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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-12095
JCC HOLDING COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 62-1650470
(State or other (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
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ONE CANAL PLACE
365 CANAL STREET, SUITE 900
NEW ORLEANS, LOUISIANA 70130
(Address of principal executive offices)
(504) 533-6000
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Class A Common Stock, par value $0.01 per share The American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the class A common stock and class B common
stock held by non-affiliates of the registrant was $11.8 million and $319,500,
respectively, at March 23, 2000, based on the closing sale price of $2.13 per
share for the class A common stock on such date on the American Stock Exchange.
Because the class B common stock is not publicly traded and each share of class
B common stock is convertible into one share of class A common stock under
certain circumstances, the market value of the class B common stock is based on
the closing sale price for the class A common stock on the American Stock
Exchange.
The number of shares of the registrant's class A common stock and class B
common stock outstanding at March 23, 2000 were 5,638,314 and 4,452,623,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Specifically identified portions of the Proxy Statement for the 2000 Annual
Meeting of Stockholders to be held on May 16, 2000 are incorporated by reference
in Part III.
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JCC HOLDING COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
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ITEM PAGE
NUMBER NUMBER
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PART I
1. Business.................................................... 1
2. Properties.................................................. 17
3. Legal Proceedings........................................... 18
4. Submission of Matters to a Vote of Security Holders......... 18
4(A). Executive Officers of the Registrant........................ 18
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 19
6. Selected Financial Data..................................... 21
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 22
7(A). Quantitative and Qualitative Disclosures about Market
Risk........................................................ 42
8. Financial Statements and Supplementary Data................. 43
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 85
PART III
10. Directors and Executive Officers of the Registrant.......... 85
11. Executive Compensation...................................... 85
12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 85
13. Certain Relationships and Related Transaction............... 85
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 85
Signatures.................................................. 97
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PART I
ITEM 1. BUSINESS.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This report of JCC Holding Company ("JCC Holding") includes forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, including in particular the statements about (1)
the plans, objectives, expectations and prospects of JCC Holding and its
subsidiaries under the headings "Item 1. Business" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this document and (2) the development of non-gaming entertainment space on the
second floor of the casino in New Orleans, Louisiana operated by a subsidiary of
JCC Holding and of various adjacent properties for entertainment uses supporting
the casino. The words "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate" and similar expressions identify forward-looking statements.
Although JCC Holding believes that the plans, objectives, expectations and
prospects reflected in or suggested by such forward-looking statements are
reasonable, such statements involve uncertainties and risks, and JCC Holding
cannot assure that such plans, objectives, expectations and prospects will be
achieved. Important factors that could cause actual results to differ materially
from the results anticipated by the forward-looking statements are set forth in
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Factors Affecting Future Performance" and elsewhere in this
document. All written or oral forward-looking statements attributable to JCC
Holding and its subsidiaries are expressly qualified in their entirety by these
cautionary statements.
THE COMPANY
GENERAL
JCC Holding is a casino and entertainment development company that was
incorporated on August 20, 1996, under Delaware law in anticipation of assuming
the business formerly owned by Harrah's Jazz Company, which, as described below,
filed for bankruptcy in November, 1995. JCC Holding conducts its business
through its wholly-owned subsidiaries, Jazz Casino Company, L.L.C., a Louisiana
limited liability company ("Jazz Casino"), JCC Development Company, L.L.C., a
Louisiana limited liability company ("JCC Development"), JCC Canal Development,
L.L.C., a Louisiana limited liability company formerly known as CP Development,
L.L.C. ("Canal Development"), and JCC Fulton Development, L.L.C., a Louisiana
limited liability company formerly known as FP Development, L.L.C. ("Fulton
Development"). JCC Holding, Jazz Casino, JCC Development, Canal Development and
Fulton Development are collectively referred to herein as the "Company." JCC
Holding, through Jazz Casino, operates a land-based casino (the "Casino") in
downtown New Orleans, Louisiana at the foot of Canal and Poydras Streets on the
site of New Orleans' former Rivergate convention center. Pursuant to a casino
operating contract dated October 30, 1998 among Harrah's Jazz Company, Jazz
Casino and the State of Louisiana, by and through the Louisiana Gaming Control
Board, Jazz Casino has the exclusive right to operate the Casino in Orleans
Parish. Currently, JCC Holding's principal executive offices are located at One
Canal Place, 365 Canal Street, Suite 900, New Orleans, Louisiana 70130, and its
telephone number is (504) 533-6000.
THE CASINO
The Casino, which opened on October 28, 1999, contains 196,000 square feet
on its first floor, 100,000 square feet of which consists of gaming space in
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 is used for a food service area with a 250 seat buffet, casino support
facilities, and multi-function, special event and meeting-room space. The second
floor of the Casino, which is subleased by Jazz Casino to JCC Development, has
not yet been developed. Parking for approximately 400 cars and approximately
145,000 square feet of back-of-house and support areas are provided in the
basement level of
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the Casino under the main gaming floor. Across Poydras Street and connected to
the Casino by an underground tunnel are two parking facilities that together
contain approximately 1,550 parking spaces.
The Casino contains approximately 2,900 slot machines and 120 table games,
including live poker, blackjack, craps, roulette and baccarat. The gaming
activities that may be conducted at the Casino, subject to the rule-making
authority of the Louisiana Gaming Control Board, 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. The
Casino, however, may not offer lotteries, bingo, wagering on dog or horse races,
sports betting or wagering on any type of sports contest or event. The Casino is
open 24 hours per day, every day of the year and can extend credit, with no loss
or wagering limits.
JCC Development intends to develop, sublease and manage the second floor of
the Casino for non-gaming uses in a manner consistent with a master plan being
developed by JCC Development and Jazz Casino. For a description of the second
floor sublease and the master plan to develop the second floor of the Casino
refer to "-- Development Plans."
DESCRIPTION OF THE MANAGER
On October 29, 1998, Jazz Casino and Harrah's New Orleans Management
Company (the "Manager") entered into a second amended and restated management
agreement pursuant to which Jazz Casino engaged the Manager to manage the
operations of the Casino. The Manager is an indirect wholly-owned subsidiary of
Harrah's Entertainment, Inc. and was formed in May 1993 for the purpose of
acting as the manager of the Casino. Harrah's Entertainment's casino business
commenced operations more than 60 years ago and, through its operating
subsidiaries and other affiliates, Harrah's Entertainment currently operates
casino entertainment facilities in 10 states under the Harrah's, Showboat and
Rio brand names.
Under the management agreement, 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, marketing and promoting the Casino;
- providing Casino-level accounting and budgeting services;
- maintaining, renovating and improving the Casino;
- performing certain system services generally performed at casinos owned
or managed by Harrah's Entertainment or its affiliates; and
- performing certain other functions identified by Jazz Casino and agreed
to by the Manager.
During the term of the management agreement, Jazz Casino is required to
fund the cost of operating the Casino and is responsible for, among other
things:
- approving budgets presented by the Manager;
- maintaining Jazz Casino's leasehold interest in the Casino's premises,
free from encumbrances other than those set forth as exceptions in the
title policy covering the Casino's premises;
- obtaining and maintaining all licenses and permits required to own and
operate the Casino and handling governmental affairs;
- developing, leasing and financing the second floor of the Casino;
- complying with certain minority, women and disadvantage persons hiring
requirements;
- paying indebtedness encumbering the Casino;
- handling community and public relations, excluding advertising, marketing
and promotions;
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- establishing and administering employee benefit plans and other employee
benefit matters;
- determining, based on the Manager's recommendations, which entity will
provide the Casino certain administrative services;
- assisting the Manager with respect to any matters delegated to the
Manager if requested in writing by the Manager and agreed to by Jazz
Casino; and
- handling all corporate, administrative and other business activities of
Jazz Casino and any other matters not expressly delegated to the Manager
under the management agreement.
The Manager is entitled to receive a management fee having two components,
a fixed base fee and an incentive fee that is based on Jazz Casino obtaining
certain consolidated earnings before interest, taxes, depreciation and
amortization ("EBITDA") targets. In addition, the Manager is entitled to receive
a travel fee equal to $100,000 per year, subject to adjustment based on changes
in the Consumer Price Index. Jazz Casino is also required to pay the Manager a
"marketing contribution" that, as of December 31, 1999, was equal to 1.5% of the
Casino's net revenues. This marketing contribution may be used for advertising
services, special promotions, public relations and other marketing services.
Harrah's Entertainment affiliates may pool the marketing contribution with
contributions made by other participating casinos owned or managed by Harrah's
Entertainment affiliates. The Manager may increase this marketing contribution
from time to time to ensure that it generally equals the fee charged to other
participating casinos owned or managed by affiliates of Harrah's Entertainment.
The management agreement also provides, among other things, that neither
the Manager nor Jazz Casino nor any affiliate of the Manager or Jazz Casino that
is controlled by the Manager's ultimate parent or Jazz Casino'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.
Jazz Casino has also entered into an administrative services agreement with
Harrah's Operating Company, Inc., a wholly-owned subsidiary of Harrah's
Entertainment, whereby, Harrah's Operating Company provides certain services for
a monthly fee that are not covered by the management agreement, such as
accounting, computer processing, payroll, risk management, marketing
teleservices and administering certain employee benefit packages.
MARKETING STRATEGY
Jazz Casino's marketing strategy is designed to attract primarily a broad
"middle market" of casino patrons made up of both domestic and international
premium gaming customers. Jazz Casino uses marketing material emphasizing the
Casino as a total entertainment destination, leveraging New Orleans' music,
food, history, architecture and spirit. Additionally, under the terms of Jazz
Casino's amended and restated ground lease with the Rivergate Development
Corporation and the City of New Orleans for the site in New Orleans on which the
Casino is located, Jazz Casino pays the City of New Orleans $1 million per year
to market and promote the Casino as a part of the city's destination marketing
program. The Rivergate Development Corporation is a public benefit corporation
formed for the purpose of subleasing to Jazz Casino the site in New Orleans
designated by law for the Casino's location.
COMPETITION
The Casino faces 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 of Louisiana. The Casino competes 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 competition facing the Casino is
expected to increase.
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The terms of the Louisiana Economic Development and Gaming Corporation Act
and the Louisiana Gaming Control Act (collectively, the "Gaming Act") and the
rules and regulations promulgated thereunder prohibit the Company from engaging
in certain activities including the following:
- giving away or subsidizing food within the Casino;
- offering direct table food services or food service with seating in
excess of 250 persons;
- contracting with local restaurant owners to provide food at designated
areas within the Casino, except under certain circumstances;
- offering lodging within the Casino;
- engaging in any practice or entering into any business relationships to
give any hotel, whether or not affiliated with Jazz Casino, any advantage
or preference not available to any similarly situated hotels; and
- selling products in the Casino that are not directly related to gaming.
Also, under Jazz Casino's casino operating contract and the Gaming Act's
rules and regulations, the provisions described above relating to food, lodging
and retail activities apply to the Company's operations on the second floor of
the Casino. Under the terms of the Casino's second floor sublease, currently the
Company is also prohibited from offering facilities on the second floor of the
Casino, the principal business purpose of which is a restaurant. Unlike the
Casino, the vast majority of the Casino's competitors operate without
restrictions on lodging, food services and entertainment. The Company believes
that the ability to provide such amenities is a considerable competitive
advantage for the Casino's competitors. In order to compensate for these
limitations and offer its patrons the integrated Casino, dining and
entertainment experience, the Casino offers its patrons complimentary meals,
hotel rooms, transportation, entertainment, and other amenities at various local
establishments. For a more complete description of these matters, refer to "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Factors Affecting Future Performance -- The Casino is Subject to
Limits on Providing Lodging, Food Services, Entertainment and Retail Operations
That Could Impact Its Ability to Operate Profitably."
Mississippi. Jazz Casino competes 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 12
dockside casinos operating in the Mississippi Gulf Coast that are within 100
miles of New Orleans. In addition, there is substantial growth in Mississippi's
Gulf Coast gaming industry, including significant expansions of hotel and
convention space and the addition of golf courses. For example, in March 1999
Mirage Resorts, Inc. opened Beau Rivage, an 1,800 room hotel, resort and
dockside casino in Biloxi that is larger than any hotel in New Orleans. Due to
its size and amenities, Beau Rivage provides 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. Mississippi has recently promulgated a regulation, however, that
requires new entrants in the industry to expend certain amounts of money on non-
gaming facilities in addition to the casino boat itself. In addition, unlike the
Casino, gaming facilities in Mississippi operate without restrictions on
lodging, food and beverage service, and entertainment, and several of such
facilities have recently expanded to enhance such services.
Louisiana. Jazz Casino has the exclusive right to operate a land-based
casino in Orleans Parish. In authorizing the operation of a single, official
land-based gaming establishment, the Louisiana legislature's intent was to
promote economic development and maintain public confidence in the integrity of
casino gaming operations in a manner that ensures that the owner or operator of
the casino has no incentive to (1) divert or skim revenues, (2) engage in
illegal activities or reduce competition from other gaming entities, or (3)
conduct land-based gaming operations so as to prevent guests from patronizing
local businesses other than the official gaming establishment. The legislature
further determined that by authorizing only a single, official land-based
casino, all persons involved with the proposed casino gaming operation,
including manufacturers, suppliers, and distributors of certain gaming devices
and equipment, could be licensed, regulated, and controlled in such a manner as
to, among other things, protect the public health, safety, morals, good order,
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and general welfare of the citizens of the State of Louisiana. Notwithstanding
its exclusive right to operate a land-based casino in Orleans Parish, on a
regional and local scale, the Casino still competes with gaming operations in
Louisiana, where 13 riverboats are operating, including:
- one riverboat in Orleans Parish;
- two 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.
The Casino may also compete with a fourteenth riverboat in Shreveport that
was conditionally awarded a license to operate and is in the development stages.
In addition, one license to conduct riverboat gaming in Louisiana has not yet
been awarded. The riverboat gaming operations are regulated by the Louisiana
Riverboat Economic Development and Gaming Control Act (the "Riverboat Act"),
which 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 customers unlimited entry and exit. The Company cannot
assure you that the Riverboat Act will not be amended to permit unlimited
dockside gaming or to increase the number of permitted riverboats. The Casino
also competes with land-based gaming facilities located in central Louisiana on
Native American land. The Tunica-Biloxi, Chitimacha and Coushatta Native
American tribes have each opened a casino near the towns of Marksville,
Charenton and Kinder, respectively, each of which is located more than 105 miles
from New Orleans.
National and international competition. The Casino competes 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 that have enhanced the
appeal of those cities as tourist destinations. To a lesser degree, the Casino
also competes 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 that 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. The Casino competes for local customers with
other forms of legal wagering, including racetracks and off-track betting
parlors. In addition, under Louisiana law, certain parishes (including Orleans
Parish) permit:
- restaurants, taverns, hotels and licensed clubs to operate up to three
video draw poker devices per location;
- qualifying truck stops to operate up to 50 video draw poker devices per
location; and
- racetracks and off-track betting parlors to operate an unlimited number
of video draw poker devices per location.
Louisiana law, however, limits video draw poker device wagering and
jackpots. Other forms of wagering, including charitable gaming and a state
lottery, provide additional local competition. Further, in 1997, the Louisiana
legislature authorized the use of slot machines at race tracks located in three
parishes in the State of Louisiana (but not Orleans Parish).
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DEVELOPMENT PLANS
Concurrent with constructing the Casino's gaming facilities, approximately
130,000 square feet of multipurpose non-gaming entertainment space on the second
floor of the Casino was constructed to the point at which the shell of the
structure is complete. Jazz Casino and JCC Development presented a preliminary
master plan governing the use of the second floor of the Casino to the City of
New Orleans on February 22, 2000. A final master plan, which must be approved by
the City of New Orleans, the Rivergate Development Corporation and the Louisiana
Gaming Control Board, would be required to establish, in addition to a variety
of uses, (1) leasing guidelines regarding rent, termination rights and
termination fees, tenant improvements and concessions, permissible uses and
brokerage fees, (2) an initial capital improvement budget and (3) an initial
operating budget for the first year of operations on the second floor. The
process of developing a master plan for final approval is expected to take
several months and currently has no deadline for approval. Jazz Casino has
subleased the second floor to JCC Development pursuant to the terms of a
sublease dated October 29, 1998, and JCC Development intends to manage and lease
the second floor development in a manner consistent with the master plan. The
term of the second floor sublease commenced in September 1999. Unless the second
floor sublease is sooner terminated by its terms, the sublease will terminate on
the earlier of the date of expiration or the date of termination of Jazz
Casino's amended and restated ground lease dated October 29, 1998 with the
Rivergate Development Corporation, as landlord, and the City of New Orleans, as
intervenor, for the site in New Orleans designated by law for the Casino's
location. The Louisiana Gaming Control Board has approval rights over the master
plan and the authority to approve all subleases and uses on the second floor.
There is currently no scheduled date for commencing the build-out of the second
floor non-gaming tenant improvements. Jazz Casino is entitled to convert any
portion of the second floor to gaming use, subject to the approval of the
Louisiana Gaming Control Board and the provisions of its casino operating
contract. If, however, this conversion reduces the sublease revenue payable to
the Rivergate Development Corporation pursuant to the second floor sublease,
Jazz Casino is required, under certain circumstances and for certain periods of
time, to compensate the Rivergate Development Corporation for the reduction. 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
shell construction.
Under a third amended plan of reorganization, on October 30, 1998 title to
the real property owned by Harrah's Jazz Company at 3 Canal Place in New
Orleans, adjacent to the Canal Place shopping center, vested in Canal
Development, and title to the real property owned by Harrah's Jazz Company on
Fulton and Poydras Streets in New Orleans, consisting of a city block of
historical buildings across the street from the Casino and its garages, vested
in Fulton Development. Canal Development and Fulton Development are wholly-owned
subsidiaries of JCC Holding. Neither of these properties generate any material
revenues for the Company. However, the Company currently intends that Fulton
Development will develop the property located on Fulton and Poydras Streets,
possibly with the assistance of a third party developer, for entertainment uses
that support the Casino. The Company has not obtained financing to fund the
development of this property. On February 14, 2000, Fulton Development entered
into a contract to sell to Wyndham International, a hotel developer, the
property located at 3 Canal Place in New Orleans for $6.5 million. Prior to the
sale, it is anticipated that Canal Development, the owner of the property, will
transfer the property to Fulton Development in exchange for a membership
interest in Fulton Development. As a condition to this sale, Wyndham must begin
construction on this property of a 300 room hotel within two years of closing.
If Wyndham does not meet this condition, Fulton Development has an option to
repurchase the property for $6.5 million plus interest on the purchase price
equal to 7.0%. The Company believes that selling the property will bring
additional hotel rooms to the Canal Street area adjacent to the Casino and will
provide capital for investment in the Company's entertainment business. Although
the Company anticipates selling this property during the second quarter of 2000,
the sale is contingent upon obtaining certain third party approvals and Wyndham
International completing its due diligence. Because the sale of the 3 Canal
Place property would violate certain of the covenants in the Company's credit
agreement, among the required third party approvals, the Company must obtain
certain waivers and consents of the lenders under its credit agreement for Canal
Development to transfer the property to Fulton Development and for Fulton
Development to sell the property to Wyndham International. The recruiting
offices of the Company are currently located on its property located on Fulton
and Poydras Streets and the Company uses the property located at 3 Canal Place
for employee
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parking. For a description of certain risks that may impact the Company's
ability to develop its properties, refer to "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation -- Factors Affecting
Future Performance -- The Company May Not be Able to Develop Certain of its
Properties."
REORGANIZATION
Harrah's Jazz Company, a general partnership that, prior to October 30,
1998, was comprised of (1) Harrah's New Orleans Investment Company, an indirect
wholly-owned subsidiary of Harrah's Entertainment, (2) New Orleans/Louisiana
Development Corporation and (3) Grand Palais Casino, Inc., was formed on
November 29, 1993 for the purposes of developing, owning and operating the
Casino. On November 19, 1994 Harrah's Jazz Company closed a series of
transactions to finance the development of the Casino, including certain equity
contributions by its partners, and the sale of Harrah's Jazz Company's and its
subsidiary's, Harrah's Jazz Finance Corp., 14 1/4% first mortgage notes due 2001
with contingent interest. By November 1995, however, design modifications and
project cost overruns, coupled with operating losses incurred by the temporary
casino (the "Basin Street Casino") operated by Harrah's Jazz Company in the City
of New Orleans' Municipal Auditorium on a temporary basis until the Casino was
completed, depleted all of the equity contributions made by Harrah's Jazz
Company's partners and the proceeds from the sale of the 14 1/4% first mortgage
notes of Harrah's Jazz Company and Harrah's Jazz Finance Corp. On November 19,
1995, the lending banks informed Harrah's New Orleans Investment Company, the
partner of Harrah's Jazz Company responsible for financing matters, that they
would no longer disburse funds to Harrah's Jazz Company under the terms of the
credit facilities. Faced with an absence of funding, on November 21, 1995
Harrah's Jazz Company closed the Basin Street Casino and suspended construction
of the Casino. On November 22, 1995, Harrah's Jazz Company and Harrah's Jazz
Finance Corp. filed for bankruptcy protection.
On April 3, 1996, Harrah's Jazz Company, Harrah's Jazz Finance Corp.,
Harrah's New Orleans Investment Company and Harrah's Entertainment filed a plan
of reorganization and related disclosure statement with the United States
Bankruptcy Court for the Eastern District of Louisiana. A third amended plan of
reorganization under Chapter 11 of Title 11 of the United States Bankruptcy
Code, as modified through October 13, 1998, was confirmed by the bankruptcy
court on October 13, 1998, the transactions contemplated thereby were
consummated on October 30, 1998, and the construction of the Casino resumed
shortly thereafter. Under the third amended plan of reorganization, the Company
is the successor to the operations of Harrah's Jazz Company and on October 30,
1998, the following events occurred:
- all of the assets of Harrah's Jazz Company vested in Jazz Casino, except
for the property located at 3 Canal Place and the property located on
Fulton and Poydras Streets, which vested in Canal Development and Fulton
Development, respectively;
- all of the partnership interests of Harrah's Jazz Company were
transferred to Jazz Casino and the holders of the 14 1/4% first mortgage
notes of Harrah's Jazz Company and Harrah's Jazz Finance Corp. acquired
an aggregate of 5,197,377 shares of JCC Holding's class A common stock,
par value $0.01 per share, or approximately 93.7% of the issued and
outstanding class A common stock and approximately 52.0% of the issued
and outstanding class A common stock and class B common stock, par value
$0.01 per share, of JCC Holding (the class B common stock, together with
the class A common stock and the unclassified common stock, $0.01 par
value per share, of JCC Holding are referred to herein collectively as
the "Common Stock");
- each holder of the 14 1/4% first mortgage notes of Harrah's Jazz Company
and Harrah's Jazz Finance Corp. received its pro rata share of the
aggregate principal amount of (1) $187.5 million in aggregate principal
amount of Jazz Casino's newly issued senior subordinated notes with
contingent payments due 2009 and (2) Jazz Casino's newly issued senior
subordinated contingent notes due 2009 (the senior subordinated
contingent notes, together with the senior subordinated notes with
contingent payments, are referred to herein collectively as the "Notes");
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- Harrah's Crescent City Investment Company, a Nevada corporation and an
indirect wholly-owned subsidiary of Harrah's Entertainment, acquired all
of the shares of JCC Holding's class B common stock in consideration for,
among other things, an equity investment of $15 million in JCC Holding
and the conversion to equity and contribution to JCC Holding on the
October 30, 1998 of $60 million in debtor-in-possession financing that
had been provided to Harrah's Jazz Company by Harrah's Entertainment or
its affiliates during the reorganization;
- Harrah's Crescent City Investment Company received warrants entitling it
to purchase additional shares of unclassified common stock such that,
upon exercise of the warrant in its entirety, Harrah's Entertainment and
its subsidiaries will own, in the aggregate, 50.0% of the then
outstanding shares of unclassified common stock, subject to certain
adjustments; and
- under certain settlement agreements executed in connection with the third
amended plan of reorganization, Harrah's Crescent City Investment Company
transferred from its acquired shares of class B common stock (1) options
to purchase 300,000 shares of class B common stock to the shareholders of
New Orleans/Louisiana Development Corporation, (2) options to purchase
150,000 shares of class B common stock to Bank One, Louisiana, N.A.,
formerly known as First National Bank of Commerce and (3) its right to
receive 350,000 shares of class B common stock pursuant to the third
amended plan of reorganization to the senior secured bondholders of Grand
Palais Casino, Inc. Because the senior secured bondholders of Grand
Palais Casino are not permitted to own shares of class B common stock
under JCC Holding's Certificate of Incorporation, the 350,000 shares
received by them automatically converted into shares of class A common
stock. Subsequent to October 30, 1998, Bank One exercised its option and
on November 13, 1998 Harrah's Crescent City Investment Company
transferred 150,000 shares of its class B common stock to Bank One.
The third amended plan of reorganization provided that, for federal income
tax purposes, the vesting of assets in Jazz Casino, Canal Development and Fulton
Development was deemed to have occurred as an exchange of the 14 1/4% first
mortgage notes of Harrah's Jazz Company and Harrah's Jazz Finance Corp. for such
assets, and an exchange by such bondholders of the assets for the class A common
stock, Jazz Casino's senior subordinated notes with contingent payments and Jazz
Casino's senior subordinated contingent notes. Pursuant to the third amended
plan of reorganization, the outstanding capital stock of JCC Holding consists of
shares of class A common stock and class B common stock. With certain
exceptions, including the election of directors and the right to separate class
voting with respect to certain amendments to JCC Holding's Certificate of
Incorporation and Bylaws, each share of class A and class B common stock has
identical rights and privileges, and ranks equally, shares ratably and is
identical in every respect and as to all matters, submitted to a vote of the
common stockholders, is entitled to one vote for each share of class A and class
B common stock held, and, except as otherwise required by law, the holders of
the shares of class A and class B common stock generally vote together as one
class on all matters submitted to a vote of the stockholders.
However, prior to the Transition Date (explained below), (1) the maximum
number of authorized directors on JCC Holding's board of directors is six, three
of which are designated as Class A directors who are elected by the holders of
the class A common stock and three of which are designated as Class B directors
who are elected by the holders of the class B common stock, (2) any amendments
to JCC Holding's Certificate of Incorporation and Bylaws which affect the rights
of holders of the class A common stock or the Class A directors or which affect
the rights of holders of the class B common stock or the Class B directors must
be approved by the affirmative vote of the holders of a majority of the affected
class of class A or class B common stock and (3) only certain entities may hold
class B common stock (the "Harrah's Entities"). As the beneficial owner through
Harrah's Crescent City Investment Company of 4,302,623 shares of class B common
stock, or approximately 96.6% of the issued and outstanding shares of class B
common stock and approximately 42.6% of the issued and outstanding class A and
class B common stock, Harrah's Entertainment, through Harrah's Crescent City
Investment Company, has the power to elect all of the Class B directors.
On the Transition Date, each share of class A common stock and each share
of class B common stock will automatically convert into one share of
unclassified common stock. Accordingly, on and after the
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Transition Date, directors will be elected by the affirmative vote of the
holders of a plurality of the shares of unclassified common stock and the
restrictions described in clauses (2) and (3) of the preceding paragraph will no
longer be applicable. "Transition Date" means the date upon which the earliest
of the following events occurs: (1) October 28, 2002, (2) the end of two
consecutive 12-month periods in which contingent payments under each of Jazz
Casino's senior subordinated notes with contingent payments and senior
subordinated contingent notes equals or exceeds $15 million or (3) the end of a
30-day period during which the average daily closing Minimum Market Value (as
defined below) equals or exceeds $435 million. "Minimum Market Value" means, for
any trading day, the sum of (a) the closing price of class A common stock
multiplied by the number of shares of class A common stock that were issued to
holders of the 14 1/4% first mortgage notes of Harrah's Jazz Company and
Harrah's Jazz Finance Corp. on October 30, 1998 pursuant to the third amended
plan of reorganization and (b) the closing price for $1,000 of Jazz Casino's
senior subordinated notes with contingent payments and senior subordinated
contingent notes divided by $1,000, and then multiplied by the aggregate
principal amount of the Notes outstanding.
In connection with the third amended plan of reorganization and resumption
of the construction of the Casino:
- the Company entered into a credit agreement dated as of October 29, 1998
among Jazz Casino, as borrower, JCC Holding, as guarantor and a syndicate
of lenders led by Bankers Trust Company, pursuant to which Jazz Casino
obtained $211.5 million of term loans to finance the construction of the
Casino and up to $25 million for working capital purposes under a
revolving line of credit;
- Harrah's Entertainment and Harrah's Operating Company provided a payment
guarantee or "put" agreement for an aggregate principal amount of up to
$166.5 million of loans and/or stated amount of letters of credit of the
Company and its subsidiaries outstanding under its credit agreement;
- Jazz Casino entered into a junior subordinated credit facility dated as
of October 30, 1998 with Harrah's Entertainment and Harrah's Operating
Company pursuant to which Harrah's Entertainment and Harrah's Operating
Company agreed to loan Jazz Casino $22.5 million of subordinated
indebtedness; and
- Jazz Casino issued to Bankers Trust Company, Bank One, Salomon Smith
Barney Inc., Donaldson, Lufkin & Jenrette Securities Corporation and BT
Alex. Brown Incorporated, approximately $27.3 million aggregate principal
amount of 8% convertible junior subordinated debentures due 2010.
On October 30, 1998, under the third amended plan of reorganization,
Harrah's Jazz Company's exclusive right to operate a land-based casino in
Orleans Parish, Louisiana revested in Harrah's Jazz Company and was assigned to
Jazz Casino in accordance with applicable law and the casino operating contract
dated October 30, 1998 among Harrah's Jazz Company, Jazz Casino and the State of
Louisiana, by and through the Louisiana Gaming Control Board. As a result, under
the terms of the casino operating contract, the Company, through Jazz Casino,
has the exclusive right to operate a land-based casino in Orleans Parish,
Louisiana. Under the casino operating contract, in each fiscal year of the
Casino's operation, Jazz Casino is required to pay to the Louisiana Gaming
Control Board an amount equal to the greater of (1) $100 million and (2)
specified percentages of the Casino's gross gaming revenue in such fiscal year.
Jazz Casino must make this payment to the Louisiana Gaming Control Board in
daily increments equal to approximately $274,000, with an end of year settlement
if the Casino's gross gaming revenues exceed certain amounts. On October 30,
1998, Jazz Casino entered into an agreement with Harrah's Entertainment and
Harrah's Operating Company, pursuant to which Harrah's Entertainment and
Harrah's Operating Company have agreed to provide a guaranty of the $100 million
annual payment due under the casino operating contract for the benefit of the
Louisiana Gaming Control Board for the first year of operation and, subject to
certain conditions, on an annual basis through March 31, 2004. In consideration
for this guaranty, Harrah's Entertainment and Harrah's Operating Company,
collectively, receive a $6 million per year guaranty fee for the years ending
March 31, 2000 and 2001 and a $5 million per year guaranty fee for the years
ending March 31, 2002, 2003 and 2004, all payable quarterly. However, in the
years that Harrah's Entertainment and Harrah's Operating Company provide the
minimum payment guaranty for less than a full year, they receive a pro rata fee
based on an annual
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fee of $6 million. For a further description of the casino operating contract,
refer to "-- Regulation -- Louisiana Gaming Act."
In addition, pursuant to the terms of the third amended plan of
reorganization, on October 30, 1998, Jazz Casino succeeded to Harrah's Jazz
Company's interest in (1) a ground lease for the site in New Orleans designated
by law for the Casino's location and (2) a general development agreement that
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 ground lease was amended by an amended and restated
lease agreement dated October 29, 1998, among Jazz Casino, the Rivergate
Development Corporation, as landlord, and the City of New Orleans, as
intervenor. Beginning on October 29, 1998, the amended and restated ground lease
has a term of 30 years, with three consecutive ten-year renewal options. The
general development agreement was amended by an amended general development
agreement dated October 29, 1998 by and among Jazz Casino and the Rivergate
Development Corporation and the City of New Orleans, as intervenor. The amended
general development agreement and the amended and restated ground lease obligate
Jazz Casino to comply with revised and updated open access program and plans
adopted pursuant thereto that are designed to facilitate participation by
minorities, women, and disadvantaged persons and business enterprises in
developing, constructing and operating the Casino. For a description of certain
risks relating to the Company's ability to comply with such plans, refer to
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Factors Affecting Future Performance -- The Company May Not be
Able to Comply with Minority Hiring Requirements and Could be Liable For Damage
Awards From Potential Lawsuits Related to These Requirements."
Also in connection with the consummation of the third amended plan of
reorganization, a number of additional agreements were entered into relating to
constructing and operating the Casino, including:
- a second amended and restated management agreement granting the Manager
the sole and exclusive right to manage and operate the Casino, a more
complete description of which is included under the heading
"-- Description of the Manager";
- completion guarantees from Harrah's Entertainment and Harrah's Operating
Company pursuant to which Harrah's Entertainment and Harrah's Operating
Company agreed, among other things, to (A) fund Jazz Casino's working
capital shortfalls until the date on which, among other things, the
Casino was equipped with the required furniture, fixtures and equipment
and ready to open for business, construction of the Casino was
substantially completed and the initial Casino operations had opened for
business, (B) guarantee that when the Casino opened for business, Jazz
Casino had available for working capital $5 million of cash and an amount
equal to $25 million (less up to $10 million for certain letters of
credit issued under its credit agreement and borrowings thereunder to
fund a bank account for the Casino) available for immediate borrowing(s)
under the working capital facility provided pursuant to the credit
agreement, (C) guarantee the full and complete payment and performance of
all obligations of Jazz Casino payable by Jazz Casino to any person,
including amounts payable to the City of New Orleans and the Rivergate
Development Corporation under the amended and restated ground lease or
the amended general development agreement, amounts owned to the Louisiana
Gaming Control Board under the casino operating contract, utilities and
maintenance expenses and (D) guarantee the obligation to maintain
insurance coverage for, and prevent deterioration and unauthorized access
to, the Casino, and to pay on a timely basis certain other amounts owing
by Jazz Casino;
- an amended and restated subordinated completion loan agreement dated as
of October 30, 1998 among Jazz Casino, Harrah's Entertainment and
Harrah's Operating Company pursuant to which any expenditures made by
Harrah's Entertainment or Harrah's Operating Company under their
completion guarantees described above must be repaid by Jazz Casino;
- a sublease, pursuant to which Jazz Casino subleases the second floor of
the Casino to JCC Development for non-gaming uses, a more complete
description of which is included under the heading "-- Development
Plans";
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- an amended and restated construction lien indemnity agreement dated
October 30, 1998 between Jazz Casino and Harrah's Operating Company
pursuant to which any expenditures made by Harrah's Operating Company
under the construction lien indemnity agreement delivered by Harrah's
Entertainment and Harrah's Operating Company to First American Title
Insurance Company regarding mechanic's liens claiming priority to loans
to Jazz Casino under the Company's credit agreement, Jazz Casino's senior
subordinated notes with contingent payments or Jazz Casino's senior
subordinated contingent notes, will be deemed unsecured, limited recourse
indebtedness of Jazz Casino due and payable on demand; and
- manager subordination agreements in favor of (1) the Rivergate
Development Corporation and the City of New Orleans, (2) Bankers Trust
Company, as Administrative Agent for the bank lenders under the Company's
credit agreement, and (3) Norwest Bank Minnesota, National Association,
as trustee under the indentures governing the Notes, that among other
things, govern the subordination of certain of Jazz Casino's obligations
owed to the Manager with respect to Jazz Casino's other payment
obligations.
EMPLOYEES
As of March 17, 2000, the Company employed 2,652 people on a full-time
basis and 259 people on a part-time basis. Jazz Casino, through the Manager,
hires and trains employees to operate the Casino. To the extent permitted by law
and contract, Jazz Casino, in its hiring directed toward the opening of the
Casino, gave priority to consideration of the former employees of the Basin
Street Casino in an evaluation of the candidate's qualifications. The Casino's
executive staff is comprised of employees of the Manager and Jazz Casino. The
Gaming Act requires that at least 80% of the Casino's employees be Louisiana
residents for at least one year prior to employment. Jazz Casino's amended and
restated ground lease with the Rivergate Development Corporation and the City of
New Orleans also requires that at least 55% of the employees of Jazz Casino and
JCC Development live and reside in Orleans Parish, subject to reduction to
comply with applicable law. This minimum percentage required under the amended
and restated ground lease will increase by 2% on each anniversary of the
Casino's opening on October 28, 1999, until the residency requirement reaches
65%, subject to reductions to comply with applicable law. Jazz Casino's amended
general development agreement and amended and restated ground lease also
obligate Jazz Casino to comply with the revised and updated open access program
and plans adopted pursuant thereto that are designed to facilitate participation
by minorities, women, and disadvantaged persons and business enterprises in
developing, constructing and operating the Casino. For a description of certain
risks relating to the Company's ability to comply with hiring requirements,
refer to "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Factors Affecting Future Performance -- The Company
May Not be Able to Comply with Minority Hiring Requirements and Could be Liable
for Damage Awards From Potential Lawsuits Related to These Requirements."
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REGULATION
LOUISIANA GAMING ACT
The ownership and operation of the Casino are subject to pervasive
governmental regulation, including regulation by the Louisiana Gaming Control
Board in accordance with the terms of the Gaming Act, the rules and regulations
promulgated thereunder and Jazz Casino's casino operating contract. Jazz
Casino's right to own and operate the Casino derives from the casino operating
contract which, subject to its terms and conditions, has a twenty-year term
beginning on July 1994, with one ten-year option to extend.
The Gaming Act and the rules and regulations promulgated thereunder, all of
which are subject to amendment or revision from time to time, establish
significant regulatory requirements with respect to gaming and non-gaming
activities and Jazz Casino and JCC Holding, including, without limitation:
- requirements with respect to permitted games;
- minimum accounting and financial practices;
- standards for gaming devices and surveillance;
- licensing requirements for the Company's equity and debt holders,
officers and directors, 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 promulgated
thereunder could result in disciplinary action, including fines and suspension
or revocation of a license or a suitability determination. Certain regulatory
violations could also constitute an event of default under the casino operating
contract resulting in the termination of Jazz Casino's right to operate the
Casino.
Under the Gaming Act and the rules and regulations promulgated thereunder,
Jazz Casino, JCC Holding, and their members, officers and directors were
required to be found suitable by the Louisiana Gaming Control Board in order to
own and operate the Casino. This suitability requirement must be continuously
satisfied during the term of Jazz Casino's casino operating contract. The Gaming
Act and the rules and regulations promulgated thereunder also require
suitability findings for, among others, the Casino's manager, anyone with a
direct ownership interest (regardless of percentage interest) or the ability to
control Jazz Casino, JCC Holding or the Casino's manager (as well as their
intermediary and holding companies), certain officers and directors of such
companies, certain employees of Jazz Casino and the Casino's manager and certain
specified debt holders and lenders that have loaned Jazz Casino or JCC Holding
money in connection with the Casino's construction and operation. Suitability of
an applicant requires that the applicant demonstrate that, among other things:
- the applicant is a person of good character, honesty and integrity;
- the applicant's prior activities, criminal record, if any, reputation,
habits and associations do not pose a threat to the public interest of
Louisiana 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
- 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 contract,
Jazz Casino must demonstrate that:
- it has or can guarantee its ability to acquire adequate business
competence and experience in conducting casino gaming operations;
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- financing that it seeks to obtain is adequate for the proposed operation
and is from suitable sources; and
- it has, or is capable of, and guarantees its ability to obtain a bond or
satisfactory financial guarantee of a sufficient amount to guarantee
successful completion of and compliance with the casino operating
contract or such other projects that are regulated by the Louisiana
Gaming Control Board.
Under the Gaming Act and rules and regulations promulgated thereunder, any
person holding or controlling a direct or beneficial 5% or more equity interest
(either alone or in combination with others) in a direct or indirect holding
company of Jazz Casino, including JCC Holding or the Casino's manager, is
presumed to have the ability to control Jazz Casino or the Casino's manager (or
their holding companies, as the case may be), requiring a finding of
suitability. However, this suitability finding is not required if, among other
things, the presumption of control is rebutted or the holder is one of several
specified passive institutional investors and, upon request, the investor can
demonstrate that it does not have the ability to control such entity and that it
does not intend to influence the affairs of Jazz Casino or the Casino's manager.
To the extent any holder of the securities of JCC Holding fails to satisfy this
requirement, the holder may be required to obtain certain qualifications or
approvals (including a finding of suitability) from the Louisiana Gaming Control
Board to continue to hold such securities. Any failure to obtain these
qualifications or approvals may, by virtue of the requirements imposed on JCC
Holding, subject these security holders to certain requirements, limitations or
prohibitions, including a requirement that the security holders liquidate their
securities at a time or at a cost that is otherwise unfavorable to the security
holders.
Under the Gaming Act and rules and regulations promulgated thereunder, the
Louisiana Gaming Control Board has the authority to deny, revoke, suspend,
limit, condition, or restrict any finding of suitability. Under the Gaming Act's
rules and regulations, the Louisiana Gaming Control Board also has the authority
to take further action against Jazz Casino on the grounds that a person found
suitable as required by the Gaming Act is associated with, or controls, or is
controlled by, or is under common control with, an unsuitable or disqualified
person. Under the Gaming Act's rules and regulations and Jazz Casino's casino
operating contract, if at any time the Louisiana Gaming Control Board finds that
any person required to be and remain suitable has failed to demonstrate
suitability, the Louisiana Gaming Control Board may, consistent with the Gaming
Act and the casino operating contract, take any action that the Louisiana Gaming
Control Board deems necessary to protect the public interest. Under the Gaming
Act's rules and regulations, however, if a person associated with Jazz Casino,
the Casino's manager or their affiliate, intermediary, or holding companies, as
the case may be, has failed to be found or remain suitable, the Louisiana Gaming
Control Board will not declare these companies unsuitable as a result if the
companies comply with the conditional licensing provisions, take immediate good
faith action and comply with any order of the Louisiana Gaming Control Board to
cause the 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 Jazz Casino, the Casino's manager
or their affiliates, intermediaries, or holding companies, as the case may be,
(1) fail to remain suitable, (2) had actual or constructive knowledge of the
facts that are the basis for the Louisiana Gaming Control Board regulatory
action and failed to take appropriate action, or (3) are so tainted by such
person that it affects the suitability of the entity under the standards of the
Gaming Act.
Under the Gaming Act, the Louisiana Gaming Control Board and the Louisiana
state police are required to issue licenses or permits to certain persons
associated with the Company's gaming operations, including:
- certain employees of Jazz Casino and the Casino's manager;
- certain manufacturers, distributors and suppliers of gaming devices;
- certain suppliers of non-gaming goods or services;
- any person who furnishes services or property to Jazz Casino under an
arrangement pursuant to which the person receives payments based on
earnings, profits or receipts from gaming operations; and
- any other persons deemed necessary by the Louisiana Gaming Control Board.
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Securing the requisite licenses and permits under the Gaming Act is a
prerequisite for conducting, operating or performing any activity regulated by
the Louisiana Gaming Control Board or the Gaming Act. The Gaming Act provides
that the Louisiana Gaming Control Board 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 Louisiana
Gaming Control Board. The Gaming Act's rules and regulations provide that the
Louisiana Gaming Control Board may take any of the actions described in the
preceding sentence with respect to any person licensed, permitted, or approved,
or any person registered, found suitable, or holding a contract, for any cause
deemed reasonable. Moreover, 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 and not a right, property or otherwise, under the constitutions of the
United States or of the State of Louisiana. The Gaming Act also provides that no
holder acquires any vested right therein or thereunder.
Under the Gaming Act's rules and regulations, gaming activities that may be
conducted at an official gaming establishment, subject to the rule-making
authority of the Louisiana Gaming Control Board, 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. The Gaming Act's rules and
regulations provide the Louisiana Gaming Control Board broad discretionary
authority to regulate all aspects of a casino operator's operations, including
the power to, among other things:
- investigate violations of the Gaming Act and any rules and regulations
promulgated thereunder, and any other incidents or transactions that it
deems appropriate;
- conduct hearings and proceedings concerning, and reviews and inspections
of, gaming operations and related activities;
- inspect and examine all premises, and all equipment or supplies thereon,
where gaming activities are conducted, and impound, examine and inspect
any equipment or supplies;
- audit the records of applicants and gaming operators relating to revenues
produced by their gaming operations;
- issue interrogatories and subpoenas; and
- monitor the conduct of a casino operator such as Jazz Casino, and
licensees, permittees and other persons having a material involvement
directly or indirectly with the casino operator.
Under Jazz Casino's casino operating contract, for each fiscal year of the
Casino's operation, Jazz Casino is required to pay to the Louisiana Gaming
Control Board the greater of: (1) $100 million or (2) specified percentages of
the Casino's gross gaming revenue. Jazz Casino must make this payment to the
Louisiana Gaming Control Board in daily increments equal to approximately
$274,000, with an end of year settlement if gross gaming revenues exceed certain
amounts. At least one day prior to the beginning of each fiscal year (no later
than March 31 of each year), Jazz Casino is required to post with the Louisiana
Gaming Control Board an unconditional guaranty of the minimum $100 million
payment to the Louisiana Gaming Control Board issued by a lender or third party
with resources suitable to cover this payment. The failure to post such a
guaranty will result in the automatic termination of the casino operating
contract with no cure period. Jazz Casino's casino operating contract also
imposes certain financial stability requirements on Jazz Casino relating to its
ability to meet ongoing operating expenses, casino bankroll requirements,
projected debt payments and capital maintenance requirements. If Jazz Casino
fails to clearly and convincingly demonstrate compliance with these
requirements, the Louisiana Gaming Control Board may impose certain regulatory
conditions, including, without limitation, placing restrictions on certain
distributions by Jazz Casino to affiliates or entities in a control relationship
with Jazz Casino and its affiliates and appointing a fiscal agent. The failure
to cure a financial stability default within the specified period of time is an
event of default under the casino operating
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contract that could lead to the closing the Casino, terminating Jazz Casino's
casino operating contract and/or the appointing a conservator.
The sale, transfer, assignment, or alienation of Jazz Casino's casino
operating contract, or an interest therein, in violation of the Gaming Act is
also prohibited. Further, 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 Jazz Casino is void as to such person without prior approval of the
Louisiana Gaming Control Board. Failure to obtain prior approval by the
Louisiana Gaming Control Board of a person acquiring 5% or more of the total
outstanding shares of a licensee or 5% or more economic interest in Jazz Casino
is grounds for cancellation of the casino operating contract or license
suspension or revocation.
The Gaming Act prohibits Jazz Casino from engaging in the following
activities:
- Offering seated restaurant facilities with table food service for
patrons. However, Jazz Casino may offer limited cafeteria style food
services for employees and patrons if permitted by rule of the Louisiana
Gaming Control Board, provided, however, that no food may be given away
or subsidized within the Casino by Jazz Casino or any licensee, and no
facility for food service may exceed seating for 250 people (by rule and
regulation, the Louisiana Gaming Control Board has authorized Jazz Casino
to contract with local food preparers to provide certain limited food
offerings at the Casino).
- 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 Jazz Casino, an advantage or preference not available to
all similarly situated hotels.
- Engaging in activities that are prohibited by the casino operating
contract.
- Engaging in the sale of products that are not directly related to gaming.
- Cashing or accepting in exchange for the purchase of tokens, chips or
electronic cards an identifiable employee payroll check.
Any contract between Jazz Casino and any hotel or lodging facilities must be
submitted to the Louisiana Gaming Control Board for approval prior to entering
into the contract.
The Gaming Act, the rules and regulations promulgated thereunder, and Jazz
Casino's casino operating contract have extensive provisions and prior approval
requirements relating to certain borrowings incurred, and security interests
granted, by Jazz Casino and JCC Holding in connection with the Casino. The
Gaming Act authorizes the Louisiana Gaming Control Board 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 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 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 related 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 these payments if the
transaction(s) giving rise to the payments were approved in advance by the
Louisiana Gaming Control Board, comply with all rules and regulations of the
Louisiana Gaming Control Board and the Louisiana Gaming Control Board determines
that the holder is 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 Louisiana Gaming Control Board. The Gaming Act's rules and
regulations do not include a rule and regulation on this provision.
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If the holder of a security interest in immovable property comprising the
official gaming establishment wishes to continue to operate 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 Louisiana Gaming Control Board as a nominal defendant in the suit and
request the appointment of a receiver from among the persons on a list
maintained by the Louisiana Gaming Control Board. Upon proof of the debtor's
default under the security instrument and the holder's right to enforce the
security interest, the court will appoint a person from the Louisiana Gaming
Control Board'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 Louisiana Gaming Control Board in an
amount to be set by the court after consultation with the Louisiana Gaming
Control Board and all parties. The Gaming Act requires the Louisiana Gaming
Control Board 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. 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 Louisiana Gaming
Control Board.
The Gaming Act provides that a receivership must terminate upon: (1) the
sale of the property subject to receivership to a duly approved or authorized
person; (2) the payment in full of all obligations due to the holder of the
security interest in the property subject to the receivership; (3) an agreement
for termination of the receivership signed by the holder of the security
interest and the debtor, and approved by the Louisiana Gaming Control Board and
the court; or (4) 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 Louisiana Gaming Control Board 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 Louisiana Gaming Control Board pursuant
to its authority to protect the holders of security interests in gaming related
collateral will be the basis for any cause of action in contract or in tort
against the State of Louisiana or the Louisiana Gaming Control Board, its board
of directors or its agents, attorneys or employees.
STATE LEGISLATION
Because legalized gaming is a relatively new industry in Louisiana, there
has been significant attention by the Louisiana legislature over the past few
years to gaming related bills dealing with a wide range of subjects that could
impact the Casino. For example, at various times, bills have been introduced to,
among other things:
- constitutionally and/or legislatively repeal all forms of gaming
(including gaming at the Casino);
- increase taxes on casinos;
- permit dockside riverboat gaming;
- limit credit that may be extended by casinos;
- mandate payout schedules for slot machines; and
- limit days and hours of operations.
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<PAGE> 19
In addition, a number of laws have been enacted that affected the
formulation of the third amended plan of reorganization and the rights to
operate the Casino under the Gaming Act and Jazz Casino's casino operating
contract. For example, a law was adopted that purports to, among other things,
retroactively amend the Gaming Act to (1) state that conducting 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 that relieves Jazz Casino of its obligation to pay compensation to
the Louisiana Gaming Control Board, and (2) provide that governmental inaction
that results in the operation of another land-based casino in Orleans Parish
will not relieve Jazz Casino of its obligation to pay compensation to the
Louisiana Gaming Control Board. This law also purports to provide that in the
event of litigation between Jazz Casino and the State of Louisiana or any of its
political subdivisions (including the Louisiana Gaming Control Board), Jazz
Casino must continue to make all payments to the State of Louisiana and any of
its political subdivisions (including the Louisiana Gaming Control Board) as
required by law during the pendency of the litigation, and that any failure to
make the required payments will render Jazz Casino unsuitable. For a description
of certain risks associated with state regulation, refer to "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Factors Affecting Future Performance -- Gaming Laws and
Regulations Could Adversely Affect the Company's Operations" and "-- Jazz Casino
May Have No Recourse if Additional Land-Based Casinos or Dockside Riverboat
Gaming is Permitted."
FEDERAL REGULATION
In 1996, Congress enacted a law creating a federal commission to study the
economic and social impact of gaming and to report its findings to Congress and
the President. A report was issued by the commission in June 1999. The Company
is unable at this time to determine the impact of this report on the gaming
industry.
ITEM 2. PROPERTIES.
Under the third amended plan of reorganization, on October 30, 1998 title
to Harrah's Jazz Company's property located at 3 Canal Place in New Orleans,
adjacent to the Canal Place Shopping Center, vested in Canal Development and
title to Harrah's Jazz Company's property located on Fulton and Poydras Streets,
consisting of a city block of historical buildings across the street from the
Casino and its garages, vested in Fulton Development. Neither of these
properties currently generate any material revenues for the Company. In
addition, pursuant to the terms of the third amended plan of reorganization, as
of October 30, 1998, Jazz Casino succeeded to Harrah's Jazz Company's interest
in the approximately 30-year long-term ground lease for the property at the foot
of Canal and Poydras Streets in New Orleans, Louisiana, the site designated by
law for the location of the Casino. On October 29, 1998, the ground lease was
amended by an amended and restated ground lease between Jazz Casino, the
Rivergate Development Corporation and the City of New Orleans. Beginning on
October 29, 1998, the amended and restated ground lease has a term of 30 years,
with three consecutive ten-year renewal options. Under the amended and restated
ground lease, Jazz Casino also leases the land across Poydras Street upon which
the Casino operates two parking facilities that are connected to the Casino by
an underground tunnel and that together contain approximately 1,550 spaces.
The Company leases its principal executive offices of approximately 30,000
square feet under a 104 month lease effective January 1, 2000. The Company's
property located on Fulton and Poydras Streets, which contains approximately
48,300 square feet of usable office space, is being used by the Company for its
recruiting offices until the property is developed. The Company currently uses
its property located at 3 Canal Place for employee parking. On February 14,
2000, Fulton Development entered into a contract to sell to Wyndham
International, a hotel developer, the property located at 3 Canal Place for $6.5
million. Prior to the sale, it is anticipated that Canal Development, the owner
of the property, will transfer the property to Fulton Development in exchange
for a membership interest in Fulton Development. As a condition to this sale,
Wyndham must begin construction on this property of a 300 room hotel within two
years of closing. If Wyndham does not meet this condition, Fulton Development
has an option to repurchase the property for $6.5 million plus interest on the
purchase price equal to 7%. Although the Company anticipates selling this
property during the second quarter of 2000, the sale is contingent upon
obtaining certain third party approvals
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<PAGE> 20
and Wyndham International completing its due diligence. Because the sale of the
3 Canal Place Property would violate certain of the covenants in the Company's
credit agreement, among the required third party approvals, the Company must
obtain certain waivers and consents of the lenders under its credit agreement
for Canal Development to transfer the property to Fulton Development and for
Fulton Development to sell the property to Wyndham International.
Approximately 130,000 square feet of multipurpose non-gaming entertainment
space on the second floor of the Casino has been constructed to the point at
which the shell of the structure is complete and the space is suitable for
tenant build-out. Jazz Casino has subleased the second floor to JCC Development
and JCC Development intends to manage and lease the second floor in a manner
consistent with a master plan being developed by JCC Development and Jazz
Casino. The term of the second floor sublease commenced in September 1999 and
terminates on the earlier of the date of expiration or the date of termination
of Jazz Casino's amended and restated ground lease with the Rivergate
Development Corporation and the City of New Orleans, unless the second floor
sublease is sooner terminated by its terms. For a more complete description of
the second floor of the Casino, refer to "Item 1. Business -- Development
Plans."
Under a lease that expires in July 2023, Jazz Casino leases approximately
15 acres of land, including an unoccupied 15,000 square foot building. It was
originally anticipated that this land would be used for employee parking.
However, more suitable parking was located closer to the Casino. The Company is
currently seeking alternative uses for this property. Pursuant to a master lease
that expires in February 2004, the Company also leases an aggregate of
approximately 41,000 square feet of warehouse space where it stores gaming
equipment and supplies for use in the Casino.
To secure present and future indebtedness under certain of the agreements
the Company entered into in connection with the third amended plan of
reorganization, (1) Jazz Casino's interest in the amended and restated ground
lease between Jazz Casino and the Rivergate Development Corporation and the City
of New Orleans, (2) the property located at 3 Canal Place, (3) the property
located on Fulton and Poydras Streets, (4) the sublease of the second floor of
the Casino and (5) the lease of approximately 15 acres of land described above
are subject to mortgages granted to the Bank of New York as the collateral
agent.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to legal proceedings and claims which arise in the
normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will materially and adversely affect the Company's business,
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of JCC Holding's stockholders during
JCC Holding's fourth fiscal quarter ended December 31, 1999.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information as of January 1, 2000 regarding the
executive officers of JCC Holding.
Frederick W. Burford, age 49, has served as the President of JCC Holding
and Jazz Casino since April 1998 and President of JCC Development, Canal
Development and Fulton Development since September 1998. Mr. Burford was also
the Secretary and Treasurer of JCC Holding from December 1997 until September
1998. Mr. Burford was a consultant to Harrah's Entertainment from May 1997 until
October 1998 and served as Vice President of JCC Holding from December 1997 to
April 1998. During August 1997, Mr. Burford served as President of TPI
Enterprises, Inc., a restaurant holding company. From November 1991 until
September 1997 Mr. Burford served as a director and the Executive Vice President
and Chief Financial Officer of TPI Enterprises, Inc. From March 1990 to October
1991, Mr. Burford served as the Vice President, Controller and Treasurer of The
Promus Companies, Inc., a gaming and hotel holding company,
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<PAGE> 21
and from August 1977 until February 1990 Mr. Burford held various positions with
the Holiday Corporation, a gaming and hotel holding company, including most
recently, Vice President and Treasurer.
L. Camille Fowler, age 44, has served as the Vice President -- Finance,
Treasurer and Secretary of JCC Holding, Jazz Casino, JCC Development, Canal
Development and Fulton Development since September 1998. Ms. Fowler also served
as Director of Finance of the Manager from April 1996 to November 1998, Vice
President and Secretary of the Manager from January 1998 to November 1998, and
Treasurer of the Manager from February 1998 to November 1998. From October 1993
until April 1996, Ms. Fowler served as the Director of Financial Reporting of
the Manager.
Frederick J. Keeton, age 42, has served as the Vice President -- Government
Affairs and Community Relations for JCC Holding since July 1999. From September
1998 to June 1999, he served in the same position as a leased employee from
Harrah's Entertainment. Mr. Keeton's position with JCC Holding remains subject
to the Louisiana Gaming Control Board finding him suitable under the Gaming Act.
Prior to joining the Company, Mr. Keeton served in various capacities at
Harrah's Entertainment including Director of Government Affairs from August 1994
to September 1998, Director of Corporate Claims Management from February 1990 to
July 1994, Senior Manager of Corporate Claims Management from February 1989 to
February 1990, and Manager of Claims from June 1984 to January 1989.
Thomas M. Morgan, age 45, has served as the Vice President -- Development
of JCC Holding since January 2000. From January 1999 to December 1999, he served
in the same capacity as a leased employee from Harrah's Entertainment. Mr.
Morgan's position with JCC Holding remains subject to the Louisiana Gaming
Holding Control Board finding him suitable under the Gaming Act. Prior to
joining the Company, Mr. Morgan served as Vice President -- Development for
Harrah's Entertainment from January 1992 through December 1998. From April 1985
through December 1991, Mr. Morgan served as Director of Development for Embassy
Suites, Inc., a hotel holding company.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
CLASS A COMMON STOCK PRICE
JCC Holding's class A common stock began trading on the American Stock
Exchange under the symbol "JAZ" during the fourth quarter of fiscal 1998 on
December 9, 1998. Prior to that time, JCC Holding's class A common stock was not
listed or traded on any organized market. Each share of JCC Holding's class B
common stock, which does not trade on any market and all of which are held by
two entities, and each share of JCC Holding's class A common stock, will
automatically convert into one share of JCC Holding's unclassified common stock
on the Transition Date. The table set forth below provides, on a per share basis
for each quarterly period in 1999 and the period from December 9, 1998 to
December 31, 1998, the high and low sales prices of JCC Holding's class A common
stock as reported on the American Stock Exchange.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
Fiscal 1999
First Quarter............................................. $ 3.75 $3.00
Second Quarter............................................ $ 8.75 $3.38
Third Quarter............................................. $ 9.50 $5.88
Fourth Quarter............................................ $10.00 $2.69
Fiscal 1998
Fourth Quarter for the period from December 9, 1998
to December 31, 1998................................... $ 4.00 $3.38
</TABLE>
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<PAGE> 22
HOLDERS
As of March 17, 2000, there were approximately 430 record holders of the
class A common stock, and the Company estimates that there were approximately
1,975 beneficial owners of the class A common stock. As of March 17, 2000 there
were 2 beneficial owners and record holders of the class B common stock.
DIVIDEND POLICY
JCC Holding has never paid any cash dividends on its class A or class B
common stock and does not intend to pay cash dividends on its class A or class B
common stock in the foreseeable future. Further, pursuant to the terms of the
Company's credit agreement, for as long as there are amounts outstanding
thereunder no dividends will be paid. In addition, the indentures governing the
Notes prohibit payment of cash dividends unless certain conditions are met,
including the condition that no dividend can be paid unless Jazz Casino has paid
the maximum amount of contingent interest payments required with respect to its
senior subordinated notes with contingent payments and its senior subordinated
contingent notes for certain periods of time. 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 JCC Holding's board of
directors.
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.
RECENT SALES OF UNREGISTERED SECURITIES
On April 29, 1999, JCC Holding awarded two of its executive officers 70,000
shares of class A common stock that are subject to certain restrictions on
transferability. The shares were issued to each of the officers without
consideration as a material inducement to serve as officers of the Company.
These issuances were exempt from registration under Section 5 of the Securities
Act of 1933 in reliance upon Section 4(2) of the Securities Act of 1933 as a
transaction by an issuer not involving a public offering.
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<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated statements of
operations and balance sheet data of (1) JCC Holding for the fiscal year ended
and as of December 31, 1999 and for the two month period ended and as of
December 31, 1998 and (2) Harrah's Jazz Company for the ten-month period ended
October 30, 1998 and for the fiscal years ended, and as of, December 31, 1997,
1996 and 1995. Although JCC Holding was incorporated on August 20, 1996, prior
to October 30, 1998, the Company had not conducted any operations, generated any
revenues or issued any capital stock. Accordingly, separate financial
information with respect to the Company prior to the two month period ended
December 31, 1998 are omitted because the Company does not believe that such
separate financial information is material. On October 30, 1998, Jazz Casino
succeeded to all of the assets of Harrah's Jazz Company except the property
located at 3 Canal Place and the property located on Fulton and Poydras Streets,
which vested in Canal Development and Fulton Development, respectively. The
selected financial data for the ten-month period ended October 30, 1998 and for
the fiscal years ended and as of December 31, 1997, 1996 and 1995 have been
derived from Harrah's Jazz Company's audited financial statements. The selected
financial data for the fiscal year ended and as of December 31, 1999 and for the
two-month period ended and as of December 31, 1998 have been derived from the
Company's audited financial statements. The selected financial data should be
read in conjunction with "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Item 8. Financial Statements
and Supplementary Data."
<TABLE>
<CAPTION>
JCC HOLDING (SUCCESSOR) HARRAH'S JAZZ COMPANY (PREDECESSOR)
--------------------------- ---------------------------------------------
TEN MONTH
FISCAL YEAR TWO MONTH PERIOD
ENDED PERIOD ENDED ENDED FISCAL YEAR ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, OCTOBER 30, -------------------------------
1999 1998 1998 1997 1996 1995
------------ ------------ ----------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Revenues(a).............. $ 41,156 $ 14 $ 87 $ 1,679 $ 1,661 $ 95,257
Extraordinary items(b)... -- -- 267,706 -- -- --
Net income (loss)........ (59,140) (3,677) 169,993 (21,244) (20,900) (301,560)
Loss per share........... (5.88) (.37) N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
JCC HOLDING (SUCCESSOR) HARRAH'S JAZZ COMPANY (PREDECESSOR)
------------------------ -----------------------------------
FISCAL YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Total assets........................ $506,402 $343,131 $354,417 $359,469 $364,480
Long-term debt...................... 368,222 185,519 -- -- --
Liabilities subject to compromise... -- -- 523,468 523,483 519,360
</TABLE>
- ---------------
(a) JCC Holding's fiscal 1999 results of operations reflect approximately two
months of revenues generated from the Casino, which opened on October 28,
1999. In addition, Harrah's Jazz Company's fiscal 1995 results of
operations reflect approximately seven months of revenues generated from
the Basin Street Casino which closed in November 1995.
(b) A discussion of the extraordinary item related to the discharge of debt
during the bankruptcy proceedings is presented in Note 1 to Harrah's Jazz
Company's financial statements included in "Item 8. Financial Statements
and Supplementary Data."
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<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
"Item 6. Selected Financial Data" and "Item 8. Financial Statements and
Supplementary Data." This discussion contains forward-looking statements that
involve uncertainties and risks, such as statements of the Company's plans,
objectives, expectations and prospects. The Company's actual results could
differ materially from those discussed herein as a result of certain factors,
including but not limited to those discussed below in "-- Factors Affecting
Future Performance" and elsewhere in this document.
OVERVIEW
JCC Holding is a casino and entertainment development company. It was
incorporated under Delaware law on August 20, 1996, and conducts business
through its wholly-owned subsidiaries, Jazz Casino, JCC Development, Canal
Development and Fulton Development. JCC Holding began operations in October
1998, when it assumed the business operations formerly owned by Harrah's Jazz
Company, which, as described below, filed for bankruptcy in November 1995. On
October 30, 1998, in accordance with the third amended plan of reorganization,
the Company became the successor to the operations of Harrah's Jazz Company.
On November 22, 1995, Harrah's Jazz Company and Harrah's Jazz Finance
Corp., its wholly-owned subsidiary, filed for reorganization under Chapter 11 of
the United States Bankruptcy Code, ceased operation of the Basin Street Casino
and suspended construction of the Casino. Prior to consummation of the third
amended plan of reorganization on October 30, 1998, Harrah's Jazz Company's
activities consisted of administering the bankruptcy case, preparing the third
amended plan of reorganization and related disclosure statement, negotiating
with interested parties with respect to the third amended plan of
reorganization, and related issues. Harrah's Jazz Company's primary source of
operating funds was debtor-in-possession financing provided by Harrah's
Entertainment and its affiliates and its largest expenses were general and
administrative expenses and reorganization costs.
Prior to consummation of the third amended plan of reorganization, the
Company had not conducted any operations, generated any revenues or issued any
capital stock. As of October 30, 1998, the effective date of the third amended
plan of reorganization, the Company applied "fresh start" reporting, which
resulted in a write-down of certain non-current assets totaling approximately
$75 million and the elimination of Harrah's Jazz Company's accumulated deficit.
In accordance with "fresh start" reporting, 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 certain intangible
non-current assets. During the period from October 30, 1998 to October 27, 1999,
the Company's activities consisted primarily of administering the construction
of the Casino and preparing for opening the Casino on October 28, 1999.
Although JCC Holding was incorporated on August 20, 1996, prior to October
30, 1998, the Company had not conducted any operations, generated any revenues
or issued any capital stock. The financial condition and results of operations
of the Company, after giving effect to the third amended plan of reorganization
and the application of "fresh start" reporting, are not comparable to the
financial condition and results of operations of either the Company or Harrah's
Jazz Company as of any dates and for any periods prior to October 30, 1998.
Furthermore, because the Casino did not open until October 28, 1999, the
discussion regarding operating results of Harrah's Jazz Company and the Company
during the periods presented in this report reflect only the Company's results
of operations subsequent to October 30, 1998, the effective date of the third
amended plan of reorganization, and the various components of significant
revenue and expense line items contributing to the Company's net losses. In
accordance with the Securities and Exchange Commission's guidelines, financial
statements and supplementary data of the Company and Harrah's Jazz Company are
presented in Item 8 herein.
RESULTS OF OPERATIONS
Total Revenues. From October 28, 1999 to December 31, 1999, the Company
generated Casino revenue of $38.0 million, food and beverage revenue of $3.7
million, and retail, parking and other revenue of $1.7 million. Casino
promotional allowances amounted to $2.3 million resulting in total net revenues
of
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<PAGE> 25
$41.1 million. For the same period, although approximately 1.1 million people
visited the Casino, which exceeded expectations, revenues fell short of
expectations due to the fewer than anticipated gaming players visiting the
Casino.
From January 1, 1999 to October 27, 1999, the Company generated revenues of
approximately $126,000 consisting of parking revenues generated primarily by the
parking facilities located on its property located at 3 Canal Place in New
Orleans and at the Casino that were opened in June and October 1999,
respectively.
From October 30, 1998 to December 31, 1998, the Company generated revenues
of approximately $14,000 consisting of parking revenues generated by the parking
lot located on its property located at 3 Canal Place in New Orleans.
Operating Expenses. From October 28, 1999 to December 31, 1999, the Company
incurred Casino expenses of $35.0 million resulting in a gaming operating profit
of $631,000. Gaming operating expenses primarily consist of the minimum gaming
revenue shares payments to the Louisiana Gaming Control Board under Jazz
Casino's casino operating contract, labor costs, player development and
entertainment costs, promotional costs, and security and surveillance related
expenses. Operating profit was lower than expected due to lower than anticipated
revenue levels coupled with the high fixed cost component associated with the
business.
From October 28, 1999 to December 31, 1999, the Company incurred food and
beverage operating expenses of $2.9 million resulting in a food and beverage
operating profit of $818,000. Food and beverage operating expenses primarily
consist of labor costs and food and beverage raw materials costs. The food and
beverage segment is somewhat limited by contractual restrictions imposed by the
Louisiana Gaming Control Board in accordance with the terms of the Gaming Act.
The Casino is prohibited from offering seated restaurant facilities with table
food services for patrons. However, the Casino may offer cafeteria style food
services for employees and a buffet for patrons with seating for up to 250
people. In addition, the Louisiana Gaming Control Board permits the Casino to
contract with local food preparers to provide food from kiosks in specific
locations on the gaming floor.
From October 28, 1999 to December 31, 1999, the Company incurred retail,
parking and other expenses of $1.2 million resulting in retail, parking and
other operating profit of $619,000. Retail, parking and other operating expenses
primarily consist of the cost of retail merchandise sold and expenses related to
operating the Casino's two parking facilities, and providing an employee
cafeteria.
For the year ended December 31, 1999, the Company incurred general and
administrative expenses of $16.0 million consisting primarily of city rental
payments, salaries and wages of administrative staff, advertising expenses,
entertainment costs, and legal and professional fees. From October 30, 1998 to
December 31, 1998, the Company incurred general and administrative expenses of
$310,000 related to franchise taxes.
For the year ended December 31, 1999 and from October 30, 1998 to December
31, 1998, the Company incurred depreciation and amortization expenses of $5.1
million and $111,000, respectively.
From January 1, 1999 to October 27, 1999 and from October 30, 1998 to
December 31, 1998, the Company incurred pre-opening expenses of $35.2 million
and $3.6 million, respectively. These expenses consisted primarily of salaries
and wages, legal and professional fees, costs incurred to recruit and train
employees to work in the Casino and pre-opening marketing expenses.
Reorganization Item. During 1999, preconfirmation contingencies were
reduced by $1.6 million due to a change in estimate.
Other Income (Expenses). From October 28, 1999 to December 31, 1999, the
Company incurred interest charges of $6.9 million. Prior to October 28, 1999,
the Company capitalized all interest charges. From January 1, 1999 to October
27, 1999 and from October 30, 1998 to December 31, 1998, the Company capitalized
interest of $21.7 million and $3.5 million, respectively.
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<PAGE> 26
For the year ended December 31, 1999 and from October 30, 1998 to December
31, 1998, the Company generated interest income of $412,000 and $310,000,
respectively, attributable primarily to overnight repurchase investments.
LIQUIDITY AND CAPITAL RESOURCES
Capital resources for construction projects. From October 30, 1998 until
the Casino's opening on October 28, 1999, the Company's principal capital
requirements related to constructing the Casino. The Company estimates that from
the date Harrah's Jazz Company filed for bankruptcy, the total cost of
completing the Casino was approximately $380.6 million. This amount included,
among other things, hard costs of completing construction of the Casino, costs
of obtaining gaming equipment and supplies, reorganization costs related to the
bankruptcy, payments to unsecured creditors and cure payments in connection with
the assumption of certain contracts. Approximately $82.3 million of this amount
was expended and paid prior to the consummation of the third amended plan of
reorganization for hard construction costs to enclose the Casino, administrative
costs related to the reorganization process and various obligations under
Harrah's Jazz Company's agreements with the City of New Orleans. As of December
31, 1999, although the Casino facility was complete, all construction and
pre-opening invoices had not yet been received. Based on construction contracts
and purchasing documents, the remaining unbilled costs of completing the Casino
are anticipated to be approximately $21.7 million, including $7.5 million in
hard construction costs and $14.2 million for gaming equipment and supplies and
other pre-opening costs.
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) were derived from a combination of the $15
million new equity investment from Harrah's Crescent City Investment Company,
the $211.5 million term loans under the Company's credit agreement, the $22.5
million under Jazz Casino's junior subordinated credit facility and the issuance
of approximately $27.3 million of convertible junior subordinated debentures,
all of which had been funded as of December 31, 1999. In addition, to finance
the loading of the Casino's slot machines with approximately $6 million in
coins, in a sale and leaseback transaction on October 20, 1999, Jazz Casino sold
1,085 of its slot machines to a subsidiary of Harrah's Entertainment. This
subsidiary is leasing the slot machines back to Jazz Casino, and Jazz Casino
used the proceeds from the sale to fill the slot machines with coins. Further,
Jazz Casino estimates that it will borrow an amount ranging from $5 million to
$8 million under the completion loan agreement with Harrah's Entertainment and
Harrah's Operating Company pursuant to their completion guarantees to fund the
balance of the construction and pre-opening costs.
Working capital for operations. From October 28, 1999 to December 31, 1999,
the Company has experienced operating losses before depreciation and
amortization of approximately $14.1 million. A number of the contractual
agreements contain provisions that allow the Company to defer payment of certain
operating expenses to absorb these initial operating losses. A description of
the various deferral arrangements follows.
Jazz Casino has the option to pay the first six semi-annual payments of
fixed interest on its senior subordinated notes with contingent payments in kind
rather than in cash. Jazz Casino also has the option of paying the interest on
its convertible junior subordinated debentures, in whole or in part, in kind
rather than in cash (1) at any time on or prior to October 30, 2003, and (2) at
any time thereafter if Jazz Casino does not make contingent payments with
respect to its senior subordinated contingent notes on the immediately preceding
interest payment date for the senior subordinated contingent notes. Under its
junior subordinated credit facility with Harrah's Entertainment and Harrah's
Operating Company, if Jazz Casino does not meet certain EBITDA tests for the
contingent payment periods ended on September 30, 2000 and 2001, or if,
subsequent to September 30, 2001, Jazz Casino pays interest in kind on its
senior subordinated notes with contingent payments, interest will not be paid
and will be added to the outstanding principal. In addition, the scheduled
quarterly repayments under the credit agreement with the banks will be deferred
for any of the first six semi-annual interest payment periods if interest on
Jazz Casino's senior subordinated notes with contingent payments is paid in kind
and the Manager has deferred its fees under the terms of its management
agreement with Jazz Casino and its agreement to provide Jazz Casino a minimum
payment guaranty. During 1999, Jazz
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<PAGE> 27
Casino paid the first and second interest payments on its senior subordinated
notes with contingent payments and convertible junior subordinated debentures in
kind rather than in cash, which amounted to $11.7 million and $2.3 million,
respectively and intends to continue to pay interest in kind rather than in cash
for at least the next 24 months. Jazz Casino estimates that for at least the
next 24 months interest on the junior subordinated credit facility will be paid
in kind and the scheduled quarterly repayments under the credit agreement with
the banks as discussed above will be deferred.
No fixed interest is payable on Jazz Casino's senior subordinated
contingent notes. Contingent payments with respect to its senior subordinated
notes with contingent payments and its senior subordinated contingent notes, to
the extent they are due and owing, are payable on each interest payment date
based on the Contingent Payment Measurement Amount, as such term is defined in
the indentures governing the Notes. For the year ended December 31, 1999 and for
the period from October 30, 1998 to December 31, 1998, the Contingent Payment
Measurement Amount, as derived from the Company's audited financial statements,
was a negative $12.0 million and $310,000, respectively. During these same
periods, Jazz Casino's Consolidated EBITDA, as such term is defined in the
indentures governing the Notes and as derived from the Company's audited
financial statements, was a negative $12.0 million and $310,000, respectively.
During these periods, no contingent payments were accrued or were paid on either
the senior subordinated notes with contingent payments or the senior
subordinated contingent notes.
Additionally, in accordance with the terms of the applicable agreement,
Jazz Casino is deferring the following amounts owed to Harrah's Entertainment or
its subsidiaries:
- interest payments under its junior subordinated credit facility with
Harrah's Entertainment and Harrah's Operating Company;
- credit enhancement fees payable as consideration for the guarantee that
Harrah's Entertainment and Harrah's Operating Company have agreed to
provide with respect to certain amounts outstanding under the Company's
credit agreement;
- fees under its minimum payment guarantee agreement with Harrah's
Entertainment and Harrah's Operating Company;
- management fees under its management agreement with the Manager;
Also on February 29, 2000, Jazz Casino entered into a limited forbearance
agreement with the Manager and Harrah's Operating Company. Under this
forbearance agreement, Harrah's Operating Company and/or the Manager agreed to
forebear until August 1, 2000, the payment of the following additional items
owed by Jazz Casino:
- rent and certain additional charges owed with respect to certain
equipment used at the Casino that Jazz Casino leases from Harrah's
Operating Company;
- fees owed with respect to certain administrative services that Harrah's
Operating Company provides Jazz Casino under an administrative services
agreement; and
- certain costs, expenses and services for which Jazz Casino is required to
reimburse the Manager under its management agreement.
As of December 31, 1999, Jazz Casino has deferred approximately $6.8
million related to the payments and fees payable to Harrah's Entertainment or
its subsidiaries under the contractual agreements as well as under the
forbearance agreement discussed above.
Under the credit agreement, Jazz Casino also has up to $25 million
available for working capital purposes under its revolving line of credit which
has been used to partially cover operating losses. As of December 31, 1999, the
outstanding balance under the revolving line of credit was $15.9 million, with
outstanding letters of credit of $2.2 million. As of February 28, 2000, the
outstanding balance was $22.1 million, including letters of credit, and as a
result of Harrah's Entertainment making the minimum daily payment to the
Louisiana
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Gaming Control Board as discussed below, the outstanding balance as of March 17,
2000 was reduced to $15.0 million with outstanding letters of credit of $2.1
million.
Under the terms of its casino operating contract, Jazz Casino must make
minimum daily payments to the Louisiana Gaming Control Board of approximately
$274,000 towards the minimum $100 million annual obligation. Jazz Casino did not
make the payment on February 28, 2000. On February 29, 2000, the Louisiana
Gaming Control Board sent notice of non-payment to Jazz Casino and a notice of
drawing to Harrah's Entertainment and Harrah's Operating Company, as called for
under the initial unconditional minimum payment guaranty agreement by Harrah's
Entertainment and Harrah's Operating Company in favor of the State of Louisiana
and the Louisiana Gaming Control Board. On February 29, 2000, Harrah's made the
payment due on February 28 in the amount of $821,918 (representing three minimum
daily payments due on February 28 in accordance with the contract), and began
making the minimum daily payments thereafter of approximately $274,000 per day.
As of March 17, Harrah's had made payments totaling $5.8 million to the
Louisiana Gaming Control Board on Jazz Casino's behalf. Because Jazz Casino's
drawing under the minimum payment guaranty (and any subsequent minimum payment
guaranty) could constitute a default under the Company's credit agreement if
Jazz Casino's reimbursement obligation to Harrah's Entertainment in connection
therewith exceeds $5 million (and drawings in excess of $5 million are
anticipated), the Company's lenders granted it a limited waiver of the default
subject to the following conditions (which have been satisfied subject to
certain conditions):
- that Harrah's Entertainment and Harrah's Operating Company agree to renew
their minimum payment guarantee for the full fiscal year beginning April
1, 2000 through March 31, 2001;
- with respect to up to $40 million of the amount that Harrah's
Entertainment and Harrah's Operating Company may pay to the Louisiana
Gaming Control Board on account of Jazz Casino under the minimum payment
guaranty, they will not demand repayment of, and Jazz Casino may not
repay, the principal or accrued interest owed on the principal, until, at
the earliest, March 31, 2001;
- the principal amount of unreimbursed payment obligations under this
agreement to Harrah's Entertainment and Harrah's Operating Company may
not exceed $40 million without additional lender waivers; and
- the waiver is terminated when Harrah's Entertainment or Harrah's
Operating Company demands repayment of the principal and accrued interest
on the advances under the minimum payment guaranty.
Advances by Harrah's Entertainment under the minimum payment guaranty are first
priority liens on the assets of the Company and therefore rank ahead of bank
debt and the senior subordinated notes. If Harrah's Entertainment and Harrah's
Operating Company make advances under the minimum payment guaranty in excess of
$40 million, they will have the right to demand prompt payment of this excess
amount, including interest due on the excess. For a description of Harrah's
Entertainment's minimum payment guarantee and certain conditions under which the
minimum payment guarantee may be terminated, refer to "Factors Affecting Future
Performance -- Jazz Casino May Not be Able to Renew its Minimum Payment
Guarantee" and "-- The Company May Not be Able to Service its Significant Debt
and Other Payment Obligations."
Capital expenditures. Pursuant to Jazz Casino's amended and restated ground
lease with the Rivergate Development Corporation and the City of New Orleans,
its management agreement with the Manager and its casino operating contract,
Jazz Casino established a capital replacement fund to fund the capital
expenditures necessary to operate the Casino. Jazz Casino is contractually
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
Casino's opening, $4 million for the second 12 months following the Casino's
opening, $5 million for the third 12 months following the Casino's opening, and
2% of the gross revenues of the Casino for each fiscal year thereafter. As of
December 31, 1999, Jazz Casino had deposited $500,000 into the interest-bearing
capital reserve account.
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Funds provided by a combination of the sources described above, including
funds provided by Harrah's Entertainment and Harrah's Operating Company under
their completion guarantees and minimum payment guaranty, anticipated cash flows
from operations and the ability to defer certain payment obligations as
described above, are expected to be sufficient to satisfy the Company's
financial obligations, including capital expenditures and working capital for
operations, during the next 12 months. The Company cannot assure that additional
financing, if needed, will be available to Jazz Casino, or that, if available,
the financing will be on terms favorable to the Company. In addition, the
Company cannot assure that Jazz Casino'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.
Capital resources for development activities. In addition to the gaming
related entertainment offered at the Casino, the Company plans to develop
additional real estate in New Orleans for entertainment uses that support the
Casino. JCC Development leases the second floor of the Casino from Jazz Casino.
The second floor was constructed to the point at which the shell of the
structure was complete when the Casino opened in October 1999. The Casino's
second floor ultimately will consist of approximately 130,000 square feet of
multipurpose non-gaming entertainment space. JCC Development has expended
approximately $1.4 million through December 31, 1999 towards developing a master
plan for the build out and leasing of the second floor of the Casino for
non-gaming uses and for construction-related work that needed to take place on
the second floor of the Casino prior to opening the Casino in order to prevent
disruption to the Casino's gaming operations. JCC Development has arranged to
borrow up to $2 million from a subsidiary of Harrah's Entertainment to fund
these items. Borrowings under this loan bear interest at 9% per year, and, at
JCC Development's option, may be paid in cash or in kind. Principal and interest
under this loan must be paid out of the permanent financing ultimately obtained
for the completion of the second floor of the Casino. As of December 31, 1999,
JCC Development has borrowed $1.2 million under this loan. Jazz Casino and JCC
Development presented a preliminary master plan governing the use of the second
floor of the Casino to the City of New Orleans on February 22, 2000 and is
currently considering alternatives for financing of the remainder this
development. Without additional financing, the Company will be unable to effect
this build-out and development.
Fulton Development owns the city block of historical buildings across the
street from the Casino and its garages, which the Company plans to develop into
other entertainment uses that support the Casino. At this time, the Company has
not completed its plans, and no financing has been obtained, for this
development.
Canal Development owns the parcel of land across from the Casino located at
3 Canal Place, adjacent to the Canal Place Shopping Center. On February 14,
2000, Fulton Development entered into a contract to sell to Wyndham
International, a hotel developer, this property for $6.5 million. Prior to the
sale, it is anticipated that Canal Development, the owner of the property, will
transfer the property to Fulton Development in exchange for a membership
interest in Fulton Development. As a condition to this sale, Wyndham must begin
construction of a 300 room hotel within two years of closing or Fulton
Development will have the option to repurchase the property for $6.5 million
plus interest on the purchase price equal to 7% per year. The Company is
currently evaluating alternatives for the use of the proceeds generated from
this sale. The sale is contingent upon obtaining certain third party approvals
and Wyndham International completing its due diligence and is expected to close
during the second quarter in 2000. Because the sale of the 3 Canal Place
property would violate certain of the covenants in the Company's credit
agreement, among the required third party approvals, the Company must obtain
certain waivers and consents of the lenders under its credit agreement for Canal
Development to transfer the property to Fulton Development and for Fulton
Development to sell the property to Wyndham International.
INFLATION
To date, the Company believes inflation has not had a material impact on
the Company's operations.
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RECENTLY ISSUED PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board issued a new Statement of
Financial Accounting Standards, or SFAS, No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which has been amended to be effective for
fiscal years beginning after June 15, 2000. SFAS 133 requires, among other
things, that derivatives be recorded on the balance sheet date at fair value.
Changes in the fair value of derivatives may, depending on circumstances, be
recognized in earnings or deferred as a component of stockholders' equity until
a hedged transaction occurs. The Company has not completed the process of
evaluating the impact that will result from adopting SFAS 133. The Company is
therefore unable to disclose the impact that adopting SFAS 133 will have on its
financial position and results of operations when such statement is adopted.
FACTORS AFFECTING FUTURE PERFORMANCE
GAMING LAWS AND REGULATIONS COULD ADVERSELY AFFECT THE COMPANY'S OPERATIONS
Future state legislation could adversely affect the Company's
operations. The Company cannot assure that the Louisiana legislature will not
enact legislation that imposes obligations, restrictions or costs that could
interfere with Jazz Casino's casino operations, cause Jazz Casino to violate
agreements to which it is a party or otherwise materially and adversely affect
the Company. Because legalized gaming is a relatively new industry in Louisiana,
over the past few years the Louisiana state legislature has given a significant
amount of attention to gaming related bills, many of which could impact the
Casino. For example, at various times, bills have been introduced to:
- constitutionally and/or legislatively repeal all forms of gaming
(including gaming at the Casino);
- increase taxes on casinos;
- permit dockside riverboat gaming;
- limit credit that may be extended by casinos;
- mandate payout schedules for slot machines;
- limit days and hours of casino operations; and
- create additional restrictions on food service offered at the Casino.
The Company cannot assure that Louisiana will not subsequently enact new
legislation that modifies or revokes Jazz Casino's right to conduct gaming
activities or otherwise materially and adversely affects the Company's business
and operations. For example, in the spring of 1996, the Louisiana legislature
passed legislation that called for a parish-by-parish referendum to decide, on
an item-by-item basis, whether riverboat gaming, video poker gaming and, in
Orleans Parish, a land-based casino should be permitted to operate in the
parish. Although, on November 5, 1996, voters in Orleans Parish elected to
permit land-based casino gaming, riverboat gaming and video poker gaming in
Orleans Parish, if similar legislation is enacted in the future, it could lead
to the Casino's gaming operations being suspended or permanently prohibited. In
addition, the State of Louisiana could increase competition by authorizing
additional riverboats or other forms of gaming or it could authorize dockside
gaming or other land-based casinos in Orleans Parish or elsewhere in Louisiana.
For example, in 1997, the Louisiana legislature authorized the use of slot
machines at race tracks in three parishes in Louisiana (but not Orleans Parish)
subject to a 15,000 square foot limitation. For a more detailed description of
the risks associated with the competition that the Company faces, refer to
"-- The Gaming Industry is Highly Competitive." In addition, other legislative
changes, such as broadened food service restrictions, and the introduction of
new legislation, could materially and adversely affect the Company's business,
financial condition and results of operations. For a description of certain
risks associated with legislative restrictions on the Casino's operation, refer
to "-- The Casino is Subject to Limits on Providing Lodging, Food Services,
Entertainment and Retail Operations That Could Impact Its Ability to Operate
Profitably."
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Jazz Casino and certain of its affiliates must be found suitable under
Louisiana law. Jazz Casino was not permitted to operate the Casino unless and
until certain persons were found suitable by the Louisiana Gaming Control Board.
These persons include (1) Jazz Casino, (2) JCC Holding, (3) Harrah's
Entertainment, (4) the Manager and (5) certain members, officers and directors
of these companies. In addition, additional officers and directors of Jazz
Casino, JCC Holding or the Manager may be required to be found suitable. If all
required suitability findings are not received on a timely basis, it could
materially and adversely affect the Company's business, financial condition and
results of operations. Once found suitable, entities and persons that are
required to be suitable have an ongoing obligation to maintain their suitability
throughout the term of Jazz Casino's casino operating contract. If these
entities and persons fail to maintain their suitability, Jazz Casino or the
Manager may be found unsuitable. Jazz Casino's and the Manager's suitability
also may be adversely affected by persons associated with them and their
respective affiliates, over whom Jazz Casino and the Manager have no control. If
Jazz Casino or the Manager is found unsuitable and, as a consequence, Jazz
Casino's casino operating contract is revoked, it would materially and adversely
affect the Company's business, financial condition and results of operations.
The Gaming Act, the rules and regulations promulgated thereunder, and Jazz
Casino's casino operating contract also impose certain suitability requirements
on the holders of the Notes, Jazz Casino's convertible junior subordinated
debentures and holders of equity in Jazz Casino and its affiliates, including
JCC Holding. For a description of these requirements, refer to "-- Holders of
Common Stock, Notes or Convertible Junior Subordinated Debentures May be
Required to Divest These Securities at Unfavorable Times or Costs."
Jazz Casino, JCC Holding and their debt and equity holders could be the
subject of regulatory enforcement actions. The Louisiana Gaming Control Board is
empowered to sanction Jazz Casino, JCC Holding, the Manager, holders of debt and
equity of Jazz Casino and its affiliates, including JCC Holding, and people that
hold permits, licenses or that are required to be found suitable by the
Louisiana Gaming Control Board for violations of the Gaming Act and the rules
and regulations promulgated thereunder. If Jazz Casino, Jazz Casino's employees,
JCC Holding or the Manager fails to comply with the Gaming Act, the rules and
regulations promulgated thereunder or regulatory requirements in Jazz Casino's
casino operating contract, including suitability requirements, it could
materially and adversely affect the Company as well as holders of debt and
equity of Jazz Casino and its affiliates. For example, the Company could be
subject to fines, suspension of its rights granted by the casino operating
contract and, under certain circumstances, revocation or termination of the
casino operating contract. In addition, if any holder of Notes, Jazz Casino's
convertible junior subordinated debentures or JCC Holding's class A or class B
common stock is required to be suitable and fails to be suitable, the holder may
be required to sell or otherwise divest such securities at substantially
below-market prices.
The Company may not be able to enforce its contractual rights against the
State of Louisiana. Under its casino operating contract, Jazz Casino is entitled
to bring an action to compel specific performance or any other remedy permitted
or provided by law if the Louisiana Gaming Control Board breaches the contract
and fails to cure the breach. In the spring of 1996, however, the Louisiana
legislature enacted a bill that purports to amend the Gaming Act to provide the
State of Louisiana and all of its subdivisions (including the Louisiana Gaming
Control Board) with immunity from suit and liability for any action or failure
to act on the part of Louisiana or any of its political subdivisions (including
the Louisiana Gaming Control Board). The Company cannot assure that in the event
Jazz Casino seeks to enforce its rights under the casino operating contact, that
a court would allow the suit to proceed. If the Louisiana Gaming Control Board
fails to comply with the casino operating contract, it could materially and
adversely affect the Company's business, financial condition and results of
operations. This adverse affect would be exacerbated if a court applied the
immunity statute and precluded Jazz Casino from seeking recourse in a judicial
forum.
The Casino's operations could be subject to future federal legislation. In
1996, Congress enacted a law creating a federal commission to study the economic
and social impact of gaming and report its findings to Congress and the
President. A report was issued by the commission in June 1999. The Company is
unable at this time to determine the impact of this report on future legislation
that may impact the gaming industry. The Company cannot assure that the report
will not result in new laws or regulations that would adversely impact the
gaming industry in general and the Casino in particular.
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THE POLITICAL ENVIRONMENT IN LOUISIANA COULD ADVERSELY AFFECT THE COMPANY'S
ABILITY TO OPERATE THE CASINO OR DEVELOP ITS OTHER PROPERTIES
Louisiana state and local politics have affected, and will continue to
affect, the Casino's development and may affect the Casino's operation. 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 Casino's development have been the subject of lawsuits, claims and
delays brought about by various anti-gaming and preservationist groups and
competitors of the Casino. Although these lawsuits and claims have all been
settled or dismissed, these lawsuits and claims, together with contract
negotiations with Louisiana and New Orleans governmental entities, significantly
delayed the Casino's development. Additional lawsuits and the uncertain
political environment may result in further delays, all of which could
materially and adversely affect the Company's business, financial condition and
results of operations.
JAZZ CASINO MAY NOT BE ABLE TO RENEW ITS MINIMUM PAYMENT GUARANTY
Jazz Casino is required to pay at least $100 million per year to the State
of Louisiana under its casino operating contract and to obtain a guaranty of
this $100 million payment obligation. On October 30, 1998 Harrah's Entertainment
and Harrah's Operating Company agreed to post the guaranty of the $100 million
payment for the first year of operation and, subject to certain conditions, on
an annual basis, through March 31, 2004, but not for the entire term of the
casino operating contract. Harrah's Entertainment and Harrah's Operating Company
are not required to post the minimum payment guaranty under certain conditions
outlined in their agreement with Jazz Casino. Although on February 29, 2000 they
agreed to post their guaranty for the full year beginning April 1, 2000 through
March 31, 2001, Harrah's Entertainment and Harrah's Operating Company do not
have to re-post their guaranty for that year if, among other things:
- Jazz Casino has declared bankruptcy;
- Jazz Casino fails to pay certain guaranty fees;
- Harrah's Entertainment or its affiliates are found unsuitable under the
applicable gaming laws;
- the Manager is removed as the manager of the Casino;
- the casino operating contract is terminated;
- Jazz Casino breaches certain covenants under the agreement pursuant to
which Harrah's Entertainment and Harrah's Operating Company have agreed
to provide the guaranty; or
- certain circumstances occur that are generally beyond Jazz Casino's
control, such as strikes, acts of God, war and certain legislative
actions, that cause the Casino to temporarily close or otherwise stop
operating.
In addition to the conditions described above, on an annual basis, Harrah's
Entertainment and Harrah's Operating Company are not required to re-post their
guaranty after April 1, 2001 and prior to March 31, 2004 if Jazz Casino fails to
meet certain EBITDA targets or if Jazz Casino does not make the required $100
million minimum payment to the State of Louisiana and there is a minimum payment
default under the casino operating contract. The Company does not currently
anticipate meeting the EBITDA targets as of April 1, 2001.
After March 31, 2004, Harrah's Entertainment and Harrah's Operating Company
have stated that at their sole discretion, they may decide not to re-post the
guaranty. In making this decision, Harrah's Entertainment and Harrah's Operating
Company have stated that they will consider only their own interests and will
not consider the interests of any other person, including the Company. On March
31, 2004, or at any earlier time that Harrah's Entertainment and Harrah's
Operating Company fail to post the $100 million minimum payment guaranty to the
State of Louisiana, Jazz Casino must find a substitute guarantor to provide a
minimum payment guaranty. If Jazz Casino cannot locate a substitute guarantor on
satisfactory terms, it would materially and adversely affect the Company because
the casino operating contract would terminate
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(with no cure period) and the Casino would have to close. Currently Harrah's
Entertainment and Harrah's Operating Company are making payments pursuant to
their minimum payment guaranty.
THE CASINO MAY NEVER BE PROFITABLE
The Company cannot predict the number of visitors to the Casino, their
propensity to wager or the success of land based gaming in New Orleans, a market
that has never supported significant land based gaming operations. For example,
Harrah's Jazz Company 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. The actual results of the
Basin Street Casino, however, proved to be significantly less than Harrah's Jazz
Company's projections for the Basin Street Casino. Gross revenues for the Basin
Street Casino's six full months of operations averaged approximately $13 million
per month and, for those six months, the Basin Street Casino had significant
negative operating cash flows, and net losses in every month, averaging
approximately $13.5 million per month. In addition, Jazz Casino has a limited
operating history. Further, the Casino cannot have associated hotel or
full-service food operations. Neither JCC Holding's board of directors nor
certain of the Manager's officers have experience operating a land-based casino
of the Casino's size without associated hotel and full-service food operations.
As a result, Jazz Casino may never be able to operate the Casino in a profitable
manner or generate positive net earnings. The Company expects that it will
sustain substantial net losses in the first two years of the Casino's
operations. For the year ended December 31, 1999, the Company incurred losses of
$59.1 million, which were greater than anticipated due primarily to the Casino's
lower than projected revenues. For a description of certain other factors that
could affect the Casino's profitability, refer to "-- The Company May Not be
Able to Service its Significant Debt and Other Payment Obligations," "-- The
Company Does Not Have Sufficient Working Capital to Fund the Casino's
Operations," "-- The Casino is Subject to Limits on Providing Lodging, Food
Services, Entertainment and Retail Operations That Could Impact Its Ability to
Operate Profitably," and "-- The Gaming Industry is Highly Competitive."
THE COMPANY MAY NOT BE ABLE TO SERVICE ITS SIGNIFICANT DEBT AND OTHER PAYMENT
OBLIGATIONS
The Company incurred significant debt in connection with the transactions
consummated pursuant to the third amended plan of reorganization and, as a
result, has significant debt service obligations. As of December 31, 1999, the
Company's total long-term indebtedness was approximately $464.0 million and its
debt to equity ratio was 10.2 to 1.0. The Company's total long-term indebtedness
may also increase if:
- fixed interest on Jazz Casino's senior subordinated notes with contingent
payments is not paid in cash but is paid with additional notes;
- interest on Jazz Casino's convertible junior subordinated debentures is
not paid in cash but is paid with additional debentures;
- Harrah's Entertainment and Harrah's Operating Company are required to
continue to make payments under their completion guarantees or minimum
payment guaranty, for which the Company is obligated to reimburse
Harrah's Entertainment and Harrah's Operating Company; or
- the Company obtains financing to fund the build-out of the non-gaming
tenant improvements on the second floor of the Casino or the development
of its property located on Fulton and Poydras Streets.
Jazz Casino also has payment obligations to the Rivergate Development
Corporation and the Louisiana Gaming Control Board. Under its casino operating
contract, each year Jazz Casino must pay the Louisiana Gaming Control Board at
least $100 million. In addition, under Jazz Casino's amended and restated ground
lease with the Rivergate Development Corporation and the City of New Orleans,
each year Jazz Casino must pay the Rivergate Development Corporation (1) at
least $12.5 million plus (2) up to $3.25 million of other general annual
payments plus (3) certain one-time payments during the first two years after the
Casino opens. Jazz Casino also must make significant payments into a marketing
fund and a capital replacement fund for refurbishing the Casino.
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Jazz Casino's substantial indebtedness and significant payment obligations
could materially and adversely affect the Company's business, financial
condition and results of operations. Its indebtedness and payment obligations
could:
- make it more difficult for the Company to satisfy its debt and other
payment obligations;
- increase the Company's vulnerability to general adverse economic and
industry conditions;
- limit the Company's ability to obtain additional financing on
satisfactory terms and to otherwise fund its future working capital,
capital expenditures and other general corporate requirements;
- require the Company to dedicate all or a substantial portion of any cash
flow its operations may generate to payments on indebtedness and payments
of other obligations, thereby reducing the availability of this cash flow
to fund its working capital, capital expenditures and other general
corporate purposes;
- limit the Company's flexibility in planning for, or reacting to, changes
in its business and the gaming industry;
- place the Company at a competitive disadvantage compared to competitors
that have less debt; and
- result in an event of default under one or more of the Company's
agreements that could materially and adversely affect the Company's
business, financial condition and results of operations; and/or
- lead to restrictions and defaults under Jazz Casino's casino operating
contract including defaults under certain financial stability
requirements, which could lead to closing the Casino, termination of the
casino operating contract and/or appointing a conservator.
The Casino has not achieved the level of gaming activity and operating cash
flow necessary to satisfy certain of its obligations described above. For
example, to ensure that the Company has sufficient liquidity to satisfy its
operating expenses, on February 28, 2000, Jazz Casino stopped making the
required daily payment to the Louisiana Gaming Control Board due under the
casino operating contract and on February 29, 2000, Harrah's Entertainment and
Harrah's Operating Company began paying under their minimum payment guaranty
Jazz Casino's required daily payment to the Louisiana Gaming Control Board due
under the casino operating contract. Also on February 29, 2000, Jazz Casino
entered into a limited forbearance agreement with the Manager and Harrah's
Operating Company that entitles Jazz Casino to defer until August 1, 2000
certain payments that it is otherwise required to pay Harrah's Operating Company
and/or the Manager. In addition, Jazz Casino estimates that it will borrow an
amount ranging from $5 million to $8 million under the completion loan agreement
with Harrah's Entertainment and Harrah's Operating Company pursuant to their
completion guarantees to fund certain outstanding Casino construction and
pre-opening costs.
The Casino may not achieve the level of gaming activity and operating cash
flow necessary to satisfy its financial obligations. In addition, the Company's
future operating results are subject to significant business, economic,
regulatory, political and competitive uncertainties and contingencies, many of
which are outside the Company's control. If the Company's operating cash flow
continues to remain insufficient to cover its expenses, including its
obligations to make payments on indebtedness (such as principal and interest),
the minimum $100 million payment to the Louisiana Gaming Control Board and the
other payments described above, as well as the expenses incident to operating
its business, the Company may be forced to reduce or delay planned capital
expenditures, sell assets, restructure debt or issue additional equity to meet
principal repayment and other obligations in later years. The Company cannot
assure that any of these remedies would be satisfactory or could be effected on
satisfactory terms, or at all, because of, among other things, the special
purpose nature of the Casino and the significant government regulation to which
the Company is subject. Alternative financings could further impair the Casino's
competitive position and reduce its cash flow. Moreover, if Harrah's
Entertainment and Harrah's Operating Company are required to pay more than $40
million of Jazz Casino's required daily payments to the Louisiana Gaming Control
Board, it may result in an event of default under the Company's credit
agreement. The occurrence of an event of default under the
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credit agreement would materially and adversely affect the Company's business,
financial condition and results of operations.
THE COMPANY DOES NOT HAVE SUFFICIENT WORKING CAPITAL TO FUND THE CASINO'S
OPERATIONS
The Company's working capital is not sufficient to fund the Casino's
operations. The Company cannot assure that, without the funding of the daily
payments due to the Louisiana Gaming Control Board under the minimum payment
guaranty, its sources of working capital will be sufficient for Jazz Casino to
operate the Casino. Jazz Casino's sources of working capital are limited to
availability under its revolving line of credit under the Company's credit
agreement and any cash flow from its operations in excess of its fixed charges
and other payment obligations. However, the Company's credit agreement requires
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 used
to repay the loans outstanding under the credit agreement. If these sources of
working capital are not sufficient, Jazz Casino may not be able to obtain new
sources of working capital on satisfactory terms, or at all. The Company's
inability to obtain sufficient working capital would materially and adversely
affect the Company's business, financial condition and results of operations.
In addition, prior to each borrowing under the Company's credit agreement,
certain conditions must be satisfied, including that (1) there exists no default
with respect to payments, or due to bankruptcy or insolvency events, under the
completion guarantees from Harrah's Entertainment and Harrah's Operating
Company, the credit agreement or the guaranty by Harrah's Entertainment and
Harrah's Operating Company of up to $166.5 million of loans and/or stated
amounts of credit under the Company's credit agreement and (2) all
representations under such loan guaranty remain true and correct in all material
respects. If the Company cannot satisfy these conditions, Jazz Casino will not
be able to borrow funds under the credit agreement and will thus be deprived of
its source of working capital financing. The Company cannot assure that these
conditions can be satisfied during the duration of the credit agreement. If Jazz
Casino is unable to obtain funds under the credit agreement, it would materially
and adversely affect the Company's business, financial condition and results of
operations.
THE CASINO IS SUBJECT TO LIMITS ON PROVIDING LODGING, FOOD SERVICES,
ENTERTAINMENT AND RETAIL OPERATIONS THAT COULD IMPACT ITS ABILITY TO OPERATE
PROFITABLY
The Gaming Act and the rules and regulations promulgated thereunder
prohibit the Company from engaging in certain activities, including the
following:
- giving away or subsidizing food within the Casino;
- offering direct table food services or food services with seating in
excess of 250 people;
- contracting with local restaurant owners to provide food at designated
areas within the Casino, except under certain circumstances;
- offering lodging within the Casino;
- engaging in any practice or entering into any business relationships to
give any hotel, whether or not affiliated with Jazz Casino, any advantage
or preference not available to any similarly situated hotels; and
- selling products in the Casino that are not directly related to gaming.
Also, under Jazz Casino's casino operating contract and the Gaming Act's
rules and regulations, the provisions described above relating to food, lodging
and retail activities apply to the Company's operations on the second floor of
the Casino. Under the terms of the second floor sublease, currently the Company
is also prohibited from offering facilities on the second floor of the Casino,
the principal business purpose of which is a restaurant.
Neither Jazz Casino, the Manager nor Harrah's Entertainment has operated a
land-based casino of the size of the Casino without associated hotel and
full-service food operations. Unlike the Casino, the majority of
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the Casino's competitors operate without restrictions on lodging, food services
and entertainment. This is a significant competitive disadvantage for the
Company. The Company cannot assure that Jazz Casino and the Manager will be able
to operate and manage the Casino on a profitable basis without such amenities.
THE GAMING INDUSTRY IS HIGHLY COMPETITIVE
The gaming industry is highly competitive and contains companies that in
many instances have greater resources than the Company. The Company believes
that the Casino's principal competitors are gaming facilities located on the
Mississippi Gulf Coast and the riverboats located in Orleans Parish and in the
New Orleans metropolitan area. To a lesser degree, the Casino also competes with
established and proposed casino hotel operations in Las Vegas, Nevada and
Atlantic City, New Jersey as well as riverboats in other areas in Louisiana and
with casinos operated by Native American tribes in the central portion of
Louisiana. The Casino also competes locally with other forms of legal wagering
including off-track betting parlors, charitable gaming, a state lottery and
video draw poker devices operated at certain locations. Some of the Casino's
competitors have longer operating histories, greater name recognition, and
substantially greater resources than the Company. As a result, their financial
strength could prevent the Casino from capturing gaming customers. Further, the
Casino operates under significant restrictions on its ability to provide
lodging, food services and entertainment imposed by the Gaming Act and the rules
and regulations promulgated thereunder. The ability of the Casino's competitors
to provide these services without restriction is a significant competitive
disadvantage for the Company.
Riverboat gaming operations in Louisiana are regulated by the Riverboat
Act, which does not impose restrictions on food services and entertainment.
Although the Riverboat Act only permits dockside gaming at the facilities
located in the Shreveport area, the Riverboat Act has been administered to allow
riverboats in other areas to conduct gaming while the riverboats are not
cruising under certain circumstances. Riverboats that remain moored under these
circumstances are permitted to allow customers' unlimited entry and exit,
thereby increasing competition to the Casino by limiting its allure as the only
land-based casino in New Orleans. Competition to the Casino on a local and
regional sale would increase if the Riverboat Act is amended to permit increased
or unlimited dockside gaming or to increase the number of permitted riverboats.
Additional regional competition also may be generated from land-based or
dockside casino facilities that may open in states that do not currently allow
casino gaming activities, including Alabama and Texas. Bills seeking to legalize
gaming in these states have been introduced in the past. Although these bills
were not enacted, similar bills may be introduced and passed in future
legislative sessions. The Company cannot guarantee that the Casino will be able
to successfully compete with the significant level of existing or new
competition. If the Company fails to adapt to emerging demands in the gaming
industry or to compete successfully with existing or new competitors, it could
materially and adversely affect the Company's business, financial condition and
results of operations.
JAZZ CASINO MAY HAVE NO RECOURSE IF ADDITIONAL LAND-BASED CASINOS OR DOCKSIDE
RIVERBOAT GAMING IS PERMITTED
The Gaming Act presently restricts land-based casino gaming in Orleans
Parish to where the Casino is presently located, at the foot of Canal and
Poydras Streets on the site of New Orleans' former Rivergate Convention Center.
However, the Company cannot assure that the State of Louisiana will not enact
future legislation that would permit competing land-based casinos at other sites
or in parishes other than Orleans Parish, including other parishes in the New
Orleans metropolitan area. If an additional land-based casino gaming
establishment is authorized to operate in Orleans Parish, Jazz Casino would not
have to pay the Louisiana Gaming Control Board the compensation required under
the provisions of its casino operating contract, although this obligation may
resume pursuant to the terms of the casino operating contract. Additional
land-based casino operations could materially and adversely affect the Casino's
operations by increasing the amount of competition it faces.
Additional dockside riverboat gaming could adversely affect the Casino's
ability to attract gaming patrons, without relieving Jazz Casino of its
obligation to pay the Louisiana Gaming Control Board the compensation required
under its casino operating contract. However, because Louisiana laws requiring
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riverboats to sail in accordance with safety conditions and within their
schedules are frequently unenforced, riverboats may be able to conduct gaming
operations while at dockside in violation of these laws. Under the casino
operating contract, if the State of Louisiana or the Louisiana Gaming Control
Board permits any riverboat to conduct dockside gaming in material violation of
the Riverboat Act or the Gaming Act after receiving notice of the violation from
Jazz Casino and having an opportunity to cure the violation, Jazz Casino will be
entitled to sue the Louisiana Gaming Control Board and/or the State of Louisiana
to seek to compel them to perform under the casino operating contract. Jazz
Casino will also be entitled to seek the judicial remedy of mandamus against the
Louisiana Gaming Control Board or any other appropriate governmental authority,
which, if granted, would compel the Louisiana Gaming Control Board or other
governmental authority not to permit these violations to occur. However, Jazz
Casino's obligation to pay specified percentages of the Casino's gross gaming
revenue to the Louisiana Gaming Control Board under its casino operating
contract will continue during the pendency of any such judicial action through
final non-appealable judgment. Thereafter, even if the court finds that the
Louisiana Gaming Control Board permitted a riverboat to conduct dockside gaming,
Jazz Casino will not be relieved of its obligation to pay the Louisiana Gaming
Control Board portions of the Casino's gross gaming revenue. In addition, an
exception to the exclusivity provisions of the casino operating contract permits
an amendment to the Gaming Act to allow one riverboat to conduct dockside gaming
on Lake Pontchartain in Orleans Parish. If such an amendment is adopted but the
Louisiana Gaming Control Board does not enforce the limitations under which the
riverboat is required to operate, Jazz Casino may seek relief by way of specific
performance and/or mandamus. However, it will not be relieved of its obligation
under the casino operating contract to pay the Louisiana Gaming Control Board
portions of the Casino's gross gaming revenue.
In addition, a state law enacted in 1996 purports to, among other things,
retroactively amend the Gaming Act to provide that conducting gaming operations
on riverboats while the riverboat is on a designated waterway and temporarily at
dockside does not constitute the authorization of additional land-based casino
gaming operations. As a result, it will not relieve Jazz Casino of its
obligation to pay compensation to the Louisiana Gaming Control Board in
accordance with the casino operating contract. The 1996 state law also provides
that governmental inaction that results in another land-based casino being
operated in Orleans Parish will not relieve Jazz Casino of its obligation to pay
this compensation. In addition, the 1996 state law purports to provide that, in
the event of litigation between Jazz Casino and the State of Louisiana or any of
its political subdivisions (including the Louisiana Gaming Control Board), Jazz
Casino must continue to make all payments to the State of Louisiana and any of
its political subdivisions (including the Louisiana Gaming Control Board) as
required by law and the casino operating contract during the pendency of this
litigation. Although the subject of this litigation could be related to a matter
that limits Jazz Casino's ability to make its required payments, any failure by
Jazz Casino to make the required payments, either directly or through its
minimum payment guarantors, will render Jazz Casino unsuitable, and thus unable
to operate the Casino.
As a result of these factors, dockside riverboat gaming operations in
Orleans Parish may compete against the Casino without relieving Jazz Casino of
its obligation to remit to the Louisiana Gaming Control Board the compensation
required under the casino operating contract. This could materially and
adversely affect the Company's business, financial condition and results of
operations.
A DEFAULT UNDER ONE OF THE AGREEMENTS TO WHICH THE COMPANY IS A PARTY MAY CAUSE
DEFAULTS UNDER OTHER AGREEMENTS TO WHICH THE COMPANY IS A PARTY
Certain events of default under Jazz Casino's casino operating contract,
amended and restated ground lease with the Rivergate Development Corporation and
the City of New Orleans, management agreement with the Manager, indentures
governing the Notes or credit agreement could result in an event of default
under another of such agreements. For example, a default under the management
agreement results in defaults under the casino operating contract and the
amended and restated ground lease. Also, a default under Jazz Casino's amended
general development agreement with the Rivergate Development Corporation and the
City of New Orleans or the revocation or termination of the casino operating
contract results in a cross default under the amended and restated ground lease.
The occurrence of an event of default under any of these
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agreements and the effect of any resulting default under another agreement of
the Company would materially and adversely affect the Company's business,
financial condition and results of operations.
THE COMPANY'S OPERATIONS DEPEND ON GAMING OPERATIONS IN A SINGLE MARKET
The Company does not have and does not presently anticipate having
operations other than the Casino and operations that support the Casino.
Therefore, the Company depends solely upon visitors to New Orleans and New
Orleans area residents for its revenue. As a result, any of the following
occurrences could negatively impact the Casino's operations, which could
materially and adversely affect the Company's business, financial condition and
results of operations:
- a downturn in the local or regional economy;
- a decline in tourism in New Orleans;
- a decline in the New Orleans gaming market;
- an increase in competition faced by the Company; or
- a reduction or cessation of activities at the Casino due to flooding,
severe weather, natural disasters or otherwise.
THE COMPANY MAY NOT BE ABLE TO DEVELOP CERTAIN OF ITS PROPERTIES
The Company cannot complete its anticipated build-out of the non-gaming
tenant improvements on the second floor of the Casino until, among other things,
the master plan governing the use of the second floor is approved, tenant leases
are obtained, the necessary financing is secured and certain zoning ordinance
waivers are obtained. In addition, the Company will be unable to develop the
property located on Fulton and Poydras Streets for entertainment uses that
support the Casino until, among other things, it obtains the necessary
financing. The Company has not made any plans for the development of this
property. The Company cannot assure that it will be able to obtain the necessary
financing and satisfy the other conditions to developing the non-gaming tenant
improvements on the second floor of the Casino, or the property located on
Fulton and Poydras Streets. The failure to develop these properties could
materially and adversely affect the Company's business, financial condition and
results of operations.
THE COMPANY IS A PARTY TO AGREEMENTS THAT RESTRICT ITS ABILITY TO OPERATE AND
OBTAIN ADDITIONAL FINANCING
Jazz Casino's amended and restated ground lease with the Rivergate
Development Corporation and the City of New Orleans and its casino operating
contract limit the amount of secured indebtedness Jazz Casino may incur and the
lenders who may provide secured financing to Jazz Casino. These restrictions
could limit Jazz Casino's ability to effect future financings or otherwise
restrict Jazz Casino's activities. The Company's operating and financing options
are also subject to covenants contained in the indentures governing the Notes,
its credit agreement, related collateral documents, and agreements with the
Louisiana Gaming Control Board and the Rivergate Development Corporation. These
covenants include, among others, limitations on:
- making restricted payments;
- granting liens;
- incurring additional indebtedness;
- paying management fees;
- issuing dividends;
- selling assets;
- entering into transactions with affiliates; and
- entering into mergers and consolidations.
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THE COMPANY MAY LOSE SUBSTANTIAL TAX BENEFITS DUE TO THE TAX TREATMENT OF THE
NOTES AND THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
The Company treats Jazz Casino's Notes and convertible junior subordinated
debentures as debt for federal income tax purposes. However, the Internal
Revenue Service may assert that because all payments on Jazz Casino's senior
subordinated contingent notes (and certain payments on Jazz Casino's senior
subordinated notes with contingent payments) are contingent upon future positive
cash flows being generated by Jazz Casino, the senior subordinated contingent
notes (or, possibly, both series of Notes) should be classified as equity,
rather than debt, for federal income tax purposes. In addition, the Internal
Revenue Service may assert that Jazz Casino's 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 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.
The Company cannot assure that the Internal Revenue Service 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. JCC
Holding would lose substantial interest deductions and other tax benefits if the
Internal Revenue Service recharacterizes any of these instrument as equity for
federal income tax purposes, or if it prohibits JCC Holding from deducting
interest paid on the convertible junior subordinated debentures due to the
amendments to the Internal Revenue Code of 1986, as amended. The loss of such
deductions and other tax benefits could materially and adversely affect the
Company's business, financial condition and results of operations.
THE COMPANY MAY NOT BE ABLE TO SATISFY CERTAIN OF ITS OBLIGATIONS IF THE CASINO
IS SUBJECT TO ADDITIONAL TAXES
Gaming companies are typically subject to significant taxes and fees that
may be increased at any time. Periodically, federal and state legislatures have
also 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 Jazz Casino, could materially and adversely affect
the Company's business, financial condition and results of operations. For
example, if additional taxes are imposed on wagers made at the Casino, Jazz
Casino may be unable to make required payments on its indebtedness.
New Orleans currently imposes a 5% amusement tax on "admission charges" to,
among other things, any game of skill and chance or any mechanical device that
is operated for pleasure or skill where there is:
- a fee charged for entrance or admission;
- a fee charged for the purpose of playing such a game or using such a
mechanical device; or
- any direct or indirect charge for or in connection with such a game or
mechanical device.
An admission charge is broadly defined to include any charge or fee for the
purpose of self-participation in any amusement activity as well as all amounts
paid for admission, season tickets, refreshments, service or merchandise.
The New Orleans City Attorney has opined that this amusement tax may not
legally be levied on gaming revenues derived from the Casino because these
revenues do not constitute taxable "admission charges." However, as applied to
riverboat gaming, the New Orleans City Attorney has opined that riverboat
cruises are "excursions" subject to the amusement tax and that admission charges
include all activities within the riverboat, including money spent on wagers.
Because opinions of the New Orleans City Attorney are not binding on the City of
New Orleans or any other person, the Company cannot assure that the City of New
Orleans will not attempt to subject the Casino's operations to this amusement
tax. If this tax is levied, the Company cannot predict whether it would be
levied on wagers, gaming revenues or some other measure. Jazz Casino's amended
and restated ground lease with the Rivergate Development Corporation and the
City of New Orleans provides that in the event the amusement tax is applicable
to Jazz Casino's receipts (other than
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from special events), Jazz Casino is entitled to set off the amount of the
amusement tax collected and remitted (other than with respect to special events)
against certain payments required to be made by Jazz Casino under the amended
and restated ground lease. However, the Company cannot assure that the amount of
the tax would not exceed the amount of the payments that Jazz Casino is required
to make under the amended and restated ground lease that it may offset the tax
against.
HOLDERS OF COMMON STOCK, NOTES OR CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES MAY
BE REQUIRED TO DIVEST THESE SECURITIES AT UNFAVORABLE TIMES OR COSTS
If a holder of Common Stock, Notes or Jazz Casino's convertible junior
subordinated debentures is required to be found suitable and fails to be so
found, the holder may be required to obtain certain qualifications or approvals
from the Louisiana Gaming Control Board to continue to hold these securities.
Failure to obtain these qualifications or approvals may subject the holder to
certain requirements, limitations or prohibitions. For example, the holder may
be required to liquidate or otherwise divest these securities at a time or at a
cost that is otherwise unfavorable for the holder. If the holder does not
divest, JCC Holding will have the right to redeem the Common Stock and Jazz
Casino will have the right to redeem its Notes and convertible junior
subordinated debentures, and, prior to such redemption, the holder will forfeit
all benefits of ownership. In the future, the Gaming Act may be interpreted,
additional rules and regulations may be implemented, or new legislation may be
enacted to (1) prohibit or impose additional restrictions on certain persons
from holding securities of JCC Holding or Jazz Casino, including the Common
Stock, the Notes and the convertible junior subordinated debentures, or (2)
require that certain persons sell or surrender these securities at a time or at
a cost that is unfavorable for them. In addition, JCC Holding's Certificate of
Incorporation provides that class A common stock may, under certain
circumstances, be redeemed by JCC Holding if JCC Holding, or certain of its
affiliates, believes redemption is required to prevent the loss or impairment of
a material gaming license of Jazz Casino or such an affiliate. If JCC Holding
does not have sufficient funds to redeem class A common stock under these
circumstances, it could materially and adversely affect the Company's business,
financial condition and results of operations.
THE HOLDERS OF CLASS A COMMON STOCK HAVE LIMITED CORPORATE CONTROL
The ability of holders of class A common stock to influence the day-to-day
operations of the Company may be limited due to a number of factors. For
example, prior to the Transition Date, the Class B directors, as members of the
Gaming Committee of JCC Holding's board of directors, generally supervise the
day-to-day activities of the Company, with the exception of certain significant
transactions. Harrah's Entertainment currently beneficially owns 96.6% of the
issued and outstanding class B common stock and, prior to the Transition Date,
Harrah's Entertainment has agreed to own at least 51% of the outstanding shares
of class B common stock. Consequently, Harrah's Entertainment is able to elect
all of the directors who will exercise day-to-day control over the Company.
Also, upon and after the Transition Date, if Harrah's Crescent City Investment
Company exercises its warrant to purchase unclassified common stock in its
entirety, Harrah's Entertainment and its subsidiaries could own up to 50.0% of
the then outstanding shares of unclassified common stock, subject to certain
adjustments. In addition, Jazz Casino has engaged the Manager, an indirect
wholly-owned subsidiary of Harrah's Entertainment, to manage the operations of
the Casino. As a result of Harrah's Entertainment's ability to elect the Class B
directors and the Company's engagement of the Manager to operate the Casino, the
ability of the holders of class A common stock to influence the day-to-day
operations of the Company is limited.
JCC HOLDING HAS ADOPTED MEASURES, AND IS SUBJECT TO PROVISIONS, THAT HAVE
ANTI-TAKEOVER EFFECTS AND COULD LIMIT THE PRICE OF JCC HOLDING'S COMMON STOCK
JCC Holding's Certificate of Incorporation and Bylaws, certain provisions
of the Gaming Act and the rules and regulations promulgated thereunder and
certain agreements to which the Company is a party include a number of
provisions that may (1) make it more difficult for a third party to acquire JCC
Holding, (2) discourage acquisition bids for JCC Holding, (3) discourage changes
in JCC Holding's management and
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(4) limit the price that investors are willing to pay for shares of Common
Stock. Certain of these provisions are described below.
JCC Holding's Certificate of Incorporation and Bylaws contain provisions
that have anti-takeover effects. Prior to the Transition Date, anti-takeover
provisions in JCC Holding's Certificate of Incorporation and Bylaws include:
- classification of the Common Stock into class A common stock and class B
common stock, together with limitations on the entities that are
permitted to hold shares of class B common stock and the requirement that
the Harrah's Entities own not less that 51% of the class B common stock;
- classification of the board of directors where Class A directors may be
elected only by holders of class A common stock and Class B directors may
be elected only by holders of class B common stock;
- a staggered board of directors;
- requirements for majority approval by the Class A directors and the Class
B directors of certain significant transactions set forth in JCC
Holding's Certificate of Incorporation;
- the increase of the number of Class B directors upon certain change of
control events set forth in JCC Holding's Certificate of Incorporation;
- the requirement that any amendment to JCC Holding's Certificate of
Incorporation or Bylaws that affects the rights of holders of the (1)
class A common stock or Class A directors or (2) class B common stock or
Class B directors, be approved by the affirmative vote of the holders of
a majority of the affected class A or class B common stock; and
- the right of the Harrah's Entities to acquire and hold shares of class A
common stock upon certain change of control events set forth in JCC
Holding's Certificate of Incorporation.
After the Transition Date, these provisions will include:
- a staggered board of directors; and
- a requirement that the affirmative vote of 75% or more of the issued and
outstanding shares of unclassified common stock be obtained to approve an
amendment to JCC Holding's Certificate of Incorporation or an amendment
to the Bylaws.
Certain provisions of the Gaming Act and the rules and regulations
promulgated thereunder have anti-takeover effects. The Gaming Act and the rules
and regulations promulgated thereunder require that officers, directors and
certain persons holding an equity interest in JCC Holding be found suitable
under the Gaming Act and the rules and regulations promulgated thereunder. The
Gaming Act also prohibits, without prior approval of the Louisiana Gaming
Control Board, (1) certain contractual transfers leading to a change of control
of JCC Holding and (2) the sale, transfer, assignment, pledge, alienation,
disposition, public offering or acquisition of securities that results in one
person owning 5% or more of the total outstanding equity securities issued by
Jazz Casino.
Agreements entered into in connection with the third amended plan of
reorganization contain provisions that have anti-takeover effects. Harrah's
Crescent City Investment Company's right upon and after the Transition Date to
purchase up to 50.0% of the then outstanding shares of unclassified common stock
under its warrant could make it more difficult for a third party to acquire
control of JCC Holding. Certain of the agreements entered into in connection
with the third amended plan of reorganization, such as the indentures governing
the Notes and Jazz Casino's convertible junior subordinated debentures, also
contain provisions restricting the ability of the Company to enter into certain
change of control transactions. These anti-takeover provisions 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, even if such a
change of control would be favorable to the interests of the stockholders of JCC
Holding.
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THE MANAGER AND CERTAIN DIRECTORS OF JCC HOLDING HAVE CONFLICTS OF INTERESTS
REGARDING THE CASINO
Harrah's Entertainment owns or controls (indirectly through one or more
subsidiaries or affiliates) dockside casinos in Vicksburg and Tunica,
Mississippi, Shreveport, Louisiana and two riverboat casinos in Lake Charles,
Louisiana. These casinos, together with other casinos that Harrah's
Entertainment (or one or more of its subsidiaries or affiliates) may develop,
compete with the Casino at a regional level. Harrah's Entertainment also owns or
controls (indirectly through one or more subsidiaries or affiliates), casinos in
the five major Nevada and New Jersey gaming markets, which casinos compete with
the Casino on a national basis. Currently, the Chairman of JCC Holding's board
of directors, Mr. Colin V. Reed, is also a member of Harrah's Entertainment
three-executive office of the President, the Executive Vice President and Chief
Financial Officer of Harrah's Entertainment and Senior Vice President of the
Manager. Mr. Reed is expected to continue to serve as a Class B director while
also serving in these capacities with Harrah's Entertainment and the Manager. In
addition, Mr. Philip G. Satre, the Chairman of the Board, President and Chief
Executive Officer of Harrah's Entertainment, and Eddie N. Williams, a director
of Harrah's Entertainment, are Class B directors. Under Jazz Casino's management
agreement with the Manager, the Manager, a wholly-owned subsidiary of Harrah's
Entertainment, is exclusively responsible for supervising and managing the
Casino. As a result of Harrah's Entertainment's ownership of competing casinos,
together with its ownership of the Manager and the positions held by Messrs.
Reed, Satre and Williams as both Class B directors and officers or directors of
Harrah's Entertainment and/or the Manager, a conflict of interest may exist
because they have access to the Company's information and business
opportunities, any or all of which could be useful to one or more of Harrah's
Entertainment's competing casinos. The indentures governing Jazz Casino's Notes,
its credit agreement and its management agreement with the Manager each impose
restrictions on the Company's ability to enter into transactions with
affiliates, including Harrah's Entertainment. In addition, JCC Holding's board
of directors has implemented procedures that require transactions with
affiliates to be approved by disinterested directors. The Company cannot assure,
however, that the restrictions in such agreements or these procedures will
successfully resolve conflicts of interest confronting, or which may confront,
the Company.
SHARES OF JCC HOLDING'S CLASS A AND CLASS B COMMON STOCK ARE CURRENTLY ELIGIBLE
FOR FUTURE SALE AND CERTAIN HOLDERS OF THE COMPANY'S SECURITIES HAVE
REGISTRATION RIGHTS
Sales of, or offers to sell, a substantial number of shares of class A
common stock, or the perception by investors, investment professionals or
securities analysts of the possibility of such sales, could adversely affect the
market for, and prevailing prices of, JCC Holding's class A common stock. These
sales or the prospects of these sales could also impair JCC Holding's ability to
raise needed funds in the capital markets at favorable times and prices. As of
March 23, 2000, JCC Holding had a total of 5,638,314 shares of class A common
stock outstanding, most of which are freely tradable without restriction under
the Securities Act of 1933. The remaining 4,452,623 shares outstanding are
shares of class B common stock, 4,302,623 of which are beneficially owned by
Harrah's Entertainment. Shares of the class B common stock automatically convert
into shares of class A common stock if they are transferred to entities other
than direct or indirect wholly-owned subsidiaries of Harrah's Entertainment or
certain entities specifically set forth in JCC Holding's Certificate of
Incorporation, which generally include Bank One and the former partners of
Harrah's Jazz Company, their affiliates and shareholders.
JCC Holding's board of directors has adopted a 1998 Long-Term Incentive
Plan and a 1999 Non-Employee Director Stock Option Plan pursuant to which JCC
Holding has issued, (1) options to purchase an aggregate of 225,973 shares of
class A common stock at exercise prices ranging from $3.50 to $7.56 per share
and (2) an aggregate of 24,664 shares of restricted class A common stock. JCC
Holding has reserved an aggregate of 649,363 additional shares of class A common
stock that it may issue in the future under these plans upon the exercise of
options granted under these plans or otherwise pursuant to these plans. JCC
Holding has filed a registration statement under the Securities Act of 1933
covering its issuance of shares upon the exercise of any options granted under
these plans or otherwise pursuant to these plans. All of these shares will be
freely tradeable in the public market, except for shares held by affiliates of
JCC Holding, which will be eligible for public sale at various times pursuant to
Rule 144 of the Securities and Exchange Commission.
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Beginning two years after the Casino opens, Harrah's Crescent City
Investment Company may require JCC Holding to register for public resale under
the Securities Act of 1933 all shares of class B common stock, or, upon and
after the Transition Date, unclassified common stock, held by it, Harrah's
Entertainment and Harrah's Entertainment's subsidiaries. Certain holders of Jazz
Casino's convertible junior subordinated debentures also have demand
registration rights for approximately 1.2 million shares of class A common stock
or, after the Transition Date, unclassified common stock, issuable by JCC
Holding after October 1, 2002 upon conversion of the convertible junior
subordinated debentures at a conversion price of $25.00 per share, subject to
dilution and other appropriate adjustments. The demand registration rights
permit the holders of these securities to require JCC Holding to register the
resale of this class A or unclassified common stock under the Securities Act of
1933.
THE COMPANY'S REORGANIZATION VALUE MAY NOT BE AS EXPECTED BECAUSE IT WAS
CALCULATED BASED ON ESTIMATES OF FUTURE PERFORMANCE
The Company's 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
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.
THE COMPANY MAY NOT BE ABLE TO ACCURATELY PREDICT ITS FUTURE FINANCIAL POSITION
The Casino did not open to the public until October 28, 1999 and from
October 30, 1998 until October 27, 1999, the Company's operations related
primarily to completing the construction and preparing for the opening of the
Casino. Prior to October 30, 1998, the Company did not conduct any operations,
generate any revenues or issue any capital stock. Because Jazz Casino succeeded
to all of the assets of Harrah's Jazz Company, except the property located at 3
Canal Place, which vested in Canal Development, and the property located on
Fulton and Poydras Streets, which vested in Fulton Development, Harrah's Jazz
Company's historical financial statements are included in this report. The
historical financial statements of Harrah's Jazz Company, however, do not
purport to represent what the Company's financial position or results of
operations would have been if the third amended plan of reorganization had been
consummated as of the dates indicated, or at the beginning of the period
indicated, in Harrah's Jazz Company's historical financial statements. In
addition, the historical financial statements of Harrah's Jazz Company do not
purport to project the financial position or results of operations of the
Company for any future date or period. Due to a number of factors, including the
application of "fresh start" reporting on October 30, 1998, the Company expects
that its future financial position and results of operations will be materially
different from Harrah's Jazz Company's financial position and results of
operations. The Company cannot assure, however, that its future financial
position and results of operations will be materially different from Harrah's
Jazz Company's historical financial position and results of operations.
THE COMPANY MAY NOT BE ABLE TO COMPLY WITH MINORITY HIRING REQUIREMENTS AND
COULD BE LIABLE FOR DAMAGE AWARDS FROM POTENTIAL LAWSUITS RELATED TO THESE
REQUIREMENTS
Under the Gaming Act, Jazz Casino is required, as nearly as practicable, to
employ minorities in proportions consistent with the population of the State of
Louisiana. However, the amended open access program and plans that Jazz Casino
is obligated to comply with may establish or require goals for the employment of
minorities at the Casino in a proportion greater than the proportion of
minorities in the State of Louisiana's population. Jazz Casino interprets the
provisions of the Gaming Act in a manner that allows it to employ a workforce
with a higher percentage of minorities than the percentage of minorities of the
State of Louisiana's population. If the Gaming Act or Jazz Casino's casino
operating contract are not applied in a manner that permits compliance with the
amended open access program and plans, there may be a conflict
41
<PAGE> 44
between the Gaming Act, the casino operating contract and the amended open
access program and plans since the percentage of Louisiana minority population
may be less than the amended open access program and plans' percentage minority
hiring goals. Jazz Casino intends to comply with the amended open access program
and plans unless they are found to be preempted by the Gaming Act. If this
conflict arises and Jazz Casino nevertheless complies with the minority hiring
goals under the amended open access program and plans, Jazz Casino may be in
violation of the Gaming Act and the provisions of the casino operating contract.
This violation could materially and adversely affect the Company's business,
financial condition and results of operations. In addition, Jazz Casino's
failure to comply with the amended open access program and plans could result in
fines, as well as a default under its amended and restated ground lease with the
Rivergate Development Corporation and the City of New Orleans, either of which
could materially and adversely affect the Company's business, financial
condition and results of operations. Jazz Casino is also required to indemnify
the City of New Orleans and the Rivergate Development Corporation against, and
could be liable for, certain damage awards arising out of potential lawsuits
related to the constitutionality of the amended open access program and plans.
If the City of New Orleans, the Rivergate Development Corporation and/or Jazz
Casino become subject to substantial damage awards related to the amended open
access program and plans, this indemnification obligation or direct liability
could materially and adversely affect the Company's business, financial
condition and results of operations.
THE COMPANY CANNOT BE SURE THAT THE YEAR 2000 PROBLEM WILL NOT AFFECT ITS
BUSINESS
Many existing computer hardware and software systems are designed to use
only two digits to identify a year in date fields (e.g., "98" for "1998"). These
systems may not properly recognize a year that begins with "20" instead of "19."
If not corrected, these systems could fail or could create erroneous results
when working with dates beyond the year 1999. This is commonly referred to as
the "year 2000 issue." The Company has not experienced any significant problems
related to the year 2000 issues associated with its computer systems, software
or other property and equipment. The Company cannot guarantee that the year 2000
issue will not adversely affect its business, financial condition or results of
operations at some point in the future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company does not engage in trading market risk sensitive instruments.
The Company also does not purchase, for investment, hedging or for purposes
"other than trading," instruments that are likely to expose it to market risk,
whether interest rate, foreign currency exchange, commodity price or equity
price risk, except as discussed in the following paragraph. The Company has not
entered into any forward or futures contracts, purchased any options or entered
into any swaps. The Company has no foreign operations and currently does not
deal in foreign currencies. Thus, the Company does not believe that it has any
material exposure to foreign currency exchange rate risk.
The Company has a significant amount of indebtedness which accrues interest
at fixed and variable rates. As of December 31, 1999, the aggregate amount of
the Company's outstanding indebtedness was $464.0 million, of which $211.5
million accrued interest at variable rates and $252.5 million accrued interest
at fixed rates. The interest rate of the Company's variable rate indebtedness
will fluctuate with changes in the base rate and the LIBOR rate applicable under
its credit agreement. A change in either the base rate or LIBOR under Jazz
Casino's credit agreement will affect the interest rate at which indebtedness
outstanding under the credit agreement accrues. As a result, a significant
increase in either the base rate or LIBOR could materially and adversely affect
the Company's business, financial position and results of operations. For
example, a 50 basis point movement in interest rates would result in an
approximate $1.1 million annualized increase or decrease in interest expense
based on the outstanding balance of the variable rate indebtedness of the
Company as of December 31, 1999.
42
<PAGE> 45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Although JCC Holding was incorporated on August 20, 1996, prior to October
30, 1998, the Company had not conducted any operations, generated any revenues
or issued any capital stock. Accordingly, separate financial statements and
other disclosures with respect to the Company prior to the two month period
ended December 31, 1998 are omitted as the Company does not believe that such
separate financial information is material. On October 30, 1998, the effective
date of the third amended plan of reorganization, Jazz Casino succeeded to all
of the assets of Harrah's Jazz Company except for the property located at 3
Canal Place and the property located on Fulton and Poydras Streets which vested
in Canal Development and Fulton Development, respectively. Therefore, the
following historical financial statements include audited financial information
of Harrah's Jazz Company prior to the two month period ended December 31, 1998.
The following is a list of the Consolidated Financial Statements appearing
herein:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements of JCC Holding Company and Subsidiaries
Report of Independent Public Accountants.................. 44
Consolidated Balance Sheets as of December 31, 1999 and
1998................................................... 45
Consolidated Statements of Operations for the Year Ended
December 31, 1999 and the Period from October 30, 1998
to December 31, 1998................................... 46
Consolidated Statements of Stockholders' Equity for the
Year Ended December 31, 1999 and the Period from
October 30, 1998 to December 31, 1998.................. 47
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1999 and the Period from October 30, 1998
to December 31, 1998................................... 48
Notes to Consolidated Financial Statements................ 49
Financial Statements of Harrah's Jazz Company and Subsidiary
Report of Independent Public Accountants.................. 73
Consolidated Statements of Operations for the Year Ended
December 31, 1997 and for the Ten Month Period Ended
October 30, 1998....................................... 74
Consolidated Statements of Partners' Capital (Deficit) for
the Year Ended December 31, 1997 and for the Ten Month
Period Ended October 30, 1998.......................... 75
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1997 and for the Ten Month Period Ended
October 30, 1998....................................... 76
Notes to Consolidated Financial Statements................ 77
</TABLE>
43
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of JCC Holding Company
New Orleans, LA
We have audited the accompanying consolidated balance sheets of JCC Holding
Company and subsidiaries (the "Company") (Successor to "Harrah's Jazz Company")
as of December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1999 and for the period from October 30, 1998 to December 31, 1998. Our audits
also included the financial statement schedule listed in the Index at Item
14(a)2. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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.
As discussed in Note 1 to the financial statements, on October 13 1998, the
Bankruptcy Court entered an order confirming the plan of reorganization which
became effective after the close of business on October 29, 1998. Accordingly,
the accompanying financial statements have been prepared in conformity with
AICPA Statement of Position 90-7, "Financial Reporting for Entities in
Reorganization Under the Bankruptcy Code," for the successor company as a new
entity with assets, liabilities, and a capital structure having carrying values
not comparable with prior periods as described in Note 2.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of JCC Holding Company and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the year ended December 31, 1999 and for the
period from October 30, 1998 to December 31, 1998 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/DELOITTE & TOUCHE LLP
Memphis, Tennessee
March 24, 2000
44
<PAGE> 47
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (includes restricted cash of
$6,382 and $605, respectively).......................... $ 34,687 $ 25,506
Accounts receivable, net of allowance for doubtful
accounts of $228 in 1999................................ 3,177 43
Inventories............................................... 354 --
Prepaids and other assets................................. 2,760 1,698
Property available for sale............................... 4,831 --
-------- --------
Total current assets................................ 45,809 27,247
-------- --------
Property and Equipment:
Buildings on leased land.................................. 329,506 --
Furniture, fixtures and equipment......................... 20,257 12,612
Property held for development............................. 10,138 13,200
Construction in progress (includes restricted cash of
$9,218 in 1998)......................................... 151 192,917
-------- --------
Total............................................... 360,052 218,729
Less -- accumulated depreciation.......................... (4,179) (71)
-------- --------
Net property and equipment.......................... 355,873 218,658
-------- --------
Other Assets:
Deferred operating contract cost, net of accumulated
amortization of $494 in 1999............................ 68,182 68,676
Lease prepayment, net of accumulated amortization of $124
in 1999................................................. 16,861 16,985
Deferred charges and other, net of accumulated
amortization of $421 and $40, respectively.............. 19,677 11,565
-------- --------
Total other assets.................................. 104,720 97,226
-------- --------
Total Assets........................................ $506,402 $343,131
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings..................................... $ 15,850 $ --
Accounts payable:
Trade and other......................................... 2,012 643
Affiliates.............................................. 4,648 500
Accrued interest.......................................... 2,081 3,025
Accrued expenses.......................................... 20,791 4,455
Preconfirmation contingencies............................. 3,033 6,679
Other..................................................... 2,009 --
-------- --------
Total current liabilities........................... 50,424 15,302
-------- --------
Long-term debt (including debt to affiliates of $23,704 in
1999)..................................................... 368,222 185,519
Deferred income taxes....................................... 37,900 37,900
Due to affiliates........................................... 4,076 --
Other long-term liabilities -- affiliate.................... 226 --
Commitments and Contingencies (Notes 8 and 9)
Stockholders' Equity:
Common Stock:
Unclassified Common Stock (40,000 shares authorized;
none issued and outstanding; par value $.01 per
share)................................................. -- --
Class A Common Stock (20,000 shares authorized; 5,638
shares and 5,547 shares, respectively, issued and
outstanding; par value $.01 per share)................. 56 55
Class B Common Stock (20,000 shares authorized; 4,453
shares issued and outstanding; par value $.01 per
share)................................................. 45 45
Additional paid-in capital................................ 108,538 107,987
Accumulated deficit....................................... (62,817) (3,677)
Less -- unearned compensation............................. (268) --
-------- --------
Total stockholders' equity.......................... 45,554 104,410
-------- --------
Total Liabilities and Stockholders' Equity.......... $506,402 $343,131
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
45
<PAGE> 48
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM OCTOBER 30, 1998 TO DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TWO-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Casino.................................................... $ 38,005 $ --
Food and beverage......................................... 3,693 --
Retail, parking and other................................. 1,819 14
Less -- casino promotional allowances..................... (2,361) --
----------- -----------
Total net revenues................................ 41,156 14
----------- -----------
Operating Expenses:
Direct:
Casino................................................. 35,013 --
Food and beverage...................................... 2,875 --
Retail, parking and other.............................. 1,200 --
General and administrative................................ 16,046 310
Depreciation and amortization............................. 5,107 111
Pre-opening............................................... 35,160 3,580
----------- -----------
Total operating expenses.......................... 95,401 4,001
----------- -----------
Operating Loss.............................................. (54,245) (3,987)
----------- -----------
Reorganization Item......................................... 1,562 --
Other income (expense):
Interest expense, net of capitalized interest............. (6,869) --
Interest and other income................................. 412 310
----------- -----------
Total other income (expense)...................... (6,457) 310
----------- -----------
Net Loss.................................................... $ (59,140) $ (3,677)
=========== ===========
Basic Net Loss Per Share.................................... $ (5.88) $ (0.37)
=========== ===========
Weighted Average Shares Outstanding......................... 10,055,140 10,000,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
46
<PAGE> 49
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM OCTOBER 30, 1998 TO DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
CLASS A CLASS B ADDITIONAL
--------------- --------------- PAID-IN ACCUMULATED UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
------ ------ ------ ------ ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -- October 30, 1998............ 5,547 $55 4,453 $45 $107,987 $ -- $ -- $108,087
Net loss............................... (3,677) (3,677)
----- --- ----- --- -------- -------- ----- --------
Balance -- December 31, 1998........... 5,547 55 4,453 45 107,987 (3,677) -- 104,410
----- --- ----- --- -------- -------- ----- --------
Restricted stock activity.............. 92 1 526 (268) 259
Other.................................. (1) 25 25
Net loss............................... (59,140) (59,140)
----- --- ----- --- -------- -------- ----- --------
Balance -- December 31, 1999........... 5,638 $56 4,453 $45 $108,538 $(62,817) $(268) $ 45,554
===== === ===== === ======== ======== ===== ========
</TABLE>
See Notes to Consolidated Financial Statements.
47
<PAGE> 50
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM OCTOBER 30, 1998 TO DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWO-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................. $ (59,140) $ (3,677)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 5,107 111
Amortization of note discount.......................... 765 --
Amortization of unearned compensation.................. 259 --
Write-off of preconfirmation contingencies............. (1,562) --
Deferred rent.......................................... 226 --
Loss on sale of property and equipment................. 27 --
Changes in operating assets and liabilities:
Accounts receivable, net............................... (3,134) (43)
Inventories............................................ (354) --
Prepaids and other assets.............................. (1,062) (1,634)
Accounts payable....................................... 1,369 643
Accrued interest....................................... (5,855) --
Accrued expenses....................................... 16,336 4,455
Pre-confirmation contingencies......................... (2,084) (68,750)
Other current liabilities.............................. 2,009 --
Due to affiliates...................................... 8,224 500
--------- ---------
Net cash flows used in operating activities....... (38,869) (68,395)
--------- ---------
Cash Flows From Investing Activities:
Capital expenditures...................................... (130,552) (27,026)
Proceeds from sale of property and equipment.............. 6,042 --
Increase in deferred charges and other assets............. (8,492) (5,700)
--------- ---------
Net cash flows used in investing activities....... (133,002) (32,726)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings....................... 15,850 --
Proceeds from issuance of long-term debt.................. 165,202 --
--------- ---------
Net cash flows provided by financing activities... 181,052 --
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 9,181 (101,121)
Cash and cash equivalents, beginning of period.............. 25,506 126,627
--------- ---------
Cash and cash equivalents, end of period.................... $ 34,687 $ 25,506
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ 10,473 --
Noncash investing and financing activities:
Increase in long-term debt for payment-in-kind interest
payments.............................................. $ 14,013 --
Amortization of note discount.......................... $ 2,771 $ 506
Capitalized interest................................... $ 18,924 $ 3,025
Issuance of restricted stock awards.................... $ 527 --
</TABLE>
See Notes to Consolidated Financial Statements.
48
<PAGE> 51
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM OCTOBER 30, 1998 TO DECEMBER 31, 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation. The accompanying
consolidated financial statements include the accounts of JCC Holding Company
("JCC Holding") and its wholly-owned subsidiaries Jazz Casino Company, L.L.C., a
Louisiana limited liability company ("Jazz Casino"), JCC Development Company,
L.L.C., a Louisiana limited liability company ("JCC Development"), JCC Canal
Development, L.L.C., a Louisiana limited liability company formerly known as CP
Development, L.L.C. ("Canal Development"), and JCC Fulton Development, L.L.C., a
Louisiana limited liability company, formerly known as FP Development, L.L.C.
("Fulton Development" and, together with JCC Holding, Jazz Casino, JCC
Development and Canal Development, the "Company"). All significant inter-company
accounts and transactions have been eliminated in consolidation.
Nature of Business. The Company's purpose is to develop and operate an
exclusive land-based casino entertainment facility (the "Casino") in New
Orleans, Louisiana, on the site of the former Rivergate Convention Center. The
Casino commenced operations on October 28, 1999. Through certain of its
subsidiaries, JCC Holding also plans to develop approximately 130,000 square
feet of multipurpose non-gaming entertainment space on the second floor of the
Casino and develop various adjacent properties for entertainment uses supporting
the Casino. Currently, the Company has not obtained financing to fund these
developments.
JCC Holding was incorporated under Delaware law on August 20, 1996 in
contemplation of succeeding to all of the assets and liabilities of Harrah's
Jazz Company, a general partnership, which filed for relief under the United
States Bankruptcy Code on November 22, 1995. Harrah's Jazz Company's general
partners included a wholly-owned subsidiary of Harrah's Entertainment, Inc. JCC
Holding conducts business through its wholly-owned subsidiaries, Jazz Casino,
JCC Development, Canal Development and Fulton Development.
On October 30, 1998 in accordance with the Third Amended Joint Plan of
Reorganization that was confirmed by the United States Bankruptcy Court on
October 13, 1998, the Company became the successor to the operations of Harrah's
Jazz Company. Except for certain real property that vested in Canal Development
and Fulton Development, all of the assets of Harrah's Jazz Company vested in
Jazz Casino. On October 30, 1998, in connection with the third amended plan of
reorganization, JCC Holding issued an aggregate of 10 million shares of its
capital stock consisting of both Class A and Class B Common Stock. The former
bondholders of Harrah's Jazz Company received an aggregate of 5,197,377 shares
of Class A Common Stock, which constituted approximately 52% of the issued and
outstanding Class A and Class B Common Stock. In addition, the former
bondholders also received their pro rata share of (i) $187.5 million in
aggregate principal amount of Jazz Casino's senior subordinated notes with
contingent payments and (ii) Jazz Casino's senior subordinated contingent notes
(see Note 5). Harrah's Entertainment, through a wholly-owned subsidiary,
acquired beneficial ownership of the Class B Common Stock and currently is the
beneficial owner of 4,302,623 shares, which constitutes approximately 43% of the
issued and outstanding Class A and Class B Common Stock. These shares were
acquired in consideration of, among other things, an equity investment of $15
million and the conversion to equity, and contribution to JCC Holding on October
30, 1999 of $60 million in debtor-in-possession financing that had been provided
to Harrah's Jazz Company by Harrah's Entertainment or its affiliates over the
course of the reorganization. Harrah's Crescent City Investment Company, an
indirect wholly-owned subsidiary of Harrah's Entertainment, originally acquired
4,802,623 shares of Class B Common Stock under the third amended plan of
reorganization. However, under certain settlement agreements entered into in
connection with the third amended plan of reorganization, Harrah's Crescent City
Investment Company transferred from its acquired shares of Class B Common Stock
(i) options to purchase 300,000 shares to the stockholders of New Orleans
Louisiana Development Company, (ii) options to purchase
49
<PAGE> 52
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
150,000 shares to Bank One, Louisiana, N.A., formerly known as First National
Bank of Commerce and (iii) its right to receive 350,000 shares to the senior
secured bondholders of Grand Palais Casino Inc., one of the former partners of
Harrah's Jazz Company. Because the senior secured bondholders of Grand Palais
Casino are not permitted to own Class B Common Stock under JCC Holding's
Certificate of Incorporation, the shares received by them automatically
converted into shares of Class A Common Stock. Subsequent to October 30, 1998,
Bank One exercised its options.
Reorganization Value and "Fresh Start" Reporting. As of October 30, 1998,
the Company's consolidated financial statements have been prepared in accordance
with the American Institute of Certified Public Accountants' ("AICPA") Statement
of Position No. 90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code" ("SOP 90-7") (see Note 2).
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. As
of December 31, 1999, restricted cash includes approximately $501,000 of
contributions to the capital replacement fund (see Notes 8 and 9), $126,000 of
contributions to the Open Access Program public support efforts (see Note 9) and
$5.8 million of construction escrow funds. Restricted cash as of December 31,
1998 includes $605,000 of construction escrow funds.
Inventories. Inventories, which consist primarily of food, beverage,
operating supplies and retail items, are stated at average cost.
Property Available for Sale. Property available for sale consists of land
owned by Canal Development. The land is valued at the lower of cost or estimated
fair value. In addition, costs incurred in developing this property prior to
offering the property for sale, not in excess of its fair value, have been
capitalized (see Note 12).
Property and Equipment. Property and equipment are stated at cost, except
for adjustments related to fresh start reporting (see Note 2). Improvements and
extraordinary repairs that extend the life of the asset are capitalized.
Maintenance and repairs are expensed as incurred. Interest is capitalized on
constructed assets at the Company's overall weighted average rate of interest.
Capitalized interest amounted to $25.2 million and $3.5 million in 1999 and
1998, respectively.
Depreciation is calculated using the straight-line method over the shorter
of the estimated useful lives of the assets or the related lease term, as
follows:
<TABLE>
<S> <C>
Buildings on leased land................................ 25 years
Furniture, fixtures and equipment....................... 3 to 7 years
</TABLE>
Property held for development is valued at the lower of cost or estimated
fair value. Costs incurred in developing these properties, not in excess of
their fair values, are capitalized.
Construction in progress includes restricted cash of approximately $9.2
million as of December 31, 1998 for use in the completion of the Casino, to be
paid according to the terms of various escrow agreements.
Deferred Operating Contract Cost. Deferred operating contract cost consists
of payments, net of adjustments related to fresh start reporting (see Note 2),
to the Louisiana Economic Development and Gaming Corporation (see Note 9)
required under the original casino operating contract between Harrah's Jazz
Company and the Louisiana Economic Development and Gaming Corporation, which
commenced on July 15, 1994, and is being amortized on the straight-line basis
over the period from October 28, 1999 through July 24, 2024, the life of the
amended and renegotiated casino operating contract dated October 30, 1998 among
Harrah's Jazz Company, Jazz Casino and the State of Louisiana, by and through
the Louisiana Gaming Control Board. The amended and renegotiated casino
operating contract, which was entered into in
50
<PAGE> 53
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
connection with the third amended plan of reorganization, modified the original
casino operating contract between Harrah's Jazz Company and the Louisiana
Economic Development and Gaming Corporation and is referred to herein as the
amended casino operating contract.
Lease Prepayment. Lease prepayment includes a non-refundable initial
payment, net of adjustments related to fresh start reporting (see Note 2),
required under the original ground lease for the site on which the Casino has
been constructed (see Note 8) and is being amortized on a straight-line basis
over 25 years, the life of the amended casino operating contract.
Revenue Recognition and Promotional Allowances. Jazz Casino recognizes the
net win from gaming activities (the difference between gaming wins and losses)
as casino revenues. Casino revenues are net of accruals for anticipated payouts
of progressive slot machine jackpots and certain progressive table game payouts.
Such anticipated jackpots and payouts are reflected as other current liabilities
on the accompanying consolidated balance sheets. Food and beverage, parking,
retail, and other revenues are recognized as services are provided. The
estimated value of beverages, parking, retail and other items, which are
provided to customers without charge, has been included in revenues and a
corresponding amount has been deducted as promotional allowances.
The estimated costs of providing such complimentary services are included
in casino costs and expenses and for the period from October 28, 1999 to
December 31, 1999 amounted to $893,000, $235,000 and $39,000 for beverages,
parking and retail items, respectively.
Under the terms of the amended casino operating contract, Jazz Casino is
not allowed to offer customers complimentary food from the Casino's buffet and
is prohibited from developing on-site lodging. In order to compensate for these
limitations and offer its patrons the integrated Casino, dining and
entertainment experience, the Casino offers its patrons complimentary meals,
hotel rooms, transportation, entertainment, and other amenities at various local
establishments. The expense related to providing these external complimentary
services are included in casino costs and expenses and totaled $4.5 million for
the period from October 28, 1999 to December 31, 1999.
Preopening Costs. Preopening costs represent primarily the direct salaries
and other operating costs incurred by the Company prior to the opening of the
Casino on October 28, 1999. The Company accounts for start-up activities under
provisions of the AICPA SOP 98-5, "Reporting on the Costs of Start-Up
Activities," which provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred.
Amortization of Note Discount. The discount associated with Jazz Casino's
senior subordinated notes with contingent payments (see Note 5) is amortized
using the interest method. The Company's interest expense for 1999 and 1998
includes amortization of the note discount of $3.5 million and $506,000,
respectively.
Income Taxes. The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting for
Income Taxes." Under SFAS No. 109, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities, using enacted tax rates in effect for the year in
which the differences are expected to reverse.
Net Income Per Share. The Company accounts for net income per share under
the provisions of SFAS No. 128, "Earnings Per Share." This standard requires
dual presentation of net income per common share and net income per share
assuming dilution on the face of the statement of operations. Basic net income
per common share is computed by dividing the net income attributable to common
stockholders by the weighted average number of shares outstanding during the
period. Diluted earnings per common share assume that any
51
<PAGE> 54
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
dilutive convertible debentures outstanding at the beginning of each year were
converted at those dates, with related interest and outstanding common shares
adjusted accordingly. Jazz Casino's convertible junior subordinated debentures
(see Note 5) were not included in the computation of diluted earnings per common
share for 1999 and 1998 because it would have resulted in an antidilutive
effect. Diluted earnings per common share also assumes that outstanding common
shares were increased by shares issuable upon exercise of those stock warrants
and stock options for which market price exceeds exercise price, less shares
which could have been purchased by the Company with related proceeds. Since the
exercise price associated with the warrant issued to Harrah's Crescent City
Investment Company (see Note 11) is above the market price of the Class A Common
Stock, it was not dilutive in 1999 and 1998.
Stock-Based Compensation. In 1999, the Company adopted the disclosure-only
provisions of SFAS No. 123 "Accounting for Stock-Based Compensation." SFAS No.
123 encourages, but does not require, companies to adopt a fair value based
method for determining expense related to stock-based compensation. The
disclosures are presented in Note 10. The Company continues to account for
stock-based compensation using the intrinsic value method as prescribed under
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees," and related interpretations.
Use of Estimates. Financial statements prepared in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Long-Lived Assets. The Company 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, the Company uses an estimate of undiscounted net cash flow over
the shorter of the remaining life of the related lease, contract, or asset, as
applicable, in determining whether the assets are recoverable.
Fair Value of Financial Instruments. SFAS No. 107, "Disclosure About Fair
Value of Financial Instruments," requires certain disclosures regarding the fair
value of financial instruments. Current assets and current liabilities,
including due to affiliates, are reflected in the consolidated financial
statements at fair value because of the short-term maturity of these
instruments. The fair value of long-term other assets and liabilities, excluding
debt, closely approximates their carrying value (see Note 5). The Company uses
quoted market prices, when available, or discounted cash flows to calculate
these fair values.
Risk of Competition. The Casino faces significant competition on a
national, regional and local scale from gaming operations in Mississippi and, on
a regional level and local scale, from gaming operations in the State of
Louisiana. The Casino also competes for patrons on a national and international
scale with large casino hotel facilities in Las Vegas, Nevada and Atlantic City,
New Jersey.
Segment Information. The Company's principal line of business is casino and
entertainment development.
Reclassifications. Certain reclassifications have been made in prior year's
financial statements to conform to classifications used in the current year.
52
<PAGE> 55
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. FRESH START REPORTING
In accordance with the SOP 90-7, the Company established its reorganization
value and adopted "fresh start" reporting as of October 30, 1998. The Company
adopted "fresh start" reporting because owners immediately before filing and
confirmation of the third amended plan of reorganization received less than 50%
of the voting shares of the emerging entity, and its reorganization value is
less than the postpetition liabilities and allowed claims, as shown below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Postpetition current liabilities....................... $ 83,777
Liabilities deferred pursuant to Chapter 11
proceedings.......................................... 523,468
--------
Total postpetition liabilities and allowed
claims..................................... 607,245
Reorganization value................................... 331,000
--------
Excess of liabilities over reorganization
value...................................... $276,245
========
</TABLE>
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 forecasted cash flows. The
factors considered by the Company included: (1) forecasted cash flow results
which gave effect to the estimated impact of the restructuring; (2) the
discounted residual value at the end of the forecast period; (3) competition and
general economic considerations; and (4) future potential profitability. Based
on this analysis, the Company, after consultation with an independent firm
specializing in reorganizations, established the Company's reorganization value
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Reorganization value as of October 30, 1998 based upon
independent appraisal................................ $ 495,000
Financing to occur post bankruptcy but prior to
opening.............................................. (164,000)
---------
Reorganization value......................... $ 331,000
=========
</TABLE>
Under the principles of "fresh start" reporting, 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" reporting, 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 lease prepayments. In addition, the
Company's accumulated deficit was eliminated.
53
<PAGE> 56
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of the third amended plan of reorganization and the application
of "fresh start" reporting to the Company's condensed (unaudited) balance sheet
as of October 30, 1998 is as follows:
<TABLE>
<CAPTION>
(PREDECESSOR) (SUCCESSOR)
HARRAH'S JAZZ JCC HOLDING
COMPANY COMPANY
PRE-FRESH START FRESH START
BALANCE SHEET PLAN OF BALANCE SHEET
OCTOBER 30, REORGANIZATION FAIR VALUE OCTOBER 30,
1998 ADJUSTMENTS(A) ADJUSTMENTS(B) 1998
--------------- -------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 14,339 $ 112,288 $ -- $126,627
Prepaids and other assets.............. 65 -- -- 65
--------- --------- -------- --------
Total current assets......... 14,404 112,288 -- 126,692
Property and equipment................. 199,967 -- (11,795) 188,172
Deferred operating contract cost....... 122,222 -- (53,546) 68,676
Lease prepayment....................... 30,263 -- (13,278) 16,985
Other assets........................... 2,084 -- 3,820 5,904
--------- --------- -------- --------
Total........................ $ 368,940 $ 112,288 $(74,799) $406,429
========= ========= ======== ========
Liabilities not subject to
compromise........................... $ 83,777 $ (8,348) $ -- $ 75,429
Liabilities subject to compromise...... 523,468 (523,468) -- --
Long-term debt......................... -- 185,013 -- 185,013
Other long-term obligations............ -- 37,900 -- 37,900
Partners' deficit/stockholders'
equity............................... (238,305) 421,191 (74,799) 108,087
--------- --------- -------- --------
Total........................ $ 368,940 $ 112,288 $(74,799) $406,429
========= ========= ======== ========
</TABLE>
- ---------------
(A) To record the transactions consummated pursuant to the third amended plan
of reorganization and eliminate partners' deficit. These adjustments
include a $15 million direct infusion of equity to JCC Holding from
Harrah's Crescent City Investment Company.
(B) To record the adjustment to state assets and liabilities at fair value and
adjust for the difference between the assumed reorganization value and the
fair value of the identifiable tangible and intangible assets by reducing
the value assigned to deferred operating contract cost and lease
prepayments.
Preconfirmation contingencies represent amounts owed to creditors of the
predecessor company, Harrah's Jazz Company, which were transferred to the
Company under the third amended plan of reorganization. During 1999,
preconfirmation contingencies were reduced by $1.6 million due to a change in
estimate. This amount is included as a reorganization item on the consolidated
statements of operations.
54
<PAGE> 57
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. ACCRUED EXPENSES
Accrued expenses as of December 31 consist of the following:
<TABLE>
<CAPTION>
1999 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Construction costs.......................................... $ 8,577 $2,998
Payroll and related benefits................................ 5,048 430
Professional fees........................................... 2,593 530
Hotel rooms and catering.................................... 1,942 --
Other....................................................... 2,631 497
------- ------
Total............................................. $20,791 $4,455
======= ======
</TABLE>
NOTE 4. SHORT-TERM BORROWINGS
Pursuant to the credit agreement dated as of October 29, 1998 among Jazz
Casino, as borrower, JCC Holding, as guarantor, and a syndicate of lenders led
by Bankers Trust Company, Jazz Casino obtained a $25 million revolving line of
credit, which terminates in January 2006, to cover short-term working capital
requirements. Letters of credit can be drawn on the available balance under this
credit facility up to $10 million. Under the revolving line of credit, the
interest rate on the Eurodollar loans ranges from LIBOR plus 2.50% to LIBOR plus
3.50% and the interest rate on the base rate loans is prime plus 1.0% less than
the applicable margin on the Eurodollar loans. As of December 31, 1999, Jazz
Casino had outstanding borrowings of $15.9 million at a weighted average
interest rate of 9.13% and outstanding letters of credit of $2.2 million under
this revolving line of credit. Refer to Note 5 for a discussion of the guarantee
related to the revolving line of credit.
NOTE 5. LONG-TERM DEBT AND OTHER FINANCING AGREEMENTS
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Term loans:
Tranche A-1, 7.25%(a)..................................... $ 10,000 $ 10,000
Tranche A-2, 9.00%(a)..................................... 20,000 --
Tranche A-3, 7.25%(a)..................................... 30,000 30,000
Tranche B-1, 8.75%(a)..................................... 30,000 30,000
Tranche B-2, 8.88%(a)..................................... 121,500 --
-------- --------
211,500 70,000
-------- --------
Senior subordinated notes with contingent payments,
5.99%(a).................................................. 199,143 187,500
Unamortized note discount................................... (95,734) (99,269)
-------- --------
103,409 88,231
-------- --------
Senior subordinated contingent notes........................ -- --
Convertible junior subordinated debentures, 8.00%(a)........ 29,609 27,288
Junior subordinated credit facility -- affiliate,
8.00%(a).................................................. 22,500 --
Promissory note -- affiliate, 9.00%(a)...................... 1,204 --
-------- --------
Total long-term debt.............................. $368,222 $185,519
======== ========
</TABLE>
- ---------------
(a) Represents the interest rate for the respective debt agreements in effect
as of December 31, 1999.
55
<PAGE> 58
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Term Loans
Pursuant to the credit agreement dated as of October 29, 1998 among Jazz
Casino, as borrower, JCC Holding, as guarantor, and a syndicate of lenders led
by Bankers Trust Company, Jazz Casino obtained a construction financing
commitment of $211.5 million under various term loans and up to $25 million of
available working capital under a revolving line of credit (see Note 4). The
term loans and the revolving line of credit are a single combined credit
facility.
The interest rates on the term loans assuming that they are maintained as
Eurodollar loans, are as follows:
<TABLE>
<CAPTION>
INTEREST RATE
-------------
<S> <C>
Tranche A-1.......................... LIBOR plus 1%
Tranche A-2.......................... LIBOR plus 2.5% to LIBOR plus 3.5%
Tranche A-3.......................... LIBOR plus 1%
Tranche B-1.......................... LIBOR plus 2.5%
Tranche B-2:
Up to $10 million.................. LIBOR plus Harrah's Entertainment's
applicable margin then in effect*
In Excess of $10 million........... LIBOR plus 2.5% to LIBOR plus 3.5%
</TABLE>
- ---------------
* Represents Harrah's Entertainment's current interest rate on its credit
facility.
The interest rate on the term loans maintained as base rate loans is the
sum of (i) the applicable base interest rate and (ii) that percentage (not below
1.0%) which is 1.0% less than the margin for loans of such tranche maintained as
Eurodollar loans.
The term loans have the following repayment terms:
<TABLE>
<S> <C>
Tranche A-1 and A-2 (Combined) Quarterly installments of $100,000 beginning July 31,
2000 with a $27.8 million lump sum payment due at
April 2006.
Tranche A-3 Quarterly installments of $1 million in year one, $1.5
million in years two and three and $1.75 million in
years four and five.
Tranche B-1 and B-2 (Combined) Quarterly installments beginning July 31, 2000 of $1.5
million in year one, $2.5 million in years two through
five, $2.125 million in year six with a $97 million
lump sum payment due at January 2006.
</TABLE>
The scheduled quarterly repayments will be deferred for any of the first
six semi-annual interest payment periods if interest on Jazz Casino's senior
subordinated notes with contingent payments (see below) is paid in kind and the
Manager has deferred its fees under the terms of its management agreement with
Jazz Casino (see Note 7) and under the agreement (the "HET/JCC Agreement") among
Jazz Casino, Harrah's Entertainment and Harrah's Operating Company, Inc., a
wholly owned subsidiary of Harrah's Entertainment, pursuant to which Harrah's
Entertainment and Harrah's Operating Company have provided an initial guaranty
in favor of the State of Louisiana by and through the Louisiana Gaming Control
Board of a $100 million annual payment due to the State of Louisiana under the
amended casino operating contract (see Note 7). Starting with the fourth year
after October 30, 1998, if Jazz Casino's consolidated EBITDA (as defined in the
indenture under which Jazz Casino's senior subordinated notes with contingent
payments are issued) does not exceed $28.5 million for the 12 months ending on
the last day of the semi-annual period ended immediately prior to the most
recent semi-annual interest payment date with respect to the senior
56
<PAGE> 59
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subordinated notes with contingent payments, interest under the term loans will
be deferred. Jazz Casino has included $5.2 million of repayments due in 2000 as
long-term debt due to its intent to defer these repayments.
The tranche A term loans generally rank senior to all existing and future
indebtedness of Jazz Casino except certain obligations of Jazz Casino under the
HET/JCC Agreement (see Note 12).
The term loans and the revolving line of credit are secured by liens on
substantially all of the assets of each of Jazz Casino (excluding the amended
casino operating contract, funds deposited in the house bank maintained at the
Casino and the Gross Gaming Revenue Share Payments (see Note 9)), JCC Holding,
JCC Development, Canal Development and Fulton Development. The credit agreement
contains 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 Jazz Casino's business, the
sale of all or substantially all of Jazz Casino'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. Subsequent to December
31, 1999, Jazz Casino has obtained a waiver under the credit agreement in
connection with the funding of amounts under the minimum payment guaranty (see
Note 12).
The obligations of Jazz Casino under its credit agreement are guaranteed on
a senior basis by JCC Holding, JCC Development, Canal Development and Fulton
Development.
The tranche A-2 and B-2 term loans along with the revolving line of credit
are also guaranteed by Harrah's Entertainment and Harrah's Operating Company. As
consideration for this guarantee, Harrah's Entertainment receives an annual
credit support fee from Bankers Trust Company and Jazz Casino equal to 2% and
approximately 0.75%, respectively, of the average aggregate principal amount of
loans and/or stated amount of letters of credit outstanding under tranche A-2
and B-2 term loans and the revolving line of credit (in the case of tranche B-2
term loans only to the extent of the aggregate principal amount thereof from
time to time in excess of $10 million). During the year ended December 31, 1999,
Jazz Casino incurred annual credit support fees of approximately $387,000, which
have been deferred under the terms of the HET/JCC agreement.
Senior Subordinated Notes
In connection with the third amended plan of reorganization, Jazz Casino
issued (1) $187.5 million aggregate principal amount of senior subordinated
notes with contingent payments maturing in 2009, and (2) senior subordinated
contingent notes maturing in 2009 pursuant to indentures, dated as of October
30, 1998, by and among Jazz Casino, as obligor, JCC Holding, JCC Development,
Canal Development and Fulton Development, as guarantors, and Norwest Bank
Minnesota, National Association, as Trustee.
As of December 30, 1998, the stated interest rate on the senior
subordinated notes with contingent payments was considered by the Company to be
lower than prevailing interest rates for debt with similar terms and credit
ratings. In accordance with fresh start reporting, the senior subordinated notes
with contingent payments were valued based on discounting concepts to
approximate their fair value (16% discount rate).
The fixed interest rate on the senior subordinated notes with contingent
payments is 5.867% per year, increasing over the first three years to a rate of
6.214% in the fourth and fifth years and increasing to 8% after the first five
years and is payable semiannually in arrears on each May 15 and November 15,
beginning May 15, 1999. Jazz Casino has the option to pay the first six
semi-annual payments of fixed interest on its senior subordinated notes with
contingent payments in kind rather than in cash; provided, however, that Jazz
Casino must pay the first four semi-annual payments of fixed interest in kind if
tranche A-1 and/or tranche A-2 term loans are outstanding when such payments are
due. Jazz Casino has the option to pay the fifth and sixth semi-annual payments
of fixed interest in kind and may be required to do so by its credit
57
<PAGE> 60
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement under certain circumstances. Jazz Casino paid the first two interest
payments amounting to $11.7 million on its senior subordinated notes with
contingent payments in kind rather than in cash and presently anticipates that
it will pay the next four interest payments in kind rather than in cash.
Starting in 2002, if consolidated EBITDA, as defined in the indentures
governing the notes, for Jazz Casino is less than $28.5 million for the 12 month
period ending on March 31 or September 30, as applicable, immediately preceding
any interest payment date occurring on or after May 15, 2002, fixed interest on
its senior subordinated notes with contingent payments must be paid in kind.
Fixed interest not paid in kind is payable in cash.
Contingent payments with respect to the senior subordinated notes with
contingent payments are generally based on a measurement amount which is defined
as the consolidated EBITDA of Jazz Casino plus or minus cash amounts advanced to
or repaid by JCC Development, Canal Development or Fulton Development.
Contingent payments are payable on each interest payment date as follows:
<TABLE>
<S> <C>
May 15 37.5% of consolidated EBITDA for the 12 month period ending
on the immediately preceding March 31 in excess of $65
million but less than $85 million
November 15 75% of consolidated EBITDA for the 12 month period ending on
the immediately preceding September 30 in excess of $65
million and less than $85 million, less amounts paid on May
15
</TABLE>
If, on any interest payment date, no contingent payments are due and
payable to holders of the senior subordinated notes with contingent payments in
accordance with the foregoing, no contingent payments will be accrued or paid on
such interest payment date.
As of December 31, 1999 and 1998, there are no amounts outstanding under
the senior subordinated contingent notes. The senior subordinated contingent
notes, which have no fixed interest, are based upon the same measurement amount
as the contingent payments required under Jazz Casino's senior subordinated
notes with contingent payments. Contingent payments are due on each May 15 and
November 15. Contingent payments with respect to the senior subordinated
contingent notes are payable on each interest payment date as follows:
<TABLE>
<S> <C>
May 15 37.5% of consolidated EBITDA for the 12 month period ending
on the immediately preceding March 31 in excess of $85
million but less than $109.425 million
November 15 75% of consolidated EBITDA for the 12 month period ending on
the immediately preceding September 30 in excess of $85
million and less than $109.425 million, less amounts paid on
May 15
</TABLE>
The senior subordinated notes with contingent payments and the senior
subordinated contingent notes are secured on an equal and ratable basis by liens
on substantially all of the assets of Jazz Casino, JCC Holding, JCC Development,
Canal Development and Fulton Development (excluding the amended casino operating
contract, funds deposited in the house bank maintained at the Casino and the
Gross Gaming Revenue Share Payments (see Note 9)).
JCC Holding, JCC Development, Canal Development and Fulton Development have
irrevocably and unconditionally guaranteed to each holder of the senior
subordinated notes with contingent payments and senior subordinated contingent
notes all amounts owed under these notes.
Upon a change in the manager of the Casino or other similar events, each
holder of the senior subordinated notes with contingent payments will have the
right, at such holder's option, to require Jazz Casino to purchase such holder's
senior subordinated notes with contingent payments at 101% of the principal
amount thereof plus accrued and unpaid interest. Jazz Casino may not have
sufficient financing to purchase its
58
<PAGE> 61
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
senior subordinated notes with contingent payments and satisfy other obligations
which may become due upon such an event. Jazz Casino's senior subordinated notes
with contingent payments and its senior subordinated contingent notes are not
redeemable or subject to mandatory prepayment prior to maturity, except that the
notes are subject to redemption in the event the holders of these securities are
required, but unable, to obtain certain qualifications or approvals from the
Louisiana Gaming Control Board. Each of the indentures governing the notes
contains certain restrictions on, among other things, restricted payments,
liens, incurrence of additional indebtedness, payment of management fees,
subsidiary dividend restrictions, asset sales, transactions with affiliates,
mergers and consolidations.
Below is the summarized unaudited financial information for each of the
entities (guarantors) on a stand-alone basis:
<TABLE>
<CAPTION>
JCC JAZZ JCC FULTON CANAL
HOLDING CASINO DEVELOPMENT DEVELOPMENT DEVELOPMENT
-------- -------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets.............. $ 66 $ 42,151 $ 1 $ -- $4,855
Non-current assets.......... 46,042 450,258 1,408 8,918 9
Current liabilities......... 492 50,439 185 398 174
Non-current liabilities..... -- 409,200 1,224 -- --
Net revenues................ -- 41,132 -- -- 24
Income (loss) from
operations................ (59,140) (53,820) -- (4) 16
Net income (loss)........... (59,140) (58,715) -- (4) 16
</TABLE>
All of the assets of JCC Holding's subsidiaries are restricted and may not
be transferred to JCC Holding in the form of loans, cash, or dividends without
the consent of a third party.
Junior Subordinated Credit Facility
On October 30, 1998, Jazz Casino entered into a junior subordinated credit
facility with Harrah's Entertainment and Harrah's Operating Company whereby
Harrah's Operating Company agreed to make available to Jazz Casino 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 the tranche
A-2 and tranche B-2 term loans), the proceeds from the issuance of the
convertible junior subordinated debentures and the $15 million equity investment
by Harrah's Crescent City Investment Company in JCC Holding on October 30, 1998.
As of December 31, 1999, Jazz Casino has drawn $22.5 million under this
facility.
The junior subordinated credit facility is unsecured. Amounts owing under
the junior subordinated credit facility are due and payable six months following
the maturity of the senior subordinated notes with contingent payments. Early
repayment is permitted, subject to meeting certain restricted payment tests.
Outstanding principal under the junior subordinated credit facility bears
interest at the rate of 8% per year. Interest will not be paid in cash and will
be added to the outstanding principal amount if certain earnings before
interest, taxes, depreciation and amortization ("EBITDA") tests are not met for
the contingent payment periods ending on September 30, 2000 and 2001, or if Jazz
Casino pays interest in kind on its senior subordinated notes with contingent
payments after September 30, 2000. Any portion of the junior subordinated credit
facility not paid at maturity will bear interest at the rate of 10% per year.
For the year ending December 31, 1999, Jazz Casino has incurred interest expense
of approximately $1.3 million under this facility and anticipates that interest
incurred during the contingent payment periods ending September 30, 2000 and
2001 will not be paid in cash and will be added to the outstanding principal
amount.
59
<PAGE> 62
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Convertible Junior Subordinated Debentures
On October 30, 1998, Jazz Casino issued to Bankers Trust Company,
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Smith Barney Inc.,
BT Alex. Brown Incorporated and Bank One, $27,287,500 aggregate principal amount
of its convertible junior subordinated debentures due 2010. The convertible
junior subordinated debentures mature in May 2010. The convertible junior
subordinated debentures bear interest at the rate of 8% per year, payable
semi-annually in cash; provided, however, that Jazz Casino has the option of
paying the interest on the debentures, in whole or in part, in kind rather than
in cash (1) at any time on or prior to October 30, 2003, and (2) at any time
thereafter if Jazz Casino did not make contingent payments with respect to the
senior subordinated contingent notes on the immediately preceding interest
payment date for the senior subordinated contingent notes. Jazz Casino has paid
the first two interest payments amounting to $2.3 million in kind rather than in
cash and anticipates that it will pay interest due through October 30, 2003 in
kind rather than in cash.
The convertible junior subordinated debentures are unsecured obligations of
Jazz Casino. The convertible junior subordinated debentures are convertible at
the option of the holders, in whole or in part, at any time after October 1,
2002, into Class A Common Stock or, after the Transition Date (as defined in
Note 11), Unclassified Common Stock) of JCC Holding at a conversion price of
$25.00 per share, subject to dilution and other appropriate adjustments. In
addition, if the convertible junior subordinated debentures are called for
redemption, each holder may, subject to certain limitations, convert the
holder's debentures at that time. The convertible junior subordinated debentures
are redeemable at the option of the Company (1) at any time at par plus accrued
but unpaid interest in cash, or (2) at any time during the 12 months prior to
October 30, 2010 if the conversion price is greater than the Current Market
Price per share on the redemption date, at par plus accrued but unpaid interest,
payable in shares of Class A Common Stock, or a combination of cash and shares
of Class A Common Stock, or after the Transition Date, Unclassified Common
Stock. The "Current Market Price" is defined to generally mean the volume
weighted average for the preceding 10 trading days of the last reported sale
price of the Class A Common Stock.
The indenture under which the convertible junior subordinated debentures
are issued restricts mergers and consolidations involving, and the sale,
transfer, lease or conveyance of all or substantially all of the assets of Jazz
Casino and JCC Holding. The obligations of Jazz Casino to the holders of the
convertible junior subordinated debentures are guaranteed on a subordinated
basis by JCC Holding.
Promissory Note
On October 26, 1999, JCC Development entered into a promissory note with
Harrah's Operating Company that provides for borrowings up to $2 million.
Borrowings under this loan bear interest at 9% per year, and, at JCC
Development's option, may be paid in cash or in kind. The entire unpaid balance
of principal and interest is due on October 26, 2004; however, the promissory
note requires mandatory prepayment in the event JCC Development obtains a loan
for the purpose of developing the second floor of the Casino. As of December 31,
1999, JCC Development has outstanding borrowings under this note of $1.2 million
and has incurred interest costs of $19,000 which have been capitalized in
connection with its development activities.
60
<PAGE> 63
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1999, maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
2000.................................................. --
2001.................................................. 13,400
2002.................................................. 16,400
2003.................................................. 16,900
2004.................................................. 18,605
Thereafter............................................ 302,917
--------
Total Long-Term Debt........................ $368,222
========
</TABLE>
Fair Value
The estimated fair values and carrying amounts of long-term debt are as
follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
FAIR VALUE CARRYING VALUE FAIR VALUE CARRYING VALUE
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Senior subordinated notes with
contingent payments................ $113,539 $103,409 $88,231 $88,231
Convertible junior subordinated
debentures......................... 29,595 29,609 27,288 27,288
Junior subordinated credit
facility -- affiliate.............. 19,422 22,500 -- --
Promissory note -- affiliate......... 1,191 1,204 -- --
</TABLE>
The fair value of Jazz Casino's long-term debt was determined using
valuation techniques that considered cash flows discounted at current market
rates and management's best estimate for instruments without quoted market
prices. Jazz Casino's term loans, all of which bear interest at floating rates,
are assumed to approximate their fair value.
NOTE 6. FEDERAL INCOME TAXES
As of December 31, the effective income tax rate differs from the statutory
federal income tax rate as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Statutory federal rate...................................... 38.00% 38.00%
State income taxes, net of federal income tax benefit....... -- --
Valuation allowance......................................... (38.23) (37.09)
Permanent items............................................. 0.23 (0.91)
------ ------
Effective tax rate................................ 0.00% 0.00%
====== ======
</TABLE>
61
<PAGE> 64
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of net deferred tax liabilities as of December 31,
consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Liabilities:
Discount on debt.......................................... $(36,379) $(37,722)
Capitalized interest...................................... (1,902) (559)
Original issue discount................................... (134) --
-------- --------
Total............................................. (38,415) (38,281)
-------- --------
Deferred Tax Assets:
Net operating loss........................................ 22,991 1,554
Basis difference in fixed assets.......................... 19,380 --
Accrued reserves.......................................... 868 122
Contribution carryover.................................... 118 --
Stock compensation cost................................... 102 --
Work opportunity credit................................... 98
Basis difference in organizational costs.................. 36 --
Original issue discount................................... -- 54
Valuation allowance....................................... (43,078) (1,349)
-------- --------
Total............................................. 515 381
-------- --------
Net deferred tax liability........................ $(37,900) $(37,900)
======== ========
</TABLE>
To the extent the Company has net deferred tax assets as of December 31,
1999 and 1998, a valuation allowance has been established to reduce such net
deferred tax assets to zero. The corresponding charge to increase the valuation
allowance reduced the Company's income tax benefit for 1999 and 1998.
As of December 31, 1999, the Company has a net operating loss carryforward
for both regular tax and alternative minimum tax of $60.8 million. For federal
income tax purposes, $57.5 million and $3.3 million of net operating loss
carryforwards will expire in 2019 and 2018, respectively. In addition, the
Company has a charitable contribution carryforward of approximately $311,000 and
a work opportunity credit carryforward of $98,000, expiring in 2004 and 2019,
respectively.
For state income tax purposes, Jazz Casino has a net operating loss
carryforward of $60.3 million of which $57.3 million and $3 million will expire
in 2014 and 2013, respectively. In addition, JCC Holding has a state net
operating loss carryforwards of $516,000 of which $219,000 and $297,000 will
expire in 2014 and 2013, respectively.
NOTE 7. RELATED PARTY TRANSACTIONS
Management and Administrative Services Agreements
The Casino's operations are managed by Harrah's New Orleans Management
Company (the "Manager"), a wholly-owned subsidiary of Harrah's Entertainment,
pursuant to the second amended and restated management agreement. The management
agreement, dated October 29, 1998, has a 20 year term expiring October 29, 2018,
but may be extended for four consecutive terms of ten years each at the option
of the Manager, provided the Manager is not in default under this agreement.
Under the terms of the management agreement, the Manager is entitled to receive
a management fee having two components. The first component is equal to 3% of
annual gross revenues of the Casino. The second component is an incentive based
fee that is equal to 7% of certain consolidated EBITDA targets. In addition, the
Manager is entitled to receive a travel fee equal to $100,000 per year, subject
to adjustment based on changes in the Consumer Price Index and a
62
<PAGE> 65
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
"marketing contribution," which as of December 31, 1999 and 1998 was an amount
equal to 1.5% and 0.4% of the Casino's net revenues, respectively. The Manager
may increase this marketing contribution from time to time to ensure that it
generally equals the fee charged to other participating casinos owned or managed
by Harrah's Entertainment's affiliates. Under the terms of the management
agreement, the management fee will be deferred until such time as Jazz Casino
meets certain interest payment requirements under its various debt agreements.
Jazz Casino has also contracted with Harrah's Operating Company to perform
various administrative services pursuant to an administrative services
agreement. The administrative service agreement, dated October 30, 1998, is
renewable each year and may be cancelled by either party 30 days after written
notice. Services to be provided under this agreement include accounting,
computer processing, risk management, marketing and administration of certain
human resource matters. The fees under the administrative agreement are
negotiated annually and are to be paid monthly.
During 1999, Jazz Casino leased certain employees from Harrah's
Entertainment or its affiliates for approximately $913,000.
For the year ended December 31, 1999, Jazz Casino incurred costs of $9.0
million under the above agreements. For the year ending December 31, 1998, Jazz
Casino incurred costs of $4.2 million consisting primarily of reimbursements for
pre-reorganization amounts.
HET/JCC Agreement
On October 30, 1998, Jazz Casino entered into the HET/JCC Agreement with
Harrah's Entertainment and Harrah's Operating Company, under which Harrah's
Entertainment and Harrah's Operating Company have posted an initial payment
guaranty for the benefit of the State of Louisiana by and through the Louisiana
Gaming Control Board to assure payment of the minimum $100 million annual
payment due to the State of Louisiana under Jazz Casino's amended casino
operating contract (see Note 12). Any amounts funded by Harrah's Entertainment
to the Louisiana Gaming Control Board under this agreement take the form of a
demand obligation by Jazz Casino to Harrah's Entertainment, and are first
priority liens on the assets of the Company.
Harrah's Entertainment and Harrah's Operating Company have committed to
post this minimum payment guaranty on an annual basis through the year ending
March 31, 2004, provided that certain conditions are met by Jazz Casino. They
have agreed, subject to certain conditions, to provide the guaranty for the
fiscal year beginning April 1, 2000 and ending March 31, 2001. Harrah's
Entertainment and Harrah's Operating Company will receive a $6 million per year
guaranty fee for the years ending March 31, 2000 and 2001 and a $5 million per
year guaranty fee for the years ending March 31, 2002, 2003 and 2004, all
payable quarterly. In the years that Harrah's Entertainment and Harrah's
Operating Company provide the minimum payment guaranty for less than a full
year, they receive a pro rata fee based on an annual fee of $6 million. For the
year ending December 31, 1999, Jazz Casino incurred minimum payment guaranty
fees of approximately $1.1 million.
Junior Subordinated Credit Facility
Harrah's Entertainment and Harrah's Operating Company have provided Jazz
Casino with the $22.5 million junior subordinated credit facility (see Note 5).
Promissory Note
Harrah's Operating Company has provided JCC Development with a $2 million
promissory note (see Note 5).
63
<PAGE> 66
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Harrah's Entertainment Loan Guarantee
Harrah's Entertainment and Harrah's Operating Company have provided a
payment guarantee with respect to the tranche A-2 and B-2 term loans and the
revolving line of credit (see Notes 4 and 5).
Completion Guarantee
Harrah's Entertainment and Harrah's Operating Company have entered into a
series of completion guarantees pursuant to which Harrah's Entertainment and
Harrah's Operating Company have guaranteed, among other things, the completion
of the Casino and the payment of all obligations of Jazz Casino up to and
through the completion of the Casino's construction. This includes the duty to
complete, equip and open the Casino if Jazz Casino failed to commence or
complete the Casino's construction and to pay certain of Jazz Casino's costs and
expenses until the Casino opens prior to the termination of the construction
date.
Amended Completion Loan Agreement
On October 30, 1998, Jazz Casino, Harrah's Entertainment and Harrah's
Operating Company entered into an amended and restated subordinated completion
loan agreement under which any expenditures made by Harrah's Entertainment and
Harrah's Operating Company under the completion guarantees described above,
which are not also expenditures under an amended and restated construction lien
indemnity agreement between Harrah's Operating Company and Jazz Casino, are
deemed unsecured loans. The loans under the completion loan agreement will bear
interest at a rate of 8% per annum and will mature on April 30, 2010. No fees
are payable to Harrah's Entertainment and Harrah's Operating Company in
connection with the completion guarantees. As of December 31, 1999, Jazz Casino
estimates that approximately $5 million to $8 million will be required and will
be available under the completion guarantee to pay the remaining costs of
completing the project.
Equipment Leases
During 1999, Jazz Casino entered into a master lease agreement for
approximately 1900 slot machines with Harrah's Operating Company (see Note 8).
Limited Forbearance Agreement
On February 29, 2000, Jazz Casino entered into a limited forbearance
agreement with Harrah's Operating Company and the Manager. Under the terms of
this agreement, Jazz Casino has the option to defer until August 1, 2000 certain
payments that are currently due under the management agreement, the
administrative agreement and the master lease agreement. The limited forbearance
agreement also waives any penalties or late charges assessed under the
agreements.
NOTE 8. LEASES
The Company leases both real estate, office space, 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. Real estate
operating leases range from 12 months to 30 years with options for extensions
for up to an additional 30 years. The average remaining term for non-real estate
leases ranges from one to five years.
The Casino Site
Jazz Casino entered into an amended and restated ground lease agreement
dated October 29, 1998 with the Rivergate Development Corporation, as landlord,
and the City of New Orleans, as intervenor, for the site
64
<PAGE> 67
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on which the Casino is located. The initial term of the amended and restated
ground lease is for 30 years beginning October 29, 1998, with three consecutive
ten-year renewal options.
Under the terms of the original ground lease, Harrah's Jazz Company was
required to make an initial payment of $30 million. The amended and restated
ground lease required payments of $736,000 per month until the Casino opened.
These monthly payments were capitalized during the construction of the Casino
until opening and are being amortized over the life of the amended casino
operating contract. Subsequent to October 28, 1999, the minimum lease payment
increased to $12.5 million per year. The amended and restated ground lease
provides for additional rents based on various percentages of gross gaming and
non-gaming revenues. Jazz Casino is also required to make a $2.0 million annual
contribution to the Orleans Parish School Board as well as certain additional
one time rental payments totaling $2.25 million over the lease term of which
$875,000 was paid during the year ended December 31, 1999. The amended and
restated ground lease also requires annual payments of approximately $1.25
million contingent upon gross gaming revenues equaling $350 million. Jazz Casino
is required to fund this initial amount on a monthly basis in the first fiscal
year of operations. At the end of the first fiscal year of operations, if Jazz
Casino's gross gaming revenue is less than $350 million, no additional amounts
are required to be paid, and the initial funded amount of $1.25 million will be
utilized as a credit in the first fiscal year that gross gaming revenue equals
or exceeds $350 million. For the year ended December 31, 1999, Jazz Casino has
paid approximately $313,000 of the $1.25 million. Jazz Casino is further
obligated to pay contingent rent in the event a dividend is declared or if the
Manager is paid a termination fee. Under certain conditions, the Rivergate
Development Corporation has a one-time right to receive additional rent based on
the net market appreciation of JCC Holdings' Common Stock as computed by a
defined formula. Jazz Casino is also required to contribute $1.0 million each
year to the City of New Orleans for a joint marketing fund and to make monthly
payments to a capital replacement fund. The annual aggregate payments to the
capital replacement fund are $3.0 million in the first year of the Casino's
operations and increase $1.0 million in year two and three and in each
succeeding year the payments are based on 2.0% of gross gaming and non-gaming
revenues. For the years ended December 31, 1999 and 1998, Jazz Casino has
contributed $1 million to the City of New Orleans for the joint marketing fund,
respectively. In addition, Jazz Casino has contributed approximately $500,000 in
an interest-bearing account to fund the capital replacement fund for the year
ended December 31, 1999. In connection with the development of the second floor
of the Casino, Jazz Casino is also required to pay the Rivergate Development
Corporation rent equal to 50% of net operating cash income generated from
operations on the second floor of the Casino.
Slot Leases
In October 1999 Jazz Casino entered into a master lease agreement with
Harrah's Operating Company pursuant to which Jazz Casino leases approximately
1,900 slot machines, including the 1,085 slot machines sold to Harrah's
Operating Company as discussed below. The terms of the various slot machines
leased under the master lease agreement range from 3 years to 3.7 years.
In October 1999 Jazz Casino sold approximately 1,085 slot machines for $6.0
million to Harrah's Operating Company. These slot machines are being leased back
under an operating lease from Harrah's Operating Company for a term of 3.7 years
pursuant to the terms of the master lease described above. The master lease is
being accounted for as an operating lease. The master lease agreement grants
Jazz Casino an option to purchase the underlying slot machines at prices
approximating fair value in 2001, 2002 and at lease termination.
65
<PAGE> 68
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate contractual future minimum rental commitments, excluding
contingent rentals related to the amended and restated ground lease as of
December 31, 1999, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
2000................................................... $ 21,895
2001................................................... 21,440
2002................................................... 21,073
2003................................................... 20,961
2004................................................... 17,016
Thereafter............................................. 392,280
--------
Total Minimum Lease Payments................. $494,665
========
</TABLE>
Scheduled rent increases are amortized on a straight-line basis primarily
over the life of the applicable lease. Lease expense for the year ended December
31, 1999 and the period from October 30, 1998 to December 31, 1998 is
approximately $6.3 million and $139,000, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Casino Operating Contract
Pursuant to the original casino operating contract, which commenced on July
15, 1994, the Louisiana Economic Development and Gaming Corporation granted
Harrah's Jazz Company the right to conduct gaming operations at the Casino. On
October 30, 1998, all of Harrah's Jazz Company's right, title and interest in
and to the original casino operating contract revested in Harrah's Jazz Company,
and the original casino operating contract was modified by the amended casino
operating contract and assigned to Jazz Casino in accordance with applicable
Louisiana law and the agreement of the parties thereto. The term of the amended
casino operating contract is 20 years, commencing in July 1994, with one
automatic ten year renewal option.
Under the original casino operating contract, Harrah's Jazz Company paid
the Louisiana Economic Development and Gaming Corporation an initial payment of
$125 million in installments as well as certain percentage payments based on the
gross gaming revenues from the operations of a temporary casino operated by
Harrah's Jazz Company. Under Jazz Casino's amended casino operating contract,
during each fiscal year of the Casino's operation, Jazz Casino is required to
pay to the State of Louisiana, by and through the Louisiana Gaming Control
Board, 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
(the "Gross Gaming Revenue Share Payments"):
18.5% of gross gaming revenue up to $600 million
20.0% of gross gaming revenue in excess of $600 million up to $700
million
22.0% of the gross gaming revenue in excess of $700 million up to $800
million
24.0% of gross gaming revenue in excess of $800 million up to $900
million
25.0% of gross gaming revenue in excess of $900 million
Under the amended casino operating contract, Jazz Casino was required to
advance the Louisiana Gaming Control Board up to $3.5 million to reimburse the
Louisiana Gaming Control Board for its actual personnel costs (to include
Louisiana Gaming Control Board, the Louisiana State Police and Louisiana
Attorney General personnel and contract staff appropriate to the suitability
process) that were incurred in connection with the suitability findings
necessary for the execution of the amended casino operating contract
66
<PAGE> 69
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and the opening of the Casino. Harrah's Jazz Company paid $500,000 of this
amount prior to October 30, 1998, and Jazz Casino advanced $3 million of this
amount on October 30, 1998. On October 19, 1999, Jazz Casino was notified
through an amendment to the amended casino operating contract by the Louisiana
Gaming Control Board that the $3.5 million advance discussed above would not be
sufficient to pay the suitability costs and that an additional $1.7 million
would be required. The amendment provided for the $1.7 million to be deducted
from the $4.8 credit due from the Louisiana Gaming Control Board to Jazz Casino.
As of December 31, 1999, the remaining credit of $3.1 million is included as an
other asset in deferred charges and other. Jazz Casino is entitled to offset
this credit against daily payments to the Louisiana Gaming Control Board during
the second full 12-month period beginning April 1.
The amended casino operating contract obligates Jazz Casino to maintain a
capital replacement fund. The capital replacement fund is the same as that
required pursuant to Jazz Casino's amended and restated ground lease with the
Rivergate Development Corporation and the City of New Orleans and its management
agreement with the Manager and is not meant to duplicate the capital replacement
fund obligations under those agreements (see Note 8).
Under the amended casino operating contract, the Casino is prohibited from
engaging in certain activities related to food, lodging and retail, which also
applies to the Company's operations on the second floor of the Casino. The
amended casino operating contract also imposes certain financial stability
requirements on Jazz Casino relating to its ability to meet ongoing operating
expenses, casino bankroll requirements, projected debt payments and capital
maintenance requirements.
General Development Agreement
The general development agreement entered into with the Rivergate
Development Corporation 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. Jazz Casino is obligated to
reimburse the Rivergate Development Corporation for certain costs incurred
during the construction of the Casino and certain of its parking facilities,
totaling approximately $280,000. During 1999, Jazz Casino reimbursed the
Rivergate Development Company for $186,000 of these costs.
Amended Open Access Program and Plans
The amended open access program and plans require Jazz Casino to form a
special purpose corporation to foster new and existing businesses owned and
controlled by minorities, women and disadvantaged people. Harrah's Jazz Company
was required to capitalize this corporation with $500,000. Jazz Casino will
underwrite its operations at a minimum of $250,000 per year for five years. The
first $250,000 payment was required to be paid on October 30, 1998 with
subsequent annual payments payable quarterly in equal installments of $62,500.
Jazz Casino paid its first quarterly installment on October 28, 1999. Jazz
Casino must also contribute an additional $500,000 per year for five years to
promote similar public support efforts, in accordance with standards to be
established by the Company. The first annual installment was due on October 28,
1999. The remaining installments are to be funded quarterly in equal
installments of $125,000. Jazz Casino is required to deposit these amounts into
a separate account and then fund contributions to qualified recipients based
upon certain criteria. As of December 31, 1999, Jazz Casino has deposited
$125,000 into a separate interest-bearing cash account.
67
<PAGE> 70
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Audubon Institute Agreement
On October 30, 1998, Jazz Casino assumed the obligations related to a
ticket purchase agreement with the Audubon Institute whereby Jazz Casino has
agreed to purchase tickets from the Audubon Institute for a minimum of $375,000
per year for the first six years of Casino operations. This amount is subject to
increase based on increasing gross gaming revenue levels achieved by Jazz
Casino. As of December 31, 1999, Jazz Casino has made the first required
installment under this agreement of $125,000.
Construction Agreements
Jazz Casino has commitments related to the construction of the Casino and
related parking facilities totaling approximately $9 million as of December 31,
1999.
Other Contingencies
The Company has various commitments to Harrah's Entertainment and its
affiliates (see Note 7).
The enactment and implementation of gaming legislation in the State of
Louisiana and the development of the Casino, temporary casino and related
facilities have been subject to 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
the Company.
The Company is involved in various inquiries and administrative proceedings
arising in the normal course of business. While any proceeding has an element of
uncertainty, the Company believes that the final outcome of these matters will
not have a material adverse effect upon the Company's consolidated financial
position or its results of operations.
NOTE 10. EMPLOYEE BENEFIT PLANS
The Company has established the following employee and non-employee
programs.
Jazz Casino Company 401(k) Plan. On November 27, 1998, the Company
established a defined contribution savings and retirement plan, which among
other things, allows pretax and after-tax contributions to be made by employees
to the plan. Under the plan, participating employees may elect to contribute up
to 16 percent of their eligible earnings, the first six percent of which is
fully matched by the Company. Under the terms of the plan, the Company may also
elect to make an additional discretionary contribution. Amounts contributed to
the plan are invested at the participant's direction in a money market fund, a
bond fund, a balanced fund, a large capitalization stock fund or a small
capitalization global stock fund. Participants become vested in the matching
contribution over five years of credited service. The Company's contribution
expense for the year ended December 31, 1999 and the period from October 30,
1998 to December 31, 1998 was approximately $46,000 and $4,400, respectively.
1998 Long-Term Incentive Plan. On October 29, 1998, the board of directors
adopted the JCC Holding 1998 Long-Term Incentive Plan, which received
stockholder approval on May 13, 1999. Under the terms of the long-term incentive
plan, the following can be awarded to employees, officers, consultants and
directors: stock options, stock appreciation rights, performance units,
restricted stock, dividend equivalents, other stock-based awards or any other
right or interest relating to Class A Common Stock, and, on or after the
Transition Date (see Note 11), Unclassified Common Stock. JCC Holding has
reserved for issuance upon the grant or exercise of the above awards, 750,000
shares of the authorized but unissued shares of Class A Common Stock. During the
year ended December 31, 1999, JCC Holding granted options to purchase an
aggregate of 214,835 shares of Class A Common Stock and 24,664 shares of
restricted Class A Common Stock under the long-term incentive plan.
68
<PAGE> 71
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1999 Non-Employee Director Stock Option Plan. On March 4, 1999, the board
of directors adopted the 1999 Non-Employee Director Stock Option Plan, which
received stockholder approval on May 13, 1999. Under the terms of JCC Holding's
director stock option plan, options to purchase Class A Common Stock, and on or
after the Transition Date (see Note 11), Unclassified Common Stock, may be
awarded to certain non-employee directors of JCC Holding. JCC Holding has
reserved for issuance upon the exercise of stock options granted under JCC
Holding's director stock option plan an aggregate of 150,000 shares of the
authorized but unissued shares of Class A Common Stock and, after the Transition
Date (see Note 11), Unclassified Common Stock. During the year ended December
31, 1999, JCC Holding granted options to purchase an aggregate of 20,000 shares
of Class A Common Stock under JCC Holding's director stock option plan.
Stock Option Awards. A stock option grant under JCC Holding's long-term
incentive plan typically vests in equal installments over a four year period and
allows the option holder to purchase stock over specified periods of time,
generally ten years from the date of grant, at a fixed price equal to the market
value at the date of grant. Options granted under JCC Holding's director stock
option plan are immediately exercisable.
A summary of stock option activity under JCC Holding's long-term incentive
plan and director stock option plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF CLASS A
COMMON SHARES
WEIGHTED AVG. --------------------------
EXERCISE PRICE OPTIONS AVAILABLE
(PER SHARE) OUTSTANDING FOR GRANT(A)
-------------- ----------- ------------
<S> <C> <C> <C>
Balance -- December 31, 1998.................... -- -- 750,000
Additional shares authorized.................... N/A 150,000
Granted......................................... $4.13 234,835 (234,835)
Exercised....................................... -- -- --
Forfeited....................................... $4.88 (8,862) 8,862
------- --------
Balance -- December 31, 1999.................... $4.11 225,973 674,027
======= ========
</TABLE>
- ---------------
(a) The number of shares of Class A Common Stock available for grant does not
include 24,664 shares of restricted stock issued during 1999.
As of December 31, 1999, there were 225,973 outstanding stock options with
exercise prices ranging from $3.50 to $7.56 and weighted average remaining
contractual lives of 9.3 years. As of December 31, 1999, there were 132,400
exercisable stock options with a weighted average exercise price of $3.50. The
weighted average fair value per share of options granted during 1999 was $5.59.
Had compensation cost for the stock options granted above been determined
under SFAS 123, based on the fair market value at the grant dates, the Company's
pro forma net loss and net loss per share for the year ended December 31, 1999
would have been $60 million and $5.97, respectively.
The fair value of each option grant is estimated on the date of grant using
the Black Scholes option pricing model with the following weighted average
assumptions used for those options granted in 1999: expected volatility of
48.0%, risk-free interest rate of 6.30%, expected lives of 10 years and no
dividend yield rate.
Restricted Stock Awards. Restricted stock awards have full voting and
dividend rights during the restricted period; however, the shares are restricted
as to transfer and subject to forfeiture during a specified period or periods
prior to vesting. The compensation arising from a grant of restricted stock
awards is based
69
<PAGE> 72
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
upon the market price at the grant date. Such expense is deferred and amortized
to expense over the vesting period.
The Company has issued awards of restricted Class A Common Stock to certain
employees and key executives pursuant to JCC Holding's long term incentive plan
as well as outside of the long term incentive plan in connection with the
employment of certain of its executive officers. All of these restricted stock
awards are administered and subject to the terms of JCC Holding's long term
incentive plan or the respective executives' employment agreements, and will
fully vest no later than January 1, 2004. However, the vesting of some or all of
these shares can be accelerated into the years 1999, 2000 and 2001 on the basis
of certain project completion goals or the termination of such executives under
certain circumstances. The expense arising from the time accelerated restricted
stock awards is being amortized to expense over the periods in which the
restrictions are most likely anticipated to lapse.
During 1999, 94,664 restricted shares were granted, which reflected a
weighted-average grant-date fair value of $5.71. The amortization expense
recognized during 1999 was approximately $259,000. There were no restricted
stock awards granted in 1998 and accordingly no related amortization expense.
Deferred Compensation Plans. On November 18, 1999, JCC Holding's board of
directors approved two deferred compensation plans established by the Company
under which certain executives and employees may defer a portion of their
compensation. Amounts deposited into these plans are unsecured liabilities of
the Company and earn interest at rates approved by the compensation committee of
the board of directors. The first plan year for each of these plans will
commence on January 1, 2000 and accordingly, there is no liability related to
deferred compensation as of December 31, 1999.
NOTE 11. STOCKHOLDERS' EQUITY
Pursuant to the third amended plan of reorganization, the capital stock of
JCC Holding consists of shares of Class A Common Stock, Class B Common Stock,
and Unclassified Common Stock. With certain exceptions, including the election
of directors and the right to separate class voting with respect to certain
amendments to JCC Holding's Certificate of Incorporation and Bylaws, each share
of Class A, Class B and Unclassified Common Stock has identical rights and
privileges, and ranks equally, shares ratably and is identical in every respect
and as to all matters, including rights in liquidation, and is entitled to vote
upon all matters submitted to a vote of the common stockholders, is entitled to
one vote for each share held, and, except as otherwise required by law, the
holders of shares of Class A, Class B and Unclassified Common Stock generally
vote together as one class on all matters submitted to a vote of stockholders.
However, prior to the Transition Date, (1) the maximum number of authorized
directors on JCC Holding's board of directors is six, three of which are to be
elected by the holders of the Class A Common Stock, designated as Class A
directors, and three of which are to be elected by the holders of the Class B
Common Stock, designated as Class B directors, (2) any amendment to JCC
Holding's Certificate of Incorporation and Bylaws which affects the right of
holders of the Class A Common Stock or the Class A directors or which affects
the rights of holders of the Class B Common Stock or the Class B directors must
be approved by the affirmative vote of the holders of a majority of the affected
class of Common Stock and (3) only certain entities may hold Class B Common
Stock. On the Transition Date, each share of Class A Common Stock and each share
of Class B Common Stock will automatically convert into one share of
Unclassified Common Stock. Accordingly, on and after the Transition Date,
directors will be elected by the affirmative vote of the holders of a plurality
of the shares of Unclassified Common Stock and the restrictions described in
clauses (2) and (3) of the preceding sentence will no longer be applicable.
"Transition Date" means the date upon which the earliest of the following events
occurs: (1) October 28, 2002, (2) the end of two consecutive 12-month periods in
each of which contingent payments under Jazz Casino's senior subordinated notes
with contingent payments and its senior subordinated contingent notes equals or
exceeds $15 million and (3) the end of a 30-day period during which the average
70
<PAGE> 73
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
daily closing Minimum Market Value (as defined below) equals or exceeds $435
million. "Minimum Market Value" means, for any trading day, the sum of (a) the
closing price of Class A Common Stock multiplied by the number of shares of
Class A Common Stock that were issued to holders of the 14 1/4% first mortgage
notes due 2001 of Harrah's Jazz Company and its subsidiary, Harrah's Jazz
Finance Corp., on October 30, 1998 pursuant to the third amended plan of
reorganization and (b) the closing price for $1,000 of Jazz Casino's senior
subordinated notes with contingent payments and its senior subordinated
contingent notes divided by $1,000, and then multiplied by the aggregate
principal amount of the notes outstanding.
Harrah's Entertainment Warrants. Pursuant to a warrant agreement between
JCC Holding and Harrah's Crescent City Investment Company dated October 30,
1998, Harrah's Crescent City Investment Company received warrants entitling it
to purchase additional shares of JCC Holding Unclassified Common Stock such
that, upon exercise of the warrant in its entirety, Harrah's Entertainment and
its subsidiaries, including Harrah's Crescent City Investment Company, will own
in the aggregate 50.0% of the then outstanding shares of Unclassified Common
Stock, subject to certain adjustments. The number of shares issuable upon
exercise of the warrant is four million. However, the number of shares issuable
under the warrant will be adjusted as necessary by JCC Holding's board of
directors in order to preserve the right of Harrah's Entertainment and its
subsidiaries to own in the aggregate 50.0% of the Unclassified Common Stock upon
full exercise of the warrant. The warrant is exercisable at any time after the
Transition Date until October 28, 2005, in whole or in part at a price of $15.00
per share of Unclassified Common Stock. Harrah's Entertainment and its
subsidiaries are not permitted to exercise the warrant with respect to that
number of shares that would cause Harrah's Entertainment and its subsidiaries to
own more than 50.0% of the Unclassified Common Stock until such time as such
exercise will not cause Harrah's Entertainment and its subsidiaries to own more
than 50.0% of the then outstanding shares of Unclassified Common Stock. If at
any time after the Transition Date the closing bid price of the Unclassified
Common Stock exceeds $20.00 per share for 60 consecutive trading days, JCC
Holding's board of directors may elect to give written notice to Harrah's
Entertainment of an election to redeem 75% of the warrants at $0.05 per warrant
unless Harrah's Entertainment exercises the warrants within forty-five days
after the date of such notice. If (1) an election to redeem warrants is made by
JCC Holding, and (2) Harrah's Entertainment exercises warrants with respect to
that number of shares which at the time of exercise would cause Harrah's
Entertainment and its subsidiaries to own in the aggregate 50.0% of the then
outstanding shares of Unclassified Common Stock, then none of the then existing
warrants which were called for redemption shall be redeemed.
NOTE 12. SUBSEQUENT EVENTS
On February 14, 2000, Fulton Development entered into a contract to sell
the property located at 3 Canal Place for $6.5 million. Prior to the sale, it is
anticipated that Canal Development, the owner of the property, will transfer the
property to Fulton Development in exchange for a membership interest in Fulton
Development. As a condition to this sale, the buyer must begin construction on
this property of a 300-room hotel within two years of closing. If the buyer does
not meet this condition, Fulton Development has an option to repurchase the
property for $6.5 million plus interest on the purchase price equal to 7%.
Although the Company anticipates selling this property during the second quarter
of 2000, the sale is contingent upon obtaining certain third party approvals and
the buyer completing its due diligence. Because the sale of the 3 Canal Place
property would violate certain of the covenants in the Company's credit
agreement, among the required third party approvals, the Company must obtain
certain waivers and consents of the lenders under its credit agreement for Canal
Development to transfer the property to Fulton Development and for Fulton
Development to sell the property.
Under the terms of its amended casino operating contract, Jazz Casino must
make minimum daily payments to the Louisiana Gaming Control Board of
approximately $274,000 towards the minimum $100 million annual obligation. Jazz
Casino did not make the minimum daily payment on February 28, 2000.
71
<PAGE> 74
JCC HOLDING COMPANY AND SUBSIDIARIES
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 29, 2000, the Louisiana Gaming Control Board sent notice of
non-payment to Jazz Casino and a notice of drawing to Harrah's Entertainment and
Harrah's Operating Company as called for under the initial unconditional minimum
payment guaranty agreement by Harrah's Entertainment and Harrah's Operating
Company in favor of the State of Louisiana and the Louisiana Gaming Control
Board. On February 29, 2000, Harrah's Entertainment and Harrah's Operating
Company made the payment due on February 28, 2000 in the amount of $821,918
(representing three minimum daily payments due on February 28 in accordance with
the contract), and began making the daily payments thereafter. As of March 17,
2000 Harrah's Entertainment and Harrah's Operating Company had funded $5.8
million to the Louisiana Gaming Control Board on Jazz Casino's behalf. Because
Jazz Casino's drawing under the minimum payment guaranty could constitute a
default under the Company's credit agreement if Jazz Casino's reimbursement
obligation to Harrah's Entertainment and Harrah's Operating Company therewith
exceeds $5 million, the Company's lenders granted it a limited waiver of the
default subject to certain conditions. Advances by Harrah's Entertainment and
Harrah's Operating Company under the minimum payment guaranty constitute a
demand obligation by Jazz Casino and are first priority liens on the assets of
the Company. The waiver granted by the lenders allows funding under this
arrangement of up to $40 million.
NOTE 13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Prior to October 28, 1999, the Company did not have any gaming operations
and most of its activities related to completing the construction of the Casino
and hiring and training employees. Operating results of the Company and its
subsidiaries for the four quarters of 1999 were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues..................................... $ 6 $ 4 $ 93 $ 41,053
Loss from operations......................... $(2,989) $(6,697) $(11,331) $(33,228)
Net loss..................................... $(2,824) $(6,627) $(11,270) $(38,419)
Basic loss per share......................... $ (0.28) $ (0.66) $ (1.12) $ (3.82)
</TABLE>
72
<PAGE> 75
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Harrah's Jazz Company:
We have audited the accompanying consolidated statements of operations,
partners' capital and cash flows of Harrah's Jazz Company (a Louisiana general
partnership) and subsidiary ("HJC") for the ten-month period ended October 30,
1998 and for the year ended 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Harrah's
Jazz Company and subsidiary for the ten-month period ended October 30, 1998 and
for the year ended December 31, 1997, in conformity with accounting principles
generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana
March 25, 1999
73
<PAGE> 76
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY)
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TEN-MONTH PERIOD ENDED OCTOBER 30, 1998 AND FOR THE YEAR ENDED DECEMBER
31, 1997
(IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
TEN-MONTH
PERIOD ENDED YEAR ENDED
OCTOBER 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Other..................................................... $ 87 $ 1,679
OPERATING EXPENSES:
General and administrative................................ 14,965 14,703
Depreciation.............................................. 522 610
-------- --------
Total operating expenses.......................... 15,487 15,313
-------- --------
Loss from operations.............................. (15,400) (13,634)
-------- --------
REORGANIZATION ITEMS:
Costs and expenses (Note 2)............................... (7,643) (6,569)
Adjust assets to reorganization value (Note 1)............ (74,799) --
Recovery of accounts receivable........................... 3 683
Interest income........................................... 126 251
-------- --------
Total reorganization items........................ (82,313) (5,635)
-------- --------
OTHER INCOME (EXPENSE):
Interest expense, net of capitalized interest (Notes 2 and
4)..................................................... -- (1,975)
-------- --------
NET INCOME/(LOSS) BEFORE EXTRAORDINARY ITEM................. (97,713) (21,244)
EXTRAORDINARY ITEM -- gain on discharge of debt (Note 1).... 267,706 --
-------- --------
NET INCOME/(LOSS)................................. $169,993 $(21,244)
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
74
<PAGE> 77
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY)
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE TEN-MONTH PERIOD ENDED OCTOBER 30, 1998 AND FOR THE YEAR ENDED DECEMBER
31, 1997
(IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
EQUITY AS A
PARTNERS' CAPITAL ACCUMULATED RESULT OF
CONTRIBUTIONS DEFICIT REORGANIZATION
----------------- ----------- --------------
<S> <C> <C> <C>
Balance -- December 31, 1996......................... 167,000 (357,963) --
Net loss........................................... -- (21,244) --
--------- --------- --------
Balance -- December 31, 1997......................... 167,000 (379,207) --
Net Income......................................... -- 169,993 --
Discharge of debt exchanged in part for equity..... -- -- 135,301
Reclassification of partners' capital contributions
and accumulated deficit as of effective date.... (167,000) 209,214 (42,214)
--------- --------- --------
Balance -- October 30, 1998.......................... $ -- $ -- $ 93,087
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
75
<PAGE> 78
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY)
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TEN-MONTH PERIOD ENDED OCTOBER 30, 1998 AND FOR THE YEAR ENDED DECEMBER
31, 1997
(IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
TEN-MONTH
PERIOD ENDED YEAR ENDED
OCTOBER 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 169,993 $(21,244)
Adjustments to reconcile net income (loss) to net cash
used in operations
Adjust assets to reorganization value.................. 74,799 --
Gain on discharge of debt.............................. (267,706) --
Depreciation........................................... 522 610
(Increase) decrease in other current assets............ -- 208
Increase (Decrease) in accounts payable and accrued
expenses.............................................. 10,162 1,159
Increase (decrease) in accounts payable and accrued
expenses prior to Petition Date....................... -- (15)
Other.................................................. -- (10)
--------- --------
Cash flows used in operating activities........... (12,230) (19,292)
--------- --------
Cash flows from investing activities:
Purchase of land, buildings and equipment................. (4,956) (2,125)
Proceeds from sale of property............................ -- 10
--------- --------
Cash flows used in investing activities........... (4,956) (2,115)
--------- --------
Cash flows from financing activities:
Proceeds received from Debtor-in-Possession borrowings.... 27,770 15,048
--------- --------
Cash flows provided by financing activities....... 27,770 15,048
--------- --------
Net increase (decrease) in cash and cash Equivalents........ 10,584 (6,359)
Cash and cash equivalents, beginning of period.............. 3,755 10,114
--------- --------
Cash and cash equivalents, end of period.................... $ 14,339 $ 3,755
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
76
<PAGE> 79
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, BANKRUPTCY, BASIS OF PRESENTATION AND FACTORS AFFECTING
FUTURE PERFORMANCE
Organization
Harrah's Jazz Company ("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 comprised of (i) Harrah's New Orleans Investment Company ("HNOIC"),
an indirect wholly-owned subsidiary of Harrah's Entertainment, Inc. ("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 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 the Ground Lease with
the City of New Orleans (the "City") and the Rivergate Development Corporation
(the "RDC") for the Rivergate site. HJC, the RDC and the City also entered into
the General Development Agreement which governed the design, development and
construction of the casino and certain related facilities 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.
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") 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. 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 were
collateralized primarily by substantially all of the Debtors' assets.
HJC, Finance Corp., HNOIC and HET (collectively, the "Proponents") filed a
plan of reorganization and related disclosure statement with the Bankruptcy
Court on April 3, 1996. As a result of, among other things, ongoing negotiations
with the City, the State of Louisiana and other parties, the Proponents amended
the plan of reorganization several times during the reorganization process.
Following a hearing on the adequacy of the disclosure statement held on
September 3, 1998, the disclosure statement was approved, and the Plan of
Reorganization was confirmed by Bankruptcy Court on October 13, 1998. The Plan
of Reorganization and the transactions contemplated thereby were consummated on
October 30, 1998.
JCC Holding Company ("JCC Holding") was incorporated under Delaware law on
August 20, 1996 in contemplation of succeeding to all of the assets and
liabilities of HJC. JCC Holding conducts its business through its wholly-owned
subsidiaries, Jazz Casino Company, L.L.C., a Louisiana limited liability company
77
<PAGE> 80
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
("JCC"), JCC Development Company, a Louisiana limited liability company ("JCC
Development"), JCC Canal Development, L.L.C., a Louisiana limited liability
company formerly known as CP Development, L.L.C. ("Canal Development"), and JCC
Fulton Development, L.L.C., a Louisiana limited liability company, formerly
known as FP Development, L.L.C. ("Fulton Development").
On October 30, 1998 (the "Effective Date") in accordance with the Third
Amended Joint Plan of Reorganization (the "Plan"), JCC Holding became the
successor to the operations of HJC. Except for certain real property which
vested in Canal Development and Fulton Development, all of the assets of HJC
vested in JCC. On the Effective Date in connection with the reorganization, JCC
Holding issued an aggregate of 10 million shares of Common Stock consisting of
both Class A and Class B stock. The former bondholders of HJC received an
aggregate of 5,197,377 shares of Class A Common Stock, valued at $75.3 million,
which constituted approximately 52% of the issued and outstanding Common Stock.
In addition, the former bondholders also received their pro rata share of $187.5
million in aggregate principal amount of New Notes and New Contingent Notes.
HET, through a wholly-owned subsidiary, acquired beneficial ownership of the
Class B Common Stock and currently is the beneficial owner of 4,302,623 shares,
which constitutes approximately 43% of the issued and outstanding common stock.
These shares were acquired in consideration of, among other things, an equity
investment of $15 million and the conversion to equity and contribution to JCC
Holding on the Effective Date of $60 million in debtor-in-possession financing
that had been provided to HJC by HET or its affiliates over the course of the
reorganization. HET originally acquired 4,802,623 shares of Class B Common
Stock. However, under certain settlement agreements entered into in connection
with the Plan of Reorganization, HET transferred from its acquired shares of
Class B Common Stock (i) options to purchase 300,000 shares to the shareholders
of NOLDC, (ii) options to purchase 150,000 shares to Bank One, Louisiana, N.A.,
formerly known as First National Bank of Commerce ("Bank One") and (iii) its
right to receive 350,000 shares to the senior secured bond holders of Grand
Palais. Because the senior secured bond holders of Grand Palais are not
permitted to own Class B Common Stock, the shares received by the senior secured
bondholders were automatically converted to Class A Common Stock.
Throughout most of the period in which HJC was in reorganization, it was
able to continue in existence because of loans (the "DIP Financing") from HET or
one of its affiliates (the "DIP Lender"). (See Note 4).
As a result of the transactions described above, HJC's 14 1/4% First
Mortgage Notes due 2001 With Contingent Interest (the "Old Bonds") were
cancelled and certain other indebtedness was forgiven and/or cancelled (see Note
4). Accordingly, HJC recognized an extraordinary gain totaling $267.7 million in
its statement of operations for the ten month period ended October 30, 1998.
78
<PAGE> 81
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fresh Start Reporting
In accordance with the AICPA Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7")
HJC established its reorganization value and adopted "fresh start" accounting as
of October 30, 1998. HJC adopted "fresh start" reporting because owners
immediately before filing and confirmation of the Plan received less than 50% of
the voting shares of the emerging entity and its reorganization value is less
than the postpetition liabilities and allowed claims, as shown below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Post Petition Date current liabilities.................. $ 83,777
Liabilities deferred pursuant to Chapter 11
proceedings........................................... 523,468
--------
Total post Petition Date liabilities and
allowed claims.............................. 607,245
Reorganization value.................................... 331,000
--------
Excess of liabilities over reorganization
value....................................... $276,245
========
</TABLE>
Pursuant to SOP 90-7, the total reorganization value of the reorganized
entity'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 JCC's forecasted cash flows. The factors
considered by JCC 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. Under the principles of
"fresh start" accounting HJC's total net assets were recorded at this assumed
reorganization value, which resulted in a write-down of assets totaling $74.8
million.
Factors Affecting Future Performance
HJC has identified certain factors that may impact the development of the
Casino or HJC's successor's ability to achieve successful future operations:
a. Future state legislation could adversely affect the Casino's
operations. There can be no assurance that the Louisiana state legislature
will not enact legislation that imposes 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 materially and adversely
affect the Casino. Because legalized gaming is a relatively new industry in
Louisiana, over the past few years the Louisiana state legislature has
given a significant amount of attention to gaming related bills that could
impact the Casino.
b. The interpretation of current regulations and the Gaming Act could
adversely affect JCC's operations. In May 1996, the State Legislature
enacted a bill that, among other things, transferred regulatory authority
over the Casino from the LEDGC to the Louisiana Gaming Control Board (the
"LGCB") and provided that the LGCB would have the assistance of the State
Police. Although the existing Rules and Regulations promulgated by the
LEDGC remain in force and effect at this time, the LGCB is empowered to
repeal these 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 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. The
LGCB's or the State Police's interpretation and implementation of the
Gaming Act, the adoption of new Rules
79
<PAGE> 82
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and Regulations, or the repeal of existing Rules and Regulations could
impose additional 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 materially and adversely affect the Casino.
c. The gaming industry is highly competitive, with companies that in
many instances have greater resources than JCC. In addition, considerable
competition has developed since the land-based Casino project was initially
proposed in the early 1990's. The attraction of a land-based casino in New
Orleans may have decreased as a result of the large number of casinos
competing on local, regional, and national levels as well as the continued
development of other gaming markets. Negative publicity associated with
HJC's bankruptcy also may have an adverse impact on the Casino's ability to
compete. Further, the Casino operates under significant restrictions on its
ability to provide lodging, food services and entertainment. The Casino's
competitors' ability to provide these services without restriction is a
considerable competitive advantage.
d. Additional land-based casino operations could materially and
adversely affect the Casino's operations by increasing the amount of
competition it faces. 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 future legislation that would permit competing
land-based casinos at other sites or in parishes other than Orleans Parish,
including other parishes in the New Orleans metropolitan area.
e. JCC incurred significant debt in connection with the transactions
described above, and, as a result, has significant debt service
obligations. JCC also has payment obligations to the RDC and the LGCB. The
Casino may not achieve the level of gaming and operating cash flow
necessary to satisfy the JCC obligations described above. 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.
f. Louisiana state and local political environments affected the
Casino's development and construction and may affect the Casino's
operation. 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 Casino's development have been the subject
of lawsuits, claims and delays brought about by various anti-gaming and
preservationist groups and competitors of the Casino. Although these
lawsuits and claims have all been settled or dismissed, these lawsuits and
claims, together with contract negotiations with State and City
governmental entities, significantly delayed the Casino's development.
Additional lawsuits and the uncertain political environment could
materially and adversely affect the Casino.
NOTE 2. 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 with respect
to the reorganization value (see Note 1) of HJC's successor and 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 JCC's ability to achieve
successful future operations, as discussed in Note 1 above. The amount of
buildings and equipment, deferred operating contract costs and lease prepayments
considered realizable could be significantly reduced, if in HJC's or its
successor's
80
<PAGE> 83
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
judgment or a change in circumstances, the likelihood of achieving successful
future operations becomes remote.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, 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 Note 4); however, the Court authorized HJC to use such funds to
pay approved post Petition Date costs.
Land, Buildings and Equipment
Land, buildings and equipment are stated at cost, except for adjustments
related to fresh start reporting (see Note 1). 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 ultimately realizable from the property
could differ materially from the estimated fair value.
Other Assets
DEFERRED OPERATING CONTRACT COST
Deferred operating contract cost consists of payments to the LEDGC (see
Note 6) required by the Casino Operating Contract, and will be amortized over
the life of the contract.
LEASE PREPAYMENTS
Lease prepayments include non-refundable initial payments required under
HJC's leases (see Note 5) and will be amortized on a straight-line basis over
the life of the related lease.
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.
Reorganization costs and expenses consisted primarily of professional fees
for the ten months ended October 30, 1998 and for the year ended December 31,
1997.
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.
81
<PAGE> 84
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 3. TRANSACTIONS WITH PARTNERS
Partners' Capital
The Partnership Agreement entered into by the Partners upon formation of
HJC 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.
The agreements discussed in the remainder of this Note are executory
contracts (see discussion in Note 1). Under the Plan, certain of these
agreements were amended and assumed, or rejected.
Management Agreement
The operations of the Casino were to be managed by Harrah's New Orleans
Management Company, an affiliate of HNOIC, pursuant to a management agreement
executed on March 15, 1994.
On October 29, 1998, JCC and the Manager entered into a second amended and
restated management agreement granting the Manager the sole and exclusive right
to manage and operate the Casino and the management agreement with HJC was
terminated.
Debtor-in-Possession Financing
See Note 4.
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. In connection
with the Plan, a receivable from HET related to the sale was forgiven and is
included in reorganization costs in the accompanying statement of operations for
the ten-month period ended October 30, 1998.
NOTE 4. DEBT
On November 16, 1994, HJC issued $435 million of the 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 were secured by substantially all assets of HJC.
In connection with the Plan, the Old Bonds were cancelled (see Note 1).
In accordance with the provisions of the United States Bankruptcy Code,
payment on HJC's pre-petition debt was suspended and reclassified as
"Liabilities Subject to Compromise." HJC believed that all of its secured
creditors were undersecured; therefore, HJC stopped accruing interest on
unsecured and undersecured debt as of November 22, 1995. For the ten-month
period ended October 30, 1998 and the year ended
82
<PAGE> 85
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31 1997, contractual interest on those obligations amounted to $51.7
million and $62.0 million, respectively, which is $51.7 million and $62.0
million, respectively, in excess of reported interest expense in those periods.
As discussed in Note 1, HJC obtained DIP Financing. Interest on all
existing loans comprising the DIP Financing ("DIP Loans") accrued at the rate of
8% per annum, payable upon maturity.
In connection with the Plan, the principal balance outstanding under the
DIP Loans at the Effective Date were converted to equity in JCC Holding (see
Note 1) and the accrued interest on the DIP Loans was forgiven and is reflected
as an extraordinary gain in the accompanying statement of operations.
NOTE 5. LEASES
HJC leased 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.
Under the Plan, all real estate and equipment leases or contracts with HJC
were either rejected or assumed by JCC.
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.
On October 29, 1998 and effective as of the Effective Date, JCC entered
into the Amended Ground Lease for the Rivergate site with the RDC and the City,
as intervenor. Beginning on the Effective Date, the Amended Ground Lease has a
term of 30 years with 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.
NOTE 6. COMMITMENTS AND CONTINGENCIES
See "The Company -- Reorganization" for a complete discussion of certain of
the agreements discussed in the balance of this note as a result of the
consummation of the Plan.
Operating Contract
HJC entered into the Casino Operating Contract with the LEDGC to operate
the Gaming Facilities for 20 years, with a 10-year extension 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.
Under the Plan, on the Effective Date, all of HJC's right, title and
interest in and to the Casino Operating Contract revested in HJC, and the Casino
Operating Contract was 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.
83
<PAGE> 86
HARRAH'S JAZZ COMPANY AND SUBSIDIARY
(PREDECESSOR TO JCC HOLDING COMPANY
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the Amended and Renegotiated Casino Operating Contract, each fiscal
year of the Casino's operation, 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 Share
Payments").
General Development Agreement
On October 29, 1998, JCC entered into the amended General Development
Agreement (the "Amended GDA") with the RDC and 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.
Open Access Program and Plans
The Open Access Program and Plans 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 the Company. As of the Petition Date, HJC had
paid $883,000 towards this obligation. Under the terms of the Plan, the Open
Access Program and Plans were amended and JCC assumed the obligations of HJC
under the Open Access Program and Plans, as so amended.
Status of Litigation Existing Prior to the Effective Date
Settlement agreements were executed and took effect on the Effective Date
which resolved substantially all of the litigation outstanding with respect to
HJC. All costs associated with these settlement agreements were recorded by HJC
prior to the Effective Date.
Other Contingencies
JCC, as successor to HJC, will be subject to legal proceedings and claims
which arise in the normal course of business. While the outcome of these matters
cannot be predicted with certainty, management does not believe the outcome of
any of these legal matters will materially and adversely affect HJC or its
successor's business, financial condition or results of operations.
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.
84
<PAGE> 87
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the directors of the Company will be set forth
under the captions "Proposal 1 -- Election of Directors -- Nominees" and
"-- Information Regarding Nominees and Continuing Directors" in the Company's
Proxy Statement for its 2000 Annual Meeting of Stockholders to be held on May
16, 2000 (the "2000 Proxy Statement"). Such information is incorporated herein
by reference. Information relating to the executive officers of the Company is
set forth in Part I, Item 4(A) of this report under the caption "Executive
Officers of the Registrant." Information regarding compliance with Section 16(a)
of the Securities Exchange Act of 1934 by directors and executive officers of
the Company and beneficial owners of more than 10% of the Company's Common Stock
will be set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the 2000 Proxy Statement. Such information is
incorporated herein by reference. The 2000 Proxy Statement will be filed with
the Securities and Exchange Commission within 120 days after December 31, 1999.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation will be set forth under the
captions "Proposal 1 -- Election of Directors -- Director Compensation,"
"Executive Compensation" and "Certain Relationships and Related Transactions" in
the 2000 Proxy Statement. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding ownership of the Company's class A and class B common
stock by certain persons will be set forth under the caption "Stock Ownership"
in the 2000 Proxy Statement. Such information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item regarding certain relationships and
transactions of the Company will be set forth under the caption "Certain
Relationships and Related Transactions" in the 2000 Proxy Statement. Such
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Consolidated Financial Statements
The following consolidated financial statements of JCC Holding Company and
Subsidiaries and of Harrah's Jazz Company and Subsidiary are set forth in Item 8
hereof:
Financial Statements of JCC Holding Company and Subsidiaries
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Operations for the Year Ended December 31,
1999
and for the Period from October 30, 1998 to December 31, 1998
Consolidated Statements of Stockholders' Equity for the Year Ended
December 31, 1999 and for
the Period from October 30, 1998 to December 31, 1998
Consolidated Statements of Cash Flows for the Year Ended December 31,
1999
85
<PAGE> 88
and for the Period from October 30, 1998 to December 31, 1998
Notes to Consolidated Financial Statements
Financial Statements of Harrah's Jazz Company and Subsidiary
Report of Independent Public Accountants
Consolidated Statements of Operations for the Year Ended December 31,
1997 and for the Ten
Month Period Ended October 30, 1998
Consolidated Statements of Partners' Capital (Deficit) for the Year
Ended December 31, 1997 and
for the Ten Month Period Ended October 30, 1998
Consolidated Statements of Cash Flows for the Year Ended December 31,
1997 and for the Ten
Month Period Ended October 30, 1998
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Except as set forth below, all schedules to the consolidated financial
statements are omitted as they are not required under the related instructions
or are inapplicable, or because the required information is included in the
consolidated financial statements or related notes thereto.
Schedule I -- Condensed Financial Information of Registrant
Condensed Balance Sheets as of December 31, 1999 and 1998
Condensed Statements of Operations for the Year Ended December 31, 1999
and for the Period
from October 30, 1998 to December 31, 1998
Statements of Stockholders' Equity for the Year Ended December 31, 1999
and for the Period
from October 30, 1998 to December 31, 1998
Condensed Statements of Cash Flows for the Year Ended December 31, 1999
and for the Period
from October 30, 1998 to December 31, 1998
3. Exhibits
The following exhibits either (i) are filed herewith or (ii) have
previously been filed with the Securities and Exchange Commission and are
incorporated herein by reference to such prior filings. Previously filed
registration statements and reports which are incorporated herein by reference
are identified in the column captioned "SEC Document Reference." The Company
will furnish any exhibit upon request to L. Camille Fowler, Vice
President -- Finance, Treasurer and Secretary of the Company, One Canal Place,
365 Canal Street, Suite 900, New Orleans, Louisiana 70130. There is a charge of
$.50 per page to cover expenses of copying and mailing.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
2.01 Third Amended Joint Plan of 022-22289
Reorganization under Chapter 11 of the Exhibit T3E.27 to Post-Effective
Bankruptcy Code as Modified Through Amendment No. 1 to Jazz Casino Company,
October 13, 1998 L.L.C.'s Application For Qualification of
Indentures on Form T-3
3.01 Certificate of Incorporation of JCC 1-12095
Holding Company Exhibit 3.02 to Pre-Effective Amendment
No. 2 to JCC Holding Company's
Registration Statement on Form 10
3.02 Second Amended and Restated Bylaws of JCC 1-12095
Holding Company Exhibit 3.05 to Pre-Effective Amendment
No. 2 to JCC Holding Company's
Registration Statement on Form 10
</TABLE>
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<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
3.03 Amendment No. 1 to Second Amended and 1-12095
Restated Bylaws of JCC Holding Company Exhibit 3.03 to JCC Holding Company's
Annual Report on Form 10-K for the Year
Ended December 31, 1998
4.01 Indenture, dated as of October 30, 1998, 022-22289
among Jazz Casino Company, L.L.C., as Exhibit T3C.2 to Post-Effective Amendment
Issuer, JCC Holding Company, JCC No. 1 to Jazz Casino Company, L.L.C.'s
Development Company, L.L.C., CP Application for Qualification of
Development, L.L.C. and FP Development Indentures on Form T-3
L.L.C., as Guarantors, and Norwest Bank
Minnesota, National Association, as
Trustee, with respect to the Senior
Subordinated Notes due 2009 with
Contingent Payments
4.02 Indenture, dated as of October 30, 1998, 022-22291
among Jazz Casino Company, L.L.C., as Exhibit T3C.2 to Post-Effective Amendment
Issuer, JCC Holding Company, JCC No. 1 to Jazz Casino Company, L.L.C.'s
Development Company, L.L.C., CP Application for Qualification of
Development, L.L.C. and FP Development Indentures on Form T-3
L.L.C., as Guarantors, and Norwest Bank
Minnesota, National Association, as
Trustee, with respect to the Senior
Subordinated Contingent Notes due 2009
4.03 Notes Completion Guarantee among Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 4.03 to Pre-Effective Amendment
Company, Inc. and Norwest Bank Minnesota, No. 2 to JCC Holding Company's
National Association, as Trustee, dated Registration Statement on Form 10
October 30, 1998
4.04 Indenture, dated as of October 30, 1998, 1-12095
among Jazz Casino Company, L.L.C., as Exhibit 4.04 to Pre-Effective Amendment
Issuer, JCC Holding Company, as No. 2 to JCC Holding Company's
Guarantor, and Norwest Bank Minnesota, Registration Statement on Form 10
National Association, as Trustee, with
respect to the 8% Convertible Junior
Subordinated Debentures due 2010
4.05 Registration Rights Agreement among Jazz 1-12095
Casino Company, L.L.C., JCC Holding Exhibit 4.05 to Pre-Effective Amendment
Company, Salomon Smith Barney, Inc., No. 2 to JCC Holding Company's
Donaldson, Lufkin & Jenrette Inc., BT Registration Statement on Form 10
Alex. Brown Incorporated, Bankers Trust
Company and First National Bank of
Commerce, dated as of October 30, 1998
4.06 Registration Rights Agreement between JCC 1-12095
Holding Company and Harrah's Crescent Exhibit 4.06 to Pre-Effective Amendment
City Investment Company, dated as of No. 2 to JCC Holding Company's
October 30, 1998 Registration Statement on Form 10
</TABLE>
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<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
4.07 Warrant Agreement between JCC Holding 1-12095
Company and Harrah's Crescent City Exhibit 4.07 to Pre-Effective Amendment
Investment Company, dated as of October No. 2 to JCC Holding Company's
30, 1998 Registration Statement on Form 10
4.08 Subordinated Loan Agreement among Jazz 1-12095
Casino Company, L.L.C., Harrah's Exhibit 4.08 to Pre-Effective Amendment
Operating Company, Inc. and Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., dated as of October Registration Statement on Form 10
30, 1998
4.09 Intercreditor Agreement among Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 4.09 to Pre-Effective Amendment
Company, Inc., Bankers Trust Company, as No. 2 to JCC Holding Company's
Administrative Agent, and Norwest Bank Registration Statement on Form 10
Minnesota, National Association, as
Trustee, and The Bank of New York, as
Collateral Agent, acknowledged and agreed
to by JCC Holding Company, Jazz Casino
Company, L.L.C., CP Development, L.L.C.,
FP Development, L.L.C. and JCC
Development Company, L.L.C., dated as of
October 29, 1998
4.10 Credit Agreement ("Credit Agreement") 1-12095
among JCC Holding Company, Jazz Casino Exhibit 4.10 to Pre-Effective Amendment
Company, L.L.C., the Banks party thereto No. 2 to JCC Holding Company's
from time to time, and Bankers Trust Registration Statement on Form 10
Company, as Administrative Agent, dated
as of October 29, 1998
+4.11 Waiver to Credit Agreement dated June 4,
1999 by and among JCC Holding Company,
Jazz Casino Company, L.L.C., Harrah's
Entertainment, Inc., Harrah's Operating
Company, Inc., JCC Development Company,
L.L.C., JCC Canal Development, L.L.C.,
JCC Fulton Development, L.L.C. and
Bankers Trust Company, as Administrative
Agent
+4.12 Waiver and Consent to Credit Agreement,
dated November 1, 1999 by and among JCC
Holding Company, Jazz Casino Company,
L.L.C., JCC Development Company, L.L.C.,
various banks party to the Credit
Agreement and Bankers Trust Company, as
Administrative Agent, acknowledged and
agreed to by Harrah's Entertainment, Inc.
and Harrah's Operating Company, Inc.
</TABLE>
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<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
+4.13 Third Waiver to Credit Agreement, dated
February 29, 2000, by and among JCC
Holding Company, Jazz Casino Company,
L.L.C., various lending institutions
party to the Credit Agreement and Bankers
Trust Company, as Administrative Agent,
acknowledged and consented to by Harrah's
Entertainment, Inc. and Harrah's
Operating Company, Inc.
10.01 Amended and Restated Lease Agreement 1-12095
among Rivergate Development Corporation, Exhibit 10.01 to Pre-Effective Amendment
as Landlord, and Jazz Casino Company, No. 2 to JCC Holding Company's
L.L.C., as Tenant, and the City of New Registration Statement on Form 10
Orleans, as Intervenor, dated October 29,
1998
10.02 Amended and Restated General Development 1-12095
Agreement among Rivergate Development Exhibit 10.02 to Pre-Effective Amendment
Corporation, Jazz Casino Company, L.L.C. No. 2 to JCC Holding Company's
and the City of New Orleans, as Registration Statement on Form 10
Intervenor, dated October 29, 1998
10.03 Basin Street Casino Lease Termination 33-73370
Agreement among the City of New Orleans, Exhibit 10.33 to Harrah's Jazz Company's
the Rivergate Development Corporation and Annual Report on Form 10-K for the fiscal
Harrah's Jazz Company, dated January 15, year ended December 31, 1997
1997
10.04 Casino Operating Contract between the 33-73370
Louisiana Economic Development and Gaming Exhibit 10.04 to Amendment No. 3 to
Corporation and Harrah's Jazz Company, Harrah's Jazz Company's and Harrah's Jazz
dated March 14, 1994 Finance Corp.'s Registration Statement on
Form S-1
10.05 Amended and Renegotiated Casino Operating 1-12095
Contract among the State of Louisiana by Exhibit 10.05 to Pre-Effective Amendment
and through the Louisiana Gaming Control No. 2 to JCC Holding Company's
Board, Harrah's Jazz Company, Jazz Casino Registration Statement on Form 10
Company, L.L.C., and Harrah's New Orleans
Management Company and JCC Holding
Company, as Intervenors effective as of
October 30, 1998
10.06 Second Amended and Restated Management 1-12095
Agreement between Harrah's New Orleans Exhibit 10.06 to Pre-Effective Amendment
Management Company and Jazz Casino No. 2 to JCC Holding Company's
Company, L.L.C., acknowledged and Registration Statement on Form 10
consented to by Rivergate Development
Corporation, as Landlord, dated as of
October 29, 1998
10.07 Second Floor Non-Gaming Sublease between 1-12095
Jazz Casino Company, L.L.C., as Exhibit 10.07 to Pre-Effective Amendment
Sublessor, and JCC Development Company, No. 2 to JCC Holding Company's
L.L.C., as Sublessee, dated October 29, Registration Statement on Form 10
1998
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.08 City/RDC Completion Guarantee among 1-12095
Harrah's Entertainment, Inc., Harrah's Exhibit 10.08 to Pre-Effective Amendment
Operating Company, Inc., the Rivergate No. 2 to JCC Holding Company's
Development Corporation and the City of Registration Statement on Form 10
New Orleans, dated as of October 29, 1998
10.09 LGCB Completion Guarantee among Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 10.09 to Pre-Effective Amendment
Company, Inc., accepted and agreed to by No. 2 to JCC Holding Company's
the Louisiana Gaming Control Board, dated Registration Statement on Form 10
as of October 30, 1998
10.10 Amended and Restated Subordinated 1-12095
Completion Loan Agreement among Jazz Exhibit 10.10 to Pre-Effective Amendment
Casino Company, L.L.C., Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., Harrah's Operating Registration Statement on Form 10
Company, Inc., and as to the provisions
of Sections 2(C)iii and (iv) only, agreed
and accepted by Bankers Trust Company as
Administrative Agent for Lenders, dated
October 30, 1998
10.11 Amended and Restated Construction Lien 1-12095
Indemnity Obligation Agreement between Exhibit 10.11 to Pre-Effective Amendment
Jazz Casino Company, L.L.C. and Harrah's No. 2 to JCC Holding Company's
Operating Company, Inc., dated October Registration Statement on Form 10
30, 1998
10.12 Bank Completion Guarantee among Harrah's 1-12095
Entertainment, Inc. and Harrah's Exhibit 10.12 to Pre-Effective Amendment
Operating Company, Inc., accepted and No. 2 to JCC Holding Company's
agreed to by Bankers Trust Company, as Registration Statement on Form 10
Administrative Agent, dated October 29,
1998
10.13 Completion Guarantor Subordination 1-12095
Agreement (Senior Subordinated Notes) Exhibit 10.13 to Pre-Effective Amendment
among Harrah's Entertainment, Inc., No. 2 to JCC Holding Company's
Harrah's Operating Company, Inc. and Registration Statement on Form 10
Norwest Bank Minnesota, N.A., as Trustee,
acknowledged and agreed to by Jazz Casino
Company, L.L.C., dated as of October 30,
1998
10.14 Manager Subordination Agreement 1-12095
(Landlord) among Harrah's New Orleans Exhibit 10.14 to Pre-Effective Amendment
Management Company, the City of New No. 2 to JCC Holding Company's
Orleans and Rivergate Development Registration Statement on Form 10
Corporation, dated as of October 29, 1998
10.15 Manager Subordination Agreement (Lenders) 1-12095
between Harrah's New Orleans Management Exhibit 10.15 to Pre-Effective Amendment
Company and Bankers Trust Company, as No. 2 to JCC Holding Company's
Administrative Agent, acknowledged and Registration Statement on Form 10
agreed to by Jazz Casino Company, L.L.C.
and The Bank of New York, dated as of
October 29, 1998
</TABLE>
90
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.16 Manager Subordination Agreement (Senior 1-12095
Subordinated Notes) between Harrah's New Exhibit 10.16 to Pre-Effective Amendment
Orleans Management Company and Norwest No. 2 to JCC Holding Company's
Bank Minnesota, National Association, as Registration Statement on Form 10
Trustee, acknowledged and agreed to by
Jazz Casino Company, L.L.C., and The Bank
of New York, dated as of October 29, 1998
10.17 HET Subordinated Lender Subordination 1-12095
Agreement (Lenders) among Harrah's Exhibit 10.17 to Pre-Effective Amendment
Entertainment, Inc., Harrah's Operating No. 2 to JCC Holding Company's
Company, Inc. and Bankers Trust Company, Registration Statement on Form 10
as Administrative Agent, acknowledged and
agreed to by Jazz Casino Company, L.L.C.,
dated as of October 29, 1998
10.18 Management Fee Reimbursement Agreement 1-12095
Guarantee among Harrah's Entertainment, Exhibit 10.18 to Pre-Effective Amendment
Inc., Harrah's Operating Company, Inc., No. 2 to JCC Holding Company's
Jazz Casino Company, L.L.C., and Harrah's Registration Statement on Form 10
New Orleans Management Company, dated
October 29, 1998
10.19 Performance Bond among Jazz Casino 1-12095
Company, L.L.C. as Principal, and Exhibit 10.19 to Pre-Effective Amendment
Reliance Insurance Company and United No. 2 to JCC Holding Company's
States Fidelity and Guaranty Company, as Registration Statement on Form 10
Sureties, for the benefit of each of the
City of New Orleans, Rivergate
Development Corporation, the Louisiana
Gaming Control Board, Norwest Bank,
Minnesota, N.A., and Bankers Trust
Company (collectively, the "Obligees"),
dated October 29, 1998
10.20 JCC Holding Company 1998 Long-Term 1-12095
Incentive Plan Exhibit 10.20 to JCC Holding Company's
Annual Report on Form 10-K for the Year
Ended December 31, 1998
10.21 Completion Guarantor Subordination 1-12095
Agreement (Lenders) among Harrah's Exhibit 10.21 to Pre-Effective Amendment
Entertainment, Inc., Harrah's Operating No. 2 to JCC Holding Company's
Company, Inc. and Bankers Trust Company, Registration Statement on Form 10
as Administrative Agent, acknowledged and
agreed to by Jazz Casino Company, L.L.C.,
dated as of October 29, 1998
</TABLE>
91
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.22 Completion Guarantor Subordination 1-12095
Agreement (Convertible Junior Exhibit 10.22 to Pre-Effective Amendment
Subordinated Debentures) among Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., Harrah's Operating Registration Statement on Form 10
Company, Inc. and Norwest Bank Minnesota,
N.A., as Trustee, acknowledged and agreed
to by Jazz Casino Company, L.L.C., dated
as of October 30, 1998
10.23 HET Subordinated Lender Subordination 1-12095
Agreement (Senior Subordinated Notes) Exhibit 10.23 to Pre-Effective Amendment
among Harrah's Entertainment, Inc., No. 2 to JCC Holding Company's
Harrah's Operating Company, Inc. and Registration Statement on Form 10
Norwest Bank Minnesota, N.A., as Trustee,
acknowledged and agreed to by Jazz Casino
Company, L.L.C., dated as of October 30,
1998
10.24 HET Subordinated Lender Subordination 1-12095
Agreement (Convertible Junior Exhibit 10.24 to Pre-Effective Amendment
Subordinated Debentures) among Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., Harrah's Operating Registration Statement on Form 10
Company, Inc. and Norwest Bank Minnesota,
N.A., as Trustee, acknowledged and agreed
to by Jazz Casino Company, L.L.C., dated
as of October 29, 1998
10.25 Credit Enhancement Fee Agreement between 1-12095
Jazz Casino Company, L.L.C. and Harrah's Exhibit 10.25 to Pre-Effective Amendment
Operating Company, Inc., dated October No. 2 to JCC Holding Company's
29, 1998 Registration Statement on Form 10
10.26 HET/JCC Agreement between Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 10.26 to Pre-Effective Amendment
Company, Inc. and Jazz Casino Company, No. 2 to JCC Holding Company's
L.L.C., dated October 30, 1998 Registration Statement on Form 10
10.27 Guaranty and Loan Purchase Agreement by 1-12095
Harrah's Entertainment, Inc. and Harrah's Exhibit 10.27 to Pre-Effective Amendment
Operating Company, Inc., acknowledged and No. 2 to JCC Holding Company's
agreed to by Bankers Trust Company as Registration Statement on Form 10
Administrative Agent, dated as of October
29, 1998
10.28 Act of Mortgage and Collateral Assignment 1-12095
by Jazz Casino Company L.L.C., in favor Exhibit 10.28 to Pre-Effective Amendment
of The Bank of New York, as Collateral No. 2 to JCC Holding Company's
Agent, for the present and future holders Registration Statement on Form 10
of the Secured Indebtedness, dated
October 29, 1998, effective as of October
30, 1998
</TABLE>
92
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.29 Act of Mortgage and Collateral Assignment 1-12095
by CP Development, L.L.C., in favor of Exhibit 10.29 to Pre-Effective Amendment
The Bank of New York, as Collateral No. 2 to JCC Holding Company's
Agent, for the present and future holders Registration Statement on Form 10
of the Secured Obligations, dated October
29, 1998, effective as of October 30,
1998
10.30 Act of Mortgage and Collateral Assignment 1-12095
by FP Development, L.L.C., in favor of Exhibit 10.30 to Pre-Effective Amendment
The Bank of New York, as Collateral No. 2 to JCC Holding Company's
Agent, for the present and future holders Registration Statement on Form 10
of the Secured Obligations, dated October
29, 1998, effective as of October 30,
1998
10.31 Act of Mortgage and Collateral Assignment 1-12095
by JCC Development Company, L.L.C., in Exhibit 10.31 to Pre-Effective Amendment
favor of The Bank of New York, as No. 2 to JCC Holding Company's
Collateral Agent, for the present and Registration Statement on Form 10
future holders of the Secured
Obligations, dated October 29, 1998,
effective as of October 30, 1998
10.32 Credit Enhancement Fee Agreement (Bank 1-12095
Credit Agreement) by and among Bankers Exhibit 10.32 to Pre-Effective Amendment
Trust Company, as Administrative Agent No. 2 to JCC Holding Company's
for Morgan Stanley Prime Income Trust and Registration Statement on Form 10
Van Kampen American Capital Prime Rate
Income Trust, Harrah's Operating Company,
Inc. and Harrah's Entertainment, Inc.,
dated October 29, 1998
10.33 Security Agreement, dated as of October 1-12095
29, 1998, among JCC Holding Company, Jazz Exhibit 10.33 to Pre-Effective Amendment
Casino Company, L.L.C., CP Development, No. 2 to JCC Holding Company's
L.L.C., FP Development, L.L.C., and JCC Registration Statement on Form 10
Development Company., L.L.C. (each, an
"Assignor" and, together with any other
entity that becomes a party, the
"Assignors"), The Bank of New York, as
Collateral Agent for the benefit of
Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc. and the Secured
Creditors.
10.34 Pledge Agreement, dated as of October 29, 1-12095
1998, among JCC Holding Company, Jazz Exhibit 10.34 to Pre-Effective Amendment
Casino Company, L.L.C., CP Development, No. 2 to JCC Holding Company's
L.L.C., FP Development, L.L.C., and JCC Registration Statement on Form 10
Development Company., L.L.C. (each a
"Pledgor" and collectively, the
"Pledgors"), The Bank of New York
Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc. and the Secured
Creditors.
</TABLE>
93
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.35 Subsidiaries Guaranty, dated as of 1-12095
October 29, 1998, among CP Development, Exhibit 10.35 to Pre-Effective Amendment
L.L.C., FP Development, L.L.C. and JCC No. 2 to JCC Holding Company's
Development Company, L.L.C. (each a Registration Statement on Form 10
"Guarantor" and, together with any other
entity that becomes a party, the
"Guarantors"), and Bankers Trust Company,
as Administrative Agent, for the benefit
of the Creditors.
10.36 Assignment of Contracts and Ancillary 1-12095
Rights, dated as of October 30, 1998, Exhibit 10.36 to Pre-Effective Amendment
among Jazz Casino Company, L.L.C., No. 2 to JCC Holding Company's
Harrah's Operating Company, Inc. and Registration Statement on Form 10
Harrah's Entertainment, Inc.
10.37 Amended and Restated Open Access Plans of 1-12095
Jazz Casino Company, L.L.C., Submitted to Exhibit 10.37 to Pre-Effective Amendment
the Council of the City of New Orleans on No. 2 to JCC Holding Company's
October 15, 1998. Registration Statement on Form 10
10.38 Open Access Program 1-12095
Exhibit 10.38 to Pre-Effective Amendment
No. 2 to JCC Holding Company's
Registration Statement on Form 10
10.39 1999 Non-Employee Director Stock Option 1-12095
Plan Exhibit 10.20 to JCC Holding Company's
Annual Report on Form 10-K for the Year
Ended December 31, 1998
10.40 Employment Agreement, dated as of May 6, Exhibit 10.40 to JCC Holding Company's
1999, by and between JCC Holding Company Quarterly Report on Form 10-Q for the
and Frederick W. Burford. Quarter Ended June 30, 1999.
10.41 Employment Agreement, dated as of August Exhibit 10.41 to JCC Holding Company's
25, 1999, by and between JCC Holding Quarterly Report on Form 10-Q for the
Company and L. Camille Fowler. Quarter Ended September 30, 1999.
+10.42 Letter dated February 29, 2000 from
Harrah's Entertainment, Inc. agreeing to
re-post Minimum Payment Guaranty.
+10.43 Letter dated February 29, 2000 from
Harrah's Entertainment, Inc. agreeing to
make daily payments to the state of
Louisiana under the Amended and
Renegotiated Casino Operating Contract.
+10.44 First Amendment to Amended and
Renegotiated Casino Operating Contract,
dated October 19, 1999, among the state
of Louisiana, by and through the
Louisiana Gaming Control Board, and Jazz
Casino Company, L.L.C., agreed and
consented to by Harrah's Entertainment,
Inc. and Harrah's Operating Company, Inc.
</TABLE>
94
<PAGE> 97
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
+10.45 Limited Forbearance Agreement, dated
February 29, 2000, by and among Harrah's
New Orleans Management Company, Harrah's
Operating Company, Inc., and Jazz Casino
Company, L.L.C.
+10.46 Promissory Note, dated October 26, 1999
from JCC Development Company, L.L.C. to
Harrah's Operating Company, Inc.
+10.47 Master Lease Agreement, dated October 28,
1999 by and among Harrah's Operating
Company, Inc. and Jazz Casino Company,
L.L.C.
+10.48 Used Slot Machine Purchase Agreement,
dated October 28, 1999 by and between
Harrah's Operating Company, Inc., and
Jazz Casino Company, L.L.C.
+10.49 Agreement effective as of January 1, 1999
by and between Jazz Casino Company,
L.L.C. and Thomas M. Morgan.
+10.50 Executive Leasing Agreement, effective as
of January 1, 1999 by and between
Harrah's Operating Company, Inc. and Jazz
Casino Company, L.L.C.
+10.51 Purchase and Sale Agreement, dated
February 14, 2000 by and between JCC
Fulton Development, L.L.C. and WI
Acquisition Corporation.
+10.52 Administrative Services Agreement between
Jazz Casino Company, L.L.C. and Harrah's
Operating Company, Inc., dated October
30, 1998.
+21.01 List of Subsidiaries of JCC Holding
Company
+23.01 Consent of Arthur Andersen LLP,
Independent Public Accountants, dated
March 29, 2000.
+23.02 Consent of Deloitte & Touche LLP,
Independent Public Accountants, dated
March 29, 2000.
+27.01 Financial Data Schedule
99.01 Opinion of New Orleans City Attorney 33-73370
regarding Amusement Tax Exhibit 99.02 to Amendment No. 4 to
Harrah's Jazz Company's and Harrah's Jazz
Finance Corp.'s Registration Statement on
Form S-1
</TABLE>
- ---------------
+ Filed herewith.
95
<PAGE> 98
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K during the fourth fiscal
quarter ended December 31, 1999.
(c) See Item 14(a) 3. above.
(d) See Item 14(a) 2. above.
96
<PAGE> 99
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 29, 2000.
JCC HOLDING COMPANY
By: /s/ FREDERICK W. BURFORD
----------------------------------
Frederick W. Burford
President and Chief Executive
Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on March 29, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ FREDERICK W. BURFORD President and Chief Executive Officer
- ----------------------------------------------------- (principal executive officer)
Frederick W. Burford
/s/ COLIN V. REED Class B Director
- -----------------------------------------------------
Colin V. Reed
/s/ SETH E. LEMLER Class A Director
- -----------------------------------------------------
Seth E. Lemler
/s/ PHILIP G. SATRE Class B Director
- -----------------------------------------------------
Philip G. Satre
/s/ RUDY J. CERONE Class A Director
- -----------------------------------------------------
Rudy J. Cerone
/s/ EDDIE N. WILLIAMS Class B Director
- -----------------------------------------------------
Eddie N. Williams
/s/ EDWIN JACOBSON Class A Director
- -----------------------------------------------------
Edwin Jacobson
/s/ L. CAMILLE FOWLER Vice President -- Finance, Treasurer and
- ----------------------------------------------------- Secretary (principal financial and
L. Camille Fowler accounting officer)
</TABLE>
97
<PAGE> 100
JCC HOLDING COMPANY
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF JCC HOLDING COMPANY
CONDENSED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 4 $ --
Intercompany receivables.................................. 62 --
-------- --------
Total current assets.............................. 66 --
-------- --------
Investment in subsidiaries................................ 46,042 104,720
-------- --------
Total Assets...................................... $ 46,108 $104,720
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Intercompany payables..................................... $ 462 $ --
Accrued franchise taxes................................... 30 310
-------- --------
Total current liabilities......................... 492 310
-------- --------
Commitments and Contingencies
Stockholders' Equity:
Common Stock:
Unclassified Common Stock (40,000 shares authorized;
none issued and outstanding; par value $.01 per
share)................................................ -- --
Class A Common Stock (20,000 shares authorized; 5,638
shares and 5,547 shares, respectively, issued and
outstanding; par value $.01
per share)........................................... 56 55
Class B Common Stock (20,000 shares authorized; 4,453
shares issued and outstanding; par value $.01 per
share)................................................ 45 45
Additional paid-in capital................................ 108,538 107,987
Accumulated deficit....................................... (62,817) (3,677)
Less -- unearned compensation............................. (206) --
-------- --------
Total stockholders' equity........................ 45,616 104,410
-------- --------
Total Liabilities and Stockholders' Equity........ $ 46,108 $104,720
======== ========
</TABLE>
See JCC Holding Company and Subsidiaries Notes to Consolidated Financial
Statements in Part II, Item 8.
98
<PAGE> 101
JCC HOLDING COMPANY
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF JCC HOLDING COMPANY
CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM OCTOBER 30, 1998 TO DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
TWO-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Expenses and Other Deductions:
Equity in subsidiary losses............................... $ 58,703 $ 3,367
General and administrative expenses....................... 437 310
----------- -----------
Total............................................. 59,140 3,677
----------- -----------
Net Loss.................................................... $ (59,140) $ (3,677)
=========== ===========
Basic Net Loss Per Share.................................... $ (5.88) $ (0.37)
=========== ===========
Weighted Average Shares Outstanding......................... 10,055,140 10,000,000
=========== ===========
</TABLE>
See JCC Holding Company and Subsidiaries Notes to Consolidated Financial
Statements in Part II, Item 8.
99
<PAGE> 102
JCC HOLDING COMPANY
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF JCC HOLDING COMPANY
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM OCTOBER 30, 1998 TO DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
CLASS A CLASS B ADDITIONAL
--------------- --------------- PAID-IN ACCUMULATED UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
------ ------ ------ ------ ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -- October 30, 1998....... 5,547 $55 4,453 $45 $107,987 $ -- $ -- $108,087
Net loss........................ (3,677) (3,677)
----- --- ----- --- -------- -------- ----- --------
Balance -- December 31, 1998...... 5,547 55 4,453 45 107,987 (3,677) -- 104,410
----- --- ----- --- -------- -------- ----- --------
Restricted stock activity....... 92 1 526 (206) 321
Other........................... (1) 25 25
Net loss........................ (59,140) (59,140)
----- --- ----- --- -------- -------- ----- --------
Balance -- December 31, 1999...... 5,638 $56 4,453 $45 $108,538 $(62,817) $(206) $ 45,616
===== === ===== === ======== ======== ===== ========
</TABLE>
See JCC Holding Company and Subsidiaries Notes to Consolidated Financial
Statements in Part II, Item 8.
<PAGE> 103
JCC HOLDING COMPANY
(SUCCESSOR TO HARRAH'S JAZZ COMPANY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF JCC HOLDING COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM OCTOBER 30, 1998 TO DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWO-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................. $(59,140) $(3,677)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity in subsidiary losses............................ 58,703 3,367
Amortization of unearned compensation.................. 259 --
Changes in operating assets and liabilities:
Intercompany payable................................... 462 --
Franchise tax payable.................................. (280) 310
-------- -------
Net cash flows used in operating activities....... 4 --
-------- -------
Net decrease in cash and cash equivalents................... 4 --
Cash and cash equivalents, beginning of period.............. -- --
-------- -------
Cash and cash equivalents, end of period.................... $ 4 $ --
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash investing and financing activities:
Issuance of restricted stock awards.................... $ 527 $ --
</TABLE>
See JCC Holding Company and Subsidiaries Notes to Consolidated Financial
Statements in Part II, Item 8.
101
<PAGE> 104
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
2.01 Third Amended Joint Plan of 022-22289
Reorganization under Chapter 11 of the Exhibit T3E.27 to Post-Effective
Bankruptcy Code as Modified Through Amendment No. 1 to Jazz Casino Company,
October 13, 1998 L.L.C.'s Application For Qualification of
Indentures on Form T-3
3.01 Certificate of Incorporation of JCC 1-12095
Holding Company Exhibit 3.02 to Pre-Effective Amendment
No. 2 to JCC Holding Company's
Registration Statement on Form 10
3.02 Second Amended and Restated Bylaws of JCC 1-12095
Holding Company Exhibit 3.05 to Pre-Effective Amendment
No. 2 to JCC Holding Company's
Registration Statement on Form 10
3.03 Amendment No. 1 to Second Amended and 1-12095
Restated Bylaws of JCC Holding Company Exhibit 3.03 to JCC Holding Company's
Annual Report on Form 10-K for the Year
Ended December 31, 1998
4.01 Indenture, dated as of October 30, 1998, 022-22289
among Jazz Casino Company, L.L.C., as Exhibit T3C.2 to Post-Effective Amendment
Issuer, JCC Holding Company, JCC No. 1 to Jazz Casino Company, L.L.C.'s
Development Company, L.L.C., CP Application for Qualification of
Development, L.L.C. and FP Development Indentures on Form T-3
L.L.C., as Guarantors, and Norwest Bank
Minnesota, National Association, as
Trustee, with respect to the Senior
Subordinated Notes due 2009 with
Contingent Payments
4.02 Indenture, dated as of October 30, 1998, 022-22291
among Jazz Casino Company, L.L.C., as Exhibit T3C.2 to Post-Effective Amendment
Issuer, JCC Holding Company, JCC No. 1 to Jazz Casino Company, L.L.C.'s
Development Company, L.L.C., CP Application for Qualification of
Development, L.L.C. and FP Development Indentures on Form T-3
L.L.C., as Guarantors, and Norwest Bank
Minnesota, National Association, as
Trustee, with respect to the Senior
Subordinated Contingent Notes due 2009
4.03 Notes Completion Guarantee among Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 4.03 to Pre-Effective Amendment
Company, Inc. and Norwest Bank Minnesota, No. 2 to JCC Holding Company's
National Association, as Trustee, dated Registration Statement on Form 10
October 30, 1998
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
4.04 Indenture, dated as of October 30, 1998, 1-12095
among Jazz Casino Company, L.L.C., as Exhibit 4.04 to Pre-Effective Amendment
Issuer, JCC Holding Company, as No. 2 to JCC Holding Company's
Guarantor, and Norwest Bank Minnesota, Registration Statement on Form 10
National Association, as Trustee, with
respect to the 8% Convertible Junior
Subordinated Debentures due 2010
4.05 Registration Rights Agreement among Jazz 1-12095
Casino Company, L.L.C., JCC Holding Exhibit 4.05 to Pre-Effective Amendment
Company, Salomon Smith Barney, Inc., No. 2 to JCC Holding Company's
Donaldson, Lufkin & Jenrette Inc., BT Registration Statement on Form 10
Alex. Brown Incorporated, Bankers Trust
Company and First National Bank of
Commerce, dated as of October 30, 1998
4.06 Registration Rights Agreement between JCC 1-12095
Holding Company and Harrah's Crescent Exhibit 4.06 to Pre-Effective Amendment
City Investment Company, dated as of No. 2 to JCC Holding Company's
October 30, 1998 Registration Statement on Form 10
4.07 Warrant Agreement between JCC Holding 1-12095
Company and Harrah's Crescent City Exhibit 4.07 to Pre-Effective Amendment
Investment Company, dated as of October No. 2 to JCC Holding Company's
30, 1998 Registration Statement on Form 10
4.08 Subordinated Loan Agreement among Jazz 1-12095
Casino Company, L.L.C., Harrah's Exhibit 4.08 to Pre-Effective Amendment
Operating Company, Inc. and Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., dated as of October Registration Statement on Form 10
30, 1998
4.09 Intercreditor Agreement among Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 4.09 to Pre-Effective Amendment
Company, Inc., Bankers Trust Company, as No. 2 to JCC Holding Company's
Administrative Agent, and Norwest Bank Registration Statement on Form 10
Minnesota, National Association, as
Trustee, and The Bank of New York, as
Collateral Agent, acknowledged and agreed
to by JCC Holding Company, Jazz Casino
Company, L.L.C., CP Development, L.L.C.,
FP Development, L.L.C. and JCC
Development Company, L.L.C., dated as of
October 29, 1998
4.10 Credit Agreement ("Credit Agreement") 1-12095
among JCC Holding Company, Jazz Casino Exhibit 4.10 to Pre-Effective Amendment
Company, L.L.C., the Banks party thereto No. 2 to JCC Holding Company's
from time to time, and Bankers Trust Registration Statement on Form 10
Company, as Administrative Agent, dated
as of October 29, 1998
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
+4.11 Waiver to Credit Agreement dated June 4,
1999 by and among JCC Holding Company,
Jazz Casino Company, L.L.C., Harrah's
Entertainment, Inc., Harrah's Operating
Company, Inc., JCC Development Company,
L.L.C., JCC Canal Development, L.L.C.,
JCC Fulton Development, L.L.C. and
Bankers Trust Company, as Administrative
Agent
+4.12 Waiver and Consent to Credit Agreement,
dated November 1, 1999 by and among JCC
Holding Company, Jazz Casino Company,
L.L.C., JCC Development Company, L.L.C.,
various banks party to the Credit
Agreement and Bankers Trust Company, as
Administrative Agent, acknowledged and
agreed to by Harrah's Entertainment, Inc.
and Harrah's Operating Company, Inc.
+4.13 Third Waiver to Credit Agreement, dated
February 29, 2000, by and among JCC
Holding Company, Jazz Casino Company,
L.L.C., various lending institutions
party to the Credit Agreement and Bankers
Trust Company, as Administrative Agent,
acknowledged and consented to by Harrah's
Entertainment, Inc. and Harrah's
Operating Company, Inc.
10.01 Amended and Restated Lease Agreement 1-12095
among Rivergate Development Corporation, Exhibit 10.01 to Pre-Effective Amendment
as Landlord, and Jazz Casino Company, No. 2 to JCC Holding Company's
L.L.C., as Tenant, and the City of New Registration Statement on Form 10
Orleans, as Intervenor, dated October 29,
1998
10.02 Amended and Restated General Development 1-12095
Agreement among Rivergate Development Exhibit 10.02 to Pre-Effective Amendment
Corporation, Jazz Casino Company, L.L.C. No. 2 to JCC Holding Company's
and the City of New Orleans, as Registration Statement on Form 10
Intervenor, dated October 29, 1998
10.03 Basin Street Casino Lease Termination 33-73370
Agreement among the City of New Orleans, Exhibit 10.33 to Harrah's Jazz Company's
the Rivergate Development Corporation and Annual Report on Form 10-K for the fiscal
Harrah's Jazz Company, dated January 15, year ended December 31, 1997
1997
10.04 Casino Operating Contract between the 33-73370
Louisiana Economic Development and Gaming Exhibit 10.04 to Amendment No. 3 to
Corporation and Harrah's Jazz Company, Harrah's Jazz Company's and Harrah's Jazz
dated March 14, 1994 Finance Corp.'s Registration Statement on
Form S-1
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.05 Amended and Renegotiated Casino Operating 1-12095
Contract among the State of Louisiana by Exhibit 10.05 to Pre-Effective Amendment
and through the Louisiana Gaming Control No. 2 to JCC Holding Company's
Board, Harrah's Jazz Company, Jazz Casino Registration Statement on Form 10
Company, L.L.C., and Harrah's New Orleans
Management Company and JCC Holding
Company, as Intervenors effective as of
October 30, 1998
10.06 Second Amended and Restated Management 1-12095
Agreement between Harrah's New Orleans Exhibit 10.06 to Pre-Effective Amendment
Management Company and Jazz Casino No. 2 to JCC Holding Company's
Company, L.L.C., acknowledged and Registration Statement on Form 10
consented to by Rivergate Development
Corporation, as Landlord, dated as of
October 29, 1998
10.07 Second Floor Non-Gaming Sublease between 1-12095
Jazz Casino Company, L.L.C., as Exhibit 10.07 to Pre-Effective Amendment
Sublessor, and JCC Development Company, No. 2 to JCC Holding Company's
L.L.C., as Sublessee, dated October 29, Registration Statement on Form 10
1998
10.08 City/RDC Completion Guarantee among 1-12095
Harrah's Entertainment, Inc., Harrah's Exhibit 10.08 to Pre-Effective Amendment
Operating Company, Inc., the Rivergate No. 2 to JCC Holding Company's
Development Corporation and the City of Registration Statement on Form 10
New Orleans, dated as of October 29, 1998
10.09 LGCB Completion Guarantee among Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 10.09 to Pre-Effective Amendment
Company, Inc., accepted and agreed to by No. 2 to JCC Holding Company's
the Louisiana Gaming Control Board, dated Registration Statement on Form 10
as of October 30, 1998
10.10 Amended and Restated Subordinated 1-12095
Completion Loan Agreement among Jazz Exhibit 10.10 to Pre-Effective Amendment
Casino Company, L.L.C., Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., Harrah's Operating Registration Statement on Form 10
Company, Inc., and as to the provisions
of Sections 2(C)iii and (iv) only, agreed
and accepted by Bankers Trust Company as
Administrative Agent for Lenders, dated
October 30, 1998
10.11 Amended and Restated Construction Lien 1-12095
Indemnity Obligation Agreement between Exhibit 10.11 to Pre-Effective Amendment
Jazz Casino Company, L.L.C. and Harrah's No. 2 to JCC Holding Company's
Operating Company, Inc., dated October Registration Statement on Form 10
30, 1998
10.12 Bank Completion Guarantee among Harrah's 1-12095
Entertainment, Inc. and Harrah's Exhibit 10.12 to Pre-Effective Amendment
Operating Company, Inc., accepted and No. 2 to JCC Holding Company's
agreed to by Bankers Trust Company, as Registration Statement on Form 10
Administrative Agent, dated October 29,
1998
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.13 Completion Guarantor Subordination 1-12095
Agreement (Senior Subordinated Notes) Exhibit 10.13 to Pre-Effective Amendment
among Harrah's Entertainment, Inc., No. 2 to JCC Holding Company's
Harrah's Operating Company, Inc. and Registration Statement on Form 10
Norwest Bank Minnesota, N.A., as Trustee,
acknowledged and agreed to by Jazz Casino
Company, L.L.C., dated as of October 30,
1998
10.14 Manager Subordination Agreement 1-12095
(Landlord) among Harrah's New Orleans Exhibit 10.14 to Pre-Effective Amendment
Management Company, the City of New No. 2 to JCC Holding Company's
Orleans and Rivergate Development Registration Statement on Form 10
Corporation, dated as of October 29, 1998
10.15 Manager Subordination Agreement (Lenders) 1-12095
between Harrah's New Orleans Management Exhibit 10.15 to Pre-Effective Amendment
Company and Bankers Trust Company, as No. 2 to JCC Holding Company's
Administrative Agent, acknowledged and Registration Statement on Form 10
agreed to by Jazz Casino Company, L.L.C.
and The Bank of New York, dated as of
October 29, 1998
10.16 Manager Subordination Agreement (Senior 1-12095
Subordinated Notes) between Harrah's New Exhibit 10.16 to Pre-Effective Amendment
Orleans Management Company and Norwest No. 2 to JCC Holding Company's
Bank Minnesota, National Association, as Registration Statement on Form 10
Trustee, acknowledged and agreed to by
Jazz Casino Company, L.L.C., and The Bank
of New York, dated as of October 29, 1998
10.17 HET Subordinated Lender Subordination 1-12095
Agreement (Lenders) among Harrah's Exhibit 10.17 to Pre-Effective Amendment
Entertainment, Inc., Harrah's Operating No. 2 to JCC Holding Company's
Company, Inc. and Bankers Trust Company, Registration Statement on Form 10
as Administrative Agent, acknowledged and
agreed to by Jazz Casino Company, L.L.C.,
dated as of October 29, 1998
10.18 Management Fee Reimbursement Agreement 1-12095
Guarantee among Harrah's Entertainment, Exhibit 10.18 to Pre-Effective Amendment
Inc., Harrah's Operating Company, Inc., No. 2 to JCC Holding Company's
Jazz Casino Company, L.L.C., and Harrah's Registration Statement on Form 10
New Orleans Management Company, dated
October 29, 1998
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.19 Performance Bond among Jazz Casino 1-12095
Company, L.L.C. as Principal, and Exhibit 10.19 to Pre-Effective Amendment
Reliance Insurance Company and United No. 2 to JCC Holding Company's
States Fidelity and Guaranty Company, as Registration Statement on Form 10
Sureties, for the benefit of each of the
City of New Orleans, Rivergate
Development Corporation, the Louisiana
Gaming Control Board, Norwest Bank,
Minnesota, N.A., and Bankers Trust
Company (collectively, the "Obligees"),
dated October 29, 1998
10.20 JCC Holding Company 1998 Long-Term 1-12095
Incentive Plan Exhibit 10.20 to JCC Holding Company's
Annual Report on Form 10-K for the Year
Ended December 31, 1998
10.21 Completion Guarantor Subordination 1-12095
Agreement (Lenders) among Harrah's Exhibit 10.21 to Pre-Effective Amendment
Entertainment, Inc., Harrah's Operating No. 2 to JCC Holding Company's
Company, Inc. and Bankers Trust Company, Registration Statement on Form 10
as Administrative Agent, acknowledged and
agreed to by Jazz Casino Company, L.L.C.,
dated as of October 29, 1998
10.22 Completion Guarantor Subordination 1-12095
Agreement (Convertible Junior Exhibit 10.22 to Pre-Effective Amendment
Subordinated Debentures) among Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., Harrah's Operating Registration Statement on Form 10
Company, Inc. and Norwest Bank Minnesota,
N.A., as Trustee, acknowledged and agreed
to by Jazz Casino Company, L.L.C., dated
as of October 30, 1998
10.23 HET Subordinated Lender Subordination 1-12095
Agreement (Senior Subordinated Notes) Exhibit 10.23 to Pre-Effective Amendment
among Harrah's Entertainment, Inc., No. 2 to JCC Holding Company's
Harrah's Operating Company, Inc. and Registration Statement on Form 10
Norwest Bank Minnesota, N.A., as Trustee,
acknowledged and agreed to by Jazz Casino
Company, L.L.C., dated as of October 30,
1998
10.24 HET Subordinated Lender Subordination 1-12095
Agreement (Convertible Junior Exhibit 10.24 to Pre-Effective Amendment
Subordinated Debentures) among Harrah's No. 2 to JCC Holding Company's
Entertainment, Inc., Harrah's Operating Registration Statement on Form 10
Company, Inc. and Norwest Bank Minnesota,
N.A., as Trustee, acknowledged and agreed
to by Jazz Casino Company, L.L.C., dated
as of October 29, 1998
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.25 Credit Enhancement Fee Agreement between 1-12095
Jazz Casino Company, L.L.C. and Harrah's Exhibit 10.25 to Pre-Effective Amendment
Operating Company, Inc., dated October No. 2 to JCC Holding Company's
29, 1998 Registration Statement on Form 10
10.26 HET/JCC Agreement between Harrah's 1-12095
Entertainment, Inc., Harrah's Operating Exhibit 10.26 to Pre-Effective Amendment
Company, Inc. and Jazz Casino Company, No. 2 to JCC Holding Company's
L.L.C., dated October 30, 1998 Registration Statement on Form 10
10.27 Guaranty and Loan Purchase Agreement by 1-12095
Harrah's Entertainment, Inc. and Harrah's Exhibit 10.27 to Pre-Effective Amendment
Operating Company, Inc., acknowledged and No. 2 to JCC Holding Company's
agreed to by Bankers Trust Company as Registration Statement on Form 10
Administrative Agent, dated as of October
29, 1998
10.28 Act of Mortgage and Collateral Assignment 1-12095
by Jazz Casino Company L.L.C., in favor Exhibit 10.28 to Pre-Effective Amendment
of The Bank of New York, as Collateral No. 2 to JCC Holding Company's
Agent, for the present and future holders Registration Statement on Form 10
of the Secured Indebtedness, dated
October 29, 1998, effective as of October
30, 1998
10.29 Act of Mortgage and Collateral Assignment 1-12095
by CP Development, L.L.C., in favor of Exhibit 10.29 to Pre-Effective Amendment
The Bank of New York, as Collateral No. 2 to JCC Holding Company's
Agent, for the present and future holders Registration Statement on Form 10
of the Secured Obligations, dated October
29, 1998, effective as of October 30,
1998
10.30 Act of Mortgage and Collateral Assignment 1-12095
by FP Development, L.L.C., in favor of Exhibit 10.30 to Pre-Effective Amendment
The Bank of New York, as Collateral No. 2 to JCC Holding Company's
Agent, for the present and future holders Registration Statement on Form 10
of the Secured Obligations, dated October
29, 1998, effective as of October 30,
1998
10.31 Act of Mortgage and Collateral Assignment 1-12095
by JCC Development Company, L.L.C., in Exhibit 10.31 to Pre-Effective Amendment
favor of The Bank of New York, as No. 2 to JCC Holding Company's
Collateral Agent, for the present and Registration Statement on Form 10
future holders of the Secured
Obligations, dated October 29, 1998,
effective as of October 30, 1998
10.32 Credit Enhancement Fee Agreement (Bank 1-12095
Credit Agreement) by and among Bankers Exhibit 10.32 to Pre-Effective Amendment
Trust Company, as Administrative Agent No. 2 to JCC Holding Company's
for Morgan Stanley Prime Income Trust and Registration Statement on Form 10
Van Kampen American Capital Prime Rate
Income Trust, Harrah's Operating Company,
Inc. and Harrah's Entertainment, Inc.,
dated October 29, 1998
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.33 Security Agreement, dated as of October 1-12095
29, 1998, among JCC Holding Company, Jazz Exhibit 10.33 to Pre-Effective Amendment
Casino Company, L.L.C., CP Development, No. 2 to JCC Holding Company's
L.L.C., FP Development, L.L.C., and JCC Registration Statement on Form 10
Development Company., L.L.C. (each, an
"Assignor" and, together with any other
entity that becomes a party, the
"Assignors"), The Bank of New York, as
Collateral Agent for the benefit of
Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc. and the Secured
Creditors.
10.34 Pledge Agreement, dated as of October 29, 1-12095
1998, among JCC Holding Company, Jazz Exhibit 10.34 to Pre-Effective Amendment
Casino Company, L.L.C., CP Development, No. 2 to JCC Holding Company's
L.L.C., FP Development, L.L.C., and JCC Registration Statement on Form 10
Development Company., L.L.C. (each a
"Pledgor" and collectively, the
"Pledgors"), The Bank of New York
Harrah's Entertainment, Inc., Harrah's
Operating Company, Inc. and the Secured
Creditors.
10.35 Subsidiaries Guaranty, dated as of 1-12095
October 29, 1998, among CP Development, Exhibit 10.35 to Pre-Effective Amendment
L.L.C., FP Development, L.L.C. and JCC No. 2 to JCC Holding Company's
Development Company, L.L.C. (each a Registration Statement on Form 10
"Guarantor" and, together with any other
entity that becomes a party, the
"Guarantors"), and Bankers Trust Company,
as Administrative Agent, for the benefit
of the Creditors.
10.36 Assignment of Contracts and Ancillary 1-12095
Rights, dated as of October 30, 1998, Exhibit 10.36 to Pre-Effective Amendment
among Jazz Casino Company, L.L.C., No. 2 to JCC Holding Company's
Harrah's Operating Company, Inc. and Registration Statement on Form 10
Harrah's Entertainment, Inc.
10.37 Amended and Restated Open Access Plans of 1-12095
Jazz Casino Company, L.L.C., Submitted to Exhibit 10.37 to Pre-Effective Amendment
the Council of the City of New Orleans on No. 2 to JCC Holding Company's
October 15, 1998. Registration Statement on Form 10
10.38 Open Access Program 1-12095
Exhibit 10.38 to Pre-Effective Amendment
No. 2 to JCC Holding Company's
Registration Statement on Form 10
10.39 1999 Non-Employee Director Stock Option 1-12095
Plan Exhibit 10.20 to JCC Holding Company's
Annual Report on Form 10-K for the Year
Ended December 31, 1998
</TABLE>
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
10.40 Employment Agreement, dated as of May 6, Exhibit 10.40 to JCC Holding Company's
1999, by and between JCC Holding Company Quarterly Report on Form 10-Q for the
and Frederick W. Burford. Quarter Ended June 30, 1999.
10.41 Employment Agreement, dated as of August Exhibit 10.41 to JCC Holding Company's
25, 1999, by and between JCC Holding Quarterly Report on Form 10-Q for the
Company and L. Camille Fowler. Quarter Ended September 30, 1999.
+10.42 Letter dated February 29, 2000 from
Harrah's Entertainment, Inc. agreeing to
re-post Minimum Payment Guaranty.
+10.43 Letter dated February 29, 2000 from
Harrah's Entertainment, Inc. agreeing to
make daily payments to the state of
Louisiana under the Amended and
Renegotiated Casino Operating Contract.
+10.44 First Amendment to Amended and
Renegotiated Casino Operating Contract,
dated October 19, 1999, among the state
of Louisiana, by and through the
Louisiana Gaming Control Board, and Jazz
Casino Company, L.L.C., agreed and
consented to by Harrah's Entertainment,
Inc. and Harrah's Operating Company, Inc.
+10.45 Limited Forbearance Agreement, dated
February 29, 2000, by and among Harrah's
New Orleans Management Company, Harrah's
Operating Company, Inc., and Jazz Casino
Company, L.L.C.
+10.46 Promissory Note, dated October 26, 1999
from JCC Development Company, L.L.C. to
Harrah's Operating Company, Inc.
+10.47 Master Lease Agreement, dated October 28,
1999 by and among Harrah's Operating
Company, Inc. and Jazz Casino Company,
L.L.C.
+10.48 Used Slot Machine Purchase Agreement,
dated October 28, 1999 by and between
Harrah's Operating Company, Inc., and
Jazz Casino Company, L.L.C.
+10.49 Agreement effective as of January 1, 1999
by and between Jazz Casino Company,
L.L.C. and Thomas M. Morgan.
+10.50 Executive Leasing Agreement, effective as
of January 1, 1999 by and between
Harrah's Operating Company, Inc. and Jazz
Casino Company, L.L.C.
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION SEC DOCUMENT REFERENCE
- ------- ----------- ----------------------
<C> <S> <C>
+10.51 Purchase and Sale Agreement, dated
February 14, 2000 by and between JCC
Fulton Development, L.L.C. and WI
Acquisition Corporation.
+10.52 Administrative Services Agreement between
Jazz Casino Company, L.L.C. and Harrah's
Operating Company, Inc., dated October
30, 1998.
+21.01 List of Subsidiaries of JCC Holding
Company
+23.01 Consent of Arthur Andersen LLP,
Independent Public Accountants, dated
March 29, 1999.
+23.02 Consent of Deloitte & Touche LLP,
Independent Public Accountants, dated
March 29, 2000.
+27.01 Financial Data Schedule
99.01 Opinion of New Orleans City Attorney 33-73370
regarding Amusement Tax Exhibit 99.02 to Amendment No. 4 to
Harrah's Jazz Company's and Harrah's Jazz
Finance Corp.'s Registration Statement on
Form S-1
</TABLE>
- ---------------
+ Filed herewith.
<PAGE> 1
EXHIBIT 4.11
WAIVER TO CREDIT AGREEMENT
WAIVER TO CREDIT AGREEMENT, dated as of June 4, 1999 (this "Waiver"),
among JCC HOLDING COMPANY ("Holdings"), JAZZ CASINO COMPANY, L.L.C. (the
"Borrower"), various lending institutions party to the Credit Agreement referred
to below (the "Banks") and BANKERS TRUST COMPANY, as Administrative Agent (the
"Agent"). All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided such terms in the Credit Agreement
referred to below.
W I T N E S S E T H
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to
a Credit Agreement, dated as of October 29, 1998 (the "Credit Agreement");
WHEREAS, Holdings and the Borrower have requested that the Banks enter
into this Waiver, and the Banks have agreed, subject to the terms and conditions
set forth herein, to enter into this Waiver as herein provided;
NOW, THEREFORE, it is agreed:
1. The Banks hereby extend the time for payment of Commitment
Commission accrued pursuant to Section 3.01 (a) and (b) of the Credit Agreement
which was due and payable on the Quarterly Payment Dates which occurred on
December 31, 1998 and March 31, 1999, until the Quarterly Payment Date occurring
on June 30, 1999. The extension granted above shall not effect the accrual or
payment of Commitment Commission otherwise becoming due and payable on June 30,
1999 and thereafter.
2. In addition, the Banks hereby waive any Default or Event of Default
which may have existed (including, without limitation, any Default or Event of
Default arising under Section 8.01(h) or in connection with any Notice of
Borrowing submitted to the Administrative Agent) solely as a result of the
Borrower's failure to pay the Commitment Commission referenced in Section I
above which became due and owing on December 31, 1998 and March 31, 1999, but
not any Default or Event of Default which may exist as a result of the
Borrower's failure to pay said Commitment Commission on June 30, 1999 or any
Commitment Commission accruing after March 31, 1999 on the applicable Quarterly
Payment Date in accordance with the Credit Agreement.
3. By executing a counterpart hereof, each Guarantor acknowledges and
agrees to the provisions of this Waiver and further acknowledges and agrees that
all extensions of credit pursuant to the Credit Agreement (after giving effect
to this Waiver) shall continue to be entitled to the benefits of the Guarantees,
notwithstanding any modifications effected pursuant to this Waiver. Furthermore,
the Credit Parties acknowledge and agree that all extensions of credit pursuant
to the Credit Agreement (after giving effect to this Waiver) shall continue to
be entitled to the benefits of the Security Documents in accordance with the
terms thereof (notwithstanding any changes effected pursuant to this Waiver). By
executing and delivering a counterpart hereof, HET acknowledges and agrees that
its prior written consent to the Waiver has been obtained in accordance with the
requirements of Section 16.12 of the Credit Agreement
1
<PAGE> 2
4. In order to induce the Banks to enter into this Waiver and grant the
extension and waivers contemplated hereby, and in exchange for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, each
of Holdings and the Borrower hereby (x) represent and warrant that no Default or
Event of Default exists on the Waiver Effective Date after giving effect to this
Waiver and (y) makes each of the representations, warranties and agreements made
by each such party contained in the Credit Agreement and the other Credit
Documents on and as of the Waiver Effective Date, after giving effect to this
Waiver (it being understood that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects as of such date).
5. This Waiver is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement (or of any provision beyond the specific Waivers granted hereby) or
any other Credit Document,
6. This Waiver may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which together
shall constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Borrower and the Agent.
7. THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
8. This Waiver shall become effective on the first date (the "Waiver
Effective Date") on which (i) each of Holdings, the Borrower, HET, HOC, JCC
Development, CPD, FPD, the Required Banks and each Bank which is, on the Waiver
Effective Date, otherwise entitled to receive any Commitment Commission the
payment date of which is being deferred pursuant to this Waiver shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered (including by way of facsimile) the same to the Agent at its Notice
office.
9. At all times on and after the Waiver Effective Date, all references
in the Credit Agreement and each of the Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement after giving effect to
this Waiver.
2
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Waiver to be duly executed and delivered as of the date first written
above.
JCC HOLDING COMPANY
By: /s/ Frederick W. Burford
---------------------------------------------
Name: Frederick W. Burford
Title: President and Chief Executive Officer
JAZZ CASINO COMPANY, L.L.C.
By: /s/ Frederick W. Burford
---------------------------------------------
Name: Frederick W. Burford
Title: President
HARRAH'S ENTERTAINMENT, INC.
By: /s/ Stephen Brammell
---------------------------------------------
Name:
Title:
HARRAH'S OPERATING COMPANY, INC.
By: /s/ Stephen Brammell
---------------------------------------------
Name:
Title:
JCC DEVELOPMENT COMPANY L.L.C.
By: /s/ Frederick W. Burford
---------------------------------------------
Name: Frederick W. Burford
Title: President
<PAGE> 4
CP DEVELOPMENT, L.L.C.
By: /s/ Frederick W. Burford
---------------------------------------------
Name: Frederick W. Burford
Title:
FP DEVELOPMENT, L.L.C.
By: /s/ Frederick W. Burford
---------------------------------------------
Name: Frederick W. Burford
Title:
BANKERS TRUST COMPANY, Individually and as
Administrative Agent
By: /s/ Mary Kay Coyle
---------------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.12
JAZZ CASINO COMPANY, L.L.C.
November 1, 1999
Bankers Company, as Agent
Each of the Banks party to the
Credit Agreement referred to below
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of October 29, 1998,
(the "Credit Agreement") by and among JCC Holding Company, a Delaware
corporation, as a Guarantor ("JCC Holding"), Jazz Casino Company, L.L.C., a
Louisiana limited liability company (the "Borrower"), each of the Banks party
thereto and Bankers Trust Company, as Administrative Agent. Capitalized terms
used herein and not otherwise defined herein have the meanings given them in the
Credit Agreement.
The purpose of this letter is to request (1) waivers for certain
technical violations (described below) of the Credit Agreement, (2) prior
approval for a sale of 1,085 slot machines to HET coupled with a leaseback of
those slot machines (collectively, the "Transaction") in order to obtain the
funds necessary to load the Casino's slot machines with coin, (3) waiver of
certain conditions related to the opening of the Casino, and (4) prior approval
for a loan by HET to JCC Development in the amount of $2 million; in each case
subject to the conditions set forth herein.
I. TECHNICAL VIOLATIONS
The Borrower has made certain expenditures on behalf of JCC Development,
FPD and CPD, subsidiaries of JCC Holding. These expenditures were made in the
process of producing the master plan of the overall development of the Casino
(including the Second Floor, the CPD Mortgaged Property and the FPD Mortgaged
Property) and represent allocations of expenses incurred on a consolidated basis
to the appropriate consolidated subsidiaries. These expenditures aggregated
approximately $1.5 million through
<PAGE> 2
September 30, 1999, and the Borrower anticipates that up to $2 million in the
aggregate of such expenditures may be required prior to obtaining alternative
financing for the projects involving those subsidiaries. Since these
expenditures may be viewed as advances to the subsidiaries or as investments in
the subsidiaries, the Borrower, JCC Holding, JCC Development, CPD and FPD may
have violated Sections 9.04(x) and 9.05(viii). Moreover, these expenditures may
have been paid with moneys in the Project Account, in which case there would be
a violation of Section 8.17. To the extent such expenditures continue, they will
violate such section.
The Borrower has either failed to deliver or failed to deliver on a
timely basis reports required under Section 8.01(g) for the fiscal quarters of
the Borrower ended March 31 and June 30, 1999.
The Borrower hereby requests that the Required Banks waive any Default
or Event of Default which may exist as a result of, and to the extent of, the
above described violations, and further request that, notwithstanding the
limitations stated in Sections 9.04(x) and 9.05(viii) of the Credit Agreement,
the Banks consent to the making of loans and advances to and/or investments in
its Permitted Subsidiaries in an aggregate amount not to exceed at any time
outstanding (without regard to any write-down or write-offs thereof) $2,000,000;
provided that, promptly upon receipt by JCC Development of the proceeds of the
Loan (as defined in Section IV hereof), $1,050,465.47 of the proceeds thereof
shall be used by JCC Development to repay the advances made by the Borrower for
JCC Development's account and, thereafter, the express limitations of Sections
9.04(x) and 9.05(viii) shall govern the making and maintenance of all such
loans, advances and/or investments.
II. SALE/LEASEBACK OF SLOT MACHINES
Although the Borrower had initially intended to use tokens in its slot
machines, it subsequently decided that its patrons would prefer machines loaded
with actual coin. The amount required to load the machines with coin, however,
is approximately $5,000,000. In order to raise that sum, the Borrower decided to
enter into a sale/leaseback transaction (the "Transaction") with HET pursuant to
which, HET will buy the slot machines, subject to the Lien of the Collateral
Agent pursuant to the Security Agreement (and HET and the Borrower hereby agrees
to execute and deliver to the Collateral Agent promptly (and in any event within
60 days of the date hereof) such documentation (including without limitation, a
security agreement and Form UCC-1 and UCC-3 Financing Statements) as the
Collateral Agent may deem necessary in its reasonable opinion to continue such
security interest in favor of the Collateral Agent after giving effect to the
Transaction), for an aggregate purchase price of $6,000,000, an amount which
exceeds their fair market value. The Borrower will then lease the slot machines
back from HET pursuant to an operating lease, a copy of which is attached. The
Borrower has engaged Jefferies & Company, Inc. to render its opinion on the
fairness of the Transaction from a financial
- 2 -
<PAGE> 3
point of view. The Borrower will use approximately $5,000,000 of the proceeds of
the sale to load its slot machines with coin (both those subject to the
Transaction and its other slot machines) and the balance will be applied to the
House Bank.
In order to accomplish the Transaction, the Borrower requests that the
Required Banks waive the following:
(a) With respect to the sale of the slot machines by the Borrower to
HET, waive the prohibition contained in Section 9.02; provided that HET shall
purchase such slot machines subject to the Lien of the Collateral Agent thereon
and HET shall comply with the provisions of the first parenthetical contained in
the first paragraph of this Section II, and the continuance of the waiver
granted hereby shall be subject to the continued effectiveness of such Liens of
the Collateral Agent on the slot machines subject to the Transaction.
(b) With respect to the Borrower's use of the proceeds received by it
in connection with the Transaction, waive the requirement contained in Section
4.02(f) that such proceeds be applied as a mandatory prepayment of outstanding
Term Loans to the extent such proceeds are otherwise applied in accordance with
the final sentence of the first paragraph of this Section II; and
(c) With respect to the Transaction, waive the prohibition contained in
Section 9.06 relating to the transactions with Affiliates; provided that such
waiver shall be conditioned upon receipt by the Borrower (a copy of which shall
be delivered to the Administrative Agent in case of clause (ii) below) of (i)
cash consideration from HET in an amount equal to the greater of (x) the fair
market value of the slot machines subject to the Transaction (as determined by
management of the Borrower in good faith) and (y) $6,000,000 and (ii) a fairness
opinion to be issued by Jefferies and Company, Inc. concluding that such
Transaction is fair to the Borrower from a financial point of view.
III. CONDITIONS RELATING TO THE OPENING OF THE CASINO
The definition of the Termination of Construction Date contains several
requirements which the Borrower will be unable to fulfill. First, it requires
that Casino have "at last 2,800 new slot machines" of which "no more than 1,100
of such slot machines may be leased pursuant to arm's-length operating leases
. . .with HET." The definition also requires that except for the machines
permitted to be leased, all the machines are to be "owned by the Borrower and
not subject to financing." The Casino will contain more than the requisite
number of slot machines; however, only 1,065 will be new slot machines. The
balance will be reconditioned machines. Also, 1,878 of the slot machines will be
leased from HET pursuant to operating leases; 104 of the machines will be
so-called "Wide Area Linked Progressives" owned by IGT and 122 machines will be
installed on a trial basis, subject to a purchase order with their owner.
- 3 -
<PAGE> 4
The Borrower requests that the Required Banks waive the following: any
Default or Event of Default which may exist pursuant to the conditions described
in the first paragraph of this Section III to the extent of the description
provided therein; provided that the lease of the slot machines pursuant to the
Transaction described in Section II hereof shall comply with the terms of the
waiver provided with respect to such Transaction pursuant to clause (a) of
Section II hereof; and
IV. LOAN TO JCC DEVELOPMENT
The Borrower, JCC Holding and JCC Development all want JCC Development to
commence construction of certain improvements for the Second Floor of the Casino
prior to the Opening Date in order to minimize or eliminate the disruption on
the Casino Floor which will be occasioned by the development of the Second
Floor. At the time of this letter, financing for the full development of the
Second Floor has not been arranged; however, HET has agreed to advance $2
million to JCC Development (the "Loan") for the purpose of financing that part
of the development of the Second Floor which would cause the most disruption on
the Casino Floor. Proceeds of the Loan would also be used to reimburse the
Borrower for funds previously advanced to pay for activities involved in the
master planning process.
The proceeds of the Loan will be drawn by JCC Development as needed,
including, without limitation, as needed to meet the obligations of JCC
Development to repay any loans, advances and/or investments made by the Borrower
and its Subsidiaries to the extent required by the final paragraph of Section I
hereof. The Loan will bear interest at 9% per annum and will be capitalized
quarterly. Because JCC Development currently has no other funds, and because it
will not have any other funds until a subsequent loan for the full development
of the Second Floor is funded, the principal of the Loan will not be payable
except from the proceeds of the funding of such subsequent loan. The Loan will
be unguaranteed and unsecured.
In order to accomplish the Loan, JCC Development requests that the
Required Banks waive the following:
(a) With respect to the incurrence of Indebtedness represented by the
Loan to the extent described above in the first and second paragraphs of this
Section IV and the capitalization of accrued interest thereon, waive the
prohibition contained in Section 9.04; provided that (i) JCC Development and the
Borrower acknowledge that any payment of cash or other interest with respect to
the Loan shall constitute "Restricted Payments" under Section 9.03 of the Credit
Agreement and (ii) notwithstanding the provisions of Section 9.03 of the Credit
Agreement, the Banks hereby consent to the capitalization of interest on such
Loan as described in the second paragraph of this Section IV. Further,
notwithstanding the prohibitions of Section 9.03 of the Credit Agreement, the
Banks
- 4 -
<PAGE> 5
consent to the repayment of the Loan (including accrued and capitalized interest
thereon) with the proceeds of another loan to JCC Development incurred to fund
the full development of the Second Floor, provided that such loan is incurred in
compliance with the terms of the Credit Agreement.
(b) With respect to the Loan and the capitalization of interest thereon
to the extent described above in the first and second paragraphs of this Section
IV, waive the prohibition contained in Section 9.06 relating to transactions
with Affiliates.
V. COMPLETION DATE
The parties hereto hereby agree that the definition of "Completion
Date" appearing in Section 11 of the Credit Agreement is hereby amended to read
in its entirety as follows:
"Completion Date" shall mean November 2, 1999.
VI. CLEAN DOWN REQUIREMENT
The parties hereto hereby agree that the proviso appearing in Section
4.02(l) of the Credit Agreement is hereby amended to read in its entirety as
follows:
"provided that from and including October 28, 1999 to and including the
Termination of Construction Date, (x) the aggregate amount of Revolving
Loans outstanding shall not exceed $10 million and (y) the Borrower
shall have caused $10 million to be deposited on October 28, 1999 to
fund the Minimum Balance as defined in the Management Agreement, as in
effect on the date hereof."
VII. REPRESENTATIONS AND WARRANTIES
To induce the Required Banks to agree as requested above, the Borrower
makes the following representations and warranties subject to the technical
violations described above:
(i) immediately before and after the consummation of the
Transaction, no Event of Default has occurred and is
continuing:
(ii) the representations and warranties of Borrower contained in
the Credit Documents are true in all material respects except
to the extent (x) such representations or warranties
specifically relate to an earlier date, in which case such
representations and warranties were true and correct as of
such date or (y) such representations or warranties become
untrue by reason of events or conditions otherwise permitted
thereunder.
- 5 -
<PAGE> 6
VIII. CONDITIONS TO THE EFFECTIVENESS OF THIS WAIVER
As conditions to the effectiveness of this waiver (a) each of HET, HOC,
Holdings, the Borrower, JCC Development and the Required Banks shall have
executed a copy of this waiver and shall have delivered (including by way of
facsimile transmission) the same to the Administrative Agent at the Notice
Office, and (b) the Borrower shall have delivered to the Administrative Agent
the following:
(1) copies; of the executed agreements which embody the
Transaction;
(2) a copy of the draft fairness opinion of Jefferies and Company
regarding the slot leases;
(3) confirmations of Subsidiaries Guaranty by each of the
Subsidiary Guarantors and of the JCC Holding Guaranty by JCC
Holding; and
(4) such other documents and instruments as the Agent may
reasonably request.
IX. MISCELLANEOUS
The foregoing waivers shall apply solely to any violations of the
provisions expressly referenced above under the Credit Agreement that otherwise
would result from consummation of the Transaction. This waiver letter from the
undersigned banks relates to the items specifically set forth herein and shall
not be deemed a waiver, consent or approval of any other terms or provisions of
the Credit Agreement or the Credit Documents. The Administrative Agent and Banks
expressly reserve any and all rights they may have under the Credit Agreement or
any other Credit Documents arising out of or in connection with any Default or
Event of Default thereunder and not specifically waived herein. The Borrower
confirms that this letter agreement is a Credit Document.
This letter agreement may be executed in counterparts and shall be
governed by and construed in accordance with the laws of the State of New York.
Very truly yours,
JCC HOLDING COMPANY,
as Guarantor
By: /s/ Frederick W. Burford
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
- 6 -
<PAGE> 7
JCC DEVELOPMENT COMPANY, L.L.C.
as Guarantor
By: /s/ Frederick W. Burford
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
JAZZ CASINO COMPANY, L.L.C.
as Borrower
By: /s/ Frederick W. Burford
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
- 7 -
<PAGE> 8
Agreed and accepted as of the date
first above written.
BANKERS TRUST COMPANY, individually and as the Administrative Agent
By: /s/ Mary Kay Coyle
-------------------------------------
Name: Mary Kay Coyle
--------------------------------
Title: Managing Director
-------------------------------
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
BY:
--------------------------------------
Title:
--------------------------------
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Douglas J. Smith
--------------------------------------
Name: Douglas J. Smith
---------------------------------
Title: Vice President
--------------------------------
Acknowledged and Agreed to:
HARRAH'S ENTERTAINMENT, INC.
By: /s/ Stephen Brammell
-----------------------------------------
Name: Stephen Brammell
-----------------------------------
Title:
----------------------------------
HARRAH'S OPERATING COMPANY, INC.
By: /s/ Stephen Brammell
----------------------------------------
Name: Stephen Brammell
----------------------------------
Title:
----------------------------------
- 8 -
<PAGE> 1
EXHIBIT 4.13
THIRD WAIVER AND AGREEMENT TO CREDIT AGREEMENT
THIRD WAIVER AND AGREEMENT TO CREDIT AGREEMENT, dated as of February
29, 2000 (this "Waiver"), among JCC HOLDING COMPANY ("Holding"), JAZZ CASINO
COMPANY, L.L.C. (the "Borrower"), various lending institutions party to the
Credit Agreement referred to below (the "Banks") and BANKERS TRUST COMPANY, as
Administrative Agent (the "Agent"). All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings provided such terms
in the Credit Agreement referred to below.
W I T N E S S E T H
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to
a Credit Agreement, dated as of October 29, 1998 (the "Credit Agreement");
WHEREAS, pursuant to the Minimum Payment Guaranty, HET and HOC have
agreed to guaranty certain amounts required to be paid by the Borrower pursuant
to the Casino Operating Contract, and
WHEREAS, Holdings and the Borrower have requested that the Banks grant
the waivers described herein, and the Banks have agreed, subject to the terms
and conditions set forth herein, to enter into this Waiver as herein provided;
NOW, THEREFORE, it is agreed
1. The Borrower shall obtain, on or before the Third Waiver Effective
Date (as defined below), a fully executed agreement from HET and HOC (and shall
have delivered a copy of same to the Agent) in the form attached hereto as
Exhibit A (the "Extension and Forbearance Agreement"), pursuant to which HET and
HOC shall agree (i) subject to the non-occurrence of certain "non-renewal
events" specified in the Extension and Forbearance Agreement, to the posting of
a new Minimum Payment Guaranty for the one year period beginning April 1, 2000
and ending March 31, 2001, (ii) to forbear against collection (or the giving of
any notice in respect of payment, non-payment or collection), at any time prior
to March 31, 2001, of (x) the principal amount of all reimbursement obligations
owing by the Borrower under the Minimum Payment Guaranty Documents not exceeding
$40,000,000 in the aggregate at any time outstanding and (y) accrued and unpaid
interest with respect to principal amounts subject to the forbearance specified
in clause (ii)(x) above, and (iii) that the rate of interest accruing on the
outstanding principal amount of reimbursement obligations owing from the
Borrower to HET and/or HOC pursuant to the Minimum Payment Guaranty Documents
during such one year renewal period shall not, to the extent such principal
obligations do not exceed $40,000,000 in aggregate outstanding principal amount,
exceed the non-default rate of interest applicable to like obligations of the
Borrower under the Minimum Payment Guaranty Documents as in effect on the Third
Waiver Effective Date.
<PAGE> 2
2. The Banks hereby waive, solely for the period from and including the
date of this Waiver to and including the date on which any payment is due and
payable by the Borrower (or any of its assigns) to HET and/or HOC with respect
to obligations of the type described below in clauses (i) and (iii) of this
Section 2 (after giving effect to any extension of the forbearance period
granted to the Borrower by HET and HOC pursuant to the Extension and Forbearance
Agreement so long as such extension does not impose any material additional
conditions upon Holdings or any of its Subsidiaries), compliance by the Borrower
with the $5,000,000 aggregate limitation set forth in Section 9.04(xvi) of the
Credit Agreement; provided that such waiver is subject to compliance by the
Borrower with the following conditions: (i) indebtedness of the Borrower
representing the principal balance of reimbursement obligations under the
Minimum Payment Guaranty Documents (excluding contingent reimbursement
obligations for payments which have not been made thereunder) shall at no time
exceed $40,000,000, (ii) the principal balance of any such reimbursement
obligations of the Borrower shall in no event be paid (or required to be paid)
by the Borrower prior to March 31, 2001, (iii) interest on such reimbursement
obligations may accrue in accordance with clause (iv) below, although no such
interest shall be payable prior to repayment in full of the aggregate
outstanding principal balance of all such obligations and (iv) the rate of
interest charged with respect to such obligations, at all times prior to the
occurrence of a payment default with respect thereto occurring on or after March
31, 2001, shall not exceed the non-default rate of interest applicable to
obligations pursuant to the Minimum Payment Guaranty Documents as in effect on
the Third Waiver Effective Date. Any failure of the Borrower to comply with the
terms and conditions of the waiver set forth above in this Section 2 shall be
deemed to be a default pursuant to Section 9 of the Credit Agreement, including,
without limitation, for purposes of Section 10.03 of the Credit Agreement. In
addition, the Banks hereby consent to the execution and delivery by the Borrower
of the Limited Forbearance Agreement in the form attached hereto as Exhibit B
(the "Forbearance Agreement") and waive any Default or Event of Default which
may exist solely as a result of the forbearance on the part of HOC or Harrah's
New Orleans Management Company effected thereby or the decision of the Borrower
not to pay any amounts outstanding under the Equipment Lease (as defined in the
Forbearance Agreement), the Casino Management Agreement (as defined in the
Forbearance Agreement) and/or the Administrative Services Agreement (as defined
in the Forbearance Agreement) prior to the date upon which such amounts are due
and payable (after giving effect to the Forbearance Agreement).
3. In order to induce the Banks to enter into this Waiver and grant the
extension and waivers contemplated hereby, and in exchange for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, each
of Holdings and the Borrower hereby (i) represent and warrant that no Default or
Event of Default exists and is continuing on the Third Waiver Effective Date
after giving effect to this Waiver, (ii) makes each of the representations,
warranties and agreements made by each such party contained in the Credit
Agreement and the other Credit Documents on and as of the Third Waiver Effective
Date, after giving effect to this Waiver (it being understood that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects as of such
-2-
<PAGE> 3
date) and (iii) represent and warrant that neither the execution and delivery or
performance of this Waiver requires any consent of any Person (except as have
been previously obtained) or will give rise to any default or event of default
with respect to any material agreement or contract of Holdings or any of its
Subsidiaries.
4. This Waiver is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement (or of any provision beyond the specific Waivers granted hereby) or
any other Credit Document.
5. This Waiver may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which together
shall constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Borrower and the Agent.
6. THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
7. This Waiver shall become effective on the, first date (the "Third
Waiver Effective Date") on which (i) each of Holdings, the Borrower, HET, HOC
and the Required Banks shall have signed a copy hereof (whether the same or
different copies) and shall have delivered (including by way of facsimile) the
same to the Agent at its Notice Office and (ii) the Agent shall have received a
fully executed copy of the Extension and Forbearance Agreement in the form
attached hereto as Exhibit A.
8. At all times on and after the Third Waiver Effective Date, all
references in the Credit Agreement and each of the Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement after
giving effect to this Waiver.
* * *
-3-
<PAGE> 4
IN WITNESS WHEREOF, each or the parties hereto has caused a counterpart
of this Waiver to be duly executed and delivered as of the date first written
above.
JCC HOLDING COMPANY
By: /s/ Frederick W. Burford
-------------------------------------------
Name:
Title:
JAZZ CASINO COMPANY, L.L.C.
By: /s/ Frederick W. Burford
-------------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, Individually and as
Administrative Agent
By: /s/ Mary Kay Coyle
-------------------------------------------
Name:
Title:
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By:
-------------------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Darvin D. Pierce
-------------------------------------------
Name: Darvin D. Pierce
Title: Vice President
-4-
<PAGE> 5
Acknowledged and Consented to:
HARRAH'S ENTERTAINMENT, INC.
By: /s/ Charles L. Atwood
---------------------------------------------
Name: Charles L. Atwood
Title: Vice President and Treasurer
HARRAH'S OPERATING COMPANY, INC.
By: /s/ Charles L. Atwood
---------------------------------------------
Name: Charles L. Atwood
Title: Vice President and Treasurer
-5-
<PAGE> 1
EXHIBIT 10.42
Harrah's Entertainment Letterhead
February 29, 2000
Frederick W. Burford
JCC Holding Company
512 South Peters
New Orleans, Louisiana 70130
Re: Jazz Casino Company, LLC/Minimum Payment Guaranty
Dear Fred:
In response to your letter of February 25, 2000, please be advised that
HET and HOCI will on March 31, 2000 provide the Minimum Payment Guaranty for the
fiscal year commencing on April 1, 2000 so long as none of the non-renewal
events set forth in paragraph 1(b) (i) through (iii) and (vi) through (x) of the
HET/JCC Agreement dated as of October 30, 1998 have occurred.
As set forth in the HET/JCC Agreement,
"(b) Non-Renewal. The Guaranty shall automatically expire and not renew
(subject to Section 1(d) hereof) and shall not be drawn upon for any of the
Fiscal Years beginning April 1, 2000, 2001, 2002, or 2003 if any of the
following events have occurred and shall be continuing or uncured as of the day
prior to the first day of any such Fiscal Year:
(i) there has been a JCC Bankruptcy Event (as hereinafter
defined) or a cessation of Casino operations;
(ii) there are any then past due and unpaid Guaranty Fees (as
hereinafter defined), other than fees deferred in accordance
with the terms of this Agreement;
(iii) there has been a Minimum Payment Default;
. . .
(vi) HET, Harrah's New Orleans Management Company ("HNOMC") or
any of their respective affiliates is found unsuitable to
own, operate, act as a lender to, or otherwise in respect of
the Casino by the State;
<PAGE> 2
(vii) HNOMC has been removed as manager of the Casino;
(viii) The Casino Operating Contract has been terminated;
(ix) JCC has breached any of its covenants under Section 5
hereof; or
(x) An Excusable Temporary Cessation of Operations has occurred
and is continuing."
Further, HET and HOCI will not claim that a non-renewal event
(including an event under Section 1(b)(iii) or (viii) of the HET/JCC Agreement)
has occurred by reason of HET or HOCI making or not making payments under the
current Minimum Payment Guaranty or as a result of HNOMC being removed as
manager of the Casino as a result of a default by HNOMC under the Management
Agreement or as result of HNOMC's resignation as manager. Please note, however,
that should an LGCB demand or drawing under the current Minimum Payment Guaranty
cause a non-renewal event under such Section 1(b) of the HET/JCC Agreement
(excluding a non-renewal event under Section 1(b)(iii) or (viii) of the HET/JCC
Agreement as a result of HET or HOCI not making payment under the current
Minimum Payment Guaranty), HET and HOCI reserve their right not to renew in such
a situation.
Please feel free to call me to discuss any of the foregoing.
Very truly yours,
/s/ Charles L. Atwood
<PAGE> 1
EXHIBIT 10.43
Harrah's Entertainment Letterhead
February 29, 2000
Frederick W. Burford
JCC Holding Company
512 South Peters
New Orleans, Louisiana 70130
Re: Minimum Payment Guaranty
Dear Fred:
In connection with the matters described in your letters of
February 21 and 22, 2000, HET and HOCI are willing to make Daily Payments under
the Minimum Payment Guaranty Documents to the State up to a total amount of $40
million on the terms and conditions set forth in this letter as agreed to by JCC
Holding Company and Jazz Casino Company, LLC (collectively, "JCC") below.
HET and HOCI are willing to make Daily Payments up to a total
of $40 million without demanding repayment (or giving any notice in respect of
payment, nonpayment or collection) thereof prior to March 31, 2001; provided
that should HET and HOCI be required to make or make Daily Payments to the State
in an amount that exceeds $40 million, then HET and HOCI reserve all of their
rights under the existing contractual agreements to demand prompt reimbursement
for all Daily Payments in excess of $40 million prior to March 31, 2001.
In addition HET and HOCI agree to defer until March 31, 2001
any interest payments owed on any Daily Payments made by the HET and HOCI up to
a total of $40 million in Daily Payments. However, should HET or HOCI be
required to make or make Daily Payments in excess of $40 million, then HET and
HOCI reserve all of their rights under the existing contractual agreements to
demand prompt repayment from JCC for all interest due on the Daily Payments in
excess of $40 million made by HET or HOCI in addition to the principal amounts
in excess of $40 million as mentioned above.
Interest on the demand loan arising upon payment of Daily
Payments by HET or HOCI up to $40,000,000 shall bear interest at the non-default
interest rate referenced in Section 3 of the HET/JCC Agreement. Interest on any
demand loans arising upon any payment of Daily Payments by HET or HOCI in excess
of $40,000,000 shall bear interest at the rate referenced in Section 3 of the
HET/JCC Agreement, including at a default rate if any such demand loan is not
timely paid.
<PAGE> 2
In connection with the foregoing, the undersigned hereby
agree, represent and warrant that:
1. They have obtained all necessary waivers, consents,
and approvals required to consummate the arrangements
described in this letter.
2. The entering into such arrangement will not create
any default or event of default under any material
agreements of HET and HOCI.
3. There are no other agreements or understandings by
HET, HOCI or their affiliates with respect to the
subject matter of this letter other than as set forth
herein or as contained in the existing documentation
relating to the New Orleans casino project.
4. HET and HOCI expressly reserve all of their rights
under the existing documentation with respect to the
New Orleans Casino project and nothing herein shall
be construed to modify or impair any of the rights or
obligations of any party thereto except as
specifically set forth in this letter.
Please feel free to call me to discuss any of the foregoing.
Very truly yours,
HARRAH'S ENTERTAINMENT, INC.
By: /s/ Charles L. Atwood
--------------------------------------------
Name: Charles L. Atwood
---------------------------------------
Title: Vice President and Treasurer
-------------------------------------
HARRAH'S OPERATING COMPANY, INC.
By:
--------------------------------------------
Name:
---------------------------------------
Title:
-------------------------------------
<PAGE> 3
Consent, Agreements and Representations and Warranties of JCC
The undersigned consent and agree to the foregoing letter and
represent and warrant that:
1. They have obtained approval of all Class A directors on JCC
Holding Company's Board of Directors and all waivers, consents or approvals
required to consummate the arrangement set forth in the foregoing letter.
2. JCC entering into this arrangement will not create a
default or event of default in any of JCC's material contracts and JCC is not
presently in default under any such contracts.
3. Subject to the terms of the agreement set forth in this
letter, JCC and their affiliates affirm all agreements with HET and HOCI and
their affiliates are in full force and effect and remain valid and binding
obligations enforceable in accordance with their terms.
4. There are no other agreements or understandings by JCC or
its affiliates with respect to the subject matter of this letter other than as
set forth herein or as contained in the existing documentation relating to the
New Orleans casino project.
5. JCC expressly reserves all rights under the existing
documentation with respect to the New Orleans casino project and nothing herein
shall be construed to modify or impair any of the rights or obligations of the
parties hereto except as specifically set forth in this letter.
JCC HOLDING COMPANY, a
Delaware corporation
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
JAZZ CASINO COMPANY, LLC, a
Louisiana limited liability company
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Dated as of February 29, 2000
<PAGE> 1
EXHIBIT 10.44
FIRST AMENDMENT TO AMENDED AND
RENEGOTIATED CASINO OPERATING CONTRACT
This amendment to the Amended and Renegotiated Casino Operating
Contract (the "First Amendment") is made and entered into effective as of the
19th day of October, 1999 among the State of Louisiana by and through the
Louisiana Gaming Control Board (the "Gaming Board") and Jazz Casino Company,
L.L.C., a Louisiana limited liability company ("JCC" or the "Casino Operator").
RECITALS
A. On October 30, 1998, the Gaming Board, JCC and Harrah's Jazz
Company, a Louisiana general partnership (which has since dissolved in
accordance with and as contemplated by the Joint Plan of Reorganization under
Chapter 11 of the United States Bankruptcy Code filed by Harrah's Jazz Company,
Harrah's Jazz Finance Corp. and Harrah's New Orleans Investment Company) entered
into the Amended and Renegotiated Casino Operating Contract (the "Amended COC").
Any capitalized terms utilized and not defined herein shall have the same
meaning as are ascribed to them in the Amended COC;
B. Effective as of July 9, 1999, the Louisiana Legislature during the
1999 Regular Session by Act No. 1221 enacted into law R.S. 27:271 which, among
other things, permits the Gaming Board, during a specified period of time, and
subject to an amendment to the Amended COC, to direct that all or portions of
the Daily Payments due under the Amended COC be paid by the Casino Operator to
the Parish of Orleans and the Compulsive and Problem Gaming Fund, with a
corresponding credit given to the Casino Operator for and toward satisfaction of
the Minimum Payment;
<PAGE> 2
C. The Gaming Board has requested and the Casino Operator has agreed to
amend the Amended COC to implement provisions of La. R.S. 27:271, authorizing
the Gaming Board to direct that portions of the Minimum Payment (and therefore
all or portions of certain Daily Payments) due under the Amended COC be paid by
the Casino Operator to the Parish of Orleans and the Compulsive and Problem
Gaming Fund (each such directed payment a "Directed Payment" and collectively
the "Directed Payments") from the date of this First Amendment through June 29,
2000, provided that, after June 29, 2000, the authorization related to such
Directed Payments shall be effective only in the event a future act(s) of the
legislature authorizes such Directed Payments to be made on or after June 30,
2000 ("Legislative Authorization"), and only for such period(s) of time
authorized by such Legislative Authorization.
D. The Casino Operator and the Gaming Board have determined that the
$3.5 million cost estimate derived in December of 1997, which estimate was used
in confecting the Bankruptcy Plan and post-Effective Date budgets submitted to
the Bankruptcy Court, is not sufficient to pay the costs associated with the
initial suitability and payment of attorney's fees and related costs incurred by
the State following the bankruptcy filing in November, 1995.
E. The parties have agreed that Section 6.1(b) of the Amended COC shall
be amended to require the Casino Operator to reimburse the Gaming Board a total
of $5.2 million, representing a fair estimate of the incurred and the projected
future costs for the initial suitability, litigation and associated fees and
expenses, and the initial administrative expenses of the State Police and
Attorney General's office. It is further acknowledged and agreed that of the
$5.2 million total "Initial Costs," $3.5 million has been paid and the
- 2 -
<PAGE> 3
remaining $1.7 million due from the Casino Operator is to be deducted from the
$4,812,447.00 credit due, from the Gaming Board to the Casino Operator as
provided in Section 6.3(a) of the Amended COC (prior to this First Amendment).
NOW, THEREFORE, in consideration of the foregoing the parties do hereby
agree as follows:
PARAGRAPH I.1 - AMENDMENTS
(a) Section 2.111 of the Amended COC is modified by
deleting same in its entirety and substituting the following in its
place and stead:
2.111 "LOUISIANA CASINO REVENUE ACCOUNT" means an
account established in the State Treasury into which
the Casino Operator shall deposit or cause to be
deposited all required sums (including the Daily
Payment and other components of the Louisiana Gross
Gaming Revenue Share Payments and Additional Charges)
which may become due and payable to the State by and
through the Gaming Board pursuant to the Casino
Operating Contract (subject to any Daily payments
made by the Casino Operator to certain specific
accounts at the direction of the Gaming Board
pursuant to Section 6.5[b]).
(b) Section 6.1(b) of the Amended COC is amended by
deleting same in its entirety and substituting the following in its
place and stead:
6.1(b) SUITABILITY AND OTHER ADVANCES. As
consideration for the actual and projected personnel
costs incurred by the Gaming Board, State Police and
Attorney General personnel related to initial
- 3 -
<PAGE> 4
suitability investigations and costs of opening the
Casino as well as the costs of litigation and
contract counsel from 1995 to the Casino Opening Date
(collectively the "Initial Costs"), it is
acknowledged and agreed that the Casino Operator has
paid to the Gaming Board Three Million, Five Hundred
Thousand and No/100 Dollars ($3,500,000.00). The
Initial Costs have been computed at a total of Five
Million, Four Hundred Ninety-Three Thousand, Six
Hundred Ten and No/100 Dollars ($5,493,610.00). In
addition to the Three Million, Five Hundred Thousand
and No/ 100 Dollars ($3,500,000.00) previously paid
by the Casino Operator as set forth above and
suitability fees of Two Hundred Ninety-Three
Thousand, Six Hundred Ten and No/100 Dollars
($293,610. 00) that have been and/or, are anticipated
to be received by the Gaming Board through the Casino
Opening Date, the parties agree that the Casino
Operator owes a final balance of One Million, Seven
Hundred Thousand and No/100 Dollars ($1,700,000.00)
in Initial Costs to be paid as set forth below. The
Casino Operator agrees that the Four Million, Eight
Hundred Twelve Thousand, Four Hundred Forty-Seven and
No/100 Dollars ($4,812,447.00) credit in Section
6.3(b) of the Casino Operating Contract owed by the
Gaming Board to the Casino Operator, shall be reduced
by One Million, Seven Hundred Thousand and No/100
Dollars ($1,700,000.00) such that the total net
credit under Section 6.3(b) of the Casino Operating
Contract shall be
- 4 -
<PAGE> 5
Three Million, One Hundred Twelve Thousand, Four
Hundred Seventy-Seven and No/100 Dollars
($3,112,477.00), which amount shall be the "Payment
Credit."
(c) Section 6.3(a) of the Amended COC is amended by deleting the
existing third to last sentence of Section 6.3(a), by adding language to the
existing second to last sentence of Section 6.3(a) and by adding anew sentence
immediately prior to the existing last sentence of Section 6.3(a), such that
Section 6.3(a) of the Amended COC is amended by deleting the same in its
entirety and substituting the following in its place and stead:
6.3(a). The parties intend that at all times during each
Fiscal Year, the Gaming Board shall be paid an amount not less
than the Daily Payment times the number of Days that have
elapsed to date in the Fiscal Year (the "Required Payments"),
with a true-up for any Louisiana Gross Gaming Revenue Share
Payments in excess of the Minimum Payment to occur at the end
of each Fiscal Year; provided however, the Required
Payments/Daily Payments shall be suspended if there is an
Excusable Temporary Cessation of Business pursuant to Section
2.58(b) hereof (in no event to exceed six [6] months) or a
business interruption insurance claim period pursuant to
Section 15.3 - "Utilization of Insurance Proceeds." The amount
of the Daily Payment in a non-leap Fiscal Year shall be the
sum of Two Hundred Seventy-Three Thousand, Nine Hundred
Seventy-Two and 60/100 Dollars ($273,972.60). The amount of
the Daily Payment in a Fiscal Leap Year shall be the sum of
Two Hundred Seventy-Three Thousand, Two Hundred Twenty-Four
and 04/100 Dollars ($273,224.04). The Daily
- 5 -
<PAGE> 6
Payment shall be paid each Business Day on the terms provided
in Section 6.5 - "Daily Deposits." The Daily Payment for each
non-Business Day shall be carried forward without interest and
paid on the next Business Day. The Casino Operator shall be
entitled to setoff against any Daily Payment to be paid
directly into the Louisiana Casino Revenue Account, the amount
of any Directed Payment actually paid to the Parish of Orleans
and/or to the Compulsive and Problem Gaming Fund pursuant to
Section 6.5(b) of the Casino Operating Contract. During the
second Full Fiscal Year, the Casino Operator shall be entitled
to setoff against each Daily Payment (due during the second
Full Fiscal Year), a per them amount equal to Four Million,
Eight Hundred Twelve Thousand, Four Hundred Forty-Seven and
No/100 Dollars ($4,812,447.00) less the sum of One Million,
Seven Hundred Thousand and No/100 Dollars ($1,700,000.00), or
a net amount of Three Million, One Hundred Twelve Thousand,
Four Hundred Seventy-Seven and No/100 Dollars ($3,112,477.00),
divided by the number of days in such second Full Fiscal Year,
as a credit for the overpayment of funds previously paid by
the Casino Operator to the LEDGC. It is further agreed that
this Payment Credit of Three Million, One Hundred Twelve
Thousand, Four Hundred Seventy-Seven and No/100 Dollars
($3,112,477.00) may be recovered by the Casino Operator only
by virtue of a per diem setoff against Daily Payments during
the second Full Fiscal Year as provided hereinabove in this
Section 6.3(a), and the Casino Operator hereby waives and
renounces any right to assert a claim for recovery of the
Three Million,
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<PAGE> 7
One Hundred Twelve Thousand, Four Hundred Seventy-Seven and
No/100 Dollars ($3,112,477. 00) Payment Credit except as a per
diem setoff as provided hereinabove in this Section 6.3(a).
Except as provided hereinabove in this Section 6.3(a) - Amount
and Payment of Daily Payment, there shall be no abatement in,
any right of offset, setoff or recoupment of, or any right to
withhold or fail to pay the Daily Payment as required in
Section 6.5 - Daily Deposits.
(d) Section 6.5 of the Amended COC is amended by deleting same in
its entirety and substituting the following in its place and stead:
6.5 DAILY DEPOSITS.
(a) Subject to Section 6.5(b), the State's Daily
Payment for each Casino Gaming Day shall be deposited by wire
or electronically directly into the Louisiana Casino Revenue
Account, or such other account designated by the State by and
through the Gaming Board, by 5:00 p.m. Central Standard Time
(or Central Daylight Savings Time when in effect in Louisiana)
of the next Business Day following the close of that Casino
Gaming Day (unless the Gaming Board directs a different
method). For example, the State's Daily Payment for the Casino
Gaming Day ending 6:00 a.m. on Thursday, June 11, 1998 shall
be deposited in the Louisiana Casino Revenue Account by
5:00p.m. on Friday, June 12, 1998.
(b) In connection with the obligations of the Gaming
Board to annually enter into a casino support services
contract with the Parish of Orleans as mandated by La. R.S.
27:247 and to deposit certain monies into
- 7 -
<PAGE> 8
the Compulsive and Problem Gaming Fund as mandated by La. R.S.
27:270(A)(2), subject to Legislative authorization, the Gaming
Board may direct the Casino Operator to pay all or any portion
of the Daily Payment to the Parish of Orleans and/or the
Compulsive and Problem Gaming Fund on behalf of the Gaming
Board. Nothing in this Section 6.5 shall be deemed to alter
the payment obligations of the Casino Operator or any other
provisions of the Casino Operating Contract and any such
payment directed by the Gaming Board and actually made by the
Casino Operator (at the direction of the Gaming Board) as
provided in this Section 6.5(b) shall, up to the amount paid,
be in satisfaction of and be deemed to be a full or partial
Daily Payment (up to the amount actually paid) for purposes of
the Casino Operating Contract (and no such set-off against any
Daily Payment shall be given to the Casino Operator unless,
and only in the amount and to the extent, a Directed Payment
is actually paid), and the Casino Operator shall be given
credit for any such Directed Payments actually made towards
the satisfaction of the Minimum Payment and the Louisiana
Gross Gaming Revenue Share Payment. Any references herein to
the payment to, or receipt by, the Gaming Board of the
Louisiana Gross Gaming Revenue Share Payment, the Minimum
Payment or the Daily Payment shall be deemed satisfied to the
extent of the Casino Operator's payment of such amounts
pursuant to this Section 6.5(b). No Directed Payment shall be
made pursuant to this Section 6.5(b) to the Parish of Orleans
or the Compulsive and Problem Gaming Fund, except in
accordance with (and only to the extent of
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<PAGE> 9
and in the amounts set forth in) a written notice to the
Casino Operator from the Gaming Board signed by the Chairman
or Vice Chairman of the Gaming Board, directing the Casino
Operator to make certain payments directly to the Parish of
Orleans and/or the Compulsive and Problem Gaming Fund, as
applicable. The Casino Operator shall send a written, dated
notice to the Gaming Board by telephonic facsimile ("fax")
each day that it makes any of the Directed Payments,
confirming that it has on the date of such fax made the
payment to the Parish of Orleans and/or the Compulsive and
Problem Gaming Fund as applicable and set forth the amount
thereof.
(c) Except as to the Directed Payments (actually paid)
nothing in this Section 6.5 shall be deemed to alter or change
the legal obligation of the Gaming Board to reimburse the
Parish of Orleans on an annual basis for casino support
services including, but not limited to, fire, police,
sanitation, health, transportation and traffic services or to
pay monies to the Compulsive and Problem Gaming Fund. Other
than the payment obligations for Directed Payments set forth
in this Section 6.5, the Casino Operator shall have no
obligation to the Gaming Board or the State to reimburse the
Parish of Orleans on an annual basis for casino support
services or to pay monies to the Compulsive and Problem Gaming
Fund.
(d) Nothing in this Section 6.5 shall be deemed to
alter or change the legal obligations of the Minimum Payment
Guarantors under the Minimum Payment Guaranty or alter HET's
and Harrah's Operating obligations under the Completion
Guarantee issued to the Gaming Board or with respect to
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<PAGE> 10
similar guarantees issued to (i) the City and Rivergate
Development, (ii) Bankers Trust Company, as administrative
agent, for the benefit of JCC's lenders under its credit
agreement entered into in connection with the Plan and as part
of the Initial Plan Financing, and (iii) Norwest Bank
Minnesota, N.A., as trustee under the indentures governing the
new notes and new contingent notes issued in connection with
the Plan and as part of the initial Plan Financing
(collectively, together with the Completion Guarantee, the
"Casino Completion Guarantees").
(e) Section 28.15 of the Amended COC is amended by
deleting same in its entirety and substituting the following
in its place and stead:
28.15 NO THIRD PARTY BENEFICIARY. Except as otherwise provided
in Article XXIII - "Leasehold Mortgages" or Section 25.4(d) -
"Reliance," there shall be no third party beneficiaries of
this Casino Operating Contract. No recipient of any payments
made by the Casino Operator at the direction of the Gaming
Board pursuant to Section 6.5(b) of this Casino Operating
Contract shall be a third party beneficiary of the Casino
Operating Contract, the Casino Completion Guarantees, the
Minimum Payment Guaranty or any other guaranty or surety of
payment provided to the Gaming Board or any third party.
PARAGRAPH I.2 - AFFIRMATION. Except as modified herein, the Amended
COC shall remain in fall force and effect.
PARAGRAPH II - REPRESENTATIONS
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<PAGE> 11
PARAGRAPH II.1 - GAMING BOARD WARRANTIES; DUE AUTHORIZATION. The Gaming
Board warrants to the Casino Operator that it is a duly established State
regulatory agency under Louisiana law and pursuant to the Gaming Act is
authorized to execute and deliver this First Amendment on its own behalf and on
behalf of the State.
PARAGRAPH II.2 - CASINO OPERATOR WARRANTIES. The Casino Operator
warrants and represents that JCC is duly organized and in good standing under
Louisiana law and has the full right, power and authority to enter into this
First Amendment.
PARAGRAPH III - GENERAL PROVISIONS
PARAGRAPH III.1 - ENTIRE AGREEMENT. The Amended COC, as modified by
this First Amendment, constitutes the entire agreement of the parties with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, whether written or oral.
PARAGRAPH III.2 - EFFECTIVE DATE. This First Amendment and the
amendments provided for herein shall take effect as of the effective date set
forth above, and as provided in paragraph C of the Recitals, which are made a
part to this First Amendment; provided, however, the authorization related to
Directed Payments shall continue to be effective after June 29, 2000, only in
the event a future act(s) of the legislature authorizes such Directed Payments
to be made on or after June 30, 2000 ("Legislative Authorization"), and only for
such period(s) of time authorized by such Legislative Authorization.
PARAGRAPH III.3 - UNENFORCEABILITY. Any provision of this First
Amendment Which is prohibited or unenforceable shall be deemed severed from the
Amended COC without invalidating the remaining provisions or affecting the
validity or enforceability of
- 11 -
<PAGE> 12
the remainder of the Amended COC, provided, however, that any Daily Payment
(being a Directed Payment) made by the Casino Operator to the Parish of Orleans
or the Compulsive and Problem Gaming fund at the written direction of the Gaming
Board in accordance with Section 6.5(b) of the Casino Operating Contract (as
amended by this First Amendment), shall be deemed paid by the Casino Operator in
satisfaction of the Minimum Payment and Louisiana, Gross Gaming Revenue Share
Payments for the Fiscal Year when it is paid notwithstanding any determination
that La. R.S. 27:271 is unconstitutional or unenforceable.
PARAGRAPH III.4 - COUNTERPART EXECUTION. This First Amendment may be
signed in any number of counterparts with the same effect as if the signatures
thereto were upon the same instrument.
PARAGRAPH III.5 - THIRD PARTIES. None of the obligations hereunder of
either the Casino Operator or the Gaming Board shall inure to or be enforceable
by any person or entity other than the Casino Operator and the Gaming Board.
PARAGRAPH III.6 - BINDING EFFECT. This First Amendment shall be binding
upon, and shall inure to the benefit of the parties and their respective
successors in interest and the permitted assigns of the parties hereto, if any.
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<PAGE> 13
IN WITNESS WHEREOF the parties hereto have executed this First
Amendment, all effective as of the day and year first above written.
THE STATE OF LOUISIANA, by and through the
LOUISIANA GAMING CONTROL BOARD
By:
-------------------------------------------
Duly authorized
Date:
-----------------------------------------
JAZZ CASINO COMPANY, L.L.C.,
A Louisiana Limited Liability Company
By: /s/ Frederick W. Burford
-------------------------------------------
Duly authorized
Date: 10/29/99
----------------------------------------
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<PAGE> 14
INTERVENTION IN AND CONSENT TO FIRST AMENDMENT
Harrah's Entertainment, Inc. and Harrah's Operating Company, Inc. (each
an "Intervenor"), as Minimum Payment Guarantors and as Completion Guarantors, do
each hereby individually and in solido agree and consent to the above First
Amendment to Amended and Renegotiated Casino Operating Contract ("First
Amendment"), and the terms and provisions thereof, and each Intervenor does
further acknowledge and agree that neither the First Amendment, nor any of the
terms and provisions thereof, shall diminish and/or otherwise affect, any of
their respective obligations to the Gaming Board or the State under the LGCB
Completion Guarantee, the Initial Unconditional Minimum Payment Guaranty
Agreement or any document or instrument, if any, related thereto.
IN WITNESS WHEREOF the Intervenors have executed this Intervention and
Consent, all effective as of the effective date of the above First Amendment.
INTERVENOR(S)
HARRAH'S ENTERTAINMENT, INC.
By: /s/ Stephen Brammell
------------------------------------------
Duly Authorized Senior Vice President
Date: 11/4/99
-----------------------------------------
HARRAH'S OPERATING COMPANY, INC.
By: /s/ Stephen Brammell
------------------------------------------
Duly Authorized Senior Vice President
Date:11/4/99
-----------------------------------------
<PAGE> 1
EXHIBIT 10.45
LIMITED FORBEARANCE
THIS LIMITED FORBEARANCE (this "Forbearance") is made as of
February 29, 2000 by and among HARRAH'S NEW ORLEANS MANAGEMENT COMPANY, a Nevada
corporation ("HNOMC"), HARRAH'S OPERATING COMPANY, INC., a Delaware corporation
("HOCI"), and JAZZ CASINO COMPANY, LLC, a Louisiana limited liability company
("JCC").
RECITALS
A. HOCI and JCC have entered into that certain Master Lease Agreement
dated October 28, 1999 (as amended, modified or supplemented by the parties from
time to time, the "Equipment Lease") with respect to certain equipment used at
JCC's New Orleans casino (the "Casino"). Pursuant to the Equipment Lease, JCC is
required to pay certain Basic Rent and Additional Charges (both as defined in
the Equipment Lease and collectively herein, the "Rent").
B. HNOMC and JCC have entered into that certain Second Amended and
Restated Management Agreement dated October 29, 1998 (as amended, modified or
supplemented by the parties from time to time, the "Casino Management
Agreement") whereby HNOMC manages the Casino. Pursuant to the Casino Management
Agreement, JCC is obligated to pay and reimburse HNOMC and its affiliates for
certain costs, expenses, and services, including, without limitation, permit
costs (Section 7.02(a)), employee matters (Section 7.01(d)), consultants
(Section 7.01(e)), emergencies (Section 11.10), accounting (Section 9.02),
Affiliate Services (Section 9.03), Proprietary Systems (Section 9.04), System
Fees (Section 11.01(a)) and Marketing-Contributions (Section 11.01(b))
(collectively, the "Reimbursables").
C. JCC and HOCI entered into that certain Administrative Services
Agreement (the "Administrative Services Agreement") dated as of October 30, 1998
whereby JCC requested HOCI to provide certain services (as defined in the
Administrative Services Agreement. Pursuant to the Administrative Services
Agreement, JCC is required to pay Service Fees (as defined in the Administrative
Services Agreement) to JCC for performing the services specified in the
Administrative Services Agreement.
D. JCC has requested that HNOMC temporarily forbear receipt of payment
of the Reimbursables and that HOCI temporarily forbear receipt of payment of the
Rent and the Service Fees so that JCC may have the opportunity to maintain
liquidity and restore working capital availability.
E. HNOMC is willing temporarily to forbear receipt of payment of the
Reimbursables, and HOCI is willing to temporarily forbear receipt of the Rent
and Service Fees, all on the terms and conditions set forth herein.
<PAGE> 2
WAIVER
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the legal sufficiency of which the parties hereto
hereby acknowledge, HNOMC, HOCI and JCC hereby agree as follows:
1. Limited Forbearance. HOCI hereby temporarily forbears until August
1, 2000 with respect of payment of the Rent and Service Fees, and HNOMC
temporarily forbears until August 1, 2000 with respect to payment of the
Reimbursables presently due and payable and any other Rent, Reimbursables, or
Service Fees which become due and payable on or before August 1, 2000; provided
that HOCI and HNOMC in their sole discretion reserve the right by written notice
to JCC to extend the August 1, 2000 date to any such later date as HET and HOCI
shall determine. Nothing herein shall restrict JCC's right to pay at any time or
from time to time all or any portion of the Rent, Reimbursables or Services Fees
as to which this Forbearance applies.
2. Notices. All notices required or desired to be given hereunder with
respect to any or all of the Lease, Casino Management Agreement or
Administrative Services Agreement, respectively, shall be in writing and shall
be delivered in accordance with, and to the respective addresses set forth for
the parties in, the Lease, the Casino Management Agreement, and the
Administrative Services Agreement, respectively.
3. Limited Nature of Waiver
(a) Except for the agreement of HOCI to forbear in accordance with
Section 1 hereof, with respect to the payment of the Rent and Service Fees, and
the agreement of HNOMC to forbear in accordance with Section 1 hereof, with
respect to the payment of Reimbursables, this Forbearance shall not (i)
constitute a consent to any departure from, or the waiver of any breach of, any
rights under the Lease, the Casino Management Agreement or the Administrative
Services Agreement or applicable law with respect thereto or (ii) waive any
breach or violation of any provision of any of the Lease, the Casino Management
Agreement or the Administrative Services Agreement or any remedies available to
HNOMC or HET with respect thereto. JCC, HNOMC and HOCI acknowledge and agree
that the execution and performance of this Forbearance shall not constitute an
event of default, or breach, or violation, of any of the Lease, the Casino
Management Agreement or the Administrative Services Agreement.
(b) JCC, HNOMC, and HOCI acknowledge certain deferrals of fees and
other amounts are permitted by the express terms of the Casino Management
Agreement and other documents between JCC and its affiliates and HOCI and HNOMC
and their affiliates, and, without limitation of Section 3(a) hereof, each of
JCC, HNOMC, and HOCI hereby expressly reserves its rights under the Casino
Management Agreement and such other documents concerning such deferrals. This
Forbearance shall not modify or affect any such reserved rights under the Casino
Management Agreement or any such other documents.
4. Agreements Remain in Effect. JCC, HOCI and HNOMC each hereby
expressly acknowledges and agrees that the obligations set forth in the Lease,
the Casino Management Agreement and the Administrative Services Agreement remain
in full force and effect.
2
<PAGE> 3
5. JCC Acknowledgement. JCC acknowledges and agrees that its
obligations under the Lease, Casino Management Agreement and Administrative
Services Agreement constitute the legal, valid and binding obligations of JCC
and are enforceable in accordance with their terms, and that, except as reserved
in Section 3(b) hereof, JCC does not have any defenses against the payment of
any amounts presently due under the Lease, the Casino Management Agreement or
the Administrative Services Agreement.
6. Entire Agreement. This Forbearance, together with the Lease, the
Casino Management Agreement and the Administrative Services Agreement, contains
all of the covenants, representations, warranties and agreements between the
parties with respect to the subject matter contained herein. Each party to this
Forbearance acknowledges that no representations, inducements, promises, or
statements, oral or otherwise, have been made by any party or anyone acting on
behalf of any party as to the subject matter hereof which are not embodied
herein, and agrees that no other agreement, covenant, representation,
inducement, promise or statement not set forth in writing in this Forbearance
shall be binding on the parties hereto as to the subject matter hereof.
7. Further Assurances. The parties hereto agree to execute all such
further instruments and take all such further action that may be reasonably
required by any party to fully effectuate the terms and provisions of this
Forbearance and the transactions contemplated herein.
8. Captions. The captions and headings of Sections of this Forbearance
are for convenience of reference only and are not to be construed in any way as
defining or limiting the scope or intent of the provisions of this Forbearance.
9. Number and Gender. Whenever used, the singular number includes the
plural, and the plural the singular, and the use of any gender includes the
other.
10. Counterparts. This Forbearance may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed to be
an original and all of which counterparts taken together will constitute but one
and the same instrument.
11. Severability. Any provision of this Forbearance which is prohibited
or unenforceable will be deemed of no force or effect without invalidating the
remaining provisions hereof.
12. No Oral Change. No amendment, modification, termination, discharge
or waiver of any provision of this Forbearance shall be effective unless it is
in writing and signed by the party intended to be bound thereby and then such
amendment, modification, termination or waiver will be effective only in the
specific instance and for the specific purpose for which given.
13. Successors and Assigns. This Forbearance shall be binding on all of
the parties hereto and their respective legal representatives, successors and
assigns (as permitted under the Lease, the Casino Management Agreement or the
Administrative Services Agreement) and shall inure to the benefit of all of the
parties and their respective legal representatives, successors and permitted
assigns.
3
<PAGE> 4
[Signature Page Follows]
4
<PAGE> 5
JAZZ CASINO COMPANY, LLC, a Louisiana
limited liability company
By: /s/ Frederick W. Burford
----------------------------------------
Name: Frederick W. Burford
----------------------------------
Title:
---------------------------------
HARRAH'S NEW ORLEANS MANAGEMENT COMPANY, a
Nevada corporation
By: /s/ John A. Schick
----------------------------------------
Name: John A. Schick
----------------------------------
Title: VP Finance HNOMC
---------------------------------
HARRAH'S OPERATING COMPANY, INC., a
Delaware corporation
By: /s/ Charles G. Atwood
----------------------------------------
Name: Charles G. Atwood
----------------------------------
Title: Vice President and Treasurer
---------------------------------
S-1
<PAGE> 1
EXHIBIT 10.46
PROMISSORY NOTE
$2,000,000.00 October 26, 1999
Memphis, Tennessee
FOR VALUE RECEIVED, the undersigned unconditionally promises to pay to
the order of HARRAH'S OPERATING COMPANY, INC., a Delaware corporation or any
successor holder of this promissory note ("Holder"), having an address at 1023
Cherry Road, Memphis, Tennessee 38117, Attn.: Corporate Treasurer, or at such
other place as the Holder may from time to time direct in writing, in lawful
money which, at the time or times of payment is the legal tender for public and
private debts in the United States of American, a principal sum up to TWO
MILLION AND 00/100 DOLLARS ($2,000,000.00) or so much thereof as shall from time
to time have been advanced for the account of JCC Development Company, L.L.C., a
Louisiana Limited Liability Company ("Development Company") by the Holder and to
pay interest on the principal sum remaining unpaid hereunder from time to time
from the date hereof until said principal sum or unpaid portion thereof shall
have been fully paid, in the manner and at the rate hereinafter set forth.
1. Rate of Interest and Method of Payment:
The principal balance of this Note advanced, outstanding and unpaid
from time to time shall bear interest at the Contract Rate as hereinafter
defined.
The Contract Rate shall be a rate of interest per annum equal to NINE
AND 00/100 PERCENT (9.00%).
<PAGE> 2
Interest shall be calculated on the daily unpaid principal balance
hereof based upon the actual number of days elapsed in the interest payment
period over a year of 360 days.
Principal and interest shall be payable on the earlier of prepayment or
maturity, by acceleration or otherwise. Accrued interest on this Note shall be
computed and compounded on the last day of each January, April, July and October
occurring during the term of this Note (the period from the date hereof through
January 31, 2000, the three months ended on the last day of each such month, and
the period from August 1, 2004 through October 26, 2004 being referred to herein
as a "Quarter".) The amount of interest due for each Quarter shall be deemed an
additional advance of principal and form the basis for further calculations of
interest due under this Note. Development Company agrees to treat the amounts so
added to the principal balance of this Note as if paid by Development Company
hereunder at the end of each such Quarter and thereupon re-advanced by the
Holder as a principal disbursement under this Note.
2. Maturity Date:
The entire unpaid balance of principal together with all interest
thereon (and including all interest accruing and added to principal hereunder)
shall, if not sooner paid, be due and payable of the fifth anniversary of the
date of this Note.
3. Prepayment:
(a) OPTIONAL PREPAYMENT. The privilege is reserved to prepay the whole
or any part of the unpaid principal sum and all interest or other charges
hereunder accrued to the date payment is received by the Holder, provided that
any amounts so received shall
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<PAGE> 3
be applied first to late charges, then to interest and finally to principal due
and payable hereunder, in such order.
(b) MANDATORY PREPAYMENT. The principal of and accrued interest on this
Note shall be mandatorily prepaid with the net cash proceeds of any loan
incurred by Development Company for the purpose of developing the second floor
of the Casino. Any such mandatory prepayment shall be made immediately after the
incurrence of such loan.
4. Events of Default:
The occurrence of any one or more of the following events shall
constitute an event of default ("Event of Default") under this Note:
(a) failure by the undersigned to make payment of principal or
interest due under this Note as and when due;
(b) the bankruptcy, insolvency, or appointment of a receiver for
Development Company whether voluntary or involuntary.
5. Remedies on Default:
Upon the occurrence of any Event of Default, at the option of any
Holder of this Note (which may be exercised immediately or at any time
thereafter so long as the Event of Default continues), all obligations of the
undersigned represented hereby shall become immediately due and payable, without
notice or demand, and Holder shall then have, in any jurisdiction where
enforcement thereof is sought, in addition to all other rights and remedies
provided herein or available to Holder at law or equity, the right to seek full
payment of all principal, interest and other charges due and owning hereunder.
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<PAGE> 4
6. Late Payment Charge:
In the event of any failure by the undersigned to pay interest or
principal when due, Holder may, at its option, accept payment of any and all
amounts in arrears and, if such late payment is more than ten (10) days in
arrears, Holder may charge, and the undersigned agrees to pay, in addition to
amounts otherwise due, a late charge equal to five (5) cents for each dollar of
principal and/or interest of the payment so in arrears. Such late charge shall
be paid as compensation for the additional service occasioned by the delay in
making payments.
7. Interest After Default:
Except as limited by Section 11 (g), overdue principal hereof and (to
the extent allowable by law) overdue interest thereon, shall bear interest,
which the undersigned jointly and severally agree to pay, at the annual rate,
determined daily, which is two percentage points (2%) above the annual rate of
interest accruing, or which would have accrued, on principal if not overdue.
Such interest on overdue principal and overdue interest shall be payable on
demand and shall continue to accrue and shall be compounded monthly until the
obligation of the undersigned in respect to the payment thereof shall have been
discharged (whether before or after judgment).
8. Time and Place of Payment:
(a) Whenever any payment to be made in respect hereto becomes due
on a day which is not a business day, the maturity thereof
shall be extended to the next succeeding business day and
interest on such unpaid amount shall accrue at the applicable
Contract Rate during such extensions.
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<PAGE> 5
(b) All payments of principal, interest or other amounts payable
on or in respect to this Note or the indebtedness evidenced
hereby, shall be made to Harrah's Operating Co., Inc., at the
address provided above or at such other address or to such
other account as may from time to time be identified by Holder
to Development Company, in funds immediately available to
Holder in the city where payment is required to be made.
9. No Right of Set Off by Makers:
No payment of principal hereof or interest hereon shall be subject to
any set off, reduction, or recoupment by the undersigned for any cause
whatsoever relating to or based upon dealings between the undersigned and/or
Development Company and Harrah's Operating Company, Inc., or any subsequent
Holder.
10. Waiver of Defenses:
(a) The undersigned and every endorser or guarantor of this Note
and any of the indebtedness evidenced hereby, by becoming such
endorser or guarantor (i) consents and agreed to be bound by
the provisions of this Note and promises, absolutely and
unconditionally to pay the principal of, said interest and
charges on this Note as herein provided; (ii) waives (to the
extent permitted by law) trial by jury and all benefits
conferred by the statute of limitations in any action on this
note; (iii) waives (to the fullest extent allowed by law) all
requirements of diligence and collection, presentment, notice
or non-payment, protest, notice of protest, suit and all other
conditions precedent in connection with the collection and
enforcement of this Note or any guarantee of the indebtedness
evidenced
-5-
<PAGE> 6
hereby; (iv) waives any right to the benefit of or to direct the
application of any security for this Note (if any) until all the
obligations of the undersigned represented hereby have been paid in
full; (v) waives the right to require the Holder to proceed against any
other person or to pursue any other remedy before proceeding against
it, and, except as otherwise required by law, waives the right to
require the Holder to proceed against any security (if any) before
proceeding against it; and (vi) agrees that no renewal or extension of
this Note, including a renewal or extension which this Note is
surrendered, no change in the rate of interest payable hereon, no
release, surrender or substitution of any security (if any) for or
guarantees of, this Note or the indebtedness evidenced hereby, no
modification or waiver of the terms of this Note, no release of or
covenant not to sue, or covenant not to levy execution against property
of any person liable under this Note or the indebtedness evidenced
hereby, no delay in the enforcement of payment of this Note or any
security for or guarantee of, this Note for the indebtedness evidenced
hereby, and no delay or omission in exercising any right or power under
this Note or any security for or guarantee of this Note or the
indebtedness evidenced hereby shall affect its liability.
(b) None of the provisions hereof and none of the Holder's right and
remedies hereunder on account of any past or future default shall
deemed to be waived by the Holder's acceptance of any past due amount
or by any indulgence granted by the Holder to the undersigned, or any
of them.
-6-
<PAGE> 7
11. Miscellaneous:
(a) This Note shall be governed by and interpreted in accordance
with the laws of the State of Tennessee;
(b) If this Note is signed by more than one party or person, it
shall be the joint and several obligation of all makers,
endorsers, guarantors, and sureties and shall be binding upon
all parties hereto and their successors, heirs, estates,
devisees and assigns;
(c) This Note may not be modified or terminated orally but only by
agreement or discharge in writing and signed by Holder;
(d) Any forbearance of the Holder in exercising any right or
remedy hereunder, or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any right
or remedy;
(e) The acceptance by a Holder of payment of any sum payable
hereunder after the due date of such payment, shall not be a
waiver of the Holder's right to either require prompt payment
when due of all other sums payable hereunder or to declare a
default for failure to make prompt payment;
(f) Whenever Holder is referred to in this Note, such reference
shall be deemed to include the successors and assigns of
Holder, including without limitation any subsequent assignee
or Holder or this Note, and all covenants, provisions and
agreements by or on behalf of any of the undersigned and any
endorsers, guarantors, and sureties hereof which are contained
herein shall inure to the benefit of the successors and
assigns of Holder;
-7-
<PAGE> 8
(g) It is the intention of the undersigned and the Holder to
conform strictly to the Interest Law, as hereinbelow defined,
applicable to the transaction. Accordingly, it is agreed that,
notwithstanding any provisions to the contrary in this Note,
or in any documents relating hereto, the aggregate of all
interest and any other charges or consideration constituting
interest under the applicable Interest Law that is taken,
reserved, contracted for, charged or received under this Note
or otherwise in connection with this transaction, shall in no
circumstances exceed the maximum amount of interest allowed by
the Interest Law applicable to this transaction. If any excess
of interest in such respect is provided for in this Note or
otherwise relating hereto, then in such event: (i) the
provisions of this paragraph shall govern and control; (ii)
neither the undersigned nor the heirs, legal representatives,
devisees, estates, successors or assigns of the undersigned
shall be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum amount of interest
allowed by the Interest Law applicable to this transaction;
(iii) any excess shall be deemed a mistake and cancelled
automatically and, if theretofore paid, shall be credited on
this Note by Holder (or if this Note shall have been paid in
full, refunded to the undersigned); and (iv) the effective
rate of interest shall be automatically subject to reduction
to the Maximum Rate of Interest, as hereinafter defined,
allowed under such Interest Law as now or hereafter construed
by courts of appropriate jurisdiction. To the extent permitted
by the Interest Law applicable to this transaction, all sums
paid or agreed to
-8-
<PAGE> 9
be paid to Holder for the use, forbearance or detention of the
indebtedness evidenced hereby, shall be amortized, pro-rated,
allocated and spread through out the full term of this Note.
For the purposes of this Note, "Interest Law" shall mean the
law of the State of Tennessee, United States of America or
other jurisdiction which has application to the interest and
other charges under this Note as of the date hereof or the
date of any advance made hereunder which ever is applicable.
The term "Maximum Rate of Interest" shall mean the maximum
rate of interest that the Holder may from time to time charge
the undersigned and in regard to which the undersigned would
be prevented successfully from raising a claim or defense of
usury under the applicable Interest Law.
(h) The undersigned represents and warrants that all of the
proceeds of this Note will be used solely in connection with
the undersigneds' trade or business.
JCC Development Company, L.L.C.
A Louisiana Limited Liability Company
By: /s/ Frederick W. Burford
---------------------------------------
Its: President & CEO
--------------------------------------
-9-
<PAGE> 1
EXHIBIT 10.47
MASTER LEASE AGREEMENT
This MASTER LEASE AGREEMENT ("Lease") is made and entered into this 28th day of
October, 1999, by and between Harrah's Operating Company, Inc., a Delaware
corporation ("Lessor"), whose address is 5100 West Sahara Avenue Suite 200 Las
Vegas, Nevada 89146 and Jazz Casino Company, L.L.C. ("Lessee") whose address is
512 South Peters Street, New Orleans, Louisiana, 70130.
Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor in
accordance with the terms and conditions contained herein, certain equipment
more fully described in the Lease Schedule or Schedules attached hereto,
referred to herein as a "Lease Schedule," as may from time to time be executed
by Lessee. All equipment described in such Lease Schedules shall be collectively
referred to as the "Equipment" and individually referred to as a "Unit" and is
to be installed in and to be used in connection with the business location
decribed herein ("Premises").
NOW THEREFORE, Lessor and Lessee agree as follows:
1. LEASE. This Lease establishes the general terms and conditions by which
Lessor will lease the Equipment to Lessee. Each Lease Schedule shall be in
substantially the form of Exhibit A hereto, with such changes as Lessee and
Lessor shall agree, and shall incorporate by reference the terms of this Lease.
2. TERM: RENT AND PAYMENT.
2.1 TERM. The term of lease of any Unit hereunder shall commence on the
date set forth in the Lease Schedule for such Unit (the "Commencement Date") and
continue as specified in such Lease Schedule ("Term").
2.2 RENT AND PAYMENT. Lessee's obligation to pay rent for any Unit
shall commence on the Commencement Date for such Unit and continue for the Term
for such Unit. The basic rent set forth on the Lease Schedule for a Unit (the
"Base Rent") shall be payable on the Commencement Date for such Unit and on the
same day of each month thereafter ("Rent Date"). Any amounts payable by Lessee
for a Unit, other than Basic Rent shall be deemed an additional charge
("Additional Charges") and shall be payable on the Rent Date next following the
date upon which they accrue or the last day of the term for such Unit, whichever
is earlier. Lessee shall make all payments at the address of Lessor set forth
above or at such other address as Lessor may designate in writing. As used
herein, the term "Rent" for a Unit shall mean all Basic Rent and Additional
Charges for such Unit.
2.3 LATE CHARGE. If any Rent is not received by Lessor or its permitted
assignees within ten (10) business days of when due, a late charge on such Rent
shall be due and payable with such Rent in an amount equal to four percent (4%)
of the amount past due or any part thereof, as reimbursement for administrative
costs and not as a penalty.
2.4 LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to
comply with any of its covenants or obligations herein, Lessor may, at its
option, perform such covenants or obligations on Lessee's behalf without thereby
waiving such conditions or obligations or the failure to comply therewith and
all sums advanced by Lessor in connection therewith shall be repayable by Lessee
as Additional Charges. No such performance shall be deemed to relieve Lessee of
its obligations herein.
<PAGE> 2
3. CERTIFICATE OF ACCEPTANCE. Upon delivery of the Equipment to Lessee, Lessee
shall deliver to Lessor a certificate of delivery, installation and acceptance
("Certificate of Acceptance") in substantially the form of Exhibit B hereto,
with such changes as Lessee and Lessor shall agree.
4. NET LEASE. Except as set forth in section 5.1, this Lease including each
Lease Schedule is a net Lease and Lessee's obligation to pay all Rent due and
the rights of Lessor or its assignees in, and to, such Rent shall be absolute
and unconditional under all circumstances, notwithstanding: (i) any setoff
abatement, reduction, counterclaim, recoupment, defense or other right which
Lessee may have against Lessor, its assignees, the manufacturer or seller of any
Unit, or any other person for any reason whatsoever, including, without
limitation, any breach by Lessor of this Lease; (ii) any defect in title,
condition, operation, fitness for use, or any damage to or destruction of, the
Equipment; (iii) any interruption or cessation of use or possession of the
Equipment for any reason whatsoever, or (iv) any insolvency, bankruptcy,
reorganization or similar proceedings instituted by or against Lessee.
5. LOCATION: USE: MAINTENANCE: IDENTIFICATION AND INSPECTION.
5.1 LOCATION, USE, MAINTENANCE AND REPAIRS. a) Lessee shall keep and
use the Equipment on the Premises and shall not relocate or remove any Unit
unless Lessor consents, in writing, prior to its relocation or removal.
b) Lessee shall at all times and, except as otherwise provided herein,
at its sole cost and expense, properly use and maintain the Equipment in good
operating condition, other than the normal wear and tear, and make all necessary
repairs, alterations and replacements thereto (collectively, "Repairs"), all of
which shall immediately become the property of Lessor and subject to this Lease,
other than those Repairs required due to Lessor's intentional misconduct or
negligent acts. In the event Lessee is required to make any such Repairs due to
Lessor's intentional misconduct or negligent acts, Lessee may set-off the cost
of such expenses of such repairs against the Basic Rent and any Additional
Charges due hereunder. Lessee shall comply with manufacturer instructions
relating to the Equipment, and any applicable laws and governmental regulations.
c) Lessee shall pay all costs and expenses associated with removal and
return of the Equipment.
5.2 IDENTIFICATION AND INSPECTION. Upon request by Lessor, Lessee shall
mark each Unit conspicuously with appropriate labels or tags furnished by
Lessor and maintain such markings through the Term for such Unit to clearly
disclose that said Unit is being leased from Lessor. Subject to Lessee's
reasonable security requirements and in a manner not to unreasonably interfere
with Lessee's business operations, Lessee shall permit Lessor's representatives
to enter the Premises where any Unit is located to inspect such Unit.
6. LOCATION: LIENS AND ENCUMBRANCES.
6.1 PERSONAL PROPERTY. Each Unit is personal property and Lessee shall
not affix any Unit to realty so as to change its nature to a fixture or real
property and agrees that each Unit shall remain personal property during the
Term for such Unit. LESSOR EXPRESSLY RETAINS OWNERSHIP AND TITLE TO THE
EQUIPMENT. LESSEE HEREBY AGREES THAT IT SHALL BE RESPONSIBLE FOR ALL OF LESSORS
OBLIGATIONS AS REQUIRED BY THE STATE GAMING LAWS AND REGULATIONS REGARDING
MAINTENANCE, USE, POSSESSION AND OPERATION OF THE EQUIPMENT. Lessee hereby
authorizes, empowers, and grants a limited power of attorney to Lessor to record
and/or execute and file, on Lessee's behalf, any certificates, memorandums,
financing statements, refiling, and continuations thereof as Lessor deems
reasonably necessary or advisable to preserve and protect its interest
hereunder. The parties intend to create a lease agreement and
<PAGE> 3
the relationship of lessor and lessee between themselves. Nothing in this Lease
shall be construed or interpreted to create or imply the existence of a finance
lease or installment lease contract. Lessor makes no representation regarding
the treatment of this Lease, the Equipment or the payment of obligations under
this Lease for financial statement reporting or tax purposes.
6.2 LIENS AND ENCUMBRANCES. Unless otherwise provided herein, Lessee
shall not directly or indirectly create, incur or suffer a mortgage, claim,
lien, charge, encumbrance or the legal process of a creditor of Lessee of any
kind upon or against this Lease or any Unit, other than those in existence on
the date hereof. Lessee shall at all times protect and defend, at its own cost
and expense, the title of Lessor from and against such mortgages, claims, liens,
charges, encumbrances and legal processes of creditors of Lessee and shall keep
all the Equipment free and clear from all such claims, liens and legal
processes. If any such lien or encumbrance is incurred, Lessee shall immediately
notify Lessor and shall take all actions required by Lessor to remove the same.
7. RETURN OF EQUIPMENT.
7.1 DUTY OF RETURN. At the expiration of the Term for a Unit or upon
termination of the Lease, Lessee at its expense shall return such Unit to Lessor
or its designee at the Lessor's facility in Las Vegas, Nevada, in accordance
with appropriate gaming laws and regulations. Each Unit shall include all parts,
accessories, attachments etc. originally delivered to Lessee with such Unit,
normal wear and tear excepted. The term normal wear and tear includes minor
scratches, dents, and chips to the exterior of the device and wear to the
interior components of the Unit that is consistent with components of comparably
aged machines. Upon return of the Unit, Lessee agrees to reimburse Lessor for
the lesser of the cost to repair or the actual cost of the Lessor to replace the
equipment that is non-functioning or missing components including, but not
limited to, components at the following indicated reimbursement cost or Lessor's
actual costs if higher, (i) Door $400.00; (ii) Validator head $550.00; (iii)
Validator Can $245.00; (iv) Monitor $250.00; (v) Circuit Board $420.00; (vi)
Hopper $350.00; and (vii) Glass panels $300.00 each.
7.2 FAILURE TO RETURN. If Lessee fails to return the Equipment or any
portion thereof, as provided above, within ten (10) business days following
expiration of the term or termination of the Lease, then Lessee shall pay to
Lessor an additional month's Rent for each month, or any portion thereof, that
Lessee fails to comply with the terms of this return provision, until all of the
Equipment is returned, as provided above.
8. RISK OF LOSS; INSURANCE.
8.1 RISK OF LOSS. Lessee shall bear the risk of all loss or damage to
any Unit or caused by any Unit during the period from the time the Unit is
delivered by its vendor to Lessee until the time it is returned as provided
herein, other than any losses or damage occurring while under the control of
Lessor or due to Lessor's intentional misconduct or negligent acts.
8.2 UNIT REPLACEMENT. If any Unit is lost, stolen, destroyed, seized by
governmental action or, in Lessee's opinion or Lessor's opinion, is damaged and
cannot be repaired ("Event of Loss"), this Lease shall remain in full force and
effect without abatement of Rent and Lessee shall promptly replace such Unit at
its sole expense with a Unit of equivalent value and utility, and similar kind
and in substantially the same condition as the replaced Unit immediately prior
to the Event of Loss, unless any such Event of Loss results from Lessor's
intentional misconduct or negligence, in which case Lessor shall promptly
replace such Unit at its sole expense with a Unit of equivalent value and
utility, and similar kind and in substantially the same condition as the
replaced Unit immediately prior to the Event of Loss. Title to such
<PAGE> 4
replacement unit immediately shall vest and remain in Lessor, and such unit
shall be deemed a Unit under this Lease. Upon such vesting of title and provided
Lessee is not in default under this Lease, Lessor shall cause to be paid to
Lessee or the vendor of any replacement Unit provided by Lessee any insurance
proceeds actually received by Lessor for the replacement Unit. Lessee shall
promptly notify Lessor of any Event of Loss and shall provide Lessor with and
shall enter into, execute and deliver such documentation as Lessor shall
reasonably request with respect to the replacement of any such Unit.
8.3 INSURANCE. Lessee shall obtain and maintain in full force and
effect the following insurance with respect to the Equipment: (i) comprehensive
personal liability, (ii) all risk property damage on the Equipment, and (iii)
workers compensation insurance, in each case at commercially reasonable levels.
Such insurance shall: (i) name Lessor and its Parents, Subsidiaries or
Assignees, if any, as additional insureds and first loss payees as their
interests may appear, and (ii) provide that the policy may not be canceled or
materially altered without thirty (30) days prior written notice to Lessor and
its Assignees. All such insurance shall be placed with companies having a rating
of at least A, Class XII or better by Best's rating service. Lessee shall
furnish to Lessor, upon request and throughout the Term, insurance certificates
of a kind satisfactory to Lessor and its Assignees showing the existence of the
insurance required hereunder and premium paid.
9. TAXES.
9.1 TAXES. Lessee agrees to report, file, pay promptly when due to the
appropriate taxing authority and indemnify, defend, and hold Lessor harmless
from and against any and all taxes (including gross receipts), assesments,
license fees and other federal, state or local governmental charges of any kind
or nature, together with any penalties, interest or fines related thereto
(collectively, "Taxes") that pertain to the Equipment, its purchase, or this
Lease, except such Taxes based solely upon the net income of Lessor. Lessee
shall be solely responsible for all privilege taxes, fees and other charges,
taxes or assessments that may be required as result of this Lease.
9.2 LESSOR'S FILING OF TAXES. Notwithstanding the foregoing, Lessor at
its election may report and file sales and/or use taxes which are filed and paid
periodically through the Term, and the amounts so due may be invoiced to Lessee
and payable as specified therein.
10. INDEMNIFICATION. Except for the negligence of Lessor, its employees or
agents and assigns, Lessee hereby assumes liability for and agrees to indemnify,
defend, protect save and hold harmless the Lessor, its agents, employees,
attorneys, directors and assignees from and against any and all losses, damages,
injuries, claims, penalties, demands and all expenses, legal or otherwise
(including reasonable attorneys' fees) of whatever kind and nature arising from
the lease, ownership, use, condition, operation or maintenance of any Equipment
(collectively, "Loss"), until the Equipment is returned to Lessor. Except for
the intentional or negligent acts of Lessee, its employees or agents and assigns
or third parties, Lessor hereby assumes liability for and agrees to indemnify,
defend, protect, save and hold harmless the Lessee, its agents, employees,
attorneys, directors and assigns from and against any Loss, until the Equipment
is returned to Lessor, resulting from the intentional misconduct or negligent
acts or omissions of Lessor or the breach of this Lease by Lessor.
Any claim, defense, setoff, or other right of any indemnifying party hereunder
against any indemnified party hereunder shall not in any way affect, limit, or
diminish the indemnifying party's indemnity obligations hereunder. Either party
hereto shall notify the other party immediately as to any claim, suit, action,
damage, or injury related to the Equipment of which the notifying party has
actual or other notice. An indemnifying party shall at its own cost and expense,
defend any and all suits which may be brought against the indemnified party
shall satisfy, pay and discharge any and all judgments and fines that may be
recovered against the indemnified party in any such action or actions, provided,
however, that any party seeking
<PAGE> 5
indemnification hereunder shall give the party against whom indemnification is
sought written notice of any such claim or demand. The parties agree that their
respective obligations under this Section 10 shall survive the expiration or
termination of this Lease.
11. REPRESENTATIONS AND WARRANTIES BY LESSEE. Lessee represents and warrants to
Lessor that (i) the making of this Lease and any Lease Schedule executed by
Lessee is duly authorized on the part of Lessee and that upon due execution
thereof by Lessee and Lessor they shall constitute valid obligations binding
upon, and enforceable against, Lessee in accordance with their terms; (ii)
neither the making of this Lease or such Lease Schedule, nor the due performance
by Lessee, including the commitment and payment of the Rent, shall result in any
breach of, or constitute a default under, or violation of, Lessee's organizing
documents, articles of incorporation, by-laws, or indentures, notes or any
material agreement to which Lessee is a party or by which Lessee is bound; (iii)
no material approval or consent not already obtained or withholding of objection
is required from any governmental authority with respect to the entering into,
or performance of this Lease or any Lease Schedule by Lessee; (iv) Lessee has
obtained all material licenses and permits required under applicable laws or
regulations (the "Gaming Laws") for the operation of its business.
12. REPRESENTATIONS AND WARRANTIES BY LESSOR. Lessor represents and warrants to
Lessee that (i) the making of this Lease and any Lease Schedule executed by
Lessor is duly authorized on the part of Lessor and that upon due execution
thereof by Lessor and Lessee they shall constitute valid obligations binding
upon, and enforceable against, Lessor in accordance with their terms; (ii)
neither the making of this Lease or such Lease Schedule, nor the due performance
by Lessor, including the commitment and lease of Equipment, shall result in any
breach of, or constitute a default under, or violation of, Lessor's organizing
documents, articles of incorporation, by-laws, or indentures, notes or any
material agreement to which Lessor is a party or by which Lessor is bound; (iii)
no material approval or consent not already obtained or withholding of objection
is required from any governmental authority with respect to the entering into,
or performance of this Lease or any Lease Schedule by Lessor; (iv) Lessor has
obtained all material licenses and permits required under applicable Gaming Laws
for the operation of its business; (v) Lessor has obtained representations from
manufacturers of slot machines leased hereunder that the Machines, and any
progressive Machines, as well as any associated computer monitoring and
communication equipment are currently, or will be Year 2000 Compliant prior to
the year 2000. Year 2000 Compliant means that the functionality of the Machine
or product is not affected by dates prior to, during or after the year 2000, or
the fact that year 2000 is a leap year.
13. DISCLAIMERS: MANUFACTURERS WARRANTIES. EXECUTION OF A CERTIFICATE OF
ACCEPTANCE SHALL CONSTITUTE LESSEE'S ACKNOWLEDGEMENT THAT THE UNITS ARE OF THE
DESIGN, CAPACITY AND MANUFACTURE SPECIFIED FOR AND BY THE LESSEE AND THAT LESSEE
IS SATISFIED THAT THE SAME IS SUITABLE FOR LESSEE'S PURPOSES. NO SALESMAN OR
AGENT OF LESSOR IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OF THIS LEASE OR MAKE
ANY REPRESENTATION REGARDING THE EQUIPMENT, EXCEPT AS SET FORTH HEREIN AND IN
EACH LEASE SCHEDULE.
(b) Lessor shall use its best efforts to obtain for Lessee's direct benefit
whatever warranties are available from the vendors or manufacturers of the
Equipment, including any parts or the Equipment such as video monitors and other
equipment, and Lessor hereby assigns and agrees to otherwise make available to
Lessee all of its right under any vendor's or manufacturers warranty on the
Equipment and any parts thereof.
(c) No affirmation of fact, including but not limited to statements regarding
suitability for use, performance, percentage hold, or par value of the Equipment
shall be deemed to be a warranty or guaranty of Lessor for any purpose. Except
as set forth in Section 10 herein, in no event shall Lessor or any of its
affiliates, subsidiaries, representatives, or agents be liable for
<PAGE> 6
indirect, special, or consequential damages, including loss of profits arising
out of any breach of this Agreement.
14. ASSIGNMENT OF LEASE.
14.1 ASSIGNMENT BY LESSOR. Lessee acknowledges and agrees that Lessor
may assign, mortgage, or otherwise transfer (collectively, "Assign") its
interest hereunder and/or in the Equipment to others ("Assignees") without
consent of Lessee, provided however that Lessee shall be notified prior thereto.
Accordingly, Lessee and Lessor agree that upon such assignment and the Lessee's
receipt of notice thereof, Lessee (i) shall acknowledge such assignment in
writing by executing a Notice, Consent and Acknowledgment of Assignment
furnished by Lessor; (ii) shall promptly pay all Rent when due to the designated
Assignees, notwithstanding any defense, setoff, abatement, recoupment, reduction
or counterclaim whatsoever that Lessee may have against Lessor; (iii) shall not
permit the Lease or Lease Schedule so assigned to be amended or the terms
thereof waived without the prior written consent of the Assignees; (iv) shall
not require the Assignees to perform any obligations of Lessor under such Lease
Schedule; (v) shall not terminate or attempt to terminate the Lease or Lease
Schedule on account of any default by Lessor, and (vi) acknowledges that any
Assignee may reassign its rights and interest with the same force and effect as
the assignment described herein. However, Lessor shall remain liable to Lessee
notwithstanding such assignment.
Notwithstanding anything to the contrary contained herein, (a) Lessor may not
Assign its interest hereunder and/or in the Equipment to any Assignee or other
person or entity in violation of any applicable laws or regulations, including,
but not limited to, Gaming Laws, (b) Lessor may not assign its interest
hereunder and/or in the Equipment to any Assignee or other person or entity on
or prior to the occurrence of the Termination of the Construction Date (as
defined in the Credit Agreement dated as of October 29, 1998 among JCC Holding
Company ("JCC Holding"), as guarantor, Lessee, as borrower, the bank parties
thereto and Bankers Trust Company, as administrative agent) and (c) neither
Lessor nor any of its Assignees may Assign its interest hereunder and/or in the
Equipment to any Assignee or other person or entity that would, if associated
with the Lessee, JCC Holding, Harrah's New Orleans Management Company (the
"Manager") or any affiliate of the Manager, impair or cause the denial,
suspension or revocation of any gaming registration, permit, license, right or
entitlement or any alcoholic beverage registration, permit, license, right or
entitlement held or applied for by the Lessee, JCC Holding, the Manager of any
affiliate of the Manager. Unless the context otherwise requires, each reference
to the Lessor herein, other than the reference in clause (c) of the preceding
sentence, shall mean and be a reference to the Lessor, its Assignees and each
subsequent Assignee.
14.2 ASSIGNMENT OR SUBLEASE BY LESSEE. Lessee shall not assign this
Lease or any Lease Schedule or assign its rights in or sublet the Equipment, or
any interest therein without Lessor's and its Assignee's prior written consent,
which consent shall not be unreasonably withheld.
15. FINANCIAL INFORMATION; FURTHER ASSURANCES.
15.1 FINANCIAL INFORMATION. Throughout the Term, Lessee shall deliver
to Lessor copies of all current financial statements of Lessee which will
reflect the financial condition and operations of Lessee; provided, however,
that so long as Lessee or its parent corporation, JCC Holding, or any successor
parent corporation (the "Reporting Peron") is subject to the reporting
requirements fo Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the financial statement reporting requirements set
forth in this Section 15.1 shall be satisfied if promptly after the Reporting
Person files with the Securities and Exchange Commission its Annual Report on
Form 10-K and Quarterly Report on Form
<PAGE> 7
10-Q ("Reports") required to be filed under the Exchange Act, Lessee delivers to
Lessor or its Assigns copies of such Reports.
15.2 FURTHER ASSURANCES. Lessee shall execute and deliver to Lessor,
such other documents, and take such further action as Lessor may reasonably
request, in order to effectively carry out the intent and purposes of this Lease
and the Lease Schedules. All documentation shall be in a form reasonably
acceptable to Lessor and its Assignees.
16. DEFAULT BY LESSEE: REMEDIES.
16.1 DEFAULT BY LESSEE. Lessee shall be in default ten (10) business
days after the occurrence of any one of the following events ("Event of
Default"): (a) failure to pay Rent when due; (b) failure to perform any other
term, condition or covenant of this Lease or any Lease Schedule; (c) Lessee
ceases or is enjoined, restrained or in any way prevented from conducting
business as a going concern; (d) if any proceeding is filed by or against the
Lessee for an assignment for the benefit of creditors, a voluntary or
involuntary petition in bankruptcy, or if Lessee is adjudicated a bankrupt or an
insolvent; (e) Lessee attempts to sell, transfer, encumber, part with possession
or sublet the Equipment or any Unit thereof; (f) any Unit is attached, levied
upon, encumbered, pledged, or seized under any judicial process; (g) any
warranty or representation made or furnished to the Lessor by or on behalf of
the Lessee is false in any material respect when made or furnished; (h) failure
to maintain in full force and effect the licenses and permits required under the
Gaming Laws for the operation of Lessee's business; (i) failure to comply in all
material respects with applicable gaming regulations; or (j) any change in
control of the Lessee.
16.2 LESSOR REMEDIES. Lessee acknowledges that the enforcement of this
Lease may require approval of certain regulatory authorities and that copies of
all Default Notices, legal proceedings, etc. will be forwarded to the
appropriate agency as required by state law or regulation. Lessee further
acknowledges that upon any Event of Default, and at any time thereafter, Lessor,
may in addition to any and all rights and remedies it may have at law or in
equity, without notice to or demand upon Lessee at its sole option (i) declare
the aggregate Rent then accrued and unpaid together with the balance of any Rent
to be immediately due and payable; (ii) proceed by appropriate court action or
other proceeding, either at law or in equity to enforce performance by Lessee of
any and all covenants of this Lease; (iii) on written notice to Lessee,
terminate any of Lessee's rights under this Lease or Schedule in which event
Lessee shall immediately surrender and return the Equipment to Lessor pursuant
to the provisions hereof; and (iv) subject to appropriate Gaming Laws, rules,
laws and regulations, and required approvals, take possession, sell and/or
re-lease any Unit as Lessor may desire, in its sole discretion.
Lessor's rights and remedies herein are cumulative and in addition to
any rights or remedies available at law or in equity including the Uniform
Commercial Code, and may be exercised concurrently or separately. Lessee shall
pay all costs, expenses, losses, damages and legal costs (including reasonable
attorneys' fees) incurred by Lessor and its Assignees as a result of enforcing
any terms or conditions of the Lease or any Schedules. A termination hereunder
shall occur only upon written notice by Lessor to Lessee and no repossession or
other act by Lessor after default shall relieve Lessee from any of its
obligations to Lessor hereunder unless Lessor so notifies Lessee in writing.
16.3 ARTICLE 2A WAIVERS. In the event that Article 2A of the Uniform
Commercial Code is adopted under applicable law and applies to this Lease, then
Lessee, to the extent permitted by law, waives any and all rights and remedies
conferred upon a lessee by Sections 2A-508 through 2A-522 of such Article 2A,
including, but not limited to, Lessee's rights to: (i) cancel or repudiate this
Lease; (ii) claim, grant or permit a security interest in the Equipment in
Lessee's possession or control for any reason, other than to Lessor or its
Assigns ; (iii) deduct from Rent
<PAGE> 8
all or any part of any claimed damages resulting from Lessor's default, if any,
under this Lease; and (iv) accept partial delivery of the Equipment.
17. MISCELLANEOUS.
17.1 NOTICES. Except as otherwise required by law, all notices required
herein shall be in writing and sent by prepaid certified mail or by overnight
courier, or fax, addressed to the party at the address of the party specified
herein or such other address designated in writing. Notice shall be effective
upon the earlier of its receipt or four (4) days after it is sent.
17.2 SURVIVAL OF INDEMNITIES. All indemnities of Lessee and Lessor
shall survive and continue in full force and effect for events occurring prior
to the return of the Equipment to the Lessor, notwithstanding the expiration or
termination of the Term.
17.3 COUNTERPARTS. Each Lease and any Lease Schedule may be executed in
counterparts.
17.4 MULTIPLE LESSEES. If more than one Lessee is named in this Lease
or a Lease Schedule the liability of each shall be joint and several.
17.5 TITLES. Section titles are not intended to have legal effect or
limit or otherwise affect the interpretation of this Lease or any Lease
Schedule.
17.6 WAIVER. No delay or omission in the exercise of any right or
remedy herein provided or otherwise available to Lessor or Lessee, or prior
course of conduct, shall impair or diminish Lessor's or Lessee's rights to
exercise the same or any other right of Lessor or Lessee, nor shall any
obligation of Lessor or Lessee hereunder be deemed waived. The acceptance of
Rent by Lessor after it is due shall not be deemed to be a waiver of any breach
by Lessee of its obligations under this Lease or any Lease Schedule.
17.7 SUCCESSORS. This Lease and each Lease Schedule shall inure to the
benefit of and be binding upon Lessor and Lessee and their respective successors
in interest.
17.8 NOT AN OFFER. Neither this Lease nor any Lease Schedule shall be
deemed to constitute an offer or be binding upon Lessor until executed by
Lessor's authorized officer.
17.9 SEVERABILITY. If any provisions of this Lease or any Lease
Schedule shall be held to be invalid or unenforceable, the validity and
enforceability of the remaining provision thereof shall not be affected or
impaired in any way.
17.10 MODIFICATION. Lessor and Lessee agree that any modifications to
this Lease or any Lease Schedule shall be in writing and shall be signed by both
parties and their last known assignees, if any.
17.11 LEASE IRREVOCABLE. The lease of each Unit is irrevocable for the
full Term set forth in the Lease Schedule therefore.
17.12 GOVERNING LAW. This Lease and each Lease Schedule are entered
into under and shall be construed in accordance with, and governed by the laws
of the State of Louisiana.
17.13 RIDERS. In the event that any riders are attached hereto and made
a part hereof and if there is a conflict between the terms and provisions of any
rider, including any Lease Schedule and the terms and provisions herein, the
terms and provisions of the rider or Lease Schedule shall control to the extent
of such conflicts.
<PAGE> 9
17.14 ENTIRE AGREEMENT. LESSEE REPRESENTS THAT IT HAS READ, RECEIVED,
RETAINED A COPY OF AND UNDERSTANDS THIS LEASE, AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS. LESSOR AND LESSEE AGREE THAT THIS LEASE, ALL RIDERS, LEASE
SCHEDULES, OR EXHIBITS HERETO, AND THE LEASE SCHEDULES SHALL CONSTITUTE THE
ENTIRE AGREEMENT AND SUPERSEDE ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR
NEGOTIATIONS AND ALL OTHER COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT
TO ANY UNIT.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
duly executed on the date set forth by their authorized representatives.
LESSEE: LESSOR:
Jazz Casino Company, L.L.C. Harrah's Operating Company, Inc.
By: /s/ Frederick W. Burford By: /s/ Philip G. Satre
----------------------------------- ---------------------------------
Its: President Its: President
----------------------------------- --------------------------------
<PAGE> 10
LEASE SCHEDULE NO. 1 TO MASTER LEASE AGREEMENT
This Lease Schedule No. 1 is attached to and made a part of the Master
Lease Agreement ("Lease") between Harrah's Operating Company, Inc., a Delaware
corporation ("Lessor"), and Jazz Casino Company, L.L.C. ("Lessee"), dated
October 28, 1999.
1. DESCRIPTION OF EQUIPMENT. The Equipment listed on Attachment "A" to
this Lease Schedule is added to the Equipment leased under the Lease and made
subject to the provisions of the Lease.
2. COMMENCEMENT DATE: The Effective Date of this Lease shall be October
28, 1999. The first payment date and the Commencement Date for the Equipment
leased under this Schedule will be November 1, 1999.
3. TERM. The Term shall commence on the Commencement Date and shall
continue for forty two (42) consecutive months.
4. BASIC RENT. The Basic Rent due each month during the Term for the
Equipment described herein is as follows:
a. The first payment of Basic Rent under this Lease Schedule in an amount equal
to $153,798.57 (including sales tax) shall be due and payable on the first of
each month in advance. The Basic Rent is based on 744 new machines at an
approximate value of $7,743.10 per unit. The residual value is approximately
$1,200.00 per unit. The lease payment is calculated at $24.49 per month per
$1,000.00 of value as set forth above.
b. Payment of the Basic Rent in the amount of $153,798.57 shall be due and
payable on the first day of each month thereafter for forty one (41) consecutive
months.
c. In addition to this monthly Basic Rent due as set forth above, Lessee shall
pay Lessor an amount equal to all taxes which may be imposed by any federal,
state or local authority from time to time relating to this Lease, other than
any income taxes.
5. UPGRADES. After eighteen (18) months from the date of this Lease
Schedule the Lessee shall have the option to upgrade twenty five percent (25%)
of the Equipment subject to this Lease during any rolling twelve (12) month
period throughout the term of the Lease or any renewals. In the event Lessee
elects to upgrade the Equipment (such equipment replacing or used to upgrade the
Equipment to hereinafter be referred to as the "Replacement Equipment"), the
original Lease Schedule governing such upgraded Equipment shall be amended to
reduce the Basic Rent paid each month by an amount equal to the "Fair Market
Wholesale Value" of the upgraded equipment. For purposes of this Section 5,
"Fair Market Wholesale Vaule" means the amount that a willing licensed
distributor selling to a willing licensed buyer with both parties under no
compulsion to buy or sell, would pay for the upgraded Equipment. The Replacement
Equipment will be placed under a new lease schedule reflecting the terms and
rental factors consistent with the terms contained in the Lease and the original
Lease Schedule.
Lessor shall use its best efforts to obtain for Lessee's direct benefit
whatever exchange policy credits or conversions available from Equipment
manufacturers in connection with upgrading the Equipment and Lessor will assign,
and otherwise make available to Lessee all of its rights under any exchange
policy credits or conversions available from such vendors or manufacturers in
connection with upgrading the Equipment.
<PAGE> 11
6. All of the provisions of the Lease are incorporated by reference
herein as if set forth fully herein.
Jazz Casino Company, L.L.C. Harrah's Operating Company, Inc.
By: /s/ Frederick W. Burford By: /s/ Philip G. Satre
----------------------------------- -----------------------------
Its: President Its: Chairman and CEO
---------------------------------- -----------------------------
<PAGE> 12
LEASE SCHEDULE NO. 2 TO MASTER LEASE AGREEMENT
This Lease Schedule No. 2 is attached to and made a part of the Master
Lease Agreement ("Lease") between Harrah's Operating Company, Inc., a Delaware
corporation ("Lessor"), and Jazz Casino Company, L.L.C. ("Lessee"), dated
October 28, 1999.
1. DESCRIPTION OF EQUIPMENT. The Equipment listed on Attachment "B" to
this Lease Schedule is added to the Equipment leased under the Lease and made
subject to the provisions of the Lease.
2. COMMENCEMENT DATE: The Effective Date of this Lease shall be October
28, 1999. The first payment date and the Commencement Date for the Equipment
leased under this Schedule will be November 1, 1999.
3. TERM. The Term shall commence on the Commencement Date and shall
continue for thirty six (36) consecutive months.
4. BASIC RENT. The Basic Rent due each month during the Term for the
Equipment described herein is as follows:
a. The first payment of Basic Rent under this Lease Schedule in an amount equal
to $4,872.68 (including sales tax) shall be due and payable on the first of each
month in advance. The Basic Rent is based on 49 refurbished machines at an
approximate value of $3,149.03 per unit. The residual value is approximately
$400.00 per unit. The lease payment is calculated at $28.97 per month per
$1,000.00 of value as set forth above.
b. Payment of the Basic Rent in the amount of $4,872.68 shall be due and payable
on the the first day of each month thereafter for thirty five (35) consecutive
months.
c. In addition to this monthly Basic Rent due as set forth above, Lessee shall
pay Lessor an amount equal to all taxes which may be imposed by any federal,
state or local authority from time to time relating to this Lease, other than
any income taxes.
5. UPGRADES. After eighteen (18) months from the date of this Lease
Schedule the Lessee shall have the option to upgrade twenty five percent (25%)
of the Equipment subject to this Lease during any rolling twelve (12) month
period throughout the term of the Lease or any renewals. In the event Lessee
elects to upgrade the Equipment (such equipment replacing or used to upgrade the
Equipment to hereinafter be referred to as the "Replacement Equipment"), the
original Lease Schedule governing such upgraded Equipment shall be amended to
reduce the Basic Rent paid each month by an amount equal to the "Fair Market
Wholesae Value" of the upgraded equipment. For purposes of this Section 5, "Fair
Market Wholesale Vaule" means the amount that a willing licensed distributor
selling to a willing licensed buyer with both parties under no compulsion to buy
or sell, would pay for the upgraded Equipment. The Replacement Equipment will be
placed under a new lease schedule reflecting the terms and rental factors
consistent with the terms contained in the Lease and the original Lease
Schedule.
Lessor shall use its best efforts to obtain for Lessee's direct benefit
whatever exchange policy credits or conversions available from Equipment
manufacturers in connection with upgrading the Equipment and Lessor will assign,
and otherwise make available to Lessee all of its rights under any exchange
policy credits or conversions available from such vendors or manufacturers in
connection with upgrading the Equipment.
<PAGE> 13
6. All of the provisions of the Lease are incorporated by reference
herein as if set forth fully herein.
Jazz Casino Company, L.L.C. Harrah's Operating Company, Inc.
By: /s/ Frederick W. Burford By: /s/ Philip G. Satre
---------------------------------- --------------------------------
Its: Its: Chairman and CEO
--------------------------------- -------------------------------
<PAGE> 14
THERE IS NO SCHEDULE 3 LCF
LEASE SCHEDULE NO. 4 TO MASTER LEASE AGREEMENT
This Lease Schedule No. 4 is attached to and made a part of the Master
Lease Agreement ("Lease") between Harrah's Operating Company, Inc., a Delaware
corporation ("Lessor"), and Jazz Casino Company, L.L.C. ("Lessee"), dated
October 28, 1999.
1. DESCRIPTION OF EQUIPMENT. The Equipment shall consist of those 1085
machines listed on Attachment "D" to this Lease Schedule and is hereby added to
the Equipment leased under the Lease and made subject to the provisions of the
Lease.
2. COMMENCEMENT DATE: The Effective Date of this Lease shall be October
28, 1999. The first payment date and the Commencement Date for the Equipment
leased under this Schedule will be November 1, 1999.
3. TERM. The Term shall commence on the Commencement Date and shall
continue for forty four (44) consecutive months.
4. BASIC RENT. The Basic Rent due each month during the Term for the
Equipment described herein is as follows:
a. Months 1 -12 $ 35,044.00
b. Months 13-24 $ 70,061.00
c. Months 25-36 $262,461.00
d. Months 37-44 $262,461.00
e. In addition to this monthly Basic Rent due as set forth above, Lessee shall
pay Lessor an amount equal to all taxes, including Louisiana sales or use tax,
(7%) which may be imposed by any federal, state or local authority from time to
time relating to this Lease, other than any income taxes.
5. OPTION TO PURCHASE. Notwithstanding anything in this Lease or the
Purchase/Renewal Option to the contrary, Lessee may purchase the Equipment
listed herein at the following times for the following amounts:
a. At the end of 24 months $5,676,471.00
b. At the end of 36 months $2,877,681.00
c. At the end of 48 months $ 660,000.00
d. In addition to the Purchase Price set forth above, Lessee shall pay Lessor an
amount equal to all taxes, including Louisiana sales or use tax, (7%) which may
be imposed by any federal, state or local authority from time to time relating
to this Lease, other than any income taxes. Lessee shall also assume any
exisiting liens of any bank or any bondholders.
6. All of the provisions of the Lease are incorporated by reference
herein as if set forth fully herein.
Jazz Casino Company, L.L.C. Harrah's Operating Company, Inc.
By: /s/ Frederick W. Burford By: /s/ Philip G. Satre
-------------------------------- -------------------------------
Its: President Its: President
-------------------------------- ------------------------------
<PAGE> 15
CERTIFICATE OF DELIVERY, INSTALLATION AND ACCEPTANCE
TO: Harrah's Operating Company, Inc, a Delaware corporation ("Lessor")
FROM: Jazz Casino Company, L.L.C. ("Lessee")
RE: Master Lease Agreement dated as of October 28, 1999 ("Lease") and Lease
Schedules No. 1, 2, 3 and 4 dated as of the same date
PREMISES:
EQUIPMENT:
Lessee hereby certifies that the items of Equipment described in the
Lease (and attached hereto as Attachment A to Lease Schedule No. 1, and
Attachment B to Lease Schedule No. 2, Attachment C to Lease Schedule No. 3,
Attachment D to Lease Schedule No. 4 all of which are attached to the Master
Lease Agreement) has been delivered to and inspected by Lessee, installed in the
Premises, found to be in good order and accepted for all purposes of the Lease
as Equipment under the Lease, all on October 28, 1999 (the "Acceptance Date").
Lessee acknowledges Lessor's right, subject to the terms of the Lease,
to assign all or part of its interest under the Lease and/or all or part of
other sums due thereunder and that any such assignee of Lessor does not assume
any of the obligations of Lessor.
LESSEE ACKNOWLEDGES THAT EACH UNIT IS OF THE DESIGN, CAPACITY AND MANUFACTURE
SPECIFIED FOR AND BY THE LESSEE AND THAT LESSEE IS SATISFIED THAT THE SAME IS
SUITABLE FOR LESSEE'S PURPOSES. LESSEE AGREES, REGARDLESS OF CAUSE, NOT TO
ASSERT ANY CLAIM WHATSOEVER AGAINST LESSOR FOR LOSS OF ANTICIPATORY PROFITS OR
CONSEQUENTIAL DAMAGES. Without limiting the generality of the foregoing it is
intended by the parties to exclude any and all implied warranties of
merchantability and fitness for particular purposes.
LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A COPY OF AND UNDERSTANDS
THIS CERTIFICATE OF DELIVERY, INSTALLATION AND ACCEPTANCE, AND AGREES TO BE
BOUND BY ITS TERMS AND CONDITIONS. LESSEE AGREES THAT THE LEASE AND ALL RIDERS
AND SCHEDULES THERETO CONSTITUTE THE ENTIRE LEASE AND SUPERSEDE ALL PROPOSALS,
ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND ALL OTHER COMMUNICATIONS BETWEEN
LESSEE AND LESSOR WITH RESPECT TO ANY UNIT. THIS LEASE IS NOT CANCELABLE BY
LESSEE FOR THE TERM HEREOF.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Delivery, Installation
and Acceptance to be duly executed on this 28th day of October 1999, by its
authorized representative.
LESSEE:
Jazz Casino Company, L.L.C.
By: /s/ Frederick W. Burford
-----------------------------------
Its: President
-----------------------------------
<PAGE> 16
PURCHASE/RENEWAL OPTION
TO LEASE SCHEDULES NO. 1, 2, 3 AND 4
This Purchase/Renewal Option ("Purchase/Renewal Option") is attached to
and made a part of Lease Schedules No. 1, 2, 3 and 4 ("Lease Schedules") and the
Master Lease Agreement ("Lease") between Harrah's Operating Company, Inc., a
Delaware corporation ("Lessor"), and Jazz Casino Company, L.L.C., ("Lessee")
each dated October 28, 1999.
If Lessee has not been in default under the terms of the Lease, at the
expiration of the Term or any Automatic Renewal Term (as defined below), Lessor
grants Lessee an option to either (a) purchase (the "Purchase Option") all of
the Equipment described in the Lease Schedules for the sum equal to the fair
remarket value of the Equipment as of the date of expiration of the Term as
determined by an independent appraiser mutually selected by Lessor and Lessee
(the "Exercise Price") or (b) renew the Lease Term (the "Renewal Option") for a
period of two (2) years (the "Renewal Term") at the then fair market rental (the
"Rental") as mutually agreed to by Lessor and Lessee. The determination of the
Exercise Price by the appraiser shall be final. If the parties cannot agree upon
a fair market Rental, the Lessor and Lessee shall jointly select and mutually
agree upon an independent appraiser. The determination of the fair market Rental
by that appraiser shall be final. A written notice of exercise of the Purchase
Option or the Renewal Option must be given by Lessee ninety (90) days prior to
the expiration of the Term, any Renewal Term or any Automatic Renewal Term (the
"Notification Period"). Unless Lessee otherwise gives Lessor notice of its
intent to terminate the Lease in accordance with its terms, a written notice of
exercise of either the Purchase Option or the Renewal Option is not received
within the Notification Period, the Lease Term shall be automatically renewed
for an additional ninety (90) days at the Basic Rent as set forth under the
Lease Schedule (the "Automatic Renewal Term"). Upon timely receipt of such
notice of exercise, receipt of the payment of all Rent due under the Lease and
payment of the Exercise Price, Lessor will, with exercise of the Purchase
Option, execute and deliver to Lessee a Bill of Sale for the Equipment described
in the Lease Schedule or upon execution of a separate agreement if Lessee so
desires. Upon failure of the Lessor to so deliver a Bill of Sale, this
Purchase/Renewal Option shall then constitute a conveyance of the Equipment in
accordance herewith. Payment in full of the Exercise Price shall be due and
payable on or before the execution of the Term or any Automatic Renewal Term. At
the expiration of the Lease Term, Renewal Term or any Automatic Renewal Term,
Lessee may, upon ninety (90) days advance written notice, notify Lessor of its
decision to terminate the Lease Schedules and thereupon Lessee shall, at
Lessee's expense, return the Equipment to Lessor at a facility designated by
Lessor, according to the terms of the Lease. Lessee shall in all respects remain
obligated under the Lease for payment of Rent, care, maintenance, delivery, use
and insurance of the Equipment until Lessor inspects and accepts the Equipment.
In the event it shall at any time be determined that by reason of the options
hereby given or otherwise that the lease of the Equipment to which the Purchase
Option or the Renewal Option applies was in fact a sale to the Lessee of the
Equipment the Lessee agrees that neither it nor its successors or assigns has or
will have any claim or cause of action against Lessor, its successors or
assigns, for any reason for loss sustained by virtue of such determination.
Lessee acknowledges that if the Equipment is sold by Lessor under the Purchase
Option, it will be sold in an "AS IS, WHERE IS" condition. Lessor will represent
that at the time of the sale that it owns the Equipment, has a right to sell the
Equipment and there are no liens or encumbrances on the Equipment except as
previously disclosed to Lessee or otherwise accepted by Lessee and Lessor makes
or will make no other representations or warranties regarding the Equipment, its
suitability for Lessee's purpose, or its compliance with any laws. Other than as
set forth herein or expressly assumed by Lessee, Lessee acknowledges that if the
Equipment is sold by Lessor under the Purchase Option, Lessee will be required
to assume all liability for the Equipment and to indemnify Lessor per the terms
of the Lease for any claim arising out of the purchase of the Equipment.
LESSEE: LESSOR:
Jazz Casino Company, L.L.C. Harrah's Operating Company, Inc.
By: /s/ Frederick W. Burford By: /s/ Philip G. Satre
----------------------------------- ---------------------------------
Its: President Its: President
----------------------------------- --------------------------------
<PAGE> 17
EXHIBIT A
This is an informational filing pursuant to LA _________________ and
relates to equipment which is the subject of a true lease. Debtor grants to
Secured Party a security interest in and to all gaming and other equipment now
or hereafter leased or to be leased under that certain Master Lease Agreement
dated October 28, 1999 and Lease Schedules No. 1, 2, 3 and 4 thereto dated
October 28, 1999 (collectively, the "Lease"), by and between Secured Party, as
lessor, and Debtor, as lessee, including the equipment described in Attachment
"A" (the "Equipment") attached hereto and all of Debtor's interest in and to the
following:
1. All security deposits, holdbacks, reserves and other monies belonging or
payable to lessee in connection with the Lease and the Equipment (other than any
cash in or used in the operation of the Equipment); and
2. All accounts, chattel paper, contract rights, documents, equipment, fixture
general intangibles (patents, copyrights, tradenames and trademarks), goods,
instruments and inventory pertaining to the Lease and the Equipment (other than
any cash in or used in the operation of the Equipment); and
3. All accessions, accessories, additions, amendments, attachments,
modifications, replacements and substitutions to any of the foregoing; and
4. All proceeds and products of any of the foregoing; and
5. All policies of insurance pertaining to any of the foregoing as well as any
proceeds pertaining to such policies; and
6. All books and records pertaining to any of the foregoing.
Initials: ______
<PAGE> 18
SECRETARY'S CERTIFICATE
I, L. Camille Fowler do hereby certify that I am the Secretary of Jazz
Casino Company, L.L.C., organized and existing under and by virtue of the laws
of the state of Delaware having its principal place of business in the City of
New Orleans, State of Louisiana. In such capacity, I herby certify that the
following resolution was duly and regularly adopted by the Board of Directors of
said corporation (by unanimous consent), dated ___________________:
"RESOLVED, that the President, each Vice President and each other officer and
each agent of this entity indicated below, or any one of them be and they are
hereby authorized to negotiate and enter into leases or a master lease
agreement, lease schedules and any supplements thereto from time to time for and
on behalf of this entity with Harrah's Operating Company, Inc., ("HOC"), in such
amounts and upon such terms as said officer or agent shall deem to be in the
best interests of this entity and said officer or agent is hereby authorized and
empowered to enter into any agreement renewing, extending, altering, amending or
modifying said agreements and instruments at any time and from time to time and
to execute, for and on behalf of this entity, financing statements,
subordination agreements, riders, addendums and such other documents and
instruments as may be required by HOC to effectuate such agreements and
instruments, and any such agreement or instrument may contain a clause whereby
this entity waives its right to trial by jury with respect to actions brought by
or against HOC regarding this entity."
In such capacity, I further certify that said resolution (a) is not
contrary to the Certificate of Incorporation or Bylaws or other organizing
documents of said entity; (b) and has not been modified, repealed or rescinded
but is in full force and effect; and (c) said HOC may continue to rely upon said
resolution until an authorized representative of said entity provides HOC with
not less than ten (10) days prior written notice to the contrary.
I further certify that the following persons are the officers of said
entity duly authorized pursuant to the foregoing resolution, each holding the
respective offices set below their names and that the signatures set opposite
their respective names and offices are their genuine signatures:
Signature:
-----------------------------------------
Name: Frederick W. Burford
President and Chief Executive Officer
Signature:
-----------------------------------------
Name: L. Camille Fowler
Vice President-Finance, Treasurer and Secretary
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of said
entity this 28th day of October, 1999.
(Seal)
- ----------------------------------------
Secretary
Witness:
- ----------------------------------------
(Signature)
Print Name:
-----------------------------
<PAGE> 1
EXHIBIT 10.48
USED SLOT MACHINE PURCHASE AGREEMENT
This Used Slot Machine Purchase Agreement ("AGREEMENT") is dated
October 28, 1999 and is by and between HARRAH'S OPERATING COMPANY, INC., a
Delaware corporation with principal offices at 5100 West Sahara Avenue, Suite
200, Las Vegas, Nevada 89146 (hereinafter referred to as "BUYER") and JAZZ
CASINO COMPANY, L.L.C. with principal offices at 512 South Peters Street, New
Orleans, Louisiana, 70130 (hereinafter referred to as "SELLER"). BUYER and
SELLER are collectively referred to as the PARTIES and singularly as the PARTY.
WHEREAS, SELLER is the owner of a casino in New Orleans, Louisiana and
thereby owns certain used slot machines or other gaming devices and desires to
sell the machines; and
WHEREAS, BUYER is in the casino business and is approved to conduct
business in Louisiana involving slot machines and wishes to purchase the gaming
devices owned by SELLER.
NOW, THEREFORE, in consideration of the following terms and conditions,
it is agreed:
1. The recitals above are true and correct and are incorporated herein
by reference.
2. BUYER agrees to purchase from SELLER those 1085 gaming devices as
set forth with particularity on Exhibit A attached hereto for the sum of Six
Million Dollars and No Cents $6,000,000.00. To effectuate the acquisition BUYER
shall, at the time of delivery of the gaming devices, pay to SELLER the above
referenced amount.
3. The above purchase price reflects the machines in AS IS and WHERE IS
condition. BUYER has made a reasonable inspection of the machines and is
satisfied as to their condition and location. Title to and risk of loss as to
the machines shall pass to BUYER in New Orleans, Louisiana. BUYER takes title
subject to various liens as previously disclosed to BUYER.
4. SELLER only warrants and represents to BUYER that the programs
(EPROMs) in the gaming devices listed on Exhibit A are legal and valid in the
state where the machines are located and have been used in legal casino
operations and not for any illegal purpose. SELLER agrees to defend, indemnify
and hold harmless BUYER from any claims or damages that may arise in the event
BUYER receives gaming devices that contain programs (EPROMs) not in accordance
with applicable gaming requirements. SELLER makes no other express or implied
warranty whatsoever.
5. BUYER understands and agrees that SELLER shall incur no tax
liability, fees or expense of any kind whatsoever in consumating this
transaction, including but not limited to sales taxes, gaming device fees,
transfer fees or their equivalents, but excluding income taxes on the sale. In
the event there is any kind of tax liability resulting from this transfer,
including, but not limited to, a sales or use tax, any kind of slot machine
device tax, or fees to gaming authorities, the same shall be the sole
responsibility of BUYER. BUYER agrees to defend, indemnify and hold harmless
SELLER from any and all damages, impositions or liabilities. In addition,
shipping costs, or other necessary and incidental costs, shall be solely at the
expense of BUYER.
6. Both parties specifically warrant that they are in compliance, and
will at all times hereafter remain in compliance, with all laws, statutes,
rules, regulations or promulgation's applicable to sellers, distributors and/or
manufacturers of gaming machines and have full, complete and requisite authority
and licenses to buy, sell, transfer, lease or otherwise convey machines, parts
or products in the jurisdiction where the machines are located.
IN WITNESS WHEREOF the parties have set their hands and seals below
this 28th day of October 1999.
BUYER SELLER
Harrah's Operating Company, Inc., Jazz Casino Company, L.L.C.
By: /s/ Philip G. Satre By: /s/ Frederick W. Burford
--------------------------------- ----------------------------------
Name: Philip G. Satre Name: Frederick W. Burford
-------------------------------- ---------------------------------
Title: President Title: President
---------------------------- --------------------------------
<PAGE> 2
Exhibit B
Bill of Sale
Jazz Casino Company, L.L.C., as SELLER, and Harrah's Operating Company,
Inc., as BUYER, in consideration of Ten Dollars ($10.00) and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, does hereby grant, bargain, sell, transfer, convey, assign and
deliver to BUYER, all of SELLER'S right, title and interest in and to the slot
machines and equipment listed on Exhibit A attached hereto (the "Machines").
TO HAVE AND TO HOLD unto BUYER, its successors and assigns forever all
of the Machines hereby sold, transferred, conveyed, assigned and delivered, free
and clear of all liens, charges, pledges, security interests or other
encumbrances, except those previously disclosed to BUYER. Any and all taxes of
whatever kind or type, fees, or other impositions arising out of this
transaction shall be paid by the BUYER.
BUYER has not assumed, and by signing this Bill of Sale, shall not
assume or otherwise be responsible for any debt, liability or obligation of
SELLER regarding such Machines, except those previously disclosed to BUYER.
This Bill of Sale shall be governed by and construed in accordance with
the laws of the state of Louisiana. SELLER warrants and represents that this
transaction has been reported to and approved by the applicable gaming
authorities.
IN WITNESS WHEREOF, SELLER has caused this instrument to be signed by
its proper and duly authorized officer as of the 28th day of October 1999.
Jazz Casino Company, L.L.C.
By: /s/ Frederick W. Burford
------------------------------------
Name: Frederick W. Burford
----------------------------------
Title: President
---------------------------------
Accepted:
Harrah's Operating Company, Inc.,
By: /s/ Philip G. Satre
-------------------------------------
Name: Philip G. Satre
-----------------------------------
Title: Chairman and CEO
----------------------------------
<PAGE> 1
EXHIBIT 10.49
AGREEMENT
This agreement ("Agreement") is made by and between Jazz Casino
Company, L.L.C., a limited liability company organized and existing under the
laws of the State of Louisiana ("JCC") and Thomas M. Morgan (the "Leased
Executive"), to be effective as of January 1, 1999 (the "Effective Date").
Section 1. Performance Standard. During the term of this Agreement,
including any extension thereof, the Leased Executive agrees that he shall
devote his full time and attention to the execution of those duties and
responsibilities as may be agreed upon by the Leased Executive, JCC and/or
Harrah's Operating Company, Inc. ("HOC") from time to time (referred to herein
as the "Performance Standards").
Section 2. Reimbursement of Expenses. The Leased Executive will not be
relocating his principal residence to New Orleans; accordingly, JCC shall pay
and/or reimburse to or for the benefit of the Leased Executive the following
expenses: (i) reasonable expenses associated with his work in New Orleans
including, but not limited to, meals and travel expenses between his Memphis
home and New Orleans and reasonable local transportation in New Orleans (it is
understood that the reimbursement for travel expense includes commuting by the
Leased Executive between Memphis and New Orleans each weekend, during Holidays
and for other reasonable needs); (ii) the Leased Executive will lease an
apartment in New Orleans and JCC, subject to review and approval of the terms of
the lease, will reimburse the Leased Executive for his expenses pursuant to the
lease and certain additional related expenses such as utilities, cable charges
and telephone charges (and any rent or other payments required by any unexpired
term of the lease if this Agreement is terminated and the Leased Executive does
not continue to work or live in the New Orleans area) or JCC will pay such
expenses directly to the lessor; and (iii) if the Leased Executive incurs any
tax liabilities as a consequence of the amounts paid or reimbursed in accordance
with this Section 2, JCC shall reimburse the Leased Executive for the amount of
such additional tax.
Section 3. Remuneration. The parties acknowledge that HOC is and shall
remain the direct employer of the Leased Executive during the term of that
certain Executive Leasing Agreement between JCC and HOC, a copy of which is
attached hereto as Exhibit 1. During such term, the Leased Executive shall
receive his salary and benefits from HOC.
In addition, JCC shall make the following payments directly to the
Leased Executive on the dates, in the amounts, and subject to the terms and
conditions specified below.
i. As of January 3, 2000, a bonus equal to 45% of the
annualized base salary paid to the Leased Executive
by HOC, determined as of the date hereof. Any amount
payable hereunder shall be conditioned upon the
material and substantial performance by the Leased
Executive of the Performance Standards, such
performance to be determined in the sole discretion
of the President of JCC. The Leased Executive
acknowledges that upon execution of this Agreement,
HOC shall have no obligation to provide to the Leased
Executive any bonus with respect to service performed
for the benefit of HOC in 1999.
<PAGE> 2
ii. As of January 3, 2000, a single-sum payment in the
amount of $50,000, constituting payment for the
Leased Executive's hardship, dislocation and loss of
long-term compensation opportunities; provided,
however, that the payment of such amount shall be
conditioned upon the material and substantial
performance by the Leased Executive of the
Performance Standards, such performance to be
determined in the sole discretion of the President of
JCC.
iii. On or before January 3, 2000, in the form of a
single-sum payment, the value of the Leased
Executive's outstanding options and restricted stock
scheduled to vest and become exercisable and/or
transferrable as of January 1, 2001, such options and
restricted stock granted to such executive under the
Harrah's Entertainment, Inc. 1990 Stock Option Plan,
as amended, and the Harrah's Entertainment 1990
Restricted Stock Plan, as amended; provided that no
amount shall be paid to the Leased Executive
hereunder if and to the extent (a) the vesting of
such options and restricted stock is otherwise
accelerated by HOC or, the President of JCC, in his
sole discretion, determines that the vesting of such
options and restricted stock should have been
accelerated by HOC in accordance with the provisions
of that certain Work Assignment Agreement between the
Leased Executive and HOC dated as of November 15,
1999, or (b) the President of JCC determines, in his
sole discretion, that the Leased Executive has failed
to satisfy the Performance Standards described in
Section 1 hereof. For purposes of this Section 3iii,
the value of any option shall be the excess of the
closing share price of Harrah's Entertainment, Inc.
common stock on December 31, 1999, over the option
price of such stock. The value of restricted stock
shall be the closing share price of Harrah's
Entertainment, Inc. common stock as of December 31,
1999. The Leased Executive acknowledges that upon
receipt of the payment described herein, such options
and restricted stock shall be canceled and be deemed
forfeited, without necessity of further action.
Section 4. Indemnification. The parties acknowledge that during the
term of this Agreement and any period that Thomas M. Morgan serves as an officer
of JCC pursuant to the provisions of Section 6 hereof said Thomas M. Morgan has
been, is and for such period will be serving as an officer of JCC at the
specific request of JCC Holding Company and is entitled to the benefit of the
indemnification provided by Article VI of the Restated Certificate of
Incorporation of JCC Holding Company, a copy of which is attached hereto as
Attachment "A" and incorporated herein by reference.
Section 5. Termination; Amendment. This Agreement shall terminate as of
the termination of the Executive Leasing Agreement by and between HOC and JCC,
except that the obligations described in Sections 3 and 6 hereof shall survive
such termination. This Agreement may be amended by written act executed by the
parties hereto.
Section 6. Employment By JCC.
6.1 Effective as of January 3, 2000, JCC shall employ the Leased
Executive, on the terms and conditions stated in this Section 6, as a common law
employee of JCC, (i) for the three-month period ending March 31, 2000, or (ii)
for such longer period as the parties might agree to in writing as an amendment
to this Agreement pursuant to Section 5 hereof; provided, however, that JCC may
terminate the employment of the Leased Executive during such three month term,
or any extension so agreed to by amendment, if JCC determines in good faith that
the Leased Executive has materially and substantially failed to comply with any
Performance Standards established in accordance with Section 1 hereof.
-2-
<PAGE> 3
6.2 Subject to approval of this Section 6.2 by the JCC Compensation
Committee, during the period of employment specified in Section 6.1 hereof, or
such shorter period as will result if the Leased Executive terminates this
Agreement sooner, JCC shall pay to the Leased Executive, in accordance with
JCC's standard payroll practices and policies, a prorated base salary calculated
on the basis of the annualized base salary, exclusive of any bonus or benefits,
being paid to the Leased Executive by his current employer, HOC, as of the date
hereof.
6.3 Subject to approval of this Section 6.3 by the JCC Compensation
Committee, and in addition to any other payments required by this Agreement,
including any payments required under Sections 6.2 or 6.4, at the termination of
the period of employment specified in Section 6.1, or such shorter period as
will result if the Leased Executive terminates this Agreement sooner, JCC shall
pay to the Leased Executive a hardship payment calculated on the basis of an
annualize amount of $50,000, prorated for the actual number of days of his
employment pursuant to the provisions of Section 6.1 hereof; provided that such
payment shall be conditioned upon material and substantial compliance by the
Leased Executive with any Performance Standards established in accordance with
Section 1 hereof during the entire term of his employment as specified in
Section 6.1, including extensions, such performance to be determined in the sole
discretion of JCC; and
6.4 Subject to approval of this Section 6.4 by the JCC Compensation
Committee, and in addition to any other payments required by this Agreement,
including any payments required under Sections 6.2 or 6.3, at the termination of
the period of employment specified in Section 6.1 hereof, or such shorter period
as will result if the Leased Executive terminates this Agreement sooner, JCC
shall pay to the Leased Executive a bonus calculated on the basis of 45% of his
annualized base salary as provided for in Section 6.2 hereof, prorated for the
actual number of days of his employment pursuant to the provisions of Section
6.1 hereof; provided that such payment shall be conditioned upon material and
substantial compliance by the Leased Executive with any Performance Standards
established in accordance with Section 1 hereof during the entire term of his
employment as specified in Section 6.1, including extensions, such performance
to be determined in the sole discretion of JCC; and
6.5 Subject to approval of this Section 6.5 by the JCC Compensation
Committee, and in addition to the foregoing, JCC shall provide, effective as of
January 3, 2000 and until his employment terminates pursuant to Section 6.1
hereof or otherwise, coverage under the group medical plan maintained by JCC for
the benefit of its similarly situated executives or, if such coverage is not
feasible or available, JCC shall pay to or for the benefit of the Leased
Executive the amount of any premium necessary to maintain the Leased Executive's
coverage under the group medical plan maintained by HOC, whether pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") or otherwise.
JCC shall provide such additional benefits as are customarily provided by JCC to
its employees at grade level 29; provided however, that the Leased Executive
acknowledges that the amounts paid under Sections 6.3 and 6.4 of this Agreement
shall be in lieu of, and not in addition to, any severance pay and annual bonus
payable by JCC to such employees.
6.6 In the event that the JCC Compensation Committee does not approve
the compensation package described in Sections 6.2 through 6.5 hereof, Leased
Executive shall have the option to negotiate a new compensation package or to
terminate his services. If such negotiations become necessary, Leased Executive
and JCC shall negotiate in good faith to agree upon a compensation package which
is (i) as close as possible to that described in Sections 6.2 through 6.5 above
and (ii) acceptable to the JCC Compensation Committee.
-3-
<PAGE> 4
Section 7. Further Employment.
Any employment of Leased Executive by JCC beyond the term specified in
Sections 6.1(i) or 6.1(ii) shall be for such term and on such terms and
conditions as may be agreed to by the parties as a written amendment to this
Agreement, in accordance with Section 5 hereof.
THIS AGREEMENT was executed in multiple counterparts, each of which
shall be deemed an original as of the dates set forth below.
THOMAS M. MORGAN JAZZ CASINO COMPANY, L.L.C.
/s/ Thomas M. Morgan
- ---------------------------------------
By: /s/ Fredrick W. Burford
---------------------------------
FREDERICK W. BURFORD
President
Date: 12/15/99 Date:
-------------------------------- -------------------------------
JCC Holding Company executes this document solely for the purpose of
acknowledging that Thomas M. Morgan, during the term of this Agreement and any
period that he serves as an officer of JCC pursuant to the provisions of Section
6 hereof, has served, is serving and will serve as an offer of JCC at the
specific request of JCC Holding Company and is entitled to the benefit of the
indemnification provided by Article VI of the Restated Certificate of
Incorporation of JCC Holding Company, a copy of which is attached hereto as
Attachment "A" and incorporated herein by reference.
JCC HOLDING COMPANY
By: /s/ Frederick W. Burford
---------------------------------------------
FREDERICK W. BURFORD
President
Date:
-------------------------------------------
-4-
<PAGE> 5
ATTACHMENT "A"
RESTATED CERTIFICATE OF INCORPORATION
OF JCC HOLDING COMPANY
ARTICLE VI.
Section 6.1 Subject to Section 6.3, the Corporation (i) shall indemnify
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 (a) is or was a director
or officer of the Corporation, or (b) 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, and (ii) may, in the discretion of the Board
of Directors (but subject to the determinations required by Section 6.3),
indemnify 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 (a) is or was an
employee or agent of the Corporation, or (b) is or was serving at the request of
the Corporation as an employee or agent 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;
provided, however, that the Corporation shall not be obligated to indemnify any
such person who is a party to an action, suit or proceeding by reason of the
fact that such person is a plaintiff with respect to such action, suit or
proceeding. The termination of any action, suit or proceeding by judgment,
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 interest of the Corporation, or, with respect to any
criminal action or proceeding, had reasonable cause to believe his conduct was
unlawful.
Section 6.2 Subject to Section 6.3, the Corporation (i) shall indemnify
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 (a)
is or was a director or officer of the Corporation, or (b) 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, and (ii) may, in the
discretion of the Board of Directors (but subject to the determinations required
by Section 6.3), indemnify 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 (a) is or was an employee or agent of the Corporation, or (b) is or
was serving at the request of the Corporation as an employee or agent 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 interest of the Corporation; except that no 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 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 the Court of Chancery or such
other court shall deem proper.
-5-
<PAGE> 6
Section 6.3 Any indemnification under this Article VI (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, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.1 or Section 6.2, as the
case may be. Such determination shall be made (i) by the majority vote of the
directors who were not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by outside legal
counsel in a written opinion, or (iv) by the stockholders. To the extent,
however, that a present or former director or officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section 6.1 or Section 6.2, 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, without the necessity of authorization in the specific case.
Section 6.4 For purposes of any determination under Section 6.3, a
person shall be deemed to have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Corporation, and,
with respect to any criminal action or proceeding, to have had no reasonable
cause to believe his conduct was unlawful, if his action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to him by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in this
Section 6.4 shall mean any other corporation or any partnership, joint venture,
limited liability company, trust or other enterprise of which such person is or
was serving at the request of the Corporation as a director, officer, employee
or agent. The provisions of this Section 6.4 shall not be deemed to be exclusive
or to limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Section 6.1 or 6.2, as the
case may be.
Section 6.5 Notwithstanding any contrary determination in the specific
case under Section 6.3, and notwithstanding the absence of any determination
thereunder, any director or officer may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 6.1 and 6.2. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standards of conduct set forth in Sections 6.1
or 6.2, as the case may be. Notice of any application for indemnification
pursuant to this Section 6.5 shall be given to the Corporation promptly upon the
filing of such application.
Section 6.6 (a) The right to indemnification under this Article VI
shall be a contract right and shall include the right to have the Corporation
pay the expenses incurred in defending or investigating a threatened or pending
action, suit or proceeding in advance of the final disposition of such action,
suit or proceeding within 20 calendar days after receipt by the Corporation of a
statement or statements from the claimant requesting such advances from time to
time; provided, however, that, if and to the extent that the DGCL requires, the
payment of such expenses incurred by a director, officer, employee or agent in
such person's capacity as a director or officer in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director, officer, employee or agent,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section 6.6 or
otherwise.
-6-
<PAGE> 7
(b) If a claim under paragraph (a) of this Section is not paid
in full by the Corporation within 30 calendar days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standard of conduct which makes it permissible under
the DGCL for the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because the claimant has met the applicable standard of
conduct set forth in the DGCL, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 6.7 The indemnification and advancement of expenses provided by
this Article VI shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses may be entitled under
any Bylaw, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of, the persons indemnified in accordance with
Sections 6.1 and 6.2 shall be made to the fullest extent permitted by law. The
provisions of this Article VI shall not be deemed to preclude the
indemnification of, and advancement of expenses to, any person who is not
specified in Sections 6.1 or 6.2 but whom the Corporation has the power or
obligation to indemnify under the provisions of the DGCL, or otherwise. The
indemnification provided by this Article VI shall continue as to a person who
has ceased to be a director, officer, employee or agent of the Corporation and
shall inure to the benefit of the heirs, executors and administrators of such
person.
Section 6.8 The Corporation shall purchase and maintain insurance on
behalf of every person who is or was a director or an officer on or prior to the
Transition Date, and the Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or an officer after the Transition
Date, or any person who at any time is or was an officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent 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 or the obligation to
indemnify him against such liability under the provisions of this Article VI.
Section 6.9 For purposes of this Article VI, reference 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, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article VI with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
-7-
<PAGE> 8
Section 6.10 No director of this Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit. If
the DGCL is hereafter amended to authorize corporate action further limiting or
eliminating the personal liability of directors, then the liability of each
director of the Corporation shall be limited or eliminated to the fullest extent
permitted by the DGCL as so amended from time to time.
-8-
<PAGE> 1
EXHIBIT 10.50
EXECUTIVE LEASING AGREEMENT
(Mr. Thomas M. Morgan)
THIS EXECUTIVE LEASING AGREEMENT (the "Leasing Agreement") is made by
and between Harrah's Operating Company, Inc., a corporation organized and
existing under the laws of the State of Delaware ("HOC"), and Jazz Casino
Company, L.L.C., a limited liability company organized and existing under the
laws of the State of Louisiana ("JCC").
Section 1. Effective Date and Term. The term of this Leasing Agreement
shall commence as of January 1, 1999, and end as of January 3, 2000, unless
earlier terminated by either party hereto with 30 days prior written notice made
in accordance with Section 16 of this Leasing Agreement.
Section 2. Leased Executive. HOC and JCC agree that during the term of
this Agreement, Thomas M. Morgan (the "Leased Executive"), an employee of HOC,
shall perform such tasks and duties for the benefit of JCC as may be identified
from time to time by the President of JCC. The parties further agree that during
the term of this Agreement, the Leased Executive shall devote his full time and
attention to the performance of such tasks and duties.
The parties agree that if the employment of the Leased Executive with
HOC is terminated (whether voluntarily or involuntarily), HOC shall use its best
efforts to replace the executive with an executive who is acceptable to JCC, but
only for the remaining term of this Leasing Agreement, and it is understood and
agreed that HOC shall have no liability to JCC on account of such termination.
Section 3. Performance of Services. The parties agree that the services
provided by the Leased Executive for the benefit of JCC hereunder shall be
substantially performed from the business premises of JCC in New Orleans and, in
connection therewith, JCC agrees to provide such office space, administrative
and secretarial support, equipment and supplies as the Leased Executive may
reasonably require to perform such duties.
Section 4. Reimbursement of Expenses. Pursuant to the terms of a
separate agreement with the Leased Executive, JCC shall directly reimburse to
the Leased Executive reasonable expenses associated with the performance of his
duties hereunder, including travel expenses, meals, lodging and transportation
while in the New Orleans area. The Leased Executive shall provide such
documentation to JCC as JCC may reasonably request to substantiate such
expenses. JCC shall indemnify and hold harmless HOC for the payment of such
expenses.
Section 5. Status of Leased Executive. HOC and JCC acknowledge that the
Leased Executive is and shall remain an employee of HOC. HOC is and shall remain
solely responsible for all matters related to: (a) the payment of compensation,
(b) the payment, withholding and remittance of all applicable Federal and state
income and employment taxes, (c) the provision of
<PAGE> 2
workers' compensation insurance, and (d) the provision of additional fringe
benefits, each with respect to the Leased Executive. HOC agrees to indemnify and
hold harmless JCC from any penalty, tax, liability or other damage arising from
HOC's failure to perform the obligations set forth in this Section 5.
Section 6. Remuneration of Leased Executive. HOC shall pay such amounts
and provide such benefits to the Leased Executive as may be agreed upon by HOC
and the Leased Executive, from time to time. Such compensation and benefits may
include coverage under the benefit plans, policies and programs regularly
maintained by HOC for the benefit of its employees and similarly situated
executives. Such compensation and benefits shall be paid at such times and in
such manner as may be agreed upon by HOC and the Leased Executive.
The parties hereto intend that any service rendered by the Leased
Executive for the benefit of JCC, including any compensation paid to the Leased
Executive by HOC with respect thereto, shall be treated as service with HOC for
purposes of coverage under or the determination of any benefit payable from any
employee benefit plan, policy or program maintained by HOC, including, without
limitation, any such qualified employee benefit plan. HOC agrees to use its best
efforts to ensure that such service and compensation is properly credited in
accordance with the provisions of this Section 6.
Section 7. Administration, Training and Discipline of Executive. During
the term of this Agreement, HOC shall remain responsible for the training,
evaluation, discipline and termination of the Leased Executive. Notwithstanding
the foregoing, JCC, through its President, shall be entitled to supervise and
direct the Leased Executive as to the performance of those duties and
responsibilities that are agreed upon by the Leased Executive, JCC and/or HOC
from time to time.
Section 8. Payment by JCC. During the term of this Leasing Agreement,
JCC shall reimburse to HOC the amounts actually paid to Leased Executive by HOC,
representing monthly payments of the Leased Executive's base salary and benefits
in effect, from time to time, during the term of this Agreement and with respect
to which months the Leased Executive performs services hereunder.
Unless this Leasing Agreement is amended in accordance with the
provisions of Section 19 hereof, JCC shall not be responsible for payments in
excess of the foregoing amounts.
Section 9. Status as an Employer. The parties acknowledge that the
services provided by the Leased Executive hereunder (whether characterized as a
direct, borrowed, special or statutory employee) are an integral part of and are
essential to the business and operations of JCC. JCC and HOC agree that
notwithstanding any characterization of JCC as the special, principal or
statutory employer of such executive under applicable law, HOC shall remain
primarily responsible for the payment of applicable worker's compensation
benefits to such Leased Executive, shall not be entitled to seek contribution
for any such payment from JCC, and HOC shall indemnify and hold harmless JCC for
any and all workers' compensation payments made by JCC to such executive.
During the term of this Leasing Agreement, HOC shall procure and
maintain worker's compensation insurance with respect to the Leased Executive in
form and substance satisfactory to JCC.
<PAGE> 3
Section 10. Indemnification reimbursement. JCC acknowledges that the
Leased Executive is a party to the Indemnification Agreement, effective February
22, 1996, between Harrah's Entertainment, Inc. and the Leased Executive, a copy
of which is attached hereto as Exhibit "A" (the "Indemnification Agreement"),
which provides for, under certain circumstances, the indemnification of the
Leased Executive. JCC agrees that should the Leased Executive become entitled to
any indemnity payment or Expense Advance as a result of an Indemnifiable Event,
as such terms are defined in or contemplated by the Indemnity Agreement,
occurring while the Leased Executive is performing tasks or duties for the
benefit of JCC under Section 2 hereof, JCC will reimburse the party making such
payment to, or on behalf of the Leased Executive; provided, however, that in any
such event, legal counsel appointed to represent the interests of the Leased
Executive shall be selected by the mutual agreement of JCC and HOC after
obtaining the views of Thomas M. Morgan with respect to the said counsel.
Section 11. Waiver. The failure by any party to enforce any of its
rights hereunder shall not be deemed to be a waiver of such rights, unless such
waiver is an express written waiver. Waiver of any one breach shall not be
deemed to be waiver of any other breach of the same or any other provision
hereof.
Section 12. Employment Rights. This Leasing Agreement is solely for the
benefit of HOC and JCC and is not intended to constitute or create or vary any
contract or arrangement as between the Leased Executive and JCC, or to modify
the existing employment relationship as between HOC and the Leased Executive.
Section 13. Governing Law. The validity of this Leasing Agreement, the
construction of its terms and the determination of the rights and duties of the
parties hereto shall be governed by and construed in accordance with federal
laws and regulations and the internal laws of the State of Louisiana applicable
to contracts made and to be performed wholly within such state.
Section 14. Counterparts. This Leasing Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
Section 15. Headings. The headings of sections and subsections hereof
are included solely for the convenience of reference and shall not control the
meaning or interpretation of any of the provisions of the Leasing Agreement.
Section 16. Assignment. This Leasing Agreement and all obligations of
JCC and HOC hereunder shall be binding on such parties and on any successor
thereto. This Leasing Agreement may not be assigned, in whole or in part, by JCC
or HOC, as the case may be, without the express written consent of the other
party; provided, however, that either party may assign this Leasing Agreement,
without consent, to any affiliate or successor, if such assignment is part of a
reorganization whereby substantially all of the party's business or operations,
or in the case of HOC, the unit or component of HOC's business or operations to
which the Leased Executive has heretofore been assigned, is transferred to such
affiliate or successor.
Section 17. Notices. All notices, requests, demands and other
communications provided for by this Leasing Agreement shall be in writing and
may be delivered in person, delivered
<PAGE> 4
by overnight courier, transmitted by telecopier with transmission confirmed or
mailed by United States mail, postage prepaid, addressed as follows:
If to HOC: Harrah's Operating Company, Inc.
5100 West Sarah Boulevard Suite 200
Las Vegas, Nevada 89146
Attn: Stephen H. Brammell
Fax: (702) 579-2671
If to JCC: Jazz Casino Company, L.L.C.
512 South Peters St.
New Orleans, Louisiana 70130
Attn: Mr. Frederick Burford
Fax: 504-533-6185
Notices hereunder shall be deemed given upon receipt.
Section 18. Integration and Amendment. The terms of this Leasing
Agreement supersede any prior agreement or understanding, whether written or
oral, relating to such subject matter hereof. No modification or amendment to
this Leasing Agreement shall be effective or binding unless in writing,
specifying such modification or amendment, executed by both parties hereto.
Section 19. Insurance; Liability. HOC shall have no liability for the
negligence, error or nonperformance of the Leased Executive with respect to the
services described herein. During the term of this Leasing Agreement, JCC agrees
to procure and maintain an employer's liability policy in form and amount
satisfactory to HOC, which shall include coverage against any claim arising out
of or attributable to any error, act or omission or negligent or fraudulent act
by the Leased Executive while performing services to or for the benefit of JCC
in accordance with the terms of this Leasing Agreement. Such policy shall
contain a specific endorsement naming HOC as an additional insured for the
purposes of this Leasing Agreement and all deductibles, shall be assumed by, for
the account of, and at JCC's own expense and risk.
Section 20. Amendment. This Leasing Agreement, including any exhibits
hereto, may be amended by written act executed by the parties hereto.
THIS EXECUTIVE LEASING AGREEMENT was duly executed by the parties
hereto in multiple counterparts, each of which shall be deemed an original, to
be effective as of the date designated in Section 1 hereof.
Harrah's Operating Company, Inc. Jazz Casino Company, L.L.C.
By: /s/ Colin V. Reed By: /s/ Frederick W. Burford
----------------------------------- -------------------------------
Name: Colin V. Reed Frederick W. Burford
--------------------------------- President
Title: Executive Vice President
--------------------------------
Date: Date:
--------------------------------- --------------------------
<PAGE> 1
EXHIBIT 10.51
AGREEMENT TO PURCHASE AND SELL
This Agreement to Purchase and Sell is made and entered into as of
February 14, 2000, by and between JCC Fulton Development, L.L.C., a Louisiana
limited liability company, and WI Acquisition Corporation, a Delaware
corporation, on the following terms and conditions.
Article 1
Definitions
1. Definitions. As used in this Agreement, the following terms have the meaning
herein set forth:
1.1 "Additional Deposit" means the sum of $150,000.00 together with any
accrued interest thereon.
1.2 "Agreement" means this Agreement for Purchase and Sale.
1.3 "Business Days" means Monday through Friday inclusive, excluding
national holidays.
1.4 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as
amended.
1.5 "Claim" means any claim, liability, demand, loss, damage,
deficiency, litigation, cause of action, penalty, fine, judgment, defense,
imposition, fee, lien, bonding cost, settlement, disbursement, penalty, cost or
expenses of any and every kind and nature (including without limitation
Litigation Expenses), whether known or unknown, incurred or potential, accrued,
absolute, direct, indirect, contingent or otherwise and whether imposed by
strict liability, and consequential, punitive and exemplary damage claims.
1.6 "Closing" means the closing of the purchase and sale of the
Property pursuant to this Agreement.
1.7 "Closing Date" means the date on which the Closing occurs.
1.8 "Closing Documents" means the documents to be executed by the
Parties at Closing.
1.9 "Closing Effective Date" shall be 12:01 a.m. central standard time
on the date immediately following the Closing Date.
1.10 "Commitment" means an owner's title policy commitment issued by
the Title Company dated no earlier than the Effective Date.
<PAGE> 2
1.11 "Days" refers to calendar days except as used in "Business Days".
1.12 "Default" means a breach of any provision of this Agreement by a
Party.
1.13 "Deposit" means the sum of $300,000.00 together with any accrued
interest thereon.
1.14 "Effective Date" is the date on which the last Party executes this
Agreement.
1.15 "Encumbrances" means any lien, privilege, charge, servitude,
easement, option, right of first refusal, conditional sales contract, mortgage,
security interest or encumbrance, including liens, charges, security interests,
or encumbrances securing payment of Claims or payment of charges for labor,
materials, supplies, equipment, rent, or utilities.
1.16 "Environmental Requirements" means all Governmental Regulations
and all other agreements and other restrictions and requirements in effect on or
prior to the Closing Date of any Governmental Authority relating to the
regulation or protection of human health and safety, natural resources,
conservation, the environment, or the storage, treatment, disposal, processing,
release, discharge, emission, use, remediation, transportation, handling, or
other management of industrial, gaseous, liquid or solid waste, hazardous waste,
hazardous or toxic substances or chemicals, or pollutants. The term shall
specifically include, without limitation, the regulations of the federal Public
Health Service and Department of Transportation concerning the transport of
etiologic agents or similar agents, the regulations of the Nuclear Regulatory
Commission concerning radioactive materials and waste, the regulations of the
Occupational Safety and Health Administration, and the following environmental
laws: The Clean Air Act (42 U.S.C.A. Section 1857); the Federal Water Pollution
Control Act (33 U.S.C. Section 1251); the Resource Conservation and Recovery Act
of 1978, (42 U.S.C. Section 6901); the Resource Conservation and Recovery Act of
1976, (42 U.S.C. Section 6901); CERCLA, as amended by the Superfund Amendments
and Reauthorization Act of 1986 (Pub. L. 99-499, 100 Stat. 1613); the Toxic
Substance Control Act (15 U.S.C. Section 2601), the Clean Water Act (33 U.S.C.
Section 1251); the Safe Drinking Water Act (42 U.S.C. Section 30); the
Occupational Safety and Health Act (29 U.S.C. Section 651); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 135); the
Louisiana Environmental Quality Act (La. R.S. 30:2001); and the Louisiana Air
Quality Regulations (La. C. 33:lll.2595) including any amendments or extensions
thereof and any rules, regulations, standards or guidelines issued pursuant to
or promulgated under any of the foregoing.
1.17 "Governmental Authority" means any federal, State, parish,
regional, or local government, political subdivision, any governmental agency,
department, authority, instrumentality, bureau, commission, board, official, or
officer, any court, judge, examiner, or hearing officer, any legislative,
judicial, executive, administrative, or regulatory body or committee or official
thereof or private accrediting body.
1.18 "Governmental Regulation" means laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, writs, injunctions, rules, regulations,
restrictions, permits, plans, authorizations,
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<PAGE> 3
concessions, investigation reports, guidelines, and requirements or
accreditation standards of any Governmental Authority.
1.19 "Hazardous Substance" means (a) any "hazardous substance" as
defined in Section 101(14) of CERCLA or any regulations promulgated thereunder;
(b) petroleum and petroleum by-products; (c) asbestos or asbestos-containing
material ("ACM"); (d) polychlorinated biphenyls; (e) urea formaldehyde foam
insulation; or (f) any additional substances or materials which at any time are
classified, defined or considered to be explosives, corrosive, flammable,
infectious, radioactive, mutagenic, carcinogenic, pollutants, hazardous or toxic
under any of the Environmental Requirements.
1.20 "Indemnified Party" means the Party entitled to indemnification
pursuant to this Agreement.
1.21 "Inspection Period" shall have the meaning provided in Section
8.1.
1.22 "Indemnifying Party" means the Party obligated to provide
indemnification pursuant to this Agreement.
1.23 "IRC" means the Internal Revenue Code of 1986, as amended, and any
and all regulations and rulings promulgated thereunder.
1.24 "Lender Consent" means any consents from any and all lenders or
security holders that may be required in order for Seller to sell the Property
as contemplated by this Agreement, free and clear of any and all liens,
encumbrances and security interests in favor of such lenders or security
holders.
1.25 "Litigation Expenses" means all out-of-pocket costs and expenses
incurred as a result of a Default, including the expenses of accountants,
experts, consultants, attorneys, legal assistants, paralegals, law clerks, and
others under such attorney's supervision and control, and all court costs and
expenses.
1.26 "Other Parties" means any Person other than a Party.
1.27 "Party" or "Parties" means Seller and Purchaser, individually and
collectively.
1.28 "Person" means all juridical persons, whether corporate or
natural, including individuals, firms, trusts, corporations, associations, joint
ventures and partnerships.
1.29 "Property" means all of Seller's right, title and interest in and
to the immovable property more fully described on Exhibit 1 attached hereto,
including without limitation the following described property:
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<PAGE> 4
(a) All of the improvements thereon;
(b) Any rights, title and interest of Seller in and to adjacent
streets, roads, alleys and rights of way;
(c) All the rights, ways, easements, privileges, servitudes, and
advantages belonging or in anywise appertaining to such
land, buildings, improvements, and other real property; and
(d) All intangible (incorporeal) property related to Seller's
use and ownership of the real property, including all rights
of Seller under any agreements with Badine Land, Limited,
including specifically that certain Air Rights Agreement
dated December 17, 1998.
1.30 "Purchaser" means the WI Acquisition Corporation and/or its
successors and assigns.
1.31 "Purchaser Group" means Purchaser and its affiliates,
subsidiaries, owners, representatives, agents, servants, officers, attorneys and
employees, individually and collectively.
1.32 "Purchaser's Inspections" means the inspections, review,
observations, studies, examinations, probes and research conducted by Purchaser
in connection with its inspections of the Property as provided for in Article 8.
1.33 "Seller" means JCC Fulton Development, L.L.C. and its successors
and assigns, individually and collectively.
1.34 "Seller Group" means Seller, and its affiliates, subsidiaries,
owners, representatives, agents, servants, officers, attorneys and employees,
individually and collectively.
1.35 "State" means the State of Louisiana.
1.36 "Survey" means a survey of the Property in form satisfactory to
Purchaser that contains, without limitation, the following characteristics:
(a) Be staked on the ground; and
(b) Show the:
(1) Location of all Improvements (both those completed and
those under construction), highways, streets, roads,
driveways, parking areas, railroads, fences, easements,
and rights-of-way,
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<PAGE> 5
(2) Location of all utilities servicing the Property or
easements on the Property;
(3) The gross number of square feet contained in the
Property.
(4) Reference bench mark utilized by the surveyor.
(5) Any encroachments upon the Property; and
(c) Contain a metes and bounds description of the land
comprising the Property. The beginning point of the metes
and bounds description should be established by a monument
or by reference to a nearby monument, and such description
should refer to all streets, roads, alleys, and other
rights-of-way that abut the Property and recite the width
thereof; and
(d) Contain the surveyor's certification addressed to Purchaser
and the Title Company stating, among other things, that
there are no encroachments across the boundary lines of the
Property, and that the Property has adequate access to
public rights-of-way.
1.37 "Title Agent" means Key Title Agency, New Orleans, Louisiana.
1.38 "Title Company" means Lawyers Title Insurance Company.
1.39 "Transaction" means the transaction contemplated under this
Agreement.
Article 2
Purchase and Sale
2.1 Sale of Property. At the Closing, Seller agrees to sell, convey,
transfer, assign, and deliver to Purchaser, and Purchaser agrees to purchase
from Seller, the Property, with limited warranty of title, Seller warranting
title for the duration of its ownership of the Property, but not otherwise, for
the sum of Six Million Five Hundred Thousand and No/100 ($6,500,000.00) Dollars
cash ("Cash Consideration").
Each of Seller and Purchaser acknowledge and agree that no
representations or warranties have been made by Seller with respect to the
Property, or the transaction contemplated by this Agreement other than those
expressly set forth in Article 4 of this Agreement. Purchaser acknowledges that
Purchaser will undertake an independent inspection of the Property and agrees
that, subject to the representations and warranties of Seller set forth in said
Article 4, Purchaser is purchasing the Property absolutely "AS IS, WHERE IS" in
its present state of condition, with all faults, including latent defects, and
Seller makes no representations or warranties of any kind, express, implied or
statutory, as to the condition of the Property. Purchaser is not relying on any
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<PAGE> 6
representations or warranties of Seller except as may be expressly set forth in
this Agreement. The act of sale transferring the Property shall contain the
following provisions:
THIS PROPERTY IS SOLD by Vendor and purchased by Purchaser "AS
IS, WHERE IS" and "WITH ALL FAULTS," with no warranty of condition
whatsoever, either expressed or implied, even for the return of the
purchase price, with Purchaser expressly waiving any and all other
warranties, including those pertaining to fitness for a particular use,
soil conditions, zoning or other use restrictions, compliance with the
provisions of the Americans with Disabilities Act, or any environmental
matters, as well as those warranties against hidden, latent, or
redhibitory defects. Without limitation of the generality of the
foregoing, Purchaser hereby expressly waives and renounces any and all
rights or claims which it has or may have for redhibition, reduction of
the purchase price, and/or quanti minoris, whether under articles 2520
et seq. of the Louisiana Civil Code or otherwise. Purchaser has
inspected the property to the extent it deems necessary and is
satisfied with the condition thereof. Purchaser acknowledges and
declares that neither the Vendor nor any party, whomsoever, acting or
purporting to act in any capacity whatsoever on behalf of the Vendor
has made any direct, indirect, explicit or implicit statement,
representation or declaration, whether by written or oral statement or
otherwise, and upon which Purchaser has relied, concerning the
existence or non-existence of any quality, characteristic or condition
of the property herein conveyed. Purchaser has had full, complete and
unlimited access to the property herein conveyed for all tests and
inspections which Purchaser, in its sole discretion deems sufficiently
diligent for the protection of its interests. Purchaser acknowledges
and agrees that the foregoing disclaimer and waiver of warranties have
been fully explained to Purchaser and that Purchaser understands the
same. Purchaser and Vendor jointly acknowledge and agree that the
foregoing waivers and disclaimers are of the essence of this
transaction and the same would not otherwise have been entered into or
consummated. By its signature Purchaser expressly acknowledges all such
waivers, and its exercise of Purchaser's right to waive warranty
pursuant to Louisiana Civil Code Articles 2503 and 2548.
________ Purchaser hereby acknowledges that the waiver of
Purchaser's warranty contained in Purchaser's this document has
Initials been fully explained to Purchaser by Purchaser's
attorney and/or the closing notary, and Purchaser
understands that by completing the sale containing
these terms Purchaser is giving up its rights to get
any money back or compensation from the Vendor in the
event Purchaser discovers problems with the property,
or any part of or equipment located or used on the
property. Understanding this, Purchaser agrees to this
provision
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<PAGE> 7
2.2 Payment of Cash Consideration. The Cash Consideration shall be due
and payable at Closing by wire transfer of immediately available funds or as
Seller shall otherwise designate in writing. At the Closing, the Cash
Consideration due from Purchaser to Seller shall be reduced by the amount of the
Deposit and Additional Deposit, if any.
2.3 Apportionment. Notwithstanding the foregoing provisions of this
Article 2, the actual amount to be paid to Seller at the Closing will be subject
to adjustment based on the apportionments and costs and expenses which the
Parties are required to pay at the Closing pursuant to this Agreement.
2.4 Deposit. On the Effective Date, Purchaser shall deliver to the
local office of the Title Company by wire transfer or check the amount of Three
Hundred Thousand Dollars and No/100 ($300,000.00) as the Deposit. The Deposit
shall be held in escrow by the Title Company and disbursed in accordance with
the terms of this Agreement. The Deposit shall not be earnest money, and
Purchaser reserves the right to demand specific performance.
2.5 Additional Deposit. On any day through the 30th day after the
termination of the Inspection Period, Purchaser may extend the Closing deadline
established in Section 11.1 an additional 60 days by delivering by wire transfer
or check the amount of $150,000.00 to the Title Company as the Additional
Deposit. The Additional Deposit will be distinct from and in addition to the
Deposit, but will be subject to all of the same terms and conditions of this
Agreement as the Deposit.
2.6 Repurchase Option. At Closing, Seller and Purchaser shall execute
documentation acceptable to each Party (and agreed to as to form and substance
prior to the end of the Inspection Period) providing that if by the second
anniversary of the Closing Date construction on the Property of a hotel designed
to have at least 300 guest rooms has not substantially commenced then Seller
will have the right to repurchase the Property (the "Repurchase Option"). The
Repurchase Option will terminate if Seller does not exercise the Repurchase
Option within ninety (90) days of the second anniversary of the Closing Date.
Seller must close its purchase within thirty (30) days of exercising the
Repurchase Option. If the Repurchase Option is exercised, Seller will pay
Purchaser $6,500,000.00 plus interest at the rate of 7% from the Closing Date to
the date on which Seller closes its repurchase of the Property. If Seller
exercises the Repurchase Option, Purchaser will convey the Property to Seller by
special warranty deed (i.e. warranty only as to Purchaser's own acts) and free
of any consensual monetary liens and mortgages but subject to any other title
exceptions in effect as of the Closing Date or created thereafter.
Article 3
Liabilities
3.1 Purchaser Liabilities. Notwithstanding anything in this Agreement
to the contrary or in any other agreement or document executed by Purchaser in
connection with this Agreement or the Transaction, Purchaser Group shall not
incur any pecuniary, financial or personal liability or
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<PAGE> 8
obligation whatsoever, whether known or unknown, accrued, absolute, direct,
indirect, contingent or otherwise, for Claims accruing prior to the Closing
Date, or which arises after the Closing Date but are based on facts,
circumstances, events, or actions of Seller prior to the Closing Date, including
but not limited to any pecuniary, financial or personal liability or obligations
for Claims arising out of or resulting from the ownership, operation, leasing,
use and maintenance through the Closing Date by Seller of the Property.
If the Closing fails to occur solely as a result of an uncured Default
by Purchaser, Seller will be entitled to retain the Deposit and the Additional
Deposit, if any, as its sole and exclusive remedy for this Default. Except as
provided in the preceding sentence, Purchaser shall have no further obligation
to Seller under this Agreement as of the Closing Date, and under no
circumstances will Purchaser Group incur any pecuniary charge or financial
liability to Seller or any Person claiming by or through Seller with respect to
Purchaser's performance under this Agreement. Seller waives any right to
specific performance.
The Purchaser shall be liable for all Claims of Other Parties arising
after the Closing Date and arising out of or resulting from the ownership,
operation, leasing, use and maintenance of the Property including, without
limitation:
(a) Claims for taxes, assessments, fees and penalties due or
accrued with respect to the Property after the Closing
Effective Date to Governmental Authorities; and
(b) Claims arising from or in connection with (i) the presence
of Hazardous Substances in, on, under, at, or emanating
from, the Property after the Closing Effective Date; (ii)
any violation of Environmental Requirements by Purchaser or
any other Person in connection with the Property or the use
of the Property occurring after the Closing Effective Date.
except for (i) Claims arising after the Closing Date but that are based on
facts, circumstances, events or actions of Seller prior to the Closing Date or
(ii) Claims that the Seller is otherwise liable for pursuant to Section 3.2
below.
3.2 Notwithstanding anything in this Agreement to the contrary or any
other agreement or document executed by Seller in connection with this Agreement
or the Transaction, Seller Group shall not have any pecuniary, financial or
personal liability or obligation whatsoever, whether known or unknown, accrued,
absolute, direct, indirect, contingent or otherwise, for Claims accruing after
the Closing Date unless such Claims are based on facts, circumstances, events,
or actions of Seller prior to Closing Date, including but not limited to any
pecuniary, financial or personal liability or obligation for Claims arising out
of or resulting from the ownership, operation, leasing, use and maintenance
after the Closing Date by Purchaser of the Property.
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<PAGE> 9
3.3 Seller's Liabilities. Seller shall be solely liable for all Claims
of Other Parties, whether known or unknown, accrued, absolute, direct, indirect,
contingent or otherwise, accruing prior to the Closing Effective Date, or which
arise after the Closing Effective Date but are based on facts, circumstances,
events, or actions of Seller Group prior to the Closing Effective Date in
connection with the Property, including without limitation, the following:
(a) Claims for taxes, assessments, fees and penalties due or
accrued with respect to the Property prior to the Closing
Effective Date to Governmental Authorities; and
(b) Claims arising from or in connection with (i) the presence
of Hazardous Substances in, on, under, at, or emanating
from, the Property on the Closing Effective Date; (ii) any
violation of Environmental Requirements by Seller or any
other Person in connection with the Property or the use of
the Property occurring prior to the Closing Effective Date.
3.4 Acknowledgments. Seller and Purchaser each acknowledge the
provisions of this Article 3, and, particularly, the limitations on each party's
liability under this Agreement. Seller and Purchaser each hereby waive and
release any and all Claims each party may have against the other party
consistent with the provision of this Article 3, and each party's acts or
failure to act with respect to the matters set forth in this Article 3. The
provisions of this Article 3 shall survive Closing.
Article 4
Representations and Warranties of Seller
Seller represents and warrants to Purchaser as follows:
4.1 Agreement Not in Breach of Other Instruments. Neither the
execution, delivery, or performance of this Agreement or any other agreement
contemplated hereby, nor the compliance with the respective terms and provisions
hereof or thereof, nor the consummation of the Transaction, will: (a) conflict
with or result in a breach of any of the terms, conditions, or provisions of, or
constitute a default under, any agreement or instrument to which Seller is a
party or is subject; (b) conflict with, or result in a breach of any agreement
or instrument reflected in public records or, to the best of Seller's knowledge,
to which any predecessor of Seller is a party, or to which the Property is
subject; (c) violate any restriction to which Seller or, to the best of Seller's
knowledge, to which any predecessor of Seller is a party, or to which the
Property is subject; (d) to the best of Seller's knowledge, constitute a
violation of any Governmental Regulation; (e) result in the acceleration of any
Encumbrance pertaining to the Property, or the cancellation of any agreement
pertaining to the Property; or (f) result in the creation of any Encumbrance
upon the Property.
4.2 Binding Obligation. This Agreement, to the extent permitted by
Governmental Authority and Governmental Regulation, constitutes the valid and
binding agreement of Seller, enforceable in accordance with its terms (except as
enforceability may be restricted or delayed by
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<PAGE> 10
bankruptcy, insolvency, moratorium or similar laws affecting or relating to the
enforcement of creditors' rights in general and by general principles of
equity).
4.3 Broker's Fee. Seller agrees to hold Purchaser harmless from and
against any and all claims and demands by any real estate agent and/or broker
engaged by Seller with respect to the purchase and sale contemplated under this
Agreement.
4.4 Environmental Matters. To Seller's knowledge and except as may be
reflected in that certain Phase I Environmental Site Assessment by W.D. Scott
Group, Inc. dated March 10, 1992, designated as SGI Project Number 24-1336-033:
(a) the ownership and operation of the Property and any use, storage, treatment,
disposal, or transportation of Hazardous Substances that has occurred in or on
the Property prior to the date of this Agreement have been in compliance with
all applicable Environmental Requirements; (b) during the ownership and
operation of the Property by Seller, no release, leak, discharge, spill,
disposal, or omission of Hazardous Substances has occurred in, on, or under the
Property in a quantity or manner that violates or requires further investigation
or remediation under Environmental Requirements; and (c) the Property is free of
Hazardous Substances in unlawful quantities as of the date of this Agreement.
Seller represents and warrants that to Seller's knowledge there is no pending or
threatened litigation or administrative investigation or proceeding concerning
the Property involving Hazardous Substances or Environmental Requirements.
Seller represents and warrants that to Seller's knowledge there are no
asbestos-containing material within the Property, whether friable or
non-friable.
4.5 Leases. To the best of Seller's knowledge, and except as may be
shown in the First American Title Insurance Company Policy No. D102642 dated
October 30, 1998, and the survey by Gandolfo Kuhn & Associates dated October 20,
1998, that there are no leases, subleases, licenses or rights of occupancy
affecting the Property other than short term parking agreements terminable
without expense on no more than thirty (30) days notice.
4.6 Parties in Possession. To the best of Seller's knowledge, and
Except as may be shown in the First American Title Insurance Company Policy No.
D102642 dated October 30, 1998, and the survey by Gandolfo Kuhn & Associates
dated October 20, 1998, there are no parties in possession of any portion of the
Property as tenants, possessors or trespassers.
4.7 Tax Status. Seller and all persons holding beneficial interests in
the Property are "United States Persons", as defined by Section 1445(f)(3) and
Section 7701(g) of the IRC, and the purchase of the Property by Purchaser
pursuant to this Agreement is not subject to the withholding requirements of
Section 1445(a) of the IRC.
4.8 Condemnation. Seller has no knowledge of any pending, contemplated,
or threatened condemnation or similar proceeding or of any litigation affecting
the Property or any part thereof.
4.9 Seller's Knowledge. The Parties hereby acknowledge and agree that
references in this Agreement to "Seller's knowledge" or "to the best of Seller's
knowledge" shall be deemed to mean
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the actual subjective knowledge of Seller, its respective representatives, and
attorneys, without any investigation and/or inquiry whatsoever.
4.10 Termination of Representations and Warranties. The representations
and warranties set forth in this Article 4 shall be continuing and shall be true
and correct on and as of the Closing Date with the same force and effect as if
made at that time, provided, however, and all such representations and
warranties shall not survive the Closing.
Article 5
Representations of Purchaser
Purchaser represents to Seller as follows:
5.1 Binding Obligation of Purchaser. This Agreement, to the extent
permitted by Governmental Authority and Governmental Regulation, constitutes a
legal, valid, and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms.
5.2 Execution and Delivery by Purchaser. On the Closing Date Purchaser
shall have taken or caused to be taken all actions necessary to authorize the
execution and delivery of this Agreement by Purchaser and the performance by
Purchaser of its obligations under this Agreement, all approvals, consents, and
authorizations required by the applicable laws of the State for Purchaser to
enter into and perform its obligations under this Agreement shall have been
obtained and/or complied with, and no further authorization shall be necessary
or required for due execution, delivery, or performance by Purchaser of this
Agreement, and Purchaser's authorization to enter into this Agreement shall not
have been repealed, or materially altered, modified, or amended.
5.3 Status and Authority of Purchaser. Purchaser has the legal right,
power and authority to enter into this Agreement, and to perform the obligations
imposed upon it under this Agreement.
5.4 Agreement Not in Breach of Other Instruments. Neither the
execution, delivery, or performance of this Agreement or any other agreement
contemplated hereby, nor the compliance with the respective terms and provisions
hereof or thereof, nor the consummation of the Transaction, will: (a) conflict
with or result in a breach of any of the terms, conditions, or provisions of, or
constitute a default under, any agreement or instrument to which Purchaser is a
party or is subject; (b) conflict with, or result in a breach of any agreement
or instrument reflected in public records or, to the best of Purchaser's
knowledge, to which any predecessor of Purchaser is a party, or to which the
Property is subject; or (c) violate any restriction to which Purchaser is
subject.
5.5 Broker's Fees. Purchaser agrees to hold Seller harmless from and
against any and all claims and demands by any real estate agent and/or broker
engaged by Purchaser with respect to the purchase and sale contemplated under
this Agreement.
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<PAGE> 12
5.6 Preservation of Accuracy of Representations and Warranties.
Purchaser shall take all action necessary to prevent any representation or
warranty contained in Article 5 of this Agreement from becoming inaccurate as of
the Closing Effective Date. Purchaser promptly will notify Seller of any
lawsuits, Claims, administrative actions or other proceedings asserted or
commenced against Purchaser involving the Property. Purchaser will promptly
notify the Seller of any facts or circumstances which come to Purchaser's
attention and which cause, or through the passage of time may cause, any of
Purchaser's representations and warranties to be inaccurate, untrue or
misleading at any time from the date of this Agreement to the Closing Effective
Date.
5.7 Termination of Representations and Warranties. The representations
and warranties set forth in this Article 5 shall be continuing and shall be true
and correct on and as of the Closing Date with the same force and effect as if
made at that time, provided, however, and all such representations and
warranties shall not survive the Closing.
Article 6
Covenants of Seller
Seller covenants and agrees with Purchaser as follows:
6.1 Access and Information. At all times prior to the Closing Effective
Date, Seller shall afford to Purchaser and its agents, employees and authorized
representatives, access, during normal business hours, to the Property and to
Seller's books, accounts and records and all other relevant documents and
information with respect to the Property, as may be reasonably requested. If
this Agreement is terminated prior to Closing for any reason, all such
information shall be returned to Seller within five (5) Business Days.
6.2 Acts Affecting the Property. During the period between the
execution of this Agreement and the Closing Effective Date, Seller will refrain
from (a) performing any grading or excavation, or construction to the Property,
or making any substantial change or improvements on or about the Property; (b)
creating any Encumbrance affecting the Property; and (c) committing any waste or
nuisance upon the Property.
6.3 Preservation of Accuracy of Representations and Warranties. Seller
shall take all action necessary to prevent any representation or warranty
contained in Article 4 of this Agreement from becoming inaccurate as of the
Closing Effective Date. Seller promptly will notify Purchaser of any lawsuits,
Claims, administrative actions or other proceedings asserted or commenced
against Seller involving the Property. Seller will promptly notify the Purchaser
of any facts or circumstances which come to Seller's attention and which cause,
or through the passage of time may cause, any of Seller's representations and
warranties to be inaccurate, untrue or misleading at any time from the date of
this Agreement to the Closing Effective Date.
6.4 Lender Consent. Seller shall take all reasonable efforts to obtain
the Lender Consent on or before March 31, 2000. If Seller fails to obtain timely
the Lender Consent, Purchaser may
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terminate this Agreement upon written notice to Seller, and if Purchaser so
elects to terminate this Agreement Purchaser shall be entitled to a return of
the Deposit and the Additional Deposit, if any, and, in addition, Seller shall
reimburse Purchaser for all of Purchaser's actual, out-of-pocket expenses
incurred in connection with the Transaction up to the sum of $300,000.00.
Article 7
Indemnification
7.1 Indemnification of Seller. Seller hereby indemnifies and holds
harmless Purchaser Group in respect of any and all Claims (including Litigation
Expenses for investigating or defending any Claims or threatened Claims)
incurred by or asserted against Purchaser Group arising out of any or all
Seller's liabilities set out in Section 3.2 or elsewhere in this Agreement. The
indemnification contained in this Section shall be in addition to, and not in
place of, any other remedies, whether at law or in equity, that Purchaser Group
may have against Seller.
7.2 Indemnification of Purchaser. Purchaser hereby indemnifies and
holds harmless Seller Group in respect of any and all Claims (including
Litigation Expenses for investigating or defending any Claims or threatened
Claims) incurred by or asserted against Seller Group arising out of any or all
Purchaser's liabilities set out in Section 3.1 or elsewhere in this Agreement.
The indemnification contained in this Section shall be in addition to, and not
in place of, any other remedies, whether at law or in equity, that Seller Group
may have against Purchaser.
7.3 Claims for Indemnification. Whenever any Claim shall arise for
indemnification hereunder, the Indemnified Party shall promptly notify the
Indemnifying Party of the Claim and, when known, the facts constituting the
basis for such Claim. In the event of any Claim for indemnification hereunder
resulting from any Claim by any Other Party, the notice to the Indemnifying
Party shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnified Party shall not settle or
compromise any Claim by an Other Party for which the Indemnified Party is
entitled to indemnification hereunder without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld) unless
suit shall have been instituted against the Indemnified Party and the
Indemnifying Party shall have failed to take control of such suit after
notification thereof as provided in this Agreement.
7.4 Defense by Indemnifying Party. In connection with any Claim giving
rise to indemnification hereunder resulting from any Claim by any Other Party,
the Indemnifying Party at its sole cost and expense may, upon written notice to
the Indemnified Party, assume the defense of any such Claim if the Indemnifying
Party acknowledges to the Indemnified Party in writing the Indemnifying Party's
obligation to indemnify the Indemnified Party with respect to all elements of
such Claim. The Indemnified Party shall be entitled to participate in (but not
control) the defense of any such action with its counsel and at its own expense.
If the Indemnifying Party does not assume the defense of any such Claim (a) the
Indemnified Party may defend against such Claim in such manner as it may deem
appropriate, including, but not limited to, settling such Claim, on such terms
as the Indemnified Party may deem appropriate after giving two (2) Business
Days' notice of the
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<PAGE> 14
terms of the proposed settlement to the Indemnifying Party, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such Claim with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such Claim or the amount or nature of any such
settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party, after taking into
consideration the potential amount of an adverse judgment, did not defend or
settle such Claim in a reasonably prudent manner.
7.5 Manner of Indemnification. All amounts indemnified hereunder shall
be paid in cash or by delivery of a check in the amount of the indemnified
liability.
Article 8
Purchaser's Due Diligence
8.1 Purchaser's Inspections. Seller agrees that Purchaser shall have
ninety (90) days after the Effective Date to conduct inspections of the Property
("Inspection Period"), including without limitation environmental audits,
wetlands determinations, appraisals, zoning, economic and engineering
feasibility studies, soil tests, and such other inspections as Purchaser deems
necessary to satisfy itself with respect to Seller's title and the condition of
the Property. Seller understands and agrees that Purchaser and its respective
employees, agents, and representatives may find it appropriate to contact
Governmental Authorities in connection with the result of Purchaser's
Inspections to the Property. Purchaser's sole remedy for any defects in the
Property discovered during the Inspection Period will be its termination rights
established in Section 8.5.
8.2 Survey. Seller, at Seller's sole cost and expense, shall cause to
have prepared the Survey. Seller shall deliver the survey to Purchaser within 45
days of the Effective Date.
8.3 Title Commitment. Seller, at Seller's sole cost and expense, shall
order the Commitment to be issued by the Title Company through the Title Agent,
accompanied by copies of all recorded documents relating to restrictions,
servitudes, easements, rights-of-way, and other matters affecting the Property.
The Commitment will be in a form satisfactory to Purchaser and will commit the
Title Company to issue at the Closing an ALTA form of Owner's Title Insurance
Policy to Purchaser, such policy to be in an amount equal to the Cash
Consideration and shall be paid for by Seller.
8.4 Inspection Procedure. Purchaser shall make Purchaser's Inspections
in good faith, with due diligence, and at Purchaser's sole risk. All inspection
fees, wetlands determinations, environmental studies, appraisal fees,
engineering fees and other expenses of any kind incurred by Purchaser relating
to Purchaser's Inspections will be solely Purchaser's expense except as set
forth in Sections 8.2 and 8.3. Seller shall cooperate with Purchaser in all
reasonable respects in making Purchaser's Inspections. Purchaser shall notify
Seller not less than one (1) Business Day in advance of making any of
Purchaser's Inspections. Purchaser agrees to indemnify and hold Seller and its
employees harmless, to the extent permitted by Governmental Authority and
Governmental
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<PAGE> 15
Regulation, from any and all Claims sustained by Seller which arise out of the
Purchaser's Inspections and to pay the cost of repair for any damage to the
Property in connection with any of Purchaser's Inspection by or on behalf of
Purchaser.
8.5 Right to Terminate. Notwithstanding anything in this Agreement to
the contrary, in the event Purchaser determines as a result of Purchaser's
Inspections that title to and/or any condition of the Property is deficient in
any respect in Purchaser's sole and absolute discretion, or if for any other
reason Purchaser elects to terminate this Agreement, Purchaser may elect to
terminate this Agreement by delivering written notice thereof to Seller prior to
the expiration of the Inspection Period, in which event the Deposit will be
immediately refunded to Purchaser and the Parties shall have no further rights
or obligations hereunder except as provided in Article 3 and Section 8.4.
Article 9
Conditions Precedent to Obligations of Purchaser
The obligations of Purchaser under this Agreement to consummate the
Transaction are, at the option of Purchaser (which may be waived specifically in
writing by Purchaser, in whole or in part), subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
9.1 Execution and Delivery of Closing Documents. Seller shall have
executed and delivered each of the Closing Documents to which Seller is a Party.
9.2 No Changes to Condition of Property. There shall have been, between
the Effective Date and the Closing Effective Date, no material adverse change in
the condition of the Property.
9.3 No Misrepresentation or Breach of Covenants, Representations and
Warranties. There shall have been no material breach by Seller in the
performance of any of its covenants herein, each of the representations and
warranties of Seller contained or referred to in this Agreement shall be true
and correct in all material respects on the Closing Effective Date as though
made on the Closing Effective Date.
9.4 Obstructive Proceedings. No suit, pleading, action, or Claim shall
have been alleged, filed or instituted by any Person (excluding Purchaser)
seeking injunctive relief or damages in a material amount, and no order, decree
or judgment shall have been rendered by any Governmental Authority, which seeks
to void or would prevent the consummation of, or render it unlawful for,
Purchaser to enter into this Agreement, or acquire and/or operate the Property.
9.5 Order Prohibiting Transaction. No order shall have been entered in
any action or proceeding before any court or Governmental Authority, and no
temporary, preliminary or permanent injunction by any court shall have been
issued which would have the effect of (a) making the Transaction unenforceable
or illegal; (b) otherwise preventing consummation of such transactions; (c)
imposing material limitations on the ability to Purchaser effectively to acquire
or hold the Property or to exercise full rights of ownership of the Property.
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<PAGE> 16
Article 10
Conditions Precedent to Obligations of Seller
The obligations of Seller under this Agreement to consummate the
Transaction are, at the option of Seller (which may be waived specifically in
writing by Seller, in whole or in part), subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
10.1 Execution and Delivery of Closing Documents. Purchaser shall have
executed and delivered each of the Closing Documents to which Purchaser is a
party and paid the Cash Consideration.
10.2 No Misrepresentation or Breach of Covenants, Representations and
Warranties. There shall have been no material breach by Purchaser in the
performance of any of its covenants herein, each of the representations and
warranties of Purchaser contained or referred to in this Agreement shall be true
and correct in all material respects on the Closing Effective Date as though
made on the Closing Effective Date.
10.3 Obstructive Proceedings. No suit, pleading, action, or Claim shall
have been alleged, filed or instituted by any Person (excluding Seller) seeking
injunctive relief or damages in a material amount, and no order, decree or
judgment shall have been rendered by any Governmental Authority, which seeks to
void or would prevent the consummation of, or render it unlawful for, Seller to
enter into this Agreement or sell the Property.
10.4 Lender Consent. Seller shall have obtained the Lender Consent.
Article 11
Closing and Closing Date
11.1 Closing. The Closing shall occur no later than 30 days after the
expiration of the Inspection Period, unless Purchaser extends the closing
deadline pursuant to Section 2.5. Anything herein to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time:
(a) on or prior to the Closing Date by the mutual consent of the
Parties; or
(b) for a reason otherwise permitted in this Agreement which does
not constitute a Default by the terminating Party.
Upon any termination as above provided, written notice shall be given to the
other Party, and thereupon this Agreement shall become void and of no effect and
there shall be no liability on the part of any Party to any other Party and the
Deposit and Additional Deposit, if any, will be refunded to Purchaser.
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<PAGE> 17
11.2 Place. The Closing shall be held at the offices of Correro Fishman
Haygood Phelps Walmsley & Casteix, L.L.P., 201 St. Charles Avenue, 46th Floor,
New Orleans, Louisiana 70170 or such other place as the Parties may mutually
agree.
11.3 Tax Deferred Exchange. Purchaser may structure the transfer of the
Property as a tax deferred exchange pursuant to Internal Revenue Code Section
1031, and Seller agrees to cooperate with Purchaser, and to take such action as
Purchaser may reasonably request in order to consummate such transfer. In
connection with the foregoing, Purchaser shall have the right, without the
consent of Seller, to assign or transfer all or any portion of its right, title
and interest in, to, under or pursuant to this Agreement to any entity that may
acquire or hold title to the Property for subsequent conveyance of the Property
to Purchaser pursuant to the provisions of this Agreement.
Article 12
Obligations of Parties at Closing
12.1 Seller's Obligations to Purchaser at Closing. At the Closing,
Seller shall execute, acknowledge, deliver or cause to be delivered to
Purchaser, each of which must be in a recordable form satisfactory to Purchaser:
(a) Act of Cash Sale. An Act of Cash Sale in substantially the
same form as Exhibit "2" attached hereto and made a part
hereof, conveying to Purchaser all of Seller's right, title
and interest in and to the Property with limited warranty of
title, Seller warranting title for the duration of its
ownership of the Property, but not otherwise, subject only
to matters acceptable to Purchaser following its due
diligence review of the Property and with full substitution
and subrogation in and to any Claims and/or causes of action
which Seller has or may have against all preceding owners.
(b) Consents. Any consents of third Persons which are necessary
to effectively transfer the Property to Purchaser.
(c) Air Rights Agreement. A mutually acceptable agreement by and
between Seller and Purchaser whereby Seller agrees that
neither Seller nor any of Seller Group will consent to any
exercise of the air rights option under that certain Air
Rights Agreement by and between CP Development, L.L.C. and
Badine Land Limited dated December 17, 1998 without Buyer's
consent unless the air rights will be transferred to the
City of New Orleans.
(d) Possession. Possession of the Property.
(e) Owner's Affidavit. An owner's affidavit or affidavits in
form and substance reasonably satisfactory to the Title
Company and sufficient to cause the Title Company to issue
an owner's policy (at Purchaser's sole cost) on the Property
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<PAGE> 18
with a policy date no earlier than the Closing Date and
without standard exceptions, including matters of survey and
mechanic's liens.
(f) Non Resident Certificate. A certificate made under penalty
of perjury by Seller stating that Seller is not a foreign
Person as defined by the IRC.
(g) 1099 Information. Any information in connection with the
conveyance of the Property by the Seller required by the IRC
in connection with the preparation and filing of Treas. Form
1099.
(h) Additional Documentation. All documents to be provided,
executed and delivered by Seller to Purchaser as required by
any other provision of this Agreement or as may be
reasonably requested by Purchaser.
12.2 Purchaser's Obligations to Seller at Closing. On the Closing Date,
Purchaser shall deliver to Seller:
(a) Funds. The Cash Consideration by wire transfer of funds.
(b) Release of Deposits. Instructions to the Title Agent
authorizing Title Agent to deliver the Deposit and the
Additional Deposit to Seller.
(c) Authority. Evidence of the Purchaser's authority to
consummate the transaction.
(d) Additional Documentation. All documents to be provided,
executed and delivered by Purchaser to Seller as required by
any other provision of this Agreement or as may be
reasonably requested by Seller.
12.3 Closing Expenses and Apportionments:
(a) Closing Expenses. Seller and Purchaser shall each bear their
respective costs and expenses incurred or to be incurred in
negotiating and preparing this Agreement. Seller shall bear
the cost of preparing and recording the Act of Sale.
(b) Proration of Taxes and Other Income. All ad valorem taxes,
property taxes, and other taxes and other assessments and
other items of current income or expense, for the current
year, if any, shall be apportioned between Seller and
Purchaser as of the Closing Effective Date; provided,
however, that if the current year's tax assessment is not
available at the time of Closing, the apportionment shall be
based upon the most recent assessment available and
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<PAGE> 19
shall be corrected so as to be accurate with monetary
adjustment made within thirty (30) days after actual taxes
are known.
(c) Transfer Taxes. All documentary, stamp, transfer, recording,
gains, sales and other taxes or assessments incident to the
sale of the Property must be paid in full by Seller prior to
Closing.
Article 13
Default
13.1 Breach by Seller. If Seller Defaults in the due and timely
performance of any of the terms to be performed by Seller hereunder, makes any
misrepresentation or is unable or unwilling to consummate the sale of the
Property for any reason except Purchaser's Default or the termination of this
Agreement pursuant to any of the termination provisions hereof (including
Section 6.4), Purchaser may, at its option, and as its sole and exclusive
remedy, either (i) terminate this Agreement by written notice to Seller and
demand the immediate return of the Deposit and Additional Deposit, if any, plus
an equal sum from Seller as liquidated damages or (ii) seek specific performance
of this Agreement.
13.2 Breach by Purchaser. If Purchaser Defaults in the due and timely
performance of any of Purchaser's obligations hereunder, the conditions to
Purchaser's obligations set forth in this Agreement having been satisfied and
Purchaser's being in Default and Seller not being in Default hereunder, Seller
as its sole and exclusive remedy may terminate this Agreement by written notice
to Purchaser and receive the Deposit and the Additional Deposit, if any. Seller
shall not have the right to demand specific performance.
13.3 Waiver. No delay or omission in the exercise of any right or
remedy accruing to one Party upon any breach by another Party under this
Agreement shall impair such right or remedy or be construed as a waiver of any
such breach theretofore or thereafter occurring. The waiver by a Party of any
condition or of any subsequent breach of the same or any other term, covenant,
or condition herein contained shall not be deemed to be a waiver of any other
condition or of any subsequent breach of the same or any other term, covenant,
or condition herein contained. Except as specifically excepted in this
Agreement, all rights, powers, options, or remedies afforded to any Party either
hereunder or by law shall be cumulative and not alternative and the exercise of
one right, power, option or remedy shall not bar other rights, powers, options,
or remedies allowed herein or by law.
Article 14
Miscellaneous
14.1 Press Releases. Neither party will issue a press release or other
public disclosure of the Transaction without the prior written approval of the
other party, except for disclosures required by law.
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<PAGE> 20
14.2 Risk of Loss. The risk of loss or damage to the Property or any
part thereof by fire or other casualty shall from the date hereof until the
Closing Effective Date be borne by Seller.
14.3 Notices. All notices or other communications required or permitted
hereunder shall be in writing, shall be delivered personally or sent by
facsimile electronic transmission (receipt confirmed), certified mail or by an
overnight delivery service that operates on a nationwide basis, and routinely
issues receipts, and shall be considered given upon the earlier of actual
receipt or forty-eight (48) hours after mailing postage prepaid. All such
notices shall be addressed as follows:
IF TO PURCHASER:
WI Acquisition Corporation
1950 Stemmons Freeway
Suite 6001
Dallas, Texas 75207
Attn: Willy Geiler
Fax No.: (214) 863-1286
with copies to:
John P. Bohlmann, Esq.
Wyndham International, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, Texas 75207
Fax No.: (214) 863-1986
and
Richard P. Bonsignore, Esq.
Akin Gump Strauss Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W., Suite 400
Washington, D.C. 20036
Fax No.: (202) 887-4288
and
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<PAGE> 21
Sterling Scott Willis, Esq.
Correro Fishman Haygood
Phelps Walmsley & Casteix, L.L.P.
201 St. Charles Avenue, 46th Floor
New Orleans, Louisiana 70170
Fax No.: (504) 586-5250
IF TO SELLER:
JCC Fulton Development, L.L.C.
512 South Peters Street
New Orleans, Louisiana 70130
Attn: Tom Morgan, Vice President
Fax No.:
with copies to:
Sam LeBlanc, Esq.
Adams and Reese, L.L.P.
4500 One Shell Square
New Orleans, Louisiana 70139
Fax No.: (504) 566-0210
IF TO TITLE COMPANY:
Key Title Agency
201 St. Charles Avenue
31st Floor
New Orleans, Louisiana 70170-3100
Fax No.: (504) 207-7249
or to such other addresses as the parties may specify in writing.
14.4 Further Assurances. Following the Closing, each of the Parties
will take such further actions and execute and deliver such additional documents
and instruments as may be reasonably requested by any other Party in order to
perfect and complete the purchase and sale of the Property as set forth herein,
and the other transactions specifically contemplated herein.
14.5 Waiver of Terms. Any of the terms or conditions of this Agreement
may be waived at any time by the Parties which are entitled to the benefit
thereof but only by a written notice signed by the Parties waiving such terms or
conditions. The waiver of any term or condition shall not be construed as a
waiver of any other term or condition of this Agreement.
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<PAGE> 22
14.6 Amendment of Agreement. This Agreement may be amended,
supplemented or modified only by a written instrument duly executed by Seller
and by Purchaser.
14.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Louisiana.
14.8 Partial Invalidity. If any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision or provisions
had never been contained herein.
14.9 Assignment. Purchaser may assign any and all of its rights under
this Agreement to any entity of which Wyndham International, Inc. owns at least
50% of the ownership interests therein. Seller may assign any and all of its
rights and interests under this Agreement to an entity which (i) controls, is
controlled by, or is under common control with Seller, or (ii) results from a
merger or consolidation with Seller.
14.10 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties, their respective successors, and permitted
assignees.
14.11 Execution in Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original agreement, but all of which together shall constitute one and the same
instrument.
14.12 Titles and Headings. Titles and headings to sections herein are
for purposes of reference only, and shall in no way limit, define, or otherwise
affect the provisions herein.
14.13 Entire Agreement. This Agreement constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, among the Parties or any of them, with respect to the subject matter
hereof.
14.14 Litigation Expenses. If a Party litigates (a) any provision of
this Agreement; (b) the subject matter of this Agreement; or (c) to enforce any
warranty, representation or covenant of this Agreement, the Parties hereto agree
that the unsuccessful litigant shall pay to the successful litigant all of its
Litigation Expenses; provided, however, Litigation Expenses in connection with a
claim for indemnification shall be governed by Article 7.
14.15 Escrow Instructions. Seller and Purchaser agree that the Deposit
and the Additional Deposit, if any (collectively, the "Deposits") shall be held
by the Title Agent who shall invest the Deposits in an interest-bearing account
or otherwise invest the same upon joint written instructions from Purchaser and
Seller. By acceptance of the Deposits and a fully executed copy of this
Agreement, Title Agent shall have agreed to the terms and conditions of this
Agreement regarding
- 22 -
<PAGE> 23
the investment, holding, and disbursement of the Deposits. Title Agent shall
disburse the Deposits in accordance with the terms of this Agreement. If a
dispute arises concerning the disbursement of the Deposits, Title Agent shall
have the right to hold the same until it is directed (a) by a court, arbitrator
or other entity having authority to determine the entitlement of the Deposits as
between Seller and Purchaser, (b) joint instructions of both Seller and
Purchaser; and shall thereafter deliver the same in accordance with such
direction. Seller and Purchaser jointly and severally agree to indemnify and
hold harmless Title Agent from and against any and all losses, costs, expenses,
liabilities, and claims, including reasonable attorney's fees, which may be
incurred by Title Agent in connection with its duties as Title Agent hereunder,
absent the willful default or gross negligence of Title Agent. Title Agent shall
not incur any liability with respect to (i) any action taken or omitted in good
faith upon the advice of its counsel or of counsel for any of the parties
hereto, given with respect to any question relating to the duties and
responsibilities of the Title Agent under this Agreement, or (ii) any action
taken or omitted in reliance upon any instrument, including the written advice
provided for herein, not only as to due execution, or identity and authority of
any person executing such instrument, its validity and effectiveness, but also
as to the truth and accuracy of any information contained therein which the
Title Agent shall in good faith believe to be genuine, to have been signed by
the proper person and which conforms to the provisions of this Agreement.
14.16 Time is of Essence. Time is of the essence of this Agreement.
However, Seller shall have until February __, 2000 at 5:00 p.m., in which to
have this Agreement reviewed by Seller's legal counsel and to either accept or
reject the terms and conditions of this Agreement.
- 23 -
<PAGE> 24
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the dates written below.
SELLER
JCC Fulton Development, L.L.C.
By: /s/ Frederick W. Burford
----------------------------------------
Name: Frederick W. Burford
------------------------------
Title: President and CEO
-----------------------------
Date:
-------------------------------
PURCHASER
WI Acquisition Corporation
By: /s/ John P. Bohlmann
----------------------------------------
Name: John P. Bohlmann
------------------------------
Title: Vice President
-----------------------------
Date:
-------------------------------
TITLE AGENT
Key Title Agency
By: /s/ Edward T. Suffery, Jr.
----------------------------
Name: Edward T. Suffery, Jr.
-------------------------------
Title: Agent
-----------------------------
Date: 02/17/00
-------------------------------
- 24 -
<PAGE> 25
Exhibit 1
Lot 3CP, Second Municipal District of the City of New Orleans, Louisiana.
Ex. 1
<PAGE> 26
Exhibit 2
CASH SALE OF PROPERTY UNITED STATES OF AMERICA
By: JCC Fulton Development, L.L.C. STATE OF LOUISIANA
To: WI Acquisition Corporation PARISH OF ORLEANS
* * * * * * * * * * * * * * * * * * * * * * *
BE IT KNOWN, that on this _________ day of ________________, _________;
BEFORE ME, the undersigned Notary Public, duly commissioned and
qualified, in and for the Parish and State aforesaid, and in the presence of the
witnesses hereinafter named and undersigned,
PERSONALLY CAME AND APPEARED:
JCC Fulton Development, L.L.C., TIN ________________, a Louisiana
limited liability company, represented herein by and through _________________,
its __________________, duly authorized pursuant to
_____________________________________;
mailing address:
(hereinafter referred to as "Vendor");
and who declared that it does by these presents grant, bargain, sell, convey,
transfer, assign, set over, abandon and deliver, with warranty of title by,
through and under Vendor, but not otherwise, Vendor hereby warranting title to
the property only from the date Vendor acquired title to the property to the
date of this sale, but with full substitution and subrogation in and to all the
rights and actions of warranty which it has or may have against all preceding
owners, unto:
WI Acquisition Corporation, TIN ________________, a Delaware
corporation, represented herein by and through its undersigned officer, duly
authorized pursuant to a Resolution of the Board of Directors of said
corporation, a certified copy of which is annexed hereto and made a part hereof;
mailing address:
(hereinafter referred to as "Purchaser");
here present, accepting and purchasing for itself, its successors and assigns,
and acknowledging due delivery and possession thereof, all and singular the
following described property, to-wit:
Ex. 2-1
<PAGE> 27
[PROPERTY DESCRIPTION]
To have and to hold the above described property unto the said
Purchaser, its successors and assigns forever.
This sale is made and accepted for and in consideration of the price
and sum of SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000.00), cash,
which the said Purchaser has well and truly paid, in ready and current money to
the said Vendor, who hereby acknowledges the receipt thereof and grants full
acquittance and discharge therefor.
THIS PROPERTY IS SOLD by Vendor and purchased by Purchaser "AS IS,
WHERE IS" and "WITH ALL FAULTS," with no warranty of condition whatsoever,
either expressed or implied, even for the return of the purchase price, with
Purchaser expressly waiving any and all other warranties, including those
pertaining to fitness for a particular use, soil conditions, zoning or other use
restrictions, compliance with the provisions of the Americans with Disabilities
Act, or any environmental matters, as well as those warranties against hidden,
latent, or redhibitory defects. Without limitation of the generality of the
foregoing, Purchaser hereby expressly waives and renounces any and all rights or
claims which it has or may have for redhibition, reduction of the purchase
price, and/or quanti minoris, whether under articles 2520 et seq. of the
Louisiana Civil Code or otherwise. Purchaser has inspected the property to the
extent it deems necessary and is satisfied with the condition thereof. Purchaser
acknowledges and declares that neither the Vendor nor any party, whomsoever,
acting or purporting to act in any capacity whatsoever on behalf of the Vendor
has made any direct, indirect, explicit or implicit statement, representation or
declaration, whether by written or oral statement or otherwise, and upon which
Purchaser has relied, concerning the existence or non-existence of any quality,
characteristic or condition of the property herein conveyed. Purchaser has had
full, complete and unlimited access to the property herein conveyed for all
tests and inspections which Purchaser, in its sole discretion deems sufficiently
diligent for the protection of its interests. Purchaser acknowledges and agrees
that the foregoing disclaimer and waiver of warranties have been fully explained
to Purchaser and that Purchaser understands the same. Purchaser and Vendor
jointly acknowledge and agree that the foregoing waivers and disclaimers are of
the essence of this transaction and the same would not otherwise have been
entered into or consummated. By its signature Purchaser expressly acknowledges
all such waivers, and its exercise of Purchaser's right to waive warranty
pursuant to Louisiana Civil Code Articles 2503 and 2548.
Ex. 2-2
<PAGE> 28
_________ Purchaser hereby acknowledges that the waiver of
Purchaser's warranty contained in this document has been Purchaser's
Initials fully explained to Purchaser by Purchaser's attorney
and/or the closing notary, and understands that by
completing the sale containing these terms Purchaser is
giving up its rights to get any money back or
compensation from the Vendor in the event Purchaser
discovers problems with the property, or any part of or
equipment located or used on the property. Understanding
this, Purchaser agrees to this provision
All City and State taxes up to and including the taxes due and eligible
in 2000 are paid. Future tax payments shall be the responsibility of the
Purchaser.
The parties waive the products of the mortgage, conveyance, UCC and tax
research certificates, and relieve and release me, Notary, from all
responsibility by reason thereof.
This sale is made and accepted subject to the following: [PERMITTED
ENCUMBRANCES]
Reference is made to these restrictive covenants and conditions for
notation purposes only and is not to be construed as a renewal or recreation of
such in any manner whatsoever.
The parties hereto take cognizance of the following:
THUS DONE AND PASSED in New Orleans, Louisiana, on the day, month and
year herein first above written, in the presence of the undersigned competent
witnesses, who hereunder sign their names with the said appearers, and me,
Notary, after reading of the whole.
WITNESSES: JCC FULTON DEVELOPMENT, L.L.C.
By:
- ------------------------------------- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
WI ACQUISITION CORPORATION
By:
- ------------------------------------- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
-------------------------------------
NOTARY PUBLIC
Ex. 2-3
<PAGE> 1
EXHIBIT 10.52
ADMINISTRATIVE SERVICES AGREEMENT
October 30, 1998
Harrah's Operating Company, Inc.
1023 Cherry Road
Memphis, TN 38117
Attention: Judy Wormser
Re: Provision of Services
Ladies and gentlemen:
Jazz Casino Company, L.L.C., a Louisiana limited liability company
("JCC") and wholly-owned subsidiary of JCC Holding Company, a Delaware
corporation ("JCC Holding"), has requested Harrah's Operating Company, Inc., a
Delaware corporation ("Service Provider") and a wholly-owned subsidiary of
Harrah's Entertainment, Inc., a Delaware corporation ("HET"), to provide or
otherwise perform certain services described on Schedule I attached hereto and
incorporated herein by reference (the "Services") in connection with the
operation of the land-based casino at 4 Canal Place, New Orleans, Louisiana
70130. JCC has determined that based on a number of factors, including, among
others, the price at which the Services will be provided by Service Provider and
the quality of the Services that can be provided by Service Provider, it is in
JCC's best interest for Service Provider to provide the Services to JCC. In
light of the foregoing, JCC hereby requests that Service Provider provide the
Services upon the terms and conditions set forth in this administrative services
agreement (this "Administrative Services Agreement").
In consideration of the agreements, representations, and covenants set
forth in this Administrative Services Agreement and for other good and valuable
consideration, the parties hereto agree as of October 30, 1998, as follows:
1. Provision of Services. Service Provider shall provide the Services
in accordance with the terms and conditions of this Agreement. This
Administrative Services Agreement is entered into pursuant to that certain
Second Amended and Restated Management Agreement by and between Harrah's New
Orleans Management Company (the "Manager") and JCC dated October 29, 1998 (the
"Management Agreement") to document only the elective services to be provided by
Manager and Manager's affiliates pursuant to Section 9.03 of the Management
Agreement and the cost of certain Proprietary Systems being provided by Manager
and Manager's affiliates pursuant to Section 9.04 of the Management Agreement.
The Services shall not include
<PAGE> 2
any services of the Manager provided pursuant to the Management Agreement, any
of the Harrah's Services as provided for in Article 11 of the Management
Agreement, any services provided by pursuant to any written employee lease
arrangement between HET or its subsidiaries and JCC Holding or its subsidiaries,
including without limitation the Donald Stroessner, Bhavna Misty, Susie Bell and
Libby Gehrman lease or other employment arrangements between HET and JCC and the
Thomas Morgan lease arrangement between HET and JCC Development, or any other
services otherwise agreed by the parties.
2. Service Fee
(a) In consideration for the provision of the Services, JCC agrees
to pay Service Provider fees for the Services and to reimburse Service Provider
for all reasonable costs and expenses incurred in providing the Services as set
forth on Schedule I hereto. Service Provider shall provide JCC reasonably
detailed invoices with respect to the Services at the end of each calendar month
in which Services are provided. At the end of each calendar year, or as
otherwise specified on Schedule I, Service Provider shall calculate actual
amounts due in respect of any Services billed monthly on an estimated basis.
Within sixty (60) days of the end of each calendar year, Service Provider shall
provide JCC a true-up calculation as to the actual costs of such estimated
Services for such year and provide JCC a creditor refund as to any over-payments
or a billing as to any under-payments for such Services. Subject to the
procedure for dispute resolution set forth below, JCC agrees to pay such monthly
and annual true-up invoices within twenty (20) days after receipt thereof.
(b) If JCC disagrees with any invoice submitted by Service Provider
as required by Section 2(a) hereof, within fifteen (15) days after the date it
has received such invoice, JCC shall notify Service Provider in writing of such
disagreement, which notice shall state the basis for such disagreement. The
parties shall then cooperate to resolve the dispute, with Service Provider
providing JCC with such supporting documentation relating to the calculation of
the cost of the Services as JCC may reasonably request.
3. Limitation on Authority. Notwithstanding any provision of this
Administrative Services Agreement, the responsibilities and authority of Service
Provider hereunder are limited to the provision of the Services and matters
related to the Services. This Administrative Services Agreement shall not, in
the absence of a specific grant by JCC in writing, authorize Service Provider to
take any other action other than in connection with the Services.
2
<PAGE> 3
4. Term; Termination
(a) This Administrative Services Agreement shall commence as of
October 30, 1998, and the Services to be provided shall begin and end as of the
dates described on Schedule I hereto. Unless earlier terminated in writing by
JCC and Service Provider, this Administrative Services Agreement shall be
effective until the earlier of (i) the expiration date of all Services as set
forth on Schedule I hereto or (ii) thirty (30) days after written notice of
termination from either party; provided, however, that JCC may terminate, at any
time, less than all of the Services to be provided by Service Provider in
accordance with Sections 4(b) and (c) hereof.
(b) As to those Services identified in Schedule I hereto as
"Severable Services," any one or more of such Severable Services shall terminate
upon the earlier of (i) the termination date for each Severable Service as
described on Schedule I hereto, (ii) thirty (30) days after written notice of
termination to Service Provider by JCC describing the Services to be terminated
or (iii) thirty (30) days after written notice of termination to JCC by Service
Provider describing the Services to be terminated.
(c) As to those Services identified in Schedule I hereto as "Bundled
Services", all, but not less than all, of such Bundled Services shall terminate
upon the earlier of (i) the termination for the Bundled Service as described on
Schedule I hereto, (ii) thirty (30) days after written notice of termination to
Service Provider by JCC, or (iii) thirty (30) days after written notice of
termination to JCC by Service Provider. Nothing in this Section 4(c) shall
prohibit JCC or Service Provider from, in accordance with this Section 4(c),
terminating any or all of the Severable Services without terminating the Bundled
Services or terminating all of the Bundled Services without terminating the
Severable Services.
5. Indemnification
(a) At all times during the term and after the termination of this
Administrative Services Agreement, JCC shall indemnify, defend and hold harmless
Service Provider and any of its affiliates, including, without limitation, HET,
employees, agents, representatives, officers and directors (the "Indemnified
Service Provider Parties") against any claim, action, suit, demand, damage,
liability, costs or expenses (including reasonable attorneys fees) arising out
of or in connection with the performance by Service Provider of the Services
(except to the extent arising out of Service Provider's proven fraud, gross
negligence or willful misconduct or with respect to any action taken by any
Indemnified Service Provider Party in breach of this Administrative Services
Agreement).
(b) At all times during the term and after the termination of this
Administrative Services Agreement, Service Provider shall indemnify, defend and
hold
3
<PAGE> 4
harmless JCC and any of its affiliates, including, without limitation, JCC
Holding (but excluding, to the extent deemed an affiliate of JCC, HET and any
affiliate of HET), employees, agents, representatives, officers and directors
against any claim, action, suit, demand, damage, liability, costs or expenses
(including reasonable attorneys fees) arising out of or in connection with the
breach of this Administrative Services Agreement by Service Provider or the
proven fraud, gross negligence or willful misconduct of Service Provider in
connection with the performance of its obligations under this Administrative
Services Agreement.
6. Independent Contractor Status. Service Provider shall be deemed to
be an independent contractor to JCC. Nothing contained in this Administrative
Services Agreement shall create or be deemed to create the relationship of
employer and employee, and no party to this Administrative Services Agreement
shall, by reason hereof, be deemed to be a partner or a joint venturer of any
other party hereto in the conduct of their respective businesses and/or the
conduct of the activities contemplated by this Administrative Services
Agreement. Except as specifically and explicitly provided in this Administrative
Services Agreement, and subject to and in accordance with the provisions hereof,
no party to this Administrative Services Agreement is now, shall become, or
shall be deemed to be an agent or representative of any other party hereto with
respect to the subject matter hereof.
7. Further Assurances. The parties hereto agree to cooperate, to the
extent reasonably necessary, by executing and delivering such other documents
and instruments and taking such further action to carry out the intent of this
Administrative Services Agreement.
8. Entire Agreement. This Administrative Services Agreement represents
the entire agreement of the parties hereto with respect to the subject matter
hereof and all prior agreements, understandings, representations and warranties
in regard to the subject matter hereof are and have been merged herein and are
superseded hereby.
9. Amendment
(a) This Administrative Services Agreement, including, without
limitation, Schedule I hereto, may not be amended, supplemented or otherwise
modified other than by a writing executed by the parties hereto.
(b) It is anticipated but not required that the parties hereto will
from time to time and most likely on an annual basis in any event review the
Services and fees therefor and determine whether to revise the scope or term of
Services or the fees therefor, and to the extent of any such agreed revisions
execute an amended Schedule I in accordance with Section 9(c) hereof. Such
amended Schedules shall each be numbered
4
<PAGE> 5
serially in the upper left hand corner, with the first such Schedule attached
hereto being version number 1.
(c) The parties hereto may revise, update, or modify Schedule I
hereto from time to time by means of both parties signing and serially numbering
a copy of such revised, updated or modified Schedule I with the following at the
end thereof: "This revised Schedule I hereby supersedes in its entirety all
prior versions of this Schedule I and is hereby attached to and made a part of
that certain Administrative Services Agreement dated October 30, 1998 between
Jazz Casino Company, LLC and Harrah's Operating Company, Inc. Except as amended
hereby, the Administrative Services Agreement remains in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this version number
___ of Schedule I to Administrative Services Agreement as of ______________.
HARRAH'S OPERATING COMPANY, INC., a
Delaware corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
JAZZ CASINO COMPANY, L.L.C., a
Louisiana limited liability company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
10. Assignment; Successors and Assigns. This Administrative Services
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their successors and assigns. Except as expressly provided in this
Administrative Services Agreement, no party hereto shall, without the prior
written consent of the other party, assign any rights or obligations of such
party hereunder.
11. Governing Law. This Administrative Services Agreement shall be
governed by and interpreted in accordance with the internal laws of the State of
Tennessee without regard to the conflicts of laws principles of such state.
12. Representations and Warranties; Further Assurances. Service
Provider represents that the service fees set forth on Schedule I hereto fully
compensate
5
<PAGE> 6
Service Provider for the cost of rendering the Services covered hereby. JCC and
Service Provider agree that the Services are being provided by Service Provider
to JCC solely in exchange for the consideration enumerated herein. JCC and
Service Provider further state that no inference or presumption shall be drawn
from this Administrative Services Agreement that it is anything other than an
"arm's length" transaction as set forth herein.
Please acknowledge your acceptance and agreement to the foregoing by
executing this Administrative Services Agreement in the space provided below as
of the date of this Administrative Services Agreement. This Administrative
Services 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
agreement, binding the parties hereto.
Very truly yours,
JAZZ CASINO COMPANY, L.L.C.
a Louisiana limited liability company
By: /s/ Camile Fowler
------------------------------------
Name: Camile Fowler
----------------------------------
Title: Vice President
---------------------------------
ACCEPTED AND AGREED
as of October 30, 1998:
HARRAH'S OPERATING COMPANY, INC.,
a Delaware corporation
By: /s/ Judy T. Wormser
----------------------------------
Name: Judy T. Wormser
--------------------------------
Title: Vice President
-------------------------------
6
<PAGE> 7
Version Number 1
Schedule I
to Administrative Services Agreement
New Orleans Systems and Services
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C>
I. 1998 System and Services
For the period from October 30, 1998 to
December 31, 1998, JCC received the following
services:
Open Access Compliance Tracking $59 per hour
information technology consulting with JCC to
establish a systematic method of collecting,
storing and reporting statistical information for
the City of New Orleans Open Access Plans
and Programs
II. 1999 System and Services
The services and fees for calendar 1999 are set forth
below for the period from January 1, 1999 up to the
Casino opening scheduled for October 30, 1999 (the
"Pre-Opening Period") and the remainder of the year
after opening (the "Post-Opening Period")
</TABLE>
S-1
<PAGE> 8
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C> <C>
A. Severable Services
1. Corporate Facilities 1999 projected costs spread evenly
Office Space in Memphis; facilities services relate to estimated at $34,610, consisting of the
corresponding function and are bundled with that function. following:
The functions are:
</TABLE>
<TABLE>
<CAPTION>
Pre Opening Post-Opening
----------- ------------
<S> <C> <C>
property reporting $ 6,678 $ 1,336
market planning 5,078 1,016
accounting systems administration 1,388 278
payroll 1,342 268
procurement 701 152
compensation 4,108 822
HRIS 4,268 854
property tax 4,090 818
1,132 226
other ---------- ----------
$ 28,842 $ 5,768
</TABLE>
<TABLE>
<S> <C> <C>
2. Market research Pre-Opening estimated at $41,667,
market information and planning Post-Opening estimated at $8,333 based
on assumed number of studies being managed
3. Property, sales and use tax assistance - review state and Pre-Opening estimated at $5,250 and
local sales and use tax applications, recommend a sales tax Post-Opening estimated at $1,050
compliance process, sales and use tax training for JCC payable in monthly installments for the
employees, as requested, response to up to 10 specific sales property tax services; $100 per hour for
and use tax questions per month, represent in any sales or use all other tax services
tax audits, prepare and file appeals and represent JCC in
appeals of audit decisions, recommendations regarding
settlement or litigation of sales or use tax controversies,
recommendation of counsel and administration of sales and use
tax litigation
4. Y2K reporting and assessment Pass through billing for any external
consultants or out-of-pocket costs
</TABLE>
S-2
<PAGE> 9
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C> <C>
5. Legal - legal services from Service Provider's in-house Lawyers at $75.00 an hour, legal
counsel located outside of New Orleans; as requested by the assistants at $22.00 an hour
general counsel of Manager, including, without limitation,
o regulatory - assistance with regulatory
filings and disciplinary matters and
regulatory inquiries
o labor
o provide general advice regarding labor
and employment law matters
o prepare/revise responses to EEOC
and related claims
o negotiate labor union contracts
o provide union contract administration
(e.g., contract interpretation and
grievance and arbitration handling)
o operations
o security-regulatory (e.g. junkets and branch office)
o contracts (e.g. kiosk agreements)
o slot purchases/leases
o uninsurance litigation referred by JCC
o Total Gold
o national agreements (e.g. food
purchasing, purchase orders, CocaCola,
Juice Time, Nascar, etc.)
o other marketing contracts
6. Miscellaneous pass through cost
federal express and copies of HET manuals
</TABLE>
S-3
<PAGE> 10
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C> <C>
7. Risk Management Property insurance estimated at
assist JCC in obtaining property, general liability and $139,520 Pre-Opening and $47,202
worker's compensation insurance pursuant to Exhibit C to the Post-Opening based on property value
Management Agreement times the Adjustment Factor (as
hereinafter defined); general liability
insurance estimated at $60,000 Pre-Opening
and $189,330 Post-Opening based on revenue
times the Adjustment Factor; worker's
compensation estimated at $230,000
Pre-Opening and $267,447 Post-Opening based
on payroll times the Adjustment Factor. The
Adjustment Factor means the class rate plus
claim adjustment fees and administrative
cost
8. Insurance Litigation management of litigation - lawyers at $75.00 an
management of insured litigation relating to the operation of hour and legal assistants at $22.00 an hour
the Casino (bundled with risk management services)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
B. Bundled Services
1. Front of House Customer Products
(Proprietary Systems pursuant to Section 9.04 of the
Management Agreement)
SDS Product Post-Opening - 2.1% of product costs - estimated
at $8,250 based on assumption of 2,850 slot
machines
CMS Product (New Gaming) Post-Opening - 3.5% of product costs - estimated
at $120,310 based on assumption of 3,500 non
poker gaming positions and $20 million of monthly
gaming revenue
WINet - Patron Database Post-Opening -1.4% of product costs - estimated
at $84,841 based on assumption of 150,000 active
accounts and $20 million of monthly gaming
revenue
</TABLE>
S-4
<PAGE> 11
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C> <C>
assumption of 150,000 active accounts and $20
million of monthly gaming revenue
WINet - Marketing Workbench Post-Opening - 1.4% of product costs - estimated
at $43,253 based on assumption of 150,000 active
accounts and $20 million of monthly gaming
revenue
Kiosks Post-Opening - 1.5% of product costs - estimated at
$2,168 based on assumption of 5 kiosks
Teleservices Pre-Opening estimated at $19,000 and Post-Opening
1-800-HARRAH'S reservation services estimated at $41,000 based on estimated call volume
at $2.50 per call
SUBTOTAL FRONT OF HOUSE PRODUCTS $318,822 (estimated)
2. Back of House Employee & Financial Products
Employee Products Post-Opening - 1.3% of product costs - estimated
at $27,700 based on assumption of 2,400 employees
Financial Products Post-Opening - 1.3% of product costs reduced by
fixed asset system cost - estimated at $21,515
based on assumption of 2,400 employees
Fixed Asset System Post-Opening - 4.4% of Financial Products Cost -
estimated at $1,000
</TABLE>
S-5
<PAGE> 12
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C> <C>
POS & Procurement Products Post-Opening - 1.3% of product costs - estimated at
$25,650 based on assumption of 2,400 employees
SUBTOTAL BACK OF HOUSE PRODUCTS $75,865 (estimated)
3. Infrastructure Products
Network Product Post-Opening - 1.2% of product costs - estimated
at $29,364 based on assumption of 2,400 employees
and 12 "rings"
Infrastructure Product Post-Opening - 1.2% of product costs - estimated
at $8,194 based on assumption of 2,400 employees
and 270 PC's
SUBTOTAL INFRASTRUCTURE PRODUCTS $37,557 (estimated)
4. 1998/1999 one time information technology implementation $487,489
charges for customer products, employee and financial
products, infrastructure products and systems
5. Human Resource Services
Payroll Pre-Opening estimated at $1,029, Post-Opening
estimated at $9,261, based on estimated volume of
transactions and average cost of $2.25 per
employee per month
HRIS Pre-Opening estimated at $30,870, Post-Opening
estimated at $7,719, based on estimated number of
employees and cost of $1.60 per employee per
month
</TABLE>
S-6
<PAGE> 13
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C> <C>
Compensation Pre-Opening estimated at $46,750, Post-Opening
estimated at $9,350, based on estimated number of
employees and cost of $1.95 per employee per
month
Benefits Pre-Opening estimated at $18,724, Post-Opening
estimated at $19,200, based on cost of $4 per
employee per month and fully operational 2,400
employees and staff
S&RP Pre-Opening estimated at $4,480, Post-Opening
estimated at $584, based on cost of $5 per
employee assuming 700 active 401K participants,
preopening includes initial setup and
administration
Legal Lawyers at $75.00 an hour and legal assistants at
$22.00 an hour
legal services relating to employee benefits administration,
including without limitation:
o review 401(k) plan document and SPD. Assist in transition
issues such as transfers of employees, service credit and
enrollment
o review group insurance plan documents and SPD for medical,
dental and vision, and disability plans
o provide advice on enrollment, eligibility and claims
administration
o review/assist on executive compensation, including stock
option, restricted stock, bonus and deferred compensation
plans
SUBTOTAL HUMAN RESOURCES SERVICES $147,967 (estimated)
</TABLE>
S-7
<PAGE> 14
<TABLE>
<CAPTION>
Type of Services Fees For Services
- ---------------- -----------------
<S> <C> <C>
6. Accounting & Tax Services
Property Reporting Pre-Opening estimated at $18,510, Post-Opening
estimated at $3,702, based on assumed services to
be provided
Fixed Asset Accounting Post-Opening estimated at $200, based upon asset
maintenance to be performed at property
Procurement Post-Opening estimated at $4,540, based on assumed
number of transactions
Financial Accounting Systems Administration Pre-Opening estimated at $10,000 flat fee and
Post-Opening estimated at $2,000 flat fee, based
on cost divided by number of properties supported
SUBTOTAL ACCOUNTING & TAX SERVICES $38,952 (estimated)
</TABLE>
III. Estimated Billings and Annual True-Up
The assumed opening date, numbers of employees, and other assumptions
regarding the Services may not occur as assumed or projected. Where
indicated, the fees for the Services are estimates based on
assumptions. Actual fees for the Services in such cases will vary
depending on the actual circumstances which may vary from the
estimates. Monthly billings by Service Provider will be based on
estimated amounts. A true-up to actual amounts will be calculated by
Service Provider after the end of the calendar year, and a credit or
refund will be made to JCC by Service Provider or a balance due will be
billed to JCC by Service Provider, as the case may be.
S-8
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have executed this Version
Number 1 of Schedule I to Administrative Services Agreement as of October 30,
1998.
HARRAH'S OPERATING COMPANY, INC.,
a Delaware corporation
By: /s/ Judy T. Wormser
---------------------------------------------
Name: Judy T. Wormser
-------------------------------------------
Title: Vice President
------------------------------------------
JAZZ CASINO COMPANY, L.L.C.,
a Louisiana limited liability company
By: /s/ L. Camile Fowler
---------------------------------------------
Name: L. Camile Fowler
-------------------------------------------
Title: Vice President, Secretary and Treasurer
------------------------------------------
S-9
<PAGE> 1
EXHIBIT 21.01
LIST OF SUBSIDIARIES OF JCC HOLDING COMPANY
1. Jazz Casino Company, L.L.C., a Louisiana limited liability company.
2. JCC Canal Development, L.L.C., a Louisiana limited liability company
formerly known as CP Development, L.L.C.
3. JCC Fulton Development, L.L.C., a Louisiana limited liability company
formerly known as FP Development, L.L.C.
4. JCC Development Company, L.L.C., a Louisiana limited liability company.
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated March 25, 1999, with respect to the consolidated financial
statements of Harrah's Jazz Company and Subsidiary included in this Form 10-K,
into JCC Holding Company's previously filed Registration Statement File No.
333-79437.
/s/ Arthur Andersen LLP
New Orleans, Louisiana,
March 29, 2000
<PAGE> 1
EXHIBIT 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-79437 of JCC Holding Company on Form S-8 of our report dated March 24, 2000,
appearing in this Annual Report on Form 10-K of JCC Holding Company for the year
ended December 31, 1999.
/s/ Deloitte & Touche LLP
Memphis, Tennessee
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JCC HOLDING
COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT
OF OPERATIONS AS OF DECEMBER 31, 1999 AND FOR THE YEAR ENDED DECEMBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 34,687
<SECURITIES> 0
<RECEIVABLES> 3,405
<ALLOWANCES> (228)
<INVENTORY> 354
<CURRENT-ASSETS> 45,809
<PP&E> 360,052
<DEPRECIATION> (4,179)
<TOTAL-ASSETS> 506,402
<CURRENT-LIABILITIES> 50,424
<BONDS> 368,222
0
0
<COMMON> 101
<OTHER-SE> 45,453
<TOTAL-LIABILITY-AND-EQUITY> 506,402
<SALES> 0
<TOTAL-REVENUES> 41,156
<CGS> 39,088
<TOTAL-COSTS> 95,401
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,869
<INCOME-PRETAX> (59,140)
<INCOME-TAX> 0
<INCOME-CONTINUING> (59,140)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,140)
<EPS-BASIC> (5.88)
<EPS-DILUTED> (5.88)
</TABLE>
