergate Development Corporation and the City of New Orleans, as Intervenor,
dated , 1998
10.03 -- Basin Street Casino Lease Termination Agreement between the City of New Orleans, the
Rivergate Development Corporation and Harrah's Jazz Company, dated January 15, 1997(3)
10.04 -- Casino Operating Contract between the Louisiana Economic Development and Gaming
Corporation and Harrah's Jazz Company, dated March 14, 1994(10)
*10.05 -- Form of Amended and Renegotiated Casino Operating Contract among the Louisiana Gaming
Control Board, Harrah's Jazz Company, and Jazz Casino Company, L.L.C., dated
, 1998
*10.06 -- Form of Second Amended and Restated Management Agreement between Harrah's New Orleans
Management Company and Jazz Casino Company, L.L.C., dated , 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------- -------------
<C> <C> <S> <C>
*10.07 -- Form of Second Floor Non-Gaming Sublease between Jazz Casino Company, L.L.C., as
Sublessor, and JCC Development Company, L.L.C., as Sublessee, dated , 1998
*10.08 -- Form of City/RDC Completion Guarantee among Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc., the Rivergate Development Corporation and the City of New
Orleans, dated , 1998
*10.09 -- Form of LGCB Completion Guarantee among Harrah's Entertainment, Inc., Harrah's Operating
Company, Inc., the State of Louisiana and the Louisiana Gaming Control Board, dated
, 1998
*10.10 -- Form of Commitment for Owner's and Lender's Title Insurance Policies issued
, 1998 by First American Title Company to Harrah's Jazz Company
*10.11 -- Form of Amended and Restated Completion Loan Agreement among Jazz Casino Company,
L.L.C., Harrah's Entertainment, Inc. and Harrah's Operating Company, Inc., dated
, 1998
*10.12 -- Form of Amended and Restated Construction Lien Indemnity Obligation Agreement between
Jazz Casino Company, L.L.C. and Harrah's Operating Company, Inc., dated ,
1998
*10.13 -- Form of Bank Completion Guarantee among Harrah's Entertainment, Inc., Harrah's Operating
Company, Inc. and the Bank Lenders, dated , 1998
*10.14 -- Form of Development Services Agreement between Jazz Casino Company, L.L.C., JCC
Development Company, L.L.C., CP Development, L.L.C., FP Development, L.L.C. and Harrah's
Operating Company, Inc., dated , 1998
*10.15 -- Form of Completion Guarantor Subordination Agreement among Jazz Casino Company, L.L.C.,
Harrah's Entertainment, Inc. and Harrah's Operating Company, Inc., dated ,
1998
*10.16 -- Form of Manager Subordination Agreement among Harrah's New Orleans Management Company
and the Rivergate Development Corporation, dated , 1998
*10.17 -- Form of Manager Subordination Agreement among Harrah's New Orleans Management Company
and Bankers Trust Company, dated , 1998
*10.18 -- Form of Manager Subordination Agreement among Jazz Casino Company, L.L.C., Harrah's New
Orleans Management Company, and Norwest Bank Minnesota, National Association, as
Trustee, dated , 1998
*10.19 -- Form of HET Subordinated Lender Subordination Agreement among Harrah's Entertainment,
Inc., Harrah's Operating Company, Inc. and Bankers Trust Company, as Administrative
Agent under the Credit Agreement, dated , 1998
*10.20 -- Form of Management Fee Guarantee Agreement among Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc. and Jazz Casino Company, L.L.C., dated , 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------- -------------
<C> <C> <S> <C>
*10.21 -- Form of Performance Bond among Jazz Casino Company, L.L.C. and Reliance Insurance
Company and United States Fidelity and Guarantee Company, as Sureties, dated
, 1998
*10.22 -- Form of Licensing Agreement among Harrah's New Orleans Management Company and Harrah's
Las Vegas, Inc. dated , 1998
21.01 -- List of Subsidiaries of JCC Holding Company
27.01 -- Financial Data Schedule(11)
99.01 -- Opinion of New Orleans City Attorney regarding Home Rule Charter(12)
99.02 -- Opinion of New Orleans City Attorney regarding Amusement Tax(12)
99.03 -- Opinion of Richard P. Ieyoub, Louisiana State Attorney General, regarding the Powers of
the Louisiana Gaming Control Board(3)
99.04 -- JORDAN VS. LOUISIANA GAMING CONTROL BOARD and MURPHY J. FOSTER AND BEAN VS. LOUISIANA
GAMING CONTROL BOARD AND RIVERGATE DEVELOPMENT CORPORATION, Nos. 98-C-1122, 98-C-1133
and 98-C-1134, (La. S. Ct., May 15, 1998)(13)
</TABLE>
- ------------------------
+ Previously filed.
* To be filed by amendment.
(1) Incorporated by reference to Harrah's Jazz Company Annual Report on Form
10-K for the year ended December 31, 1995, File No. 33-73370.
(2) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended June 30, 1996, filed August 14, 1996, File No.
33-73370.
(3) Incorporated by reference to Harrah's Jazz Company Annual Report on Form
10-K for the year ended December 31, 1997, File No. 33-73370.
(4) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended March 30, 1997, filed May 15, 1997, File No.
33-73370.
(5) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, filed August 14, 1997, File No.
33-73370.
(6) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, filed November 14, 1997, File
No. 33-73370.
(7) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, filed May 15, 1998, File No.
33-73370.
(8) Incorporated by reference to Harrah's Jazz Company Quarterly Report on Form
10-Q for the quarter ended June 30, 1998, filed August 14, 1998, File No.
33-73370.
(9) Incorporated by reference to the Form T-3 of the Jazz Casino company,
L.L.C., filed December 16, 1997, File No. 022-22293.
(10) Incorporated by reference to Amendment No. 3 to the Registration Statement
on Form S-1 of Harrah's Jazz Company and Harrah's Jazz Finance Corp., filed
August 4, 1994, File No. 33-73370.
(11) Not required pursuant to Item 601(c)(1)(ii) of Regulation S-K.
(12) Incorporated by reference to Amendment No. 4 to the Registration Statement
on Form S-1 of Harrah's Jazz Company and Harrah's Jazz Finance Corp., filed
October 12, 1994, File No. 33-73370.
(13) Incorporated by reference to Harrah's Jazz Company Current Report on Form
8-K, filed May 19, 1998, File No. 33-73370.
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: jointly administered
Debtor. : with
:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH SEPTEMBER 3, 1998
September 3, 1998
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: jointly administered
Debtor. : with
:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH SEPTEMBER 3, 1998
Dated: September 3, 1998 JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
<PAGE>
HELLER, DRAPER, HAYDEN &
HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130-6103
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for
Harrah's Entertainment, Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I. DEFINITION AND CONSTRUCTION OF TERMS............................................................3
A. Definitions.....................................................................................3
B. Other Terms....................................................................................28
C. Construction of Certain Terms..................................................................28
ARTICLE II. TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS.............................28
2.1. Administrative Expense Claims.........................................................28
2.2. Priority Tax Claims...................................................................30
ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS..................................................30
A. HJC Classification.............................................................................30
B. Finance Corp. Classification...................................................................31
C. HNOIC Classification...........................................................................32
ARTICLE IV. TREATMENT OF CLAIMS AND EQUITY INTERESTS.......................................................32
A. HJC Treatment..................................................................................32
4.1. Class A1 -- Other Priority Claims.....................................................32
4.2. Class A2 -- Non-Bondholder Secured Claims.............................................33
4.3. Class A3 -- Bank Claims...............................................................33
4.4. Class A4 -- Bondholder Claims.........................................................33
4.5. Class A5 -- Old Indenture Predecessor Trustee and Old Indenture Predecessor
Collateral Agent Claims...............................................................36
4.6. Class A6 -- WARN Act Claims...........................................................36
4.7. Class A7 -- General Unsecured Claims..................................................36
4.8. Class A8 -- Penalty Claims............................................................37
4.9. Class A9 -- Equity Interests..........................................................37
B. Finance Corp. Treatment........................................................................37
4.10. Class B1 -- Other Priority Claims.....................................................37
4.11. Class B2 -- Bank Claims...............................................................37
4.12. Class B3 -- Bondholder Claims.........................................................38
4.13. Class B4 -- WARN Act Claims...........................................................38
4.14. Class B5 -- General Unsecured Claims..................................................38
4.15. Class B6 - Penalty Claims.............................................................38
4.16. Class B7 -- Equity Interests..........................................................39
C. HNOIC Classification...........................................................................39
4.17. Class C1 -- Other Priority Claims.....................................................39
4.18. Class C2 -- Secured Claims............................................................39
4.19. Class C3 -- WARN Act Claims...........................................................39
4.20. Class C4 -- Unsecured Claims (for which HJC is liable)................................39
4.21. Class C5 -- General Unsecured Claims..................................................40
4.22. Class C6 -- Showboat Claim............................................................41
4.23. Class C7 -- Penalty Claims............................................................41
4.24. Class C8 -- Equity Interests..........................................................41
ARTICLE V. SETTLEMENT OF CERTAIN CLAIMS AND PROSECUTION AND ASSIGNMENT OF CERTAIN CLAIMS..................41
5.1. Release by Debtors of Causes of Action Against the HET Group, Debtors Group,
Bondholders Committee Group, NOLDC Group and Grand Palais Group.......................41
</TABLE>
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5.2. Release by Bondholders of Causes of Action Against HET Group, Debtors
Group, Bondholders Committee Group, City Group, State Group, NOLDC
Group, Grand Palais Group and the Bank/Underwriter Group..............................42
5.3. Release by Debtors of Causes of Action Against State Group............................43
5.4. Release by Debtors of Causes of Action Against City and RDC...........................44
5.5. Release by Debtors of Causes of Action Against Bank/Underwriter Group.................44
5.6. Release by Grand Palais Bondholders of Causes of Action Against HET Group,
Debtors Group, Bondholders Committee Group, City Group, State Group,
NOLDC Group, Grand Palais Group and the Bank/Underwriter Group........................44
5.7. Injunction Against Commencement of Individual Actions Against HET Group,
Debtors Group, Bondholders Committee Group, City Group, State Group,
NOLDC Group, Grand Palais Group and the Bank/Underwriter Group........................45
5.8. Extinguishment of Certain Causes of Action Under the Avoiding Power
Provisions............................................................................46
5.9. Assignment and Prosecution of Assigned Litigation Claims, Judgment Reduction
Protection and Distribution of Recoveries from Assigned Litigation Claims.............50
5.10. Approval of Other Settlement Agreements...............................................51
ARTICLE VI. MEANS FOR IMPLEMENTATION AND EXECUTION OF THE PLAN.............................................51
A. General Implementation Matters.................................................................51
6.1. General Corporate Matters.............................................................51
6.2. Effective Date Transactions...........................................................51
B. New Entities and Their Governance..............................................................51
6.3. General...............................................................................58
6.4. Board of Directors and Initial Members of New Entities................................58
6.5. Officers of New Entities..............................................................58
6.6. Suitability Determinations............................................................58
6.7. Entity Action.........................................................................58
C. Distributions..................................................................................59
6.8. Generally.............................................................................59
6.9. Services of Old Indenture Trustee.....................................................59
6.10. Distributions to be Made to Bondholders as of Distribution Record Date................59
6.11. Cancellation and Surrender of Existing Securities and Agreements......................60
6.12. Distributions of Cash.................................................................60
6.13. Timing of Distributions...............................................................60
6.14. Hart-Scott-Rodino Compliance..........................................................60
6.15. Minimum Distributions; No Duplicative Distributions; No Interest......................61
6.16. Fractional Distributions..............................................................61
6.17. Delivery of Distributions.............................................................62
6.18. Fees and Expenses of Disbursing Agents................................................62
6.19. Time Bar to Cash Payments.............................................................63
6.20. Transfer of Release Pool Distributions................................................63
D. Procedure for Resolving Disputed Claims........................................................63
6.21. Objection Deadline....................................................................63
6.22. Authority to Oppose Claims............................................................63
6.23. No Distributions Pending Allowance....................................................63
6.24. Determination by Bankruptcy Court.....................................................64
6.25. Treatment of Disputed Claims..........................................................64
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ARTICLE VII. ACCEPTANCE OR REJECTION OF THE PLAN............................................................64
7.1. Classes Entitled to Vote..............................................................64
7.2. Class Acceptance Requirement..........................................................64
7.3. Cramdown..............................................................................64
ARTICLE VIII. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.......................................................65
8.1. Assumption or Rejection of Executory Contracts and Unexpired Leases...................65
8.2. Retiree Benefits......................................................................67
ARTICLE IX. EFFECT OF CONFIRMATION OF PLAN.................................................................67
9.1. Revesting of Assets...................................................................67
9.2. Discharge of Debtors..................................................................68
9.3. Dissolution of Debtors................................................................69
9.4. Exculpations..........................................................................69
ARTICLE X. CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVE DATE........................................69
10.1. Condition Precedent to Confirmation of the Plan.......................................69
10.2. Conditions Precedent to Effective Date................................................70
10.3. Waiver of Conditions..................................................................72
10.4. Effect of Failure of Conditions.......................................................72
ARTICLE XI. RETENTION OF JURISDICTION......................................................................73
ARTICLE XII. MISCELLANEOUS PROVISIONS.......................................................................74
12.1. Exemption from Transfer Taxes.........................................................74
12.2. Post-Confirmation Date Fees and Expenses of Professional Persons......................75
12.3. Committees............................................................................75
12.4. Amendment or Modification of the Plan; Severability...................................75
12.5. Revocation or Withdrawal of the Plan..................................................75
12.6. Existing Agreements...................................................................76
12.7. Notices...............................................................................76
12.8. Governing Law.........................................................................77
12.9. Withholding and Reporting Requirements................................................77
12.10. Headings..............................................................................78
12.11. Exhibits..............................................................................78
12.12. JCC Intermediary......................................................................78
12.13. Filing of Additional Documents........................................................78
12.14. Controlling Effect of Agreements with State/LGCB......................................78
12.15. Rights of State and LGCB..............................................................78
</TABLE>
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: jointly administered
Debtor. : with
:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH SEPTEMBER 3, 1998
The Bankruptcy Court (as defined below) has previously entered an order
dated April 28, 1997 confirming the Third Amended Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code, As Modified (the "Original Plan"),
which was filed by Harrah's Jazz Company, as debtor and debtor-in-possession
("HJC"), Harrah's Jazz Finance Corp., as debtor and debtor-in-possession
("Finance Corp."), Harrah's New Orleans Investment Company, as debtor and
debtor-in-possession ("HNOIC" and, together with HJC and Finance Corp.,
collectively, the "Debtors") and Harrah's Entertainment, Inc. ("HET" and,
together with the Debtors, collectively, the "Proponents"), a Delaware
corporation. The Bankruptcy Court subsequently entered an order dated January
29, 1998 confirming the Third Amended Joint Plan of Reorganization Under Chapter
11 of the Bankruptcy Code, as Modified Through January 29, 1998 (the "January
29, 1998 Plan"), and an order dated April 6, 1998 confirming the Third Amended
Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as
Modified Through April 6, 1998 (the "April 6, 1998 Plan"). The Proponents
propose the following further modifications of the Original Plan pursuant to
Section 1127(b) of title 11 of the United States Code. This Plan (as defined
below), if confirmed as to each of the Debtors,
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provides for the transfer of all property of the Debtors (except for property
distributed pursuant to the Plan) to JCC, CP Development and FP Development
(each as defined below) as successor to each of the Debtors. If the Plan is not
confirmed as to each of the Debtors, it may not be confirmed as to any of the
Debtors.
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ARTICLE I.
DEFINITION AND CONSTRUCTION OF TERMS
A. Definitions
As used herein, the following terms have the respective meanings
specified below, unless the context otherwise requires:
1.1. A Term Loan means the senior secured term loan in the principal
amount of $60 million to be obtained by JCC on the Effective Date pursuant to
Section 6.2(h) of the Plan, which loan shall consist of Tranche A-1, Tranche A-2
and Tranche A-3 and have the terms and conditions set forth in the Bank Term
Sheet and such other terms and conditions as shall be set forth in the A Term
Loan Documents.
1.2. A Term Loan Documents means, collectively, the loan agreement and
all other loan and security documents governing the terms and conditions of the
A Term Loan, which documents shall be satisfactory in form and substance to the
Bondholders Committee (in its sole discretion) and HET (in its sole discretion)
on behalf of the Proponents and if a party thereto, HJC (which approval shall
not be unreasonably withheld or delayed). The forms of the A Term Loan Documents
shall be filed with the Bankruptcy Court as Plan Documents pursuant to Section
6.2(t) of the Plan.
1.3. Administrative Agent shall have the meaning assigned such term in
the Old Bank Credit Agreement.
1.4. Administrative Expense Claim means with respect to any Debtor, any
claim against such Debtor under Sections 503(b), 507(a)(1) or 507(b) of the
Bankruptcy Code, including, without limitation, any actual and necessary
expenses of preserving the estate of the Debtor, any actual and necessary
expenses of operating the business of the Debtor, all compensation or
reimbursement of expenses allowed by the Bankruptcy Court under Section 330 or
503 of the Bankruptcy Code (including, without limitation, any attorneys' fees
or other expenses of Fidelity which are allowed by the Bankruptcy Court under
Section 503(b) of the Bankruptcy Code), the reasonable travel and other expenses
of members of the Committees in connection with their duties as Committee
members which are allowed by the Bankruptcy Court, and any fees or charges
assessed against the estate of the Debtor under Section 1930 of chapter 123 of
Title 28 of the United States Code.
1.5. Affiliate shall have the meaning assigned to such term in Section
101(2) of the Bankruptcy Code. For purposes of this Plan, NOLDC, HNOIC and Grand
Palais shall be deemed to be Affiliates of HJC.
1.6. Allowed, when used with respect to any Claim (except for a Claim
that is an Administrative Expense Claim) or any Equity Interest, means a Claim
or Equity Interest to the extent that (a)(i) a proof of claim or interest is
timely and properly filed prior to the Bar Date or (ii) if no proof of claim or
interest was filed, such Claim or Equity Interest is listed on the Schedules of
the applicable Debtor as liquidated in amount and non-disputed or noncontingent,
and (b)(i) no Debtor or other party in interest entitled to do so has made an
objection to the allowance thereof on or before the
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applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy
Rules, the Bankruptcy Court or the Plan or (ii) such Claim or Equity Interest
has been allowed by a Final Order. Unless otherwise specified herein, Allowed
Claims shall not include interest on such Claims for the period from and after
the Commencement Date, nor shall they include any Claim which may be disallowed
under Section 502(d) of the Bankruptcy Code. Allowed, when used with respect to
any Administrative Expense Claim, means an Administrative Claim that has become
"Allowed" pursuant to the procedures set forth in Article II of the Plan.
1.7. Allowed General Unsecured Claim shall have the meaning assigned to
such term in Section 4.7(a) of the Plan.
1.8. Allowed General Unsecured Creditor shall have the meaning assigned
to such term in Section 4.7(b) of the Plan.
1.9. Amended and Restated Canal Street Casino Lease means that certain
Amended and Restated Canal Street Casino Lease to be executed on or before and
as of the Effective Date by JCC and the RDC, with the City as Intervenor, and
incorporating amendments to the Canal Street Casino Lease that are described in
the City Agreement.
1.10. Amended and Renegotiated Casino Operating Contract means the
Casino Operating Contract, as renegotiated between HJC and the LGCB and amended,
substantially in the form attached to the April 6, 1998 Plan as Exhibit B and
incorporated herein by reference, subject to such further modifications as might
be approved by the LGCB, the Bondholders Committee and the Proponents, which is
to be executed on or before the Effective Date by HJC and the LGCB and assigned
to JCC as of the Effective Date in accordance with the provisions of Section
8.1(g) of this Plan.
1.11. Amended and Restated Completion Loan Documents means that certain
Amended and Restated Completion Loan Agreement to be executed by JCC, HET and
HOCI on or before and as of the Effective Date, as described in the term sheet
attached hereto as Exhibit A, and all other loan or security agreements,
instruments or documents executed in connection therewith. The Amended and
Restated Completion Loan Agreement and all such other loan or security
agreements, instruments and documents shall be satisfactory in form and
substance to the Bondholders Committee (in its sole discretion), HET (in its
sole discretion) on behalf of the Proponents, and if a party thereto, HJC (which
approval shall not be unreasonably withheld or delayed). The forms of the New
Completion Loan Documents shall be filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan. JCC's repayment obligations
under the Amended and Restated Completion Loan Documents shall be unsecured
obligations of JCC and shall be junior in right of payment to the New Bonds and
the New Contingent Bonds.
1.12. Amended and Restated Construction Lien Indemnity Obligation
Agreement means that certain Amended and Restated Construction Lien Indemnity
Obligation Agreement to be entered into by JCC and HOCI on or before and as of
the Effective Date, as described in the term sheet attached hereto as Exhibit B.
The form of the Amended and Restated Construction Lien Indemnity Obligation
Agreement shall be filed with the Bankruptcy Court as a Plan Document pursuant
to Section 6.2(t) of the Plan.
1.13. Amended and Restated General Development Agreement means that
certain Amended and Restated General Development Agreement to be executed on or
before and as of the Effective Date
4
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by JCC and the RDC, with the City as Intervenor, and incorporating the
amendments to the General Development Agreement that are described in the City
Agreement.
1.14. Amended and Restated Management Agreement means that certain
Second Amended and Restated Management Agreement to be executed on or before and
as of the Effective Date by JCC and HNOMC, as described in the term sheet
attached hereto as Exhibit C.
1.15. April 6, 1998 Plan shall have the meaning assigned to such term
in the preamble hereof.
1.16. Architect means Perez Ernst Farnet/Modus, Inc. Architects and
Planners and its successors and assigns.
1.17. Architect Contract means the Design Agreement dated January 16,
1995 (and effective November 15, 1994), between HJC, as prepetition debtor, and
Architect, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.18. Assigned Bondholder Litigation Claims means any and all claims
and causes of action, including, without limitation, Avoidance Claims, of any
Releasing Bondholder (in its capacity as a Bondholder) which, as of the
Effective Date, exists or may exist against any or all of (i) the
Non-Participating Banks, and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release to the extent such Releasing Bondholder, through an
appropriate indication on the ballot provided to such holder or in such other
manner as may be prescribed by an applicable order of the Bankruptcy Court, has
affirmatively evidenced its intent to be a Releasing Bondholder and as a
consequence to assign all such claims and causes of action to JCC.
1.19. Assigned Debtor Litigation Claims means any and all claims and
causes of action, including, without limitation, Avoidance Claims, of any Debtor
which, as of the Effective Date, exists or may exist against any or all of (i)
the Non-Participating Banks and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release.
1.20. Assigned Litigation Claims means all Assigned Debtor Litigation
Claims and all Assigned Bondholder Litigation Claims.
1.21. Avoidance Claims means all rights, claims, causes of action,
avoiding powers, suits and proceedings of or brought by or on behalf of any
Debtor or any Person and arising under any or all of Sections 510 and 544
through 554 of the Bankruptcy Code.
1.22. B Term Loan means the secured term loan in the principal amount
of $151.5 million to be obtained by JCC on the Effective Date pursuant to
Section 6.2(h) of the Plan, which loan shall consist of Tranche B-1 and Tranche
B-2 and shall have the terms and conditions set forth in the Bank Term Sheet and
such other terms and conditions as shall be set forth in the B Term Loan
Documents.
1.23. B Term Loan Documents means, collectively, the loan agreement and
all other loan and security documents governing the terms and conditions of the
B Term Loan, which documents shall be satisfactory in form and substance to the
Bondholders Committee (in its sole discretion) and HET (in its sole discretion)
on behalf of the Proponents and if a party thereto, HJC (which approval
5
<PAGE>
shall not be unreasonably withheld or delayed). The forms of the B Term Loan
Documents shall be filed with the Bankruptcy Court as Plan Documents pursuant to
Section 6.2(t) of the Plan.
1.24. Bank Reserve Fund shall have the meaning assigned to such term in
Section 4.3(b) of the Plan.
1.25. Bank Term Sheet means the term sheet attached hereto as Exhibit
F.
1.26. Bank/Underwriter Group means each Participating Bank and
Underwriter which executes the Bank/Underwriter Release and FNBC in any capacity
and their respective Affiliates, predecessors, successors and assigns and the
officers, directors, employees, attorneys, financial advisors, accountants,
agents or other representatives of each of the foregoing.
1.27. Bank/Underwriter Release means, collectively, the mutual releases
described in the Bank Term Sheet, the Underwriter Term Sheet and the FNBC
Settlement Agreement, including, without limitation, mutual releases between the
Participating Banks, the Underwriters, the Old Bank Collateral Agent, the Old
Indenture Predecessor Trustee, the Old Indenture Predecessor Collateral Agent,
on the one hand, and the other Released Parties, on the other hand. The
Bank/Underwriter Release shall be in form and substance satisfactory to the
non-Debtor parties thereto (in their sole discretion), HJC (which shall not
unreasonably withhold or delay its approval), HET (in its sole discretion) on
behalf of the other Proponents and the Bondholders Committee (in its sole
discretion).
1.28. Bankruptcy Code means Title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Cases.
1.29. Bankruptcy Court means the United States District Court for the
Eastern District of Louisiana having jurisdiction over the Chapter 11 Cases and,
to the extent of any reference made pursuant to section 157 of Title 28 of the
United States Code, the unit of such District Court pursuant to section 157 of
Title 28 of the United States Code.
1.30. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure,
as amended from time to time, as applicable to the Chapter 11 Cases, including
the Local Rules of the Bankruptcy Court.
1.31. Banks means, collectively, Bankers Trust Company, as Bank and
Administrative Agent, The Boatmen's National Bank of St. Louis, Prime Income
Trust, Van Kampen Merritt Prime Rate Income Trust, Senior High Income Portfolio,
Inc., Senior High Income Portfolio II, Inc., Senior Strategic Income Fund, Inc.,
as Banks, and First National Bank of Commerce, as Bank (but not as Collateral
Agent), and their successors and assigns, as the foregoing terms are defined in
the Old Bank Credit Agreement.
1.32. Bar Date shall mean the applicable dates fixed by the Bankruptcy
Court or this Plan for filing proofs of claim or interests in the Chapter 11
Cases: (i) in the case of Rejection Claims, the date set forth in Section 8.1(f)
of the Plan, (ii) April 1, 1997 (subject to revocation under certain
circumstances), with respect to Claims of the Bondholders and the Old Indenture
Trustee other than contractual Claims based on the principal of or interest on
the Old Bonds, and certain Claims against HNOIC held by NOLDC, HJC, Finance
Corp., Grand Palais and/or their shareholders, and (iii) May 15, 1996, with
respect to all other pre-petition Unsecured Claims other than Claims which were
6
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included in any Schedule and not listed therein as "disputed," "unliquidated" or
"contingent" and to which such scheduled amounts the holders of such Claims
agree.
1.33. Basin Street Casino Lease means that certain Temporary Casino
Lease dated March 14, 1994, between the RDC and HJC, as prepetition debtor, with
the City as Intervenor, together with any amendments thereto executed prior to
the Commencement Date of the Chapter 11 Case of HJC.
1.34. Basin Street Casino Lease Termination Agreement means that
certain Basin Street Casino Lease Termination Agreement entered into by JCC and
the RDC, with the City as Intervenor, dated as of January 15, 1997.
1.35. Bondholder Claims means all of the respective Claims of holders
and beneficial owners of the Old Bonds against any or all of the Debtors.
1.36. Bondholder Deficiency Amount shall have the meaning assigned to
such term in Section 5.9(f)(vi) of the Plan.
1.37. Bondholder Term Sheet means the term sheet attached hereto as
Exhibit D.
1.38. Bondholders means the holders and beneficial owners of the Old
Bonds.
1.39. Bondholders Committee means the statutory committee of
Bondholders appointed by the United States Trustee in the Chapter 11 Case of HJC
pursuant to Section 1102 of the Bankruptcy Code.
1.40. Bondholders Committee Group means the Bondholders Committee, and
each of the current and former members thereof in its capacities as a member of
the Bondholders Committee and as a Bondholder, and each Professional Person
retained by the Bondholders Committee.
1.41. Bondholders Director Nominees shall have the meaning assigned to
such term in Section 6.4 of the Plan.
1.42. Broadmoor means Broadmoor, a Louisiana general partnership, and
its successors and assigns.
1.43. Broadmoor Construction Agreement means that certain Construction
Agreement dated October 10, 1994, between HJC, as prepetition debtor, and
Broadmoor, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.44. Broadmoor Release means the Release, in a form mutually
acceptable to the parties thereto, to be executed on or before and as of the
Effective Date by Broadmoor, and providing for releases in favor of the Debtors,
the Debtors Group, the HET Group, the NOLDC Group (but only if the applicable
Persons in the NOLDC Group execute and deliver on or before the Effective Date
the NOLDC Shareholders/HET Settlement Agreement) and the Grand Palais Group (but
only if the applicable Persons in the Grand Palais Group execute and deliver on
or before the Effective Date the applicable GP Representative/HET Settlement
Agreements). Neither the Broadmoor Settlement Agreement nor the Broadmoor
Release shall provide for any release of claims by or against either of
Honore/Broadmoor, a joint venture, or Honore Construction Company, Inc.
7
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1.45. Broadmoor Settlement Agreement means the Settlement Agreement
dated October 15, 1996, between HJC and Broadmoor and attached to the Original
Plan as Exhibit H and incorporated by reference herein, as the same may be
amended.
1.46. Business Day means any day other than a Saturday, Sunday or any
other day on which commercial banks in New York, New York are required or
authorized to close.
1.47. Canal Street Casino Lease means that certain Amended Lease
Agreement dated March 15, 1994, between the RDC and HJC, as prepetition debtor,
with the City as Intervenor, together with any amendments thereto executed prior
to the Commencement Date of the Chapter 11 Case of HJC.
1.48. Casino means that certain casino to be constructed on the real
property leased by HJC on Canal Street in New Orleans, Louisiana, together with
the parking lot adjacent thereto.
1.49. Casino Operating Contract means that certain Casino Operating
Contract dated as of July 15, 1994, between the LEDGC, and HJC, as prepetition
debtor, together with any amendments thereto executed prior to the Commencement
Date of the Chapter 11 Case of HJC.
1.50. Centex-Landis means Centex Landis Construction Co., Inc., and its
successors and assigns.
1.51. Centex-Landis Construction Agreement means that certain
Construction Agreement dated October 10, 1994, between HJC, as prepetition
debtor, and Centex-Landis, together with any amendments thereto executed prior
to the Commencement Date of the Chapter 11 Case of HJC.
1.52. Centex-Landis Release means the Release, substantially in the
form attached to the Centex-Landis Settlement Agreement, to be executed on or
before and as of the Effective Date by Centex-Landis, providing for releases in
favor of the Debtors, the Debtors Group, the HET Group, the NOLDC Group (but
only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement) and
the Grand Palais Group (but only if the applicable Persons in the Grand Palais
Group execute and deliver on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements).
1.53. Centex-Landis Settlement Agreement means the Settlement Agreement
dated November 25, 1996, between HJC and Centex-Landis and attached to the
Original Plan as Exhibit L and incorporated by reference herein, as the same may
be amended.
1.54. Certified WARN Act Class means the class of holders of WARN Act
Claims certified for settlement purposes by the Bankruptcy Court pursuant to
Bankruptcy Rule 7023 by order dated December 10, 1996.
1.55. Chapter 11 Cases means the above-captioned cases under Chapter 11
of the Bankruptcy Code commenced by each Debtor and currently pending in the
Bankruptcy Court.
1.56. City means the City of New Orleans, Louisiana.
8
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1.57. City Agreement means that certain Agreement Regarding
Modifications And Related Agreements In Respect Of Amended And Restated Canal
Street Casino Lease, Termination Of Basin Street Casino Lease, Amended And
Restated General Development Agreement, The Conditional Use Ordinances And Other
Regulatory Matters dated as August 15, 1996, by and among the City, RDC and HJC,
a copy of which is attached to the Original Plan as Exhibit A and incorporated
by reference herein, as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time.
1.58. City Group means the City, the Mayor of the City, the City
Council of the City, the members of the City Council, the RDC, all boards,
commissions, agencies and other instrumentalities of the City and the officers,
directors, employees, staff members, attorneys, financial advisors, accountants,
agents and other representatives of each of the foregoing.
1.59. City/RDC Release means the City Release Agreement, in the form
attached hereto as Exhibit E (or as modified on terms satisfactory to HET and
with the consent of HJC (which consent may not be unreasonably withheld or
delayed)) to be executed on or before and as of the Effective Date by the City,
the RDC, the Debtors, NOLDC, Grand Palais, HET, HOCI, HNOMC, JCC and/or certain
of their respective Affiliates, and providing for, among other things, mutual
releases in favor of the City, the RDC and their respective Affiliates, on the
one hand, and the Debtors, the Debtors Group, the New Entities, the HET Group,
the Bank/Underwriter Group, the Bondholders Committee Group, the NOLDC Group
(but only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement) and
the Grand Palais Group (but only if the applicable Persons in the Grand Palais
Group execute and deliver on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements), on the other hand.
1.60. Claim shall have the meaning assigned to such term in Section
101(5) of the Bankruptcy Code.
1.61. Class A New Common Stock means the Class A Common Stock of JCC
Holding authorized pursuant to Section 6.2(d) and (f) of the Plan. Class A New
Common Stock shall have a par value of $.01 per share and such rights with
respect to dividends, liquidation, voting and other matters as are provided for
by applicable nonbankruptcy law or in the JCC Holding Certificate of
Incorporation and JCC Holding Bylaws.
1.62. Class A 33 Act Registration Statement shall have the meaning
assigned to such term in Section 6.2(q) of the Plan.
1.63. Class A 34 Act Registration Statement shall have the meaning
assigned to such term in Section 6.2(q) of the Plan.
1.64. Class B New Common Stock means the Class B Common Stock of JCC
Holding authorized pursuant to Sections 6.2(d), (e) and (f) of the Plan. Class B
New Common Stock shall have a par value of $.01 per share and such rights with
respect to dividends, liquidation, voting and other matters as are provided for
by applicable nonbankruptcy law or in the JCC Holding Certificate of
Incorporation and JCC Holding Bylaws.
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1.65. Class B Registration Rights Agreement shall have the meaning
assigned to such term in Section 6.2(r) of the Plan.
1.66. Class B Registration Statement shall have the meaning assigned to
such term in Section 6.2(r) of the Plan.
1.67. Class C5 Cash Amount shall have the meaning assigned to such term
in Section 4.21 of the Plan.
1.68. Class C5 Claims Reserve shall have the meaning assigned to such
term in Section 4.21 of the Plan.
1.69. COC Fiscal Year means the 12-month period ending March 31 for
purposes of the Amended and Renegotiated Casino Operating Contract.
1.70. Commencement Date means the date on which the applicable Debtor
commenced its Chapter 11 Case: (i) November 22, 1995, with respect to the
Chapter 11 Cases of HJC and Finance Corp. and (ii) December 22, 1995, with
respect to HNOIC.
1.71. Committees mean the Bondholders Committee and the Unsecured
Creditors Committee.
1.72. Completion Loan Documents means the Completion Loan Agreement
dated as of October 12, 1994, by and among HJC, as prepetition debtor, HET,
HOCI, NOLDC, Grand Palais and Grand Palais Management Companies, L.L.C., and the
Completion Loan Documents (as defined in the Completion Loan Agreement),
together with any amendments thereto executed prior to the Commencement Date of
the Chapter 11 Case of HJC.
1.73. Completion Notice shall have the meaning assigned such term in
Section 5.9(f)(ii) of the Plan.
1.74. Confirmation Date means the date on which the Clerk of the
Bankruptcy Court enters an order confirming this Plan.
1.75. Confirmation Hearing means the hearing convened to consider
confirmation of the Plan.
1.76. Confirmation Order means the order of the Bankruptcy Court
entered April 28, 1997 and confirming the Original Plan, together with any
subsequent orders pursuant to Sections 1127, 1128 and 1129 of the Bankruptcy
Code approving modifications to the Original Plan.
1.77. Construction Lien Indemnity Obligation Agreement means that
certain Construction Lien Indemnity Obligation Agreement dated October 12, 1994,
by and among HJC, as prepetition debtor, HOCI, NOLDC, Grand Palais, and Grand
Palais Management Company, L.L.C., together with any amendments thereto executed
prior to the Commencement Date of the Chapter 11 Case of HJC.
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1.78. Contingent Claim means a Claim that is contingent or unliquidated
on the Effective Date, including, without limitation, any Rejection Claim or
Deficiency Claim which has not been allowed on the Effective Date.
1.79. Convertible Junior Subordinated Debenture Documents means,
collectively, the Convertible Junior Subordinated Debentures, and, if
applicable, all other security agreements, mortgages, indentures and other
documents governing the terms and conditions of the obligations of HJC (and JCC
as HJC's successor) in respect of the Convertible Junior Subordinated
Debentures. The Convertible Junior Subordinated Debenture Documents shall be
satisfactory in form and substance to the non-Debtor parties thereto (in their
sole discretion), the Bondholders Committee (in its sole discretion) and HET (in
its sole discretion) on behalf of the Proponents, and if HJC is a party thereto,
HJC (which approval shall not be unreasonably withheld or delayed). The forms of
the Convertible Junior Subordinated Debenture Documents shall be filed with the
Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of the Plan.
1.80. Convertible Junior Subordinated Debentures means the convertible
junior subordinated debentures to be issued by JCC on the Effective Date
pursuant to Sections 4.3(a) and 6.2(h) hereof in the approximate principal
amount of $15 million to the Underwriters (or Affiliates thereof), in the
approximate principal amount of $11.637 million to Bankers Trust Company (or an
Affiliate thereof) and the Participating Banks (plus additional convertible
junior subordinated debentures purchased pursuant to clause (C) of the first
sentence of Section 4.3(a)(ii) of the Plan) and in the principal amount of
$400,000 to FNBC (which amount is in addition to the $357,150 in principal
amount of Convertible Junior Subordinated Debentures to be purchased by FNBC as
a Participating Bank). These convertible junior subordinated debentures shall
have the terms and conditions set forth in the Convertible Junior Subordinated
Debenture Documents.
1.81. CP Development means CP Development, L.L.C., a Louisiana limited
liability company, and its successors and assigns, to which all right, title and
interest of the Debtors in the 3CP Property shall be transferred on the
Effective Date.
1.82. Creditor means the holder of an Allowed Claim.
1.83. Debtors means HJC, Finance Corp. and HNOIC.
1.84. Debtors Group means each Debtor's officers, directors, employees,
attorneys, financial advisors, accountants and, in the case of HJC, the members
of its Executive Committee and its Reorganization Steering Committee.
1.85. Deficiency Claim means a Claim equal to the amount, if any, by
which the total Allowed Claim of any Creditor exceeds the sum of (i) any Setoff
or Recoupment Claims of the Creditor against the applicable Debtor provided for
by applicable law and preserved by Section 553 of the Bankruptcy Code plus (ii)
the portion of such Claim that is a Secured Claim; provided, however, that if
the Class of which such Claim is a part makes the election provided for by
Section 1111(b)(2) of the Bankruptcy Code, there shall be no Deficiency Claim in
respect of such Claim.
1.86. Derivative Claim means any claim, demand, suit, action or cause
of action in law, equity or otherwise which is the property of any of the
Debtors or their respective estates.
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1.87. Development Services Agreement means the Development Services
Agreement to be executed on or before the Effective Date by JCC and the Harrah's
Investor and containing the terms and conditions described in the term sheet
attached hereto as Exhibit I. The Development Services Agreement shall be in
form and substance satisfactory to the Harrah's Investor, HET (in its sole
discretion) on behalf of the Proponents and the Bondholders Committee (in its
sole discretion).
1.88. DIP Indebtedness means, as of the date of determination, the
balance of principal, accrued interest and other amounts then outstanding in
respect of the debtor-in-possession loans (exclusive of any loans made under the
Junior Subordinated Credit Facility) made by HOCI or any of its Affiliates at
any time on or before the Effective Date to HJC pursuant to orders of the
Bankruptcy Court entered at any time on or before the Effective Date.
1.89. DIP Lender means HOCI and/or any Affiliate which advanced any
funds constituting DIP Indebtedness.
1.90. DIP Loan Claim means, collectively, any and all Claims based on
the DIP Indebtedness.
1.91. Director Nominees shall have the meaning assigned to such term in
Section 6.4 of the Plan.
1.92. Disbursing Agent means any Person designated by HET (in its sole
discretion) on behalf of the Proponents or designated in the Plan to make
distributions required under the Plan, which may include, without limitation,
any JCC Entity, the Old Indenture Successor Trustee or any financial institution
of recognized standing.
1.93. Disbursing Agreements means those agreements referenced in
Section 6.8 of the Plan. The form of the Disbursing Agreement(s) shall be filed
with the Bankruptcy Court as Plan Document(s) pursuant to Section 6.2(t) of the
Plan.
1.94. Disclosure Statement means the disclosure statement relating to
this Plan, as approved by the Bankruptcy Court pursuant to Section 1125 of the
Bankruptcy Code.
1.95. Disputed means, with respect to a Claim or Equity Interest, (i)
any Claim (including any Administrative Expense Claim) or Equity Interest as to
which any Debtor or any other party in interest has interposed a timely
objection or request for estimation in accordance with the Bankruptcy Code and
the Bankruptcy Rules, which objection or request for estimation has not been
withdrawn or determined by a Final Order in favor of the holder thereof, (ii)
any Claim or Equity Interest as to which a proof of claim or interest was
required to be filed by order of the Court but as to which a proof of claim or
interest was not timely or properly filed, and (iii) any Contingent Claim until
such Claim becomes fixed and absolute by Final Order, settlement or otherwise.
1.96. Disputed Claim Amount means, as to a particular Class on the date
of determination, the aggregate amount of Disputed Claims in that Class that are
not Contingent Claims. For purposes of calculating the initial distributions to
be made to holders of Allowed Class C5 Claims pursuant to Section 4.21 of the
Plan, the Disputed Claim Amount for each Disputed Claim shall be based upon
either (i) the amount of such Creditor's Disputed Claim as set forth in its
filed proofs of claim or (ii) the amount at which the Bankruptcy Court may
estimate such Disputed Claim.
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1.97. Distribution Record Date means the Effective Date, unless
otherwise ordered by the Bankruptcy Court, and shall be used to determine which
holders of the Old Bonds are entitled to receive distributions, other than
distributions from the Release Pool, provided under the Plan.
1.98. Effective Date means a Business Day selected by HET (in its sole
discretion) on behalf of the Proponents after the first Business Day (A) which
is on or after the date of the entry of the Confirmation Order and (B) on which
(i) the Confirmation Order is not stayed and (ii) all conditions to the
effectiveness of the Plan have been satisfied or waived as provided in Article X
of the Plan, but not later than October 31, 1998, which date may be extended by
HET (in its sole discretion) on behalf of the Proponents with the written
consent of the Bondholders Committee, the LGCB and the City (each of whose
consent may be withheld in its sole discretion).
1.99. 8/95 WARN Act Claimant means any holder of a WARN Act Claim who
was terminated from his or her casino position in August, 1995.
1.100. 11/95 WARN Act Claimant means any holder of a WARN Act Claim who
was terminated from his or her casino position on or about November 22, 1995.
1.101. Encumbrance means any Lien, imperfection of title, option or
restriction of any kind affecting any property.
1.102. Equity Interest shall have the meaning assigned to the term
"Equity Security" in Section 101(16) of the Bankruptcy Code.
1.103. Estimation Order shall have the meaning assigned to such term in
Section 4.3(b)(ii) of the Plan.
1.104. Existing Lender's Title Insurance Policy means that certain
lender's title insurance policy previously issued by First American Title
Insurance Company for the benefit of the Banks and the Bondholders and certain
other parties, together with all reinsurance agreements, endorsements and
supplements thereto.
1.105. Existing Owners' Title Insurance Policy means that certain
Policy of Title Insurance issued by First American Title Insurance Company with
an original effective date of March 16, 1994, Policy Number D 102631 to HJC, as
superseded and replaced by a policy of the same policy number with an effective
date of November 16, 1994, together with all reinsurance agreements,
endorsements and supplements thereto.
1.106. Fee Application means an application of a Professional Person
under Section 330, 503 or 506(b) of the Bankruptcy Code for allowance of
compensation and reimbursement of expenses in any Chapter 11 Case.
1.107. Fee Claim means a Claim under Section 330, 503 or 506(b) of the
Bankruptcy Code for allowance of compensation and reimbursement of expenses in
any Chapter 11 Case.
1.108. Fidelity means, collectively, Fidelity Management and Research
Company and Fidelity Management Trust Company.
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1.109. Final Order means an order of the Bankruptcy Court or any other
court of competent jurisdiction (a) which has become final for purposes of 28
U.S.C. ss. 158 or 1291 or such analogous law or rule in the case of an order of
a state court and (b)(i) as to which the time to appeal, petition for
certiorari, or move for reargument or rehearing has expired and as to which no
appeal, petition for certiorari, or other proceedings for reargument or
rehearing shall then be pending or as to which any right to appeal, petition for
certiorari, reargue, or rehear shall have been waived in writing in form and
substance satisfactory to HET (in its sole discretion) on behalf of the
Proponents or JCC or (ii) in the event that an appeal, writ of certiorari, or
reargument or rehearing thereof has been sought which shall have been determined
by the highest court to which such order was appealed, or certiorari, reargument
or rehearing shall have been denied or resulted in no modification of such order
and the time to take any further appeal, petition for certiorari or move for
reargument or rehearing shall have expired; provided, however, that the
possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure,
or Bankruptcy Rule 9024 or other analogous rules governing procedure in cases
before the court, if not the Bankruptcy Court, may be filed with respect to such
order shall not cause such order not to be a Final Order.
1.110. Finance Corp. means Harrah's Jazz Finance Corp., a Delaware
corporation, as debtor and debtor in-possession.
1.111. First American Settlement Agreement means that certain
settlement agreement by and between HJC and First American Title Insurance
Company, dated as of December 18, 1996, providing for, among other things, the
issuance of new owner's and lender's title insurance policies.
1.112. FNBC means First National Bank of Commerce and its successors
and assigns.
1.113. FNBC Cash Collateral shall have the meaning assigned to such
term in Section 6.2(k)(ii) of the Plan.
1.114. FNBC Settlement Agreement means the letter agreement dated
April 24, 1997, among HJC, HET, FNBC, the Bondholders Committee and Bankers
Trust Company attached hereto as Exhibit H.
1.115. FP Development means FP Development, L.L.C., a Louisiana limited
liability company, and its successors and assigns, to which all right, title and
interest of the Debtors in the Fulton Property shall be transferred on the
Effective Date.
1.116. Fulton Property means real property owned by HJC located in New
Orleans, Louisiana bounded by Fulton Street, Lafayette Street, Poydras Street
and South Peters Street, commonly known as 224 Poydras Street, 228 Poydras
Street, 237 Lafayette Street/550 South Peters Street, 508-510 South Peters
Street, 512-526 South Peters Street, 528 South Peters Street/529 Fulton Street
and 530 South Peters Street, together with any easements, rights of servitude
and other rights appurtenant thereto and any improvements thereupon, which shall
be transferred to FP Development on the Effective Date.
1.117. General Development Agreement means that certain Amended General
Development Agreement dated March 15, 1994, between HJC, as prepetition debtor,
and the RDC, with the City as
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Intervenor, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.118. Grand Palais means Grand Palais Casino, Inc., a Delaware
corporation, and its successors and assigns.
1.119. Grand Palais Bondholders means the holders and beneficial owners
of the Grand Palais Senior Secured Bonds.
1.120. Grand Palais Group means Grand Palais, and its Affiliates (other
than the Debtors), predecessors, successors and assigns and the officers,
directors, employees, attorneys, financial advisors, accountants, agents and
other representatives of each of the foregoing.
1.121. GP Representative/HET Settlement Agreements means, collectively,
(i) the settlement agreements to be executed on or before the Effective Date by
the person(s) authorized under applicable law to act on behalf of Grand Palais,
Christopher B. Hemmeter ("Hemmeter"), Hemmeter's Chapter 7 bankruptcy trustee,
Cezar M. Froelich ("Froelich"), Eddie L. Sapir ("Sapir"), William Broadhurst
("Broadhurst") and certain of their Affiliates on the one hand, and HET, HOCI
and HNOMC, on the other hand, (ii) the releases attached as exhibits to such
settlement agreements, pursuant to which the authorized representative(s) of
Grand Palais, Hemmeter, Hemmeter's Chapter 7 bankruptcy trustee, Froelich,
Sapir, Broadhurst and certain of their Affiliates on the one hand, and HET,
HOCI, HNOIC, HNOMC and certain Affiliates thereof, on the other hand, shall
release certain claims and causes of action against each other, (iii) the
further releases provided for in such settlement agreements in favor of the
Bondholders Committee Group, the Debtors Group, the Bank/Underwriter Group, the
State Group and the City Group, and (iv) all other agreements, instruments and
documents executed or to be executed in connection with these settlement
agreements. The GP Representative/HET Settlement Agreements shall be in the form
and substance satisfactory to the parties thereto.
1.122. Grand Palais Indenture means that certain Amended and Restated
Indenture, dated as of November 16, 1994, between Grand Palais and Fleet
National Bank of Connecticut (formerly known as Shawmut Bank Connecticut,
National Association), as trustee, governing the terms of the Grand Palais
Senior Secured Bonds, as the same may be amended from time to time.
1.123. Grand Palais Releasing Bondholder shall have the meaning set
forth in Section 5.6 of the Plan.
1.124. Grand Palais Senior Secured Bonds means the 18.25% Senior
Secured Pay-In-Kind Notes, due November 1, 1997, issued by Grand Palais pursuant
to the Grand Palais Indenture.
1.125. Grand Palais Settlement Consideration shall have the meaning
assigned such term in Section 6.2(f)(i) of the Plan.
1.126. Harrah's Director Nominees shall have the meaning assigned to
such term in Section 6.4 of the Plan.
1.127. Harrah's Investor means, collectively, Harrah's Crescent City
Investment Company, a Nevada corporation and wholly-owned subsidiary of HET, HET
and/or any Affiliates of HET as the
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holder(s) of the shares of New Common Stock issued pursuant to Sections
6.2(e) and 6.2(f) of the Plan, and its (their) successors and assigns.
1.128. Harrah's New Equity Investment shall have the meaning assigned
to such term in Section 6.2(e) of the Plan.
1.129. HET means Harrah's Entertainment, Inc., a Delaware corporation,
formerly known as The Promus Companies, Incorporated, and its successors and
assigns.
1.130. HET Group means HET, HOCI, HNOMC, the Harrah's Investor and
their respective Affiliates (other than the Debtors), predecessors, successors
and assigns and the officers, directors, employees, attorneys, financial
advisors, accountants, agents and other representatives of each of the
foregoing.
1.131. HET/JCC Agreement means that certain HET/JCC Agreement executed
by HET and HOCI in favor of the LGCB and attached as an exhibit to the Amended
and Restated Casino Operating Contract.
1.132. HET Loan Guarantee means, collectively, the payment guarantees
or "put" agreements by HET and HOCI with respect to (i) Tranche A-2 of the A
Term Loan, (ii) Tranche B-2 of the B Term Loan, and (iii) the Working Capital
Facility on terms satisfactory to such lenders and HET. The forms of the HET
Loan Guarantee shall be filed with the Bankruptcy Court as Plan Documents
pursuant to Section 6.2(t) of the Plan.
1.133. HET Warrant means warrants to purchase additional shares of New
Common Stock such that, upon exercise of the warrants in their entirety, HET and
its subsidiaries (including Harrah's Investor) would own in the aggregate 50.0%
of the New Common Stock issued on the Effective Date, as described in the
Bondholder Term Sheet attached hereto as Exhibit E, and which shall be (i)
satisfactory in form and substance to HET (in its sole discretion) on behalf of
the Proponents and the Bondholders Committee (in its sole discretion) and (ii)
filed with the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of
the Plan.
1.134. HJC means Harrah's Jazz Company, a Louisiana general
partnership, as debtor and debtor in-possession.
1.135. HNOIC means Harrah's New Orleans Investment Company, a Nevada
corporation, as debtor and debtor in-possession.
1.136. HNOMC means Harrah's New Orleans Management Company, a Nevada
corporation, and its successors and assigns.
1.137. HOCI means Harrah's Operating Company, Inc., a Delaware
corporation, formerly known as Embassy Suites, Inc., and its successors and
assigns.
1.138. Indenture Trustee Charging Lien means any Lien or other priority
in payment available to the Old Indenture Trustee pursuant to the Old Indenture
or otherwise against distributions made to the Bondholders under the Plan for
payment of any fees, costs, disbursements or amounts incurred by the Old
Indenture Trustee.
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1.139. Indenture Trustee Claim means a contractual Claim held by the
Old Indenture Trustee for compensation, reimbursement of costs or disbursements
(including, without limitation, the costs and expenses of its attorneys,
accountants and financial advisors), or indemnity arising from the Old Indenture
or otherwise, regardless of whether such fees and expenses are incurred prior or
subsequent to the Commencement Date.
1.140. Initial Class C5 Distribution Date shall have the meaning
assigned to such term in Section 4.21 of the Plan.
1.141. Insider shall have the meaning assigned to such term in
Section 101(31) of the Bankruptcy Code.
1.142. January 29, 1998 Plan shall have the meaning assigned to such
term in the preamble hereof.
1.143. JCC means Jazz Casino Company, L.L.C., a Louisiana limited
liability company, and its successors and assigns, to which all of the property
of the Debtors and their estates shall be transferred on the Effective Date
(except as otherwise provided in the Plan).
1.144. JCC Development means JCC Development Company, L.L.C., a
Louisiana limited liability company, and its successors and assigns, which shall
lease the second floor of the Casino building from JCC and develop it for
non-gaming uses.
1.145. JCC Entities means JCC, JCC Intermediary (to the extent JCC
Intermediary is formed) and JCC Holding, and their respective successors and
assigns.
1.146. JCC Holding means JCC Holding Company, a Delaware corporation,
and its successors and assigns, which shall be a holding company owning directly
or indirectly all of the membership interests of JCC Intermediary (to the extent
JCC Intermediary is formed), JCC, JCC Development, CP Development and FP
Development.
1.147. JCC Holding Bylaws means the Bylaws of JCC Holding, containing,
among other things, the applicable corporate governance provisions in the
Bondholder Term Sheet, and in the form to be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan.
1.148. JCC Holding Certificate of Incorporation means the Restated
Certificate of Incorporation of JCC Holding, containing, among other things, the
applicable corporate governance provisions in the Bondholder Term Sheet, and in
the form to be filed with the Bankruptcy Court as a Plan Document pursuant to
Section 6.2(t) of the Plan.
1.149. JCC Intermediary means JCC Intermediary Company, L.L.C., a
Louisiana limited liability company, and its successors and assigns, which shall
be a holding company owning all of the membership interest(s) in JCC. As set
forth in Section 12.12 hereof, the formation of JCC Intermediary shall be at the
election of HET (in its sole discretion) on behalf of the Proponents.
1.150. JCC Intermediary Operating Agreement means, to the extent JCC
Intermediary is formed, the operating agreement of JCC Intermediary, containing,
among other things, the applicable
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governance provisions in the Bondholder Term Sheet, and in the form to be filed
with the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of the
Plan.
1.151. JCC Intermediary Organizational Documents means, collectively,
the articles of organization and initial report of JCC Intermediary and any
other documents required under the law of the State of Louisiana to form JCC
Intermediary as a limited liability company, each in the form to be filed with
the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of the Plan.
1.152. JCC Operating Agreement means the operating agreement of JCC,
containing, among other things, the applicable governance provisions in the
Bondholder Term Sheet, and in the form to be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan.
1.153. JCC Organizational Documents means, collectively, the articles
of organization and the initial report of JCC and any other documents required
under the law of the State of Louisiana to form JCC as a limited liability
company, each in the form to be filed with the Bankruptcy Court as a Plan
Document pursuant to Section 6.2(t) of the Plan.
1.154. Junior Subordinated Credit Facility means the junior
subordinated credit facility in the aggregate principal amount of $22.5 million
to be provided by HET (or an Affiliate of HET) to JCC on the Effective Date
pursuant to Section 6.2(i) of the Plan, which junior subordinated credit
facility shall have such terms and conditions as may be agreed to by the
Bondholders Committee (in its sole discretion), the Participating Banks (in
their sole discretion), such Affiliate of HET, and HET (in its sole discretion)
on behalf of the Proponents, and if HJC is a party to the Junior Subordinated
Loan Documents, with the consent of HJC, which consent shall not be unreasonably
withheld or delayed.
1.155. Junior Subordinated Loan Documents means, collectively, the loan
agreement and all other loan documents and, if applicable, security documents
governing the terms and conditions of the Junior Subordinated Credit Facility,
which documents shall be satisfactory in form and substance to the Bondholders
Committee, the Participating Banks (in their sole discretion) and HET (in its
sole discretion) on behalf of the Proponents and if HJC is a party thereto, HJC,
which approval shall not be unreasonably withheld or delayed. The form of the
Junior Subordinated Loan Documents shall be filed with the Bankruptcy Court as
Plan Documents pursuant to Section 6.2(t) of the Plan.
1.156. LEDGC means the Louisiana Economic Development and Gaming
Corporation.
1.157. LGCB means the Louisiana Gaming Control Board and its successors
and assigns.
1.158. Lien shall have the meaning assigned to such term in Section
101(37) of the Bankruptcy Code.
1.159. Litigation Costs means (i) all reasonable fees, costs and
expenses (including all attorneys' and other professionals' fees and expenses)
of or incurred by JCC in prosecuting, settling or otherwise in connection with
any Assigned Litigation Claim or any action in which any Assigned Litigation
Claim is asserted or otherwise in connection with its performance of tasks and
duties pursuant to Section 5.9 of the Plan, (ii) all reasonable fees, costs and
expenses of Selected Counsel payable by JCC pursuant to clause (i) of the second
sentence of Section 5.9(d) hereof, and (iii) all reasonable out-of-pocket costs
and expenses of any Released Party reimbursable by JCC pursuant to clause (ii)
of the second sentence of Section 5.9(d) hereof.
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1.160. Litigation Defendant means any Person against whom an Assigned
Litigation Claim is asserted at any time by JCC.
1.161. Major Bondholders means each member of the Bondholders Committee
in its capacity as a Bondholder or a member of the Bondholders Committee as of
the Voting Record Date.
1.162. Management Agreement means that certain Amended and Restated
Management Agreement for the Harrah's New Orleans Casino dated March 14, 1995,
between HJC, as prepetition debtor, and HNOMC, together with any amendments
thereto executed prior to the Commencement Date of the Chapter 11 Case of HJC.
1.163. Minimum Payment Guarantor Lien means the Lien securing certain
obligations of JCC under the HET/JCC Agreement, as well as the obligations of
JCC to any successor or substitute guarantor providing the Minimum Payment
Guaranty.
1.164. Minimum Payment Guaranty means a guaranty in the maximum stated
amount of $100 million for the benefit of the LGCB to assure payment of certain
obligations under the Amended and Renegotiated Casino Operating Contract. The
form of the Minimum Payment Guaranty shall be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan and is attached to the
Amended and Renegotiated Casino Operating Contract.
1.165. Modified Contracts means (i) the Canal Street Casino Lease, (ii)
the General Development Agreement, (iii) the Broadmoor Construction Agreement,
(iv) the Management Agreement, (v) the Architect Contract, (vi) the Completion
Loan Documents, (vii) the Construction Lien Indemnity Obligation Agreement,
(viii) the Ticket Purchase Agreement dated July 19, 1996, and (ix) the
Centex-Landis Construction Agreement, in each case as modified (or in the case
of the Basin Street Casino Lease, as modified and terminated) on the Effective
Date in the manner provided in Section 8.1(a) of the Plan.
1.166. New Bond Documents means the New Indenture, the New Bonds, the
New Contingent Bonds, and all other security agreements, mortgages, indentures
and other documents of any kind and nature evidencing a Lien or other
Encumbrance or other obligation of JCC in respect of the New Bonds or New
Contingent Bonds. The forms of the New Bond Documents shall be filed with the
Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of the Plan.
1.167. New Bonds means the Senior Subordinated Notes due 2009 with
Contingent Payments of JCC to be issued under the Plan in the aggregate
noncontingent principal amount of $187.5 million, as more particularly described
in the Bondholder Term Sheet attached as Exhibit D hereto.
1.168. New Bonds 33 Act Registration Statement shall have the meaning
set forth in Section 6.2(s) of the Plan.
1.169. New Common Stock means the Class A New Common Stock and Class B
New Common Stock of JCC Holding.
1.170. New Completion Guarantees means the completion guarantees to be
executed and delivered on or before and as of the Effective Date by HET and HOCI
in favor of (i) the holders of the
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New Bonds as described in the Bondholder Term Sheet, (ii) the LGCB and the City
and RDC, on terms substantially similar to the terms of the completion guarantee
in favor of the holders of the New Bonds, and (iii) the lenders under the A Term
Loan, the B Term Loan and the Working Capital Facility on terms satisfactory to
such lenders and HET and HOCI. The forms of these completion guarantees shall be
filed with the Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of
the Plan.
1.171. New Contingent Bonds means the Senior Subordinated Contingent
Notes due 2009 to be issued under the Plan, as more particularly described in
the Bondholder Term Sheet attached as Exhibit D hereto.
1.172. New Entities means, collectively, JCC Holding, JCC Intermediary
(if formed), JCC, JCC Development, CP Development and FP Development.
1.173. New Indenture means, collectively, the indentures, as described
in the Bondholder Term Sheet, to be entered into by JCC and the trustees
thereunder and effective on or before and as of the Effective Date governing the
terms and conditions under which the New Bonds and New Contingent Bonds,
respectively, will be issued, subject to such modification as hereinafter may be
made by HET (in its sole discretion) on behalf of the Proponents with the
consent of the Bondholders Committee (which consent may be withheld in its sole
discretion) that do not adversely affect the rights of the holders of the New
Bonds and New Contingent Bonds and filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan or as shall thereafter be
required by the Securities and Exchange Commission in connection with its
qualification under the Trust Indenture Act.
1.174. New Indenture Trustee means the Person selected on or before the
Effective Date by HET (in its sole discretion) on behalf of the Proponents and
with the consent of the Bondholders Committee (which consent may be withheld in
its sole discretion) to serve as the trustee under the New Indenture if such
Person is eligible under the Trust Indenture Act and the New Indenture to serve
as the trustee under the New Indenture.
1.175. NOLDC means New Orleans/Louisiana Development Corporation, a
Louisiana corporation, as debtor and debtor-in-possession.
1.176. NOLDC/Grand Palais Settlement Agreement means, collectively, (i)
the Settlement Agreement to be executed on or before and as of the Effective
Date by the NOLDC Shareholders and Grand Palais, (ii) mutual releases, in the
forms attached as exhibits to such Settlement Agreement, pursuant to which
NOLDC, the NOLDC Shareholders and certain Affiliates thereof, on the one hand,
and Grand Palais and certain Affiliates, on the other hand, release certain
claims and causes of action against each other, and (iii) all other agreements,
instruments or documents executed or to be executed in connection with the
Settlement Agreement. The NOLDC/Grand Palais Settlement Agreement shall be in
form and substance satisfactory to the NOLDC Shareholders and Grand Palais.
1.177. NOLDC Group means NOLDC, the NOLDC Shareholders, and their
respective Affiliates (other than the Debtors), predecessors, successors and
assigns and the officers, directors, employees, attorneys, financial advisors,
accountants, agents and other representatives of each of the foregoing.
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1.178. NOLDC Plan means the plan of reorganization to be confirmed
pursuant to a Final Order in the bankruptcy case of NOLDC, which plan of
reorganization and Final Order shall be in form and substance satisfactory to
the NOLDC Shareholders and HET in its sole discretion on behalf of the
Proponents.
1.179. NOLDC Shareholders means T. George Solomon, Jr., Calvin Fayard,
Carl J. Eberts, Ronald M. Lamarque, Duplain W. Rhodes, III, Louie Roussel, III,
Michael X. St. Martin, John J. Cummings, III and Wendell H. Gauthier, and their
respective heirs, assigns and personal representatives.
1.180. NOLDC Shareholders/HET Settlement Agreement means, collectively,
(i) the Settlement Agreement to be executed on or before the Effective Date by
the NOLDC Shareholders, HET, HOCI and HNOMC, (ii) the mutual releases, in the
forms attached as exhibits to such Settlement Agreement, pursuant to which
NOLDC, the NOLDC Shareholders and certain Affiliates thereof, on the one hand,
and HET HOCI, HNOIC, HNOMC and certain Affiliates thereof, on the other hand,
release certain claims and causes of action against each other, (iii) the
further releases provided for in such settlement agreement in favor of the
Bondholders Committee Group, the Debtors Group, the Bank/Underwriter Group, the
State Group and the City Group, and (iv) all other agreements, instruments or
documents executed or to be executed in connection with the Settlement
Agreement. The NOLDC Shareholders/HET Settlement Agreement shall be in form and
substance satisfactory to the NOLDC Shareholders and HET and shall be approved
by the bankruptcy court in the Chapter 11 case of NOLDC either pursuant to
Section 1123(b)(3)(A) of the Bankruptcy Code as part of the NOLDC Plan or
pursuant to Bankruptcy Rule 9019 by separate Final Order (in form and substance
satisfactory to the NOLDC Shareholders and HET).
1.181. Non-Participating Banks means each Bank which is not a
Participating Bank.
1.182. Objection Deadline means the date by which objections to Claims
shall be filed with the Bankruptcy Court and served upon the respective holders
of each of the Claims as provided in Section 6.21 of the Plan.
1.183. Old Bank Collateral Agent means First National Bank of Commerce
and its successors and assigns, as collateral agent for the Banks under the Old
Bank Credit Documents.
1.184. Old Bank Credit Agreement means that certain Credit Agreement
dated as of November 8, 1994, among Bankers Trust Company, as Administrative
Agent and Bank, the other Banks listed therein and HJC and Finance Corp., as
prepetition debtors, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.185. Old Bank Credit Documents means the Old Bank Credit Agreement,
all Credit Documents (as defined in the Old Bank Credit Agreement), and all
other security agreements, mortgages, indentures and documents of every kind and
nature evidencing any Claims of any or all Banks, together with any amendments
thereto executed prior to the Commencement Date of the Chapter 11 Case of HJC.
1.186. Old Bond Documents means the Old Indenture, the Old Bonds, the
Collateral Documents (as defined in the Old Indenture), and all other security
agreements, mortgages, indentures and other documents of every kind and nature
evidencing a Lien or other Encumbrance or other
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obligation of any Debtor relating to any Claim in respect of the Old Indenture
or any of the Old Bonds, together with any amendments thereto executed prior to
the Commencement Date of the Chapter 11 Case of HJC.
1.187. Old Bonds means the 14-1/4% First Mortgage Notes due 2001 in the
aggregate principal amount of $435 million issued by HJC and Finance Corp., as
prepetition debtors, pursuant to the Old Indenture.
1.188. Old Completion Guarantees means (i) the Notes Completion
Guaranty dated as of November 16, 1994, by HET and HOCI in favor of the Old
Indenture Trustee and the City and the RDC, (ii) the LEDGC Completion Guaranty
dated as of November 16, 1994 by HET and HOCI in favor of LEDGC and (iii) the
Bank Completion Guaranty dated as of November 16, 1996, by HET and HOCI in favor
of the Administrative Agent (as defined in the Old Bank Credit Agreement).
1.189. Old Indenture means that certain Indenture dated as of November
15, 1994, between HJC and Finance Corp., as prepetition debtors, and First
National Bank of Commerce, as trustee, governing the terms of the Old Bonds,
together with any amendments thereto executed prior to the Commencement Date of
the Chapter 11 Cases of HJC and Finance Corp.
1.190. Old Indenture Predecessor Collateral Agent means First National
Bank of Commerce and its successors and assigns, as the predecessor collateral
agent for the Old Indenture Trustee and the Bondholders under the Old Bond
Documents.
1.191. Old Indenture Predecessor Trustee means First National Bank of
Commerce as predecessor trustee under the Old Indenture and its successors and
assigns.
1.192. Old Indenture Successor Trustee means Norwest Bank Minnesota,
N.A., as successor indenture trustee under the Old Indenture, and its successors
and assigns.
1.193. Old Indenture Trustee means, collectively, Norwest Bank
Minnesota, N.A., a successor indenture trustee, and First National Bank of
Commerce, as predecessor indenture trustee, under the Old Indenture, and their
respective successors and assigns.
1.194. Operating Agreements means the JCC Operating Agreement, the JCC
Intermediary Operating Agreement (if JCC Intermediary is formed), the operating
agreement for CP Development, the operating agreement for FP Development, and
the operating agreement for JCC Development.
1.195. Organizational Documents means the JCC Holding Bylaws, the JCC
Holding Certificate of Incorporation, the JCC Intermediary Organizational
Documents (if JCC Intermediary is formed), the JCC Organizational Documents, and
the articles of organization, initial reports and other documents required under
the laws of the State of Louisiana to form CP Development, FP Development and
JCC Development as limited liability companies.
1.196. Original Confirmation Date means April 28, 1997, the date the
Bankruptcy Court entered an order confirming the Original Plan.
1.197. Original Plan shall have the meaning assigned to such term in
the preamble hereof.
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1.198. Other Priority Claim means, with respect to any Debtor, any
Claim, against such Debtor entitled to priority in right of payment under any or
all of Sections 507(a)(3) through (a)(7) of the Bankruptcy Code.
1.199. Participating Banks means Bankers Trust Company, as Bank and
Administrative Agent, and any other Bank which elects through an appropriate
indication on the ballot provided to such Bank or otherwise in writing on or
before the Effective Date to be treated as a "Participating Bank" pursuant to
Section 4.3(a) of the Plan and for all other purposes under the Plan. No Bank
shall be treated as a Participating Bank for voting purposes unless it makes
such election prior to the deadline for submitting completed ballots. The term
"Participating Banks" shall include FNBC, provided that FNBC shall not have any
obligations under the Bank Term Sheet but shall instead be subject to the
provisions of the FNBC Settlement Agreement.
1.200. Penalty Claims means (a) Claims for fines, penalties or
forfeiture or for multiple, exemplary or punitive damages, to the extent that
such fine, penalty, forfeiture or damages are not compensation for actual
pecuniary loss suffered by the holder of such Claim, (b) Claims filed after the
Bar Date, (c) Claims increased through amendment after the Bar Date which the
Bankruptcy Court determines do not relate back to the applicable original timely
filed Claim, but only to the extent of the amount of such increase, (d) Claims
subject to subordination under Section 510 of the Bankruptcy Code, including,
without limitation, Securities Laws Claims, and (e) Claims for post-petition
attorneys' fees except to the extent allowed under Section 506(b) of the
Bankruptcy Code.
1.201. Person means a person, a corporation, a partnership, an
association, a joint stock company, a joint venture, a limited liability
company, an estate, a trust, an unincorporated organization, a government or any
subdivision thereof or any other entity.
1.202. Plan means this Third Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code, as Modified Through September 3, 1998
(including all exhibits and schedules annexed hereto), either in its present
form or as it may be altered, amended, or modified from time to time.
1.203. Plan Documents means all of the agreements, instruments and
documents referenced in Section 6.2 of the Plan and all other agreements,
instruments and documents as HET, in its sole discretion, on behalf of the
Proponents deems necessary or appropriate to effectuate the terms and conditions
of or transactions contemplated by the Plan.
1.204. Priority Tax Claim means a Claim of a governmental unit of the
kind specified in Sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.205. Professional Person means a Person retained or to be compensated
pursuant to Section 327, 328, 330, 503(b), 506(b) or 1103 of the Bankruptcy
Code.
1.206. Pro Rata Share or Pro Rata Interest means a proportionate share,
so that the ratio of the consideration distributed on account of an Allowed
Claim in a class to the amount of such Allowed Claim is the same as the ratio of
the amount of the consideration distributed on account of all Allowed Claims in
such class to the amount of all Allowed Claims in such class, or if the context
so requires, to the amount of all Allowed Claims in a designated portion of such
class.
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1.207. Proponents means the Debtors and HET as proponents of the Plan.
1.208. RDC means Rivergate Development Corporation, a Louisiana public
benefit corporation, and its successors and assigns.
1.209. Registrar means the registrar under the Old Indenture of
transfers and exchanges of Old Bonds.
1.210. Rejection Claim means any Claim of any party to an executory
contract or unexpired lease with any Debtor arising from the rejection by such
Debtor of such executory contract or unexpired lease.
1.211. Release Claims means any actions, causes of action, in law or in
equity, suits, debts, Liens, liabilities, claims, demands, damages, punitive
damages, losses, costs or expenses and reasonable attorneys' fees of any kind or
nature whatsoever, whether fixed or contingent, known or unknown, and whenever
arising (including, without limitation, claims based on legal fault,
misrepresentations or omissions, negligence, offense, quasi-offense, contract,
quasi-contract or any other theory), which in any way relate to any Debtor, the
business affairs or operations of any Debtor, the issuance by any Debtor of any
securities or the Casino or the Temporary Casino (as defined in the Basin Street
Casino Lease), including, but not limited to, the licensing, leasing, financing,
arranging, development, construction, promotion, management or operation
thereof, or other matters relating to any Debtor or any successor to any of them
in connection with the Casino or the Temporary Casino, except to the extent any
of the foregoing arises under any of the Plan Documents on or after the
Effective Date.
1.212. Release Pool shall have the meaning assigned to such term in
Section 6.2(f) of the Plan.
1.213. Release Pool Distribution Record Date means May 5, 1997, the
date set by the Bankruptcy Court for determining which holders of the Old Bonds
are entitled to receive distributions from the Release Pool provided under the
Plan.
1.214. Release Pool Transferee shall have the meaning assigned to such
term in Section 6.20 of the Plan.
1.215. Release Pool Transfer Form shall have the meaning assigned to
such term in Section 6.20 of the Plan.
1.216. Released Avoidance Claims means any and all Avoidance Claims
which are released pursuant to Section 5.8 of the Plan.
1.217. Released Parties means the Debtors and the New Entities and each
Person in any or all of the HET Group, the Debtors Group, the Bondholders
Committee Group, the City Group, the State Group, the Bank/Underwriter Group,
the NOLDC Group (if the applicable Persons in the NOLDC Group execute and
deliver on or before the Effective Date the NOLDC Shareholders/HET Settlement
Agreement) and the Grand Palais Group (if the applicable Persons in the Grand
Palais Group execute on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements).
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1.218. Releases means the City/RDC Release, the State/LGCB Release, the
Centex-Landis Release, the Broadmoor Release, the NOLDC Shareholders/HET
Settlement Agreement, the GP Representative/HET Settlement Agreements, the NOLDC
Shareholders/Grand Palais Settlement Agreement and the Bank/Underwriter Release.
1.219. Releasing Bondholders shall have the meaning assigned to such
term in Section 5.2 of the Plan, and shall include, without limitation, each
Major Bondholder.
1.220. Schedules means the schedules of assets and liabilities and the
statement of financial affairs filed by each Debtor as required by Section 521
of the Bankruptcy Code and Bankruptcy Rule 1007, and all amendments thereto
through the Confirmation Date.
1.221. SEC means the Securities and Exchange Commission or its
successors and assigns.
1.222. Secured Claim means an Allowed Claim held by any Person to the
extent of the value, as set forth in the Plan or as determined by a Final Order
of the Bankruptcy Court pursuant to Section 506(a) of the Bankruptcy Code, of
any interest in property of the applicable Debtor's estate securing such Allowed
Claim.
1.223. Securities Laws Claim means an Allowed Claim held by any Person
for rescission, damages or reimbursement, indemnification or contribution
arising out of a purchase or sale of any security (including, without
limitation, any Old Bonds) of either Debtor or any Affiliate thereof.
1.224. Selected Counsel shall have the meaning assigned to such term in
Section 6.2(t)(iv) hereof.
1.225. Setoff or Recoupment Claim or Setoff means a Claim which is
secured by setoff or recoupment rights of a Creditor of a Debtor, provided for
by applicable law and preserved by Section 553 of the Bankruptcy Code.
1.226. Showboat means Showboat, Inc., and its successors and assigns.
1.227. State means the State of Louisiana.
1.228. State Group means the State, the Governor of the State, the
LEDGC, the LGCB, the Riverboat Gaming Commission, the Attorney General of the
State, all boards, commissions, agencies, and other instrumentalities of the
State, and all of their respective predecessors, successors, and assigns, and
the officers, directors, employees, staff, members, attorneys, financial
advisors, accountants, agents, and other representatives of each of the
foregoing.
1.229. State/LGCB Release means the Release, in a form substantially
similar to the City/RDC Release and satisfactory to HJC (which may not
unreasonably withhold or delay its approval) and HET, to be executed on or
before and as of the Effective Date by the Attorney General of the State of
Louisiana on behalf of the State Group, the Debtors, NOLDC, Grand Palais, HET,
HOCI, HNOMC, JCC and/or certain of their respective Affiliates, and providing
for mutual releases in favor of the State Group, on the one hand, and the
Debtors, the New Entities, the HET Group, the Debtors Group, the
Bank/Underwriter Group, the Bondholders Committee Group, the NOLDC Group (but
only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective
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Date the NOLDC Shareholders/HET Settlement Agreement), and the Grand Palais
Group (but only if the applicable Persons in the Grand Palais Group execute and
deliver on or before the Effective Date the applicable GP Representative/HET
Settlement Agreements), on the other hand.
1.230. Subsequent Bank Distribution Date shall have the meaning set
forth in Section 4.3(b) of the Plan.
1.231. Surety Bond shall have the meaning set forth in Section 6.2(g)
of the Plan.
1.232. Third Party Claim means any claim or action (whether legal or
equitable, by subrogation or otherwise) by a Litigation Defendant against any
Released Party that seeks to hold such Person liable, in whole or in part, for
(i) any Assigned Litigation Claim, in whole or in part, brought at any time by
JCC against such Litigation Defendant or (ii) any claim or action, in whole or
in part, arising from any of the same transactions, occurrences, or facts upon
which such Assigned Litigation Claim brought at any time by JCC against such
Litigation Defendant is based in whole or in part.
1.233. 3CP Property means the parcel of real property owned by HJC
located at 3 Canal Place in New Orleans, Louisiana, bounded by the Canal Place
shopping center, Canal Street and that parcel of land adjacent to the Entergy
Delta substation which acts as a continuation of Iberville Street known as Lot
S-1, together with any easements, rights of servitude and other rights
appurtenant thereto and any improvements thereupon, which shall be transferred
to CP Development on the Effective Date.
1.234. Total Claims Amount means, as to a particular class, the sum of
(i) the aggregate amount of Allowed Claims in that class and (ii) the Disputed
Claim Amounts in that class.
1.235. Tranche A-1 means the $10 million A-1 tranche of the A Term
Loan.
1.236. Tranche A-2 means the $20 million A-2 tranche of the A Term
Loan.
1.237. Tranche A-3 means the $30 million A-3 tranche of the A Term
Loan.
1.238. Tranche B-1 means the $30 million B-1 tranche of the B Term
Loan.
1.239. Tranche B-2 means the $121.5 million B-2 tranche of the B Term
Loan.
1.240. Trust Indenture Act means the Trust Indenture Act of 1939, 15
U.S.C. sections 77aaa-77bbbb, as now in effect or hereinafter amended.
1.241. Trustee Account shall have the meaning assigned to such term in
Section 4.5(b) of the Plan.
1.242. Underwriter Term Sheet means the term sheet attached hereto as
Exhibit G.
1.243. Underwriters means Salomon Smith Barney, Donaldson, Lufkin &
Jenrette and BT Alex. Brown Incorporated as underwriters of the Old Bonds.
1.244. Unknown Claim means any Claim which any party asserting such
Claim does not know or suspect to exist in his, her, or its favor at the time of
the giving of the applicable releases and
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waivers set forth in this Plan which, if known by him, her or it, might have
affected his, her or its decision regarding such releases and waivers.
1.245. Unsecured Claim means any Claim that is not a Secured Claim,
Administrative Expense Claim, Priority Tax Claim, Penalty Claim or Other
Priority Claim.
1.246. Unsecured Creditors Committee means the statutory committee of
unsecured creditors appointed by the United States Trustee in the Chapter 11
Case of HJC pursuant to Section 1102 of the Bankruptcy Code.
1.247. Unsubscribed Release Pool Shares means the shares of New Common
Stock in the Release Pool equal to the product of (i) 1,500,000 times (ii) a
fraction, the numerator of which is the aggregate principal amount of Old Bonds
held by Bondholders on the Release Pool Distribution Record Date that are not
Releasing Bondholders, and the denominator of which is $435 million. All
Unsubscribed Release Pool Shares which are distributed to the Releasing
Bondholders in accordance with the provisions of this Plan shall be shares of
Class A New Common Stock, and all Unsubscribed Release Pool Shares which are
distributed to Harrah's Investor in accordance with the provisions of this Plan
shall be shares of Class B New Common Stock.
1.248. Valuation Order means the order, if any, entered by the
Bankruptcy Court on or before the Effective Date determining that the value of
the Assigned Debtor Litigation Claims (net of all estimated Litigation Costs and
the estimated aggregate amount of all Third Party Claims) is greater than the
sum of (i) the Bondholder Deficiency Amount, plus (ii) the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims, plus (iii) the
aggregate amount of all Allowed Claims in Class A7, plus (iv) the aggregate
amount of all cure payments made as provided in Section 8.1(e) of the Plan.
1.249. Voting Record Date means November 25, 1996, the date set by the
Bankruptcy Court for determining which holders of Old Bonds were entitled to
vote to accept or reject the Original Plan and are entitled to change their
acceptances or rejections of the Original Plan.
1.250. Wachtell Fees and Expenses shall have the meaning assigned to
such term in Section 4.3(a)(ii) of the Plan.
1.251. WARN Act Claim means any Claim against any or all of the Debtors
arising under the Worker Adjustment and Retraining Notification Act of 1988, 29
U.S.C. ss. 2101 et seq. and/or the Employee Retirement Income Security Act of
1974 as amended, 29 U.S.C. ss. 1001 et seq.
1.252. WARN Act Counsel means the law firms of Robein, Urann & Lurye,
P.L.C., Lowe, Stein, Hoffman, Alweiss & Hauver, and Shields, Mott, Lund &
Burnside, as counsel to the class representatives of the holders of WARN Act
Claims.
1.253. WARN Act Settlement means the settlement agreement approved by
the Bankruptcy Court by order dated February 20, 1997, providing for the
settlement of the respective WARN Act Claims of the members of the Certified
WARN Act Class against any or all of the Debtors, HNOMC and Affiliates of HNOMC.
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1.254. Withheld Funds means the funds withdrawn by or on behalf of any
or all of the Banks from one or more accounts of HJC on November 21 or 22, 1995,
(less the amount of any such funds which were subsequently returned to HJC), to
the extent such funds were not, prior to the commencement of the Chapter 11 Case
of HJC, legally and properly setoff or otherwise legally and properly applied
against the outstanding balance of the prepetition indebtedness (exclusive of
contingent indebtedness or obligations) owing to the Banks under the Old Bank
Credit Documents as of the commencement of the Chapter 11 Case of HJC, plus
interest thereon either (i) in the amount of interest actually credited to the
account(s) at which the Withheld Funds have been deposited, if HET, on behalf of
the Plan Proponents, the Bondholders Committee and Bankers Trust Company so
agree in their respective sole discretion, or (ii) if there is no such
agreement, at a rate to be determined by the Bankruptcy Court.
1.255. Working Capital Facility means the revolving credit facility in
the principal amount of $25,000,000 to be provided by Bankers Trust Company and
any other Participating Banks to JCC on the Effective Date pursuant to Section
6.2(i) of the Plan, which revolving credit facility shall have the terms and
conditions set forth in the Bank Term Sheet and such other terms and conditions
as shall be set forth in the Working Capital Loan Documents.
1.256. Working Capital Loan Documents means, collectively, the loan
agreement and all other loan and security documents governing the terms and
conditions of the Working Capital Facility, which documents shall be
satisfactory in form and substance to the Bondholders Committee (in its sole
discretion) and HET (in its sole discretion) on behalf of the Proponents, and if
HJC is a party to the Working Capital Loan Documents, with the consent of HJC,
which consent shall not be unreasonably withheld or delayed. The forms of the
Working Capital Loan Documents shall be filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan.
1.257. 34 Act shall have the meaning assigned to such term in Section
6.2(q) of the Plan.
B. Other Terms
A term used herein that is not defined herein shall have the meaning
ascribed to that term, if any, in the Bankruptcy Code.
C. Construction of Certain Terms
(a) The words "herein," "hereof," "hereto," "hereunder," and others of
similar import refer to the Plan as a whole and not to any particular section,
subsection, or clause contained in the Plan.
(b) Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include the singular and the plural
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, the feminine and the neuter.
(c) The rules of construction used in Section 102 of the Bankruptcy
Code shall apply to the construction of this Plan.
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ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
2.1. Administrative Expense Claims. All Administrative Expense Claims
against any of the Debtors shall be treated as follows:
(a) Time for Filing Administrative Expense Claims. The holder of an
Administrative Expense Claim, other than (i) a Fee Claim, (ii) a liability
incurred and payable in the ordinary course of business by any Debtor in
accordance with any budget which is then in effect and has been approved by
the DIP Lender and filed with the Bankruptcy Court (including, without
limitation, the fees payable to the U.S. Trustee under 28 U.S.C. section
1930), (iii) the DIP Loan Claim or (iv) an Administrative Expense Claim which
was allowed prior to the Original Confirmation Date, must file with the
Bankruptcy Court and serve on the Proponents and their counsel, a request for
payment of such Administrative Expense Claim within thirty days after the
Original Confirmation Date, or in the case of any Administrative Expense
Claim incurred after the Original Confirmation Date, within thirty days after
the latter of (i) the date of incurrence of such Administrative Expense
Claim, and (ii) the Confirmation Date. Such request must set forth at a
minimum (i) the Debtor that is liable for the Claim, (ii) the name of the
holder of the Claim, (iii) the amount of the Claim, and (iv) the basis of the
Claim. Failure to file this request timely and properly shall result in the
Administrative Expense Claim being forever barred and discharged.
(b) Time for Filing Fee Claims. Each Professional Person, Old Indenture
Trustee or other Person that holds or asserts an Administrative Expense Claim
that is a Fee Claim incurred before the Effective Date shall be required to file
with the Bankruptcy Court, and serve on all parties required to receive notice,
a final Fee Application within sixty days after the Effective Date. The failure
to file any such final Fee Application timely shall result in the applicable Fee
Claim being forever barred and discharged.
(c) Allowance of Administrative Expense Claims. An Administrative
Expense Claim with respect to which a request for payment has been properly
filed pursuant to Section 2.1(a) of the Plan shall become an Allowed
Administrative Expense Claim if no objection is filed within thirty days after
the filing and service of such request for payment of such Administrative
Expense Claim. If an objection is filed within such thirty-day period, the
Administrative Expense Claim shall become an Allowed Administrative Expense
Claim only to the extent allowed by Final Order. An Administrative Expense Claim
that is a Fee Claim and with respect to which a Fee Application has been
properly filed pursuant to Section 2.1(b) of the Plan, shall become an Allowed
Administrative Expense Claim only to the extent allowed by Final Order.
(d) Payment of Allowed Administrative Expense Claims. Each holder of
an Allowed Administrative Expense Claim against a Debtor shall receive (i)
the amount of such holder's Allowed Claim in one cash payment on, or as soon
as practicable thereafter, the later of the Effective Date and the day on
which such Claim becomes an Allowed Claim (but in no event after the tenth
(10th) Business Day after the later of those two dates), or (ii) such other
treatment as may be agreed upon in writing by the applicable Debtor (prior to
the Effective Date) or JCC (from and after the Effective Date) and such
holder; provided, however, that an Administrative Expense Claim representing
a liability incurred in the ordinary course of business of a Debtor
(including, without limitation, the fees payable to the U.S. Trustee under 28
U.S.C. section 1930) may be paid in the ordinary course of business
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by such Debtor, and provided further, that the payment of an Allowed
Administrative Expense Claim representing a right to payment under Sections
365(b)(l)(A), 365(b)(l)(B), or Section 365(d)(3) of the Bankruptcy Code may
be made in one or more cash payments over a period of time as is determined
to be appropriate by the Bankruptcy Court.
(e) Waiver or Cancellation of Certain Administrative Expense Claims.
Solely for purposes of this Plan, and subject to the occurrence of the Effective
Date, HET, NOLDC and Grand Palais and their respective Affiliates and Insiders
shall be deemed to have waived or agreed to cancel any Administrative Expense
Claim other than (i) any Administrative Expense Claim covered by any insurance
policy assumed pursuant to Section 8.1(c) hereof (provided, however, that any
such Administrative Claim shall be payable only from available coverage under
such insurance policy (and not be payable by any Debtor) and only to the extent
permitted under the NOLDC Shareholders/HET Settlement Agreement or GP
Representative/HET Settlement Agreements, as applicable) and (ii) in the case of
HET and its Affiliates and Insiders, the principal amount of the DIP
Indebtedness outstanding on the Effective Date, which shall be converted to
equity and contributed by the Harrah's Investor as part of the Harrah's New
Equity Investment or any Administrative Expense Claim for unreimbursed premiums
or other unreimbursed amounts paid for insurance coverage provided to any Debtor
under any insurance policy assumed pursuant to Section 8.1(c) of the Plan. The
respective distributions to which the Bondholders and, if applicable, the Old
Indenture Trustee are entitled under Article IV hereto shall be deemed to be in
complete satisfaction, discharge and release of any Administrative Expense Claim
or any superpriority administrative expense claim or any lien securing any of
the foregoing of the Bondholders or the Old Indenture Trustee, as applicable,
other than the Administrative Expense Claims of Fidelity, the respective Fee
Claims of the members of the Bondholders Committee and the Professional Persons
retained by the Bondholders Committee, any Bondholder or the Old Indenture
Trustee, which Fee Claims shall be governed by the applicable provisions of the
Plan and the Bankruptcy Code.
(f) DIP Loan Claim. In consideration of, among other things, the
execution and delivery of the Releases and the other releases provided pursuant
to or in connection with the Plan and the issuance of New Common Stock in
accordance with the provisions of Sections 6.2(e) and (f) of the Plan, the
principal amount of the DIP Indebtedness outstanding on the Effective Date shall
be converted to equity and contributed by the Harrah's Investor to JCC Holding
as part of the Harrah's New Equity Investment on the Effective Date. All accrued
interest on the DIP Indebtedness outstanding as of the Effective Date shall be
canceled.
2.2. Priority Tax Claims. Except to the extent that the holder of an
Allowed Priority Tax Claim agrees to a different treatment, JCC shall pay to
each holder of an Allowed Priority Tax Claim, at the sole option of JCC, (a)
cash in an amount equal to such Allowed Priority Tax Claim on the later of the
Effective Date and the date such Priority Tax Claim becomes an Allowed Priority
Tax Claim, or as soon thereafter as is practicable (but in no event after the
tenth (10th) Business Day after the later of those two dates), or (b) equal
quarterly cash payments in an aggregate amount equal to such Allowed Priority
Tax Claim, together with interest at a fixed annual rate to be determined by the
Bankruptcy Court or otherwise agreed to by JCC and such holder, over a period
through the sixth anniversary of the date of assessment of such Allowed Priority
Tax Claim, or upon such other terms determined by the Bankruptcy Court to
provide the holder of such Allowed Priority Tax Claim deferred cash payments
having a value, as of the Effective Date, equal to such Allowed Priority Tax
Claim.
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ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
Claims, other than Administrative Expense Claims and Priority Tax
Claims, are classified for all purposes, including voting, confirmation, and
distribution pursuant to the Plan, as follows:
<TABLE>
<S> <C>
A. HJC Classification
Class A1 -- Other Priority Claims: Class A1 consists of all Allowed Other Priority Claims against HJC.
Class A2 -- Non-Bondholder Secured Class A2 consists of all Allowed Secured Claims against
Claims: HJC other than the Secured Claims specified in Class A3 or A4 of the Plan.
Class A3 -- Bank and Old Bank Class A3 consists of two separate subclasses. Class
Collateral Agent Claims: A3(a) consists of all Allowed Secured Claims of the
Participating Banks and the Old Bank Collateral Agent against HJC, and Class A3(b)
consists of all Allowed Secured Claims of the Non-Participating Banks against HJC.
Class A4 -- Bondholder Claims: Class A4 consists of all Allowed Secured and Unsecured Claims of the Bondholders
against HJC.
Class A5 -- Old Indenture Predecessor Class A5 consists of all Allowed Secured Claims of the
Trustee and Old Indenture Old Indenture Predecessor Trustee and the Old Indenture
Collateral Agent Claims: Collateral Agent against HJC.
Class A6 -- WARN Act Claims: Class A6 consists of all Allowed WARN Act Claims against HJC of holders who are part of
the Certified WARN Act Class and are bound by the WARN Act Settlement.
Class A7 -- General Unsecured Claims: Class A7 consists of all Allowed Unsecured Claims against HJC other than the Unsecured
Claims of the Bondholders and the Unsecured Claims in Class A6 or A8.
Class A8 -- Penalty Claims Class A8 consists of all Allowed Penalty Claims against HJC.
Class A9 -- HJC Equity Interests: Class A9 consists of all Allowed Equity Interests in HJC, and any option, warrant or
other agreement requiring the issuance of any such Equity Interest.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
B. Finance Corp. Classification
Class B1 -- Other Priority Claims: Class B1 consists of all Allowed Other Priority Claims against Finance Corp.
Class B2 -- Bank Claims: Class B2 consists of all Allowed Secured Claims of the Banks and the Old Bank
Collateral Agent against Finance Corp.
Class B3 -- Bondholder Claims: Class B3 consists of all Allowed Secured and Unsecured Claims against Finance Corp. of
the Bondholders.
Class B4 -- WARN Act Claims: Class B4 consists of all Allowed WARN Act Claims against Finance Corp. of holders who
are part of the Certified WARN Act Class and are bound by the WARN Act Settlement.
Class B5 -- General Unsecured Claims: Class B5 consists of all Allowed Unsecured Claims against Finance Corp. other than the
Unsecured Claims of the Bondholders.
Class B6 -- Penalty Claims Class B6 consists of all Allowed Penalty Claims against Finance Corp.
Class B7 -- Equity Interests: Class B7 consists of all Allowed Equity Interests in Finance Corp., and any option,
warrant or other agreement requiring the issuance of any such Equity Interest.
C. HNOIC Classification
Class C1 -- Other Priority Claims: Class C1 consists of all Allowed Other Priority Claims against HNOIC.
Class C2 -- Secured Claims: Class C2 consists of all Allowed Secured Claims against HNOIC.
Class C3 -- WARN Act Claims: Class C3 consists of all Allowed WARN Act Claims against HNOIC of holders who are part
of the Certified WARN Act Class and are bound by the WARN Act Settlement.
Class C4 -- Unsecured Claims (for Class C4 consists of all Allowed Unsecured Claims
which HJC is liable): against HNOIC for which HJC is also liable.
Class C5 -- General Unsecured Claims: Class C5 consists of all Allowed Unsecured Claims against HNOIC other than Unsecured
Claims in Class C3, C4, C6 or C7.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Class C6 -- Showboat Claim: Class C6 consists of all Allowed Claims of NOLDC against HNOIC for reimbursement of a
portion of the amount owing by NOLDC to Showboat.
Class C7 -- Penalty Claims Class C7 consists of all Allowed Penalty Claims against HNOIC.
Class C8 -- Equity Interests: Class C8 consists of all Allowed Equity Interests in HNOIC, and any option, warrant or
other agreement requiring the issuance of any such Equity Interest.
Equity Interest.
</TABLE>
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS
A. HJC Treatment
4.1. Class A1 -- Other Priority Claims.
(a) Impairment and Voting. Class A1 is impaired by the Plan. Each
holder of an Allowed Claim in Class A1 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class A1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.2. Class A2 -- Non-Bondholder Secured Claims.
(a) Impairment and Voting. Class A2 is impaired by the Plan. Each
holder of an Allowed Claim in Class A2 is entitled to vote to accept or reject
the Plan.
(b) Reinstatement of Claims or Surrender of Collateral. Except as
provided in the immediately following two sentences, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Claim in Class A2 to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of a default, each Allowed
Claim in Class A2 will be reinstated and rendered unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign,
abandon or surrender any property securing any Secured Claim in Class A2 to the
holder of such Secured Claim. The Court will determine the value of any such
property so assigned, abandoned or surrendered, and any Deficiency Claim
resulting therefrom will be paid as a Class A7 or A8 Claim.
4.3. Class A3 -- Bank Claims.
(a) Class A3(a) -- Claims of Participating Banks and Old Bank
Collateral Agent.
(i) Impairment and Voting. Class A3(a) is impaired by the
Plan. Each holder of an Allowed Secured Claim in Class A3(a) is entitled to vote
to accept or reject the Plan. Solely for
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<PAGE>
voting purposes, each Participating Bank shall be deemed to have an Allowed
Class A3(a) Claim in the aggregate amount set forth in clauses (A) through (D)
of the first sentence of Section 4.3(a)(ii) hereof.
(ii) Allowance and Distributions. The Claim of each holder in Class
A3(a) shall be allowed in an amount equal to: (A) with respect to any holder
that participated in the pre-petition standby letter of credit issued by Bankers
Trust Company in the amount of $5,000,000 and previously drawn in full by
Broadmoor as the beneficiary, such holder's Pro Rata Share of the sum of
$5,000,000 plus all unpaid interest thereon (at the nondefault rate specified in
the Old Bank Credit Documents) and unpaid fees in respect of such letter of
credit that accrue through the Effective Date: (B) with respect to any holder
that participated in the undrawn Standby Letter of Credit S-10269 issued by
Bankers Trust Company in the amount of $1,500,000 in favor of the City, such
holder's Pro Rata Share of the unpaid fees in respect of such letter of credit
that accrue through the Effective Date; (C) the amount paid by such holder in
respect of the fees and expenses of Wachtell, Lipton, Rosen & Katz, as the
restructuring counsel of the Administrative Agent that accrue through the
Effective Date (the "Wachtell Fees and Expenses") (which shall not include any
fees and expenses in connection with the Convertible Junior Subordinated
Debentures, the A Term Loan, the B Term Loan, and/or the Working Capital
Facility), provided that such holder purchases on the Effective Date additional
Convertible Junior Subordinated Debentures in an amount equal to its Pro Rata
Share of the Wachtell Fees and Expenses; and (D) in the case of the
Administrative Agent, all unpaid facing fees arising under the Old Bank Credit
Agreement through the Effective Date; provided, however, that the Class A3(a)
Claims of FNBC as a Participating Bank and as Old Bank Collateral Agent shall be
allowed and otherwise treated in accordance with the provisions of the FNBC
Settlement Agreement. Each Allowed Class A3(a) Claim shall be paid from the
Withheld Funds on the Effective Date by the Administrative Agent and, to the
extent such Withheld Funds are insufficient to pay the Allowed Class A3(a)
Claims of FNBC, the unpaid portion of FNBC's Allowed Class A3(a) Claims shall be
paid by JCC. Any remaining Withheld Funds shall be remitted by the
Administrative Agent to the Old Bank Collateral Agent for distribution pursuant
to Section 4.3(b)(ii) hereof. The Participating Banks and FNBC as the Old Bank
Collateral Agent waive all of their other Class A3(a) Claims against the Debtor,
and shall not receive any distribution on account thereof. As a condition to the
allowance of their respective Class A3(a) Claims, the holders of Class A3(a)
Claims shall purchase on the Effective Date Convertible Junior Subordinated
Debentures in an aggregate principal amount equal to the sum of (x) $11,000,000
plus (y) in the case of any holders of Class A3(a) Claims electing to have the
portion of their Class A3(a) Claim described in clause (C) above allowed, the
aggregate amount of Class A3(a) Claims allowed pursuant to such clause (C). The
$11,000,000 portion of the Convertible Junior Subordinated Debentures to be
purchased by each holder of a Class A3(a) Claim pursuant to clause (x) in the
immediately preceding sentence shall be based on the ratio of the amount of fees
and expenses paid to such holder in connection with the credit facility under
the Old Bank Credit Documents to the aggregate amount of fees and expenses paid
to all holders of Class A3(a) Claims in connection with such credit facility.
Notwithstanding anything to the contrary herein, FNBC shall be obligated to
purchase the principal amount of Convertible Junior Subordinated Debentures
specified in the FNBC Settlement Agreement, and $357,150 of such principal
amount shall be deemed to have been purchased by FNBC as a holder of Class A3(a)
Claims and shall be credited against the $11 million in aggregate principal
amount of Convertible Junior Subordinated Debentures to be purchased by holders
of Class A3(a) Claims pursuant to clause (x) of the third-to-last sentence of
this Section 4.3(a)(ii).
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<PAGE>
(b) Class A3(b) -- Claims of Non-Participating Banks.
(i) Impairment and Voting. Class A3(b) is impaired by the
Plan. Each holder of an Allowed Secured Claim in Class A3(b) is entitled to vote
to accept or reject the Plan.
(ii) Distributions. The amount of the Allowed Secured Claim of
each holder in Class A3(b) shall be estimated for distribution purposes on or
before the Effective Date. As soon as practicable after the later of the
Effective Date and the date on which all of the Allowed Secured Claims in Class
A3(b) have been estimated pursuant to an order of the Bankruptcy Court (the
"Estimation Order"), the Old Bank Collateral Agent (A) shall distribute to each
such holder from the Withheld Funds remitted to the Old Bank Collateral Agent
pursuant to Section 4.3(a)(ii) hereof an amount of cash equal to the lesser of
(I) the portion of such holder's estimated Allowed Secured Claim that has been
liquidated as of the date of such Estimation Order, and (II) the product of (x)
the amount of such Withheld Funds and (y) a fraction, the numerator of which is
the amount specified in the immediately preceding clause (I) above and the
denominator of which is the aggregate amount of each holder's estimated Allowed
Secured Claim that has been liquidated as of the date of the Estimation Order,
(B) shall retain a portion of such Withheld Funds (the "Bank Reserve Fund")
equal to the aggregate amount of each such holder's estimated Class A3(b) Claim
that remains Contingent as of such date, which Bank Reserve Fund shall secure
the unliquidated portion of each holder's unliquidated estimated Class A3(b)
Claims, and (C) shall remit promptly to JCC the balance of such Withheld Funds.
On the tenth (10th) Business Day ("Subsequent Bank Distribution Date") after
each six-month anniversary of the Effective Date, and upon receipt of the
appropriate documentation from the applicable holder, Old Bank Collateral Agent
shall distribute to each holder of an estimated or actual Allowed Class A3(b)
Claim an amount equal to the lesser of (A) the portion of such Claim, if any,
that has been liquidated during the six-month period ending on such sixth (6th)
month anniversary date, and (B) the product of (x) the remaining amount of funds
in the Bank Reserve Fund times (y) a fraction, the numerator of which is the
amount specified in the immediately preceding clause (A) and the denominator of
which is the aggregate amount of all such estimated or actual Allowed Secured
Claims that have been liquidated during such six month period. In the event the
Claims of the holders in Class A3(b) are allowed as Secured Claims in an
aggregate amount in excess of the amount of Withheld Funds distributed to the
Old Bank Collateral Agent pursuant to Section 4.3(a)(ii) hereof, then each such
holder shall receive the "indubitable equivalent" (within the meaning of Section
1129(b)(2)(A)(iii) of the Bankruptcy Code) as determined by Final Order of the
Bankruptcy Court with respect to that portion of such holder's Allowed Secured
Claim in excess of its Pro Rata Share of such Withheld Funds. In the event that
the Secured Claim of any holder in Class A3(b) is, pursuant to a Final Order,
disallowed or allowed in an amount less than the amount of distributions
previously made on account of such Claim, such holder shall promptly remit to
JCC the excess of any such distributions over the amount of its Allowed Secured
Claim, if any. Upon the liquidation and payment in full of all Allowed Class
A3(b) Claims, the Old Bank Collateral Agent shall remit promptly to JCC the
remaining balance in the Bank Reserve Fund.
4.4. Class A4 -- Bondholder Claims.
(a) Impairment and Voting. Class A4 is impaired by the Plan. Each
holder of an Allowed Claim in Class A4 as of the Voting Record Date is entitled
to vote to accept or reject the Plan.
(b) Allowance and Distributions. The Claim of each record holder of Old
Bonds as of the Distribution Record Date or the Release Pool Distribution Record
Date, as applicable, to the extent such Claim is based on the principal of and
accrued interest on the Old Bonds owned as of the Distribution Record Date or
the Release Pool Distribution Record Date, as applicable, shall be allowed
35
<PAGE>
in the aggregate amount of the principal of such Old Bonds plus accrued interest
(calculated in accordance with the provisions of the Old Indenture) through and
including the Effective Date. On the Effective Date or as soon as practicable
thereafter but in no event after the tenth (10th) Business Day after the
Effective Date (or in the case of clause (v), as provided in Section 5.2
hereof), each record holder of an Allowed Claim in Class A4 shall receive (i)
8.529 shares of Class A New Common Stock for each $1,000 of the principal amount
of the Old Bonds held by such holder on the Distribution Record Date, (ii) $431
in principal amount of New Bonds for each $1,000 of the principal amount of the
Old Bonds held by such holder on the Distribution Record Date, (iii) its Pro
Rata Share of the New Contingent Bonds, (iv) its Pro Rata Share of the interests
in proceeds of Assigned Litigation Claims allocated to holders of Allowed Class
A4 Claims (as of the Distribution Record Date) and/or Releasing Bondholders (as
of the Release Pool Distribution Record Date), as applicable, under Section 5.9
of the Plan, and (v) in the case of any holder which is a Releasing Bondholder,
as consideration for its release of claims against the Released Parties if such
holder specifically elects to release such claims as provided in Section 5.2 of
the Plan, from the Release Pool, 3.448 shares of Class A New Common Stock for
each $1,000 in principal amount of Old Bonds held by such holder on the Release
Pool Distribution Record Date plus its Pro Rata Share (based on the total
principal amount of Old Bonds held by all Releasing Bondholders) of Class A New
Common Stock consisting of 86.67% of the Unsubscribed Release Pool Shares. The
foregoing distributions shall be deemed to include the distribution to which
each holder of an Allowed Claim in Class A4 is entitled as a holder of an
Allowed Claim in Class B3.
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<PAGE>
4.5. Class A5 -- Old Indenture Predecessor Trustee and Old Indenture
Predecessor Collateral Agent Claims.
(a) Impairment and Voting. Class A5 is impaired by the Plan. FNBC, as
the sole holder of Claims in Class A5, is entitled to vote to accept or reject
the Plan.
(b) Distributions. All of FNBC's Claims as Old Indenture Predecessor
Trustee and Old Indenture Predecessor Collateral Agent shall be allowed and
otherwise treated in accordance with the provisions of the FNBC Settlement
Agreement.
4.6. Class A6 -- WARN Act Claims.
(a) Impairment and Voting. Class A6 is impaired by the Plan. Each
holder of an Allowed Claim in Class A6 is entitled to vote to accept or reject
the Plan. Solely for purposes of voting, each holder of a WARN Act Claim shall
be deemed to have an Allowed WARN Act Claim in the amount of $1.00.
(b) Distributions and Other Treatment. On or as soon as practicable
after the Effective Date, JCC shall pay the sum of $2.265 million minus the fees
and expenses of WARN Act Counsel incurred in connection with its representation
of the holders of WARN Act Claims, and a portion of certain taxes attributable
to the WARN Act settlement (all as more fully described in the February 20, 1997
Bankruptcy Court order approving the settlement of WARN Act Claims), to holders
of Allowed 11/95 WARN Act Claims based on their respective Pro Rata Interests in
the balance of the $2.265 million payment, subject to any tax or other
withholdings required by law. The Allowed amount of the WARN Act Claim of each
11/95 WARN Act Claimant for purposes of determining his or her Pro Rata Interest
shall be determined by WARN Act Counsel in its reasonable discretion pursuant to
a set of objective and nondiscriminatory criteria to be filed with the
Bankruptcy Court on or before the Effective Date. In addition, to the extent
such positions are or become available, JCC shall offer each 11/95 WARN Act
Claimant re-employment to his or her former position or, if his or her former
position no longer exists or is not then available, to a substantially
equivalent position, prior to offering employment to such position to any other
Person other than any 11/95 WARN Act Claimant. As for the 8/95 WARN Act
Claimants, JCC (A) shall place each 8/95 WARN Act Claimant on a preferential
rehire list for one year following the date on which the Casino opens for
business, and (B) to the extent such positions are or become available, shall
offer re-employment to his or her former position or, if his or her former
position no longer exists or is not then available, to a substantially
equivalent position, prior to offering employment to such position to any Person
other than any 11/95 WARN Act Claimant, any 8/95 WARN Act Claimant or any Person
who was formerly employed and laid off by the Flamingo Casino.
4.7. Class A7 -- General Unsecured Claims.
(a) Impairment and Voting. Class A7 is impaired by the Plan. Each
holder of an Allowed Claim in Class A7 (an "Allowed General Unsecured Claim") is
entitled to vote to accept or reject the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed General
Unsecured Claim (an "Allowed General Unsecured Creditor") cash in an amount
equal to such Allowed General Unsecured Claim on the later of the Effective Date
and the date on which such Claim becomes an
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Allowed Claim, or as soon as practicable thereafter. Solely for purposes of this
Plan, and subject to the occurrence of the Effective Date, HNOIC, Finance Corp.,
HET, NOLDC, Grand Palais and all of their respective Affiliates and Insiders
shall be deemed to have waived any Class A7 Claim except (i) any Allowed Class
A7 claim covered by any insurance policy assumed pursuant to Section 8.1(c)
hereof (provided that any such Allowed Class A7 Claim shall be payable only from
available coverage under such insurance policy (and not be payable by any
Debtor) and only to the extent permitted under the NOLDC Shareholders/HET
Settlement Agreement or GP Representative/HET Settlement Agreements, as
applicable), (ii) in the case of HET and its Affiliates and Insiders, any Class
A7 Claim for unreimbursed premiums or other unreimbursed amounts paid for
insurance coverage provided to any Debtor under any insurance policy assumed
pursuant to Section 8.1(c) of the Plan, and (iii) the Allowed Class A7 Claim of
Deborah Sulzer in the amount of $39,579.52 as reflected in Claim No. 490.
4.8. Class A8 -- Penalty Claims. Class A8 is impaired by the Plan. The
holders of Class A8 Claims shall not receive any distributions on account of
such Claims, and on the Effective Date, all Class A8 Claims shall be
extinguished; provided, however, that if a Valuation Order is entered on or
before the Effective Date, each holder of an Allowed Claim in Class A8 shall
receive its Pro Rata Share of the interests in the proceeds of Assigned Debtor
Litigation Claims as allocated to holders of Allowed Class A8 Claims under
Section 5.9 of the Plan. Each holder of a Class A8 Claim is conclusively
presumed to have rejected the Plan as a holder of a Class A8 Claim and is not
entitled to vote to accept or reject the Plan.
4.9. Class A9 -- Equity Interests. Class A9 is impaired by the Plan.
The holders of Equity Interests in Class A9 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity Interests
in HJC shall be extinguished. Each holder of an Equity Interest in Class A9 is
conclusively presumed to have rejected the Plan as a holder of a Class A9 Equity
Interest and is not entitled to vote to accept or reject the Plan.
B. Finance Corp. Treatment
4.10. Class B1 -- Other Priority Claims.
(a) Impairment and Voting. Class B1 is impaired by the Plan. Each
holder of an Allowed Claim in Class B1 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class B1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.11. Class B2 -- Bank Claims.
(a) Impairment and Voting. Class B2 is impaired by the Plan. Each
holder of an Allowed Secured Claim in Class B2 is entitled to vote to accept or
reject the Plan.
(b) Distributions. As soon as practicable after the later of the
Effective Date and the date on which all of the Allowed Secured Claims in Class
B2 have been allowed or disallowed by Final Order, each holder of an Allowed
Class B2 Claim is entitled to receive from JCC its pro rata share (based on the
ratio of its Allowed Class B2 Claim to the aggregate amount of all Allowed
Secured
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Claims in Class B2 and Class B3) of $1,000 in cash. The distribution to which
each holder of an Allowed Class B2 Claim which is also a holder of an Allowed
Class A3(a) Claim is entitled shall be deemed part of, and satisfied upon
receipt of, the distributions which such holder is entitled to receive as a
holder of an Allowed Class A3(a) Claim.
4.12. Class B3 -- Bondholder Claims.
(a) Impairment and Voting. Class B3 is impaired by the Plan. Each
holder of an Allowed Secured Claim in Class B3 as of the Voting Record Date is
entitled to vote to accept or reject the Plan.
(b) Distributions. Each holder of an Allowed Claim in Class B3 is
entitled to receive its Pro Rata Share of shares of Class A New Common Stock and
New Bonds which, in the aggregate, have a value equal to the product of (i)
$1,000 and (ii) a fraction, the numerator of which is the aggregate amount of
Allowed Secured Claims in Class B3, and the denominator of which is the
aggregate amount of Allowed Secured Claims in Class B2 and Class B3. The
distribution to which each holder of an Allowed Class B3 Claim is entitled shall
be deemed part of, and satisfied upon receipt of, the distributions which such
holder is entitled to receive as a holder of an Allowed Class A4 Claim.
4.13. Class B4 -- WARN Act Claims.
(a) Impairment and Voting. Class B4 is impaired by the Plan. Each
holder of an Allowed Claim in Class B4 is entitled to vote to accept or reject
the Plan.
(b) Distributions and Other Treatment. Each holder of an Allowed Claim
in Class B4 shall be deemed to have received on account of his or her Class B4
Claims, and in full satisfaction thereof, the distribution and/or other
treatment he or she receives as a holder of a Class A6 Claim pursuant to Section
4.6 of the Plan. No other distribution shall be provided to such holder on
account of his or her Class B4 Claims.
4.14. Class B5 -- General Unsecured Claims.
(a) Impairment and Voting. Class B5 is impaired by the Plan. Each
holder of an Allowed Claim in Class B5 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class B5 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date on which such Claim becomes an Allowed Claim, or as
soon as practicable thereafter. Solely for purposes of this Plan, and subject to
the occurrence of the Effective Date, HNOIC, HJC, HET, NOLDC, Grand Palais and
all of their respective Affiliates and Insiders shall be deemed to have waived
their right to receive any distribution as a holder of a Class B5 Claim.
4.15. Class B6 - Penalty Claims. The holders of Class B6 Claims shall
not receive any distributions on account of such Claims, and on the Effective
Date, all Class B6 Claims shall be extinguished; provided, however, that if a
Valuation Order is entered on or before the Effective Date, each holder of an
Allowed Class B6 Claim shall be deemed to have received on account of its Class
B6 Claim, and in full satisfaction thereof, the distribution it receives as a
holder of a Class A8 Claim
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pursuant to Section 4.8 of the Plan. Each holder of a Class B6 Claim is
conclusively presumed to have rejected the Plan as a holder of a Class B6 Claim
and is not entitled to vote to accept or reject the Plan.
4.16. Class B7 -- Equity Interests. Class B7 is impaired by the Plan.
The holders of Equity Interests in Class B7 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity Interests
in Finance Corp. shall be extinguished. Each holder of an Equity Interest in
Class B7 is conclusively presumed to have rejected the Plan as a holder of a
Class B7 Equity Interest and is not entitled to vote to accept or reject the
Plan.
C. HNOIC Classification
4.17. Class C1 -- Other Priority Claims.
(a) Impairment and Voting. Class C1 is impaired by the Plan. Each
holder of an Allowed Claim in Class C1 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class C1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.18. Class C2 -- Secured Claims.
(a) Impairment and Voting. Class C2 is impaired by the Plan. Each
holder of an Allowed Claim in Class C2 is entitled to vote to accept or reject
the Plan.
(b) Reinstatement of Claims or Surrender of Collateral. Except as
provided in the immediately following two sentences, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Claim in Class C2 to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of default, each Allowed
Claim in Class C2 will be reinstated and rendered unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign,
abandon or surrender any property securing any Secured Claim in Class C2 to the
holder of such Secured Claim. The Court will determine the value of any such
property so assigned, abandoned or surrendered, and any Deficiency Claim
resulting therefrom will be paid as a Class C5 or C7 Claim.
4.19. Class C3 -- WARN Act Claims.
(a) Impairment and Voting. Class C3 is impaired by the Plan. Each
holder of an Allowed Claim in Class C3 is entitled to vote to accept or reject
the Plan.
(b) Distributions and Other Treatment. Each holder of an Allowed Claim
in Class C3 shall be deemed to have received on account of his or her Class C3
Claims, and in full satisfaction thereof, the distribution and/or other
treatment he or she receives as a holder of a Class A6 Claim pursuant to Section
4.6 of the Plan. No other distribution shall be provided to such holder on
account of his or her Class C3 Claims.
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4.20. Class C4 -- Unsecured Claims (for which HJC is liable).
(a) Impairment and Voting. Class C4 is impaired by the Plan. Each
holder of an Allowed Claim in Class C4 is entitled to vote to accept or reject
the Plan.
(b) Distributions. Each holder of an Allowed Claim in Class C4 shall be
deemed to have received on account of its Class C4 Claims, and in full
satisfaction thereof, the distribution it receives as an Allowed General
Unsecured Creditor pursuant to Section 4.7 of the Plan. No other distribution
shall be provided to such holder on account of its Class C4 Claims.
4.21. Class C5 -- General Unsecured Claims.
(a) Impairment and Voting. Class C5 is impaired. Each holder of an
Allowed Claim in Class C5 is entitled to vote to accept or reject the Plan.
(b) Distributions. To the extent there are any holders of Allowed
Claims in Class C5, each such holder shall receive the lesser of the amount of
its Allowed Class C5 Claim or its Pro Rata Share of $1,000 in cash (the "Class
C5 Cash Amount") to be provided by JCC and distributed as follows:
(i) On the ninetieth (90th) day after the Effective Date or as
soon as practicable thereafter (the "Initial Class C5 Distribution
Date"), each holder of an Allowed Claim in Class C5 on the Initial
Class C5 Distribution Date shall receive, as an initial distribution of
the Class C5 Cash Amount, an amount equal to the product of (A) the
amount of such holder's Allowed Class C5 Claim times (B) a fraction,
(x) the numerator of which is the aggregate amount of Allowed Class C5
Claims on the Initial Class C5 Distribution Date, and (y) the
denominator of which is the Total Claims Amount for Class C5 on the
Initial Class C5 Distribution Date.
(ii) As soon as reasonably practicable after making the
initial distribution of the Class C5 Cash Amount, JCC will deposit the
remaining portion of the Class C5 Cash Amount in an interest-bearing,
money market account (such deposit, together with any interest thereon,
the "Class C5 Claims Reserve").
(iii) No payment or distribution of any portion of the Class
C5 Cash Amount shall be made with respect to any Disputed Claim unless
and until such Claim becomes an Allowed Claim, and no holder of a Class
C5 Claim shall receive more than one hundred percent (100%) of its
Allowed Class C5 Claim or be entitled to any post-petition interest
thereon.
(iv) As soon as practicable after any Disputed Claim becomes
an Allowed Class C5 Claim by Final Order, JCC shall make an initial
distribution to the holder of such Allowed Claim from the Class C5
Claims Reserve in an amount equal to the product of (A) the Class C5
Cash Amount times (B) a fraction, (x) the numerator of which is the
amount of such holder's Allowed Class C5 Claim and (y) the denominator
of which is the Total Claims Amount for Class C5 on the Initial Class
C5 Distribution Date.
(v) As soon as practicable after all Disputed Claims have been
allowed or disallowed by Final Order, and after all interim
distributions have been made pursuant
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to clause (iv) above, JCC shall distribute to each holder of an Allowed
Class C5 Claim its Pro Rata Share of any remaining funds in the Class
C5 Claims Reserve, but in no event more than the amount of such
holder's Class C5 Claim then outstanding (exclusive of post-petition
interest). Any funds remaining in the Class C5 Claims Reserve after
payment in full of all Allowed Class C5 Claims shall become the
exclusive property of JCC free and clear of all Claims and shall be
subject to its exclusive control.
Solely for purposes of this Plan, and subject to the occurrence of the Effective
Date, HJC, Finance Corp., HET, NOLDC, Grand Palais and all of their Affiliates
and Insiders shall be deemed to have waived any right to receive any
distribution as a holder of a Class C5 Claim.
4.22. Class C6 -- Showboat Claim.
(a) Impairment and Voting. Class C6 is impaired by the Plan. NOLDC, as
the only holder of a Class C6 Claim, is entitled to vote to accept or reject the
Plan.
(b) Distributions. In accordance with the terms of the NOLDC Plan and
the NOLDC Shareholders/HET Settlement Agreement, consideration shall be
furnished directly to Showboat in exchange for a full release from Showboat to
NOLDC. This transaction will result in a release of NOLDC's Class C6 Claim. No
distributions shall be provided to NOLDC on account of its Class C6 Claim.
4.23. Class C7 -- Penalty Claims. The holders of Class C7 Claims shall
not receive any distributions on account of such Claims, and on the Effective
Date, all Class C7 Claims shall be extinguished; provided, however, that if a
Valuation Order is entered on or before the Effective Date, each holder of an
Allowed Claim in Class C7 shall be deemed to have received on account of its
Class C7 Claim, and in full satisfaction thereof, the distribution it receives
as a holder of a Class A8 Claim pursuant to Section 4.8 of the Plan. Each holder
of a Class C7 Claim is conclusively presumed to have rejected the Plan as a
holder of Class C7 Claim and is not entitled to vote to accept or reject the
Plan.
4.24. Class C8 -- Equity Interests. Class C8 is impaired by the Plan.
The holder of Equity Interests in Class C8 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity Interests
in HNOIC shall be extinguished. The holder of Equity Interests in Class C8 is
conclusively presumed to have rejected the Plan as a holder of Class C8 Equity
Interests and is not entitled to vote to accept or reject the Plan.
ARTICLE V.
SETTLEMENT OF CERTAIN CLAIMS AND
PROSECUTION AND ASSIGNMENT OF CERTAIN CLAIMS
5.1. Release by Debtors of Causes of Action Against the HET Group,
Debtors Group, Bondholders Committee Group, NOLDC Group and Grand Palais Group.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of,
among other things, (i) the execution and delivery of the HET Loan Guarantee by
HET and the New Completion Guarantees by HET and HOCI and the provision of the
Surety Bond, (ii) the DIP Lender's consent to the conversion to equity and
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contribution of the principal amount of the DIP Indebtedness outstanding on the
Effective Date as part of the Harrah's New Equity Investment, (iii) the Harrah's
New Equity Investment, (iv) the waiver by Persons in the HET Group, the NOLDC
Group and the Grand Palais Group of any right to distributions as holders of
certain Class A6 and/or Class C5 Claims, (v) certain pre-development and
development services by HET and its Affiliates performed prior to the Effective
Date, and (vi) other good and valuable consideration, without which this Plan
could not be confirmed and consummated, on the Effective Date, each Debtor shall
be conclusively and irrevocably deemed to have released any and all Release
Claims of such Debtor or its estate against, respectively, (i) each Person in
the HET Group, (ii) each Person in the Debtors Group, (iii) each Person in the
Bondholders Committee Group, (iv) each Person in the NOLDC Group but only if the
applicable Persons in the NOLDC Group execute and deliver on or before the
Effective Date the NOLDC Shareholders/HET Settlement Agreement, and (v) each
Person in the Grand Palais Group but only if the applicable Persons in the Grand
Palais Group execute and deliver on or before the Effective Date the applicable
GP Representative/HET Settlement Agreements. The Confirmation Order shall
constitute an order approving as a compromise and settlement pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code the foregoing releases and the respective
releases of the Debtors contained in the NOLDC Shareholders/HET Settlement
Agreement and the GP Representative/HET Settlement Agreements and the Debtors'
execution and delivery of the applicable release agreements in the forms
attached as exhibits to the NOLDC Shareholders/HET Settlement Agreement and the
GP Representative/HET Settlement Agreements.
5.2. Release by Bondholders of Causes of Action Against HET Group,
Debtors Group, Bondholders Committee Group, City Group, State Group, NOLDC
Group, Grand Palais Group and the Bank/Underwriter Group. Pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code, in consideration of (i) Harrah's
Investor's contribution of 200,000 shares of New Common Stock to the Release
Pool, and (ii) JCC Holding's contribution of 1,300,000 shares of New Common
Stock to the Release Pool on the Effective Date, each Bondholder that, through
an appropriate indication on the ballot previously provided to such Bondholder
in connection with the voting on the Original Plan or through an appropriate
indication on the Bondholder release form provided to it by the Proponents, has
affirmatively evidenced its intent to release the Persons in the HET Group, the
Debtors Group, the Bondholders Committee Group, the City Group, the State Group,
the NOLDC Group, the Grand Palais Group and the Bank/Underwriter Group,
respectively (each, a "Releasing Bondholder"), shall be conclusively and
irrevocably deemed to have (i) released each Person in the HET Group, the
Debtors Group, the Bondholders Committee Group, the City Group, the State Group,
the NOLDC Group, the Grand Palais Group and the Bank/Underwriter Group,
respectively, from any and all Release Claims that such Releasing Bondholder, or
any of its predecessors-in-interest, successors or assigns, has or may have as
of the Effective Date arising in whole or in part from any acts, omissions,
activities and/or events prior to the Effective Date, and (ii) released, waived
and agreed not to bring any Claims against HET or HOCI, whether a known Claim or
an Unknown Claim, that may arise in any way, in whole or in part, out of (a) the
decision of HET or HOCI either to renew or not renew the HET/JCC Agreement or
any Minimum Payment Guaranty, (b) HET's or HOCI's acting in their own best
interests in connection with the execution of, renewal of or failure to renew
the HET/JCC Agreement or any Minimum Payment Guaranty, and/or (c) any alleged
assurance or guarantee by HET or HOCI concerning the financial results of the
Casino, unless such Claim is based on a writing (but in any event cannot be
based on the HET/JCC Agreement or any Minimum Payment Guaranty) properly
executed by the party against whom such a Claim is being made, provided,
however, that such release in this clause (ii) hereof shall not bar or release
any Claims against HET or HOCI for (x) any breach of the HET/JCC Agreement or
any Minimum Payment Guaranty to which HET or HOCI is a party, (y) mismanagement
of the Casino after the Effective Date or (z) any other conduct, act or omission
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occurring after the Effective Date which is not directly related to the
matters set forth in this clause (ii)(a) through (c) above; further provided,
however, that (A) the foregoing release by the Releasing Bondholders shall not
be effective or enforceable as to (i) any Person in the NOLDC Group unless the
applicable Persons in the NOLDC Group execute and deliver on or before the
Effective Date the NOLDC Shareholders/HET Settlement Agreement, and (ii) any
Person in the Grand Palais Group unless the applicable Persons in the Grand
Palais Group execute and deliver on or before the Effective Date the applicable
GP Representative/HET Settlement Agreements; (B) each Major Bondholder shall be
conclusively and automatically deemed to be a Releasing Bondholder without the
necessity of taking the action otherwise required of any Bondholder to become a
Releasing Bondholder and regardless of the manner in which such Major Bondholder
fills out its ballot with respect to this Plan or filled out its ballot with
respect to the Original Plan or the January 29, 1998 Plan; (C) the release
provisions in any ballot or other writing previously executed by any Bondholder
to evidence its agreement to the foregoing release, unless revoked pursuant to
clause (D) below, shall be binding on such Bondholder and any transferee of the
Old Bonds held by such Bondholder; and (D) any Bondholder who agreed to the
foregoing release in connection with the Original Plan shall be entitled to
revoke such agreement by evidencing in writing its intent to do so in any manner
and subject to such conditions and within any time period set by the Bankruptcy
Court. Nothing in the foregoing release by the Releasing Bondholders constitutes
a release of any claims or causes of action of any Releasing Bondholders against
any Persons other than the Released Parties, including, without limitation, any
claims or causes of action against any or all of the Non-Participating Banks and
any Underwriter which fails to execute and deliver the Bank/Underwriter Release.
On, or as soon as practicable after the Effective Date, (i) each Releasing
Bondholder shall receive from the Release Pool 3.448 shares of Class A New
Common Stock for each $1,000 in principal amount of Old Bonds held by such
Releasing Bondholder on the Release Pool Distribution Record Date plus its Pro
Rata Share (based on the total principal amount of Old Bonds held by all
Releasing Bondholders on the Release Pool Distribution Record Date) of Class A
New Common Stock consisting of 86.67% of the Unsubscribed Release Pool Shares,
and (ii) Harrah's Investor shall receive from the Release Pool Class B New
Common Stock consisting of 13.33% of the Unsubscribed Release Pool Shares.
Notwithstanding the foregoing, and except as otherwise provided for in Section
6.20 of this Plan, (i) no Releasing Bondholder shall be entitled to any
distribution from the Release Pool unless such holder is a Bondholder of record
on the Release Pool Distribution Record Date (or, in the case of a beneficial
owner of any Old Bonds, is the beneficial owner of Old Bonds on the Release Pool
Distribution Record Date that are held on its behalf by a Person which is a
holder of record on the Release Pool Distribution Record Date) and has not
assigned or otherwise transferred its claims, if any, against any Person in the
HET Group, the Debtors Group, the Bondholders Committee Group, the City Group,
the State Group, the NOLDC Group, the Grand Palais Group or the Bank/Underwriter
Group to be released pursuant to this Section 5.2, except that any Releasing
Bondholder may transfer its Old Bonds on or after the Release Pool Distribution
Record Date subject to clause (ii) below, (ii) the foregoing release by each
Releasing Bondholder shall be binding on any subsequent transferee of the Old
Bonds held by such Releasing Bondholder on the Release Pool Distribution Record
Date, and (iii) the foregoing release by each Releasing Bondholder which is a
beneficial owner of any Old Bonds shall be binding on any record holder,
participant or nominee with respect to such Old Bonds. The Confirmation Order
shall constitute an order approving the foregoing release as a compromise and
settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code.
5.3. Release by Debtors of Causes of Action Against State Group.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of
and subject to, the execution and delivery of the State/LGCB Release and the
Amended and Renegotiated Casino Operating Contract by LGCB
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and/or the State, as applicable, on the Effective Date, each Debtor shall be
conclusively and irrevocably deemed to have released each Person in the State
Group from any and all Release Claims of such Debtor or its estate only to the
extent set forth in the State/LGCB Release. The Confirmation Order shall
constitute an order approving the foregoing release as a compromise and
settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code.
5.4. Release by Debtors of Causes of Action Against City and RDC.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of,
and subject to, the execution and delivery by the City and the RDC of the
City/RDC Release and the other documents set forth in Section 6.2(o) of the
Plan, on the Effective Date, each Debtor shall be conclusively and irrevocably
deemed to have released each of the City and the RDC from any and all Release
Claims of such Debtor or its estate only to the extent set forth in the City/RDC
Release. The Confirmation Order shall constitute an order approving the
foregoing release as a compromise and settlement pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code.
5.5. Release by Debtors of Causes of Action Against Bank/Underwriter
Group. Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in
consideration of, and subject to, the execution and delivery by each
Participating Bank, FNBC and each Underwriter of the Bank/Underwriter Release
and the provision by certain Persons in the Bank/Underwriter Group of the A Term
Loan, the B Term Loan and the Working Capital Facility and the purchase of the
Convertible Junior Subordinated Debentures by the Underwriters, FNBC, Bankers
Trust Company, and any other Participating Banks, all as more particularly
described in the Bank Term Sheet, the FNBC Settlement Agreement and the
Underwriter Term Sheet, on the Effective Date, each Debtor shall be conclusively
and irrevocably deemed to have released any and all Release Claims of such
Debtor or its estate against each Person in the Bank/Underwriter Group. The
Confirmation Order shall constitute an order approving as a compromise and
settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code the
foregoing releases and the Debtors' execution and delivery of the
Bank/Underwriter Release. Except as provided in Section 4.3 and 4.11 hereof,
each Person in the Bank/Underwriter Group shall be deemed to have waived any
Claim against any Debtor or NOLDC (except for FNBC with respect to NOLDC as set
forth in the NOLDC Plan and the NOLDC Shareholders/HET Settlement Agreement) and
any right to receive any distribution on account of any such Claim. Without
limiting the foregoing and except for its Lien on the FNBC Cash Collateral, FNBC
shall be deemed to have released all of its Liens (including, without
limitation, its Indenture Trustee Charging Lien) on any and all (i) assets of
each Debtor (including, without limitation, all cash collateral held by the Old
Indenture Trustee) and (ii) any distributions made or to be made under the Plan.
5.6. Release by Grand Palais Bondholders of Causes of Action Against
HET Group, Debtors Group, Bondholders Committee Group, City Group, State Group,
NOLDC Group, Grand Palais Group and the Bank/Underwriter Group. Pursuant to
Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of, among other
things, (i) the Grand Palais Settlement Consideration, (ii) the execution and
delivery of the HET Loan Guarantee and the New Completion Guarantees by HET and
HOCI and the provision of the Surety Bond, (iii) the DIP Lender's consent to the
conversion to equity and contribution of the principal amount of the DIP
Indebtedness outstanding on the Effective Date as part of the Harrah's New
Equity Investment, (iv) the Harrah's New Equity Investment, (v) the waiver by
Persons in the HET Group, the NOLDC Group and the Grand Palais Group of any
right to distributions as holders of certain Class A7 and/or Class C5 Claims,
(vi) certain pre-development and development services by HET and its Affiliates
performed prior to the Effective Date, (vii) the provision by certain Persons in
the Bank/Underwriter Group of certain financing to JCC, and
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(viii) other good and valuable consideration, without which this Plan could
not be confirmed and consummated, on the Effective Date, each Grand Palais
Bondholder that, through an appropriate indication on the release
solicitation statement provided to such Grand Palais Bondholder by the
Disbursing Agent or in such other manner as may be prescribed by an
applicable order of the Bankruptcy Court, has affirmatively evidenced its
intent to release the Persons in the HET Group, the Debtors Group, the
Bondholders Committee Group, the City Group, the State Group, the NOLDC
Group, the Grand Palais Group and the Bank/Underwriter Group, respectively
(each, a "Grand Palais Releasing Bondholder"), shall be conclusively and
irrevocably deemed to have (i) released each Person in the HET Group, the
Debtors Group, the Bondholders Committee Group, the City Group, the State
Group, the NOLDC Group, the Grand Palais Group and the Bank/Underwriter
Group, respectively, from any and all Release Claims that such Grand Palais
Releasing Bondholder, or any of its predecessors-in-interest, successors or
assigns, has or may have as of the Effective Date arising in whole or in part
from any acts, omissions, activities and/or events prior to the Effective
Date, and (ii) released, waived and agreed not to bring any Claims against
HET or HOCI, whether a known Claim or an Unknown Claim, that may arise in any
way, in whole or in part, out of (a) the decision of HET or HOCI either to
renew or not renew the HET/JCC Agreement or any Minimum Payment Guaranty, (b)
HET's or HOCI's acting in their own best interests in connection with the
execution, renewal or failure to renew the HET/JCC Agreement or any Minimum
Payment Guaranty, and/or (c) any alleged assurance or guarantee by HET or
HOCI concerning the financial results of the Casino, unless such Claim is
based on a writing (but in any event cannot be based on the HET/JCC Agreement
or any Minimum Payment Guaranty) properly executed by the party against whom
such a Claim is being made; provided, however, that the foregoing release by
the Grand Palais Releasing Bondholders shall not be effective or enforceable
as to (i) any Person in the NOLDC Group unless the applicable Persons in the
NOLDC Group execute and deliver on or before the Effective Date the NOLDC
Shareholders/HET Settlement Agreement; and (ii) any Person in the Grand
Palais Group unless the applicable Persons in the Grand Palais Group execute
and deliver on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements. On, or as soon as practicable after
the Effective Date, each Grand Palais Releasing Bondholder shall receive its
pro rata share of the Grand Palais Settlement Consideration (with respect to
each Grand Palais Releasing Bondholder, such pro rata share for such Grand
Palais Releasing Bondholder shall be determined by the ratio between the
aggregate principal amount of Grand Palais Senior Secured Bonds beneficially
owned by such Grand Palais Releasing Bondholder and the aggregate principal
amount of Grand Palais Senior Secured Bonds beneficially owned by all of the
Grand Palais Releasing Bondholders, each calculated as of the Distribution
Record Date). Notwithstanding the foregoing, (i) no Grand Palais Releasing
Bondholder shall be entitled to any distribution of the Grand Palais
Settlement Consideration unless such holder is a Grand Palais Bondholder of
record on the Distribution Record Date (or, in the case of a beneficial owner
of any Grand Palais Senior Secured Bonds, is the beneficial owner of Grand
Palais Senior Secured Bonds on the Distribution Record Date that are held on
its behalf by a Person which is a holder of record on the Distribution Record
Date) and has not assigned or otherwise transferred its claims, if any,
against any Person in the HET Group, the Debtors Group, the Bondholders
Committee Group, the City Group, the State Group, the NOLDC Group, the Grand
Palais Group or the Bank/Underwriter Group to be released pursuant to this
Section 5.6, except that any Grand Palais Releasing Bondholder may transfer
its Grand Palais Senior Secured Bonds, subject to clause (ii) below, (ii) the
foregoing release by each Grand Palais Releasing Bondholder shall be binding
on any subsequent transferee of the Grand Palais Senior Secured Bonds held by
such Grand Palais Releasing Bondholder on the Distribution Record Date, and
(iii) the foregoing release by each Grand Palais Releasing Bondholder which
is a beneficial owner of any Grand Palais Senior Secured Bonds shall be
binding on any record holder, participant or nominee with respect to such
Grand Palais Senior Secured
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Bonds. The Confirmation Order shall constitute an order approving the foregoing
release as a compromise and settlement pursuant to Section 1123(b)(3)(A) of the
Bankruptcy Code.
5.7. Injunction Against Commencement of Individual Actions Against HET
Group, Debtors Group, Bondholders Committee Group, City Group, State Group,
NOLDC Group, Grand Palais Group and the Bank/Underwriter Group. To implement the
Releases and the release provisions of Sections 5.1, 5.2, 5.3, 5.4, 5.5 and 5.6
of the Plan, the Confirmation Order shall constitute and provide for an
injunction by the Bankruptcy Court as of the Effective Date against (a) any
Releasing Bondholder or any Grand Palais Releasing Bondholder from (i)
commencing or continuing in any manner any action or other proceeding of any
kind against any Released Party or any property of any Released Party, (ii)
enforcing, attaching, collecting and/or recovering by any manner or means any
judgment, award, decree or order against any Released Party or any property of
any Released Party, (iii) creating, perfecting or enforcing any Encumbrance of
any kind against any Released Party or any property of any Released Party, or
(iv) asserting any right of setoff, right of subrogation or recoupment against
any Released Party or any property of any Released Party, in each case to the
extent any of the foregoing is released, waived or otherwise prohibited by the
release provisions of Section 5.2 or 5.6 of the Plan, as applicable, (b) except
as provided in the FNBC Settlement Agreement or Section 6.1(k)(ii), 6.2(l)(i) or
6.2(l)(ii) hereof, any party to any of the Releases from (i) commencing or
continuing in any manner any action or other proceeding of any kind against any
Released Party or any property of any Released Party, (ii) enforcing, attaching,
collecting and/or recovering by any manner or means any judgment, award, decree
or order against any Released Party or any property of any Released Party, (iii)
creating, perfecting or enforcing any Encumbrance of any kind against any
Released Party or any property of any Released Party, or (iv) asserting any
right of setoff, right of subrogation or recoupment against any Released Party
or any property of any Released Party, in each case to the extent any of the
foregoing is released, waived or otherwise prohibited by the applicable
Release(s), and (c) any Creditor, any holder of an Equity Interest or any other
party in interest in any of the Chapter 11 Cases from commencing or continuing
any Derivative Claim against any Released Party; provided, however, that the
foregoing injunction against the Releasing Bondholders and the Grand Palais
Releasing Bondholders shall not be effective or enforceable as to (i) any Person
in the NOLDC Group unless the applicable Persons in the NOLDC Group execute and
deliver on or before the Effective Date the NOLDC Shareholders/HET Settlement
Agreement, (ii) any Person in the Grand Palais Group unless the applicable
Persons in the Grand Palais Group execute and deliver on or before the Effective
Date the applicable GP Representative/HET Settlement Agreements, and (iii) any
claim or cause of action other than a Release Claim that is released pursuant to
Section 5.2 or 5.6 of the Plan or a Derivative Claim.
5.8. Extinguishment of Certain Causes of Action Under the Avoiding
Power Provisions. On the Effective Date, Avoidance Claims against any Released
Party, any Bondholder or any other Person other than the Non-Participating Banks
and any Underwriter which fails to execute and deliver the Bank/Underwriter
Release shall be released, discharged and extinguished, whether or not then
pending.
5.9. Assignment and Prosecution of Assigned Litigation Claims, Judgment
Reduction Protection and Distribution of Recoveries from Assigned Litigation
Claims.
(a) On the Effective Date, the Debtors and the Releasing Bondholders
(to the extent provided in the definition of Assigned Litigation Claims and
without any representations or warranties (except as to ownership)) shall be
deemed to have assigned their respective Assigned Litigation Claims
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to JCC. At the direction of (x) a majority of the Bondholders Director Nominees
in the case of any and all Assigned Bondholder Litigation Claims and (y) both a
majority of all directors of JCC and a majority of the Bondholders Director
Nominees in the case of any and all Assigned Debtor Litigation Claims, JCC, in
its sole discretion, and either in its own name or in the name, place and stead
of the Debtors and their estates and/or the Releasing Bondholders, as the case
may be, shall have the exclusive right to prosecute or otherwise enforce or,
subject to the provisions of Section 5.9(c) hereof, to waive or release any or
all Assigned Litigation Claims; provided, however, that JCC shall be prohibited
from asserting or maintaining any Assigned Litigation Claims after its delivery
of a Completion Notice. Without limiting the generality of the foregoing, JCC
shall have the authority (in its sole discretion), on behalf of the Releasing
Bondholders, to opt out of any class actions affecting any Assigned Litigation
Claims.
(b) JCC shall pay all Litigation Costs.
(c) Subject to the remaining provisions of this Section 5.9(c), JCC
shall be entitled to settle any Assigned Litigation Claim. JCC shall not settle
any Assigned Litigation Claim against any Litigation Defendant without either
(A) obtaining from the Litigation Defendant a written release in favor of each
Released Party of all Third Party Claims, or (B) to the extent written releases
are not provided in favor of any Released Party as contemplated in clause (A),
obtaining the written consent of such Released Party, as applicable, to the
settlement. Each Released Party may withhold its written consent to any such
settlement in its sole discretion, and shall not have any duties to any Person
in making its discretionary determination as to whether to provide such written
consent.
(d) In the event any Third Party Claim is brought against any Released
Party, or such Released Party is required to participate by way of discovery or
otherwise in connection with any Assigned Litigation Claim brought by JCC
against a Litigation Defendant, the Released Party shall select counsel (the
"Selected Counsel") in its sole discretion from a pre-approved list of law
firms, to be mutually agreed upon after good faith negotiations between the
Bondholders Committee and HET (in its sole discretion) on behalf of the
Proponents, to represent such Released Party, including to defend against,
negotiate, settle or otherwise deal with such Third Party Claim; provided,
however, that if two or more Released Parties (other than any Person in the HET
Group) require counsel pursuant to this sentence in connection with the same
action, the same Selected Counsel shall represent all such Released Parties
unless a conflict of interest precludes such joint representation; and provided,
further, that if two or more Persons in the HET Group require counsel pursuant
to this sentence in connection with the same action, the same Selected Counsel
selected by HET (in its sole discretion) shall represent all such Persons unless
a conflict of interest precludes such joint representation. Subject to the
provisions of Sections 5.9(e) and (f) hereof and the immediately following
sentence, JCC shall, promptly upon request by the applicable Released Party, (i)
pay for all reasonable fees, costs and expenses incurred by the Selected Counsel
on behalf of the Released Party (except to the extent any such fees, costs and
expenses are incurred in connection with a Third Party Claim which is based on
any claim asserted by any non-releasing parties against the applicable
Litigation Defendant), (ii) reimburse the Released Party for its reasonable
out-of-pocket costs and expenses (i.e., litigation costs) in defense of such
Third Party Claim (except to the extent such Third Party Claim is based on any
claim asserted by any non-releasing parties against the applicable Litigation
Defendant) or in connection with its participation by way of discovery or
otherwise with any Assigned Litigation Claim brought by JCC against a Litigation
Defendant, and (iii) indemnify the Released Party for any liability incurred in
respect of any judgment or settlement of a Third Party Claim that is not
satisfied pursuant to Section 5.9(e) hereof (except to the extent such Third
Party Claim is based on a settlement or
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judgment obtained by any non-releasing parties against the applicable Litigation
Defendant). Any and all indemnification liability of JCC to each Released Party
pursuant to clause (iii) of the immediately preceding sentence shall be limited
to the aggregate proceeds of Assigned Litigation Claims that are available to
pay such liability pursuant to Section 5.9(f). The Released Party shall
cooperate fully with JCC and Selected Counsel in connection with the prosecution
of any Assigned Litigation Claim and the defense of any Third Party Claim. In
the event a Third Party Claim is brought against a Released Party, such Released
Party shall assert all available defenses and/or claims or actions arising from
the same transactions, occurrences, or facts on which such Third Party Claim is
based, in whole or in part, held by such Released Party against such Litigation
Defendant in order to reduce, setoff, or recoup against any recovery sought by
such Litigation Defendant against such Released Party. The Released Party shall
not settle any Third Party Claim without the prior written consent of JCC (in
its sole discretion) to any such settlement. The Released Party shall promptly
notify JCC in writing of the assertion of any Third Party Claim against such
Released Party or a request to participate by way of discovery or otherwise in
connection with any Assigned Litigation Claim brought by JCC against a
Litigation Defendant.
(e) In the event JCC is entitled to any recovery by judgment or
settlement against any Litigation Defendant in connection with any Assigned
Litigation Claim, and such Litigation Defendant is entitled to any recovery by
way of judgment or settlement against any Released Party based upon any Third
Party Claim, then (i) the recovery to which JCC would otherwise be entitled
against such Litigation Defendant shall be reduced (through a reduction or
credit against any judgment or settlement obtained against such Litigation
Defendant or through some other appropriate action achieving the same result) by
an amount equal to the aggregate recovery to which such Litigation Defendant is
entitled against such Released Party based upon any Third Party Claim, and (ii)
such reduction in JCC's recovery against such Litigation Defendant shall
discharge and satisfy in full any recovery to which such Litigation Defendant is
entitled against such Released Party based upon any Third Party Claim; provided,
however, that any recovery in favor of JCC shall be reduced only to the extent
necessary to satisfy that portion of any judgment or settlement obtained against
a Released Party by a Litigation Defendant on account of a Third Party Claim,
(and not to the extent such Third Party Claim is based on a judgment or
settlement obtained by non-releasing parties against such Litigation Defendant).
To facilitate the orderly and expeditious resolution of all Assigned Litigation
Claims and related Third Party Claims and the orderly and expeditious
distribution of the proceeds of Assigned Litigation Claims in accordance with
the provisions of Section 5.9(f) hereof, the Confirmation Order shall require
each Litigation Defendant against which JCC has asserted an Assigned Litigation
Claim to assert, on or before the earlier of (x) the 170th day after the
commencement of such action by JCC, and (y) the entry of a Final Order
adjudicating all claims asserted in such action, and maintain exclusively in
such action all Third Party Claims arising in whole or in part from the same
transactions, occurrences, or facts on which any such Assigned Litigation Claim
is based in whole or in part, and each Litigation Defendant shall be forever
barred from asserting in any other forum or action any Third Party Claim not
asserted in accordance with the provisions of this sentence.
(f) Any proceeds recovered by JCC on account of any and all Assigned
Litigation Claims shall be held in escrow in an interest-bearing account shall
be applied and/or distributed only in the manner and pursuant to the terms set
forth below:
(i) First, to the payment of all accrued and unpaid Litigation
Costs and to the extent JCC has paid, without reimbursement, any
Litigation Costs, to JCC in the amount of such unreimbursed Litigation
Costs.
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(ii) Second, as a reserve for payment of future Litigation
Costs in an aggregate amount no less than $2 million or such lesser
amount, if any, as jointly determined by (i) JCC and (ii) HET in its
sole discretion; provided, however, that if (x) JCC has, by written
notice to HET (the "Completion Notice"), irrevocably determined that it
will not assert or maintain any further Assigned Litigation Claims, and
(y) as of the thirtieth (30th) day after HET's receipt of the
Completion Notice, all previously asserted Assigned Litigation Claims
and Third Party Claims have been conclusively resolved by Final Order
or settlement pursuant to Section 5.9(c) hereof, or in the case of any
Assigned Litigation Claims, have been dismissed, then on or as soon as
practicable after the thirtieth (30th) day after HET's receipt of the
Completion Notice, any remaining funds in the reserve established
pursuant to this Clause (ii) shall be distributed in accordance with
the provisions of Clauses (iii) through (ix) of this Section 5.9(f).
(iii) Third, to the extent any Released Party has incurred any
liability based on any Third Party Claim asserted by any Litigation
Defendant that has not been satisfied by a corresponding reduction in
any recovery obtained by JCC against such Litigation Defendant as
provided in Section 5.9(e) hereof, then any remaining distributable
proceeds of any Assigned Litigation Claims shall be distributed pro
rata to each such Released Party for application to such liability.
(iv) Fourth, in the event (A) there are any pending Third
Party Claims that have not been conclusively resolved by Final Order or
settlement pursuant to Section 5.9(c) hereof, or (B) any Assigned
Litigation Claim has been pending for less than six months, then any
remaining distributable proceeds of any Assigned Litigation Claims
shall be held in escrow as a reserve for satisfying any liability
incurred by any Released Party in respect of any Third Party Claim.
After all amounts in Clauses (i) through (iv) have been paid or fully reserved
for, and if (A) there are no pending Third Party Claims that have not been
conclusively resolved by Final Order or settlement pursuant to Section 5.9(c)
hereof, and (B) no Assigned Litigation Claim has been pending for less than six
months, then any remaining proceeds of any Assigned Bondholder Litigation Claims
shall be distributed in their entirety to:
(v) The Releasing Bondholders pro rata (based on the ratio of
the aggregate principal amount of Old Bonds beneficially owned by such
Releasing Bondholder to the aggregate principal amount of Old Bonds
beneficially owned by all of the Releasing Bondholders).
After all amounts in Clauses (i) through (iv) have been paid or fully reserved
for, and if (A) there are no pending Third Party Claims that have not been
conclusively resolved by Final Order or settlement pursuant to Section 5.9(c)
hereof, and (B) no Assigned Litigation Claim has been pending for less than six
months, then any remaining distributable proceeds of Assigned Debtor Litigation
Claims shall be distributed pursuant to Clauses (vi) through (ix) below;
provided, however, that if the Bankruptcy Court does not enter a Valuation Order
on or before the Effective Date, all such remaining proceeds of Assigned Debtor
Litigation Claims shall be retained in their entirety by JCC free and clear of
all Claims and subject to JCC's exclusive control.
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(vi) First, to the holders of Allowed Class A4 Claims, their
respective Pro Rata Interests in any remaining distributable proceeds
of Assigned Debtor Litigation Claims up to an amount equal to the
difference (the "Bondholder Deficiency Amount") between (A) the
aggregate amount of Allowed Class A4 Claims (which shall be deemed to
be $435 million plus accrued interest thereon, unless the Bankruptcy
Court otherwise orders) and (B) the sum of (I) $187.5 million, and (II)
the estimated value of the Class A New Common Stock to be distributed
to the holders of Allowed Class A4 Claims.
(vii) Second, to Harrah's Investor, any remaining
distributable funds up to the sum of (A) the aggregate amount of the
Allowed Claims in Class A7, plus (B) the aggregate amount of all cure
payments made as provided in Section 8.1(e) of the Plan, plus (C) the
$2,265,000 to be distributed to the applicable holders of Allowed Class
A6 Claims pursuant to Section 4.6 of the Plan.
(viii) Third, to the holders of Allowed Class A8 Claims, their
respective Pro Rata Interests in any remaining distributable proceeds
of Assigned Debtor Litigation Claims up to the aggregate amount
necessary to pay all such Allowed Claims in full (without any
post-petition interest thereon unless the Bankruptcy Court otherwise
orders); provided, however, that the Bankruptcy Court may allocate the
funds distributable under this Clause (viii) to the holders of Allowed
Class A8 Claims in any other manner which the Bankruptcy Court
determines is required under the Bankruptcy Code.
(ix) Fourth, to the holders of Allowed Claims in Classes A4
and A8, and Harrah's Investor, their respective pro rata interests in
any remaining distributable proceeds of Assigned Debtor Litigation
Claims (based on the ratio of their respective Allowed Claims (or in
the case of Harrah's Investor, the aggregate amount of Allowed Claims
in Class A7 plus the aggregate amount of cure payments made as provided
in Section 8.1(e) of the Plan, plus the $2,265,000 to be distributed to
the applicable holders of Allowed Class A6 Claims pursuant to Section
4.6 of the Plan) to the aggregate amount of the Allowed Claims in
Classes A4, A7 and A8 plus the aggregate amount of cure payments made
as provided in Section 8.1(e) of the Plan, plus the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims
pursuant to Section 4.6 of the Plan).
(g) The interests in the proceeds of Assigned Litigation Claims granted
pursuant to the Plan shall not be transferable except in accordance with the
laws of descent and distribution or by operation of law.
5.10. Approval of Other Settlement Agreements. Except to the extent the
Bankruptcy Court has entered a separate order providing for such approval, the
Confirmation Order shall constitute an order (a) approving as a compromise and
settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, the
Broadmoor Settlement Agreement, the Broadmoor Release, the Centex-Landis
Settlement Agreement, the Centex-Landis Release, the First American Settlement
Agreement, the NOLDC Shareholders/HET Settlement Agreement, the NOLDC/Grand
Palais Settlement Agreement, the GP Representative/HET Settlement Agreements,
the FNBC Settlement Agreement and all other
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settlement agreements entered into or to be entered into by any Debtor and any
other Person as contemplated by the Plan and all other agreements, instruments
or documents relating to any of the foregoing to which any Debtor is a party and
(b) authorizing the Debtors' execution and delivery of the Broadmoor Settlement
Agreement, the Broadmoor Release, the Centex-Landis Settlement Agreement, the
Centex-Landis Release, the First American Settlement Agreement, the NOLDC
Shareholders/HET Settlement Agreement, the NOLDC/Grand Palais Settlement
Agreement, the GP Representative/HET Settlement Agreements, the FNBC Settlement
Agreement and all other settlement agreements entered into or to be entered into
by any Debtor or any other Person as contemplated by the Plan and all related
agreements, instruments or documents to which any Debtor is a party.
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ARTICLE VI.
MEANS FOR IMPLEMENTATION
AND EXECUTION OF THE PLAN
A. General Implementation Matters
6.1. General Corporate Matters. Except as provided in Section 12.12
hereof, on or before the Effective Date, each New Entity shall take such action
as is necessary under the laws of the State of Delaware (in the case of JCC
Holding), the State of Louisiana (in the case of JCC, JCC Intermediary (if
formed), CP Development, FP Development and JCC Development) and any other
applicable law to effect the terms and provisions of the Plan. Among other
actions, on or before the Effective Date, each New Entity shall (i) file its
applicable Organizational Documents with the Secretary of State of Delaware (in
the case of JCC Holding) or the State of Louisiana (in the cases of the other
New Entities) in accordance with the applicable state law, and (ii) in the cases
of JCC, JCC Intermediary, CP Development, FP Development and JCC Development
enter into the applicable Operating Agreements. The JCC Holding Certificate of
Incorporation shall comply with the requirements of Section 1123(a)(6) of the
Bankruptcy Code.
6.2. Effective Date Transactions.
(a) Membership Interests. On or before the Effective Date, (i) if JCC
Intermediary is formed, JCC Intermediary shall receive 100% of the membership
interests in JCC, JCC Development, CP Development and FP Development, or (ii) if
JCC Intermediary is not formed, JCC Holding shall receive 100% of the membership
interests in JCC, JCC Development, CP Development and FP Development. Such
membership interests shall have rights with respect to distributions,
liquidation, voting and other matters as are provided for by applicable
nonbankruptcy law and in the applicable Organizational Documents and Operating
Agreements.
(b) JCC Intermediary Membership Interest(s). If JCC Intermediary is
formed, on or before the Effective Date, JCC Holding shall receive 100% of the
membership interest(s) in JCC Intermediary. Such membership interest(s) shall
have rights with respect to distributions, liquidation, voting and other matters
as are provided for by applicable nonbankruptcy law and in the JCC Intermediary
Organizational Documents and JCC Intermediary Operating Agreement.
(c) New Bond Documents. On the Effective Date, (i) JCC and the New
Indenture Trustee shall enter into the New Indenture and shall execute and
deliver all instruments, agreements, legal opinions and other operative
documents contemplated by the New Indenture, and (ii) JCC shall execute and
deliver all other New Bond Documents.
(d) Distribution to Creditors. On, or as soon as practicable after, the
Effective Date but in no event after the tenth (10th) Business Day after the
Effective Date (or in the case of holders of Allowed Class C5 Claims, on the
Initial Class C5 Distribution Date), or as otherwise provided in the Plan, JCC
and, in the case of the New Common Stock, JCC Holding will issue and deliver to
the Disbursing Agents for distribution to the applicable holders of Allowed
Claims in accordance with the Plan (i) the New Bonds, New Contingent Bonds and
Convertible Junior Subordinated Debentures, (ii) cash in the amount determined
pursuant to the provisions of Article IV, and (iii) shares of Class A and
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Class B New Common Stock in the respective amounts determined pursuant to the
provisions of Article IV.
(e) Purchase of New Common Stock by Harrah's Investor. On the Effective
Date, Harrah's Investor shall pay to JCC Holding, as an equity contribution, an
amount equal to the difference between $75 million and the principal amount of
DIP Indebtedness then outstanding, which shall be converted to equity and
contributed to JCC Holding on the Effective Date (the "Harrah's New Equity
Investment"). In consideration of, among other things, the Harrah's New Equity
Investment and the DIP Lender's consent to the conversion to equity and
contribution of the principal amount of the DIP Indebtedness outstanding on the
Effective Date, on the Effective Date JCC Holding shall sell to Harrah's
Investor 4,990,000 shares of New Common Stock, a portion of which shall be
issued by JCC Holding to certain other Persons in accordance with the provisions
of Section 6.2(f) hereof. All shares of New Common Stock purchased by Harrah's
Investor and issued by JCC Holding to Harrah's Investor pursuant to this Section
or to the Disbursing Agent for the benefit of Harrah's Investor pursuant to
Section 6.2(f) hereof shall be shares of Class B New Common Stock, and all
shares purchased by Harrah's Investor and issued by JCC Holding directly to the
Disbursing Agent for the benefit of the Releasing Bondholders or the Grand
Palais Releasing Bondholders pursuant to Section 6.2(f) shall be shares of Class
A New Common Stock. On the Effective Date, all proceeds from the Harrah's New
Equity Investment shall be contributed as an equity contribution by JCC Holding
(i) if JCC Intermediary has been formed, to JCC Intermediary, which, in turn,
shall contribute such amounts as an equity contribution to JCC, or (ii) if JCC
Intermediary has not been formed, to JCC.
(f) Transfer of New Common Stock to Certain Persons in Settlement
of Claims.
(i) NOLDC Shareholders and Grand Palais. On the later of the
Effective Date and the date on which the NOLDC Shareholders/HET
Settlement Agreement is executed and delivered by all of the parties
thereto and is approved by the bankruptcy court in the Chapter 11 case
of NOLDC either pursuant to Section 1123(b)(3)(A) of the Bankruptcy
Code as part of the NOLDC Plan or pursuant to Bankruptcy Rule 9019 by
separate Final Order, each of the nine NOLDC Shareholders shall have an
option, on the terms set forth in the NOLDC Shareholders/HET Settlement
Agreement, to purchase .33% of the shares of New Common Stock (for an
aggregate of up to 3% of the shares of New Common Stock), and FNBC
shall have the option to purchase 1.5% of the shares of New Common
Stock, which shares are to be initially distributed to Harrah's
Investor pursuant to Section 6.2(e) hereof. On the later of the
Effective Date and the date on which the GP Representative/HET
Settlement Agreements are executed and delivered by all of the parties
thereto, JCC Holding shall, in accordance with the provisions of the GP
Representative/HET Settlement Agreements, issue directly to the
Disbursing Agent on behalf of the Grand Palais Releasing Bondholders a
number of shares of Class A New Common Stock to be specified in the GP
Representative/HET Settlement Agreements (the "Grand Palais Settlement
Consideration"), which shares would otherwise be distributed to
Harrah's Investor pursuant to Section 6.2(e) hereof. In no event shall
the aggregate number of shares of New Common Stock distributed to the
NOLDC Shareholders, FNBC and Grand Palais Releasing Bondholders
pursuant to this Section exceed 800,000 shares.
(ii) Releasing Bondholders. On the Effective Date, JCC Holding
shall issue directly to the Disbursing Agent on behalf of the Releasing
Bondholders and, if
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applicable, Harrah's Investor, 1,500,000 shares of Class A New Common
Stock (or Class B New Common Stock with respect to any shares
distributed to Harrah's Investor) (such shares, collectively, the
"Release Pool"). The Release Pool shall include 200,000 shares of New
Common Stock to which Harrah's Investor would otherwise be entitled
pursuant to the second sentence of Section 6.2(e). The remaining
1,300,000 shares of New Common Stock in the Release Pool shall be
issued by JCC Holding in consideration of, among other things, (i) the
execution and delivery of the HET Loan Guarantee and the New Completion
Guarantees by HET and HOCI and the provision of the Surety Bond, (ii)
DIP Lender's consent to the conversion to equity and contribution of
the principal amount of the DIP Indebtedness outstanding on the
Effective Date as part of the Harrah's New Equity Investment, (iii) the
Harrah's New Equity Investment, (iv) the waiver by Persons in the HET
Group, the NOLDC Group and the Grand Palais Group of any right to
distributions as holders of certain Class A7 and/or Class C5 Claims,
(v) certain pre-development and development services by HET and its
Affiliates performed prior to the Effective Date, (vi) the execution
and delivery by the City and the RDC of the agreements referenced in
Section 6.2(o) hereof and the City/RDC Release, (vii) the execution and
delivery by the LGCB and/or the State of the agreements referenced in
Section 6.2(n) hereof and the State/LGCB Release and (viii) other good
and valuable consideration from the various beneficiaries of the
releases provided by the Releasing Bondholders pursuant to Section 5.2
hereof, without which this Plan could not be confirmed and consummated.
The 1,500,000 shares of New Common Stock in the Release Pool shall be
distributed in accordance with the provisions of Sections 4.4(b) and
5.2 hereof.
(g) New Completion Guarantees; Amended and Restated Construction Lien
Indemnity Obligation Agreement; Minimum Payment Guaranty. On the Effective Date,
HET, HOCI (in the case of clauses (i) through (v)) and JCC (in the case of
clauses (iii) through (v)) shall execute and deliver (i) the HET Loan Guarantee,
(ii) the New Completion Guarantees, (iii) the Amended and Restated Construction
Lien Indemnity Obligation Agreement, (iv) the Amended and Restated Completion
Loan Documents, and (v) a Minimum Payment Guaranty for the COC Fiscal Year
ending March 31, 2000. On the Effective Date, the Old Completion Guarantees
shall be terminated and canceled to the extent any of such guarantees has not
been previously terminated and canceled. On the Effective Date, a surety bond
(the "Surety Bond") shall be obtained to assure completion of the construction
of the Casino. As consideration for the HET Loan Guarantee, HET will be paid an
annual credit support fee based on the average aggregate principal amount of
outstanding indebtedness guaranteed by HET pursuant thereto as set forth in
Exhibit A hereto, and JCC Holding shall issue to HET or its designee the HET
Warrant. Pursuant to the HET/JCC Agreement, and subject to the non-renewal and
termination provisions thereof, as consideration for providing a Minimum Payment
Guaranty, HET and HOCI, among other things, will be paid an annual guarantee fee
of $6 million for the COC Fiscal Years ending March 31, 2000 and 2001 and $5
million for the COC Fiscal Years ending March 31, 2002, 2003 and 2004, all
payable quarterly; provided, however, that HET and HOCI will be paid a pro rata
fee based on an annual fee of $6 million for the COC Fiscal Year ending March
31, 2000, if it is a partial COC Fiscal Year.
(h) Bank/Underwriter Financing. On or before the Effective Date, JCC
and the applicable Persons in the Bank/Underwriter Group shall execute and
deliver the A Term Loan Documents, the B Term Loan Documents, the Working
Capital Loan Documents and the Convertible Junior Subordinated
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Debenture Documents, pursuant to which JCC will obtain the A Term Loan, the B
Term Loan and the Working Capital Credit Facility and issue the Convertible
Junior Subordinated Debentures.
(i) HET Affiliate Financing and Development Services Agreement. On or
before the Effective Date, JCC and HET (or an Affiliate of HET) shall execute
and deliver the Junior Subordinated Loan Documents pursuant to which JCC shall
obtain the Junior Subordinated Credit Facility. On or before the Effective Date,
the Harrah's Investor and JCC shall execute and deliver the Development Services
Agreement.
(j) Releases. On the Effective Date, each of the City, RDC,
Centex-Landis, Broadmoor, the Debtors, JCC and the applicable Persons in the HET
Group, the NOLDC Group and the Grand Palais Group shall execute and deliver the
City/RDC Release, the Centex-Landis Release or the Broadmoor Release, as the
case may be. On or before the Effective Date, (i) the NOLDC Shareholders, HET,
the Debtors, JCC and the other parties thereto shall execute and deliver the
NOLDC Shareholder/HET Settlement Agreement, (ii) Grand Palais, HET, the Debtors,
JCC and the other parties thereto shall execute and deliver the applicable GP
Representative/HET Settlement Agreements, and (iii) Grand Palais, NOLDC, the
NOLDC Shareholders and the other parties thereto shall execute and deliver the
NOLDC/Grand Palais Settlement Agreement. On or before the Effective Date, the
Debtors, the Underwriters, the Participating Banks, FNBC (in all capacities) and
the other parties thereto, as the case may be, shall execute and deliver the
Bank/Underwriter Release.
(k) Cancellation of Old Indenture, Old Bond Documents and Existing
Lenders' Title Insurance Policy.
(i) On the Effective Date, except as otherwise provided in
this Section or in Sections 6.9 and 6.10 of the Plan, (A) the Old
Indenture shall be terminated and canceled, (B) the other Old Bond
Documents, and all Liens granted under the Old Bond Documents, shall be
terminated and canceled, and (C) all collateral pledged or otherwise
granted as security pursuant to the Old Bond Documents shall be
released by the Old Indenture Trustee or the Old Indenture Predecessor
Collateral Agent, as applicable, and shall be repledged to secure the
obligations secured by the Minimum Payment Guarantor Lien and the A
Term Loan, B Term Loan, the Working Capital Facility, the New Bonds and
the New Contingent Bonds pursuant to the Construction Loan Documents,
the Working Capital Loan Documents and the New Bond Documents, as
applicable; provided, however, that, except for the termination of the
Indenture Trustee Charging Lien, nothing in this Plan shall terminate
or impair the rights, if any, of FNBC under the Old Bond Documents
against any Persons other than the Debtors or the New Entities. The Old
Indenture Predecessor Trustee, the Old Indenture Trustee Collateral
Agent, and any other holder of any Liens under the Old Bond Documents
and/or the Old Bank Credit Documents shall execute and deliver all
termination statements, mortgage releases and other instruments or
documents reasonably requested by JCC to effectuate or evidence the
release of any such Liens.
(ii) On the Effective Date, all of FNBC's claims or other
rights to indemnity and/or reimbursement under the Old Indenture and
the other Old Bond Documents and all Liens securing same (including the
Indenture Trustee Charging Lien) shall be canceled and extinguished
except as follows: On the Effective Date, JCC (A) shall assume on an
unsecured basis any obligation of HJC under the Old Bond
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Documents to indemnify FNBC for attorneys' fees or other costs of
defense incurred in connection with any claim asserted by any Person
against FNBC and (B) shall assume as an in rem obligation limited in
recourse solely to the FNBC Cash Collateral any other indemnification
obligations of HJC under the Old Bond Documents. As security for the
assumed indemnification obligations of JCC set forth in the immediately
preceding sentence and in Section 6.2(l)(ii) hereof, FNBC shall be
authorized to retain $100,000 plus any interest accruing thereon from
and after the Effective Date (such amount and accrued interest,
collectively, the "FNBC Cash Collateral") until the later of (x) the
first anniversary of the Effective Date or (y) the date of resolution
by final unappealable judgment of any litigation filed against FNBC
within one year of the Effective Date to which FNBC is entitled to
indemnity under the Old Bank Credit Documents and/or Old Bond
Documents, at which time the then remaining balance of the FNBC Cash
Collateral shall be released to JCC.
(iii) If, pursuant to the First American Settlement Agreement,
First American Title Insurance Company issues one or more new lender's
title insurance policies satisfactory to the Persons in the
Bank/Underwriter Group which are parties to the A Term Loan Documents,
B Term Loan Documents and/or Working Capital Loan Documents, then the
Existing Lender's Title Insurance Policy shall be deemed terminated as
of the Effective Date, and First American Title Insurance Company shall
not have any further liability thereunder.
(l) Cancellation of Old Bank Credit Documents.
(i) On the Effective Date, except as otherwise provided in
this Section, the Old Bank Credit Documents, and all Liens granted
thereunder, shall be terminated and canceled to the extent the
foregoing have not been previously terminated and canceled, and all
collateral pledged or otherwise granted as security pursuant to the Old
Bond Documents or the Old Bank Credit Documents shall be released by
the Banks and, in the case of any collateral held by any Bank or the
Old Bank Collateral Agent, promptly returned to JCC; provided, however,
that to the extent provided in Section 4.3 of the Plan, the
Administrative Agent and the Old Bank Collateral Agent may retain, for
application to any Allowed Secured Claim of any Bank or Old Bank
Collateral Agent or as security for any Disputed Secured Claims of any
Bank or Old Bank Collateral Agent, a portion of the Withheld Funds as
specified in Section 4.3 hereof; provided, further, that nothing in the
Plan shall terminate or impair the rights, if any, of FNBC under the
Old Bank Credit Documents against any Persons other than the Debtors or
the New Entities.
(ii) On the Effective Date, all of FNBC's claims or other
rights to indemnity and/or reimbursement under the Old Bank Credit
Documents and all Liens securing same shall be canceled and
extinguished except as follows: On the Effective Date, JCC (A) shall
assume on an unsecured basis any obligation of HJC under the Old Bank
Credit Documents to indemnify FNBC for any attorneys' fees or other
costs of defense incurred in connection with any claim asserted by any
Person against FNBC, and (B) shall assume as an in rem obligation
limited in recourse solely to the FNBC Cash Collateral any other
indemnification obligations of HJC under the Old Bank Credit Documents.
As set forth in Section 6.2(k)(ii) hereof, the FNBC Cash Collateral
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shall secure, among other things, the assumed indemnification
obligations of JCC set forth in this Section 6.2(l)(ii).
(m) Cancellation of Equity Interests. On the Effective Date, all Equity
Interests in each Debtor shall be canceled.
(n) Agreements with the State Group. On the Effective Date, HJC shall
execute the Amended and Renegotiated Casino Operating Contract, and shall
thereupon assign the Amended and Renegotiated Casino Operating Contract to JCC,
which assignment shall take place pursuant to and in accordance with applicable
State law and the agreement of the parties thereto. On the Effective Date, upon
the assignment of the Amended and Renegotiated Casino Operating Contract from
HJC to JCC, JCC shall undertake the obligations of HJC thereunder, and shall
execute the State/LGCB Release and all other agreements, instruments and
documents necessary or appropriate to evidence or consummate the transactions
contemplated therein.
(o) Agreements with City and RDC. Provided that the City Council shall
have enacted the ordinance(s) approving the Lease Documentation (as defined in
the City Agreement), on the Effective Date, JCC, the City and RDC shall enter
into the Amended and Restated Canal Street Casino Lease Agreement, Amended and
Restated General Development Agreement and all other agreements, instruments and
documents necessary or appropriate to evidence or consummate the transactions
contemplated therein. Unless earlier terminated in accordance with the
provisions thereof, the City Agreement shall remain in full force and effect
through the occurrence of the Effective Date.
(p) Agreements with HNOMC. On the Effective Date, JCC and HNOMC shall
enter into the Amended and Restated Management Agreement and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein.
(q) Registration and Listing of Class A New Common Stock. The JCC
Entities shall use their best efforts to cause the Class A New Common Stock to
be listed on a national securities exchange or quoted on NASDAQ upon the
Effective Date. JCC Holding shall also use its best efforts to be, on or prior
to the Effective Date, a reporting company under the Securities Exchange Act of
1934, as amended (the "34 Act"), with respect to the Class A New Common Stock.
JCC Holding shall file a registration statement under the 34 Act (the "Class A
34 Act Registration Statement") no later than promptly after the date of entry
of the Final Order approving the Disclosure Statement. If the Class A 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of such registration statement with the SEC (provided, however, that this
clause (i) is not applicable if JCC Holding did not file such registration
statement prior to the date which is five days after the date of entry of the
Final Order approving the Disclosure Statement), (ii) 60 days after the date of
entry of the Final Order approving the Disclosure Statement, (iii) 30 days after
receipt of any SEC comments on such registration statement, and (iv) the
Effective Date, then the JCC Entities shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of Class A New Common Stock (based on the
greater of (x) the market value of such Class A New Common Stock at such time
and (y) $15.00 per share) to be registered, which amount shall increase by $.05
every 45 days to a maximum of $.30 per week.
In addition, to the extent that it is reasonably determined that the
registration of public resales by any Bondholder of any Class A Common Stock
received by such Bondholder under the Plan is required by law, JCC Holding will
file a registration statement (the "Class A 33 Act Registration
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Statement") with respect to such resales promptly after the Effective Date. If
such Class A 33 Act Registration Statement is not effective within 120 days
after it is filed, then the JCC Entities shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of Class A New Common Stock (based on the
greater of (x) the market value of such Class A New Common Stock at such time
and (y) $15.00 per share) to be registered, which amount shall increase by $.05
every 45 days to a maximum of $.30 per week.
(r) Registration of Class B New Common Stock. On the Effective Date,
JCC Holding and Harrah's Investor shall enter into a Registration Rights
Agreement (the "Class B Registration Rights Agreement") containing such terms
and conditions as are customary under the circumstances, including the
following:
(i) upon the request of Harrah's Investor, which request may
not be made prior to the second anniversary of the opening of the
Casino, JCC Holding shall promptly file with the Securities and
Exchange Commission and cause to become effective as soon as reasonably
practicable thereafter a registration statement on the appropriate form
(the "Class B Registration Statement") relating to all shares of Class
B New Common Stock held by Harrah's Investor, including any shares of
Class B New Common Stock obtained by Harrah's Investor pursuant to the
exercise of the HET Warrant; and
(ii) JCC Holding shall cause such Class B Registration
Statement to be continually effective, subject to customary exceptions,
through the third anniversary of the date on which the Class B
Registration Statement first becomes effective.
(s) Registration of New Bonds. To the extent that it is reasonably
determined that the registration of public resales by any Bondholder of any New
Bonds or New Contingent Bonds received by such Bondholder under the Plan is
required by law, JCC will file a registration statement (the "New Bonds 33 Act
Registration Statement") with respect to such resales promptly after the
Effective Date. If such New Bonds 33 Act Registration Statement is not effective
within 120 days after it is filed, then the JCC Entities shall pay to the
Bondholders an amount equal to $.05 per week for each $1,000 of securities which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
(t) Plan Documents. All Plan Documents shall be in form and substance
satisfactory to the Bondholders Committee in its sole discretion and to HET (in
its sole discretion) on behalf of the Proponents, and if a party thereto, HJC
(which consent shall not be unreasonably withheld or delayed). The forms of the
respective Organizational Documents and any shareholders' agreements relating to
any New Entity shall be filed with, and approved by, the Bankruptcy Court on or
before the Effective Date. In addition, the operative Plan Documents specified
in Sections 1.2, 1.11 - 1.12, 1.23, 1.79, 1.93, 1.132 - 1.133, 1.147 - 1.148,
1.152 - 1.153, 1.155, 1.164, 1.166, 1.170, 1.173 and 1.256 hereof shall be filed
with the Bankruptcy Court on or before the Effective Date.
(u) Continued DIP Financing. Through the later of October 31, 1998 and
such later date to which the DIP Lender may consent, and subject to any
necessary additional approval by the Bankruptcy Court, HJC shall request, and
the DIP Lender shall provide to HJC debtor-in-possession financing in an
aggregate principal amount, together with all other outstanding DIP
Indebtedness, of up to $60 million (plus any additional amounts which the DIP
Lender elects to advance in its sole discretion) on terms and conditions set
forth in the Final Order (1) Authorizing Debtor-in-Possession
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To Incur Post-Petition Secured Indebtedness, (2) Granting Security Interests
And Priority Pursuant To 11 U.S.C. section 364, And (3) Modifying The
Automatic Stay entered by the Bankruptcy Court on or about August 26, 1998.
Such additional debtor-in-possession financing shall be used to fund
expenditures necessary to recommence construction of the Casino and any other
amounts necessary for the completion of the Chapter 11 Case of HJC and the
consummation of the Plan.
(v) Dismissal of Litigation. Upon the earlier of (i) the date provided
for in a release executed pursuant to this Plan, and (ii) 180 days following the
Confirmation Date, the Debtors shall voluntarily dismiss with prejudice all
litigation (including any adversary proceedings) as to, and to the extent of,
any Claims that are released pursuant to this Plan.
B. New Entities and Their Governance
6.3. General. From and after the Effective Date, the management,
control and operation of each New Entity shall become the general responsibility
of its Board of Directors or managing member, as applicable, pursuant to the
Organizational Documents and Operating Agreement, if any, applicable to such
entity.
6.4. Board of Directors and Initial Members of New Entities. Subject to
the provisions of Section 6.6 hereof, the initial Board of Directors of JCC
Holding shall consist of six members, three of whom shall be elected by the
Bondholders Committee (the "Bondholders Director Nominees") and the remaining
three of whom shall be elected by the holders of a majority of the outstanding
shares of Class B New Common Stock (the "Harrah's Director Nominees" and
together with the Bondholders Director Nominees, collectively the "Director
Nominees"), and their names shall be disclosed at or prior to the Confirmation
Hearing; provided, however, that if any Director Nominee has not been found
suitable by LGCB (or deemed exempt or waived from such suitability requirements)
on or before the Effective Date, the number of Director Nominees which each of
the Bondholders Committee and such majority holders of Class B New Common Stock
is entitled to elect shall be so reduced (until all six Director Nominees have
been found suitable by LGCB or deemed exempt or waived from such suitability
requirements) so that each of the Bondholders Committee and such majority
holders of Class B New Common Stock has the equivalent number of Director
Nominees appointed to the Board of Directors of JCC Holding. Subject to the
provisions of Section 6.6 hereof, (a) the initial member of JCC, CP Development,
FP Development and JCC Development shall be (i) JCC Intermediary, if JCC
Intermediary is formed, or (ii) JCC Holding, if JCC Intermediary is not formed,
and (b) the initial member of JCC Intermediary (if formed) shall be JCC Holding.
6.5. Officers of New Entities. The initial officers of each New Entity
shall be selected by their respective Board of Directors or initial member, as
applicable, and to the extent such officers have been selected, their names
shall be disclosed at or prior to the Confirmation Hearing. The selection of
officers of each New Entity after the Effective Date shall be as provided in the
Organizational Documents and Operating Agreement, if any, applicable to such
entity.
6.6. Suitability Determinations. Notwithstanding anything to the
contrary hereunder, any Person required by the Louisiana Economic Development
and Gaming Control Act, the rules and regulations of the LGCB (as said rules and
regulations may be amended from time to time), and the Amended and Renegotiated
Casino Operating Contract, to be found suitable by the LGCB must meet the
suitability requirements of the Louisiana Economic Development and Gaming
Control Act, the
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rules and regulations of the LGCB (as said rules and regulations may be amended
from time to time), and the Amended and Renegotiated Casino Operating Contract.
6.7. Entity Action. As of the Effective Date, each New Entity shall be
deemed to have adopted the Organizational Documents and Operating Agreement, if
any, applicable to such entity. Except as specifically provided in the Plan, the
adoption of the Organizational Documents and Operating Agreement, if any,
applicable to each New Entity, the selection of the directors and/or officers,
as the case may be, of each New Entity, the distribution of cash, the issuance
and distribution of New Bonds, New Contingent Bonds, and Class A and Class B New
Common Stock and the adoption, execution and delivery of all contracts,
instruments, indentures, modifications and other agreements relating to any of
the foregoing, and other matters provided for under the Plan involving corporate
or other action to be taken or required of the applicable New Entity or Debtor
shall be deemed to have occurred and be effective as provided herein, and shall
be authorized and approved in all respects without any requirement of further
action by the respective stockholders, initial members, officers or directors of
the New Entities and Debtors. To the extent required by law, the Board of
Directors or managing member, as the case may be, of each New Entity shall take
such action as may be necessary from time to time to approve the issuance of any
New Bonds, New Contingent Bonds or Class A and Class B New Common Stock and such
other action, if any, as may be required to meet the requirements of the Plan or
any of the New Bonds, New Contingent Bonds or Class A and Class B New Common
Stock issued pursuant thereto. Any officer of any New Entity is authorized to
execute and deliver on behalf of such New Entity or any Debtor from and after
its dissolution any Plan Document or any other certificates, instruments or
documents relating thereto.
C. Distributions
6.8. Generally. All distributions required hereunder to holders of
Allowed Claims shall be made by a Disbursing Agent pursuant to a Disbursing
Agreement, provided that no Disbursing Agreement shall be required if any JCC
Entity makes such distributions or if the Old Indenture Successor Trustee makes
such distributions pursuant to Section 6.9 hereof. The Disbursing Agent may
designate, employ or contract with other Persons to assist in or perform the
distribution of the property to be distributed. The Disbursing Agent and such
other Persons shall serve without bond.
6.9. Services of Old Indenture Trustee. The Old Indenture Successor
Trustee (or its nominee, designee or affiliate) is designated a Disbursing Agent
for purposes of effecting distributions to the Bondholders pursuant to the Plan.
Any reference in this Plan to "Disbursing Agent" in respect of distributions to
be made to the Bondholders shall be deemed to refer to the Old Indenture
Successor Trustee or its nominee, designee or affiliate. All distributions to be
made to the Bondholders under the Plan will be made to the Old Indenture
Successor Trustee in accordance with the Old Indenture, applicable law and the
Plan, and the Old Indenture Successor Trustee shall, as soon as reasonably
practicable, in accordance with the Old Indenture, applicable law and the Plan,
deliver the distributions, free and clear of any Indenture Trustee Charging
Lien, which Lien shall be canceled and extinguished on the Effective Date.
6.10. Distributions to be Made to Bondholders as of Distribution Record
Date. Only Bondholders of record as of the Distribution Record Date, or the
Release Pool Distribution Record Date as to distributions from the Release Pool,
shall be entitled to receive the distributions provided for in Article IV of the
Plan; provided, however, that any Bondholder which is a record holder but not
the beneficial owner of any Old Bond shall not be entitled to retain any
distributions made hereunder
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on account of such Old Bond, but instead shall receive and hold in trust such
distributions on behalf of such beneficial owner and shall promptly cause such
distributions to be remitted to the beneficial owner. As of the close of
business on the Distribution Record Date or the Release Pool Distribution Record
Date, as applicable, the transfer ledgers in respect of the Old Bonds shall be
closed for purposes of making the distributions required to be made to the
Bondholders pursuant to Article IV of the Plan. Except as otherwise provided
herein, the JCC Entities, the Old Indenture Successor Trustee and their
respective agents shall have no obligation to recognize any transfer of the Old
Bonds occurring after the close of business on the Distribution Record Date or
the Release Pool Distribution Record Date, as applicable, for purposes of such
distributions. Except as otherwise provided herein, the JCC Entities, the Old
Indenture Successor Trustee and their respective agents shall recognize and, for
purposes of making such distributions under the Plan, will only deal with those
Bondholders of record reflected on the transfer ledgers maintained by the
Registrar for the Old Bonds as of the close of business on the Distribution
Record Date or the Release Pool Distribution Date, as applicable; provided that
nothing contained herein shall be deemed to prohibit or otherwise restrict the
right of any such Bondholder to transfer the Old Bonds at any time. As of the
Effective Date, the Debtors and the JCC Entities shall have no further
obligations under the Old Indenture. The Old Indenture shall continue in effect
for the sole purpose of allowing the Old Indenture Successor Trustee to make
distributions on account of the Allowed Claims of the Bondholders under the
Plan, and upon completion of such distributions, the Old Indenture shall
terminate and have no further force or effect; provided, however, that except
for the termination of the Indenture Trustee Charging Lien, such termination of
the Old Indenture shall not terminate or impair the rights, if any, of FNBC
under the Old Indenture (i) against any Persons other than the Debtors or the
New Entities or (ii) against any of the Debtors and the New Entities, but solely
to the extent provided in Section 6.2(k) hereof and/or the FNBC Settlement
Agreement. Any actions taken by the Old Indenture Trustee that are not for the
purpose authorized in the Plan shall be null and void.
6.11. Cancellation and Surrender of Existing Securities and Agreements.
(a) On the Effective Date, the promissory notes, share certificates and
other instruments evidencing any Claim or Equity Interest shall be deemed
canceled without further act or action under any applicable agreement, law,
regulation, order, or rule, and the obligations of any Debtor under the
agreements, indentures and certificates of designations governing such Claims
and Equity Interests, as the case may be, shall be discharged.
(b) Each holder of a promissory note, share certificate or other
instrument evidencing a Claim or Equity Interest shall surrender such promissory
note, share certificate or instrument to JCC or, in the case of Old Notes, to
the Old Indenture Successor Trustee. No distribution of property hereunder shall
be made to or on behalf of any such holders unless and until such promissory
note or instrument is received by JCC or the Old Indenture Successor Trustee or
the unavailability of such note or instrument is established to the reasonable
satisfaction of JCC or the Old Indenture Successor Trustee. JCC or the Old
Indenture Successor Trustee may require any entity delivering an affidavit of
loss and indemnity to furnish a bond in form and substance (including, without
limitation, with respect to amount) reasonably satisfactory to JCC or the Old
Indenture Successor Trustee. Any holder that fails within one year after the
date of entry of the Confirmation Order (i) to surrender or cause to be
surrendered such promissory note or instrument, (ii) to execute and deliver an
affidavit of loss and indemnity reasonably satisfactory to JCC or the Old
Indenture Successor Trustee, and (iii) if requested, to furnish a bond
reasonably satisfactory to JCC or the Old Indenture Successor Trustee upon
request
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shall be deemed to have forfeited all rights, Claims, and interests and shall
not participate in any distribution hereunder.
6.12. Distributions of Cash. Any payment of cash made by JCC pursuant
to the Plan shall be made by check drawn on a domestic bank, or at the option of
JCC, by wire transfer from a domestic bank; except that payment to foreign
holders of Allowed Claims may be in such funds and by such means (as determined
by JCC) as are customary or necessary in a particular foreign jurisdiction.
6.13. Timing of Distributions. Any payment or distribution required to
be made under the Plan on a day other than a Business Day shall be due on the
next succeeding Business Day.
6.14. Hart-Scott-Rodino Compliance. Any shares of Class A or Class B
New Common Stock to be distributed under the Plan to any Person required to file
a Pre-merger Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, shall not be distributed until the
notification and waiting periods applicable under such Act to such Person shall
have expired or been terminated.
6.15. Minimum Distributions; No Duplicative Distributions; No Interest.
No payment of cash less than ten dollars is required to be made by JCC to any
holder of a Claim unless a request therefor is made in writing to JCC.
Notwithstanding anything to the contrary in this Plan, to the extent more than
one Debtor is liable for any Allowed Claim (including, without limitation, any
Allowed WARN Act Claim), any distribution to which a holder of such Allowed
Claim is entitled from any Debtor under the Plan shall be reduced pro tanto by
any distribution received from any other Debtor on account of such Allowed
Claim, and the portion of the Allowed Claim to which the received distribution
relates shall be deemed satisfied and discharged. Except as otherwise expressly
provided herein, no holder of any Allowed Claim shall be entitled to any
post-petition interest on such Claim.
6.16. Fractional Distributions. Except as otherwise provided in this
Section, (i) no fractional shares of New Common Stock or cash in lieu thereof
shall be distributed, and (ii) no New Contingent Bonds shall be issued in any
nominal (face) amount that contains a fraction of a dollar.
(a) Section 4.4(b)(i) Distributions of New Common Stock. The amount of
New Common Stock distributed to each recordholder shall be determined by
excluding the fractional shares of New Common Stock distributable to each such
recordholder. The fractional portion of any distribution of New Common Stock to
any recordholder of Old Bonds pursuant to Section 4.4(b)(i) hereof shall be
determined based upon such recordholder's aggregate holding of Old Bonds on the
Distribution Record Date, without regard to the number or amount of
participants, respondents or beneficial owners for which such recordholder acts
as nominee. The fractional shares which, but for this Section 6.16, would be
distributed to each recordholder of Old Bonds under Section 4.4(b)(i) hereof
shall be cumulated, and one additional share of New Common Stock shall be
distributed as part of such distribution in descending order to each of the
recordholders whose respective distributions under Section 4.4(b)(i) hereof have
the highest fractional amounts until the aggregate amount of all fractional
shares of New Common Stock distributable under Section 4.4(b)(i) hereof
(exclusive of the fractional portion of such aggregate amount) has been
distributed to the applicable recordholders of Old Bonds. For purposes of this
section, the term "recordholder" means those Persons listed as holders of the
Old Bonds on the books and records of the Registrar for the Old Bonds as of the
close of business on the Distribution Record Date.
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(b) Section 4.4(b)(v) Distributions of New Common Stock. Distributions
of New Common Stock to Releasing Bondholders pursuant to Section 4.4(b)(v)
hereof shall be made directly to or for the benefit of Releasing Bondholders
constituting beneficial owners of Old Bonds on the Release Pool Distribution
Record Date. In connection with the distribution of New Common Stock under
Section 4.4(b)(v) hereof, the fractional shares which, but for this Section
6.16, would be distributed to Releasing Bondholders under Section 4.4(b)(v)
hereof shall be cumulated, and one share of additional New Common Stock shall be
distributed as part of such distribution in descending order to each of the
Releasing Bondholders whose respective distributions under Section 4.4(b)(v)
hereof have the highest fractional amounts until the aggregate amount of
fractional shares of New Common Stock distributable under Section 4.4(b)(v)
hereof (exclusive of the fractional portion of such aggregate amount) has been
distributed to the applicable Releasing Bondholders.
(c) Section 4.4(b)(iii) Distributions of New Contingent Bonds. Unless
otherwise ordered by the Bankruptcy Court, the New Contingent Bonds issued
pursuant to Section 4.4(b)(iii) hereof shall bear a nominal (face) amount equal
to, subject to the third sentence of this Section 6.16(c), the maximum
contingent payment to which a holder of such New Contingent Bonds may be
entitled during any one-year period following the Effective Date. The Old
Indenture Successor Trustee shall distribute the New Contingent Bonds pro rata
to all recordholders of Old Bonds pursuant to Section 4.4(b)(iii) hereof based
upon such recordholder's aggregate holding of Old Bonds on the Distribution
Record Date, without regard to the number or amount of participants, respondents
or beneficial owners for which such recordholder acts as nominee. Unless
otherwise ordered by the Bankruptcy Court, the Old Indenture Successor Trustee
shall round up or down (in its sole discretion) all New Contingent Bonds issued
pursuant to Section 4.4(b)(iii) hereof, such that no New Contingent Bonds are
issued in any face amount that contains a fraction of a dollar. Recordholders of
Old Bonds shall be determined based upon such recordholder's aggregate holding
of Old Bonds on the Distribution Record Date, without regard to the number or
amount of participants, respondents or beneficial owners for which such
recordholder acts as nominee. For purposes of this section, the term
"recordholder" means those Persons listed as holders of the Old Bonds on the
books and records of the Registrar for the Old Bonds as of the close of business
on the Distribution Record Date.
6.17. Delivery of Distributions. Subject to Bankruptcy Rule 9010,
distributions to holders of Allowed Claims shall be made at the address of each
such holder as set forth on the Schedules filed by the applicable Debtor with
the Bankruptcy Court, unless superseded by the address as set forth on proofs of
claim filed by such holders or other writing notifying the applicable Debtor of
a change of address (or at the last known address of such a holder if no proof
of claim is filed or if the applicable Debtor has not been notified in writing
of a change of address). In the case of the Bondholders, distributions may be
made at the addresses of the registered Bondholders contained in the records of
the Registrar as of the Distribution Record Date or, with respect to the Release
Pool Distribution in the manner specified in the proof of ownership or other
document delivered by each Releasing Bondholder to the Balloting Agent. If any
distribution to a holder of an Allowed Claim is returned as undeliverable, no
further distributions to such holder shall be made, unless and until JCC or the
Disbursing Agent is notified of such holder's then current address, at which
time all missed distributions shall be made to such holder together with any
interest or dividends earned thereon. Amounts in respect of the undeliverable
distributions made through the Disbursing Agent shall be returned to the
Disbursing Agent making such distribution until such distributions are claimed.
All Claims for undeliverable distributions shall be made on or before the later
of the first anniversary of the Effective Date and the date ninety (90) days
after such Claim is Allowed. After such date, all unclaimed property held for
distribution to any holder of an Allowed Claim shall be revested in and
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returned to JCC except for any unclaimed New Common Stock which shall be
revested in and returned to JCC Holding, and the Claim of any holder with
respect to such property shall be discharged and forever barred.
6.18. Fees and Expenses of Disbursing Agents. Except as otherwise
ordered by the Bankruptcy Court, the amount of any reasonable fees and expenses
incurred by a Disbursing Agent, including, but not limited to, the Old Indenture
Successor Trustee, on or after the Confirmation Date, and any compensation and
expense reimbursement claims (including reasonable fees and expenses of its
attorneys and other agents) made by such Disbursing Agent shall be repaid by JCC
in accordance with the applicable Disbursing Agreement or the Old Indenture, as
the case may be, without further order of the Bankruptcy Court; provided,
however, that the Bankruptcy Court will hear and determine any disputes in
respect of such fees and expenses. In addition, the amount of any reasonable
fees and expenses incurred by FNBC as Old Bank Collateral Agent, Old Indenture
Predecessor Trustee and/or Old Indenture Predecessor Collateral Agent on or
after the Confirmation Date to consummate the transactions contemplated by the
Plan shall be paid by JCC, without further order of the Bankruptcy Court;
provided, however, that the Bankruptcy Court will determine and hear any
disputes in respect of such fees and expenses.
6.19. Time Bar to Cash Payments. Checks issued by JCC in respect of
Allowed Claims shall be null and void if not negotiated within ninety (90) days
after the date of issuance thereof. Any amounts paid to the Disbursing Agent in
respect of such a check shall be promptly returned to JCC by the Disbursing
Agent. Requests for reissuance of any check shall be made directly to JCC by the
holder of the Allowed Claim with respect to which such check originally was
issued. Any claim in respect of such a voided check shall be made on or before
the later of the first anniversary of the Effective Date and the date ninety
(90) days after such Claim is Allowed, and the failure timely to make any such
claim shall result in such claim being forever barred and discharged.
6.20. Transfer of Release Pool Distributions. Upon request of the
Debtors or the Bondholders Committee, the Bankruptcy Court may enter an order
with or without notice or hearing establishing a form (the "Release Pool
Transfer Form") and procedure whereby Releasing Bondholders who, on or after the
Release Pool Distribution Record Date but prior to the Distribution Record Date,
sold, assigned or otherwise transferred their rights under the Plan to receive
distributions in accordance with Section 4.4(b)(v) hereof to a third party (each
such third party, a "Release Pool Transferee") may designate a Release Pool
Transferee to receive directly such Releasing Bondholder's distribution of New
Common Stock from the Release Pool pursuant to Section 4.4(b)(v) hereof;
provided, however, that no person (including a Disbursing Agent, any of the
Proponents or any of the New Entities) shall have any liability to a Release
Pool Transferee in the event that a distribution of New Common Stock from the
Release Pool is for any reason whatsoever made to the Releasing Bondholder
instead of the Release Pool Transferee designated in such Release Pool Transfer
Form; provided, further, that any Release Pool Transfer Form shall contain an
acknowledgment by the Release Pool Transferee that it is the beneficial owner of
the Old Bonds to which such Release Pool Transfer Form relates as of the
Distribution Record Date.
D. Procedure for Resolving Disputed Claims
6.21. Objection Deadline. As soon as practicable, but in no event later
than ninety (90) days after the Effective Date, unless otherwise ordered by the
Bankruptcy Court, objections to Claims shall
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be filed with the Bankruptcy Court and served upon the holders of each of the
Claims to which objections are made.
6.22. Authority to Oppose Claims. On and after the Effective Date,
except for the Assigned Litigation Claims, the objecting to, disputing,
defending against, and otherwise opposing, and the making, asserting, filing,
litigation, settlement or withdrawal of all objections to, Claims shall be the
exclusive responsibility of JCC. The managing member of JCC shall have the
power, without notice to or approval of the Bankruptcy Court, in the exercise of
its business judgment to preserve, fail to preserve, settle, compromise or
litigate any claim or cause of action (except for any claims or causes of action
released or to be released pursuant to or in connection with this Plan and any
Assigned Litigation Claims) before any applicable or appropriate court, panel,
agency or tribunal (including, where appropriate, the Bankruptcy Court) that JCC
may have against any Person based on acts, omissions or events prior to the
Effective Date.
6.23. No Distributions Pending Allowance. Notwithstanding any other
provision in the Plan, no payment or distribution shall be made with respect to
any Claim to the extent it is a Disputed Claim unless and until such Claim
becomes an Allowed Claim.
6.24. Determination by Bankruptcy Court. The amount of any Disputed
Claim, and the rights of the holder of such Claim, if any, to payment in respect
thereof shall be determined by the Bankruptcy Court, unless it shall have sooner
become an Allowed Claim.
6.25. Treatment of Disputed Claims. Cash, shares of New Common Stock,
New Bonds and/or New Contingent Bonds, as applicable, shall be distributed by
JCC or JCC Holding (in the case of the New Common Stock) to a holder of a
Disputed Administrative Expense Claim or Disputed Claim when, and to the extent
that, such Disputed Administrative Expense Claim or Disputed Claim becomes an
Allowed Administrative Expense Claim or Allowed Claim pursuant to a Final Order.
Such distribution shall be made in accordance with the Plan to the holder of
such Claim based upon the amount in which such Disputed Administrative Expense
Claim or Disputed Claim becomes an Allowed Administrative Expense Claim or
Allowed Claim, as the case may be.
ARTICLE VII.
ACCEPTANCE OR REJECTION OF THE PLAN
7.1. Classes Entitled to Vote. Each holder of an Allowed Claim in a
Class of Claims against any Debtor which may be impaired under the Plan,
including any holder of an Allowed Claim in Classes A1, A2, A3(a), A3(b), A4,
A5, A6, A7, B1, B2, B3, B4, B5, C1, C2, C3, C4, C5 or C6 shall be entitled to
vote separately to accept or reject the Plan. Each holder of a Claim in a Class
of Claims which is unimpaired under the Plan shall be deemed to have accepted
the Plan pursuant to Section 1126(f) of the Bankruptcy Code. Each holder of a
Claim in a Class of Claims or an Equity Interest in a Class of Equity Interests
which are not receiving any distributions under the Plan shall be deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
7.2. Class Acceptance Requirement. An impaired Class of Claims shall
have accepted the Plan if (i) the holders (other than any holder designated
under Section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount
of the Allowed Claims actually voting in such Class have voted to
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accept the Plan and (ii) the holders (other than any holder designated under
Section 1126(e) of the Bankruptcy Code) of more than one-half in number of the
Allowed Claims actually voting in such Class have voted to accept the Plan. An
impaired Class of Equity Interests shall have accepted the Plan if the holders
(other than any holder designated under Section 1126(e) of the Bankruptcy Code)
of at least two-thirds in amount of the Allowed Equity Interests actually voting
in such Class have voted to accept the Plan. For purposes of calculating the
number of Allowed Claims in a class of Claims held by holders of Allowed Claims
in such class that have voted to accept or reject the Plan under Section 1126(c)
of the Bankruptcy Code, all Allowed Claims in such class held by one entity or
any Affiliate shall be aggregated and treated as one Allowed Claim in such
class.
7.3. Cramdown. In the event that any impaired class or classes of
Claims shall not accept the Plan, the Proponents reserve the right to (a)
request that the Bankruptcy Court confirm the Plan in accordance with Section
1129(b) of the Bankruptcy Code and/or (b) modify the Plan pursuant to the
provisions of Section 12.4 of the Plan to provide treatment sufficient to assure
that the Plan does not discriminate unfairly, and is fair and equitable, with
respect to the class or classes not accepting the Plan, and, in particular, the
treatment necessary to meet the requirements of Sections 1129(a) and (b) of the
Bankruptcy Code with respect to the rejecting classes and any other classes
affected by such modifications. The Proponents acknowledge that the Plan, in the
form of the "Third Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as Modified Through September 3, 1998" cannot be confirmed
under the cramdown requirements of Section 1129(b) of the Bankruptcy Code if
Class A4 does not accept the Plan.
ARTICLE VIII.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1. Assumption or Rejection of Executory Contracts and Unexpired
Leases.
(a) Assumption of Modified Contracts. On the Effective Date, JCC (as
HJC's successor) shall assume, or at JCC's option HJC shall assume and assign to
JCC (i) the Canal Street Casino Lease as amended and restated pursuant to, and
enter into, the Amended and Restated Canal Street Casino Lease Agreement, (ii)
the General Development Agreement as amended and restated pursuant to, and enter
into, the Amended and Restated General Development Agreement, (iii) the
Broadmoor Construction Agreement as modified in accordance with the Broadmoor
Settlement Agreement, (iv) the Management Agreement as amended and restated
pursuant to, and enter into, the Amended and Restated Management Agreement, (v)
the Architect Contract as modified, if necessary, on terms acceptable to the
parties thereto, (vi) the Completion Loan Documents as amended and restated
pursuant to, and enter into, the Amended and Restated Completion Loan Documents,
(vii) the Construction Lien Indemnity Obligation Agreement as amended and
restated pursuant to, and enter into, the Amended and Restated Construction Lien
Indemnity Obligation Agreement, (viii) the Ticket Purchase Agreement dated July
19, 1995, as amended pursuant to the Agreement to Amend and Assume Executory
Contract between HJC and The Audubon Institute and attached as Exhibit I to the
Original Plan and incorporated by reference herein, and (ix) the Centex-Landis
Construction Agreement as modified in accordance with the Centex-Landis
Settlement Agreement.
(b) Other Executory Contracts. All executory contracts and unexpired
leases that exist between any Debtor and any Person are hereby rejected, except
for any executory contract or
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unexpired lease (in certain instances, as modified) (i) which is to be assumed
by JCC, assigned to JCC, or revested in HJC pursuant to Section 8.1(a), 8.1(c),
8.1(g) or 9.1(a) of the Plan, (ii) which has been assumed or assumed and
assigned (in certain instances, as modified) pursuant to an order of the
Bankruptcy Court entered prior to the Confirmation Date, (iii) which has been
entered into by HJC after the Commencement Date in the ordinary course of
business or pursuant to an order of the Bankruptcy Court, (iv) as to which a
motion for approval of the assumption or assumption and assignment of such
contract (in certain instances, as modified) has been filed prior to and is
pending on the Confirmation Date or (v) which (in certain instances, as
modified) is set forth in a schedule (acceptable to the Bondholders Committee
(in its sole discretion) and HET (in its sole discretion) on behalf of the
Proponents) filed prior to the conclusion of the Confirmation Hearing. Subject
to the occurrence of the Effective Date, the rejection of any executory contract
or unexpired lease pursuant to this Article VIII shall be effective upon the
earliest of (i) the Confirmation Date, (ii) the date on which the applicable
Debtor or JCC notifies the non-debtor party to such contract or lease of the
effectiveness of such rejection, and (iii) the date specified as the effective
date of rejection in any order of the Bankruptcy Court.
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(c) Insurance Policies.
(i) Existing Owner's Title Insurance Policy. If the First
American Settlement Agreement becomes effective on or before the Effective Date
(including, without limitation, the issuance of new owner's and lender's title
insurance policies on or before the Effective Date), the Existing Owner's Title
Insurance Policy shall be deemed rejected and terminated as of the Effective
Date in accordance with the terms of the First American Settlement Agreement. If
the First American Settlement Agreement either has not become effective by the
date agreed to by the parties or has become ineffective for any reason, then HJC
or JCC (as HJC's successor), with the consent of HET (in its sole discretion) on
behalf of the Proponents, shall be entitled, upon ten days' prior notice, to
seek to assume the Existing Owner's Title Insurance Policy pursuant to Section
365(a) of the Bankruptcy Code. If the First American Settlement Agreement has
not become effective by the time at which all other conditions to the Effective
Date have been satisfied or waived, then HJC or JCC (as HJC's successor), with
the consent of HET (in its sole discretion) on behalf of the Proponents, shall
be entitled, upon ten days' prior notice, to seek to assume the Existing Owner's
Title Insurance Policy pursuant to Section 365(a) of the Bankruptcy Code. To the
extent HJC or JCC, as applicable, seeks to assume the Existing Owner's Title
Insurance Policy in accordance with the provisions of this Section, First
American Title Insurance Company shall be entitled to oppose such assumption on
any grounds other than on the grounds that the Confirmation Date has already
occurred.
(ii) Other Insurance Policies. The directors and officers
liability insurance policy of HJC and all other insurance policies and any
agreements, documents or instruments relating thereto, (including, without
limitation, any retrospective premium rating plans relating to such policies),
except for the Existing Owner's Title Insurance Policy and those policies (and
any agreements, documents or instruments relating thereto) set forth in a
schedule to be filed prior to the commencement of the Confirmation Hearing, are
treated as executory contracts under the Plan and shall be assumed by JCC, or
assumed by HJC and assigned to JCC, on the Effective Date pursuant to Section
365(a) of the Bankruptcy Code. Notwithstanding the foregoing, distributions
under the Plan to any holder of a Claim covered by any of the insurance policies
to be assumed pursuant to this Section shall be in accordance with the treatment
provided under Article IV of the Plan.
(d) Approval of Assumption or Rejection of Leases and Contracts. Entry
of the Confirmation Order shall constitute (i) the approval, pursuant to
Sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the assumption or
assumption and assignment of the executory contracts and unexpired leases
assumed pursuant to Sections 8.1(a), (b) and (c) hereof, (ii) the extension of
time pursuant to Section 365(d)(4) of the Bankruptcy Code within which HJC may
assume or reject the unexpired leases specified in Sections 8.1(a), (b) and (c)
hereof through the Confirmation Date, and (iii) the approval, pursuant to
Sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the rejection of the
executory contracts and unexpired leases rejected pursuant to Section 8.1
hereof.
(e) Cure of Defaults. All cure payments which may be required by
Section 365(b)(1) of the Bankruptcy Code under any executory contract or
unexpired lease which is assumed under this Plan shall be made by JCC on the
Effective Date or as soon as practicable thereafter. All requests for cure
payments by a party to such assumed contract or lease must be filed pursuant to
Section 2.1(a), unless such cure payments are agreed to by such non-debtor
party, HJC (on or before the Effective Date), JCC (after the Effective Date),
HET (in its sole discretion) on behalf of the other Proponents and the
Bondholders Committee (in its sole discretion) or are otherwise determined by
the Bankruptcy Court upon appropriate notice and hearing. In the event of a
dispute regarding the amount of any cure
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payment, the ability of JCC to provide adequate assurance of future performance
or any other matter pertaining to assumption, JCC shall make such cure payments
required by Section 365(b)(1) of the Bankruptcy Code following the later of the
Effective Date (or as soon as practicable thereafter) and the date of the entry
of a Final Order resolving such dispute. Without limiting the foregoing, in
connection with JCC's assumption of the Amended and Restated Canal Street Casino
Lease Agreement, JCC will cure any and all defaults in the annual payment of
$200,000.00 to the Audubon Park Commission pursuant to Section 4.7 of the Canal
Street Casino Lease. Notwithstanding anything to the contrary herein, any
payments to be made by JCC to the State or the LGCB shall be paid in accordance
with the provisions of the Amended and Renegotiated Casino Operating Contract
without any requirement of filing any type of request for payments.
(f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts
and Unexpired Leases Rejected Pursuant to the Plan. Claims arising out of the
rejection of an executory contract or unexpired lease pursuant to Section 8.1
must be filed with the Bankruptcy Court no later than thirty days after entry of
the Confirmation Order. Any Claims not filed within such time will be forever
barred from assertion against the Debtors, their estates, and their property.
Unless otherwise ordered by the Bankruptcy Court, all Claims arising from the
rejection of executory contracts and unexpired leases shall be treated as Claims
in Class A7, A8, B5, B6, C4, C5, C6, or C7 as applicable, under the Plan. To the
extent necessary, entry of the Confirmation Order shall amend and supersede any
previously entered order of the Bankruptcy Court regarding procedures for
payment of such Claims.
(g) Assignment of Amended and Renegotiated Casino Operating Contract.
On the Effective Date, upon the revesting of the Casino Operating Contract in
HJC, HJC shall enter into the Amended and Renegotiated Casino Operating
Contract, and shall thereupon assign the Amended and Renegotiated Casino
Operating Contract to JCC, which assignment shall take place pursuant to and in
accordance with applicable State law and the agreement of the parties thereto.
On the Effective Date, upon the assignment of the Amended and Renegotiated
Casino Operating Contract from HJC to JCC, JCC shall undertake the obligations
of HJC thereunder, and shall execute the State/LGCB Release and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein.
8.2. Retiree Benefits. Payments, if any, due to any person for the
purpose of providing or reimbursing payments for retired employees and their
spouses and dependents for medical, surgical or hospital care benefits, or
benefits in the event of sickness, accident, disability or death under any plan,
fund or program (through the purchase of insurance or otherwise) maintained or
established in whole or in part by any Debtor prior to the Commencement Date
shall be continued by JCC for the duration of the period such Debtor has
obligated itself to provide such benefits.
ARTICLE IX.
EFFECT OF CONFIRMATION OF PLAN
9.1. Revesting of Assets.
(a) On the Effective Date, all of HJC's right, title and interest in
and to the Casino Operating Contract shall revest in HJC, which Casino Operating
Contract shall then be modified by the Amended and Renegotiated Casino Operating
Contract and assigned to JCC in accordance with
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applicable State law, the agreement of the parties thereto and the provisions of
Section 8.1(g) hereof. In addition, on the Effective Date all right, title and
interest of the Debtors in the Fulton Property shall vest in FP Development, and
all right, title and interest of the Debtors in the 3CP Property shall vest in
CP Development. All other property of the estates (including, without
limitation, all present and future claims and causes of action) of the Debtors
shall vest in JCC on the Effective Date, and JCC shall be deemed to be the
successor to each of the Debtors; provided that none of the New Entities or any
of their respective property shall be subject to any of the Claims or Equity
Interests against or in any Debtor except as expressly provided in this Plan.
For Federal income tax purposes, the vesting of the property of the estates of
the Debtors shall be solely in JCC Holding and shall be deemed to have occurred
as follows: (i) a deemed exchange by the Bondholders of the Old Bonds for all of
the assets of HJC (including any Assigned Litigation Claims assigned by HJC to
JCC), and (ii) a deemed exchange by the Bondholders of such HJC assets (not
including any Assigned Litigation Claims assigned by HJC to JCC) with JCC
Holding for shares of Class A New Common Stock (which shares, along with Class A
New Common Stock received in exchange for certain releases, will represent 50.1%
of the value of JCC Holding's outstanding New Common Stock), the New Bonds and
the New Contingent Bonds (each of which shall be considered obligations of JCC
Holding). For Federal income tax purposes, JCC Holding, FP Development, CP
Development, JCC Intermediary (if formed) and JCC shall be treated as a single
taxable entity, and all assets of any such entities shall be deemed to be owned
by JCC Holding for federal income tax purposes. In the event that JCC files an
election to be treated as a corporation for federal income tax purposes, JCC
shall be treated as a separate taxable entity and the HJC assets that are deemed
to be exchanged with JCC Holding for the New Bonds and New Contingent Bonds
shall instead be deemed to be exchanged with JCC for such New Bonds and New
Contingent Bonds.
(b) From and after the Effective Date, the New Entities may operate
their business, and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code.
(c) As of the Effective Date, all property of the Debtors shall be free
and clear of all Claims and Equity Interests of holders thereof, except as
provided in the Plan.
(d) Pursuant to Section 1123(b)(3) of the Bankruptcy Code, except (i)
those rights, causes of action and claims released or to be released pursuant to
or in connection with the Plan, (ii) HJC's right, title and interest in and to
the Casino Operating Contract, which shall revest in HJC on the Effective Date,
(iii) as otherwise provided in Section 5.9 hereof with respect to Assigned
Litigation Claims, and (iv) rights relating to the 3CP Property and Fulton
Property which shall be transferred to CP Development and FP Development,
respectively, JCC, in its sole discretion, and either in its own name or in the
name, place and stead of the Debtors and their estates, shall have the exclusive
right to enforce or waive or release any and all present or future rights or
causes of action against any Person and rights of the Debtors that arose before
or after the Commencement Date, and shall be entitled to retain all proceeds
thereof. CP Development, in its sole discretion, and either in its own name or
in the name, place and stead of the Debtors and their estates, shall have the
exclusive right to enforce or waive or release any and all present or future
rights or causes of action against any Person and rights of the Debtors that
arose before or after the Commencement Date relating to the 3CP Property, and
shall be entitled to retain all proceeds thereof. FP Development, in its sole
discretion, and either in its own name or in the name, place and stead of the
Debtors and their estates, shall have the exclusive right to enforce or waive or
release any and all present or future rights or causes of action against any
Person and rights of the Debtors that arose before or after the Commencement
Date relating to the Fulton Property, and shall be entitled to retain all
proceeds thereof.
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9.2. Discharge of Debtors. The rights afforded herein and the treatment
of all Claims and Equity Interests herein shall be in exchange for and in
complete satisfaction, discharge, and release of Claims and Equity Interests of
any nature whatsoever, including any interest accrued on such Claims from and
after the Commencement Date, against any or all Debtors, or any of their assets
or properties. Except as otherwise provided herein, on the Effective Date (a)
all such Claims against, and Equity Interests in, the Debtors shall be
satisfied, discharged, and released in full and (b) all Persons shall be
precluded from asserting against any Debtor or New Entity, or its successors, or
their respective assets or properties any other or further Claims or Equity
Interests based upon any act or omission, transaction, or other activity of any
kind or nature, whether known or unknown, that occurred prior to the Effective
Date, whether or not (i) a proof of claim or interest based upon such Claim or
Equity Interest is filed or deemed filed under Section 501 of the Bankruptcy
Code, (ii) such Claim or Equity Interest is allowed under Section 502 of the
Bankruptcy Code, or (iii) the holder of such Claim or Equity Interest has
accepted the Plan. Except as provided herein, the Confirmation Order shall be a
judicial determination of discharge of all liabilities of the Debtors. As
provided in Section 524 of the Bankruptcy Code, such discharge shall void any
judgment against any Debtor or any New Entity at any time obtained to the extent
it relates to a Claim or Equity Interest discharged, and shall operate as an
injunction against the prosecution of any action against any Debtor or any New
Entity, or the property of any of them, to the extent it relates to a Claim or
Equity Interest discharged. Nothing in this Plan, including this Section 9.2,
shall be construed as or constitute a release of any Claim against HJC arising
under the Casino Operating Contract, which Casino Operating Contract shall
revest in HJC on the Effective Date, be modified by the Amended and Renegotiated
Casino Operating Contract, and be assigned to JCC in accordance with applicable
State law, the agreement of the parties, and the provisions of Section 8.1(g)
hereof.
9.3. Dissolution of Debtors. On or as of the Effective Date, each
Debtor shall be dissolved, liquidated or otherwise terminated under applicable
law.
9.4. Exculpations. Subject to the occurrence of the Effective Date,
neither the Debtors, the New Entities, the Committees, nor any of their
respective members (including, in the case of HJC, its executive committee
members and reorganization steering committee members), officers, directors,
employees, agents or professionals shall have or incur any liability to any
holder of a Claim or Equity Interest for any act, event or omission in
connection with, or arising out of, the Chapter 11 Cases (including the
activities and deliberations of the Committees), the confirmation of the Plan,
the consummation of the Plan, or the administration of the Plan or the property
to be distributed under the Plan, except for willful misconduct or gross
negligence. Such exculpation shall not extend to any prepetition act, event or
omission of any party nor shall it extend to any post-petition act of any party
other than in connection with that party's official capacity in the Chapter 11
Cases.
ARTICLE X.
CONDITIONS PRECEDENT TO
CONFIRMATION AND EFFECTIVE DATE
10.1. Condition Precedent to Confirmation of the Plan. Confirmation of
the Plan will not occur unless all of the following conditions precedent have
been satisfied or have been waived by HET (in its sole discretion) on behalf of
the Proponents subject to the provisions of Section 10.3 hereof:
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(a) The Confirmation Order and the Plan as confirmed pursuant to the
Confirmation Order shall be in form and substance satisfactory to HJC (which may
not unreasonably withhold or delay its approval) and HET (in its sole
discretion) on behalf of the other Proponents, and shall confirm the Plan as to
each of the Debtors. Without limiting the foregoing, the Confirmation Order
shall expressly provide that pursuant to Sections 364(f) and 1145 of the
Bankruptcy Code, all New Common Stock, New Bonds, New Contingent Bonds,
Convertible Junior Subordinated Debentures, the HET Warrant and all other
securities issued in connection with the Plan (including, without limitation,
all shares of New Common Stock in the Release Pool which are distributed to the
Releasing Bondholders or Harrah's Investor pursuant to Section 5.2 hereof or to
the NOLDC Shareholders and Grand Palais Releasing Bondholders pursuant to
Section 6.2(f) hereof) shall be (i) exempt from Section 5 of the Securities Act
of 1933, as amended, and any state or local law requiring registration for offer
or sale of a security or registration for offer or sale of a security or
registration or licensing of an issuer of, underwriter of, or broker or dealer
in, a security, and (ii) otherwise entitled to all of the benefits and
protections afforded by Section 1145 of the Bankruptcy Code.
10.2. Conditions Precedent to Effective Date. The Effective Date of the
Plan will not occur unless all of the following conditions precedent have been
satisfied or waived by HET (in its sole discretion) on behalf of the Proponents,
but only as permitted by Section 10.3 hereof:
(a) Each of the conditions precedent set forth in Section 10.1 hereof
shall have been satisfied or waived by HET (in its sole discretion) on behalf of
the Proponents subject to the provisions of Section 10.3 hereof.
(b) The Confirmation Order shall have been entered and shall not be
stayed.
(c) The Effective Date shall occur no later than October 31, 1998,
unless extended pursuant to Section 10.4 of the Plan.
(d) All those transactions described in Section 6.2 hereof shall have
been effected, and all of the agreements and instruments described in Section
6.2 hereof shall have been executed and delivered, and all other agreements and
instruments to be delivered under or necessary to effectuate the Plan shall have
been executed and delivered, and all executory contracts and unexpired leases to
be assumed by or assigned to JCC as provided in Section 8.1 hereof shall have
been assumed by or assigned to JCC. The Amended and Renegotiated Casino
Operating Contract, the State/LGCB Release, and all other agreements,
instruments and documents necessary to evidence or consummate the transactions
contemplated therein shall have been executed and delivered by the parties
thereto. All other cure or other payments required to be paid in connection with
the assumption of any executory contract or unexpired lease shall be acceptable
to HET (in its sole discretion) on behalf of the Proponents and the Bondholders
Committee (in its sole discretion).
(e) The New Indenture shall have been qualified under the Trust
Indenture Act.
(f) Tranches A-1 and A-3 of the A Term Loan, Tranche B-1 of the B Term
Loan and the Convertible Junior Subordinated Debentures shall be fully funded
concurrently with the occurrence of the Effective Date, and the A Term Loan
Documents, the B Term Loan Documents, the Working Capital Loan Documents and the
Convertible Junior Subordinated Debenture Documents shall have been executed and
delivered.
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(g) The Junior Subordinated Loan Documents shall have been executed and
delivered.
(h) The Bankruptcy Court shall have entered an (i) order (which may be
the Confirmation Order) estimating, for purposes of distribution, the maximum
amount of the Allowed Secured Claims of the NonParticipating Banks in an
aggregate amount no greater than the amount of the Withheld Funds which the
Administrative Agent is obligated to remit to the Old Bank Collateral Agent
pursuant to Section 4.3(a)(ii) hereof, or (ii) to the extent such Allowed
Secured Claims of the Non-Participating Banks are estimated by the Bankruptcy
Court to exceed the amount of such portion of the Withheld Funds, an order
(which may be the Confirmation Order) granting the Banks the indubitable
equivalent of that portion of the Allowed Secured Claims in excess of the amount
of such portion of the Withheld Funds, which indubitable equivalent shall be
acceptable to HET (in its sole discretion) on behalf of all Proponents.
(i) The LGCB, the State and the City and their respective agencies and
instrumentalities shall have given or issued all necessary approvals, consents,
waivers, and permits and licenses or modifications thereof (including any
modifications to any conditional use ordinances), if any, and, in the case of
LGCB, shall have (i) made all suitability determinations and given all approvals
required by the Louisiana Economic Development and Gaming Control Act, the rules
and regulations of the LGCB (as said rules and regulations are in effect at such
time as the issuance of the approvals and making of suitability determinations)
and the Amended and Renegotiated Casino Operating Contract, and (ii) consented
to the assignment of the Amended and Renegotiated Casino Operating Contract to
JCC, in each case to the extent necessary to enter into the agreements
contemplated by this Plan. The City Council shall have enacted the ordinance(s)
approving the Lease Documentation (as defined in the City Agreement).
(j) HET shall have received all approvals, consents and waivers from
its board of directors or its lenders or any other third parties which HET
determines in its sole discretion to be necessary or appropriate in order for it
or any of its Affiliates to take any of the actions, execute and deliver any of
the agreements, instruments or documents, or consummate any of the transactions
contemplated by the Plan.
(k) The NOLDC Plan shall have been confirmed by a Final Order (in form
and substance satisfactory to the NOLDC Shareholders and HET), and the NOLDC
Shareholders/HET Settlement Agreement and the GP Representative/HET Settlement
Agreements shall have been executed and delivered by all of the parties thereto,
and the NOLDC Shareholders/HET Settlement Agreement shall have been approved by
the bankruptcy court in the Chapter 11 case of NOLDC either pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code as part of the NOLDC Plan, or pursuant to
Bankruptcy Rule 9019 by separate Final Order (in form and substance satisfactory
to the NOLDC Shareholders and HET).
(l) The Bankruptcy Court shall have entered an order (which may be the
Confirmation Order) approving the A Term Loan, the B Term Loan, the Working
Capital Credit Facility, the Convertible Junior Subordinated Debentures and the
Junior Subordinated Credit Facility, respectively, which order shall be in form
and substance satisfactory to HET (in its sole discretion) on behalf of the
Proponents, and the non-Debtor parties providing such financing (in their sole
discretion).
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(m) The Bondholders Committee shall have approved in its sole
discretion all of the Plan Documents.
(n) Except as provided in the FNBC Settlement Agreement or Section
6.2(k)(ii), 6.2(l)(i) or 6.2(l)(ii) hereof, the assets of the New Entities shall
not be subject to any Liens other than the Minimum Payment Guarantor Lien and
the Liens securing the A Term Loan, the B Term Loan, the Working Capital
Facility, the New Bonds, and the New Contingent Bonds, and if applicable, the
Convertible Junior Subordinated Debentures and the Junior Subordinated Credit
Facility, or any Liens expressly permitted under the HET/JCC Agreement, the A
Term Loan Documents, the B Term Loan Documents, the Working Capital Loan
Documents, the Junior Subordinated Loan Documents, the Convertible Junior
Subordinated Debenture Documents or the New Indenture or any other Liens as may
be approved by the Bondholders Committee (in its sole discretion) and HET (in
its sole discretion) on behalf of the Proponents.
(o) The Debtors and the Bondholders Committee shall have requested a
determination by the Bankruptcy Court that the value of the Assigned Debtor
Litigation Claims (net of all estimated Litigation Costs and the estimated
aggregate amount of all Third Party Claims) is no greater than the sum of (i)
the Bondholder Deficiency Amount, plus (ii) the aggregate amount of the Allowed
Class A7 Claims, plus (iii) the aggregate amount of the cure payments made as
provided in Section 8.1(e) of the Plan, plus (iv) the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims pursuant to
Section 4.6 of the Plan, and the Bankruptcy Court shall have entered an order
(which may be the Confirmation Order) adjudicating this issue.
(p) (i) The First American Settlement Agreement shall have become
effective or (ii) JCC shall have assumed the Existing Owner's Title Insurance
Policy.
(q) The LGCB shall have found suitable (or deemed exempt or waived from
such suitability requirements) in accordance with its rules and regulations (as
said rules and regulations are in effect at the time of the suitability
determinations) at least one proposed officer of JCC Holding and at least two of
the proposed directors of JCC Holding (including at least one Bondholders
Director Nominee and one Harrah's Director Nominee).
10.3. Waiver of Conditions. HET (in its sole discretion) on behalf of
the Proponents may waive any condition or any portion of any condition set forth
in this Article X, without notice and without leave or order of the Bankruptcy
Court but only with the written consent of both the Bondholders Committee (which
consent may be withheld in its sole discretion), and HJC (which consent may not
be unreasonably withheld or delayed) and to the extent such waiver is
inconsistent with the City Agreement, the written consent of the City; provided,
however, that HET on behalf of the Proponents may not waive, (i) without the
consent of the City, any condition to the Effective Date set forth in Sections
10.2(b), (c) or (i) hereof or Section 10.2(d) hereof (but only to the extent
Section 10.2(d) requires the execution and delivery of the City/RDC Release, the
Amended and Restated Canal Street Casino Lease Agreement, and the other
agreements, instruments and documents referenced in Section 6.2(o) hereof), and
(ii) without the consent of LGCB, any condition to the Effective Date set forth
in Sections 10.2(b), (c), (i) or (q) hereof or Section 10.2(d) hereof (but only
to the extent Section 10.2(d) relates to execution and delivery of the Amended
and Renegotiated Casino Operating Contract, the State/LGCB Release and the other
agreements, instruments and documents referenced in Section 6.2(n) hereof).
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10.4. Effect of Failure of Conditions. In the event that all of the
conditions specified in Section 10.1 or 10.2 have not been satisfied or waived
in accordance with the provisions of this Article X on or before October 31,
1998 (which date may be extended by HET (in its sole discretion) on behalf of
the Proponents only with the written consent of the Bondholders Committee, the
City and the LGCB (each of whose consent may be withheld in its sole
discretion)), and upon notification submitted by HET to the Bankruptcy Court and
counsel for the Committees, (a) the Confirmation Order shall be vacated, (b) no
distributions under the Plan shall be made, (c) the Debtors and all holders of
Claims and Equity Interests shall be restored to the status quo ante as of the
day immediately preceding the date the January 29, 1998 Plan was confirmed as
though such date never occurred, and (d) all the Debtors' respective obligations
with respect to the Claims and Equity Interests shall remain unchanged and
nothing contained herein or in the Disclosure Statement shall be deemed an
admission or statement against interest or to constitute a waiver or release of
any claims by or against any Debtor or any other Person or to prejudice in any
manner the rights of any Debtor or any Person in any further proceedings
involving any Debtor or Person. Nothing in this Section 10.4 shall be deemed to
impair the right of any party to seek revocation of the Confirmation Order under
Section 1144 of the Bankruptcy Code or other applicable law (if any).
ARTICLE XI.
RETENTION OF JURISDICTION
11.1. To the maximum extent permitted by the Bankruptcy Code or other
applicable law, the Bankruptcy Court shall have jurisdiction of all matters
arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to,
and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following nonexclusive purposes:
(a) To construe and to take any action to enforce this Plan and to
issue such orders as may be necessary for the implementation, execution and
confirmation of this Plan;
(b) To determine the allowance or classification of Claims or Equity
Interests and to determine any objections thereto;
(c) To determine rights to distribution pursuant to this Plan;
(d) To hear and determine applications for the assumption or rejection
of executory contracts or unexpired leases and the allowance of Claims resulting
therefrom;
(e) To determine any and all applications, motions, adversary
proceedings, contested matters and other litigated matters that may be pending
in the Bankruptcy Court on or initiated after the Effective Date;
(f) To hear and determine any objection to Administrative Expense
Claims or to Claims or to Equity Interests;
(g) To hear and determine any causes of action brought or continued by
any Debtor or New Entity as assignee of the Debtors (with respect to the
Assigned Debtor Litigation Claims or
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otherwise) or the Releasing Bondholders (with respect to the Assigned Bondholder
Litigation Claims), to the maximum extent permitted under applicable law;
(h) To enter and implement such orders as may be appropriate in the
event the Confirmation Order is for any reason stayed, revoked, modified, or
vacated;
(i) To determine such other matters and for such other purposes as may
be provided in the Confirmation Order;
(j) To hear and determine matters concerning any Release and to enforce
the injunctions set forth in the Plan, including those set forth in Sections
2.2, 5.7, and 9.2 hereof;
(k) To consider any modifications of the Plan, to cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(l) To hear and determine all Fee Applications;
(m) To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Plan or any transactions
contemplated by the Plan;
(n) To hear and determine all questions and disputes regarding title
to, and any action to recover any of, the assets or property of any Debtor or
its estate, wherever located;
(o) To hear and determine any disputes relating to the Liens,
Encumbrances or other claims filed by any immediate or remote subcontractors,
laborers, suppliers or vendors against any of the property of any Debtor;
(p) To hear and determine matters concerning state, local, and Federal
taxes in accordance with Sections 346, 505, and 1146 of the Bankruptcy Code;
(q) To consider and act on the compromise and settlement of any claim
against any Debtor or its estate;
(r) To hear any other matter not inconsistent with the Bankruptcy Code;
(s) To enter a final decree closing the Chapter 11 Cases;
(t) To effectuate the provisions of Section 10.4 of the Plan; and
(u) To enter such orders as may be appropriate to evidence, for
recordation purposes, the transfer to and vesting in JCC, CP Development and FP
Development of the Debtors' immovable property and other instruments creating
rights in and to immovable property, and the execution and delivery of the
sublease of the second floor of the Casino by JCC and JCC Development;
provided, that nothing in the Plan or the Confirmation Order is intended or
shall be construed to alter the jurisdiction, if any, of the Bankruptcy Court to
determine issues regarding the contractual or other
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relationships between the Debtors and JCC and the State Group, nor shall the
Plan or the Confirmation Order be construed as to the State Group as consenting
to any jurisdiction by the Bankruptcy Court.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1. Exemption from Transfer Taxes. Pursuant to Section 1146(c) of the
Bankruptcy Code, the issuance, transfer or exchange of notes or equity
securities under the Plan, the creation of any mortgage, deed of trust or other
security interest, the making or assignment of any lease or sublease, or the
making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including any merger agreements
or agreements of consolidation, deeds, bills of sale or assignments executed in
connection with any of the transactions contemplated under the Plan shall not be
subject to any stamp, real estate transfer, mortgage recording or other similar
tax.
12.2. Post-Confirmation Date Fees and Expenses of Professional Persons.
After the Confirmation Date, each Debtor (before the Effective Date) and JCC
(from and after the Effective Date) shall, in the ordinary course of business
and with such approval of the Bankruptcy Court as it may require, pay the
reasonable fees and expenses incurred after the Confirmation Date by the
Professional Persons employed by such Debtor or in the case of HJC, either
Committee, to the extent such fees and expenses are related to implementation
and consummation of the Plan. No such fees and expenses shall be paid, however,
except upon receipt by such Debtor or JCC, as applicable, of a written invoice
from the Professional Person seeking fee and expense reimbursement.
12.3. Committees. The appointment of the Committees shall terminate on
the Effective Date except that the professionals of the Committees shall be
entitled to prosecute their respective applications for final allowances of
compensation and reimbursement of expenses.
12.4. Amendment or Modification of the Plan; Severability.
(a) This Plan may not be altered, amended or modified without the
written consent of HET (in its sole discretion) on behalf of the Proponents and
the written consent of the Bondholders Committee (which consent may be withheld
in its sole discretion) and the consent of HJC (which consent may not be
unreasonably withheld or delayed by HJC). Subject to the first sentence of this
Section 12.4(a), the treatment of any Claim provided for under the Plan may be
modified with the consent of the holder of such Claim or the approval of the
Bankruptcy Court.
(b) In the event that the Bankruptcy Court determines, prior to the
Confirmation Date, that any provision in the Plan is invalid, void or
unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.
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12.5. Revocation or Withdrawal of the Plan.
(a) HET (in its sole discretion) on behalf of the Proponents and with
the written consent of HJC (which consent may not be unreasonably withheld or
delayed) reserves the right to revoke or withdraw the Plan prior to the
Confirmation Date.
(b) If the Plan is revoked or withdrawn prior to the Confirmation Date
in accordance with Section 12.5(a) hereof, then the Plan shall be deemed null
and void. In such event, (i) the Debtors and all holders of Claims and Equity
Interests shall be restored to the status quo ante as of the day immediately
preceding the date the January 29, 1998 Plan was confirmed as though such date
never occurred, and (ii) all the Debtors' respective obligations with respect to
the Claims and Equity Interests shall remain unchanged and nothing contained
herein or in the Disclosure Statement shall be deemed an admission or statement
against interest or to constitute a waiver or release of any claims by or
against any Debtor or any other Person or to prejudice in any manner the rights
of any Debtor or any Person in any further proceedings involving any Debtor or
Person.
(c) Notwithstanding anything to the contrary in this Plan, (i) none of
HET, HOCI, HNOMC, HNOIC, Harrah's Investor, DIP Lender and their respective
Affiliates shall have any obligations or liabilities (including, without
limitation, any obligation to provide the Harrah's New Equity Investment) under
the Plan or any Plan Documents at any time prior to the Effective Date, and (ii)
HET and HNOIC expressly reserve their respective rights in their sole discretion
to withdraw as Proponents of this Plan or to otherwise terminate their support
for this Plan.
12.6. Existing Agreements. Unless otherwise ordered by the Bankruptcy
Court or the context clearly requires otherwise, all references in any
settlement agreement, agreement regarding the assumption or rejection of
executory contracts, plan exhibits or other writings to the confirmation,
consummation or Effective Date of the Original Plan, the January 29, 1998 Plan
and/or the April 6, 1998 Plan shall be deemed to refer to this Plan.
12.7. Notices. Any notice required or permitted to be provided under
the Plan shall be in writing and served by either (a) certified mail, return
receipt requested, postage prepaid, (b) hand delivery, or (c) reputable
overnight delivery service, freight prepaid, to be addressed as follows:
HARRAH'S ENTERTAINMENT, INC.
1023 Cherry Road
Memphis, Tennessee 38117
Attn: General Counsel
with a copy to:
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Attn: Robert J. Rosenberg, Esq.
HARRAH'S JAZZ COMPANY and
HARRAH'S JAZZ FINANCE CORP.
to its counsel:
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JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Attn: Daniel R. Murray, Esq.
and
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Attn: William H. Patrick, Esq.
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HARRAH'S NEW ORLEANS INVESTMENT COMPANY
1023 Cherry Road
Memphis, Tennessee 38117
Attn: General Counsel
with a copy to:
HELLER, DRAPER, HAYDEN & HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130-6103
Attn: Edward M. Heller, Esq.
BONDHOLDERS COMMITTEE
MERRILL LYNCH ASSET MANAGEMENT
800 Scudders Mill Road
Plainsboro, NJ 08536
Attn: Bradley J. Lucido, Esq.
HARRIS ASSOCIATES L.P.
2 North LaSalle Street, Suite 500
Chicago, IL 60602-3790
Attn: John Raitt
STANDARD MORTGAGE COMPANY
300 Plaza, One Shell Square
New Orleans, LA 70139
Attn: Edgar Bright, Jr.
with a copy to:
WEIL GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153-0001
Attn: John K. Cunningham, Esq.
MCGLINCHEY STAFFORD
643 Magazine Street
New Orleans, LA 70130
Attn: Rudy J. Cerone, Esq.
12.8. Governing Law. Except to the extent the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights and obligations arising under this
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the State of Louisiana, without giving effect to the principles of
conflicts of law thereof.
12.9. Withholding and Reporting Requirements. In connection with the
Plan and all instruments issued in connection therewith and distributions
thereon, the Debtors or the New Entities,
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as the case may be, shall comply with all withholding and reporting requirements
imposed by any Federal, state, local, or foreign taxing authority and all
distributions hereunder shall be subject to any such withholding and reporting
requirements.
12.10. Headings. Headings are used in the Plan for convenience and
reference only, and shall not constitute a part of the Plan for any other
purpose.
12.11. Exhibits. All exhibits and schedules to the Plan are
incorporated into and are a part of the Plan as if set forth in full herein.
12.12. JCC Intermediary. Notwithstanding anything to the contrary in
the Plan or any Plan Document, any provisions herein or therein relating to JCC
Intermediary shall be applicable only if JCC Intermediary is formed at the
election of HET (in its sole discretion) on behalf of the Proponents.
12.13. Filing of Additional Documents. On or before substantial
consummation of the Plan, HET (in its sole discretion) on behalf of the
Proponents and before the Effective Date, with the consent of HJC (which consent
shall not be unreasonably withheld or delayed), may file with the Bankruptcy
Court such agreements and other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the Plan, which
agreements and other documents shall be in form and substance satisfactory to
the Bondholders Committee in its sole discretion, and to the extent required
under applicable laws, rules and regulations or the Amended and Renegotiated
Casino Operating Contract, shall be approved by LGCB.
12.14. Controlling Effect of Agreements with State/LGCB. Except as
otherwise provided in this Section 12.14 of the Plan, in the event of any
conflict between any provision of this Plan and the provisions of any of the
contracts or agreements entered into between the State and/or the LGCB on the
one hand and HJC, JCC or any other Person on the other hand (including
particularly, but not limited to, the Amended and Renegotiated Casino Operating
Contract, the State/LGCB Release and the Minimum Payment Guaranty), the
provisions of any of said contracts and agreements shall control the rights of
the parties to the particular contracts and agreements. Notwithstanding any
provision of this Plan, the Confirmation Order, the Casino Operating Contract,
the Amended and Renegotiated Casino Operating Contract, the State/LGCB Release
or any other document necessary to effectuate and implement this Plan to the
contrary, nothing contained in this Plan, the Confirmation Order, the Casino
Operating Contract, the Amended and Renegotiated Casino Operating Contract, the
State/LGCB Release or any such other document shall release any obligation of
HJC arising under the Casino Operating Contract or the Amended and Renegotiated
Casino Operating Contract, and the Casino Operating Contract, as modified by and
restated in the Amended and Renegotiated Casino Operating Contract, shall remain
in force and effect.
12.15. Rights of State and LGCB. Notwithstanding any other provisions
of this Plan (including, without limitation, Sections 5.3, 5.10, 6.2(n), 8.1(d),
8.1(g) or 9.1(a)) or the Confirmation Order to the contrary, if any, nothing
contained in this Plan or the Confirmation Order is intended to require, or
shall be construed as requiring, that the LGCB and/or the State (i) enter into
the Amended and Renegotiated Casino Operating Contract, the State/LGCB Release,
or any other agreements or contracts contemplated by the Plan, or (ii) be bound
by any such contract, release or agreement without their express written consent
as evidenced by their execution thereof, whether or not the provisions of this
Section 12.15 are referred to in the other provisions of this Plan or the
Confirmation Order.
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Respectfully submitted:
------------------------------------------
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 527-0484
------------------------------------------
William H. Patrick, III (10359)
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
------------------------------------------
HELLER, DRAPER, HAYDEN & HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130-6103
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's Entertainment, Inc.
1
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INDEX OF EXHIBITS
Exhibit A Amended and Restated Completion Loan Agreement Term Sheet
Exhibit B Amended and Restated Construction Lien Indemnity Obligation
Agreement Term Sheet
Exhibit C Amended and Restated Management Agreement Term Sheet
Exhibit D Bondholder Term Sheet
Exhibit E Form of City Release Agreement
Exhibit F Term Sheet for Settlement Agreement among Debtors and
Participating Banks
Exhibit G Term Sheet for Settlement Agreement among Debtors and Underwriters
Exhibit H FNBC Settlement Agreement
Exhibit I Term Sheet for Development Services Agreement
2
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Exhibit 2.10
Exhibit A
Term Sheet
September 3, 1998
Amended and Restated
Completion Loan Agreement
<PAGE>
Exhibit A
Term Sheet
September 3, 1998
Amended and Restated
Completion Loan Agreement
This term sheet outlines the principal terms of proposed modifications of and
agreements related to that certain Completion Loan Agreement, dated as of
October 12, 1994, as amended by that certain First Amendment to Completion Loan
Agreement dated as of November 8, 1994, by and among Harrah's Jazz Company, a
Louisiana general partnership ("HJC"), Embassy Suites, Inc. (now known as
Harrah's Operating Company, Inc.), a Delaware corporation ("HOCI"), The Promus
Companies Incorporated (now known as Harrah's Entertainment, Inc.), a Delaware
corporation ("HET"), Harrah's New Orleans Investment Company, a Nevada
corporation ("HNOIC"), Grand Palais Casino, Inc., a Delaware corporation, Grand
Palais Management Company, L.L.C., a Delaware limited liability company, and New
Orleans/Louisiana Development Corporation, a Louisiana corporation (the "Prior
Completion Loan Agreement"). This term sheet is attached to and incorporated
into that certain plan of reorganization in the bankruptcy proceedings of HJC
(the "Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
modifications of and agreements related to an amendment and restatement in its
entirety of the Prior Completion Loan Agreement in connection with the Plan. As
set forth more fully in the Plan, if the Plan is not consummated within the time
period specified therein, the parties shall have no further obligations to
pursue the matters described herein.
2. HET and HOCI Approvals
(a) The amended and restated Completion Loan Agreement (the "Amended Completion
Loan Agreement") shall reflect the substitution of Jazz Casino Company, L.L.C.
(the "Company") for HJC under the Amended Completion Loan Agreement as
contemplated by the Plan.
(b) The Amended Completion Loan Agreement shall reflect HET's and HOCI's
approval of the changes in the plans and specifications for the Casino and the
completion of the Casino in phases as contemplated by the Plan.
3. Reorganized Debt Structure. The Prior Completion Loan Agreement, including
without limitation the definitions of "Bank Loan Documents," "Bank Notes," First
Mortgage Notes," "Prior Debt," and "Public Debt," shall be amended to reflect
the ownership, equity, financing and capital structure of the Company as
contemplated by the Plan.
A-1
<PAGE>
4. Completion Loans. The Amended Completion Loan Agreement shall provide that
any amounts (i) expended by HET and/or HOCI pursuant to any of the completion
guarantees to be provided by HET and HOCI as contemplated by the Plan, (ii)
expended by the completion guarantors pursuant to the Performance Bond Indemnity
Agreement (as defined in the Amended Completion Loan Agreement), or (iii)
advanced pursuant to the HET/HOC Guaranty and Loan Purchase Agreement (as
defined in the A Term Loan Documents) shall be unsecured loans ("Completion
Loans") to the Company bearing interest at a rate of eight percent (8%) per
annum and having a maturity date that is six (6) months following the maturity
of the New Bonds and the New Contingent Bonds (each as defined in the Plan)
pursuant to the Plan. Subject to meeting certain "Restricted Payment" tests
contained in the indenture for the New Bonds and in the A Term Loan, B Term Loan
and Working Capital Facility Documents (each as defined in the Plan), early
repayment of the Completion Loans will be permitted. In addition, HET and/or
HOCI as the completion guarantors will be required to make Completion Loans to
the extent that the total cost to complete the Casino (to the point at which the
Casino contains 100,000 square feet of net gaming space) exceeds the budgeted
cost to complete the Casino.
5. Use of Available Funds. The Amended Completion Loan Agreement shall provide
that at such time that there is a demand, call, notice or requirement for
performance of any completion guarantee, without any further action by the
parties to the Amended Completion Loan Agreement the completion guarantors shall
be entitled to control the disbursement and use of certain available funds of
the Company and to apply such available funds of the Company to any and all
costs required to complete the Casino, including, without limitation, drawing or
using any portion of the A Term Loan and the B Term Loan up to the total amount
available thereunder, or taking any other action which the completion guarantors
reasonably determine to be necessary or helpful to obtain the available funds of
the Company to be applied to the cost to complete the Casino. The Amended
Completion Loan Agreement shall also provide that the Company shall use all of
its available funds other than available cash flow for the construction and
development of the Casino.
6. Completion Guarantee Fee and Financing Advisory Fee. Except for the guarantee
fees payable in connection with the HET Loan Guarantee, no further fee shall be
paid by the Company to HET or HOCI in respect of (i) issuing the completion
guarantees, and (ii) HOCI's services and advice in connection with arranging the
financing for completion of the Casino. HET and HOCI shall waive their right to
receive the fee of Eleven Million Eight Hundred Thousand Dollars ($11,800,00)
provided for in Section 7(b) of the Prior Completion Loan Agreement.
7. Elimination of Consulting Fees. The Amended Completion Loan Agreement shall
reflect the elimination of all consulting fees referenced in the definition of
"Consulting Fees" and "Consulting Agreements" in the Prior Completion Loan
Agreement.
8. Entry Agreement. The Company will use its best efforts to cause the City and
the RDC to execute an entry agreement in favor of the completion guarantors in
substantially the form of the entry agreement executed in connection with the
Prior Completion Loan Agreement.
A-2
<PAGE>
Exhibit 2.10
Exhibit B
Term Sheet
September 3, 1998
Amended and Restated
Construction Lien Indemnity Obligation Agreement
<PAGE>
Exhibit B
Term Sheet
September 3, 1998
Amended and Restated
Construction Lien Indemnity Obligation Agreement
This term sheet outlines the principal terms of proposed modifications of and
agreements related to that certain Construction Lien Indemnity Obligation
Agreement, dated as of October 12, 1994, by and among Harrah's Jazz Company, a
Louisiana general partnership ("HJC"), Embassy Suites, Inc. (now known as
Harrah's Operating Company, Inc.), a Delaware corporation ("HOCI"), Harrah's New
Orleans Investment Company, a Nevada corporation ("HNOIC"), Grand Palais Casino,
Inc., a Delaware corporation ("Grand Palais"), Grand Palais Management Company,
L.L.C., a Delaware limited liability company ("Grand Palais LLC"), and New
Orleans/Louisiana Development Corporation, a Louisiana corporation (the "Prior
CLIOA"). This term sheet is attached to and incorporated into that certain plan
of reorganization in the bankruptcy case of HJC (the "Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
modifications of and agreements related to an amendment and restatement in its
entirety of the Prior CLIOA in connection with the Plan. As set forth more fully
in the Plan, if the Plan is not consummated within the period specified therein,
the parties shall have no further obligations to pursue the matters described
herein.
2. Substitution and Elimination of Parties. The amended and restated
Construction Lien Indemnity Obligation Agreement (the "Amended CLIOA") shall
reflect (i) the substitution of Jazz Casino Company, L.L.C. (the "Company") for
HJC under the Amended CLIOA as successor to HJC's right, title and interest in
the Prior CLIOA, and (ii) the elimination of HNOIC, Grand Palais, Grand Palais
LLC and NOLDC as parties thereto.
3. Construction Lien Indemnity Obligations. It is anticipated that a new
Construction Lien Indemnity Agreement will be required to be delivered to the
title company providing a lender's policy of title insurance in connection with
the new construction financing contemplated by the Plan. Said new Construction
Lien Indemnity Agreement is anticipated to indemnify the Company's title
insurers regarding mechanic's liens claiming priority to Casino financing. The
Amended CLIOA shall provide that any amounts expended by HOCI pursuant to said
new Construction Lien Indemnity Agreement shall be obligations of the Company
payable on demand by HOCI if allowed pursuant to the restricted payments
covenants in the New Indenture and Working Capital Loan Documents (as defined in
the Plan). Such obligations shall bear interest at a rate of eight percent (8%)
per annum.
B-1
<PAGE>
4. No Additional Fees. The Amended Construction Lien Indemnity Obligation
Agreement shall provide that no additional fees shall be payable to HOCI in
respect of its agreement to enter into the Amended Construction Lien Indemnity
Obligation Agreement.
B-2
<PAGE>
Exhibit 2.10
Exhibit C
Term Sheet
September 3, 1998
Amended and Restated
Casino Management Agreement
<PAGE>
Exhibit C
Term Sheet
September 3, 1998
Amended and Restated
Casino Management Agreement
This term sheet outlines the principal terms of proposed modifications
of and agreements related to that certain Amended and Restated Management
Agreement, dated as of March 15, 1994 (the "Management Agreement"), by and among
Harrah's New Orleans Management Company, a Nevada corporation ("Manager"), and
Harrah's Jazz Company, a Louisiana general partnership ("HJC"). This term sheet
is attached to and incorporated into that certain plan of reorganization in the
bankruptcy case of Owner (the "Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
modifications of and agreements related to the Management Agreement in
connection with the Plan. As set forth more fully in the Plan, if the Plan is
not consummated within the time period specified therein, the parties shall have
no further obligations to pursue the matters described herein.
2. Manager Approvals
(a) New Owner. The Management Agreement shall be amended and restated
(the "Second Amended Management Agreement") to reflect the substitution of Jazz
Casino Company, L.L.C., a Louisiana limited liability company, as "Owner" under
the Second Amended Management Agreement as successor to all of HJC's right,
title and interest in the Second Amended Management Agreement.
(b) Modified Project. The Second Amended Management Agreement,
including without limitation Section 2.03 - "Development" and the approved
Program Plans attached as Exhibit "G" to the Second Amended Management
Agreement, shall reflect Manager's approval of the build out of the casino to be
located at the Rivergate site (the "Casino") as described in the Plan.
3. Development and Construction. The Second Amended Management Agreement,
including without limitation the definitions of "Completion Deadline" and
"Opening Date," shall tie any development, construction and related deadlines to
the development, construction and opening of the Casino.
4. Reserve Fund for Capital Replacements and Capital Improvements; Periodic
Contributions to Reserve Fund. The capital reserve provisions will be revised to
conform to the proposed changes in the City Lease whereby Manager on behalf of
Owner shall deposit into the reserve
<PAGE>
fund one-twelfth of Three Million Dollars ($3,000,000) for each month of the
first twelve (12) month period following the completion of the Casino,
one-twelfth of Four Million Dollars ($4,000,000) for each month of the second
twelve (12) month period following the completion of the Casino, one-twelfth of
Five Million Dollars ($5,000,000) for each month of the third twelve (12) month
period following the Completion of Casino, and two percent (2%) of gross
revenues of the Casino for each fiscal month thereafter.
5. Management Fees
(a) Base and Incentive Fee. Section 9.01 of the Second Amended
Management Agreement will reflect that Owner agrees to pay to Manager a
management fee (the "Management Fee") having two components. The first component
(the "Base Fee") shall equal three percent (3.0%) of gross revenues of the
Casino. The second component (the "Incentive Fee") shall equal seven percent
(7.0%) of consolidated EBITDA (the EBITDA definition in the Second Amended
Management Agreement will be the same as the EBITDA definition in the Indenture)
in excess of (i) $40 million for the six month period ending on the date which
is six months after the opening of the Casino and each anniversary of such date,
and (ii) $75 million for the twelve month period ending on the date which is
twelve months after the opening of the Casino and each anniversary of such date,
less the Incentive Fee paid to the Manager for the prior six (6) months;
provided however, that the Manager shall refund to JCC all fees paid by JCC
under subsection (i) hereof if EBITDA does not exceed $75 million for the twelve
month period ending on the date which is twelve months after the opening of the
Casino and each anniversary of such date, with appropriate proration of such
threshold for any partial year following the opening date of the Casino and
preceding the termination of the Second Amended Management Agreement, as the
case may be. The Base Fee shall be payable to Manager monthly subject to the
priorities set forth in the Second Amended Management Agreement. The Incentive
Fee, if any, shall be payable to Manager at six (6) month intervals on the next
business day following actual cash payment of all accrued fixed interest and
contingent interest, if any, on the New Bonds and the New Contingent Bonds (both
of which are as defined in the Plan) pursuant to the Plan and subject to the
priorities set forth in the Second Amended Management Agreement.
(b) Defaults. No Base Fee shall be paid, and no Incentive Fee shall be
accrued or paid, during or with respect to any period in which Owner is in
default with respect to interest or principal payments under the New Bonds, the
New Contingent Bonds or the Bank Loans. In the case of any such default, any
unpaid Base Fees shall be deferred and payable at such time as any such default
is cured.
(c) Deferral of Management Fees
(i) The New Bonds provide for 6 elections by Owner to pay
semi-annual interest in kind rather than in cash for the first 3 year period of
the term of the New Bonds and for further elections by Owner to pay semi-annual
interest in kind thereafter if the Consolidated EBITDA for the prior twelve (12)
months have not exceeded $28,500,000 (collectively the "PIK Elections"). If
Owner is required by the Indenture or by the Credit Agreement to defer Base
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Fees, Manager consents and agrees to such deferrals of Base Fees. Any such
election or elections shall be by written notice from Owner to Manager
specifying the amount required to be deferred under the Indenture and/or the
Credit Agreement (the "Deferral Amount"). Such Deferral Amount shall first be
applied to any Base Management Fees then unpaid and thereafter accruing during
the applicable six (6) month period. To the extent any such Deferral Amount
shall exceed the projected amount of any unpaid and thereafter accruing Base
Management Fees for the applicable six (6) month period or if such six (6) month
deferral period shall have already elapsed, Manager shall refund to Owner the
remaining amount of such Deferral Amount not to exceed the amount of any Base
Management Fees previously paid to Manager with respect to any portion of the
applicable six (6) month period accruing prior to Owner's PIK election. To the
extent Manager is required to refund to Owner any Incentive Fee or any deferred
Base Management Fees pursuant to this Section 5, HET shall guarantee such
repayment. Owner and Manager acknowledge that the Indenture and the Credit
Agreement require that the Incentive Management Fee be deferred during any
corresponding PIK Election. Manager consents to such deferrals of Incentive Fees
as may be required by the Indenture and Credit Agreement.
(ii) Any Management Fees deferred pursuant to Section 5(c)(i)
above shall bear interest at eight percent (8.0%), which shall accrue until such
deferred Management Fees are repaid. Interest on Base Fees shall accrue (A) from
the date the Base Fees would otherwise have been payable, if the Base Fees were
not paid pursuant to Section 5(c)(i) hereof, or (B) from the date the Base Fees
were refunded by Manager, if the Base Fees were refunded pursuant to Section
5(c)(i) hereof. Following such time as Owner has achieved Consolidated EBITDA of
not less than Sixty Five Million Dollars ($65,000,000) for the preceding twelve
(12) month period, any Base Management Fees deferred pursuant to Section 5(c)(i)
hereof together with interest thereon shall be payable to Manager pro rata with
any deferred guaranty fees out of excess cash flow (remaining after application
of the excess cash flow sweep required by the Credit Agreement for the Bank
Loans) to the extent Consolidated EBITDA exceeds Sixty Five Million Dollars
($65,000,000). Following such time as Owner has achieved Consolidated EBITDA of
not less than Seventy Five Million and 00/100 Dollars ($75,000,000) for the
preceding twelve (12) month period, any incentive fees deferred pursuant to this
Article 9.01(c) together with interest thereon shall be payable to Manager,
after repayment of any deferred Base Management Fees and deferred guaranty fees
out of excess cash flow (remaining after application of the excess cash flow
sweep required by the Credit Agreement for the Bank Loans) to the extent
Consolidated EBITDA exceeds Seventy Five Million and 00/100 Dollars
($75,000,000).
6. Termination Rights and Termination Fees
(a) Change of Control of Owner. Following the Transition Date (as
defined in the Certificate of Incorporation of JCC Holding), if any entity
(including any Controlled Affiliates, as defined in the Second Amended
Management Agreement, of such entity and any entity of which such entity is a
Controlled Affiliate) which (i) controls or operates, or, as of the date the
Plan is consummated, is licensed or qualified to control or operate in any of
the states of Illinois, Indiana, Louisiana, Mississippi, Missouri, Nevada or New
Jersey, a casino or casino hotel facility, or (ii) has been, within the five (5)
years prior to the date the Plan is consummated, involved in litigation
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with Harrah's Entertainment, Inc. which Harrah's Entertainment, Inc. has
disclosed in an Annual Report on Form 10-K on or prior to the date the Plan is
consummated, or which Harrah's Entertainment, Inc. would be required to disclose
in its next Annual Report on Form 10-K following the date the Plan is
consummated, acquires twenty percent (20%) or more of the outstanding shares of
JCC Holding and the Board of Directors of JCC Holding shall not consist of a
majority of Continuing Directors, Manager shall be entitled to terminate this
Agreement upon ninety (90) days' written notice to Owner, but shall not be
entitled to receive a Termination Fee as defined in Article 17.02 of the Second
Amended Management Agreement.
(b) Sale of Casino. Following the Transition Date, if Owner shall sell,
assign or transfer any of its direct or indirect legal or beneficial interest in
the Casino, to any person other than a Qualified Purchaser (as defined in
Article 21.02(c) of the Second Amended Management Agreement) approved by Manager
pursuant to Article 21.02(d) of the Second Amended Management Agreement and
which assumes and agrees to perform all obligations of Owner under the Second
Amended Management Agreement, Manager shall be entitled to terminate the Second
Amended Management Agreement upon the closing of such sale, assignment or
transfer, but shall not be entitled to receive a Termination Fee.
(c) Failure to Open. The Second Amended Management Agreement shall
terminate without any further action of JCC or the Manager immediately upon the
termination of the Amended Ground Lease by the RDC as a result of JCC's failure
timely to complete construction of the Casino, and the Manager shall not be
entitled to any Termination Fee.
(d) Condemnation. If the Casino is condemned, the Manager shall be
entitled to seek its share of any condemnation proceeds but shall not be
entitled to any Termination Fee.
(e) Default by Owner. Upon a default by Owner or failure of Owner to
complete any obligatory reconstruction or restoration of the Casino after an
insured casualty or partial condemnation, the Manager shall be entitled to
receive a Termination Fee.
7. Assignment or Transfer of Title by Owner. The Second Amended Management
Agreement will provide no restriction on transfers of ownership interests in the
ultimate parent of Owner; provided, however, if a Non-Qualified Person shall
have a legal or beneficial interest in the equity or debt of the Company, and
such situation is not cured within forty five (45) days, or such shorter period
as may be required by any governmental entity with authority over the Casino,
Manager shall have the right to terminate the Second Amended Management
Agreement and collect the Termination Fee. The Second Amended Management
Agreement shall provide that a "Non-Qualified Person" shall be any person or
entity that
(a) controls or operates, or, as of the date the Plan is consummated,
is licensed or qualified to control or operate in any of the states of Illinois,
Indiana, Louisiana, Mississippi, Missouri, Nevada or New Jersey, a casino or
casino hotel facility; and
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(b) has been, within the five (5) years prior to the date the Plan is
consummated, involved in litigation with Harrah's Entertainment, Inc. which
Harrah's Entertainment, Inc. has disclosed in an Annual Report on Form 10-K on
or prior to the date the Plan is consummated, or which Harrah's Entertainment,
Inc. would be required to disclose in its next Annual Report on Form 10-K
following the date the Plan is consummated; and
(c) would, if associated with Owner or Owner's affiliates or with
Manager, in the reasonable judgment of Manager or any licensing authority,
impair or cause the denial, suspension or revocation of any gaming registration,
permit, license, right or entitlement or alcoholic beverage registration,
permit, license, right or entitlement held or applied for by Owner, Manager or
any affiliate of Manager or Owner.
8. Competition. The covenant not to compete will be revised to apply to Owner
and Manager and their respective affiliates.
9. Miscellaneous
(a) Casino Operational Standards. The definition of Casino Operational
Standards in the Second Amended Management Agreement shall provide that the
standard of the physical plant of the Casino may be measured against the
Harrah's Atlantic City Casino and that the operational practices of the Casino
shall be gauged against the operational practices of the Harrah's Atlantic City
Casino.
(b) Payments. A general catch-all provision will be added to the Second
Amended Management Agreement as Article 6.05 allowing Manager to make payments
in accordance with the Second Amended Management Agreement.
(c) Choice of Law. The choice of law will be Nevada, except as
mandatory provisions of the Gaming Act as to which the external laws of the
State of Louisiana shall apply without regard to principles of conflicts of law.
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<PAGE>
Exhibit 2.10
Exhibit D
September 3, 1998
Bondholder Term Sheet
Summary of Restructuring
<PAGE>
Exhibit D
September 3, 1998
Bondholder Term Sheet
Summary of Restructuring
A. New Capital
1. Capital Structure. Jazz Casino Company, L.L.C., a Louisiana limited
liability company ("JCC") will fund the completion of construction of the casino
at the Rivergate site in New Orleans (the "Casino") through (i) a $60 million
term loan (the "A Term Loan") from a syndicate of lenders led by Bankers Trust
Company ("BTCo"), (ii) a $151.5 million term loan from BTCo (the "B Term Loan"
and, together with the A Term Loan, the "Term Loans"), (iii) the sale of
approximately $27 million aggregate principal amount of Convertible Junior
Subordinated Debentures of JCC (the "Convertible Junior Subordinated
Debentures"), (iv) a credit facility pursuant to which Harrah's Entertainment
Inc. ("HET") and Harrah's Operating Company, Inc. ("HOCI"), a wholly-owned
subsidiary of HET, will make available up to $22.5 million of subordinated
indebtedness (the "Junior Subordinated Credit Facility") to fund project costs,
and (v) an equity investment by Harrah's Crescent City Investment Company (the
"Harrah's Investor") in an amount equal to the difference between $75 million
and the then outstanding principal amount of debtor-in-possession financing
provided at any time on or before the Effective Date (the "New Equity
Investment"). JCC will also have up to $25 million available for working capital
purposes under a working capital line of credit (the "Working Capital Facility"
and, together with the Term Loans, the "Bank Loans").
2. The Bank Loans. The Bank Loans will be on the terms and conditions
set forth in Exhibit F to the Third Amended Joint Plan of Reorganization, as
Modified through August 12, 1998 (the "Plan") and will have such other terms and
conditions as are acceptable to HET and the committee (the "Bondholders'
Committee") made up of holders (the "Bondholders") of the 14 1/4% First Mortgage
Notes due 2001 (the "Old Bonds") of Harrah's Jazz Company ("HJC").
B. New Entities
1. Assets and Ownership of the New Entities. The assets and business,
except certain excess real property, of HJC will be transferred to JCC on the
Effective Date as set forth in the Plan, subject to any gaming regulatory
approvals and state law and, to the extent practicable, taking into account
economic efficiencies and simplicity of execution. Title to certain excess real
property owned by HJC will vest in each of CP Development, L.L.C. ("CPD") and FP
Development, L.L.C. ("FPD"), both of which are newly formed Louisiana limited
liability companies. JCC will enter into a sublease of the second floor of the
Casino with JCC Development, L.L.C., a Louisiana limited liability company. CPD,
FPD and JCC Development will each provide mortgages (which may be released or
subordinated under terms and conditions acceptable to the Banks, the
Bondholder's Committee and the Proponents) and guarantees for the benefit of the
banks, bondholders and Minimum Payment Guarantors. JCC, JCC Development,
<PAGE>
CPD and FPD will be wholly-owned by JCC Intermediary Company, L.L.C., a
Louisiana limited liability company ("JCC Intermediary"), which, in turn, will
be wholly-owned by JCC Holding Company, a Delaware corporation ("JCC Holding"
and, together with JCC and JCC Intermediary, the "JCC Entities" and the JCC
Entities, together with CPD, FPD, and JCC Development, the "New Entities").
Pending the resolution of certain structural considerations, JCC Intermediary
may be eliminated prior to the Effective Date. In such case, JCC, JCC
Development, CPD and FPD will be wholly-owned subsidiaries of JCC Holding. HET,
the bondholders of Grand Palais, and the shareholders of NOLDC will receive a
49.9% stock ownership in JCC Holding (of which 2.0% will be allocated to
Releasing Bondholders, as provided in the Plan); provided that HET will hold not
less than 51% of such 49.9% stock ownership and will, for as long as the
corporate governance provisions described below are in effect, maintain a
majority interest thereof. Of the remaining 50.1%, 37.1% of the stock of JCC
Holding will be issued to the Bondholders, and the remaining 13.0% of the stock
of JCC Holding will be allocated to Releasing Bondholders, as provided in the
Plan of Reorganization. Accordingly, under the Plan, Releasing Bondholders will
receive an aggregate of 15% of the stock of JCC Holding.
2. Flip Events. Generally, the directors designated by the Class B
Stockholders (the "Class B Directors") will supervise the day-to-day activities
with respect to the New Entities unless one of the following events ("Flip
Events") occurs: (i) (a) JCC is in default in any material respect under the
Bonds (as hereinafter defined) or the JCC Entities are in default in any
material respect under any material agreements with the City of New Orleans (the
"City") or the State of Louisiana (the "State"), any other financing agreements,
any other material contracts or any of their organizational documents, and (b)
such default by the JCC Entities is caused by HET, HOCI or Harrah's New Orleans
Management Company (the "Casino Manager") related events, (ii) the Casino
Manager is in default in any material respect under its management agreement,
HET or HOCI is in default in any material respect under the completion
guaranties or HET or its affiliates are in default in any material respect under
any other material agreements relating to the Casino between HET or its
affiliates and the City or the State or any agency or instrumentality of the
City or State, (iii) a filing for bankruptcy by or against HET, HOCI, the Casino
Manager, any direct or indirect parent thereof, or any affiliate of HET which is
controlled by HET (an "HET Controlled Affiliate") if the filing by or against
such HET Controlled Affiliate has or is reasonably likely to have an adverse
effect on JCC, the Casino or the suitability of any person required to be found
suitable under Louisiana gaming laws, or (iv) the Louisiana Gaming Control Board
(the "LGCB") makes the determination that HET or its affiliate is unsuitable to
own an equity interest in JCC Holding.
3. Effect of Flip Event. Upon the occurrence of a Flip Event, the
directors of JCC Holding selected by the former Bondholders (the "Independent
Directors") will supervise the day-to-day activities with respect to the New
Entities; provided, however, that if all defaults causing a Flip Event to have
occurred are cured, the Class B Directors will resume supervising the day-to-day
activities of the New Entities.
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4. Significant Transactions. Notwithstanding the foregoing, approval by
the Independent Directors of JCC Holding will be required if a New Entity
proposes to engage in a Significant Transaction. "Significant Transactions"
shall include, without limitation, (i) amendments of the organizational
documents of any of the New Entities, (ii) any merger, consolidation, lease or
sale of a material portion of their respective businesses or assets, (iii) any
material transaction or transactions, except for certain excluded transactions,
during a single fiscal year with HET or an HET Controlled Affiliate (including
any decisions regarding the exercise, waiver or modification of rights or
obligations under the management agreement) which in the aggregate involve
consideration in excess of a threshold to be determined by the board of
directors of JCC Holding, (iv) declarations of dividends, (v) amendment of any
material agreements with the City or the State, (vi) bankruptcy events, (vii)
incurrence of, or assumption of liability for, indebtedness for borrowed money,
other than indebtedness incurred pursuant to the Plan, the amendment of the
terms of any indebtedness for borrowed money or any modification, consent or
waiver thereunder, (viii) any issuance of securities, (ix) any repurchase of
securities of a New Entity, (x) any change in the independent auditors, and (xi)
approval of JCC's annual operating plan and annual capital budget.
5. After a Flip Event. If a Flip Event has not occurred, or has
occurred other than as the result of a willful action or failure to act by the
Class B Directors, HET, the Casino Manager, or an HET Controlled Affiliate, as
determined by Speedy Arbitration, the approval by the Class B Directors will be
required if any of the JCC Entities proposes to engage in Significant
Transactions. Speedy Arbitration shall mean an arbitration in which a single
arbitrator is selected by HET or its subsidiary and the Bondholders Committee,
the arbitration is binding, and the arbitration occurs on an expeditious
schedule as determined by the arbitrator. An arbitrator or a mechanism for
arbitration shall be identified and set forth in the appropriate organizational
documents. If a Flip Event has occurred and the approval of the Class B
Directors is not required for a Significant Transaction, any action or inaction
by the Independent Directors during the period after the Flip Event and prior to
the cure of all defaults giving rise thereto shall not disproportionately affect
any group of holders of equity of the JCC Entities. Such approval by the
Independent Directors and the Class B Directors, respectively, will, in certain
cases, require a majority thereof and in other cases will require unanimity.
6. Independent Directors; Extraordinary Flip Event. JCC Holding's board
of directors will consist of an equal number of Independent Directors and Class
B Directors, but (i) the Independent Directors will constitute a majority of the
audit committee, (ii) one Independent Director will be added to the board if a
Flip Event (including a Flip Event resulting from Casino Manager bankruptcy
events, but excluding a Flip Event resulting from HET bankruptcy events) occurs
as the result of a willful action or failure to act by the Class B Directors,
HET, the Casino Manager, or an HET Controlled Affiliate as determined in a
Speedy Arbitration process (an "Extraordinary Flip Event"); provided, however,
that such additional Independent Director will be removed if such Extraordinary
Flip Event is cured, and (iii) unless an Extraordinary Flip Event has occurred
and has not been cured, one Class B Director will be added to the board in the
event that
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at least 20% of the outstanding shares of Class A Stock of JCC Holding are
acquired (a "Change of Control") by any entity (including any parent and any
controlled affiliates) (a "Conflicted Entity") (a) which controls or operates,
or is licensed in any of Illinois, Indiana, Louisiana, Mississippi, Missouri,
Nevada or New Jersey to control or operate, as of the Effective Date, a casino
or casino hotel facility, or (b) which has been involved in material litigation
with HET within the five years prior to the Effective Date; provided, however,
that such additional Class B Director will be removed if (x) the percentage of
Class A Stock of JCC Holding owned by such Conflicted Entity falls below 20%, or
(y) an Extraordinary Flip Event occurs after such Change of Control.
7. Classes of Directors. JCC Holding's board will be divided into three
classes of directors with staggered terms of office.
8. Class A and Class B Directors. Until the Transition Date (as
hereinafter defined) there shall be an equal number of Independent Directors and
Class B Directors in each of the three classes of directors. When an Independent
Director's term of office expires, the remaining Independent Directors will
constitute the committee authorized to nominate the candidate for such
Independent Director's position, and when a Class B Director's term of office
expires, the remaining Class B Directors will constitute the committee
authorized to nominate the candidate for such Class B Director's position.
9. JCC and JCC Intermediary Governance. JCC shall be a member managed
Louisiana limited liability company with JCC Holding as its sole member manager.
If JCC Intermediary is utilized, the sole member manager of JCC Intermediary
will be JCC Holding, and JCC Intermediary will be the sole member manager of
JCC.
10. Director Compensation. The JCC Entities will pay reasonable
directors' fees and long term compensation to all of the Independent Directors
(and, until the Transition Date, to Class B Directors who are not employees of
HET), will pay the reasonable out-of-pocket expenses of all of their directors,
and will carry adequate D&O insurance for the benefit of all of their directors.
11. Classes of Stock and Conversion of Stock. Until the Transition Date
there will be two outstanding classes of common stock of JCC Holding, one class
to be received by the Bondholders ("Class A Stock") and one class to be received
by HET, the bondholders of Grand Palais and the shareholders of NOLDC ("Class B
Stock"), which will be identical in all respects except (i) holders of Class A
Stock will elect the Independent Directors and holders of Class B Stock will
elect the Class B Directors, (ii) shares of Class B Stock will be converted into
shares of Class A Stock upon transfer to any entity except HET, the bondholders
of Grand Palais, NOLDC, any shareholder of NOLDC, and any of such entities'
affiliates (collectively, "Class B Entities"), and (iii) subject to certain
exceptions upon a Change of Control, shares of Class A Stock upon transfer to a
Class B Entity will be converted into shares of Class B Stock.
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12. Capital Budget. All changes to JCC's capital budget prior to
termination of the Completion Guarantee (as defined herein), except for changes
which reduce the scope or character of the Casino, as reflected in the approved
Plans and Specifications, or which exceed $5 million or such other threshold as
may be determined by the board of directors of JCC Holding, will be approved by
the Gaming Committee of JCC Holding's board of directors; thereafter all changes
to JCC's capital budget up to $250,000 will be approved by the Gaming Committee
and all changes to JCC's capital budget between $250,000 and $2 million will be
approved by the Capital Committee of JCC Holding's board of directors
(consisting of a single Independent Director and a single Class B Director until
the Transition Date). The capital budget itself will be approved by the board of
directors of JCC Holding.
13. Transition Date. The governance provisions set forth in Sections
B.2, 3, 4, 5, 6, 8 and 11 shall terminate upon the Transition Date. The
"Transition Date" shall occur on the earliest of (i) the third anniversary of
the date which the Casino is open to customers, (ii) the end of two consecutive
12-month periods in each of which the Contingent Payments under the New Bonds
and the New Contingent Bonds equals or exceeds $15 million, and (iii) the end of
a period consisting of 30 consecutive trading days during which the average
daily closing Minimum Market Value (as defined below) equals or exceeds $435
million (as adjusted by the board of directors in good faith to account for
purchases of common stock or issuances of additional common stock). The "Minimum
Market Value" is, for each trading day, the sum of (i) the closing bid price of
a share of Class A Stock multiplied by the aggregate number of such shares
issued and outstanding plus (ii) the closing bid price per $1,000 of New Bonds
and New Contingent Bonds, divided by $1,000, and multiplied by the aggregate
principal amount of such Bonds outstanding.
C. Fiduciary Considerations
All definitive documentation implementing the transactions contemplated
by this term sheet will provide the Bondholders' Committee with a "fiduciary
out" in the event that there is a superior offer with respect to the Old Notes.
The Bondholders' Committee has agreed not to solicit any other sponsors after
August 23, 1996 (the "No Shop Date"). After the No Shop Date, if the
Bondholders' Committee supports a plan of reorganization not supported by HET,
or withdraws its support for a plan of reorganization supported by HET, then at
such time, HET shall be entitled to receive the immediate repayment of its DIP
loans (including all amounts advanced thereunder and accrued interest on such
advances). In addition, if after the date on which HET, the City, the State and
the Bondholders' Committee are definitively committed to support a plan of
reorganization supported by HET (the "Definitive Commitment Date"), the
Bondholders' Committee supports a plan of reorganization not supported by HET,
or withdraws its support for a plan of reorganization supported by HET, then HET
shall be entitled to receive from HJC a "break-up" fee of $2.5 million at such
time and the Bondholders' Committee shall not support any plan that does not
provide that HET shall be entitled to receive from HJC $5 million at the time of
the confirmation of such other plan and $5 million at the time of consummation
of
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such other plan. The Definitive Commitment Date shall be the date on which the
HET, the Bondholders Committee, the City and the State have negotiated and
agreed to definitive documentation. All such definitive documentation shall be
in form and substance acceptable to the Bondholders Committee.
D. Old Notes
The holders of $435 million of the existing Old Bonds will receive: (i)
$187.5 million of Senior Subordinated Notes with Contingent Payments of JCC (the
"New Bonds") having the terms described on the attached term sheet; (ii) the
Senior Subordinated Contingent Notes (the "New Contingent Bonds" and, together
with the New Bonds, the "Bonds") having the terms defined in the attached term
sheet; and (iii) 37.1% of the stock of JCC Holding. The Releasing Bondholders
shall receive 13.0% of the stock of JCC Holding to be allocated among the
Releasing Bondholders, as described herein.
E. Management Agreement
1. Management Fees. The Casino Manager will receive 3.0% of gross
revenues ("Base Management Fee") and 7.0% of EBITDA above (i) $40 million for
the six-month period ending on the date which is six months after the opening of
the Casino and each anniversary of such date, and (ii) $75 million for the
twelve month period ending on the date which is twelve months after the opening
of the Casino and each anniversary of such date, less the Incentive Fee paid to
the Casino Manager for the prior six months ("Incentive Management Fee") for
managing the Casino; provided, however, that the Casino Manager shall refund to
JCC all fees paid by JCC under subsection (i) hereof if EBITDA does not exceed
$75 million for the twelve month period ending on the date which is twelve
months after the opening of the Casino and each anniversary of such date.
"EBITDA" means earnings before interest, taxes, depreciation and amortization
but after payment of the Base Management Fee. The definition of EBITDA for
purposes of the Incentive Management Fee shall be the same as for purposes of
the New Contingent Bonds.
2. Payment of Base Management Fees. The Base Management Fee will be
paid monthly; provided, however, that HET will unconditionally guarantee the
repayment to JCC of the Casino Manager's obligation to repay any Base Management
Fees required as a result of a PIK election.
3. Payment of Incentive Management Fees. The Incentive Management Fee,
if any, will be paid at six month intervals on the next business day following
actual cash payment of all accrued fixed interest and contingent interest, if
any, on the Bonds. No Base Management Fee will be paid, and no Incentive
Management Fee will be accrued or paid, during or with respect to any period in
which JCC is in default with respect to interest or principal payments under the
Bonds.
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<PAGE>
4. Deferrals. JCC shall have the option of making the first six
semi-annual interest payments of fixed interest on the New Bonds in kind rather
than in cash (the "PIK Periods"); provided however, that the first four
semi-annual interest payments must be paid in kind if Tranches A-1 and/or A-2
are outstanding at the end of the corresponding PIK Periods.
a. The Casino Manager will defer Base Management Fees for the
corresponding first, second, third or fourth PIK Period to the extent the cash
savings resulting from the PIK election is needed for cash flow deficiencies
other than repayment of Tranche A-1 and Tranche A-2, and such deferred Base
Management Fee plus applicable interest shall be due and payable to the Casino
Manager, pro rata with any deferred guaranty fees, out of excess cash flow
(remaining after application of the excess cash flow sweep required by the
Credit Agreement for the Bank Loans) at such time and to the extent that EBITDA
exceeds $65 million.
b. Any Incentive Management Fee payable to the Casino Manager will
be deferred during the corresponding third, fourth, fifth or sixth PIK Periods
if the respective third, fourth, fifth or sixth PIK election, as the case may
be, is required under the bank credit agreement or elected by JCC, and such
deferred Incentive Management Fees shall be due and payable to the Casino
Manager, after repayment of any deferred Base Management Fees and deferred
guaranty fees, out of excess cash flow (remaining after application of the
excess cash flow sweep required by the Credit Agreement for the Bank Loans) at
such times as and to the extent that EBITDA exceeds $75 million.
c. If EBITDA is less than $28.5 million for the twelve-month
period ending one month prior to each semi-annual New Bond interest payment date
beginning with the fourth year after the Effective Date, the Base Management
Fee, Bank Loan principal, and HET guaranty fees will be deferred, and the
Bondholders will receive PIK interest.
d. JCC may not pay fixed interest in kind for the fifth and sixth
PIK-periods if (i) Tranches A-1 and A-2 have been fully repaid, (ii) there are
no outstanding drawings under the Revolving Credit Facility, and (iii) the
Casino has accumulated cash availability of at least $20 million.
5. Subordination of Management Fees and Other Amounts. In the event of
any payment default on the Bonds, any other default that results in acceleration
of the Bonds, the bankruptcy of JCC, or similar matters, any accrued but unpaid
Base Management Fees or Incentive Management Fees shall be subordinated to
payments on the Bonds in the following order:
a. Fixed interest on New Bonds
b. Principal amount of New Bonds
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<PAGE>
c. Base Management Fee
d. Contingent Payments on New Bonds and New Contingent Bonds
e. Amounts advanced under Completion Guarantee
f. Incentive Management Fee
6. Year 2000 Compliance. The Management Agreement shall contain a
covenant from the Manager regarding Year 2000 compliance.
F. DIP Financing
1. Prior DIP Loans. HET, or an affiliate of HET, has advanced over $40
million to recommence construction of the Casino and fund other amounts
necessary for the continuation of the HJC bankruptcy case and the consummation
of the Plan in the form of debtor-in-possession ("DIP") loans.
2. Additional DIP Loans. The JCC Entities will need additional funds
prior to the Effective Date. HET, or an affiliate of HET, will provide
additional DIP financing in accordance with the HET DIP order entered by the
Bankruptcy Court.
3. Repayment. Principal on the DIP loans will be (i) repaid in full in
cash upon consummation of a plan of reorganization, or (ii) converted into the
New Equity Investment (and count toward the $75 million equity investment) on a
dollar-for-dollar basis. The Plan shall provide that any HET claim for interest
on the DIP Loans will be canceled upon consummation of the Plan. The DIP loans
shall be entitled to an administrative priority superior to the priority of all
other creditors in the bankruptcy.
4. Collateral. The DIP loans will receive a primary lien on all assets
of the estate, including the Fulton Street and 3CP properties, all gaming
equipment (subject to regulatory approval), all cash collateral (including the
cash collateral held by FNBC), and all causes of action of the Estate other than
insider claims.
5. Funding. Prior to the termination of the DIP loans (by acceleration,
maturity or otherwise), HET will fund sufficient amounts under the DIP loans to
provide for the payment of administrative expense claims for fees, expenses and
costs of professionals properly retained pursuant to court order, including
professionals properly retained pursuant to court order by the debtors and the
creditors' committees (including, without limitation, the Bondholders Committee)
to the extent such fees, expenses and costs (i) are payable pursuant to a court
order entered prior to such termination of the DIP loans, or (ii) are provided
for in a budget approved by HET.
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<PAGE>
6. Termination. Upon the termination of the DIP loans (by acceleration,
maturity or otherwise), HET's administrative priority claims and the liens and
security interests granted under the terms of the DIP loans shall not have
priority over, and shall be subordinate and junior to, up to an aggregate of
$1.5 million of unpaid administrative expense claims for fees, expenses and
costs of professionals properly retained pursuant to court order, including
professionals properly retained pursuant to court order by the debtors and the
creditors' committees (including, without limitation, the Bondholders'
Committee).
7. Call. The DIP loans may be called at par plus accrued interest at
any time at the discretion of the Bondholders' Committee.
G. Agreements with City and State
1. City and LGCB. Any plan of reorganization of HJC is subject to the
approval of the LGCB (LEDGC's successor) and the City of New Orleans, except to
the extent such approvals are not required under bankruptcy law.
2. Agreement. As part of its Plan, HJC will seek certain agreements
with the City and State. Any agreements between HJC, on the one hand, and the
City or the State, on the other hand, shall be satisfactory to the Bondholders'
Committee, in its sole discretion.
H. Completion Guarantee
1. Form of Completion Guarantee. For the benefit of holders of the
Bonds, HET and HOCI will unconditionally and irrevocably guarantee completion of
the project (the "Completion Guarantee") as discussed below, in accordance with
the City and State requirements, subject only to force majeure, on terms
substantially identical to the terms to be contained in HET's and HOCI's
completion guarantee in favor of the State and the City delivered in connection
with the Plan (including without limitation, collateral, guaranties or third
party financial support). In any event, such Completion Guarantee shall not
contain any financing condition precedent to the obligations of HET or HOCI.
2. Reimbursement of Completion Guarantors. The obligation of JCC to
repay amounts advanced by HET or HOCI will be an unsecured obligation and junior
in right of payment to the full $187.5 million of New Bonds and all amounts
owing under the New Contingent Bonds. Such repayment obligation will have an
interest rate of 8% per annum and will mature 6 months after the maturity of the
Bonds; provided, however, that early repayment of such obligation will be
permitted if allowed pursuant to a "Restricted Payments" test to be negotiated
in the indenture for the Bonds.
3. Scope of Completion Guarantee. The Completion Guarantee will cover
the costs of construction, equipment, opening (pre-opening expenses and
cashloads) and opening working capital for the Casino and Second Floor Shell
Construction in accordance with an
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agreed-upon list of Casino and Second Floor Shell Construction completion
specifications. The Casino shall consist of approximately 100,000 square feet of
net gaming space on the first floor, a 250-seat buffet, two parking garages, an
underground tunnel between the Casino and the parking garages and approximately
15,000 square feet of multi-function, special event, food service and
meeting-room space on the first floor. The Second Floor Shell Construction shall
consist of an additional approximately 130,000 square feet of multipurpose
non-gaming entertainment space on the second floor of the premises constructed
to the point at which the shell of the structure is complete and the space is
suitable for tenant build-out.
4. Working Capital. The $25 million Working Capital Facility will be
obtained from a third party lender prior to the initial opening of the Casino.
Upon the completion of the Casino and Second Floor Shell Construction, pursuant
to the Completion Guarantee, JCC will have available for working capital (i) $5
million of cash, (ii) $10 million on deposit with the Casino Manager or
available under the Working Capital Facility to fund the Minimum Balance (as
defined in the Management Agreement), and (iii) the Working Capital Facility
Maximum Amount of availability for drawdown(s) under the Working Capital
Facility. The "Working Capital Facility Maximum Amount" equals $25 million
reduced by the amount of funds, if any, not to exceed $2 million, available
under any letter of credit sub-facility under the Working Capital Facility for
purposes other than those relating to project costs of the Casino and further
reduced by a drawing of up to $10 million to be deposited in the Bank Account
(as defined in the Management Agreement) to fund the Minimum Balance. The
Completion Guarantee shall not cover any operating losses following the
completion of the Casino and Second Floor Shell Construction.
I. HET/JCC Agreement
1. Guaranty. HET and HOCI will enter into an agreement with JCC (the
"HET/JCC Agreement") to provide a Minimum Payment Guaranty (as defined in the
Amended and Renegotiated Casino Operating Contract) to the LGCB, subject to
renewal or early termination in accordance with the terms of the HET/JCC
Agreement.
2. Interest. Any drawing on a Minimum Payment Guaranty shall bear
interest at the bank facility Tranche A-3 interest rate. For purposes of
computing the minimum annual payments to the LGCB, the Casino's fiscal year (a
"COC Fiscal Year") will begin on April 1.
3. Renewal. HET and HOCI will commit to provide a Minimum Payment
Guaranty through the COC Fiscal Year ending March 31, 2004; provided that the
obligation of HET and HOCI to provide a Minimum Payment Guaranty pursuant to the
HET/JCC Agreement shall not renew for any of the COC Fiscal Years beginning
April 1, 2000, 2001, 2002 or 2003 if prior to such date: (i) there has been a
JCC bankruptcy or a cessation of Casino operations; (ii) there are any unpaid
guaranty fees (other than fees deferred as agreed in the HET/JCC Agreement);
(iii) there are any unreimbursed drawings on a Minimum Payment Guaranty; (iv) in
D-10
<PAGE>
the case of a renewal for the COC Fiscal Year beginning April 1, 2000, the
project has failed to generate positive EBITDA for the period of operations
commencing with the opening of the Casino and ending January 31, 2000, however,
there shall be no EBITDA test for the period of operations ending January 31,
2000 if such period of operations commenced after August 1, 1999; (v) in the
case of the COC Fiscal Years beginning April 1, 2001, 2002, and 2003, the
project has failed to generate EBITDA as of the twelve month period ending
November 30 of the prior calendar year in an amount equal to $15 million as of
the twelve month period ending November 30, 2000, $20 million as of the twelve
month period ending November 30, 2001, and $25 million as of the twelve month
period ending November 30, 2002; (vi) HET, HOCI or the Casino Manager or any of
HET's affiliates has been determined to be unsuitable or the Casino Manager has
been removed as manager of the Casino; (vii) JCC has breached any of the
covenants under Section 5 of the HET/JCC Agreement; (viii) an Excusable
Temporary Cessation of Operations has occurred and is continuing and has not
been cured in accordance with the terms of the Amended and Renegotiated Casino
Operating Contract; or (ix) the Amended and Renegotiated Casino Operating
Contract has been terminated. The HET/JCC Agreement will contain provisions to
adjust the EBITDA test for purposes of clauses (iv) and (v) above if an
Excusable Temporary Cessation of Operations has occurred during a COC fiscal
year.
4. Definition of EBITDA. For purposes of clauses I.3(d) and I.3.(e)
above, EBITDA shall mean operating income determined according to generally
accepted accounting principles plus depreciation and amortization determined
according to generally accepted accounting principles, but will not include any
extraordinary non-cash items, such as the write down of assets, or pre-opening
expenses.
5. Notice. HET and HOCI shall give JCC at least ninety days prior
written notice of any such non-renewal pursuant to clauses I.3(b) and I.3(e)
above. HET shall give JCC at least thirty days prior written notice of any such
non-renewal pursuant to clause I.3.(d). above.
6. Cancellation. Commencing with the COC Fiscal Year ending March 31,
2002, upon ninety days written notice prior to the first day of the respective
COC Fiscal Year, JCC may cancel the commitment of HET and HOCI to provide a
Minimum Payment Guaranty for the COC Fiscal Year ending March 31, 2002 upon
payment of a termination fee of $1 million in cash and may cancel the commitment
of HET and HOCI to provide a Minimum Payment Guaranty for the COC Fiscal Years
ending March 31, 2003 and 2004 without any fee.
7. Restriction on Termination. Notwithstanding any other provision
hereof, JCC will be restricted from terminating the HET/JCC Agreement unless JCC
has obtained a replacement guaranty or letter of credit which meets the
requirements of the Amended and Renegotiated Casino Operating Contract and which
does not result in increased cost to JCC (after giving effect to payment to HET
and HOCI of the termination fee, if applicable), the Amended and Renegotiated
Casino Operating Contract no longer requires JCC to provide a guaranty or
D-11
<PAGE>
letter of credit, or the LGCB waives the requirement that JCC provide a guaranty
or letter of credit.
8. Fee. HET and HOCI, collectively, will receive a $6 million per annum
guaranty fee for the COC Fiscal Years ending March 31, 2000 and 2001 and $5
million per annum guaranty fee for the COC Fiscal Years ending March 31, 2002,
2003 and 2004, all payable quarterly. HET and HOCI, collectively, shall receive
a pro rata fee based on an annual fee of $6 million for any partial COC Fiscal
Year ending March 31, 2000. HET and HOCI shall not receive a guaranty fee for
any COC Fiscal Year in which a Minimum Payment Guaranty is not provided and
shall repay to JCC any guaranty fee previously advanced to it in respect of such
COC Fiscal Year.
9. Deferred Fees. If EBITDA is less than $28.5 million for the twelve
month period ending one month prior to each semi-annual New Bond interest
payment date beginning with the fourth year after the Effective Date, the
guaranty fee to HET and HOCI will be deferred. JCC's obligation under the
HET/JCC Agreement to pay the per annum guaranty fee and any termination fee to
HET and HOCI and to reimburse HET and HOCI for any drawings (including interest
thereon) by the LGCB under a Minimum Payment Guaranty will be secured by a first
lien on the Casino assets.
10. Collateral. The collateral to be provided to HET and HOCI pursuant
to the HET/JCC Agreement is to be substantially as provided to the LGCB pursuant
to the State Mortgage and Security Documents attached as exhibits to the LGCB
April, 1997 approved Casino Operating Contract. The mortgages, security
agreement and other lien documents will be joint documents in favor of the
Minimum Payment Guarantors and the Banks and Bondholders, subject to the terms
of a Minimum Payment Guarantor/Bank-Bondholder intercreditor agreement setting
forth their lien priorities and other intercreditor matters and all in a form
satisfactory to the Bondholders Committee. The HET/JCC Agreement shall contain
covenants in favor of HET and HOCI (i) requiring JCC to maintain insurance, pay
taxes and impositions, repair and maintain the Casino, and keep the lease in
effect, as was the case for the LGCB pursuant to Section 20.4(d) of the Amended
and Renegotiated Casino Operating Contract, and (ii) on terms and conditions to
be agreed by the parties, restricting indebtedness and liens by JCC and
restricting dividends, merger and asset disposition. The parties agree that any
successor guarantor may be secured by the first lien position of HET and HOCI,
subject to payment of any unpaid fees or obligations to HET and HOCI in respect
of the HET/JCC Agreement.
J. Resale Issues
1. Listing. The JCC Entities will use their best efforts to cause the
Class A Common Stock of JCC Holding to be listed on a national securities
exchange or quoted on NASDAQ upon the Effective Date.
D-12
<PAGE>
2. Reporting Company. JCC Holding shall use its best efforts to be, on
or prior to the Effective Date, a reporting company under the Securities
Exchange Act of 1934, as amended (the "34 Act"), with respect to its Class A
Common Stock. JCC Holding will file a registration statement under the 34 Act
(the "34 Act Registration Statement") no later than promptly after the court
approves the disclosure statement for the Plan.
3. Effect of 34 Act Registration Not Becoming Effective. If the 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of such registration statement with the SEC (provided, however, that this
clause (i) is not applicable if JCC Holding did not file such registration
statement prior to the date which is five days after final court approval of the
disclosure statement for the plan of reorganization), (ii) 60 days after final
court approval of the disclosure statement for the plan of reorganization, (iii)
30 days after receipt of any SEC comments on such registration statement, and
(iv) the Effective Date, then JCC Holding shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of securities to be registered, which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
4. Registration For Public Resales. In addition, to the extent that it
is reasonably determined that the registration of public resales by any
Bondholder of any securities received by such Bondholder under the Plan is
required by law, the JCC Entities will file a registration statement (the "33
Act Registration Statement") with respect to such resales promptly after the
Effective Date. If such 33 Act Registration Statement is not effective within
120 days after it is filed, then JCC shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of securities to be registered, which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
5. Registration Rights Agreement. On the Effective Date, JCC Holding
and HET, or an affiliate of HET, will enter into a registration rights agreement
containing such terms and conditions as are customary under the circumstances,
including the following: (i) upon the request of HET, or an affiliate of HET,
which request may not be made prior to the second anniversary of the opening of
the Casino, JCC Holding must promptly file with the SEC and cause to become
effective as soon as reasonably practicable thereafter a registration statement
on the appropriate form relating to all shares of Class B Common Stock of JCC
Holding held by HET, or an affiliate of HET, including any shares obtained
pursuant to the exercise of warrants by HET, or an affiliate of HET; and (ii)
JCC Holding will cause such registration statement to be continually effective,
subject to customary exceptions, through the third anniversary of the day on
which such registration statement first becomes effective.
K. HET Warrant
In lieu of the warrants set forth in the Third Amended Plan of
Reorganization as confirmed on April 6, 1998 of HJC, HET, or its affiliate, will
receive warrants to purchase an
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amount of common stock of JCC Holding so that upon the exercise of all such
warrants HET, or its affiliate, will own 50.0% of JCC Holding's common stock.
The number of shares issuable upon exercise of such warrants shall be adjusted
as necessary to reflect, among other things, the transfer of shares upon
exercise of the options held by FNBC and the NOLDC shareholders to purchase from
HET or one of its subsidiaries up to 4.5% of the common stock of JCC Holding and
the issuance of shares if all or a portion of the Convertible Junior
Subordinated Debentures are converted. The warrants will be exercisable at any
time, in whole or in part, after the Transition Date until the sixth anniversary
of the opening of the Casino in whole or in part at a price of $15.00 per share.
If at any time after the Transition Date the market trading price of the JCC
Holding common stock has exceeded $20.00 for sixty consecutive days, the board
of directors of JCC Holding may elect to give written notice to HET of an
election to redeem 75% of the warrants at $.05 per warrant unless HET, or its
affiliate, exercises the warrants within forty-five days after the date of such
notice. If (i) an election to redeem warrants is made by JCC Holding, and (ii)
HET or its affiliate exercises warrants with respect to that number of shares
which at the time of exercise would cause HET and its affiliates to own in the
aggregate 50% of JCC Holding's common stock, then none of the then unexercised
warrants which were called for redemption shall be redeemed. Prior to the
Transition Date, and except as provided in Section B.11.iii hereof, all JCC
Holding common stock directly or indirectly owned by HET and its affiliates
shall be Class B Common Stock, and all Class A Common Stock acquired by HET and
its affiliates prior to the Transition Date shall promptly be converted to Class
B Common Stock.
L. Litigation and Claims
1. Releases. As provided in the Third Amended Plan of Reorganization as
confirmed on April 6, 1998, the Bondholders will release HET, the bondholders of
Grand Palais, and the shareholders of NOLDC and their affiliates.
2. Assigned Claims. As provided in the Third Amended Plan of
Reorganization as confirmed on April 6, 1998, on the Effective Date, HJC,
Harrah's Jazz Finance Corp. and Harrah's New Orleans Investment Company and the
releasing Bondholders will assign their respective Assigned Litigation Claims
(as defined in the Third Amended Plan of Reorganization as confirmed in April,
1997) to JCC, without any representations or warranties. The prosecution of the
Assigned Litigation Claims, judgment reduction protection and distribution of
recoveries from Assigned Litigation Claims will occur as provided in the Third
Amended Plan as confirmed on April 6, 1998.
3. Other Claims. Treatment of chapter 11 administrative expenses and
all other claims in the HJC chapter 11 case shall be on terms and conditions
satisfactory to the Bondholders' Committee. It is understood that provision for
satisfaction of such expense claims has been included in the HJC reorganization
budget.
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<PAGE>
M. Miscellaneous
1. Support of Plan. The Bondholders Committee will join the Proponents
of the Plan of Reorganization of HJC and HJFC in urging the Bondholders not to
change their earlier support of the Plan of Reorganization.
2. Counsel Fees. The fees and expenses of Weil, Gotshal & Manges and
McGlinchey Stafford shall not be capped and shall be paid in accordance with the
existing HJC monthly budget process.
3. Investment Advisor Fees. All rights of Ladenberg with respect to
fees and expenses are reserved.
4. No Other Obligations. HET will not be required to provide equity,
guaranties, loans or other financial commitment beyond those described in the
Third Amended Plan of Reorganization as confirmed on April 6, 1998, in the Term
Sheet attached as Exhibit F to the Plan, and in this Bondholder Term Sheet. The
Bondholders will not be required to provide any concessions beyond those
described in the Third Amended Plan of Reorganization as confirmed on April 6,
1998, in the Term Sheet attached as Exhibit F to the Plan, and in this
Bondholder Term Sheet.
5. Waivers and Release. The New Bonds Indenture and the New Contingent
Bonds Indenture shall contain waiver and release provisions regarding any
non-renewal of a Minimum Payment Guaranty in accordance with the terms of the
HET/JCC Agreement or non-renewal of the HET/JCC Agreement after March 31, 2004.
D-15
<PAGE>
SUMMARY OF TERM SHEET
SENIOR SUBORDINATED NOTES WITH CONTINGENT PAYMENTS
--------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Issuer: Jazz Casino Company, L.L.C. ("JCC"), a
Louisiana limited liability company
Issue: Senior Subordinated Notes With Contingent
Payments (the "New Bonds").
Principal Amount: $187,500,000.
Maturity: 2009 (11 years).
Fixed Interest: The interest will be as follows for the
first 10 semi-annual periods:
1 - 5.867%
2 - 5.927%
3 - 5.987%
4 - 6.046%
5 - 6.103%
6 - 6.159%
7 - 6.214%
8 - 6.214%
9 - 6.214%
10 - 6.214%
and then 8% thereafter, payable in kind from
the Effective Date for six semi-annual
periods (the "PIK Periods"), and payable
semi-annually in cash, in arrears,
thereafter.
JCC shall have the option of making the
first six semi-annual interest payments in
kind rather than in cash; provided, however,
that the first four semi-annual interest
payments must be paid in kind if Tranches
A-1 and/or A-2 are outstanding at the end of
the corresponding PIK Periods. If EBITDA is
less than $28.5 million for the twelve-month
period ending one month prior to each
semi-annual interest payment date beginning
with the fourth year after the Effective
Date, the semi-annual interest payment may
be paid in kind.
</TABLE>
D-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Contingent Payments: Payable semi-annually and limited to 75%
of EBITDA over $65 million and under $85
million calculated on a fiscal-year basis.
If, and to the extent that, JCC's EBITDA
results for any year are less than the
amount required to cause maximum contingent
payments for such year to become due, the
incremental amount between the contingent
payments actually earned for such year and
the maximum contingent payments for such
year will never be paid. Procedures to
address seasonality and tax considerations
in connection with semi-annual payments will
be developed. "EBITDA" means earnings before
interest, taxes, depreciation and
amortization but after payment of the Base
Management Fee; provided, however, that the
fee to HET under the HET/JCC Agreement will
be treated as an operating expense for
purposes of calculating EBITDA. For federal
income tax purposes, all contingent payments
will be recharacterized as principal and
interest using a 12% discount factor.
Collateral: The New Bonds will be secured by a lien
on all assets of JCC Holding, JCC, JCC
Development, CPD and FPD (excluding the
Amended and Renegotiated Casino Operating
Contract, the Casino's bankroll and the
Gross Revenue Share payments) junior to the
liens securing certain obligations of JCC
under the HET/JCC Agreement, the A Term
Loan, the Working Capital Facility and any
refinancings of the A Term Loan and the
Working Capital Facility which do not
increase the principal amount of
indebtedness outstanding and available
thereunder or decrease the weighted-average
maturity thereof (collectively, the "Senior
Permitted Refinancings"), and pari passu
with the liens securing the New Contingent
Bonds (described below), the B Term Loan and
any refinancings of the B Term Loan which do
not increase the principal amount of
indebtedness outstanding and available
thereunder or decrease the weighted-average
maturity thereof (collectively, the "Senior
Subordinated Permitted Refinancings").
Optional Redemption: The New Bonds will not be redeemable prior
to maturity.
</TABLE>
D-17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Mandatory Redemption: The New Bonds will not be subject to
mandatory prepayment prior to maturity.
Change of Control Put to be triggered by
changes in the manager or other similar
events.
Ranking: The New Bonds will be secured obligations of
JCC, subordinated in right of payment to
certain obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working
Capital Facility and the Senior Permitted
Refinancings, and pari passu with the New
Contingent Bonds, the B Term Loan and the
Senior Subordinated Permitted Refinancings.
With the exception of the certain
obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working
Capital Facility, the Senior Permitted
Refinancings, the New Contingent Bonds, the
B Term Loan, the Senior Subordinated
Permitted Refinancings and certain special
purpose indebtedness, any other indebtedness
for borrowed money of JCC must be
subordinated to the New Bonds.
Summary of Certain Covenants: Including, but not limited to: Limitation
on Restricted Payments; Limitation on
Dividends Affecting Subsidiaries; Limitation
on Indebtedness; Limitation on Payment of
Management Fees; Limitation on Asset Sales;
Limitation on Transactions with Affiliates
(except for affiliate transactions approved
by the board of directors of JCC Holding
within limitations to be established by the
board of directors of JCC Holding);
Limitation on Mergers and Consolidations;
Limitation on Liens; and Change of Control.
</TABLE>
D-18
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Make Whole Provisions: The provisions in the Indenture regarding
the Make-Whole Amount shall be revised as
follows:
- The Make-Whole Amount with respect to
the Notes shall consist of a Primary
Make-Whole Amount and a Secondary
Make-Whole Amount.
- The Primary Make-Whole Amount shall
mean, as of any date, the greater of
(a) zero and (b) the remainder of the
present value (using a discount rate
equal to the Formula Rate at such time)
of any unpaid scheduled payments of
principal and interest with respect to
any remaining periods (excluding
Maximum Contingent Payments) payable
in respect of the Notes minus the
principal amount of the Notes
outstanding on such date.
- Formula Rate and Maximum Contingent
Payments are as defined in the
previously circulated draft of the
Indenture.
- The Secondary Make-Whole Amount shall
mean, as of any date, the present value
(determined using a discount rate equal
to the Formula Rate at such time) of
any unpaid Maximum Contingent Payments
with respect to any remaining periods
less any negative amount determined
according to clause (b) of the
definition of the Primary Make-Whole
Amount.
- Upon acceleration of the Notes (i) all
principal and then accrued and unpaid
interest (including then accrued and
unpaid Contingent Payments) shall be
immediately due, (ii) the Primary
Make-Whole Amount and the Secondary
Make-Whole Amount shall be immediately
due, (iii) the Secondary Make-Whole
Amount shall be subordinate to all of
the bank debt including any bank debt
to which HET succeeds as guarantor, and
(iv) the Primary Make-Whole Amount
shall be pari passu with Tranche B of
the bank debt including any bank debt
to which HET succeeds as guarantor.
</TABLE>
D-19
<PAGE>
SUMMARY OF TERM SHEET
SENIOR SUBORDINATED CONTINGENT NOTES
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Issuer: Jazz Casino Company, L.L.C. ("JCC"), a
Louisiana limited liability company.
Issue: Senior Subordinated Contingent Notes (the
"New Contingent Bonds").
Final Contingent 2009 (11 years).
Payment:
Stated Interest: None.
Semi-Annual Payments: Subject to contingency described below, the
New Contingent Bonds will be self-amortizing
with semi-annual payments as described
below.
Contingent Payments: All payments will be contingent and will be
limited to 75% of EBITDA over $85 million
and under $109,425,380 calculated on a
fiscal year basis. If, and to the extent
that, JCC's EBITDA results for any year are
less than the amount required to cause
maximum contingent payments for such year to
become due, the incremental amount between
the contingent payments actually earned for
such year and the maximum contingent
payments for such year will never be paid.
Procedures to address seasonality and tax
considerations in connection with
semi-annual payments will be developed.
"EBITDA" means earnings before interest,
taxes, depreciation and amortization but
after payment of the Base Management Fee;
provided, however, that the fee to HET under
the HET/JCC Agreement will be treated as an
operating expense for purposes of
calculating EBITDA. For federal income tax
purposes, the contingent interest will be
recharacterized as principal and interest
using a 16% discount factor.
</TABLE>
D-20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Collateral: The New Contingent Bonds will be secured by
a lien on all assets of JCC Holding, JCC,
JCC Development, CPD and FPD (excluding the
Amended and Renegotiated Casino Operating
Contract, the Casino's bankroll and the
Gross Revenue Share Payments) junior to the
liens securing certain obligations of JCC
under the HET/JCC Agreement, the A Term
Loan, the Working Capital Facility and any
refinancings of the A Term Loan and the
Working Capital Facility which do not
increase the principal amount of
indebtedness outstanding and available
thereunder or decrease the weighted-average
maturity thereof (collectively, the "Senior
Permitted Refinancings"), and pari passu
with the liens securing the New Bonds, the B
Term Loan and any refinancings of the B Term
Loan which do not increase the principal
amount of indebtedness outstanding and
available thereunder or decrease the
weighted-average maturity thereof
(collectively, the "Senior Subordinated
Permitted Refinancings").
Optional Redemption: The New Contingent Bonds will not be
redeemable prior to maturity.
Mandatory Redemption: The New Contingent Bonds will not be subject
to mandatory prepayment prior to maturity.
Ranking: The New Contingent Bonds will be secured
obligations of JCC, subordinated in right of
payment to certain obligations of JCC under
the HET/JCC Agreement, the A Term Loan, the
Working Capital Facility and the Senior
Permitted Refinancings, and pari passu with
the New Bonds, the B Term Loan and the
Senior Subordinated Permitted Refinancings.
With the exception of the certain
obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working
Capital Facility, the Senior Permitted
Refinancings, the New Bonds, the B Term
Loan, the Senior Subordinated Permitted
Refinancings and certain special purpose
indebtedness, any other indebtedness for
borrowed money of JCC must be subordinated
to the New Contingent Bonds.
</TABLE>
D-21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Summary of Certain Covenants: Including, but not limited to: Limitation on
Restricted Payments; Limitation on Dividends
Affecting Subsidiaries; Limitation on
Indebtedness; Limitation on Payment of
Management Fees; Limitation on Asset Sales;
Limitation on Transactions with Affiliates
(except for affiliate transactions approved
by the board of directors of JCC Holding
within limitations to be established by the
board of directors of JCC Holding);
Limitation on Mergers and Consolidations;
Limitation on Liens.
Make Whole Provisions; The New Contingent Bonds will contain
Liquidated Damages: appropriate provisions so that in the event
of a payment default or bankruptcy, the New
Contingent Bondholders will be made whole
for any accelerated maturity (which shall
consist solely of Contingent Payments that
are due but have not yet been paid),
reduction in anticipated yield or any other
expenses or costs; provided that the amount
of future Contingent Payments shall be
subordinated to the bank claims including
bank claims to which HET as guarantor
succeeds.
</TABLE>
D-22
<PAGE>
Exhibit 2.10
Exhibit E
September 3, 1998
Form of City Release Agreement
<PAGE>
CITY RELEASE AGREEMENT
THIS CITY RELEASE AGREEMENT (the "Agreement") is entered into
this ____ day of __________, 1998 by and among RIVERGATE DEVELOPMENT
CORPORATION, a Louisiana public benefit corporation ("RDC"), CITY OF NEW
ORLEANS, LOUISIANA ("City"), HARRAH'S ENTERTAINMENT, INC., a Delaware
corporation ("HET"), HARRAH'S OPERATING COMPANY, INC., a Delaware corporation
("HOCI"), HARRAH'S NEW ORLEANS MANAGEMENT COMPANY, a Nevada corporation
("HNOMC"), HARRAH'S NEW ORLEANS INVESTMENT COMPANY, a Nevada corporation
("HNOIC"), HARRAH'S JAZZ COMPANY, a Louisiana general partnership ("HJC"), NEW
ORLEANS/LOUISIANA DEVELOPMENT CORPORATION, a Louisiana corporation ("NOLDC"),
GRAND PALAIS CASINO, INC., a Delaware corporation ("Grand Palais"), JAZZ CASINO
COMPANY, L.L.C. a Louisiana limited liability company ("JCC"), and HARRAH'S JAZZ
FINANCE CORPORATION, a Delaware corporation ("HJFC").
RECITALS
A. HJC and HJFC filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code on November 22, 1995. HNOIC
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code on December 22, 1995. The cases are now pending in the United
States Bankruptcy Court for the Eastern District of Louisiana (the "Bankruptcy
Court"), Case Nos. 95-14544, 95-14545 and 95-14871. The cases are being jointly
administered.
B. HJC, RDC and City entered into that certain Amended Lease
Agreement effective as of March 15, 1994 (the "Original Lease Agreement")
C. HJC and certain other parties (collectively, the
"Proponents") have submitted, and the Bankruptcy Court has entered an order
confirming, a plan of reorganization in the bankruptcy proceedings of HJC, HJFC
and HNOIC (the "Plan").
D. As provided by the Plan, JCC has succeeded to certain
rights and obligations of HJC under the Original Lease Agreement and the
Original Lease Agreement has been superseded by that certain Amended and
Restated Lease Agreement by and among RDC, City and JCC of even date herewith
and exhibits thereto (including, without limitation, the Casino Management
Agreement and Second Floor Sublease) (collectively, the "Amended and Restated
Lease"). In addition, JCC has assumed certain rights and obligations pursuant to
that certain Amended and Restated General Development Agreement by and among
RDC, City and JCC of even date herewith and exhibits thereto (including, without
limitation, the Completion Guarantee and Performance Bond) (the "Amended and
Restated GDA"), and that certain Amended and Restated Open Access Program
attached to the Amended and Restated Lease as Exhibit G (the "Amended and
Restated OAP").
<PAGE>
E. RDC, City and JCC have previously entered into that certain
Basin Street Casino Lease Termination Agreement and the exhibits thereto and an
Agreement dated January 15, 1997, in connection therewith (collectively, the
"Termination Agreement").
F. RDC, City, HET, HOCI, HNOMC, HNOIC, HJC, NOLDC, Grand
Palais, JCC and HJFC desire to enter into certain settlements and releases on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, RDC, City, HET, HOCI, HNOMC, HNOIC, HJC, NOLDC, Grand Palais, JCC
and HJFC agree as follows:
1. Effectiveness
(a) This Agreement shall be effective upon its execution by
all parties hereto and the occurrence of the Effective Date of the Plan. The
"Effective Date" shall have the meaning set forth in the Plan.
(b) The release by the City Releasors (as hereinafter defined)
set forth in Section 2(a) hereof shall not be effective or enforceable as to (i)
the NOLDC Releasees (as hereinafter defined) unless NOLDC and the other NOLDC
Releasees which are parties thereto execute and deliver (A) the NOLDC
Shareholders/HET Settlement Agreement (as defined in the Plan), executed by all
parties thereto, on or before the Effective Date and (B) this Agreement; (ii)
the Grand Palais Releasees (as hereinafter defined) unless Grand Palais and the
other Grand Palais Releasees which are parties thereto execute and deliver (A)
the Grand Palais/HET Settlement Agreement (as defined in the Plan), executed by
all parties thereto, on or before the Effective Date and (B) this Agreement;
(iii) the HET Releasees (as hereinafter defined) unless each of HET, HOCI, HNOIC
and HNOMC executes and delivers this Agreement; (iv) the HJC Releasees (as
hereinafter defined) unless each of JCC, HJC and HJFC executes and delivers this
Agreement; (v) each Participating Bank (as defined in the Plan) and each
Underwriter (as defined in the Plan) unless each such Participating Bank or
Underwriter enters into, executes and delivers its respective Bank/Underwriter
Release (as defined in the Plan), executed by all parties thereto, on or before
the Effective Date; or (vi) the FNBC Releasees, unless FNBC makes the FNBC
Settlement Election (as defined in the Plan) and executes and delivers the
Bank/Underwriter Release on or before the Effective Date.
(c) This Agreement and the releases set forth in this
Agreement shall be valid and enforceable as among the HET Releasees, the HJC
Releasees and the City Releasors, notwithstanding (i) the failure of NOLDC to
execute and deliver the NOLDC Shareholders/HET Settlement Agreement or this
Agreement, (ii) Grand Palais to execute and deliver the Grand Palais/HET
Settlement Agreement or this Agreement, (iii) the failure of each Participating
Bank
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<PAGE>
and Underwriter to execute and deliver its respective Bank/Underwriter
Release, or (iv) the failure of FNBC to execute and deliver its Bank/Underwriter
Release.
(d) The releases set forth in this Agreement shall not affect
the validity and enforceability of the Amended and Restated Lease, the Amended
and Restated GDA, the Amended and Restated OAP, the Termination Agreement or any
other document executed and delivered pursuant to the Plan.
2. Release. Notwithstanding the foregoing, nothing contained in this
Agreement shall release or waive any rights or obligations of the parties
pursuant to the Amended and Restated Lease, the Amended and Restated GDA, the
Amended and Restated OAP and the Termination Agreement or any allowed claims or
administrative expenses of the City or the RDC in HJC's bankruptcy.
(a) City Release. Subject to the provisions of Sections 1(b)
and 2(f)(iii) hereof, the City Releasors, and each of them, hereby release and
forever discharge the HJC Releasees, the HET Releasees, the NOLDC Releasees, the
Grand Palais Releasees, the Bank/Underwriter Releasees, the FNBC Releasees, and
each of them, of and from any and all manner of Claims (as hereinafter defined)
which the City Releasors, or any of them, now have or may hereafter have against
the HJC Releasees, the HET Releasees, the NOLDC Releasees, the Grand Palais
Releasees, the Bank/Underwriter Releasees, the FNBC Releasees, or any of them,
by reason of any matter, cause or thing whatsoever to the extent such Claims
arose prior to the Effective Date, including, but not limited to, any breaches,
defaults, or events of default under the Original Amended Lease, the Original
Amended GDA, and the OAP occurring at any time on or before the Effective Date.
The foregoing release shall not apply to any Claims to the extent such Claims
arise from or are based on any acts, omissions, events, circumstances or other
matters occurring on or after the Effective Date.
(b) HJC Release. Subject to the provisions of Section
2(f)(iii) hereof, the HJC Releasors (as hereinafter defined), and each of them,
hereby release and forever discharge the City Releasees (as hereinafter
defined), and each of them, of and from any and all manner of Claims which the
HJC Releasors, or any of them, now have or may hereafter have against the City
Releasees or any of them, by reason of any matter, cause or thing whatsoever to
the extent such Claims arose prior to the Effective Date, including, but not
limited to, any breaches, defaults, or events of default under the Original
Amended Lease, the Original Amended GDA, and the OAP occurring at any time on or
before the Effective Date; provided, however, that the foregoing release shall
not apply to any Claims to the extent such Claims arise from or are based on any
acts, omissions, events, circumstances or other matters occurring on or after
the Effective Date.
(c) HET Release. Subject to the provisions of Section
2(f)(iii) hereof, the HET Releasors, and each of them, hereby release and
forever discharge the City Releasees, and each of them, of and from any and all
manner of Claims which the HET Releasors, or any of them, now have or may
hereafter have against the City Releasees or any of them, by reason of any
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<PAGE>
matter, cause or thing whatsoever to the extent such Claims arose prior to the
Effective Date, including, but not limited to, any breaches, defaults, or events
of default under the Original Amended Lease, the Original Amended GDA, and the
OAP occurring at any time on or before the Effective Date. The foregoing release
shall not apply to any Claims to the extent such Claims arise from or are based
on any acts, omissions, events, circumstances or other matters occurring on or
after the Effective Date.
(d) NOLDC Release. Subject to the provisions of Section
2(f)(iii) hereof, the NOLDC Releasors (as hereinafter defined), and each of
them, hereby release and forever discharge the City Releasees, and each of them,
of and from any and all manner of Claims which the NOLDC Releasors, or any of
them, now have or may hereafter have against the City Releasees or any of them,
by reason of any matter, cause or thing whatsoever to the extent such Claims
arose prior to the Effective Date, including, but not limited to, any breaches,
defaults, or events of default under the Original Amended Lease, the Original
Amended GDA, and the OAP occurring at any time on or before the Effective Date.
The foregoing release shall not apply to any Claims to the extent such Claims
arise from or are based on any acts, omissions, events, circumstances or other
matters occurring on or after the Effective Date.
(e) Grand Palais Release. Subject to the provisions of Section
2(f)(iii) hereof, the Grand Palais Releasors (as hereinafter defined), and each
of them, hereby release and forever discharge the City Releasees, and each of
them, of and from any and all manner of Claims which the Grand Palais Releasors,
or any of them, now have or may hereafter have against the City Releasees or any
of them, by reason of any matter, cause or thing whatsoever to the extent such
Claims arose prior to the Effective Date, including, but not limited to, any
breaches, defaults, or events of default under the Original Amended Lease, the
Original Amended GDA, and the OAP occurring at any time on or before the
Effective Date. The foregoing release shall not apply to any Claims to the
extent such Claims arise from or are based on any acts, omissions, events,
circumstances or other matters occurring on or after the Effective Date.
(f) Scope of Releases
(i) The releases effectuated by this Agreement
are intended by the parties hereto to be as broad as the law allows with
respect to the released Claims and, subject to the provisions of Section 1(b)
hereof, are intended specifically to be a compromise and release generally of
all released Claims of the City Releasors against the HJC Releasees, the HET
Releasees, the NOLDC Releasees, the Grand Palais Releasees, the Bank/Underwriter
Releasees, and the FNBC Releasees and all released Claims of the HJC Releasors,
the HET Releasors, the NOLDC Releasors and the Grand Palais Releasors against
the City Releasees.
(ii) The releases effectuated by this Agreement are
intended by the parties hereto include the release of Claims as set forth
in Sections 9.2 and 9.4 of the Plan. To the extent there are inconsistencies
among the releases provided for herein and those set forth in the Plan, the
provisions of this Agreement shall control.
E-5
<PAGE>
(iii) The releases effectuated by this Agreement
shall not effect the release of any
Excluded Claims.
3. Definitions
(a) Bank/Underwriter Releasees. The "Bank/Underwriter
Releasees" shall mean any or all of the Participating Banks (as defined in the
Plan), which on or before the Effective Date execute and deliver their
respective Bank/Underwriter Releases (as defined in the Plan), and, in their
capacity as Participating Banks, any or all of their Affiliates, successors and
assigns and Salomon Brothers, Inc., Donaldson, Lufkin & Jenrette and BT
Securities Corporation in their capacity as underwriters of the Old Bonds (as
defined in the Plan), and any or all of their Affiliates, successors and assigns
in their capacity as underwriters of the Old Bonds, and the shareholders,
parents, subsidiaries, of each of the foregoing, and the officers, directors,
employees, attorneys, financial advisors, lenders, accountants, agents and other
representatives of each of the foregoing when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns, but in any event shall not include the FNBC
Releasees, the Excluded Grand Palais Parties, the Excluded HNOIC Parties or the
Excluded NOLDC Parties.
(b) City Releasees. The "City Releasees" shall mean RDC and
the City and any or all of their Affiliates (as defined in the Plan), successors
and assigns, and the shareholders, parents, subsidiaries, officers, directors,
council members, mayor, employees, attorneys, financial advisors, investment
bankers, lenders, accountants, agents (pursuant to a written agency agreement)
and other representatives of each of the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any and all of their successors and assigns, but in any event shall not include
the FNBC Releasees, the Excluded Grand Palais Parties, the Excluded HNOIC
Parties, the Excluded NOLDC Parties or the Bank/Underwriter Releasees.
(c) City Releasors. The "City Releasors" shall mean RDC and
City and any or all of their Affiliates, successors and assigns, and each of the
shareholders, parents, subsidiaries, officers, directors, council members,
mayor, employees and agents (pursuant to a written agency agreement) of each of
RDC and City, and any and all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing.
(d) Claims. "Claims" shall mean any action or actions, cause
or causes of action, in law or in equity, suits, debts, liens, liabilities,
claims, demands, damages, punitive damages, losses, costs or expenses, and
reasonable attorneys' fees of any nature whatsoever (including, without
limitation, claims based upon legal fault, negligence, offense, quasi-offense,
contract, quasi-contract, or any other theory) whether fixed or contingent and
including known or suspected claims and Unknown Claims (as hereinafter defined),
which in any way relate to HJC, HJFC and HNOIC, the business affairs or
operations of HJC, HJFC and HNOIC, the issuance by HJC and HJFC of any
securities, the Permanent Casino (as defined in the Original Lease
E-6
<PAGE>
Agreement), the Casino (as defined in the Amended and Restated Lease) or
the Temporary Casino (as defined in the Original Lease Agreement), including,
but not limited to, the licensing, leasing, financing, arranging, development,
construction, promotion, management, or operation thereof, or any matters
related to HJC, HJFC, HNOIC or any successor to any of them in connection with
the Permanent Casino, the Casino or the Temporary Casino, except to the extent
that any of the foregoing arises under any of the Plan Documents (as defined in
the Plan) on or after the Effective Date.
(e) Excluded Claims. "Excluded Claims" shall mean any Claims
related to or arising from (i) any obligations which have not been performed as
of the Effective Date pursuant to the Termination Agreement; (ii) any
obligations pursuant to Sections 5, 6, 7 and 8 of that certain Forbearance
Agreement dated as of ____________, 1997 by and among counsel for the City,
counsel for the RDC and counsel for HJC. Notwithstanding the foregoing, Excluded
Claims shall not include (i) any claim to revoke the Amended and Restated Lease,
the Amended and Restated GDA or the Amended and Restated OAP based on any
action, event or circumstance occurring prior to the Effective Date; (ii) any
claim affecting the rights of JCC under the Amended and Restated Lease, the
Amended and Restated GDA or the Amended and Restated OAP; or (iii) any claim
which is discharged, enjoined or otherwise released pursuant to Sections 5.7,
9.2 or 9.4 of the Plan.
(f) Excluded Grand Palais Parties. The "Excluded Grand Palais
Parties" shall mean any or all of Grand Palais and its successors and assigns,
and the shareholders, parents, subsidiaries (except the JCC Entities, HJC or
HJFC), officers, directors, employees, attorneys, financial advisors, investment
bankers, lenders, accountants, agents (pursuant to a written agency agreement)
and other representatives of each the foregoing when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns.
(g) Excluded HNOIC Parties. "Excluded HNOIC Parties" shall
mean any or all of HET, HOCI, HNOIC and HNOMC, and any or all of their
successors and assigns, and the shareholders, parents, subsidiaries (except the
JCC Entities, HJC or HJFC), officers, directors, employees, attorneys, financial
advisors, investment bankers, lenders, accountants, agents (pursuant to a
written agency agreement) and other representatives of each of the foregoing,
when acting in their respective representative capacities with respect to each
of the foregoing, and any or all of their successors and assigns.
(h) Excluded NOLDC Parties. The "Excluded NOLDC Parties" shall
mean NOLDC and any or all of its successors and assigns, and the shareholders,
parents, subsidiaries (except the JCC Entities, HJC, or HJFC) officers,
directors, employees, attorneys, financial advisors, investment bankers,
lenders, accountants, agents (pursuant to a written agency agreement) and other
representatives of each the foregoing, when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns.
E-7
<PAGE>
(i) FNBC. "FNBC" shall mean the First National Bank of
Commerce and any or all of its successors and assigns.
(j) FNBC Releasees. "FNBC Releasees" shall mean FNBC and any
or all of its Affiliates, successors and assigns, and the shareholders, parents,
subsidiaries, officers, directors, employees, attorneys, financial advisors,
investment bankers, lenders, accountants, agents (pursuant to a written agency
agreement) and other representatives of each the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any or all of their successors and assigns, but in any event shall not include
any Excluded Grand Palais Party, Excluded HNOIC Party, Excluded NOLDC Party, or
the Bank/Underwriter Releasees.
(k) Grand Palais Releasees. The "Grand Palais Releasees" shall
mean Grand Palais and any or all of its Affiliates (except the JCC Entities, HJC
or HJFC), successors and assigns, and the shareholders, parents, subsidiaries
(except the JCC Entities, HJC or HJFC), officers, directors, employees,
attorneys, financial advisors, investment bankers, lenders, accountants, agents
(pursuant to a written agency agreement) and other representatives of each the
foregoing when acting in their respective representative capacities with respect
to each of the foregoing, and any or all of their successors and assigns, but in
any event shall not include any Excluded HNOIC Party, Excluded NOLDC Party, the
FNBC Releasees or the Bank/Underwriter Releasees.
(l) Grand Palais Releasors. The "Grand Palais Releasors" shall
mean Grand Palais and any or all of its Affiliates (except JCC, JCC Holding, HJC
or HJFC), successors and assigns, and each of the shareholders, parents,
subsidiaries (except JCC, JCC Holding, HJC or HJFC), officers, directors,
employees and agents (pursuant to a written agency agreement) of each of the
foregoing and any or all of their successors and assigns and all persons acting
or claiming through or under any or all of the foregoing, but shall not include
any Excluded HNOIC Party, Excluded NOLDC Party, the FNBC Releasees or the
Bank/Underwriter Releasees.
(m) HET Releasees. The "HET Releasees" shall mean any or all
of HET, HOCI, HNOIC and HNOMC and any or all of their Affiliates (except the JCC
Entities, HJC or HJFC), successors and assigns, and the shareholders, parents,
subsidiaries (except the JCC Entities, HJC or HJFC), officers, directors,
employees, attorneys, financial advisors, investment bankers, lenders,
accountants, agents (pursuant to a written agency agreement) and other
representatives of each the foregoing when acting in their respective
representative capacities with respect to the foregoing, and any or all of their
successors and assigns, but in any event shall not include any Excluded NOLDC
Party, Excluded Grand Palais Party, the FNBC Releasees or the Bank/Underwriter
Releasees.
(n) HET Releasors. The "HET Releasors" shall mean any or all
of HET, HOCI, HNOIC and HNOMC and any or all of their Affiliates (except JCC,
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<PAGE>
JCC Holding, HJC or HJFC), successors and assigns, and each of the shareholders,
parents, subsidiaries (except JCC, JCC Holding, HJC or HJFC), officers,
directors, employees and agents (pursuant to a written agency agreement) of each
of the foregoing and any or all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing, but shall not
include any Excluded NOLDC Party, Excluded Grand Palais Party, the FNBC
Releasees or the Bank/Underwriter Releasees.
(o) HJC Releasees. The "HJC Releasees" shall mean any or all
of the JCC Entities, HJC, HJFC and any or all of their Affiliates, successors
and assigns, and the shareholders, parents, subsidiaries, of each of the
foregoing, and the officers, directors, employees, attorneys, financial
advisors, investment bankers, lenders, accountants, agents (pursuant to a
written agency agreement) and other representatives of each the foregoing when
acting in their respective representative capacities with respect to each of the
foregoing, and any or all of their successors and assigns, but in any event
shall not include any Excluded HNOIC Party, Excluded NOLDC Party, Excluded Grand
Palais Party, the FNBC Releasees or the Bank/Underwriter Releasees.
(p) HJC Releasors. The "HJC Releasors" shall mean any or all
of JCC, JCC Holding, HJC, HJFC and any or all of their Affiliates, successors
and assigns, and each of the shareholders, parents, subsidiaries, officers,
directors, employees and agents (pursuant to a written agency agreement) of each
of the foregoing and any or all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing, but shall not
include any Excluded HNOIC Party, Excluded NOLDC Party, Excluded Grand Palais
Party, the FNBC Releasees or the Bank/Underwriter Releasees.
(q) JCC Entities. The "JCC Entities" shall mean JCC, JCC
Holding Company, a Delaware corporation, and any of all of their Affiliates,
successors and assigns, and each of the shareholders, parents, subsidiaries.
(r) NOLDC Releasees. The "NOLDC Releasees" shall mean NOLDC
and any or all of its Affiliates (except the JCC Entities, HJC or HJFC),
successors and assigns, and the shareholders, parents, subsidiaries (except the
JCC Entities, HJC or HJFC), officers, directors, employees, attorneys, financial
advisors, investment bankers, lenders, accountants, agents (pursuant to a
written agency agreement) and other representatives of each the foregoing when
acting in their respective representative capacities with respect to each of the
foregoing, and any or all of their successors and assigns, but in any event
shall not include any Excluded HNOIC Party, Excluded Grand Palais Party, the
FNBC Releasees or the Bank/Underwriter Releasees.
(s) NOLDC Releasors. The "NOLDC Releasors" shall mean NOLDC
and any or all of its Affiliates (except JCC, JCC Holding, HJC or HJFC),
successors and assigns, and each of the shareholders, parents, subsidiaries
(except the JCC Entities, HJC or HJFC), officers, directors, employees and
agents (pursuant to a written agency agreement) of each of the foregoing and any
or all of their successors and assigns and all persons acting or claiming
through
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<PAGE>
or under any or all of the foregoing, but shall not include any Excluded
HNOIC Party, Excluded Grand Palais Party, the FNBC Releasees or the
Bank/Underwriter Releasees.
(t) Unknown Claims. "Unknown Claims" means any and all Claims
including, without limitation, any Claim which any of the parties hereto does
not know or even suspect to exist in his, her or its favor at the time of the
giving of the release which, if known by him, her or it might have affected his,
her or its decision regarding the releases. Each party hereto acknowledges that
he, she or it might hereafter discover facts in addition to or different from
those which he, she or it now knows or believes to be true with respect to the
subject matter of the matters released, but each such party shall be deemed to
have fully, finally and forever settled and released any and all Claims whether
known or unknown, suspected or unsuspected, contingent or non-contingent, which
now exist or heretofore have existed upon any theory of law or equity whether
such theory of law or equity now exists or comes into existence in the future.
Unknown Claims shall not include any Claim to the extent that such Claim arises
from or is based upon any act, omission, event, circumstance or other matter
occurring after the Effective Date.
4. Representations and Warranties. In connection herewith, the parties
hereto each represent and warrant that the following are true and correct:
(a) Such party has due power and authority to enter into this
Agreement and perform its obligations hereunder.
(b) Such party has taken the requisite action, corporate or
otherwise, necessary to authorize the execution and delivery of this Agreement,
and this Agreement has been duly executed and delivered by such party and
constitutes its valid and binding obligation, enforceable against such entity in
accordance with its terms.
(c) All consents, approvals and waivers from governmental
authorities and other parties necessary for such party to enter into this
Agreement have been obtained.
(d) To the best of such party's knowledge, no suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person or legal or administrative proceeding has been instituted or
threatened that questions the validity or legality of this Agreement.
(e) This Agreement does not conflict with any law or
regulation applicable to, or with any term or provision of any agreement binding
upon, such party.
(f) Such party has not currently assigned or transferred any
interest in any of the released Claims and such party will not in the future,
assign or transfer any interest in any such released Claim.
(g) Such party acknowledges that it (i) has been given the
opportunity to review all information and documents with respect to the Claims
released hereby prior to entering
E-10
<PAGE>
into this Agreement; (ii) has made an independent investigation in making
its decision to enter into this Agreement; and (iii) is not relying on any
statements or representations by any other party hereto in entering into this
Agreement other than as expressly set forth in the Plan or the Amended and
Restated Lease.
5. Amendments. Any amendment to this Agreement may only be made and
shall only be effective upon written approval of all parties hereto.
6. Entire Agreement. This Agreement, as written, contains all of the
terms and conditions agreed between the parties, relating to the transactions
covered by this Agreement, it being agreed that all understandings and
agreements heretofore and between the parties on the subject matter hereof are
merged in this Agreement which alone fully and completely expresses their
agreement and understanding with regard to the subject matter contained in this
Agreement.
7. Voluntary Agreement. The parties hereto have entered into this
Agreement freely and voluntarily, without coercion, duress, distress, or undue
influence by any other persons or such person's respective shareholders,
directors, officers, partners, agents or employees.
8. Advice From Counsel. The parties hereto understand that this
Agreement may affect legal rights. The parties hereto represent that they have
received legal advice from counsel of their choice in connection with the
negotiation and execution of this Agreement and are satisfied with their legal
counsel and the advice received.
9. Governing Law. This Agreement shall be governed and construed in
accordance with the internal substantive laws of the State of Louisiana,
regardless of the laws which might otherwise govern under Louisiana's or other
applicable concepts of conflicts of law.
10. Captions. The headings on the sections in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
11. Interpretation of Words. A masculine pronoun wherever used in this
Agreement shall be construed to include the feminine or neuter where
appropriate. The singular form wherever used in this Agreement shall be
construed to include the plural where appropriate.
12. No Admission of Wrongdoing. Nothing in this Agreement shall be
construed as an admission of liability or fault on the part of any HJC Releasee,
HET Releasee, NOLDC Releasee, Grand Palais Releasee, Bank/Underwriter Releasee,
the FNBC Releasees, or any City Releasee.
13. Successors and Assigns. Subject to the provisions of Section 1(b)
hereof, this Agreement shall be binding upon the City Releasors, HJC Releasors,
HET Releasors, NOLDC Releasors, Grand Palais Releasors, and each of their
respective successors and assigns and inure to the benefit of the City
Releasees, HJC Releasees, HET Releasees, NOLDC Releasees, Grand Palais
Releasees, Bank/Underwriter Releasees, the FNBC Releasees, and each of their
respective successors and assigns.
E-11
<PAGE>
14. Severability. If any provision of this Agreement or the application
of such provision to any person, entity or circumstance, shall be held invalid,
the remainder of this Agreement, or the application of such provision to
persons, entities or circumstances other than those to which it is held invalid,
shall not be affected thereby; provided that the parties shall attempt to
reformulate such invalid provision to give effect to such portions thereof as
may be valid without defeating the intent of such provision.
15. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, notwithstanding that all of the parties
hereto are not signatories to the original or the same counterpart. In addition,
this Agreement may contain more than one counterpart of the signature pages, and
this Agreement may be executed by the affixing of the signatures of each of the
parties hereto to one of such counterpart signature pages; all of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
16. Pending Litigation. On the Effective Date, the parties hereto
hereby agree to cause the dismissal with prejudice of the action styled City of
New Orleans and Rivergate Development Corporation v. Harrah's Entertainment,
Inc. (f/k/a The Promus Companies, Inc.), Grand Palais Casino, Inc., Embassy
Suites, Inc., First National Bank of Commerce and Ronald A. Lenczycki, Adversary
No. 96-1031, now pending in the Bankruptcy Court by signing and filing an
appropriate order to dismiss with prejudice as to the City and RDC. With respect
to the action styled Harrah's Jazz Company v. A&D Maintenance Service, et al.,
Adversary Proceeding No. 97-1174, pending in the United States Bankruptcy Court
for the Eastern District of Louisiana, the parties hereto hereby agree to cause
the dismissal with prejudice as to all defendants (including, without
limitation, the City and the RDC) except (i) the Non-Participating Banks, and
(ii) any Underwriter which fails to execute and deliver the Bank/Underwriter
Release (as such terms are defined in the Plan) (the defendants identified in
clauses "(i)" and "(ii)," together, the "Remaining Defendants"), as to which
Remaining Defendants there shall be an appropriate reservation of rights by JCC,
by signing and filing an appropriate order to dismiss with prejudice as to all
defendants (including, without limitation, the City and the RDC) except the
Remaining Defendants and by causing the aforesaid order to be entered as soon as
is reasonably practicable after the Effective Date. Such dismissal shall
encompass all claims, counterclaims, cross-claims, third party claims, motions
or other demands brought by the parties hereto with respect to all defendants
(including, without limitation, the City and the RDC) except the Remaining
Defendants. JCC shall defend, indemnify and hold harmless the City and the RDC
from any claims, counterclaims, cross-claims, third party claims, motions or
other demands brought by any of the Remaining Defendants in accordance with
section 5.9 of the Plan.
[SIGNATURE PAGE FOLLOWS]
E-12
<PAGE>
IN WITNESS WHEREOF, the undersigned hereto have duly executed
this Agreement as of the date first written above.
RIVERGATE DEVELOPMENT CORPORATION, a
Louisiana public benefit corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CITY OF NEW ORLEANS
By:
----------------------------------
Name: Marc H. Morial
Title: Mayor
HARRAH'S JAZZ COMPANY, a Louisiana general
partnership
By: HARRAH'S NEW ORLEANS
INVESTMENT COMPANY, a Nevada
corporation, General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By: NEW ORLEANS/LOUISIANA
DEVELOPMENT CORPORATION, a
Louisiana corporation, General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By: GRAND PALAIS CASINO, INC., a
Delaware corporation, General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
E-13
<PAGE>
JAZZ CASINO COMPANY, L.L.C., a Louisiana
limited liability company
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S OPERATING COMPANY, INC., a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
GRAND PALAIS CASINO, INC., a Delaware
corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
NEW ORLEANS/LOUISIANA DEVELOPMENT
CORPORATION, a Louisiana corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S JAZZ FINANCE CORPORATION, a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-14
<PAGE>
HARRAH'S NEW ORLEANS INVESTMENT
COMPANY, a Nevada corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S NEW ORLEANS MANAGEMENT
COMPANY, a Nevada corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S ENTERTAINMENT, INC., a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-15
<PAGE>
Exhibit 2.10
Exhibit F
September 3, 1998
Terms and Conditions of
Pre-Petition Bank Participation in Reorganization Financing
<PAGE>
Exhibit F
September 3, 1998
Harrah's Jazz Company
Jazz Casino Company, L.L.C.
Terms and Conditions of
Pre-petition Bank Participation in Reorganization Financing
I. Terms of Bank Financing As described in the attached Jazz Casino
Facility Company, L.L.C. Bank Financing Indicative
Term Sheet (the "Bank Financing").
II. Terms of Debtors' Chapter 11 The following shall be effectuated through
Plan (the "Plan") pre-solicitation modifications to the
proposed Plan satisfactory to the banks
participating in the Bank Financing
("Participating Banks"):
A. Allowance of Pre-Petition Claims of Participating Banks (the "Allowed
Claims of Participating Bank Claims") will be granted final
Banks allowance in the Plan in an amount equal to:
(i) with respect to any
Participating Bank which participated in the
pre-petition standby letter of credit issued
by Bankers Trust Company and previously
drawn by the beneficiary (Broadmoor), its
respective share of the amount drawn
($5,000,000) plus unpaid interest and fees
accrued through the effective date of the
Plan (the "Effective Date");
(ii) with respect to any
Participating Bank which participated in the
Standby LC S-10269, which remains undrawn by
the beneficiary (City of New Orleans), its
respective share of accrued unpaid fees
through the Effective Date;
(iii) with respect to Bankers Trust
Company as Administrative Agent, all unpaid
facing fees arising under the Old Bank
Credit Agreement through the Effective Date;
and
F-1
<PAGE>
(iv) with respect to any
Participating Bank which purchases on the
Effective Date additional Convertible Junior
Subordinated Debentures equal to the amount
allowed under this clause (iv), its share of
the fees and expenses of Wachtel, Lipton,
Rosen & Katz as restructuring counsel of the
Administrative Agent (but excluding any fees
and expenses incurred in connection with the
Bank Financing). On the Effective Date, the
Administrative Agent will pay the Allowed
Bank Claims from the Withheld Funds (as
defined in the Plan).
B. Purchase of Convertible On the Effective Date, each Participating
Junior Subordinated Bank will purchase Convertible Junior
Debentures Subordinated Debentures in a principal
amount equal to the sum of (x) its pro rata
share of $11,000,000 based on the ratio of
the fees and expenses paid to it in
connection with the existing credit facility
to the aggregate fees and expenses paid to
all Participating Banks in connection with
such credit facility, plus (y) with respect
to any Participating Bank which elects to
have the portion of its claim described in
Paragraph II. A (iv) above allowed and paid,
the amount of such allowed claim. Any
remaining withheld Funds will be paid over
to First National Bank of Commerce as Old
Bank Collateral Agent to be distributed
according to the Plan.
C. Waiver of all Claims of Except as set forth in paragraph A, all
Participating Banks Participating Banks and affiliated members
of the Bank/Underwriter Group shall waive
any Claims against any Debtor or partners of
Harrah's Jazz Company.
F-2
<PAGE>
D. Settlement and Releases Participating Banks shall exchange releases
with the estate of each Debtor, the Debtors
Group, the HET Group, the Bondholder
Committee Group, the City Group, the State
Group, the NOLDC Group and the Grand Palais
Group, FNBC and other parties receiving
releases from the Debtor on terms no less
favorable than those being granted under the
Plan to Harrah's Entertainment, Inc. ("HET")
or such other parties. Injunctive and other
protections granted to Released Parties (as
defined in the Plan) shall apply on the same
terms to Participating Banks. All of the
foregoing shall be effectuated to obtain the
broadest possible preclusive effect with
respect to all potential derivative or
direct claims.
Participating Banks shall be included in the
group of persons whose collective release is
being solicited from bondholders through the
separate consensual release mechanism.
Consideration for release of Participating
Banks will be, among other things, the
Release Pool stock to be contributed by
HET.)
Any claims against non-participating banks
or other non-settling parties will be
retained by the reorganized debtor, with a
judgment reduction and indemnity mechanism
for settled parties in respect of such
claims.
III. Reimbursement of Attorneys' JCC shall reimburse the Participating Banks
Fees and Expenses up to $750,000 in attorneys' fees plus
out-of-pocket expenses of White & Case,
including local counsel fees, incurred in
connection with the negotiation and
documentation of the Bank Financing.
F-3
<PAGE>
Exhibit A
(to Terms and Conditions of Pre-Petition Bank Participation in
Reorganization Financing)
F-A-1
<PAGE>
JAZZ CASINO COMPANY, L.L.C. - BANK FINANCING INDICATIVE TERM SHEET
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Bank Financing Indicative Term Sheet does not constitute (and shall not be
construed as) a commitment on the part of, or an engagement of, Bankers Trust
Company ("BTCo") or any of its affiliates and creates no obligation or liability
on the part of BTCo or any of its affiliates in connection therewith. If the
Credit Facility contemplated by this Bank Financing Indicative Term Sheet is
entered into, all terms and conditions not expressly (or to the extent not
expressly) described herein will be subject to the agreement of BTCo and the
respective other parties thereto.
I. Credit Facilities
A. Revolving Credit Facility
Amount: $25 million, with a $10 million letter of
credit sublimit.
Maturity Date: January 31, 2006
Scheduled Amortization: None.
Credit Support: Harrah's Entertainment, Inc. ("HET") and
Harrah's Operating Company, Inc. ("HOC")
shall provide a joint and several
unconditional payment guaranty and/or "put"
agreement. Such guaranty and/or put
agreement shall contain terms and conditions
satisfactory to Bankers Trust Company
("BTCo") and HET, including incorporating by
reference the covenants contained in HET's
existing senior bank credit facility.
F-A-2
<PAGE>
Security: To include a deed of trust and security
interest in the following collateral (the
"Collateral"): the real property comprising
the Casino Project, including improvements
hereafter completed; all personal property,
FF&E, contract rights, equipment leases,
intangibles and all other assets of the
Borrower and its subsidiaries now owned or
hereafter acquired, but excluding, in each
case to the extent not permitted to be
assigned pursuant to applicable law, the
Casino Operating Contract and gross revenue
share payments to the State of Louisiana.
Ranking: The Revolving Credit Facility will be a
senior secured obligation of the Borrower,
ranking junior (except for the right to
receive and retain payments pursuant to HET
and/or HOC guarantees and put agreements) to
the $60 million A Term Loans (as hereinafter
defined), having a senior lien priority to
the $151.5 million B Term Loans (as
hereinafter defined) and the $187.5 million
of Bonds due 2009, which bonds include
contingent payments and the related new
contingent bonds (collectively, the
"Bonds"), and having a senior lien priority
to all other existing and future
indebtedness of the Borrower. The Revolving
Credit Facility will also have a junior
priority to the lien in favor of HET and HOC
as guarantors of the Minimum Payment, as
described in Section II below in the
paragraph entitled "Prior Security."
F-A-3
<PAGE>
Interest Rate: Loans under the Revolving Credit Facility
will bear interest at a rate per annum which
is (i) so long as the "Carry Obligations"
under the Completion Guarantee referenced
below remain guaranteed pursuant to the
terms of such Completion Guarantee and in
accordance with the terms thereof (with the
first date upon which such Carry Obligations
are no longer so guaranteed being herein
called the "Carry Obligation Termination
Date"), at the applicable HET interest rate
and (ii) at all times from and after the
Carry Obligation Termination Date, at a rate
per annum equal to the sum of (a) Libor +
2.50%, plus, if applicable, (b) any
increase, not to exceed 1.0%, in the
applicable interest rate charged under HET's
existing senior bank credit facility ("HET
interest rate") above the HET interest rate
in effect on the Effective Date, except that
default interest rates will apply to
past-due amounts.
B. Senior Secured Term Loans
(the "A Term Loans")
Amount: $60.0 million; with Tranche A-1 comprising
$10 million (the "A-1 Term Loans"), Tranche
A-2 comprising $20 million (the "A-2 Term
Loans"), and Tranche A-3 comprising $30
million (the "A-3 Term Loans").
Maturity: Tranches A-1 and A-2 - January 31, 2006
Tranche A-3 - April 30, 2005
Scheduled Amortization: As shown on Annex I attached hereto. See the
paragraph entitled "Amortization" in Section
II below.
Credit Support: HET and HOC shall jointly and severally
provide an unconditional payment guaranty
of, and/or "put" agreement with respect to,
all amounts owing under Tranche A-2 of the A
Term Loan Facility. Such guarantee and/or
put agreement shall contain terms and
conditions satisfactory to BTCo and HET,
including incorporating by reference the
covenants contained in HET's existing senior
bank credit facility.
F-A-4
<PAGE>
Security: To include a deed of trust and security
interest in the Collateral.
Ranking: The A Term Loans will be senior secured
obligations of the Borrower, ranking senior
to all existing and future indebtedness of
the Borrower (including the Revolving Credit
Facility, the B Term Loans and the Bonds),
but ranking junior to the lien in favor of
HET and HOC as guarantors of the Minimum
Payment, as described in Section II below in
the paragraph entitled "Prior Security."
Interest Rate: Loans under Tranche A-1 and Tranche A-3 will
bear interest at Libor + 1.0%, and loans
under Tranche A-2 will bear interest at a
rate per annum equal to the sum or (i) Libor
+ 2.50%, plus, if applicable, (ii) any
increase, not to exceed 1.0%, in the
applicable HET interest rate above the HET
interest rate in effect on the Effective
Date, except that in all cases default
interest rates will apply to past due
amounts.
C. Secured Term Loans (the "B
Term Loans")
Amount: $151.5 million; with Tranche B-1 comprising
$30 million (the "B-1 Term Loans") and
Tranche B-2 comprising $121.5 million
(the "B-2 Term Loans").
Maturity: January 31, 2006
Scheduled Amortization: As shown on Annex I. See the paragraph
entitled "Amortization" in Section II below.
Credit Support: HET and HOC shall jointly and severally
provide an unconditional payment guaranty
of, and/or "put" agreement with respect to,
all of the amounts owing under Tranche B-2
of the B Term Loan Facility. Such guaranty
and/or put agreement shall contain terms and
conditions satisfactory to BTCo and HET,
including incorporating by reference the
covenants contained in HET's existing senior
bank credit facility.
F-A-5
<PAGE>
Security: To include a deed of trust and security
interest in the Collateral.
Ranking: The B Term Loan Facility will be
subordinated to the A Term Loan Facility
and, in lien priority, to the Revolving
Credit Facility, pari passu with the Bonds,
and senior in lien priority to all other
existing and future senior indebtedness of
the Borrower. The B Term Loan Facility will
also have a junior priority to the lien in
favor of HET and HOC as guarantors of the
Minimum Payment, as described in Section II
below in the paragraph entitled "Prior
Security."
Interest Rate: Loans under Tranche B-1 will bear interest
at Libor + 2.50%. The loans under Tranche
B-2 will bear interest at a rate per annum
equal to (i) Libor + 2.50%, plus, if
applicable, (ii) any increase, not to exceed
1.0%, in the applicable HET interest rate
above the HET interest rate in effect on the
Effective Date on the portion of the loans
under Tranche B-2 in excess of $10 million
and in the case of the first $10 million of
such loans at any time outstanding, the rate
will be the applicable HET interest rate,
except that in all cases default interest
rates will apply to past-due amounts.
II. Terms Applicable to All
Credit Facilities
Prior Security: The security interests in favor of the
Revolving Credit Facility, A Term Loans and
B Term Loans will be subject to a prior
security interest in favor of HET and HOC as
guarantors of the Minimum Payment, as
described in Exhibit B to the Plan of
Reorganization. Intercreditor arrangements
involving this prior security interest are
to be determined.
Borrower A newly formed company, Jazz Casino Company,
L.L.C., to operate the former Harrah's Jazz
Casino project in New Orleans (the "Company"
or the "Borrower")
F-A-6
<PAGE>
Amortization The maturity date for each Tranche of the
Credit Facilities, as well as the
amortization schedule on Annex I attached
hereto, were based on a projected Effective
Date of October 31, 1998 and a projected
casino opening date of October 31, 1999. The
Credit Agreement will set forth an
amortization schedule based on the actual
Effective Date and the projected casino
opening date as of the Effective Date.
The scheduled amortization payments shown on
Annex I attached hereto (x) with respect to
the A-1 and A-2 Term Loans, shall be applied
pro rata to the outstanding A-1 and A-2 Term
Loans (based upon the relative outstanding
principal amounts thereof) and (y) with
respect to the B Term Loans, shall be
applied, first, to the repayment of all then
outstanding Tranche B-1 Term Loans and,
after all Tranche B-1 Term Loans have been
repaid in full, to outstanding Tranche B-2
Term Loans.
Amortization payments with respect to the
B-2 Term Loans shall be applied first to the
portion of the B-2 Term Loans as to which a
credit support fee is payable until such
portion is fully repaid and thereafter to
the balance of the B-2 Term Loans as to
which no credit support fee is payable.
For the first six PIK periods, the scheduled
quarterly amortizations listed in Annex I
attached hereto shall be deferred for the
corresponding PIK period if (i) the
payment-in-kind feature applicable to the
Bonds is exercised such that payments in
kind have been made for the semi-annual
periods ending prior to such quarterly
amortization date, (ii) HNOMC has deferred
base management fees for the corresponding
PIK period, (iii) HNOMC has deferred
incentive management fees for the
corresponding PIK periods, and (iv) HET has
deferred its fees for providing a guaranty
to the LGCB for the corresponding PIK
period.
F-A-7
<PAGE>
If EBITDA is less than $28.5 million for the
twelve month period ending one month prior
to each semi-annual bond interest payment
date beginning with the fourth year after
the Effective Date, the bonds will receive
PIK interest, management fees will be
deferred, scheduled amortization of bank
principal will be deferred (in no case
beyond the scheduled maturity date) and the
HET guarantee fee will be deferred.
At such time as EBITDA exceeds $65 million,
any deferred base management fees and
deferred guaranty fees may be repaid pro
rata out of available cash flow remaining
after application of Excess Cash Flow as set
forth in the paragraph entitled "Priorities
within Credit Facilities and Application of
Excess Cash Flow" in Section II below, and
at such time as EBITDA exceeds $75 million,
after payment of any deferred base fees and
deferred guaranty fees, any deferred
incentive management fees may also be repaid
pro rata out of available cash flow
remaining after application of Excess Cash
Flow as set forth in the paragraph entitled
"Priorities within Credit Facilities and
Application of Excess Cash Flow" in Section
II below.
Use of Proceeds/Funding: To complete, in all material respects, the
Casino Project (the "Casino Project") to be
developed in accordance with the Plans and
Specifications, Budget and Timetable (to be
defined in the Credit Agreement), provided
that the timing of the availability of the
Revolving Credit Facility and limitations on
the uses of the proceeds thereof, in each
case satisfactory to BTCo, shall be
provided.
The A-1, A-3 and the B-1 Term Loans must be
drawn at closing, without subsequent funding
or disbursement conditions, and the proceeds
may be used for the project or held for
future use by Borrower. Any such proceeds
being held for future use will constitute
Collateral.
F-A-8
<PAGE>
After the funding of A-1, A-3 and B-1 Term
Loans, drawings of the B-2 and A-2 Term
Loans and extensions of credit pursuant to
the Revolving Credit Facility will be
subject to conditions precedent that there
exist no default under Section 10.01
(payment) or Section 10.06 (bankruptcy) or
under the Bank Completion Guarantee or the
HET/HOC Guaranty and Loan Purchase Agreement
and that all representations in the Bank
Completion Guarantee and the HET/HOC
Guaranty and Loan Purchase Agreement remain
true and correct in all material respects;
provided that HET shall have an irrevocable
and unconditional obligation to fund any
undrawn amounts under the Bank Completion
Guarantee, subject to its terms.
Tranche B-2 must be drawn prior to Tranche
A-2. If any of Tranche B-2 remains undrawn
on completion of the Casino Project, on such
completion it shall be drawn, to the extent
Tranche A-1 Loans are then outstanding, to
pay down Tranche A-1. If any of Tranche B-2
remains undrawn (or will remain undrawn)
after the actions required by the
immediately preceding sentence are taken,
outstanding Tranche B-1 Loans in an
aggregate amount equal to such undrawn
amount shall be converted into Tranche B-2
Loans.
Upfront Fee: None.
F-A-9
<PAGE>
Completion Guarantee: HET and HOC will also guarantee completion
of the Casino Project in conformity with the
Plans and Specifications, the Budget and the
Timetable. If the Company has insufficient
funds to complete the Casino Project in
accordance with the Plans, HET and HOC will
be jointly and severally obligated to
promptly contribute at the time of such
insufficiency, in the form of junior
subordinated debt maturing in not less than
11 years, all amounts, in cash, necessary to
permit completion of the Casino Project. The
Completion Guarantee will terminate on the
date on which the Casino Project is
completed in all material respects. The
Completion Guarantee shall contain terms and
provisions which are substantially the same
as the provisions of the other Completion
Guarantees furnished by HET or HOC, as the
case may be, in respect of the Casino
Project and, in any event, shall be required
to be satisfactory to BTCo and HET.
HET/JCC Agreement: The Credit Agreement shall contain waiver
and release provisions regarding any
non-renewal of any Guaranty to the LGCB by
HET and HOCI in accordance with the terms of
the HET/JCC Agreement or non-renewal by HET
and HOCI of the HET/JCC Agreement after
March 31, 2004.
Priorities within Credit For purposes of allocating payments among
Facilities and Application the holders of the Term Loans and the
of Excess Cash Flow: lenders pursuant to the Revolving Credit
Facility only, all Excess Cash Flow (to be
defined in the Credit Agreement) will first
be allocated to repayment of Tranches A-1
and A-2 on a pro rata basis until Tranches
A-1 and A-2 have been repaid in full.
Scheduled amortization and other payments
made in respect of the Term Loan Facilities
and Revolving Credit Facility (excluding
payments pursuant to the payment guarantees
and put agreements referenced above) will
first be allocated to any unpaid amounts
F-A-10
<PAGE>
which are then due and payable with respect
to Tranches A and B-1. Payments shall be
allocated to amounts then due and payable
pursuant to the Revolving Credit Facility
and Tranche B-2 only if all amounts then due
and payable with respect to Tranches A and
B-1 have been paid in full.
After Tranches A-1 and A-2 are repaid,
mandatory prepayments resulting from
application of Excess Cash Flow and other
proceeds (excluding scheduled amortization)
shall be applied:
(i) if any principal amortization has been
deferred as set forth above, 75% of Excess
Cash Flow and such other proceeds shall be
applied to first to Tranche B-1 and second
to Tranche A-3 to the extent of the total of
all of such deferred principal amortization
(i.e. the total of deferred amortization on
Tranches A-1, A-2, A-3, B-1, and B-2); and
(ii) otherwise, and after the application of
clause (i) above, 50% of Excess Cash Flow
and such other proceeds shall be applied pro
rata to Tranches A-3, B-1 and B-2 until an
agreed Threshold Amount (determined based on
projected cash flow) for the respective
fiscal year has been so applied to Tranche
B-2. At such time as an aggregate amount
equal to the agreed Threshold Amount has
been so applied in any fiscal year, Excess
Cash Flow shall be applied first to Tranche
B-1, second to Tranche A-3 and third to
Tranche B-2.
The B-1 Term Loans and the B-2 Term Loans
will be secured equally and ratably with the
Bonds, and if, as a result of any
distribution pursuant to the security
arrangements or pursuant to a bankruptcy or
other similar proceeding with respect to the
Borrower or in
F-A-11
<PAGE>
other similar circumstances, amounts are
distributed in respect of Tranche B-2 (other
than payments pursuant to the payment
guarantees and put agreements referenced
above), then the holders of the B-2 Term
Loans shall (and shall agree to) turn such
amounts over to the holders of the B-1 Term
Loans until all amounts owing with respect
to the B-1 Term Loans are repaid in full.
The Credit Agreement and the payment
guarantees and/or put agreements in respect
of the B-2 Term Loans shall contain
subrogation and other provisions
satisfactory to BTCo acknowledging and
agreeing to the foregoing.
Administrative Agent's Fee: $100,000 payable annually in arrears.
Credit Support Fee: So long as the Revolving Credit Facility,
A-2 Term Loans or B-2 Term Loans are
entitled to the respective payment
guarantees and/or put agreements provided by
HET and/or HOC as described above, the
respective Banks shall agree that, from
interest payments actually received by them
in respect of the Revolving Credit Facility,
A-2 Term Loans or B-2 Term Loans, as the
case may be, HET shall be paid a fee equal
to 2% per annum on the outstanding principal
amount of Loans and/or stated amount of
letters of credit outstanding from time to
time pursuant to the Revolving Credit
Facility and Tranche A-2 and B-2 Term Loans
(in the case of B-2 Term Loans, only to the
extent of the aggregate outstanding
principal amount thereof from time to time
is in excess of $10 million); provided,
however, that (i) the fee described above
with respect to the credit support provided
for the Revolving Credit Facility shall only
accrue from and after the occurrence of the
Carry Obligation Termination Date; (ii) for
any time period in which the HET applicable
margin increases by more than 1.0% per annum
above the HET applicable margin in effect on
the Effective Date, the credit support fee
paid by the
F-A-12
<PAGE>
Banks shall decrease by .01% for each such
.01% increase in the HET applicable margin
(in excess of 1.0% over the HET applicable
margin in effect on the Effective Date)
until such credit support fee is reduced to
zero; (iii) for any time period in which the
HET applicable margin decreases below the
HET applicable margin in effect on the
Effective Date, the credit support fee paid
by the Banks shall increase by .01% for each
such .01% decrease in HET applicable margin
(below the HET applicable margin in effect
on the Effective Date).
So long as the Revolving Credit Facility,
A-2 Term Loans or B-2 Term Loans are
entitled to the respective payment
guarantees and/or put agreements provided by
HET and/or HOC as described above, JCC shall
pay a credit support fee equal to .75% per
annum on the outstanding principal amount of
Loans and/or stated amount of letters of
credit outstanding from time to time
pursuant to the Revolving Credit Facility
and Tranche A-2 and B-2 Term Loans (in the
case of B-2 Term Loans, only to the extent
of the aggregate outstanding principal
amount thereof from time to time is in
excess of $10 million); provided, however,
that (i) the fee described above with
respect to the credit support provided for
the Revolving Credit Facility shall only
accrue from and after the occurrence of the
Carry Obligation Termination Date; (ii) for
any time period in which the HET applicable
margin increases by more than .25% per annum
above the HET applicable margin in effect on
the Effective Date, the credit support fee
paid by JCC shall decrease by .01% for each
such .01% increase in the HET applicable
margin (in excess of .25% over the HET
applicable margin in effect on the Effective
Date) until such credit support fee is
reduced to zero.
F-A-13
<PAGE>
Covenants: The Credit Facilities will contain covenants
(which will apply equally to each of the
Credit Facilities) usual and customary for a
financing of this nature.
Intercreditor Agreement: The Administrative Agent (on behalf of the
lenders) and the trustee for the Bonds shall
enter into an intercreditor agreement with a
collateral agent regarding the Collateral
and the rights and remedies of the various
classes of lenders with respect thereto (the
"Intercreditor Agreement"), which
Intercreditor Agreement shall be in form and
substance satisfactory to BTCo. The
Intercreditor Agreement will provide HET
certain limited secured creditor voting
rights if HET is called on its payment
guaranty.
F-A-14
<PAGE>
Miscellaneous: The Credit Facilities will be documented
pursuant to mutually acceptable definitive
loan and collateral documents, including a
Credit Agreement and a satisfactory
Intercreditor Agreement. The Credit
Agreement will contain customary
representations, warranties, covenants,
events of default and other provisions.
Conditions Precedent will include as
conditions precedent to the closing date,
among other things:
(i) BTCo's satisfaction with Harrah's Jazz
Company's Plan of Reorganization, including
without limitation the releases to be
provided in connection therewith.
(ii) All necessary governmental and third
party consents and approvals have been
obtained (including, without limitation, all
approvals of the Bankruptcy Court having
jurisdiction over Harrah's Jazz Company's
bankruptcy case, all approvals by the LGCB
or its successor agency and all necessary
approvals by the people of Louisiana and
Orleans Parish).
(iii) Lender's satisfaction with the Plans
and Specifications, Budget, Timetable and
other Casino Project documents.
The Credit Agreement will include provisions
for:
(i) Payment of any Libor breakage costs,
capital adequacy charges and any applicable
taxes by the Borrower;
(ii) Regular reports as to the progress of
construction of the Casino Project;
(iii) Regular furnishing of unaudited
quarterly and audited annual financial
statements of the Borrower, monthly detailed
operating reports and other reports;
F-A-15
<PAGE>
(iv) Furnishing of the same reports with
respect to HET and its subsidiaries as are
required under the HET Bank Facility;
(v) Indemnification of Lenders as to all
third-party claims relative to the Credit
Facilities (except as to matters involving
the gross negligence or willful misconduct
of Lenders) and environmental law matters;
(vi) Application of New York law (except
certain security documentation that the
lenders determine should be governed by
Louisiana law) and waiver of jury trial; and
(vii) Assignments to customary eligible
assignees permitted with consent of the
Borrower, the Administrative Agent and, in
the case of assignments of interests in the
Revolving Credit Facility and A-2 or B-2
Term Loans, HET (none of which consents
shall be unreasonably withheld), subject to
$5.0 million minimum. No consents will be
required for assignment to existing Lenders
or after an event of default. Participations
permitted without consent of the Borrower or
Administrative Agent, subject to customary
limitations.
(viii) An event of default due to a change
of control of HET as a result of the Board
of HET not consisting of a majority of
Continuing Directors.
(ix) The change of control event of default
in the bank credit agreement will also occur
if HET does not retain at least 51% of the
Class B stock prior to the Transition Date
and 20% of the JCC Holding stock after the
Transition Date.
F-A-16
<PAGE>
(x) The Continuing Director event of default
or the change in ownership of Class B Stock
Event of Default will be deemed cured in
respect of the debt acquired by HET as
guarantor if the guaranteed bank debt is
acquired by HET as guarantor; provided that
such deemed cure shall not affect the bank
debt guaranteed by HET unless and until HET
as guarantor acquires such bank debt and in
any event shall not affect the bank debt not
guaranteed by HET.
(xi) The change of the Casino Manager or
loss of the Harrah's name shall be an event
of default in the Bank Credit Agreement.
Requisite Lenders: Lenders comprising more than 50% of total
commitments under the Credit Facilities;
provided that commitments held by HET, HOC
or any other affiliate of the Borrower shall
be excluded.
Expense and Indemnity Provisions: JCC shall reimburse the Banks up to $750,000
in attorneys' fees plus out-of-pocket
expenses of White & Case, including local
counsel fees, incurred in connection with
the negotiation and documentation of the
Revolving Credit Facility, the A Term Loans
and the B Term Loans.
F-A-17
<PAGE>
ANNEX I TO JAZZ CASINO COMPANY, L.L.C. - BANK FINANCING INDICATIVE TERM SHEET
<TABLE>
<CAPTION>
$30 million $30 million $151.5 million
A-1 and A-2 A-3 Term Loan B Term Loans Total
Term Loans
<S> <C> <C> <C> <C>
July 31, 2000 $100,000 $1,000,000 $1,500,000 $ 2,600,000
October 31, 2000 $100,000 $1,000,000 $1,500,000 $ 2,600,000
January 31, 2001 $100,000 $1,000,000 $1,500,000 $ 2,600,000
April 30, 2001 $100,000 $1,000,000 $1,500,000 $ 2,600,000
July 31, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
October 31, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
January 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
April 30, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
July 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
October 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
January 31, 2003 $100,000 $1,500,000 $2,500,000 $ 4,100,000
April 30, 2003 $100,000 $1,500,000 $2,500,000 $ 4,100,000
July 31, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
October 31, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
January 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
April 30, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
July 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
October 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
January 31, 2005 $100,000 $1,750,000 $2,500,000 $ 4,350,000
April 30, 2005 $100,000 $1,750,000 $2,500,000 $ 4,350,000
July 31, 2005 $100,000 $0 $4,250,000 $ 4,350,000
October 31, 2005 $100,000 $0 $4,250,000 $ 4,350,000
January 31, 2006 $27,800,000 $0 $97,000,000 $124,800,000
Total $30,000,000 $30,000,000 $151,500,000 $211,500,000
</TABLE>
Note: See the paragraph entitled "Amortization" in Section II of the Bank
Financing Indicative Term Sheet to which this Annex I is attached.
F-A-18
<PAGE>
Exhibit 2.10
Exhibit G
September 3, 1998
Terms and Conditions of
Underwriters Participation in Reorganization Financing
<PAGE>
Exhibit G
September 3, 1998
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Harrah's New Orleans Investment Co.
Terms and Conditions of
Underwriters Participation in Reorganization Financing
I. Terms of Underwriters' Donaldson, Lufkin & Jenrette Securities
Financing: Corporation ("DLJ"), Salomon Brothers Inc.
("Salomon") and BT Securities Corporation
("BT Securities") (collectively in their
capacity as underwriters for HJC and HNOIC,
the "Underwriters") subject to the
conditions set forth below agree to purchase
approximately $15 million face value of
subordinated notes (the "Notes") on mutually
acceptable terms and conditions as set forth
in the attached term sheet. The aggregate
amount of the Notes to be purchased by the
Underwriters shall be equal to the aggregate
fees, and expenses paid or reimbursed to the
Underwriters.
II. Terms of the Debtors' The following shall be effectuated through
Chapter 11 Plan (the pre-solicitation modifications to the
"Plan"): proposed Plan satisfactory to the
Underwriters:
A. Waiver of Other The Underwriters agree to waive all of their
Claims: claims against any or all of the Debtors and
the HJC Partners.
G-1
<PAGE>
B. Settlement and The Underwriters shall exchange mutual
Releases: releases with the estate of each Debtor, the
Debtors Group, the HET Group, the Bondholder
Committee Group, the City Group, the State
Group, the NOLDC Group and the Grand Palais
Group, FNBC and other parties receiving
releases from the Debtors, on terms no less
favorable than those being granted under the
Plan to Harrah's Entertainment, Inc. ("HET")
and such other parties. Injunctive and other
protections granted to Released Parties (as
defined in the Plan) shall apply on the same
terms to the Underwriters. All of the
foregoing shall be effectuated to obtain the
broadest possible preclusive effect with
respect to all potential derivative or
direct claims.
The Underwriters shall be included in the
group of persons whose collective release is
being solicited from bondholders through the
separate consensual release mechanism.
(Note: consideration for release of the
Underwriters is, inter alia, the Release
Pool stock to be contributed by HET.) Any
claims against non-participating banks or
other non-settling parties will be retained
by the reorganized debtor, with a judgment
reduction and indemnity mechanism for
settled parties in respect of such claims.
III. No Reimbursement of Each Underwriter shall bear all fees and
Attorneys' Fees and expenses of attorneys acting on its behalf
Expenses related to the original financing, the Exit
Financing (through the closing) and these
bankruptcy cases.
G-2
<PAGE>
FOR DISCUSSION PURPOSES ONLY
Term Sheet for
Convertible Junior Subordinated Debentures (the "Debentures")
To Be Issued By
Jazz Casino Company, L.L.C.
Issuer Jazz Casino Company, L.L.C. ("Jazz")
Principal Amount Approximately $26.637 million
Approximately $15 million purchased by the
Underwriters or their affiliates and
approximately $11.0 million to be purchased
by Bankers Trust. The aggregate amount of
the Debentures to be purchased by the
Underwriters shall be equal to the aggregate
fees, and expenses paid or reimbursed to the
Underwriters.
Purchase Price Par.
Maturity 6 months following the scheduled maturity of
the $187.5 million of new contingent bonds
(the "Contingent Bonds") to be issued to
existing bondholders.
Interest 8.0% per annum payable semi-annually either
in cash, or at the option of Jazz, in whole
or in part, in additional Debentures (i) at
any time during the first five full years
following the issuance of the Debentures,
and (ii) at any time thereafter if during
the immediately preceding full interest
period on the Contingent Bonds, no
contingent interest was paid on the
Contingent Bonds.
Amortization None.
G-3
<PAGE>
Rank Subordinated to the A Term Loan, the B Term
Loan, the Working Capital Facility, the New
Bonds and the New Contingent Bonds, as well
as all debt which would constitute Senior
Debt to the foregoing. The Debentures will,
however, be senior to the repayment of
Jazz's obligations under the Completion Loan
and any other amounts advanced by Harrah's
Entertainment under its completion
obligations.
Collateral None.
Convertible At the Conversion Price in whole or in part,
at any time after October 1, 2002 at the
option of the holder into Class A Common
Stock of Jazz.
Conversion Price $25.00 per share of Class A Common Stock,
subject to anti-dilution and other
appropriate adjustments (which has been
calculated using the 10,000,000 shares of
Class A and Class B Common Stock which are
expected to be issued on the Effective Date,
and a target total market value of such
shares of Class A and Class B common stock
equal to $250.0 million).
Redeemable At the option of Jazz, (i) at any time at
par plus accrued interest in cash, or (ii)
at any time during the 12 months prior to
the maturity of the Debentures, at par in
whole or in part in shares of Class A Common
Stock at the Conversion Price per share if
the Conversion Price per share is greater
than the Current Market Price per share. The
"Current Market Price" of the Class A Common
Stock as of any date will be defined as the
volume-weighted average of the closing
trading or bid prices of the Class A common
stock for the 10 consecutive trading days
preceding such date, with customary
modification if the Class A common stock is
not then traded.
Amortization None required prior to maturity.
Credit Support None.
Purpose Construction financing and other corporate
purposes.
G-4
<PAGE>
Fees None, other than the payment of interest.
Covenants None, other than payment of interest.
Conditions, Representations and None other than basic legality and
Warranties enforceability of the Debentures.
Issuance The Debentures are to be purchased by the
Underwriters or their affiliates and the
banks on the Effective Date of the HJC
Bankruptcy. Jazz to provide demand
registration rights to permit one
underwritten secondary offering of these
Debentures if requested by the initial
holders of the restricted Debentures in an
amount no less than $5 million and no sooner
than October 1, 2002.
Jazz will file the reports required under
Section 13(a) or 15(d) of the 1934 Act and
the rules and regulations adopted by the SEC
thereunder. Upon the request of any holder
of Debentures, Jazz will (i) make publicly
available such information as is necessary
to permit sales pursuant to Rule 144 under
the 1933 Act, (ii) deliver such information
as is necessary to permit sales pursuant to
Rule 144A under the 1933 Act, and (iii) take
such further action as is reasonable under
the circumstances to enable such holder to
sell its Debentures without registration
under the 1933 Act. Upon the request of any
holder of Debentures, Jazz will deliver to
such holder a written statement as to
whether it has complied with such
requirements.
Acknowledgment The Indenture for the Convertible
Subordinated Debenture will contain certain
waiver and release provisions regarding any
non-renewal of the Guaranty (as defined in
the HET/JCC Agreement between HET, HOCI and
JCC in favor of the LGCB) in accordance with
the terms of the HET/JCC Agreement or
non-renewal of the HET/JCC Agreement after
March 31, 2004
G-5
<PAGE>
EXHIBIT 2.10
EXHIBIT H
FNBC SETTLEMENT AGREEMENT
<PAGE>
[LETTERHEAD]
WRITER'S DIRECT DIAL NO. (504) 556-4132
WRITER'S DIRECT E-MAIL NO. [email protected]
NEW ORLEANS, LOUISIANA
APRIL 24, 1997
<TABLE>
<S> <C>
William H. Patrick, III, Esq. Rudy J. Cerone, Esq.
A Professional Law Corporation McGlinchey, Stafford, Lang
365 Canal Street, Suite 2800 643 Magazine Street
New Orleans, LA 70130 New Orleans, LA 70130
Re: Harrah's Jazz Company
Docket No. 95-14545
United States Bankruptcy Court
Eastern District of Louisiana
</TABLE>
Dear Billy and Rudy:
This is to confirm the agreement of Harrah's Jazz Company ("HJC"), Harrah's
Entertainment, Inc. ("HET"), the Official Bondholders' Committee (the
"Committee"), Bankers Trust Company and First National Bank of Commerce
("FNBC"). The consent of these parties is reflected by the respective signatures
below. In reliance upon this agreement, FNBC will withdraw its pending
objections to the Third Amended Joint Plan of Reorganization under Chapter 11 of
the Bankruptcy Code (the "Plan") and will support its confirmation. All
capitalized terms used below have the meanings ascribed to them in the Plan. The
agreement is as follows:
1. FNBC shall purchase $757,150.00 of Convertible Junior Subordinated
Debentures on the Effective Date. Other than this purchase FNBC shall not be
required to participate in any loans or other forms of financing of Jazz
Casino Company;
2. FNBC shall be authorized to retain $100,000 plus accrued interest until the
later of (i) one year from the Effective Date or (ii) the resolution by
final unappealable judgment of any litigation filed against FNBC within one
year of the Effective Date to which FNBC is entitled to indemnity under the
Old Bank Credit Documents and/or Old Bond Documents, at which time the
principal and accrued interest shall be released to Jazz Casino Corporation.
These funds will be pledged to secure the indemnity obligations of HJC under
the Old Bank Credit Documents and/or Old Bond Documents which will be
assumed by Jazz Casino Company as an IN REM obligation limited solely to the
funds held by FNBC;
3. In addition, FNBC shall be entitled to the unsecured indemnity obligations
for costs of defense only as granted in Old Bond Documents and/or Old Bank
Credit Documents from Jazz Casino Company;
4. All services rendered by FNBC as Old Bank Collateral Agent, Old Indenture
Predecessor Trustee and Old Indenture Predecessor Collateral Agent to
consummate the Plan shall be for the account of Jazz Casino Company and
payable to FNBC pursuant to Section 6.18 of the Plan;
5. FNBC shall be included as a Released Party under the Plan;
6. All claims of FNBC for indemnity and the security interests which secure
them (including the charging lien against distributions to the Bondholders)
pursuant to the Old Bank Credit Documents and/or Old Bond Documents shall be
canceled and extinguished on the Effective Date except as provided in
paragraphs 2 and 3, above;
7. The undrawn Standby Letter of Credit S-10269 issued by Bankers Trust Company
in the amount of $1,500,000 in favor of the City of New Orleans shall be
canceled under the Plan as of the Effective Date.
<PAGE>
8. The Unsecured and Secured Claim of FNBC (I.E., Classes A.7 and A.3) shall be
allowed finally and shall be paid in accordance with the attached Exhibit A.
9. All reasonable attorney's fees and expenses of Liskow & Lewis up to
$275,000.00 through the date hereof and other costs (including expert
witness fees and expenses) up to $75,000 through the date hereof and all
reasonable attorney's fees and expenses of Phelps Dunbar, L.L.P. which FNBC
has incurred in connection with this bankruptcy case through the Effective
Date for which it has not received prior reimbursement from HJC shall be
paid by JCC upon approval by the Bankruptcy Court. With regard to these
attorney's fees and expenses and other costs which HJC acknowledges as being
an obligation to be paid, the "reasonableness" of the fees charged by FNBC's
attorneys shall be the only unresolved issue. Upon resolution of any such
dispute whether by agreement or otherwise, FNBC shall be paid by JCC on or
as soon as practicable after the Effective Date.
10. The parties agree to file mutually acceptable modifications to the Plan and
other pleadings as are necessary to effectuate this Agreement.
11. The FNBC shall receive the indemnity from HET in the form attached hereto as
Exhibit B.
12. This agreement may be executed in multiple counterparts, which when executed
by all the parties hereto shall constitute a single agreement.
<TABLE>
<S> <C>
Very truly yours,
Liskow & Lewis
By:
-----------------------------------------
Philip K. Jones, Jr.
Phelps, Dunbar
By:
-----------------------------------------
S. Ault Hootsell, III
Co-counsel for First National Bank of
Commerce
Agreed to:
HARRAH'S JAZZ COMPANY HARRAH'S ENTERTAINMENT INC.
By: By:
-------------------------------------- -----------------------------------------
OFFICIAL BONDHOLDERS' COMMITTEE BANKERS TRUST COMPANY
By: By:
-------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
(EXHIBIT "A")
EASTERN DISTRICT OF LOUISIANA
<TABLE>
<S> <C> <C>
IN RE: * CASE NO. 95-14545-TMB
HARRAH'S JAZZ COMPANY, * CHAPTER 11
DEBTOR *
* * * * * * * * * * * * * * * * * * * * * * * * *
IN RE: * CASE NO. 95-14544-TMB
HARRAH'S JAZZ FINANCE CORP., * CHAPTER 11
DEBTOR *
* * * * * * * * * * * * * * * * * * * * * * * * * *
</TABLE>
AGREED ORDER
BEFORE THIS COURT, on this 28th day of April, 1997, at 10:00 a.m., came on
for hearing the objections of Harrah's Jazz Company ("HJC") and Harrah's Jazz
Finance Corp. ("HJFC") to Proof of Claim No. 563 filed by First National Bank of
Commerce ("FNBC") in the HJC bankruptcy and Proof of Claim No. 66 filed by FNBC
in the HJFC bankruptcy (the "Proofs of Claim"), as set forth in HJC's Sixth Set
of Objections to Claims, as amended by the Debtors' Amended Objections to Claims
of First National Bank of Commerce or, in the Alternative, Motion for Estimation
and Valuation of Claims.
By Agreement, HJC, HJFC and the Official Bondholders Committee have agreed
to withdraw their objections to the Proofs of Claim;(1) the parties' stipulation
with regard to the treatment of FNBC's unsecured claims and secured letter of
credit claims is set forth below. (Defined terms below shall have the same
meaning ascribed to them under the Third Amended Joint Plan of Reorganization
and Chapter 11 of the Bankruptcy Code, as modified.)
It appearing to this Court that there exists just cause for the entry of the
Order, as presented:
IT IS ORDERED that the Unsecured Claim of FNBC be, and hereby is, Allowed
finally and shall not be subject to any further objections.
IT IS FURTHER ORDERED that FNBC's Unsecured Claim be, and is hereby,
established in the amount of $42,317.06, and shall be paid under the Plan in
accordance with Clause A7--General Unsecured Claims.
IT IS FURTHER ORDERED that the Secured Claims of FNBC under (i) the
prepetition standby letter of credit issued by Bankers Trust Company in the
amount of $5,000,000 and previously drawn in full by Broadmoor as the
beneficiary (the "$5mm L/C") and the (ii) undrawn Standby Letter of Credit
S-10269 issued by Bankers Trust Company in the amount of $1,500,000 in favor of
the City (the "$1.5mm L/C") shall be, and hereby is, Allowed finally and shall
not be subject to any further objection.
IT IS FURTHER ORDERED that FNBC's Allowed Secured Claims under the $5mm L/C
and $1.5mm L/C be, and hereby are, established in an amount equal to (A) FNBC's
participation interest (5.7142866%) in the $5mm L/C ($285,714.28), plus all
unpaid interest thereon (at the nondefault rate specified in the Old Bank Credit
Documents); and (B) FNBC's participation interest (5.714866%) in the unpaid fees
in respect of both the $5mm L/C and the $1.5mm L/C through the Effective Date.
- ------------------------
(1) The Official Bondholders Committee, which filed a response in support of
HJC's Objections to the Proofs of Claim, joins in this Agreed Order.
2
<PAGE>
IT IS FURTHER ORDERED that, in addition to the amounts established under the
preceding paragraph, to extent that the FNBC's obligations under the $1.5mm L/C
are not terminated and/or cancelled as a result of the occurrence of the
Effective Date, FNBC's allowed Secured Claims under the $1.5mm L/C shall also
include (i) FNBC's participation interest (5.7142866%) in any draws under the
$1.5mm L/C, (ii) interest thereon and (iii) any additional fees or other amounts
to which FNBC may be entitled under the $1.5mm L/C subsequent to the Effective
Date.
IT IS FURTHER ORDERED that FNBC's Secured Claims under the $5mm L/C and
$1.5mm L/C shall be paid on the Effective Date. Such payment shall be made first
from the Withheld Funds by the Administrative Agent, and second, if the Withheld
Funds are insufficient, by the payment of cash by JCC.
IT IS FURTHER ORDERED that FNBC's Proofs of Claim be, and hereby are,
amended to reflect the terms of, and are superseded by, this Agreed Order and
the April 24, 1997 Letter Agreement by and between FNBC, HJC, the Bondholders
Committee and Bankers Trust Company.
IT IS FURTHER ORDERED that HJC's, HJFC's and the Bondholders Committee's
objections to FNBC's Proofs of Claim, as so amended herein, be, and hereby are,
withdrawn.
NEW ORLEANS, LOUISIANA, this day of April, 1997.
--------------------------------------
UNITED STATES BANKRUPTCY JUDGE
3
<PAGE>
AGREED
- ---------------------------------------------
WILLIAM HARDY PATRICK III
A PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, LA 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
ATTORNEYS FOR HARRAH'S JAZZ COMPANY
AND HARRAH'S JAZZ FINANCE CORP.
- ---------------------------------------------
RUDY J. CERONE, ESQ.
FRANK MARTIN, ESQ.
MCGLINCHEY STAFFORD LANG
643 Magazine Street
New Orleans, LA 70130
Telephone: (504) 586-1200
ATTORNEYS FOR THE OFFICIAL
BONDHOLDERS COMMITTEE
PHELPS DUNBAR, L.L.P.
- ---------------------------------------------
S. AULT HOOTSELL III (#17630)
Thirtieth Floor, Texaco Center
400 Poydras Street
New Orleans, LA 70130-3245
Telephone: (504) 566-1311
ATTORNEYS FOR FIRST NATIONAL
BANK OF COMMERCE
4
<PAGE>
LATHAM & WATKINS
ATTORNEYS AT LAW
SEARS TOWER, SUITE 5800
CHICAGO, ILLINOIS 60606
TELEPHONE (312) 875-7700
FAX (312) 993-9767
APRIL 24, 1997
(EXHIBIT "B")
First National Bank of Commerce
c/o Philip K. Jones
Liskow & Lewis
One Shell Square, 50th Floor
New Orleans, LA 70139-5001
and
Mr. S. Ault Hootsell III
Phelps Dunbar, L.L.P.
Texaco Center, 30th Floor
400 Poydras Street
New Orleans, LA 70130-3245
Re: Harrah's Entertainment, Inc. Indemnity Agreement
Dear Kirk and Ault:
On behalf of my client, Harrah's Entertainment, Inc. ("HET"), I am writing
to confirm HET's agreement with regard to several matters for First National
Bank of Commerce ("FNBC").
First, HET hereby confirms that the Stipulation and Agreement of Settlement
executed on April 16, 1997 ("the Stipulation and Agreement of Settlement"),
resolving that certain action captioned IN RE HARRAH'S ENTERTAINMENT SECURITIES
LITIGATION, Master File No. 95-3925, pending before the United States District
Court for the Eastern District of Louisiana (the "Class Action") includes a
release of FNBC on the same terms as are provided for the release of HET.
Second, HET agrees that it will not seek to either eliminate or limit in any
way the release provided to FNBC in the Stipulation and Agreement of Settlement,
including any amendments or modifications thereof, before final approval by the
United States Distric Court.
Third, HET agrees that it shall assure that FNBC is included as a released
party under any amendments or modifications to the Stipulation and Agreement of
Settlement, or any other settlement of the Class Action, on the same terms
provided for the release of HET, without any consideration being paid by FNBC.
Fourth, HET agrees to indemnify and defend FNBC from and against any and all
losses suffered by FNBC if the Stipulation and Agreement of Settlement,
including any amendments or modifications thereof, or any other settlement of
the Class Action, is approved by the United States District Court (i) with the
inclusion of HET, but not FNBC, as a released party therein, or (ii) which
contains a release of HET which is broader than the release provided therein to
FNBC.
This Agreement shall be effective upon the occurence of the Effective Date
of (and as defined in) the debtor's Third Amended Joint Plan of Reorganization
under Chapter 11 of the Bankruptcy Code, as modified (the "Plan"), in the
consolidated bankruptcies captioned, "In the matter of Harrah's Jazz Company,"
Case No. 95-14544, before the United States Bankruptcy Court, Eastern District
of Louisiana. HET acknowledges and agrees that upon the occurrence of the
Effective Date, as defined in the Plan,
<PAGE>
HET shall be liable for any breach of this Agreement by HET that has occurred
after April 24, 1997, and for all damages sustained by FNBC.
Sincerely,
Richard A Levy
APPROVED AND AGREED:
Harrah's Entertainment, Inc.
By:
- --------------------------------------
Name:
Title:
Date:
- ------------------------------------
<PAGE>
Exhibit 2.10
Exhibit I
Term Sheet
September 3, 1998
Development Services Agreement
<PAGE>
Exhibit I
September 3, 1998
Term Sheet
Development Services Agreement
This term sheet outlines the principal terms proposed for inclusion in that
certain Development Services Agreement to be entered into by and between Jazz
Casino Company, L.L.C., a Louisiana limited liability company (the "Company"),
JCC Development Company, L.L.C., a Louisiana limited liability company ("JCC
Development"), CP Development, L.L.C., a Louisiana limited liability company
("CPD") and FP Development, L.L.C., a Louisiana limited liability company
("FPD") (the Company, JCC Development, CPD and FPD are referred to collectively
herein as the "Owners") and Harrah's Operating Company Inc. ("HOCI") (the
"Development Services Agreement"). This term sheet is attached to and
incorporated into that certain plan of reorganization in the bankruptcy
proceedings of Harrah's Jazz Company, a Louisiana general partnership (the
"Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
agreements related to the Development Services Agreement in connection with the
Plan. As set forth more fully in the Plan, if the Plan is not consummated within
the time period specified therein, the parties shall have no further obligations
to pursue the matters described herein.
2. Development Services. Under the Development Services Agreement, the Owners,
or any of them, may request that HOCI or an affiliate of HOCI perform any or all
of the following project development and management functions (the "Development
Services") with respect to the Casino, the second floor of the Casino, the
Fulton Street property and the 3CP property (the "Development Properties"):
(a) researching and investigating potential uses for the Development
Properties;
(b) identifying and exploring the professional qualifications of
individuals and companies who may be capable of performing services in
connection with designing, determining appropriate uses for and
developing the Development Properties;
(c) assisting in the evaluation of options as to the Development
Properties; or
(d) assisting in or coordinating activities involved in the development of
the Development Properties.
3. Payment For Development Services. If any Owner requests that HOCI or an
affiliate of HOCI perform any Development Services and HOCI accepts such
request, such Owner shall pay
I-1
<PAGE>
to HOCI or any affiliate of HOCI development
services fees or reimbursements of costs and expenses at market rates as agreed
between such Owner and HOCI prior to HOCI or its affiliate undertaking from time
to time any Development Services.
4. Indemnities
(a) The Owners agree to defend, indemnify and save HOCI and all affiliates
of HOCI completely harmless in respect to any action, cause of action,
suit, debt, cost, expense, claim, or demand whatsoever brought by any
third party at law or in equity, in connection with the performance by
HOCI or any affiliates of HOCI of any and all of its obligations under
the Development Services Agreement, including without limitation, any
damage or injury whatsoever to any employees or other persons,
entities or property arising out of the use, administration, or
control of the Development Properties during the term of the
Development Services Agreement, which defense, indemnity, and holding
harmless shall continue notwithstanding the termination of the
Development Services Agreement with respect to any act or occurrence
preceding such termination; provided, however, that in no event shall
the defense, indemnity and holding harmless extend to any action,
cause of action, suit, debt, cost, expense, claim, or demand caused by
the willful misconduct or gross negligence of HOCI or any affiliate of
HOCI, or to any action taken by HOCI or any affiliate of HOCI in
violation of or outside the provisions of the Development Services
Agreement.
(b) HOCI shall defend, indemnify and save the Owners completely harmless
in respect to any action, cause of action, suit, debt, cost, expense,
claim, or demand whatsoever brought or asserted by any third party, at
law or in equity, arising by way of the gross negligence or willful
misconduct of HOCI or any affiliate of HOCI in connection with the
performance by HOCI or any affiliate of HOCI of any and all of HOCI's
obligations under the Development Services Agreement, which indemnity
shall continue notwithstanding the termination of the Development
Services Agreement with respect to any act or occurrence preceding
such termination.
I-2
<PAGE>
Exhibit 3.04
AMENDED AND RESTATED
BYLAWS
OF
JCC HOLDING COMPANY
<PAGE>
AMENDED AND RESTATED
BYLAWS OF
JCC HOLDING COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
ARTICLE I. OFFICES...............................................................................................1
Section 1. REGISTERED OFFICES..............................................................................1
Section 2. OTHER OFFICES...................................................................................1
ARTICLE II. MEETINGS OF STOCKHOLDERS.............................................................................1
Section 1. PLACE OF MEETINGS...............................................................................1
Section 2. ANNUAL MEETING OF STOCKHOLDERS..................................................................1
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF...................................................2
Section 4. VOTING..........................................................................................2
Section 5. PROXIES.........................................................................................3
Section 6. SPECIAL MEETINGS................................................................................3
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS................................................................4
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST..................................................4
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.........................................5
ARTICLE III. DIRECTORS...........................................................................................6
Section 1. THE NUMBER OF DIRECTORS.........................................................................6
Section 2. VACANCIES.......................................................................................6
Section 3. POWERS..........................................................................................7
Section 4. PLACE OF DIRECTORS' MEETINGS....................................................................7
Section 5. REGULAR MEETINGS................................................................................7
Section 6. SPECIAL MEETINGS................................................................................7
Section 7. QUORUM..........................................................................................8
Section 8. ACTION WITHOUT MEETING..........................................................................8
Section 9. TELEPHONIC MEETINGS.............................................................................8
Section 10. COMMITTEES OF DIRECTORS.........................................................................9
Section 11. MINUTES OF COMMITTEE MEETINGS...................................................................9
Section 12. COMPENSATION OF DIRECTORS......................................................................10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV. OFFICERS............................................................................................10
Section 1. OFFICERS.......................................................................................10
Section 2. ELECTION OF OFFICERS...........................................................................11
Section 3. SUBORDINATE OFFICERS...........................................................................11
Section 4. COMPENSATION OF OFFICERS.......................................................................11
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES..........................................................11
Section 6. CHAIRMAN OF THE BOARD..........................................................................11
Section 7. PRESIDENT......................................................................................12
Section 8. VICE PRESIDENTS................................................................................12
Section 9. SECRETARY......................................................................................13
Section 10. ASSISTANT SECRETARY............................................................................13
Section 11. TREASURER......................................................................................13
Section 12. ASSISTANT TREASURER............................................................................14
ARTICLE V. INDEMNIFICATION OF DIRECTORS AND OFFICERS............................................................14
ARTICLE VI. INDEMNIFICATION OF EMPLOYEES AND AGENTS.............................................................19
ARTICLE VII. CERTIFICATES OF STOCK..............................................................................19
Section 1. CERTIFICATES...................................................................................19
Section 2. SIGNATURES ON CERTIFICATES.....................................................................19
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES.............................................20
Section 4. LOST CERTIFICATES..............................................................................20
Section 5. TRANSFERS OF STOCK.............................................................................21
Section 6. FIXED RECORD DATE..............................................................................21
Section 7. REGISTERED STOCKHOLDERS........................................................................22
ARTICLE VIII. GENERAL PROVISIONS................................................................................22
Section 1. DIVIDENDS......................................................................................22
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES........................................................22
Section 3. CHECKS.........................................................................................23
Section 4. FISCAL YEAR....................................................................................23
Section 5. CORPORATE SEAL.................................................................................23
Section 6. MANNER OF GIVING NOTICE........................................................................23
Section 7. WAIVER OF NOTICE...............................................................................23
Section 8. ANNUAL STATEMENT...............................................................................24
ARTICLE IX. AMENDMENTS..........................................................................................24
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.........................................................24
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
JCC HOLDING COMPANY
ARTICLE I.
OFFICES
Section 1. REGISTERED OFFICES. The registered office shall be
in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall
be held at any place within or outside the State of Delaware designated by the
Board of Directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting
of stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
1
<PAGE>
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A
majority of the stock issued and outstanding and entitled to vote at any meeting
of stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by
these Bylaws. A quorum, once established, shall not be broken by the withdrawal
of enough votes to leave less than a quorum and the votes present may continue
to transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat.
Section 4. VOTING. When a quorum is present at any meeting, in
all matters other than the election of directors, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes, or the Certificate of
Incorporation, or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors.
2
<PAGE>
Section 5. PROXIES. At each meeting of the stockholders, each
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article VII, Section 6 hereof.
Section 6. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose, or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the
President and shall be called by the President or the Secretary at the
request in writing of a majority of the Board of Directors, or at the request
in writing of stockholders owning a majority in amount of the entire capital
stock of the corporation issued and outstanding, and entitled to vote. Such
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
3
<PAGE>
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever
stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which notice shall state the place,
date and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. The written notice of any meeting
shall be given to each stockholder entitled to vote at such meeting not less
than ten nor more than sixty days before the date of the meeting. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST. The
officer who has charge of the stock ledger of the corporation shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
4
<PAGE>
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Unless otherwise provided in the Certificate of Incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted and shall be delivered to the corporation by delivery to its
registered office in Delaware, its principal place of business, or to an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Every written consent
shall bear the date of signature of each stockholder who signs the consent
and no written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the earliest dated consent
delivered in the manner required by this Section 9 to the corporation,
written consents signed by a sufficient number of holders to take action are
delivered to the corporation by delivery to its registered office in
Delaware, its principal place of business or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt
requested. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
5
<PAGE>
ARTICLE III.
DIRECTORS
Section 1. THE NUMBER OF DIRECTORS. The number of directors
which shall constitute the whole Board shall be one (1). The directors need not
be stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified;
provided, however, that unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, either with or without cause, from the Board of Directors at any
meeting of stockholders by a majority of the stock represented and entitled to
vote thereat.
Section 2. VACANCIES. Vacancies on the Board of Directors by
reason of death, resignation, retirement, disqualification, removal from
office, or otherwise, and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. The directors so chosen shall hold office until the next
annual election of directors and until their successors are duly elected and
shall qualify, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
If, at the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
Board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to
be held to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office.
6
<PAGE>
Section 3. POWERS. The property and business of the
corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may
hold their meetings and have one or more offices, and keep the books of the
corporation outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President on forty-eight hours' notice to each
director, either personally or by mail or by telegram; special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of two directors unless the Board consists of only one
director; in which case special meetings shall be called by the President or
Secretary in like manner or on like notice on the written request of the sole
director.
7
<PAGE>
Section 7. QUORUM. At all meetings of the Board of Directors
one-third (1/3) of the total number of authorized directors shall be necessary
and sufficient to constitute a quorum for the transaction of business, except
that when a board of one director is authorized, then one director shall
constitute a quorum. The vote of a majority of the directors present at any
meeting at which there is a quorum, or if only one director is authorized, the
vote of such sole director, shall be the act of the Board of Directors, except
as may be otherwise specifically provided by statute, by the Certificate of
Incorporation or by these Bylaws. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 8. ACTION WITHOUT MEETING. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 9. TELEPHONIC MEETINGS. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
8
<PAGE>
Section 10. COMMITTEES OF DIRECTORS. The Board of Directors
may, by resolution passed by a majority of the whole Board, designate one or
more committees, each such committee to consist of one or more of the
directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the Bylaws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
Section 11. MINUTES OF COMMITTEE MEETINGS. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors when required.
9
<PAGE>
Section 12. COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE IV.
OFFICERS
Section 1. OFFICERS. The officers of this corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board of
Directors or a President, or both, and a Secretary. The corporation may also
have at the discretion of the Board of Directors such other officers as are
desired, including a Vice-Chairman of the Board of Directors, a Chief
Executive Officer, a Treasurer, one or more Vice Presidents, one or more
Assistant Secretaries and Assistant Treasurers, and such other officers as
may be appointed in accordance with the provisions of Section 3 hereof. In
the event there are two or more Vice Presidents, then one or more may be
designated as Executive Vice President, Senior Vice President, or other
similar or dissimilar title. At the time of the election of officers, the
directors may by resolution determine the order of their rank. Any number of
offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide.
10
<PAGE>
Section 2. ELECTION OF OFFICERS. The Board of Directors, at
its first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all
officers and agents of the corporation shall be fixed by the Board of Directors.
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers
of the corporation shall hold office until their successors are chosen and
qualify in their stead. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. If the office of any officer or officers becomes vacant
for any reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board,
if such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in Section 7 of this Article IV.
11
<PAGE>
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board, if
there be such an officer, the President shall be the Chief Executive Officer
of the corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business
and officers of the corporation. He shall preside at all meetings of the
stockholders and, in the absence of the Chairman of the Board, or if there be
none, at all meetings of the Board of Directors. He shall be an ex-officio
member of all committees and shall have the general powers and duties of
management usually vested in the office of President and Chief Executive
Officer of corporations, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
Section 8. VICE PRESIDENTS. In the absence or disability of
the President, the Vice Presidents in order of their rank as fixed by the Board
of Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
12
<PAGE>
Section 9. SECRETARY. The Secretary shall attend all sessions
of the Board of Directors and all meetings of the stockholders and record all
votes and the minutes of all proceedings in a book to be kept for that purpose;
and shall perform like duties for the standing committees when required by the
Board of Directors. He shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or these Bylaws. He shall
keep in safe custody the seal of the corporation, and when authorized by the
Board, affix the same to any instrument requiring it, and when so affixed it
shall be attested by his signature or by the signature of an Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. ASSISTANT SECRETARY. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 11. TREASURER. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation
and shall deposit all moneys, and other valuable effects in the name and to
the credit of the corporation, in such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the corporation.
If required by the Board of Directors, he shall give the corporation a bond,
in such sum and with such surety or sureties as shall be satisfactory to the
Board of Directors, for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
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Section 12. ASSISTANT TREASURER. The Assistant Treasurer, or
if there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors, or if there be no such determination, the
Assistant Treasurer designated by the Board of Directors, shall, in the absence
or disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
ARTICLE V.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The corporation shall indemnify to the maximum extent
permitted by law any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he
is or was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment,
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order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify to the maximum extent
permitted by law any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such Court
of Chancery or such other court shall deem proper.
(c) To the extent that a director or officer of the
corporation shall be successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (a) and (b). Such determination
shall be made (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) if there
are no such directors, or if such directors so direct, by independent legal
counsel in
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a written opinion, or (3) by the stockholders. The corporation,
acting through its Board of Directors or otherwise, shall cause such
determination to be made if so requested by any person who is indemnifiable
under this Article V.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Article V.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Article V shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Board of Directors may authorize, by a vote of a
majority of a quorum of the Board of Directors, the corporation to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article V.
(h) For the purposes of this Article V, references to
"the corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article V with respect to the
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resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include service as a director or officer of the corporation which imposes
duties on, or involves services by, such director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The corporation shall be required to indemnify a person in
connection with an action, suit or proceeding (or part thereof) initiated by
such person only if the action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the corporation.
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ARTICLE VI.
INDEMNIFICATION OF EMPLOYEES AND AGENTS
The corporation may indemnify every person who was or is a
party or is or was threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was an employee or agent of the corporation
or, while an employee or agent of the corporation, is or was serving at the
request of the corporation as an employee or agent or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including counsel fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to the extent permitted by
applicable law.
ARTICLE VII.
CERTIFICATES OF STOCK
Section 1. CERTIFICATES. Every holder of stock of the
corporation shall be entitled to have a certificate signed by, or in the name of
the corporation by, the Chairman or Vice Chairman of the Board of Directors, or
the President or a Vice President, and by the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer of the corporation,
certifying the number of shares represented by the certificate owned by such
stockholder in the corporation.
Section 2. SIGNATURES ON CERTIFICATES. Any or all of the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
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Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES.
If the corporation shall be authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences
and relative, participating, optional or other special rights of each class
of stock or series thereof and the qualification, limitations or restrictions
of such preferences and/or rights shall be set forth in full or summarized on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, provided that, except as otherwise
provided in section 202 of the General Corporation Law of Delaware, in lieu
of the foregoing requirements, there may be set forth on the face or back of
the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
Section 4. LOST CERTIFICATES. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
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Section 5. TRANSFERS OF STOCK. Upon surrender to the
corporation, or the transfer agent of the corporation, of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 6. FIXED RECORD DATE. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of the stockholders, or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting. In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date which shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board of
Directors.
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VIII.
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before
payment of any dividend there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interests of the corporation, and the directors may
abolish any such reserve.
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Section 3. CHECKS. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 6. MANNER OF GIVING NOTICE. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it
shall not be construed to mean personal notice, but such notice may be given
in writing, by mail, addressed to such director or stockholder, at his
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the
same shall be deposited in the United States mail. Notice to directors may
also be given by telegram.
Section 7. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
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Section 8. ANNUAL STATEMENT. The Board of Directors shall
present at each annual meeting, and at any special meeting of the stockholders
when called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
ARTICLE IX.
AMENDMENTS
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS. These
Bylaws may be altered, amended or repealed or new Bylaws may be adopted by the
stockholders or by the Board of Directors, when such power is conferred upon the
Board of Directors by the Certificate of Incorporation, at any regular meeting
of the stockholders or of the Board of Directors or at any special meeting of
the stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon
the Board of Directors by the Certificate of Incorporation it shall not divest
or limit the power of the stockholders to adopt, amend or repeal Bylaws.
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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of JCC
Holding Company, a Delaware corporation; and
(2) That the foregoing amended and restated bylaws constitute
the bylaws of said corporation as duly adopted by the written consent of the
Board of Directors of said corporation as of April 20, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
20th day of April, 1998.
Frederick W. Burford
-----------------------------------
Frederick W. Burford, Secretary
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Exhibit 21.01
SUBSIDIARIES OF THE REGISTRANT
1. Jazz Casino Company, L.L.C., a limited liability company organized
under the laws of the State of Louisiana. It is anticipated that Jazz
Casino will do business under the name "Jazz Casino Company, L.L.C."
2. JCC Development Company, L.L.C., a limited liability company organized
under the laws of the State of Louisiana. It is anticipated that JCC
Development Company, L.L.C. will do business under the name "JCC
Development Company, L.L.C."
3. CP Development, L.L.C. , a limited liability company organized under
the laws of the State of Louisiana. It is anticipated that CP
Development, L.L.C. will do business under the name "CP Development,
L.L.C."
4. FP Development, L.L.C., a limited liability company organized under the
laws of the State of Louisiana. It is anticipated that FP Development,
L.L.C. will do business under the name "FP Development, L.L.C."
