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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES
UNDER THE TRUST INDENTURE ACT OF 1939
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JAZZ CASINO COMPANY, L.L.C.
(NAME OF APPLICANT)
512 SOUTH PETERS, NEW ORLEANS, LOUISIANA 70130
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
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TITLE OF CLASS AMOUNT
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Senior Subordinated Notes Due 2009 $187,500,000
With Contingent Payments
Approximate date of proposed issuance: February 28, 1998
Jazz Casino Company, L.L.C.
512 South Peters
New Orleans, Louisiana 70130
(Name and address of agent for service)
With a copy to:
John M. Newell, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
(213) 485-1234
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The applicant hereby amends this application for qualification on such date
or dates as may be necessary to delay its effectiveness until (i) the 20th day
after the filing of a further amendment which specifically states that it shall
supersede this amendment, or (ii) such date as the Commission, acting pursuant
to Section 307(c) of the Trust Indenture Act of 1939, as amended (the "Act"),
may determine upon the written request of this applicant.
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GENERAL
1. GENERAL INFORMATION. Furnish the following as to the applicant.
(a) Form of organization:
A limited liability company.
(b) State or other sovereign power under the laws of which organized:
Louisiana.
2. SECURITIES ACT EXEMPTION APPLICABLE. State briefly the facts relied upon
by the applicant as a basis for the claim that registration of the indenture
securities under the Securities Act of 1933 is not required.
On November 22, 1995, Harrah's Jazz Company, a Louisiana general
partnership ("HJC"), and Harrah's Jazz Finance Corp., a Delaware corporation
and wholly-owned subsidiary of HJC ("Finance Corp."), filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code"). On December 22, 1995, Harrah's New Orleans
Investment Company, a Nevada corporation and partner in HJC ("HNOIC" and,
collectively with HJC and Finance Corp., "the Debtors"), filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code to facilitate
efforts to reorganize HJC. On or about February 26, 1997 the Debtors filed
the Third Amended Joint Plan of Reorganization (the "Plan of Reorganization")
and related Disclosure Statement (the "Disclosure Statement") with the U.S.
Bankruptcy Court for the Eastern District of Louisiana (the "Bankruptcy
Court"). By order dated February 28, 1997 the Bankruptcy Court approved the
Disclosure Statement. By order dated April 28, 1997 the Bankruptcy Court
confirmed the Plan or Reorganization.
The Effective Date of the Plan of Reorganization was and is conditioned
upon, among other things, the execution and delivery of a modified Casino
Operating Contract and all necessary approvals, if any, from the State of
Louisiana (the "State"). The State has taken the position that the State
legislature must approve the modified Casino Operating Contract, which the
State legislature failed to do in its regular session which adjourned on June
23, 1997. As a result of the State legislature's failure to approve the
modified Casino Operating Contract, the Plan of Reorganization was modified
in certain respects. On December 10, 1997 the Debtors submitted a Third
Amended Joint Plan of Reorganization As Modified Through December 10, 1997
(the "Modified Plan of Reorganization") and related Disclosure Statement (the
"Modified Disclosure Statement"). A hearing to consider the adequacy of the
Modified Disclosure Statement was held on December 10, 1997, at which the
Bankruptcy Court approved the Modified Disclosure Statement. A hearing to
consider confirmation of the Modified Plan of Reorganization is set for
January 21, 1998. The Modified Disclosure Statement is expected to be
distributed to creditors of the Debtors on or about December 18, 1997.
Accordingly, if the Modified Plan of Reorganization is confirmed, and if
certain other conditions precedent are satisfied or waived as set forth in
the Modified Plan of Reorganization, the Effective Date (as defined below)
may occur, and the Notes (as defined below) may be issued, on or about
February 28, 1998.
Under the Modified Plan of Reorganization, the assets and business of
HJC will vest in Jazz Casino Company, L.L.C., a Louisiana limited liability
company (the "Company" or "applicant"), on the date that the Modified Plan of
Reorganization is consummated (the "Effective Date"). On the Effective Date,
the holders (the "Bondholders") of the 14 1/4% First Mortgage Notes due 2001
with Contingent Payments of HJC and Finance Corp. issued under a previously
qualified indenture, will receive, pursuant to the Modified Plan of
Reorganization, among other things, a PRO RATA share of (i) $187.5 million in
aggregate principal amount of Senior Subordinated Notes due 2009 with
Contingent Payments of the Company (the "Notes"), to be issued under the
indenture to be qualified, and a guarantee (the "Guarantee") of such notes by
JCC Holding and (ii) Senior Subordinated Contingent Notes due 2009 of the
Company (for which a separate Application on Form T-3 has been filed
concurrently herewith).
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The issuance of the Notes will not be registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to the exemption from the
registration requirements of the Securities Act provided by Section 1145 of the
Bankruptcy Code. Generally, section 1145 of the Bankruptcy Code exempts the
offer or sale of securities under a plan of reorganization from registration
under the Securities Act and under equivalent state securities and "blue sky"
laws if the following requirements are satisfied: (i) the securities are issued
by the debtor or its successor under a plan of reorganization; (ii) the
recipients of the securities hold a claim against the debtor, an interest in the
debtor or a claim for an administrative expense against the debtor; and (iii)
the securities are issued entirely in exchange for the recipient's claim against
or interest in the debtor or are issued "principally" in such exchange and
"partly" for cash or property. The Company believes that the issuance of the
Notes under the Modified Plan of Reorganization will satisfy such requirements
of section 1145 of the Bankruptcy Code and, therefore, such issuance is exempt
from the registration requirements referred to above.
AFFILIATIONS
3. AFFILIATES. Furnish a list or diagram of all affiliates of the applicant
and indicate the respective percentages of voting securities or other bases of
control.
As of December 16, 1997:
100% of the membership interests in the Company are owned by JCC
Holding Company, a Delaware corporation ("JCC Holding").
As of the Effective Date:
100% of the membership interests in the Company will be owned by JCC
Holding; and
100% of the membership interests in JCC Development Company, L.L.C., a
Louisiana limited liability company ("JCC Development"), will be owned by JCC
Holding.
As a result of certain transactions to be consummated on the Effective Date
pursuant to the Plan of Reorganization, Harrah's Entertainment, Inc., a
Delaware corporation, and certain Bondholders may be deemed to be affiliates
of the Company. This application on Form T-3 (the "Application") will be
amended to include a complete list of affiliates of the Company as of the
Effective date.
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS. List the names and complete mailing
addresses of all directors and executive officers of the applicant and all
persons chosen to become directors or executive officers. Indicate all offices
with the applicant held or to be held by each person named.
As of December 16, 1997:
None. The Company is a member managed, single member, limited liability
company formed under the Louisiana Limited Liability, Company Law, La. R.S.
12:1301 ET SEQ., and as such the Company does not have directors and is not
required to appoint officers.
As of the Effective Date:
The Company expects to appoint officers prior to or on the Effective
Date, however, the individuals who will serve as officers of the Company have
not yet been determined. This Application will be amended to include the
individuals who will serve as officers as of the Effective Date.
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5. PRINCIPAL OWNERS OF VOTING SECURITIES. Furnish the following information
as to each person owning 10 percent or more of the voting securities of the
applicant.
As of December 16, 1997:
Name and Complete Title of Class Percentage of Voting
Mailing Address Owned Amount Owned Securities Owned
----------------- -------------- ------------ ---------------------
JCC Holding Company Membership Interest N/A* 100%
1023 Cherry Road
Memphis, Tennessee 38117
* The Company is a single member limited liability company formed under the
Louisiana Limited Liability Company Law, La. R.S. 12:1301 ET SEQ. The sole
member, JCC Holding, presently owns, and is expected to own on the
Effective Date, all of the membership interests in the Company.
As of the Effective Date the Company expects the above list of principal
owners of voting securities will remain unchanged.
6. UNDERWRITERS. Give the name and complete mailing address of (a) each
person who, within three years prior to the date of filing the application,
acted as an underwriter of any securities of the obligor which were outstanding
on the date of filing the application, and (b) each proposed principal
underwriter of the securities proposed to be offered. As to each person
specified in (a), give the title of each class of securities underwritten.
(a) Within three years prior to the date of the filing of this
Application, no person acted as an underwriter of any securities of the
Company which are currently outstanding.
(b) None.
CAPITAL SECURITIES
7. CAPITALIZATION. (a) Furnish the following information as to each
authorized class of securities of the applicant.
As of December 16, 1997:
<TABLE>
<CAPTION>
Amount Amount
Title of Class Authorized Outstanding
-------------- ----------- -----------
<S> <C> <C>
Membership Interest N/A* N/A*
As of the Effective Date:
Amount Amount
Title of Class Authorized Outstanding
-------------- ----------- -----------
Membership Interest N/A* N/A*
Senior Subordinated Notes Due 2009 With Contingent Payments $187,500,000(1) $187,500,000
Senior Subordinated Contingent Notes Due 2009 (2) (2)
8% Convertible Junior Subordinated Debentures Due 2009 $ 26,637,000(3) $ 26,637,000(3)
</TABLE>
* The Company is a single member limited liability company formed under the
Louisiana Limited Liability Company Law, La. R.S. 12:1301 ET SEQ. The sole
member, JCC Holding, presently owns, and is expected to own on the
Effective Date, all of the membership interests in the Company.
(1) Plus additional Notes issued in lieu of cash interst payments in
accordance with the terms of the Indenture (as defined below).
(2) All payments in respect of the Senior Subordinated Contingent Notes due
2009 will be contingent payments, and such contingent payments will be
limited to an annual aggregate maximum amount of $18,319,035.
(3) Plus additional 8% Convertible Junior Subordinated Debentures due 2009
issued (i) in lieu of cash interest payments in accordance with the terms
of the indenture for such securities or (ii) pursuant to the Modified Plan
of Reorganization.
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(b) Give a brief outline of the voting rights of each class of voting
securities referred to in paragraph (a) above.
Because the Company is a member manager, single member, limited
liability company, all decisions relating to the business affairs and
properties of the Company shall be made by JCC Holding as the sole member of
the Company.
Holders of the Notes, the Senior Subordinated Contingent Notes Due 2009 and
the 8% Convertible Junior Subordinated Debentures Due 2009 do not have any
voting rights by reason of ownership of those securities.
INDENTURE SECURITIES
8. ANALYSIS OF INDENTURE PROVISIONS. Insert at this point the analysis of
indenture provisions required under section 305(a)(2) of the Trust Indenture Act
of 1939, as amended (the "TIA").
The Notes will be issued under an indenture (the "Indenture") to be dated
as of the Effective Date, between the Company, JCC Holding, as guarantor, and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), a copy
of which is included as Exhibit T3C hereto. Capitalized terms used in this
Section 8 which are not otherwise defined below or elsewhere in the Application
have the respective meanings assigned to them in the Indenture. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety, by reference to all of the
provisions of the Indenture.
(A) EVENTS OF DEFAULT. The following are Events of Default under the
Indenture:
(1) the failure by the Company to pay any installment of
interest on the Notes or the Contingent Notes as and when due and payable
and the continuance of any such failure for 30 days;
(2) the failure by the Company to pay all or any part of the
principal, or premium, if any, on the Notes when and as the same become due
and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, failure to pay any Offer to Purchase
Price or otherwise;
(3) the failure by the Company or any Guarantor to observe or
perform any other covenant or agreement contained in the Notes or the
Indenture and, in certain instances, the continuance of such failure
for a period of 30 days, and in other instances, the continuance of such
failure for a period of 30 days after written notice is given to the
Company by the Trustee, or to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of the Notes then
outstanding;
(4) certain events of bankruptcy, insolvency or reorganization
in respect of either the Company or a Significant Subsidiary;
(5) a default in the payment of principal, premium or interest
when due at final maturity or an acceleration for any other reason of the
maturity of any Indebtedness (other than Non-recourse Indebtedness) of the
Company or any Significant Subsidiary with an aggregate principal amount in
excess of $15,000,000, including, without limitation, the Bank Credit
Facilities at such times as the aggregate principal amount of Indebtedness
thereunder exceeds $15,000,000;
(6) final unsatisfied judgments not covered by insurance (other
than with respect to Non-recourse Indebtedness) aggregating in excess of
$15,000,000, at any one time rendered against the Company or any
Significant Subsidiary of the Company and not stayed, bonded or discharged
within 60 days;
(7) the loss of the legal right of the Company to operate slot
machines at the Casino for gaming activities and such loss continuing for
more than 90 days;
(8) an event of default under, or if none is specified therein,
a failure to comply with the provisions of the Collateral Documents or the
Security Agreement and the continuance of such event of default or failure
to comply, as the case may be, for a period of 30 days after written notice
is given to the Company by the
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Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes outstanding, provided that if such
event of default or failure to comply, as the case may be, materially and
adversely affects (a) the Collateral, (b) the priority or perfection of the
security interests purported to be created with respect to any material
portion of the Collateral or (c) the rights and remedies of the Collateral
Agent, the Trustee or the respective secured creditors in respect of any
material portion of the Collateral, then the event of default or failure to
comply, as the case may be, need only continue after the applicable cure
period specified in the Security Agreement or applicable Collateral
Document;
(9) any Collateral Document fails to become or ceases to be in
full force and effect (other than in accordance with its terms or the terms
of the Indenture) or ceases (once effective) to create in favor of the
Trustee, with respect to any material amount of Collateral, a valid and
perfected Lien on the Collateral to be covered thereby (unless a prior or
exclusive Lien is specifically permitted by the Indenture);
(10) the failure of the Casino Completion Date to have occurred
by 30 days following the date on which an event of default entitling the
City to terminate the Ground Lease has occurred under the Ground Lease as a
result of the failure to complete the Casino;
(11) an "Event of Default" (as defined in the Ground Lease) has
occurred; and
(12) an "Event of Default" (as defined in the Contingent Notes
Indenture) has occurred.
If an Event of Default (other than an Event of Default specified in
clause (4) above), or the acceleration of the maturity of amounts owing under
the Bank Credit Facilities occurs and is continuing, then, and in every such
case, unless the principal of all of the Notes shall have already become due
and payable, either the Trustee or the Holders of not less then 25% in
aggregate principal amount of then outstanding Notes, by a notice in writing
to the Company and the Guarantors (and to the Trustee if given by Holders)
(an "Acceleration Notice"), may declare all of the principal of the Notes,
determined as set forth below, together with accrued interest thereon, to be
due and payable immediately. If an Event of Default specified in clause (4)
above occurs, (i) all principal of, premium applicable to, and accrued
interest on, the Notes, and (ii) the Make-Whole Amount, shall be immediately
due and payable on all outstanding Notes without any declaration or other act
on the part of the Trustee or the Holders; provided, however, that (A) the
Primary Make-Whole Amount shall rank PARI PASSU with any Senior Subordinated
Debt including, without limitation, any Senior Subordinated Debt to which HET
has succeded to the rights of the lenders thereunder and (B) the Secondary
Make-Whole Amount shall be subordinated to any Senior Subordinated Debt
including, without limitation, any Senior Subordinated Debt to which HET has
succeeded to the rights of the lenders thereunder. The Holders of no less
than a majority in aggregate principal amount of then outstanding Notes
generally are authorized to rescind such acceleration if all existing Events
of Default, other than the non-payment of amounts which have become due
solely by such acceleration, have been cured or waived.
If a Default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or interest (including Contingent Payments) on, any
Note (including the payment of the Change of Control Offer Price on the Change
of Control Purchase Date, the Redemption Price on the Redemption Date and the
Asset Sale Offer Amount on the Asset Sale Purchase Date, as the case may be),
the Trustee may withhold the notice if and so long as a Trust Officer in good
faith determines that withholding the notice is in the interest of the Holders.
(B) AUTHENTICATION AND DELIVERY; APPLICATION OF PROCEEDS.
The Notes shall be executed on behalf of the Company and the Guaranty
shall be executed on behalf of the Parent Guarantor by the Chairman of the
Board, the President or one of the Vice Presidents of each of them, under the
corporate seal of each respective company, reproduced thereon, and attested
by the Secretary or one of the Assistant Secretaries of each of them. The
signature of any of these officers on the Notes or Guarantees may be manual
or facsimile. A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note, but
such signature shall be conclusive evidence that the Note has been
authenticated pursuant to the terms of the Indenture. There will be no
proceeds from the issuance of the Notes because such securities (together
with other securities of the Company and JCC Holding) will be issued or
distributed pursuant to the Modified Plan of Reorganization in exchange for
the satisfaction and discharge of certain claims arising from the ownership
of certain securities of or claims against the Debtors in the bankruptcy
case. Accordingly, no provisions are contained in the Indenture with respect
to the use by the Company of proceeds of the issuance of the Notes.
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(C) RELEASE AND SUBSTITUTION OF PROPERTY SUBJECT TO THE LIEN OF THE
INDENTURE.
The Company may, without requesting the release or consent of the
Trustee or Collateral Agent, (i) dispose of and replace any worn out or
obsolete machinery or equipment, (ii) in the ordinary course of business, (A)
sell inventory held for resale, (B) collect, liquidate, sell, factor, or
otherwise dispose of accounts receivable or notes receivable, or (C) make
Cash payments from Cash that is part of the Collateral, (iii) sell or
otherwise dispose of personal property that is no longer necessary in the
conduct of the Company's business (iv) sell or otherwise dispose of property
in accordance with the covenant regarding asset sales set forth in the
Indenture, and (v) sell or otherwise dispose of certain parcels of, and
interests in, real property.
Subject to applicable law, the release of any Collateral from Liens
created by the Collateral Documents or the release of, in whole or in part,
the Liens created by the Collateral Documents, will not be deemed to impair
the Collateral Documents in contravention of the provisions of the Indenture
if and to the extent the Collateral or Liens are released pursuant to, and in
accordance with, the applicable Collateral Documents or pursuant to, and in
accordance with, the terms of the Indenture. To the extent applicable,
without limitation (except as provided in the last sentence of this
paragraph), the Company, the Parent Guarantor and each obligor on the Notes
shall cause TIA Section 314(d), relating to the release of property or
securities from the Liens of the Collateral Documents, to be complied with.
Any certificate or opinion required by TIA Section 314(d) may be made by two
Officers of the Company, except in cases in which TIA Section 314(d) requires
that such certificate or opinion be made by an independent person. The
Company shall not be required under the Indenture to deliver to the Trustee
any certificates or opinions required to be delivered pursuant to Section
314(d) of the TIA in connection with releases of Collateral in accordance
with clause (ii) of the preceding paragraph, unless TIA Section 314(d) would
require such certificate or opinion to be made by an independent person.
(D) SATISFACTION AND DISCHARGE.
The obligations of the Company under the Notes and the Indenture will
terminate (except for certain obligations of the Company to indemnify the
Trustee under certain circumstances and certain obligations with respect to
unclaimed funds) when all outstanding Notes theretofore authenticated and
issued have been delivered to the Trustee for cancellation and the Company
has paid all sums payable by it.
In addition, the Company may, at its option and at any time, elect to
have its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, and the Indenture shall cease to be of further effect as
to all outstanding Notes and Guarantees except as to the following
obligations which will survive unless otherwise terminated or discharged
under the Indenture (a) the rights of Holders of outstanding Notes to receive
from the trust fund described below, payments in respect of the principal of,
premium, if any, and interest (including Contingent Payments) on such Notes
when such payments are due; (b) the Company's obligations with respect to the
Notes concerning, among other things, issuing temporary Notes, registration
of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of
an office or agency for payment and money for security payments held in
trust; (c) the rights, powers, trusts, duties, and immunities of the Trustee,
and the Company's obligations in connection therewith; and (d) the Legal
Defeasance provisions of the Indenture. The Company may cause Legal
Defeasance to occur at any time. In addition, the Company may, at its option
and at any time, elect to have its obligations released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance: (a)
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, U.S. Legal Tender, non-callable
Government Notes or a combination thereof, in such amounts as will be
sufficient to pay and discharge the principal of and interest (including
Maximum Contingent Payments for the current and all future Contingent Payment
Periods) on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, of such principal or installment of
principal or interest (including Contingent Payments); and (ii) the Holders
must have a valid and perfected exclusive security interest in such trust;
(b) in the case of Legal Defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel reasonably satisfactory to the Trustee
confirming that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (ii) since the Issue
Date, there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Legal Defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance
has not occurred; (c) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such Covenant Defeasance and will
be subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (d) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit or, in so
far as Events of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 91st day after the date of such
deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, the Indenture or any
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other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit made by the Company was not made by the
Company with the intent of preferring the Holders over other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (g) the Company shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating to either the
Legal Defeasance or the Covenant Defeasance have been complied with.
(E) EVIDENCE AS TO COMPLIANCE WITH CONDITIONS AND COVENANTS.
The Company is required to furnish the Trustee, within 120 days after
the end of each of its fiscal year, an Officers' Certificate complying
(whether or not required) with Section 314(a)(4) of the TIA and stating that
a review of its activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under the Indenture and the
Collateral Documents and further stating, as to each such Officer signing
such certificate, whether or not the signer knows of any failure by the
Company, any Guarantor or any Subsidiary of the Company or any Guarantor to
comply with any conditions or covenants in the Indenture and, if such signer
does know of such a failure to comply, the certificate shall describe such
failure with particularity.
The Company is also required to furnish the Trustee within 120 days
after the end of each fiscal year a written report of a firm of independent
certified public accountants stating that in conducting their audit for such
fiscal year, nothing has come to their attention that caused them to believe
that the Company or any Subsidiary of the Company was not in compliance with
the provisions set forth in certain sections of the Indenture. The Company
is also required to furnish the Trustee, immediately upon becoming aware of
any Default or Event of Default under the Indenture, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
The Indenture provides that upon any application or request by the
Company to the Trustee to take any action under a provision of the Indenture,
the Company must furnish to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent, if any,
provided for in the Indenture relating to the proposed action have been
compiled with. Any such certificate or opinion must comply with the
requirements of the TIA and the Indenture.
9. OTHER OBLIGORS. Give the name and complete mailing address of any
person, other than the applicant, who is an obligor upon the indenture
securities.
JCC Holding Company, 1023 Cherry Road, Memphis, Tennessee 38110, is a
guarantor of the Notes.
CONTENTS OF APPLICATION FOR QUALIFICATION. This application for qualification
comprises:
(a) Pages numbered __ to __, consecutively.(1)
(b) The statement of eligibility and qualification of the trustee under
the indenture to be qualified.
(c) The following exhibits in addition to those filed as part of the
statement of eligibility and qualification of the trustee:
Exhibit T3A Operating Agreement of the Company.
Exhibit T3B Not applicable.
Exhibit T3C Form of Indenture to be qualified for Senior
Subordinated Notes due 2009 with Contingent
Payments.
Exhibit T3D Not applicable.
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Exhibit T3E.1 Debtors' Third Amended Joint Disclosure
Statement dated February 26, 1997, and
exhibits thereto. (2)
Exhibit T3E.2 Debtors' Third Amended Joint Plan of
Reorganization dated February 26, 1997, and
exhibits thereto. (2)
Exhibit T3E.3 Letter to Creditors from Debtors' Counsel,
dated March 3, 1997.
Exhibit T3E.4 Letter to Creditors from The Official
Committee of Bondholders of Harrah's Jazz
Company, dated February 28, 1997.
Exhibit T3E.5 Notices of Entry of Order and Order Approving
Debtors' Third Amended Joint Disclosure
Statement and of Plan Confirmation Hearing.
Exhibit T3E.6 Voting Procedures Notice.
Exhibit T3E.7 Ballots.
Exhibit T3E.8 Debtors' Fourth Amended Joint Disclosure
Statement, dated July 24, 1997, and
exhibits thereto. (3)
Exhibit T3E.9 Debtors' Fourth Amended Joint Plan of
Reorganization, dated July 24, 1997, and
exhibits thereto. (3)
Exhibit T3E.10 Notice of Entry of Order Approving Debtors'
Fourth Amended Joint Disclosure Statement.
Exhibit T3E.11 Ballot.
Exhibit T3E.12 Form of Debtors' Fifth Amended Joint
Disclosure Statement dated December 10, 1997,
and exhibit thereto.
Exhibit T3E.13 Form of Debtor's Third Amended Joint Plan of
Reorganization under Chapter 11 of the
Bankruptcy Code as modified through December
10, 1997, dated December 10, 1997, and
exhibits thereto.
Exhibit T3E.14 Form of Ballots.
Exhibit T3E.15 Form of letter to Creditors from Debtors'
Counsel, dated December 10, 1997.
Exhibit T3E.16 Form of Notices of Entry of Order Approving
Debtors' Fifth Amended Joint Disclosure
Statement and of Plan Confirmation Hearing.
Exhibit T3E.17 Form of Modified Voting Procedures.
Exhibit T3F See Exhibit T3C for cross reference sheet
showing the location in the Indenture of the
provisions inserted therein pursuant to
Section 310 through 318(a), inclusive, of the
TIA.
- ------------------
(1) Pursuant to Rule 309(a) of Regulation S-T, requirements as to
sequential numbering shall not apply to this electronic format
document.
(2) Incorporated by reference to HJC's Annual Report on Form 10-K for the
year ended December 31, 1996 filed with the Securities and Exchange
Commission on March 28, 1997, Registration No. 33-73370.
9
<PAGE>
(3) Incorporated by reference to Harrah's Jazz Company Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997, filed with the
Securities and Exchange Commission on August 14, 1997, Registration
No. 33-73370.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Jazz Casino Company, L.L.C, a limited liability company organized
and existing under the laws of Louisiana, has duly caused this application to
be signed on its behalf by the undersigned, thereunto duly authorized, and
its seal to be hereunto affixed and attested, all in the City of Memphis and
State of Tennessee, on the 16th day of December, 1997.
JAZZ CASINO COMPANY, L.L.C.
By: JCC HOLDING COMPANY
Its: Sole Member
By: /s/ FREDERICK W. BURFORD
------------------------------
Name: Frederick W. Burford
------------------------------
Title: Vice President, Secretary
and Treasurer
------------------------------
Attest: /s/ COLIN V. REED
---------------------------
Name: Colin V. Reed
----------------------
11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------------------
__ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
----------------------
JAZZ CASINO COMPANY, L.L.C.
(Exact name of obligor as specified in its charter)
LOUISIANA APPLICATION IN PROCESS
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
512 SOUTH PETERS 70130
NEW ORLEANS, LA (Zip code)
(Address of principal executive offices)
----------------------
SENIOR SUBORDINATED CONTINGENT NOTES DUE 2009
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Company
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor
is not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank incorporates
by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.(1)
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872,
by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.(1)
b. A copy of the certificate of the Comptroller of
the Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust
Company of Minneapolis, with the surviving entity
being titled Northwestern National Bank and Trust
Company of Minneapolis.(1)
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12, 1943,
as to change of corporate title of Northwestern
National Bank and Trust Company of Minneapolis to
Northwestern National Bank of Minneapolis.(1)
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National
Bank of Minneapolis to Norwest Bank Minneapolis,
National Association.(1)
e. A copy of the letter dated January 4, 1988 from
the Administrator of National Banks for the
Comptroller of the Currency certifying approval of
consolidation and merger effective January 1, 1988 of
Norwest Bank Minneapolis, National Association with
various other banks under the title of "Norwest Bank
Minnesota, National Association.(1)
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.(1)
Exhibit 4. Copy of By-laws of the trustee as now in effect.(1)
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.(2)
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
(1) Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
(2) To be filed by amendment.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 11th day of December, 1997.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Gavin Wilkinson
----------------------------------------
Gavin Wilkinson
Vice President
<PAGE>
EXHIBIT 6
December 11, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Gavin Wilkinson
----------------------------------------
Gavin Wilkinson
Vice President
<PAGE>
OPERATING AGREEMENT
OF
JAZZ CASINO COMPANY, L.L.C
This Operating Agreement (this "Agreement") of Jazz Casino Company, L.L.C.
(the "Company") is entered into and shall be effective as of the 9th day of
December, 1997, by and between:
JCC Holding Company, a Delaware corporation (the "Member"), whose
address is 1023 Cherry Road, Memphis, Tennessee 38117; and
Jazz Casino Company, L.L.C., a Louisiana limited liability company,
whose address is 512 South Peters Street, New Orleans, Louisiana
70130;
pursuant to the provisions of the Louisiana Limited Liability Company Law,
LSA-R.S. 12:1301, ET SEQ. (the "Act"), and on the following terms and
conditions:
1. FORMATION. The Member has caused the Company to be formed as a
limited liability company pursuant to the provisions of the Act, and upon the
terms and conditions set forth in the Articles (as defined below) and this
Agreement.
2. OPERATING AGREEMENT. This Agreement shall be considered the
"operating agreement" of the Company within the meaning of Section 1301A(16) of
the Act. The rights and obligations of the Member and the administration and
termination of the Company shall be governed by this Agreement, the Articles and
the Act; provided, however, that to the extent this Agreement is inconsistent in
any respect with the Act, this Agreement shall control.
3. COMPANY NAME. The name of the Company Jazz Casino Company, L.L.C.
4. PURPOSE. The business and purpose of the Company shall be to engage
in any activity for which limited liability companies may be engaged under
applicable law (including, without limitation, the Act).
5. CLASSIFICATION FOR FEDERAL INCOME TAX PURPOSES. Pursuant to Treasury
Regulation Section 301.7701-3, it is intended that the Company be disregarded as
an entity separate from the Company's sole Member for federal income tax
purposes.
6. PRINCIPAL PLACE OF BUSINESS AND MAILING ADDRESS. The principal place
of business of the Company shall be located at 512 South Peters Street, New
Orleans, Louisiana 70130, and the mailing address of the Company shall be 512
South Peters Street, New Orleans, Louisiana 70130. The Member may change the
principal place of business and/or mailing address of the Company to any other
place or address, respectively, within or without the State of Louisiana at any
time without an amendment to this Agreement.
<PAGE>
7. REGISTERED AGENT AND REGISTERED OFFICE. The registered office and
registered agent of the Company in the State of Louisiana shall be as the Member
may designate from time to time.
8. TERM. The term of the Company shall commence on the date the
Company's separate existence begins under the Act as a result of the filing of
the articles of organization described in Section 1305 of the Act (the
"Articles") in the office of the Secretary of State of Louisiana in accordance
with the Act and shall continue in perpetuity unless its business and affairs
are earlier wound up following dissolution at such time as this Agreement may
specify.
9. MEMBERS. JCC Holding Company, is the sole "member" of the Company,
within the meaning of Section 1301A(13) of the Act.
10. CAPITAL CONTRIBUTIONS. Within 120 days of the effective date of this
Agreement, the Member shall contribute to the capital of the Company cash in the
amount of $100.00. The Member shall not be required to make any other or
additional contribution to the capital of the Company but may, in its sole and
absolute discretion, make additional contributions to the capital of the
Company.
11. MANAGEMENT OF COMPANY. All decisions relating to the business affairs
and properties of the Company shall be made by the Member in its capacity as the
sole member of the Company. The Member may appoint a President and one or more
Vice Presidents and such other officers of the Company as the Member may deem
necessary or advisable to manage the day-to-day business affairs of the Company
(the "Officers"). The Officers shall serve at the pleasure of the Member. To
the extent delegated by the Member, the Officers shall have the authority to act
on behalf of, bind and execute and deliver documents in the name and on behalf
of the Company. No such delegation shall cause the Member to cease to be a
Member. Such Officers, when and if appointed by the Member, shall have such
authority and responsibility as is generally attributable to the holders of such
offices in corporations incorporated under the laws of Louisiana. In addition,
until such time as such delegation of authority is revoked by the Member in its
sole and absolute discretion, the President, when and if appointed by the
Member, is hereby authorized to take any and all actions consistent with the
purposes of the Company that he or she believes is in the best interests of the
Company.
12. LIMITATION OF LIABILITY AND INDEMNIFICATION OF MEMBER. The Member
shall not be personally liable for monetary damages for breach of any duty
provided for in LSA-R.S. 12:1314. The Company shall defend, indemnify and hold
harmless the Member against judgments, settlements, penalties, fines or expenses
incurred because such person or entity is or was a member of the Company.
13. INDEMNIFICATION OF OFFICERS AND EMPLOYEES. The Company may, in its
sole and absolute discretion, defend, indemnify and hold harmless the Officers,
employees or agents of the Company against judgments, settlements, penalties,
fines or expenses incurred because such
2
<PAGE>
person is or was an Officer, employee or agent of the Company, except in the
case of an Officer's, employee's or agent's fraud, willful misconduct,
malfeasance or bad faith.
14. PROFITS AND LOSSES. Profits and losses and each item of income, gain,
loss, deduction and credit of the Company shall be allocated 100% to the Member.
15. DISTRIBUTIONS. The Company shall distribute cash or other property
from time to time 100% to the Member in such amount or of such type and at such
times as the Member may determine.
16. COMPANY BOOKS AND RECORDS. In addition to the records required to be
maintained pursuant to Section 1319 of the Act, the Company shall maintain
separate books and records of accounts for the Company in such manner and form
as the Member deems appropriate.
17. DISSOLUTION AND WINDING UP. The Company shall dissolve at the time
and date specified in, and its business and affairs shall be wound up pursuant
to, a written instrument executed by the Member. If the Member's membership in
the Company ceases as a result of the Member's dissolution or termination as an
entity at a time when the Company has no other member, the successors in
interest of the Member with respect to its interest in the Company shall become
substitute members in the Company upon the occurrence of such event, each
holding a proportionate membership interest in the Company in accordance with
their interest as a successor to the Member, and the Company shall not dissolve.
18. AMENDMENTS. This Agreement and the Articles may be amended or
modified from time to time only by written instrument executed by the Member or
a majority in interest of the members, if there is more than one member, and by
the Company.
19. GOVERNING LAW. The validity and enforceability of this Agreement
shall be governed by and construed in accordance with the laws of the State of
Louisiana without regard to otherwise governing principles of conflicts of law.
[Signature Page To Follow]
3
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Operating Agreement
of Jazz Casino Company, L.L.C., effective as of the day first above set forth.
JCC HOLDING COMPANY,
a Delaware corporation
By:
------------------------------
Colin V. Reed
Its: President
JAZZ CASINO COMPANY, L.L.C.,
a Louisiana limited liability company
By: JCC HOLDING COMPANY,
a Delaware corporation
Its: Sole Member
By:
------------------------
Frederick W. Burford
Its: Vice President
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JAZZ CASINO COMPANY, L.L.C.
ISSUER,
JCC HOLDING COMPANY
GUARANTOR,
AND
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
TRUSTEE
--------------------
INDENTURE
Dated as of __________, 1998
--------------------
$187,500,000
Senior Subordinated Notes due 2009
With Contingent Payments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
- ------- -------
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8;
8.10;
13.2
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
313 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6;
13.2
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6
314 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7;
5.8
13.2
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2;
8.2;
13.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2;
13.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)
4.2
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c)
4.2
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5
(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b)
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5:
8.6;
13.2
<PAGE>
TIA INDENTURE
SECTION SECTION
- ------- -------
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(a)
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8;
7.11;
8.1(c)
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.12
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7;
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
- ------------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 INCORPORATION BY REFERENCE OF TIA. . . . . . . . . 31
SECTION 1.3 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . 31
ARTICLE II
THE SECURITIES . . . . . . . . . 32
SECTION 2.1 FORM AND DATING. . . . . . . . . . . . . . . . . . 32
SECTION 2.2 EXECUTION AND AUTHENTICATION . . . . . . . . . . . 32
SECTION 2.3 REGISTRAR AND PAYING AGENT . . . . . . . . . . . . 34
SECTION 2.4 PAYING AGENT TO HOLD ASSETS IN TRUST . . . . . . . 34
SECTION 2.5 SECURITYHOLDER LISTS . . . . . . . . . . . . . . . 35
SECTION 2.6 TRANSFER AND EXCHANGE. . . . . . . . . . . . . . . 35
SECTION 2.7 REPLACEMENT SECURITIES . . . . . . . . . . . . . . 35
SECTION 2.8 OUTSTANDING SECURITIES . . . . . . . . . . . . . . 36
SECTION 2.9 TREASURY SECURITIES. . . . . . . . . . . . . . . . 36
SECTION 2.10 TEMPORARY SECURITIES . . . . . . . . . . . . . . . 36
SECTION 2.11 CANCELLATION . . . . . . . . . . . . . . . . . . . 37
SECTION 2.12 DEFAULTED INTEREST . . . . . . . . . . . . . . . . 37
ARTICLE III
REDEMPTION . . . . . . . . . . 38
SECTION 3.1 RIGHT OF REDEMPTION. . . . . . . . . . . . . . . . 38
SECTION 3.2 REDEMPTION PURSUANT TO APPLICABLE LAWS . . . . . . 38
SECTION 3.3 NOTICES TO TRUSTEE . . . . . . . . . . . . . . . . 39
SECTION 3.4 NOTICE OF REDEMPTION . . . . . . . . . . . . . . . 39
SECTION 3.5 EFFECT OF NOTICE OF REDEMPTION . . . . . . . . . . 40
SECTION 3.6 DEPOSIT OF REDEMPTION PRICE. . . . . . . . . . . . 40
SECTION 3.7 SECURITIES REDEEMED IN PART. . . . . . . . . . . . 40
ARTICLE IV
SECURITY. . . . . . . . . . . 40
SECTION 4.1 SECURITY INTEREST. . . . . . . . . . . . . . . . . 40
SECTION 4.2 RECORDING; OPINIONS OF COUNSEL . . . . . . . . . . 41
SECTION 4.3 DISPOSITION OF CERTAIN COLLATERAL. . . . . . . . . 42
iii
<PAGE>
PAGE
----
SECTION 4.4 NET CASH PROCEEDS ACCOUNT. . . . . . . . . . . . . 44
SECTION 4.5 CERTAIN RELEASES OF COLLATERAL . . . . . . . . . . 44
SECTION 4.6 LIEN SUBORDINATION.. . . . . . . . . . . . . . . . 45
SECTION 4.7 PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . 45
SECTION 4.8 SUITS TO PROTECT THE COLLATERAL. . . . . . . . . . 46
SECTION 4.9 TRUSTEE'S DUTIES . . . . . . . . . . . . . . . . . 46
SECTION 4.10 COLLATERAL DOCUMENTS . . . . . . . . . . . . . . . 46
ARTICLE V
COVENANTS. . . . . . . . . . . 47
SECTION 5.1 PAYMENT OF SECURITIES. . . . . . . . . . . . . . . 47
SECTION 5.2 MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . 47
SECTION 5.3 LIMITATION ON RESTRICTED PAYMENTS. . . . . . . . . 48
SECTION 5.4 EXISTENCE. . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.5 PAYMENT OF TAXES AND OTHER CLAIMS. . . . . . . . . 49
SECTION 5.6 MAINTENANCE OF INSURANCE . . . . . . . . . . . . . 50
SECTION 5.7 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT. . . . . 50
SECTION 5.8 REPORTS. . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.9 WAIVER OF STAY, EXTENSION OR USURY LAWS. . . . . . 51
SECTION 5.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES . . . . 52
SECTION 5.11 LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK. . . 53
SECTION 5.12 LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES. . . . . . . 55
SECTION 5.13 LIMITATION ON LIENS. . . . . . . . . . . . . . . . 56
SECTION 5.14 LIMITATION ON SALES OF ASSETS AND SUBSIDIARY
STOCK; EVENT OF LOSS . . . . . . . . . . . . . . 57
SECTION 5.15 CONSTRUCTION . . . . . . . . . . . . . . . . . . . 61
SECTION 5.16 LIMITATION ON USE OF CERTAIN FUNDS . . . . . . . . 61
SECTION 5.17 LIMITATION ON LINES OF BUSINESS. . . . . . . . . . 61
SECTION 5.18 LIMITATION ON STATUS AS INVESTMENT COMPANY . . . . 62
SECTION 5.19 RESTRICTIONS ON SALE AND ISSUANCE OF SUBSIDIARY
STOCK . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.20 LIMITATION ON PAYMENT OF MANAGEMENT FEES . . . . . 62
SECTION 5.21 LISTING OF SECURITIES. . . . . . . . . . . . . . . 63
SECTION 5.22 COMPLIANCE WITH ENVIRONMENTAL LAWS . . . . . . . . 63
SECTION 5.23 LIMITATION ON LAYERING DEBT. . . . . . . . . . . . 64
ARTICLE VI
SUCCESSORS . . . . . . . . . . 64
SECTION 6.1 LIMITATION ON MERGER, SALE OR CONSOLIDATION . . . . 64
SECTION 6.2 SUCCESSOR SUBSTITUTED . . . . . . . . . . . . . . . 66
iv
<PAGE>
PAGE
----
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES . . . . . 66
SECTION 7.1 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . 66
SECTION 7.2 ACCELERATION OF MATURITY DATE; RESCISSION AND
ANNULMENT . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE . . . . . . . . . . . . . . 70
SECTION 7.4 TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . 71
SECTION 7.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION
OF SECURITIES . . . . . . . . . . . . . . . . . . 72
SECTION 7.6 PRIORITIES. . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.7 LIMITATION ON SUITS . . . . . . . . . . . . . . . . 72
SECTION 7.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL AND INTEREST . . . . . . . . . . . . . . 73
SECTION 7.9 RIGHTS AND REMEDIES CUMULATIVE. . . . . . . . . . . 73
SECTION 7.10 DELAY OR OMISSION NOT WAIVER. . . . . . . . . . . . 73
SECTION 7.11 CONTROL BY HOLDERS. . . . . . . . . . . . . . . . . 74
SECTION 7.12 WAIVER OF PAST DEFAULT. . . . . . . . . . . . . . . 74
SECTION 7.13 UNDERTAKING FOR COSTS . . . . . . . . . . . . . . . 74
SECTION 7.14 RESTORATION OF RIGHTS AND REMEDIES. . . . . . . . . 75
ARTICLE VIII
TRUSTEE . . . . . . . . . . . 75
SECTION 8.1 DUTIES OF TRUSTEE . . . . . . . . . . . . . . . . . 75
SECTION 8.2 RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . 77
SECTION 8.3 INDIVIDUAL RIGHTS OF TRUSTEE. . . . . . . . . . . . 78
SECTION 8.4 TRUSTEE'S DISCLAIMER. . . . . . . . . . . . . . . . 78
SECTION 8.5 NOTICE OF DEFAULT . . . . . . . . . . . . . . . . . 78
SECTION 8.6 REPORTS BY TRUSTEE TO HOLDERS . . . . . . . . . . . 78
SECTION 8.7 COMPENSATION AND INDEMNITY. . . . . . . . . . . . . 79
SECTION 8.8 REPLACEMENT OF TRUSTEE. . . . . . . . . . . . . . . 80
SECTION 8.9 SUCCESSOR TRUSTEE BY MERGER, ETC. . . . . . . . . . 81
SECTION 8.10 ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . . 81
SECTION 8.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE IX
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . 81
SECTION 9.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.2 LEGAL DEFEASANCE AND DISCHARGE. . . . . . . . . . . 81
SECTION 9.3 COVENANT DEFEASANCE . . . . . . . . . . . . . . . . 82
SECTION 9.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. . . . . 82
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PAGE
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SECTION 9.5 DEPOSITED U.S. LEGAL TENDER AND U.S. GOVERNMENT
OBLIGATIONS TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . 84
SECTION 9.6 REPAYMENT TO COMPANY. . . . . . . . . . . . . . . . 84
SECTION 9.7 REINSTATEMENT . . . . . . . . . . . . . . . . . . . 85
ARTICLE X
AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . 85
SECTION 10.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS. . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.2 AMENDMENTS, SUPPLEMENTAL INDENTURES AND
WAIVERS WITH CONSENT OF HOLDERS. . . . . . . . . 86
SECTION 10.3 COMPLIANCE WITH TIA. . . . . . . . . . . . . . . . 87
SECTION 10.4 REVOCATION AND EFFECT OF CONSENTS. . . . . . . . . 87
SECTION 10.5 NOTATION ON OR EXCHANGE OF SECURITIES. . . . . . . 88
SECTION 10.6 TRUSTEE TO SIGN AMENDMENTS, ETC. . . . . . . . . . 88
SECTION 10.7 CONSENT TO CERTAIN AMENDMENTS OF THE
GROUND LEASE; TRUSTEE'S ACTIONS. . . . . . . . . 89
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE . . . . . . 89
SECTION 11.1 REPURCHASE OF SECURITIES AT OPTION OF
THE HOLDER UPON CHANGE OF CONTROL. . . . . . . . 89
ARTICLE XII
GUARANTY. . . . . . . . . . . 92
SECTION 12.1 GUARANTY . . . . . . . . . . . . . . . . . . . . . 92
SECTION 12.2 EXECUTION AND DELIVERY OF GUARANTY . . . . . . . . 93
SECTION 12.3 FUTURE SUBSIDIARY GUARANTORS . . . . . . . . . . . 94
SECTION 12.4 RELEASE OF GUARANTOR . . . . . . . . . . . . . . . 94
SECTION 12.5 WHEN THE GUARANTOR MAY MERGE, ETC. . . . . . . . . 95
SECTION 12.6 CERTAIN BANKRUPTCY EVENTS. . . . . . . . . . . . . 96
ARTICLE XIII
SUBORDINATION OF SECURITIES . . . . . . 96
SECTION 13.1 SECURITIES SUBORDINATED TO SENIOR DEBT . . . . . . 96
SECTION 13.2 SECURITIES SUBORDINATED TO PRIOR PAYMENT OF
ALL SENIOR DEBT ON DISSOLUTION, LIQUIDATION,
REORGANIZATION, ETC. OF THE COMPANY. . . . . . . 97
SECTION 13.3 HOLDERS OF SECURITIES TO BE SUBROGATED TO
RIGHT OF HOLDERS OF SENIOR DEBT. . . . . . . . . 98
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SECTION 13.4 OBLIGATIONS OF THE COMPANY UNCONDITIONAL . . . . . 99
SECTION 13.5 COMPANY NOT TO MAKE PAYMENTS WITH RESPECT
TO SECURITIES IN CERTAIN CIRCUMSTANCES . . . . . 99
SECTION 13.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT
PROHIBITED IN ABSENCE OF NOTICE . . . . . . . . . 101
SECTION 13.7 APPLICATION BY TRUSTEE OF MONIES DEPOSITED
WITH IT. . . . . . . . . . . . . . . . . . . . . 101
SECTION 13.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS
OR OMISSIONS OF COMPANY OR HOLDERS OF
SENIOR DEBT . . . . . . . . . . . . . . . . . . . 102
SECTION 13.9 HOLDERS OF SECURITIES AUTHORIZE TRUSTEE TO
EFFECTUATE SUBORDINATION OF SECURITIES . . . . . 103
SECTION 13.10 RIGHT OF TRUSTEE TO HOLD SENIOR DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS. . . . . . . . 103
SECTION 13.11 ARTICLE XIII NOT TO PREVENT EVENTS OF
DEFAULT . . . . . . . . . . . . . . . . . . . . 103
SECTION 13.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF
SENIOR DEBT . . . . . . . . . . . . . . . . . . 104
SECTION 13.13 TRUST MONIES NOT SUBORDINATED . . . . . . . . . . 104
ARTICLE XIV
SUBORDINATION OF GUARANTEE . . . . . . 104
SECTION 14.1 GUARANTEE SUBORDINATED TO GUARANTOR SENIOR DEBT. . 104
SECTION 14.2 GUARANTEE SUBORDINATED TO PRIOR PAYMENT OF
ALL GUARANTOR SENIOR DEBT ON DISSOLUTION,
LIQUIDATION, REORGANIZATION, ETC. OF
THE GUARANTOR. . . . . . . . . . . . . . . . . . 105
SECTION 14.3 HOLDERS OF SECURITIES TO BE SUBROGATED TO
RIGHT OF HOLDERS OF GUARANTOR SENIOR DEBT. . . . 106
SECTION 14.4 OBLIGATIONS OF THE GUARANTOR UNCONDITIONAL . . . . 107
SECTION 14.5 GUARANTOR NOT TO MAKE PAYMENTS IN RESPECT
OF THE GUARANTY IN CERTAIN CIRCUMSTANCES . . . . 107
SECTION 14.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT
PROHIBITED IN ABSENCE OF NOTICE. . . . . . . . . 108
SECTION 14.7 APPLICATION BY TRUSTEE OF MONIES DEPOSITED
WITH IT. . . . . . . . . . . . . . . . . . . . . 108
SECTION 14.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS
OR OMISSIONS OF A GUARANTOR OR HOLDERS
OF GUARANTOR SENIOR DEBT . . . . . . . . . . . . 109
SECTION 14.9 HOLDERS OF SECURITIES AUTHORIZE TRUSTEE
TO EFFECTUATE SUBORDINATION OF GUARANTY. . . . . 110
SECTION 14.10 RIGHT OF TRUSTEE TO HOLD GUARANTOR
SENIOR DEBT; PRESERVATION OF TRUSTEE'S
RIGHTS. . . . . . . . . . . . . . . . . . . . . 110
SECTION 14.11 ARTICLE XIV NOT TO PREVENT EVENTS OF
DEFAULT. . . . . . . . . . . . . . . . . . . . . 111
SECTION 14.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF
GUARANTOR SENIOR DEBT. . . . . . . . . . . . . . 111
SECTION 14.13 TRUST MONIES NOT SUBORDINATED . . . . . . . . . . 111
ARTICLE XV
MISCELLANEOUS. . . . . . . . . . 111
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SECTION 15.1 TIA CONTROLS . . . . . . . . . . . . . . . . . . . 111
SECTION 15.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . 112
SECTION 15.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS . . . 113
SECTION 15.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT . . . . . . . . . . . . . . . . . . . . 113
SECTION 15.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. . . 113
SECTION 15.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR. . . . . 114
SECTION 15.7 LEGAL HOLIDAYS . . . . . . . . . . . . . . . . . . 114
SECTION 15.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . 114
SECTION 15.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. . . 114
SECTION 15.10 NO RECOURSE AGAINST OTHERS. . . . . . . . . . . . 115
SECTION 15.11 SUCCESSORS. . . . . . . . . . . . . . . . . . . . 115
SECTION 15.12 DUPLICATE ORIGINALS . . . . . . . . . . . . . . . 115
SECTION 15.13 SEVERABILITY. . . . . . . . . . . . . . . . . . . 115
SECTION 15.14 TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . 116
SECTION 15.15 GAMING LAWS . . . . . . . . . . . . . . . . . . . 116
SECTION 15.16 TAX TREATMENT . . . . . . . . . . . . . . . . . . 116
SECTION 15.17 WAIVERS AND RELEASES. . . . . . . . . . . . . . . 116
viii
<PAGE>
INDENTURE, dated as of ________, 1998, between Jazz Casino Company,
L.L.C., a Louisiana limited liability company ("JCC" or the "Company"), JCC
Holding Company, a Delaware corporation ("JCC Holding"), and Norwest Bank
Minnesota, National Association, as Trustee.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's
Senior Subordinated Notes due 2009 with Contingent Payments.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"ACCELERATION NOTICE" shall have the meaning specified in Section 7.2.
"ACCEPTANCE AMOUNT" shall have the meaning specified in Section 5.14.
"ACCUMULATED AMOUNT" shall have the meaning specified in Section 5.14.
"ACQUIRED ASSETS" means assets of any person existing at the time such
person becomes a Subsidiary of the Company or is merged or consolidated into or
with the Company or one of its Subsidiaries.
"ACQUIRED INDEBTEDNESS" means Indebtedness of any person existing at
the time such person becomes a Subsidiary of the Company or is merged or
consolidated into or with the Company or one of its Subsidiaries, and not
incurred in connection with or in anticipation of, such merger or consolidation
or of such person becoming a Subsidiary of the Company.
"ACQUISITION" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, merger consolidation, or other transfer, and whether or not for
consideration.
"ADMINISTRATIVE SERVICES AGREEMENT" means any Administrative Services
Agreement entered into between HOC and JCC after the date hereof relating to the
performance of certain administrative services.
"AFFILIATE" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
of the Guarantors, (ii) any spouse, immediate family member, or other relative
who has the same principal residence of any person described in clause (i)
above, and (iii) any trust in which any person described in clause (i) or (ii)
above has a beneficial interest. For purposes of this definition, the term
"control" means (a) the power to direct the management and policies of a person,
directly or through one or more intermediaries, whether through the ownership of
voting securities, by contract, or otherwise, or (b) the beneficial ownership of
10% or more of any
<PAGE>
class of voting Capital Stock of a person (on a fully diluted basis) or of
warrants or other rights to acquire such class of Capital Stock (whether or not
presently exercisable). Notwithstanding the foregoing, Affiliate shall not
include wholly-owned Subsidiaries of the Company.
"AFFILIATE TRANSACTION" shall have the meaning specified in Section
5.10.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"AGGREGATE AMOUNT" shall have the meaning specified in Section 5.14.
"AGGREGATE CONTINGENT PAYMENTS" means the Contingent Payments together
with all payments in respect of the Contingent Notes.
"APPROVALS" means all approvals, licenses (including Gaming Licenses),
permits, authorizations, findings and other filings necessary under applicable
gaming laws.
"ASSET SALE" shall have the meaning specified in Section 5.14.
"ASSET SALE OFFER" shall have the meaning specified in Section 5.14.
"ASSET SALE OFFER AMOUNT" shall have the meaning specified in Section
5.14.
"ASSET SALE OFFER PERIOD" shall have the meaning specified in Section
5.14.
"ASSET SALE OFFER PRICE" shall have the meaning specified in Section
5.14.
"ASSET SALE PURCHASE DATE" shall have the meaning specified in Section
5.14.
"ASSET SALE PUT DATE" shall have the meaning specified in Section
5.14.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal payment of such security or instrument
multiplied by the amount of each such principal payment by (ii) the sum of all
such principal payments.
"BANK AGENT" means Bankers Trust Company or any successor or
replacement Administrative Agent (as defined in the Bank Credit Agreement) under
the Bank Credit Facilities.
"BANK CREDIT FACILITIES" means the Credit Agreement, dated as of
_________, 1998 (the "Bank Credit Agreement"), among JCC, JCC Holding, the Bank
Lenders from time to time parties thereto, and Bankers Trust Company, as
administrative agent, together with the related documents thereto (including,
without limitation, any guaranty agreements
2
<PAGE>
and security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including by way of adding Subsidiaries of
JCC as additional borrowers or guarantors thereunder) all or a portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"BANK LENDERS" means the lenders from time to time party to the Bank
Credit Facilities.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"BANK SECURITY INTERESTS" means the Liens on the Collateral created by
the Collateral Documents for the benefit of the Bank Lenders.
"BOARD OF DIRECTORS" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
"BOARD RESOLUTION" means, with respect to any person, a duly adopted
resolution of the Board of Directors (or, if such person is a limited liability
company, of the Manager) of such person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
"CAPITALIZED LEASE OBLIGATION" means obligations under a lease,
entered into on or after the Issue Date, that are required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligations shall be the capitalized amount of
such obligations, as determined in accordance with GAAP.
"CAPITAL STOCK" means, with respect to any person, any capital stock
of such person and shares, interests, participations or other ownership
interests (however designated) of any person and any rights (other than debt
securities convertible into corporate stock), warrants and options to purchase
any of the foregoing, including (without limitation) each class of common stock
and preferred stock of such person if such person is a corporation and each
general and limited partnership interest of such person if such person is a
partnership.
"CASH" means U.S. Legal Tender or U.S. Government Obligations.
3
<PAGE>
"CASH EQUIVALENT" means (i) securities issued or directly and fully
guaranteed, or secured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) and in each case maturing
within one year after the date of acquisition, (ii) time deposits and
certificates of deposit of any commercial bank having, or which is the principal
subsidiary of a bank holding company organized under the laws of the United
States, any State thereof, the District of Columbia or any foreign jurisdiction
having capital and surplus in excess of $250,000,000 and commercial paper issued
by others rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within one year after the date of
acquisition, (iii) repurchase obligations with a term of not more than 90 days
collateralized by securities issued or directly and fully guaranteed, or secured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof) entered into with any bank or other person meeting
the qualifications specified in clause (ii) above, and (iv) investments in money
market funds substantially all of whose assets are comprised of securities of
the types described in clauses (i) through (iii).
"CASINO" means the Harrah's Casino New Orleans to be located at the
site of the former Rivergate Convention Center in New Orleans, Louisiana that is
operated in accordance with the Casino Operating Contract.
"CASINO COMPLETION DATE" means the Termination of Construction Date
(as defined in the Notes Completion Guarantee).
"CASINO OPENING DATE" means the date upon which Harrah's Management
Company first opens the Casino to the public and commences business.
"CASINO OPERATING CONTRACT" means the modified Casino Operating
Contract between the Company and the Louisiana Gaming Control Board, dated as of
________, 1998, as it may be amended or supplemented from time to time.
"CHANGE OF CONTROL" shall be deemed to have occurred if HET or a
direct or indirect Subsidiary of HET does not have the exclusive authority to
manage the Casino.
"CHANGE OF CONTROL OFFER" shall have the meaning specified in Section
11.1.
"CHANGE OF CONTROL OFFER PERIOD" shall have the meaning specified in
Section 11.1.
"CHANGE OF CONTROL OFFER PRICE" shall have the meaning specified in
Section 11.1.
"CHANGE OF CONTROL PAYMENT DATE" shall have the meaning specified in
Section 11.1.
4
<PAGE>
"CHANGE OF CONTROL PUT DATE" shall have the meaning specified in
Section 11.1.
"CITY" means the City of New Orleans, Louisiana.
"COLLATERAL" means the Property and assets of the Company which is now
or hereafter subject to the Liens created by the Collateral Documents.
"COLLATERAL AGENT" shall have the meaning set forth under the
definition of "Security Agreement."
"COLLATERAL DOCUMENTS" or "MORTGAGE" means the Security Agreement, the
Intellectual Property Security Documents and the Pledge Agreement and any other
agreement purporting to convey to the Collateral Agent or the Trustee for the
benefit of the Holders, a security interest in Property pursuant to the
requirements of this Indenture executed by the Company in favor of the
Collateral Agent or the Trustee for the benefit of the Holders, as the same may
be amended from time to time.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"COMPANY REQUEST" means a written request of the Company or a
Guarantor, as the case may be, in the form of an Officers' Certificate.
"COMPLETION GUARANTEES" means (i) the Notes Completion Guarantee (the
"Notes Completion Guarantee"), dated as of _______, 1998, by HOC and HET in
favor of the Trustee, as trustee, as it may be amended or supplemented from time
to time, (ii) the Bank Completion Guarantee, dated as of _______, 1998, by HOC
and HET in favor the Bank Agent, as agent, as it may be amended or supplemented
from time to time, (iii) the LGCB Completion Guarantee, dated as of _______,
1998, by HOC and HET in favor of the Regulating Authority, as it may be amended
or supplemented from time to time, and (iv) the RDC/City Completion Guarantee,
dated as of _______, 1998, by HOC and HET in favor of the RDC and the City, as
it may be amended or supplemented from time to time.
"COMPLETION LOAN AGREEMENT" means the Amended and Restated Completion
Loan Agreement, dated as of ________, 1998, among the Company, HOC and HET, as
it may be amended or supplemented from time to time.
"CONSOLIDATED CAPITAL EXPENDITURES" means, with respect to any person
for any period, the capital expenditures of such person and its Consolidated
Subsidiaries (determined in accordance with GAAP) for such period.
"CONSOLIDATED COVERAGE RATIO" of any person on any date of
determination (the "Transaction Date") means, the ratio, on a PRO FORMA basis,
of (a) the aggregate amount of Consolidated EBITDA of such person attributable
to continuing operations and businesses
5
<PAGE>
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of for the Reference Period) to (b) the aggregate
Consolidated Fixed Charges of such person (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of, but only to
the extent that the obligations giving rise to such Consolidated Fixed Charges
would no longer be obligations contributing to such person's Consolidated Fixed
Charges subsequent to the Transaction Date) during the Reference Period;
provided, that for purposes of such calculation, (i) Acquisitions which occurred
during the Reference Period or subsequent to the Reference Period and on or
prior to the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period, (ii) transactions giving rise to the need to calculate
the Consolidated Coverage Ratio shall be assumed to have occurred on the first
day of the Reference Period, (iii) the incurrence of any Indebtedness or
issuance of any Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date (and
the application of the proceeds therefrom to the extent used to refinance or
retire other Indebtedness) shall be assumed to have occurred on the first day of
such Reference Period, (iv) the Consolidated Fixed Charges of such person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate shall be computed
on a PRO FORMA basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to an
Interest Rate Agreement (which shall remain in effect for the 12-month period
immediately following the Transaction Date) that has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used, (v) there shall be excluded from Consolidated
Fixed Charges any portion of such Consolidated Fixed Charges related to any
amount of Indebtedness that was outstanding during the Reference Period but is
not outstanding on the Transaction Date, except for Consolidated Fixed Charges
actually incurred with respect to Indebtedness borrowed (as adjusted pursuant to
clause (iv)) under a revolving credit or similar arrangement to the extent the
commitment thereunder remains in effect on the Transaction Date and (vi) the
Consolidated Fixed Charges of such person attributable to interest on any
Indebtedness under a revolving credit facility computed on a PRO FORMA basis
shall be computed based upon the average daily balance of such Indebtedness
during the Reference Period.
"CONSOLIDATED EBITDA" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such period adjusted (A)
to add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of (i) Permitted Tax
Distributions and, if such person is not treated as a pass through entity for
federal income tax purposes, or any similar provision of state or local law,
income tax expense (whether or not payable during such period) of such person
and its Consolidated Subsidiaries, (ii) consolidated depreciation and
amortization expense, (iii) Consolidated Fixed Charges, (iv) Aggregate
Contingent Payments, whether paid or accrued, (v) Incentive Management Fees,
whether paid or accrued, (vi) amortization expense with respect to deferred
financing fees, (vii) pre-opening expenses, (viii) any extraordinary loss
reflected in the calculation of Consolidated Net Income, (ix) other non-cash
charges, and (x) solely for the purpose of calculating Contingent Payments, if
any, and Incentive
6
<PAGE>
Management Fees, if any, the proceeds, if any, from the exercise of the HET
Warrant, and (B) to subtract therefrom any extraordinary gain reflected in the
calculation of Consolidated Net Income.
"CONSOLIDATED FIXED CHARGES" of any person means, for any period, the
aggregate amount (without duplication) of (a) interest (excluding, solely for
purpose of this definition, Aggregate Contingent Payments and Incentive
Management Fees, whether paid or accrued) expensed or capitalized, paid,
accrued, or scheduled to be paid or accrued in accordance with GAAP (except as
set forth below and including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) during such period in
respect of all Indebtedness of such person and its Consolidated Subsidiaries
including the interest portion of all deferred payment obligations calculated in
accordance with GAAP, and excluding original issue discount and non-cash
interest payments or accruals on any Indebtedness, and all commissions,
discounts and other fees and charges owed with respect to bankers' acceptance
financings and currency and Interest Rate Agreements and (b) the amount of
dividends payable by such person or any of its Consolidated Subsidiaries in
respect of Disqualified Capital Stock (other than by Subsidiaries of such person
to such person or such person's wholly owned Subsidiaries). For purposes of
this definition, (x) interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by the Company to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP and (y) interest expense attributable to any Indebtedness represented
by the guaranty by such person or a Subsidiary of such person of an obligation
of another person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"CONSOLIDATED NET INCOME" means, with respect to any person for any
period, the net income (or loss) of such person and its Consolidated
Subsidiaries (determined in accordance with GAAP) for such period, adjusted to
exclude (only to the extent included in computing such net income (or loss) and
without duplication): (a) all gains which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including from the sale of assets outside of the ordinary course of business or
from the issuance or sale of Capital Stock), (b) the net income, if positive, of
any person, other than a Consolidated Subsidiary, in which such person or any of
its Consolidated Subsidiaries has an interest, except to the extent of the
amount of any dividends or distributions actually paid in cash to such person or
a Consolidated Subsidiary of such person during such period, but not in excess
of such person's PRO RATA share of such person's net income for such period, (c)
the net income, if positive, of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, and (d) the
net income, if positive, of any of such person's Consolidated Subsidiaries to
the extent that the declaration or payment of dividends or similar distributions
is not at the time permitted by operation of the terms of its charter or bylaws
or any other agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary.
"CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of
such person (whether now existing or hereafter created or acquired) the
financial statements of
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which are or are required to be consolidated for financial statement reporting
purposes with the financial statements of such person in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" of any person at any date means, in
the case of a partnership, the partners capital and, in the case of a
corporation, the aggregate of capital, surplus and retained earnings of such
person (plus, in the case of a corporation, amounts of equity attributable to
preferred stock) and its Consolidated Subsidiaries, as would be shown on the
consolidated balance sheet of such person prepared in accordance with GAAP,
adjusted to exclude (to the extent included in calculating such equity), (a) the
amount of partners capital (or capital, surplus and accrued but unpaid
dividends, as the case may be), attributable to any Disqualified Capital Stock,
(b) all upward revaluations and other write-ups in the book value of any asset
of such person or a Consolidated Subsidiary of such person subsequent to the
Issue Date, (c) all investments in Subsidiaries that are not Consolidated
Subsidiaries and in persons that are not Subsidiaries, (d) all unamortized debt
discount and expense and unamortized deferred charges and (e) goodwill and other
intangible assets.
"CONTINGENT NOTES" means the Company's Senior Subordinated Contingent
Notes due 2009.
"CONTINGENT NOTES INDENTURE" means the Indenture, dated as of
________, 1998, among the Company, as obligor, JCC Holding, as guarantor, and
Norwest Bank Minnesota, National Association, as trustee, in connection with the
Contingent Notes.
"CONTINGENT PAYMENT PERIOD" means collectively a First Semiannual
Period together with the next succeeding Second Semiannual Period.
"CONTINGENT PAYMENTS" means collectively the First Period Contingent
Payments and the Second Period Contingent Payments.
"CONTINGENT PAYMENT ACCRUAL" means, at any time, the total amount of
Contingent Payments accrued and unpaid through and as of such time.
"CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES" means the 8% Convertible
Junior Subordinated Debentures due 2009 issued by the Company in connection with
the Plan of Reorganization.
"CREDIT ENHANCEMENT FEE AGREEMENT" means the Credit Enhancement Fee
Agreement, dated as of ________, 1998, between the Company and HOC.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
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"DEFAULTED INTEREST" shall have the meaning specified in Section 2.12.
"DESIGNATED SENIOR DEBT" means (i) so long as any Indebtedness is
outstanding in respect of the Tranche A Term Loans or the Revolving Loans, such
Indebtedness, and (ii) thereafter, any other Senior Debt permitted under this
Indenture the principal amount of which is $15,000,000 or more.
"DESIGNATED SENIOR DEBT OF THE GUARANTORS" means (i) so long as any
Indebtedness of the Guarantors is outstanding in respect of the Tranche A Term
Loans or the Revolving Loans, such Indebtedness, and (ii) thereafter, any other
Guarantor Senior Debt permitted under this Indenture the principal amount of
which is $15,000,000 or more.
"DEVELOPMENT AGREEMENT" means that certain Development Agreement,
dated as of _______, 1998, between the Company and a subsidiary of HOC.
"DISQUALIFIED CAPITAL STOCK" means (a) except as provided in (b), with
respect to any person, Capital Stock of such person that, by its terms or by the
terms of any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased (including at the option of the holder thereof) by
such person or any of its Subsidiaries, in whole or in part on or prior to the
Stated Maturity of the Notes, and (b) with respect to any Subsidiary of such
person (including any Subsidiary of the Company), any Capital Stock other than
any Capital Stock with no preference, privileges, or redemption or repayment
provisions.
"ENVIRONMENTAL LAW" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guideline, written policy
and rule of common law now or hereafter in effect and in each case as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, to the extent
binding on the Company or any of its subsidiaries, relating to the environment,
employee health and safety or Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C.
Section 9601 ET SEQ.; the Resource Conservation and Recovery Act, as the same
may be amended from time to time, 42 U.S.C. Section 6901 ET SEQ.; the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251 ET SEQ.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; the Clean Air Act,
42 U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section
3803 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 ET SEQ., the Hazardous Material Transportation Act, 49 U.S.C.
Section 1801 ET SEQ. and the Occupational Safety and Health Act, 29 U.S.C.
Section 651 ET SEQ. (to the extent it regulates occupational exposure to
Hazardous Materials); and any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"EVENT OF DEFAULT" shall have the meaning specified in Section 7.1.
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"EVENT OF LOSS" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset, or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"FIRST PERIOD CONTINGENT PAYMENTS" means the amounts payable in the
aggregate to the Holders of the Securities on the Interest Payment Date next
following the six-month period ending on ____________ (the "First Semiannual
Period") in an amount equal to the product of (i) 75% of the Company's
Consolidated EBITDA for the First Semiannual Period in excess of $35,000,000 and
less than $45,769,000, and (ii) a fraction (A) the numerator of which is
the aggregate principal amount of Securities (including Secondary Securities)
outstanding on the close of business on the Record Date corresponding to such
Interest Payment Date and (B) the denominator of which is the sum of (x)
$187,500,000 and (y) the total aggregate principal amount of Secondary
Securities issued to Holders in lieu of cash interest payments as of such Record
Date.
"FIXED INTEREST" means interest, payable semi-annually on the Interest
Payment Dates in accordance with this Indenture, at a rate per annum for the
indicated periods:
__________, 1998 through __________, 1998 . . . 5.867%
__________, 1998 through __________, 1999 . . . 5.927%
__________, 1999 through __________, 1999 . . . 5.987%
__________, 1999 through __________, 2000 . . . 6.046%
__________, 2000 through __________, 2000 . . . 6.103%
__________, 2000 through __________, 2001 . . . 6.159%
__________, 2001 through __________, 2003 . . . 6.214%
__________, 2003 through __________, 2009 . . . 8.000%
"FORMULA RATE" means, with respect to any Note, one-half percent per
annum plus (a) the rate of interest per annum equal to the yield to maturity of
the United States Treasury Security having a maturity equal to the Weighted
Average Life to Maturity at such time of such Note, provided that if there shall
be more than one United States Treasury Security having a maturity equal to the
Weighted Average Life to Maturity of such Note, the Formula Rate shall be equal
to the average of the yields to maturity (expressed as a rate per annum) of such
United States Treasury Securities, or (b) if no United States Treasury Security
shall have a maturity equal to the Weighted Average Life to Maturity of such
Note, the rate of interest per annum to maturity (expressed as a rate per annum)
of the United States Treasury Security having a maturity as close as possible
to, but less than, the Weighted Average Life to Maturity of such Note. For
purposes of this definition, "United States Treasury Security" means, at any
time, each of the United States Treasury notes, bonds, three month bills, six
month bills and one year bills having the maturities and yields to maturity as
set forth in the then most recently published Federal Reserve Board Statistical
Release, provided (A) if, for any particular maturity set forth in such Federal
Reserve Board
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Statistical Release, more than one date is associated therewith for which a
yield to maturity is set forth, then the yield to maturity for the most recent
date associated with such maturity shall be used for purposes of determining the
Formula Rate and (B) if, for any particular maturity and the most recent date
associated therewith that is set forth in such Federal Reserve Board Statistical
Release, more than one yield to maturity is set forth therein, then the average
yield associated with such maturity and such date shall be used for purposes of
determining the Formula Rate. For purposes of this definition, "Federal Reserve
Board Statistical Release" means the weekly Statistical Release H.15(519) of the
Federal Reserve Board of Governors or any successor or substitute publication.
"GAAP" means United States generally accepted accounting principles as
in effect on the date of this Indenture.
"GAMING AUTHORITY" means any Governmental Authority with the power to
regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental
Authorities with responsibility to interpret and enforce the laws and
regulations applicable to gaming in any Gaming Jurisdiction.
"GAMING LICENSE" means every material license, material franchise or
other material authorization on the Issue Date or thereafter required to own,
lease, operate or otherwise conduct or manage a casino facility in any state,
local or other jurisdiction including, without limitation, any applicable
material liquor licenses, and with respect to the Company (and without
limitation), the Casino Operating Contract.
"GENERAL DEVELOPMENT AGREEMENT" means the Amended and Restated General
Development Agreement among the Company, the RDC and the City dated as of
________, 1998, as amended or supplemented from time to time.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision and whether now or hereafter in existence, or any
officer or official thereof, and any maritime authority.
"GROSS REVENUE" means all revenues and income of any nature derived
directly or indirectly from the Casino, or from the use or operation thereof,
including without limitation, win (gaming) (i.e., the difference between gaming
wins and losses before deducting cost and expenses determined according to
Casino Standard Accounting Principles (as the term is defined in the Management
Agreement, as in effect on the Issue Date)), food and beverage revenue,
telephone, telegraph, satellite or cable video and telex revenue, entertainment
revenue, parking revenue, rental payment from any lessees or concessionaires,
merchandise sales revenue, interest income, and the actual cash proceeds of
business interruption, increased cost of operation, use occupancy or similar
insurance.
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"GROUND LEASE" means the Amended and Restated Ground Lease for the
site of the Casino among the Company, the RDC and the City, as Intervenor, dated
as of ________, 1998, as amended or supplemented from time to time.
"GUARANTOR SENIOR DEBT" means Indebtedness, including any obligation
for interest which would accrue but for any proceeding referred to in Section
14.2 at the relevant contractual rate, whether or not an allowed claim in any
such proceeding, of the Guarantors in respect of the Tranche A Term Loans or the
Revolving Loans, and any Refinancing (in whole or in part) of the Tranche A Term
Loans or the Revolving Loans (or any previous Refinancing thereof).
"GUARANTORS" means collectively the Parent Guarantor and the
Subsidiary Guarantors.
"GUARANTY" shall have the meaning specified in Section 12.1.
"HARRAH'S INVESTOR" means Harrah's Crescent City Investment Company, a
Nevada corporation.
"HARRAH'S MANAGEMENT COMPANY" means Harrah's New Orleans Management
Company, a Nevada corporation.
"HAZARDOUS MATERIALS" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous substances," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority under Environmental Laws.
"HET" means Harrah's Entertainment, Inc., a Delaware corporation.
"HET/JCC AGREEMENT" means the Agreement, dated as of ______________,
1998, among HET, HOC and the Company, as it may be amended, modified, renewed,
extended or replaced from time to time, pursuant to which HET and HOC shall
provide the Minimum Payment Guaranty for certain periods and subject to certain
terms and conditions set forth therein.
"HET LOAN GUARANTEE" means the guarantees of HET and HOC pursuant to
that certain Guaranty and Loan Purchase Agreement, dated as of ________ 1998,
among HET, HOC and Bankers Trust Company, as administrative agent.
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"HET WARRANT" means the warrants granted to Harrah's Investor in
connection with the Plan of Reorganization pursuant to that certain Warrant
Agreement, dated as of ________, 1998, between JCC Holding and Harrah's
Investor, as it may be amended from time to time.
"HOC" means Harrah's Operating Company, Inc., a Delaware corporation.
"HOLDER" or "SECURITYHOLDER" means the person in whose name a Security
is registered on the Registrar's books.
"HOLDER OF CONTINGENT NOTES" means the person in whose name a
Contingent Note is registered on the books of the registrar with respect to the
Contingent Notes.
"INCUR" shall have the meaning specified in Section 5.11.
"INCURRENCE DATE" shall have the meaning specified in Section 5.11.
"INDEBTEDNESS" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), including
accrued and unpaid Aggregate Contingent Payments, (ii) evidenced by bonds,
notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, except
such as would constitute trade payables to trade creditors in the ordinary
course of business, if and to the extent any of the foregoing described in
clauses (i), (ii) and (iii) would appear as a liability on the balance sheet of
such Person, (iv) evidenced by bankers' acceptances or similar instruments
issued or accepted by banks, (v) for the payment of money relating to a
Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(b) all net obligations of such person under Interest Rate Agreements and
foreign currency hedges; (c) all liabilities of others of the kind described in
the preceding clause (a) or (b) that such person has guaranteed or that is
otherwise its legal liability; (d) all obligations to purchase, redeem or
acquire any Capital Stock; and (e) all obligations secured by a Lien to which
the property or assets (including, without limitation, leasehold interests and
any other tangible or intangible property rights) of such person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such person's legal liability, provided, that the amount of
such obligations shall be limited to the lesser of the fair market value of the
assets or property to which such Lien attaches and the amount of the obligation
so secured. In addition, "Indebtedness" of any person shall include
Indebtedness described in the foregoing clauses (a) (i), (ii) and (iii) that
would not appear as a liability on the balance sheet of such person if (l) such
Indebtedness is the obligation of a partnership or joint venture that is not a
Subsidiary of such person (a "Joint Venture"), (2) such person or a Subsidiary
of such person is a general partner of the Joint Venture (a "General Partner"),
and (3) there is recourse, by contract or operation of law, with respect to
payment of such obligation to property or assets of such person or a Subsidiary
of such person; then such Indebtedness shall be included in an amount not to
exceed (x) the greater of (A) the net assets of the
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General Partner, and (B) the amount of such obligations to the extent that there
is recourse, by contract or operation of law, to the property or assets of such
person or a Subsidiary of such person (other than the General Partner) or (y) if
less than the amounts determined pursuant to clause (x) above, the actual amount
of such Indebtedness that is recourse to such person, if the Indebtedness is
evidenced by a writing and is for a determinable amount.
"INDEMNITY AGREEMENT" means the Amended and Restated Construction Lien
Indemnity Obligation Agreement, dated as of ________, 1998, between the Company
and HOC.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"INDENTURE OBLIGATIONS" means the obligations of the Company and the
Guarantors pursuant to this Indenture and the Securities (and any other obligor
hereunder or under the Securities) now or hereafter existing, to pay principal
of and interest (including Contingent Payments) on the Securities when due and
payable, whether on the Maturity Date or an Interest Payment Date, by
acceleration, Required Regulatory Redemption, acceptance of any Asset Sale
Offer, Change of Control Offer, or otherwise, and interest on the overdue
principal of, and (to the extent lawful) interest, if any, on, the Securities
and all other amounts due or to become due in connection with this Indenture,
the Securities and the Collateral Documents, including any and all extensions,
renewals or other modifications thereof, in whole or in part, and the
performance of all other obligations of the Company (and any other obligor
hereunder or under the Securities) and the Guarantors, including all costs and
expenses incurred by the Trustee or the Holders in the collection or enforcement
of any such obligations or realization upon the Collateral or the security of
any Collateral Documents.
"INSURANCE PROCEEDS" means the Company's and the Guarantors' interest
in and to (a) all proceeds which now or hereafter may be paid under any
insurance policies now or hereafter obtained by or on behalf of the Company or
any of the Guarantors in connection with the conversion of the Property subject
to the Collateral Documents into Cash, Cash Equivalents or liquidated claims,
together with the interest payable thereon and the right to collect and receive
the same, including, but without limiting the generality of the foregoing,
proceeds of casualty insurance, title insurance, business interruption insurance
and any other insurance now or hereafter maintained with respect to such
Property and (b) all amounts attributable to Events of Loss.
"INTELLECTUAL PROPERTY SECURITY DOCUMENTS" means the Assignment of
Security Interests in United States Trademarks and Patents and the Assignment of
Security Interest in United States Copyrights, each substantially in the form
annexed to the Security Agreement and executed in favor of the Collateral Agent.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as
of ________, 1998, among the Company, the Administrative Agent under the Bank
Credit
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Facilities, the Trustee, the Collateral Agent and the other parties named
therein, as it may be amended or supplemented from time to time.
"INTEREST PAYMENT DATE" means the stated due date of an installment of
interest on the Securities. The "First Interest Payment Date" shall mean
_________, 1998. The "Second Interest Payment Date" shall mean _________, 1999.
The "Third Interest Payment Date" shall mean _________, 1999. The "Fourth
Interest Payment Date" shall mean _________, 2000. The "Fifth Interest Payment
Date" shall mean _________, 2000. The "Sixth Interest Payment Date" shall mean
_________, 2001.
"INTEREST RATE AGREEMENT" means the obligations of any person pursuant
to any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement, in each case designed to protect such person
or any of its Subsidiaries against fluctuations in interest rates.
"INVESTMENT" by any person in any other person means (without
duplication) (a) the acquisition by such person (whether for cash, property,
services, securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities,
including any options or warrants, of such other person or any agreement to
make any such acquisition; (b) the making by such person of any deposit with,
or advance, loan or other extension of credit to or on behalf of, such other
person (including the purchase of property from another person subject to an
understanding or agreement, contingent or otherwise, to resell such property
to such other person) or any commitment to make any such advance, loan or
extension (but excluding accounts receivable arising in the ordinary course
of business); (c) other than (i) any guarantees of the Notes, (ii) any
guarantees of the Contingent Notes, (iii) any guarantees of the Bank Credit
Facilities, (iv) any guarantees of Interest Rate Agreements, and (v) any
guarantees of Indebtedness or other liabilities of the Company or its
Subsidiaries by the Guarantors, including, without limitation, the Parent
Guarantor, the Company or its Subsidiaries, the entering into by such person
of any guarantee of, or other credit support or contingent obligation with
respect to, Indebtedness or other liability of such other person; (d) the
making of any capital contribution by such person to such other person; or
(e) the designation by the Manager of the Company of a Subsidiary to be an
Unrestricted Subsidiary in accordance with the definition of "UNRESTRICTED
SUBSIDIARY." The Company shall be deemed to make an "Investment" in an
amount equal to the fair market value of the net assets of any Subsidiary, at
the time that such Subsidiary is designated an Unrestricted Subsidiary, and
any property transferred to an Unrestricted Subsidiary from the Company or
one of its Subsidiaries shall be deemed an Investment valued at its fair
market value at the time of such transfer, as determined by the Manager of
the Company in good faith. For purposes of such determination, the amount of
outstanding Investments shall be reduced by the fair market value (determined
by the Manager of the Company in good faith) of the net assets of any
Unrestricted Subsidiary upon its designation as a Subsidiary.
"ISSUE DATE" means the date of first issuance of the Notes under this
Indenture.
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"LEASEHOLDS" of any person means all the right, title and interest of
such person as lessee or licensee in, to and under any lease.
"LEGAL HOLIDAY" shall have the meaning provided in Section 13.7.
"LICENSING AGREEMENT" means the Licensing Agreement, dated as of
________, 1998, between Harrah's Las Vegas, Inc. and JCC relating to JCC's use
of "Harrah's" in the name of the Casino and on its signage and advertising.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including, without limitation, any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give any security interest in and any filing or other
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"MAKE-WHOLE AMOUNT" with respect to the Notes shall consist of a
Primary Make-Whole Amount and a Secondary Make-Whole Amount.
"MANAGEMENT AGREEMENT" means the Second Amended and Restated
Management Agreement between the Company and Harrah's Management Company
relating to the management of the Casino dated as of ________, 1998, as it may
be amended or supplemented from time to time.
"MANAGEMENT FEE" means "Management Fee" as defined by the Management
Agreement.
"MANAGER" means (i) for so long as the Company is a limited liability
company, the Manager of the Company as set forth in the Company's Operating
Agreement or, if the Company's Operating Agreement does not provide for a
Manager, the member or members of the Company, and (ii) otherwise the Board of
Directors of the Company.
"MATURITY DATE," when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at Stated Maturity, a Change of Control Payment
Date, an Asset Sale Purchase Date or by declaration of acceleration, call for
redemption or otherwise.
"MAXIMUM CONTINGENT PAYMENTS" means, for any Contingent Payment
Period, an amount equal to the product of (i) $15,000,000 and (ii) a fraction
(x) the numerator of which is the aggregate principal amount of Securities
(including Secondary Securities) outstanding on the close of business on the
Record Date corresponding to the Interest Payment Date immediately following
such Contingent Payment Period, and (y) the denominator of which is the sum of
(I) $187,500,000 and (II) the total aggregate principal amount of Secondary
Securities issued to Holders in lieu of cash interest payments as of such Record
Date.
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"MINIMUM ACCUMULATION DATE" shall have the meaning specified in
Section 5.14.
"MINIMUM PAYMENT GUARANTY" means the guaranty that the Casino
Operating Contract obligates the Company to cause to be provided to the
Regulating Authority guaranteeing the Company's $100,000,000 annual minimum
payment obligation to the Regulating Authority under the Casino Operating
Contract.
"MINIMUM PAYMENT GUARANTOR" means any person that provides the Minimum
Payment Guaranty to the State.
"MINIMUM PAYMENT GUARANTOR SECURITY INTEREST" means a first priority
Lien on the Collateral for the Benefit of the Minimum Payment Guarantor to
secure the Company's obligation to pay any amounts owing to the Minimum Payment
Guarantor including, without limitation, (i) any fees owing to the Minimum
Payment Guarantor in connection with providing the Minimum Payment Guaranty,
(ii) any termination payment owing by the Company to the Minimum Payment
Guarantor in connection with the Minimum Payment Guaranty, and (iii) payments of
principal and interest in respect of Indebtedness incurred by the Company to the
Minimum Payment Guarantor as a result of drawings (including interest thereon)
by the Regulating Authority under the Minimum Payment Guaranty.
"MORTGAGE" shall have the meaning set forth under the definition of
"Collateral Documents."
"NET CASH PROCEEDS" means the aggregate amount of U.S. Legal Tender or
Cash Equivalents received by the Company in the case of a sale of Qualified
Capital Stock and by the Company and its Subsidiaries in respect of an Asset
Sale, less, in each case, the sum of all fees, commissions and other expenses
incurred in connection with such sale of Qualified Capital Stock or Asset Sale,
and, in the case of an Asset Sale only, less (a) the amount (estimated
reasonably and in good faith by the Company) of income, franchise, sales and
other applicable taxes required to be paid by the Company or any of its
Subsidiaries in connection with such Asset Sale and (b) the aggregate amount of
U.S. Legal Tender or Cash Equivalents so received which is used to retire (in
whole or in part) any existing Indebtedness of the Company or its Subsidiaries
(owed to a person other than an Affiliate) which was secured by the assets that
were the subject of such Asset Sale and which was required to be repaid (which
repayment, in the case of a revolving credit arrangement or multiple advance
arrangement, reduces the commitment thereunder) in connection with such Asset
Sale.
"NET CASH PROCEEDS ACCOUNT" means the separate custodial account
established and maintained by the Company in the name of the Collateral Agent
for the benefit of the Holders and the Bank Lenders pursuant to Section 4.4 and
the terms of the Security Agreement into which the Net Cash Proceeds from Asset
Sales and Insurance Proceeds are to be deposited.
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"NET PROCEEDS" means the aggregate Net Cash Proceeds and fair market
value of property and assets (valued at the fair market value thereof at the
time of receipt in good faith by the Manager of the Company), other than
securities of the Company or any of its Subsidiaries, received by the Company
after payment of expenses, commissions, discounts and the like incurred in
connection therewith.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness of a person to the
extent that under the terms thereof or pursuant to applicable law (i) no
personal recourse shall be had against such person for the payment of the
principal of or interest or premium on such Indebtedness, and (ii) enforcement
of obligations on such Indebtedness is limited only to recourse against
interests in property and assets purchased with the proceeds of the incurrence
of such Indebtedness and as to which none of the Company, the Guarantors or any
of their Subsidiaries provides any credit support or is liable.
"NOTES." See "SECURITIES."
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any
Indebtedness.
"OFFER TO PURCHASE" means any Change of Control Offer or Asset Sale
Offer.
"OFFER TO PURCHASE PRICE" means any Change of Control Offer Price or
Asset Sale Offer Price.
"OFFICER" means, with respect to any person, the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary or Assistant Secretary of such
person.
"OFFICERS' CERTIFICATE" means, with respect to the Company or any
Guarantor, a certificate signed by any Officer of the Company (or, if the
Company does not have any Officers, by an Officer of the Manager) or such
Guarantor and otherwise complying with the requirements of Sections 15.4 (1) and
15.5.
"OPEN ACCESS PROGRAM" means the program required under the General
Development Agreement and the Ground Lease pursuant to which the Company is to
facilitate the participation by minorities, women and disadvantaged persons and
business enterprises in developing, constructing and operating the Casino.
"OPINION OF COUNSEL" means a written opinion from legal counsel to the
Company reasonably acceptable to the Trustee and which complies with the
requirements of Sections 15.4 and 15.5. Unless otherwise required by this
Indenture, the counsel may be in-house counsel to the Company.
"PARENT GUARANTOR" means JCC Holding.
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"PARTIAL PERIOD CONTINGENT PAYMENTS" means (A) with respect to a First
Semiannual Period, the product of (i) the fraction, the numerator of which is
the number of days from the end of the previous Second Semiannual Period to the
date giving rise to such calculation and the denominator of which is 180 (but in
no event shall such fraction be greater than 1.0), and (ii) the Contingent
Payments for the prior First Semiannual Period, and (B) with respect to a Second
Semiannual Period, the product of (i) the fraction, the numerator of which is
the number of days from the end of the previous First Semiannual Period to the
date giving rise to such calculation and the denominator of which is 180 (but in
no event shall such fraction be greater than 1.0), and (ii) the Contingent
Payments for the prior Second Semiannual Period.
"PAYING AGENT" shall have the meaning specified in Section 2.3.
"PERFORMANCE BOND INDEMNITY AGREEMENT" means the Performance Bond
Indemnity Agreement, dated as of ________, 1998, between the Company and HOC.
"PERMITTED FF&E FINANCING" means Indebtedness which is Non-recourse
Indebtedness to the Company or any of its Subsidiaries or any of their
properties (other than as provided in this definition) that is incurred to
finance the acquisition or lease after the Casino Completion Date of newly
acquired or leased furniture, fixtures or equipment ("FF&E") used directly in
the operation of the Casino or a Related Business and secured by a Lien on such
FF&E (which Lien, subject to certain limitations, shall be the only Permitted
Lien with respect to such FF&E and may be an exclusive Lien or senior, PARI
PASSU or junior to the rights of the Trustee and the Collateral Agent under the
Collateral Documents).
"PERMITTED INDEBTEDNESS" means any of the following:
(a) the Company and any Guarantor may incur Indebtedness solely in
respect of bankers' acceptances, letters of credit and payment and
performance bonds (to the extent that such incurrence does not result in
the incurrence of any obligation for the payment of borrowed money of any
person other than the Company or such Subsidiary), all in the ordinary
course of business, in amounts and for the purposes customary in the
Company's industry for gaming operations similar to those of the Company;
provided, that the aggregate principal amount outstanding of such
Indebtedness (including any Indebtedness issued to refinance, refund or
replace such Indebtedness) shall at no time exceed $5,000,000;
(b) the Company may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness to any other Subsidiary or to the
Company; PROVIDED, however, that such obligations, in any case, shall be
subordinated to such entity's obligations pursuant to the Notes; PROVIDED
FURTHER that, in the case of Indebtedness of the Company to any of its
Subsidiaries, any disposition, pledge or transfer of any such Indebtedness
by the Subsidiary to a person (other than a Subsidiary) shall be deemed to
be an incurrence of such Indebtedness by the Company not permitted by this
clause (b);
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(c) the Company and any of its Subsidiaries may incur Indebtedness
representing the balance deferred and unpaid of the purchase price of any
property or services used in the ordinary course of their business that
would constitute ordinarily a trade payable to trade creditors; and
(d) the Company and any of its Subsidiaries may post a bond or surety
obligation (or incur an indemnity or similar obligation) in order to
prevent the impairment or loss of or to obtain the Casino Operating
Contract, to the extent required by applicable law and consistent in
character and amount with customary industry practice.
"PERMITTED LIENS" means any of the following:
(a) Liens for taxes, assessments or other governmental charges not
yet due or which are being contested in good faith and by appropriate
proceedings by the Company or a Subsidiary thereof if adequate reserves
with respect thereto are maintained on the books of the Company or such
Subsidiary, as the case may be, in accordance with GAAP;
(b) statutory Liens of carriers, warehousemen, mechanics, landlords,
laborers, materialmen, repairmen or other like Liens arising by operation
of law in the ordinary course of business and consistent with industry
practices and Liens on deposits made to obtain the release of such Liens if
(i) the underlying obligations are not overdue for a period of more than 60
days or (ii) such Liens are being contested in good faith and by
appropriate proceedings by the Company or a Subsidiary thereof and adequate
reserves with respect thereto are maintained on the books of the Company or
such Subsidiary, as the case may be, in accordance with GAAP;
(c) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred in the ordinary course
of business and consistent with industry practices which, in the aggregate,
are not substantial in amount, and which do not in any case materially
detract from the value of the property subject thereto (as such property is
used or proposed to be used by the Company or such Subsidiary) or interfere
with the ordinary conduct of the business of the Company or such
Subsidiary; provided, that any such Liens are not incurred in connection
with any borrowing of money or any commitment to loan any money or to
extend any credit;
(d) Liens existing on the Issue Date;
(e) pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance and other
types of social legislation;
(f) Liens created by this Indenture, the Contingent Notes Indenture
and the Collateral Documents;
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(g) Liens that secure Acquired Indebtedness or Liens on Acquired
Assets, provided, in each case, that such Liens do not secure any other
property or assets and were not put in place in connection with or in
anticipation of such acquisition, merger or consolidation;
(h) any judgment Lien unless it constitutes an Event of Default;
(i) Liens to secure payment or performance bonds to the extent
permitted under clause (a) under the definition of "Permitted
Indebtedness;"
(j) Liens incurred in the ordinary course of business securing
Indebtedness under Interest Rate Agreements;
(k) leases or subleases granted to other persons in the ordinary
course of business not materially interfering with the conduct of the
business of the Company or any of its Subsidiaries or materially detracting
from the value of the relative assets of the Company or such Subsidiary of
the Company; and
(l) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by the
Company or any of its Subsidiaries in the ordinary course of business.
"PERMITTED TAX DISTRIBUTION" means (A) for so long as the Company is
treated as a pass through entity for federal income tax purposes, distributions
to equity holders of the Company in an amount not to exceed the Tax Amount for
such period and (B) for so long as the Company is a corporation and for any
taxable year of the Company in which it joins in filing a consolidated federal
income tax return with JCC Holding, a payment (including any estimated tax
payment based on any estimated tax liability for such year) by the Company to
the Parent Guarantor in an amount not in excess of the lesser of (i) the
separate return federal income tax liability (if any) of the affiliated group
(within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended) of which the Company would be the parent (the "JCC Group") if it were
not a member of another affiliated group for that or any other taxable year, and
(ii) the actual tax liability (if any) of the affiliated group of which the
Company is actually a member (the "Guarantor Group") for such year allocable to
the JCC Group; PROVIDED, that such payment can be made by the Company no earlier
than the date on which the Guarantor Group is required to make federal income
tax payments for such year to the Internal Revenue Service; and PROVIDED,
FURTHER, that for purposes of clause (ii) the actual tax liability of the
Guarantor Group shall be computed without regard to any income, gain, loss,
deduction or credit generated by a corporation other than the Parent Guarantor,
the Company or a Subsidiary of the Company. In the event that the Parent
Guarantor and any member of the JCC Group join in filing any combined or
consolidated (or similar) state or local income or franchise tax returns, then
Permitted Tax Distributions shall include payments with respect to such state or
local income or franchise taxes determined in a manner as similar as possible to
that provided in the preceding sentence for federal income taxes.
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"PERSON" means any individual, limited liability company, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
"PLAN OF REORGANIZATION" means the plan of reorganization of Harrah's
Jazz Company, Harrah's Jazz Finance Corp., and Harrah's New Orleans Investment
Company (including all exhibits and schedules annexed thereto), as amended,
under chapter 11 of the United States Bankruptcy Code.
"PLANS" means all drawings, plans and specifications prepared by or on
behalf of the Company or one of its Subsidiaries, as the same may be amended or
supplemented from time to time in good faith, and, if required by applicable
law, submitted to and approved by the building or other relevant department,
which describe and show the Casino, or a Project Expansion, as the case may be,
and the labor and materials necessary for construction thereof.
"PLEDGE AGREEMENT" means the Pledge Agreement, dated ________, 1998,
executed by the Company in favor of the Collateral Agent, as it may be amended
or supplemented from time to time.
"PRIMARY MAKE-WHOLE AMOUNT" shall mean, as of any date, the greater of
(a) zero and (b) the remainder of the Present value (using a discount rate equal
to the Formula Rate at such time) of the remaining scheduled payments of
principal and interest (excluding Maximum Contingent Payments) payable in
respect of the Notes minus the principal amount of the Notes outstanding on such
date.
"PRINCIPAL" or "PRINCIPAL" of any Indebtedness (including the
Securities) means the principal of such Indebtedness plus any applicable
premium, if any, on such Indebtedness.
"PROJECT COSTS" means, with respect to a Project Expansion, the
aggregate costs required to complete such Project Expansion, through the Project
Expansion Termination of Construction Date with respect to such Project
Expansion in accordance with the Plans therefor and applicable legal
requirements, as set forth in a statement submitted to, and receipted for by,
the Trustee, setting forth in reasonable detail all amounts theretofore expended
and any anticipated costs and expenses estimated to be incurred and reserves to
be established in connection with the construction and development of such
Project Expansion, including direct costs related thereto such as construction
management, architectural engineering and interior design fees, site work,
utility installations and hook-up fees, construction permits, certificates and
bonds, land and lease acquisition costs and the cost of furniture, fixtures,
furnishings, machinery and equipment (including gaming equipment), but excluding
the following: principal or interest payments on any Indebtedness (other than
interest on Indebtedness in respect of such Project Expansion which is required
to be capitalized in accordance with GAAP, which shall be included in
determining Project Costs).
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"PROJECT EXPANSION TERMINATION OF CONSTRUCTION DATE" means that date
by which (a) a temporary certificate of occupancy has been issued for the
Project Expansion by the building department and other relevant agencies;
(b) all required Approvals with respect to the Project Expansion have been
obtained by the Company and its Subsidiaries and their respective officers,
directors and equityholders; (c) a notice of completion has been duly recorded;
(d) all materialmen's claims, mechanics' liens or other liens or claims for
liens directly related to the Casino have been paid or satisfactory provisions
have been made for such payment, and the period of time for filing such claims
and liens has expired; (e) an Officers' Certificate has been delivered to the
Trustee certifying that the Project Expansion Termination of the Construction
Date has occurred; (f) a certificate has been delivered by the general
contractor and an architect engaged with respect to the Project Expansion to the
Trustee certifying that the Project Expansion has been substantially completed
in accordance with the Plans therefor and all applicable building laws,
ordinances and regulations; (g) the Project Expansion is in a condition
(including the installation of fixtures, furnishings and equipment) to receive
customers in the ordinary course of business; (h) the Project Expansion is open
for business to the general public. For purposes of the preceding sentence,
satisfactory provision for payment of claims, liens and claims for liens shall
be deemed to have been made if a bond, escrow or trust account for payment has
been established with an independent third party satisfactory to the Trustee in
an amount at least equal to the total of such outstanding claims, liens and
claims for liens.
"PROJECT EXPANSION" means any capital addition, improvement, extension
or repair to the Casino after the Casino Completion Date or to a Related
Business property.
"PROPERTY" or "PROPERTY" means any right or interest in or to property
or assets of any kind whatsoever, whether real, personal or mixed and whether
tangible, intangible, contingent, indirect or direct.
"PURCHASE PRICE" means any Change of Control Offer Price or Asset Sale
Offer Price.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
"QUALIFIED EXCHANGE" means any defeasance, redemption, repurchase or
other acquisition of (a) Capital Stock or Indebtedness of the Company with the
Net Proceeds received by the Company from the substantially concurrent sale of
Qualified Capital Stock or in exchange for Qualified Capital Stock or (b)
subordinated Indebtedness of the Company through the issuance of new
subordinated Indebtedness of the Company, provided that any new subordinated
Indebtedness (l) shall be in a principal amount that does not exceed the
principal amount (after deduction of reasonable and customary fees and expenses
incurred in connection with the refinancing) so refinanced (or, if the
subordinated Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, then such lesser amount as of the date of determination),
plus the lesser of (x) the stated amount of any premium required to be paid in
connection with such a refinancing pursuant to the terms of the Indebtedness
being refinanced
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and (y) the amount of premium actually paid at such time to refinance the
Indebtedness; (2) has an Average Life greater than or equal to the Average Life
of the subordinated Indebtedness so refinanced; (3) has a stated maturity for
its final scheduled principal payment not sooner than the stated maturity of the
subordinated Indebtedness so refinanced; and (4) is expressly subordinated in
right of payment to the Notes pursuant to subordination provisions that are at
least as favorable to the holders of the Notes as those relating to the
subordinated Indebtedness so refinanced.
"RDC" means the Rivergate Development Corporation, a Louisiana public
benefit corporation established by the City.
"REAL PROPERTY" of any person shall mean all the right, title and
interest of such person in and to land, improvements and fixtures, including
Leaseholds.
"RECORD DATE" means a Record Date specified in the Securities whether
or not such Record Date is a Business Day.
"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the applicable form of Security.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the principal amount thereof, plus accrued and unpaid interest
to the Redemption Date (or such lesser amount as may be required by applicable
law or by order of any Gaming Authority).
"REFERENCE PERIOD" with regard to any person means the four full
fiscal quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination is
to be made pursuant to the terms of the Notes or this Indenture; provided, that
the Consolidated Fixed Charges of such person, to the extent such person has
been in existence for a shorter period than four full fiscal quarters, shall be
computed on an annualized basis.
"REFINANCING" shall have the meaning set forth in the definition of
"Refinancing Indebtedness."
"REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital
Stock issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part (a
"Refinancing"), any Indebtedness or Disqualified Capital Stock in a principal
amount or, in the case of Disqualified Capital Stock, liquidation preference,
not to exceed (after deduction of (a) any accrued and unpaid interest and/or
other amounts owing with respect to such Indebtedness which is included in the
Refinancing, and (b) reasonable and customary fees and expenses incurred in
connection with the Refinancing) the lesser of (i) the principal amount or, in
the case of Disqualified Capital Stock, liquidation preference, of the
Indebtedness or Disqualified Capital Stock so
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Refinanced and (ii) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing plus, in either case, the lesser of
the amount of premium actually paid at such time to refinance the Indebtedness
and the stated amount of any premium required to be paid in connection with such
a Refinancing pursuant to the terms of the Indebtedness being refinanced;
PROVIDED, HOWEVER, that (A) Refinancing Indebtedness of any Subsidiary of the
Company shall only be used to Refinance outstanding Indebtedness or Disqualified
Capital Stock of such Subsidiary, (B) Refinancing Indebtedness shall (x) not
have an Average Life shorter than the Indebtedness or Disqualified Capital Stock
to be so refinanced at the time of such refinancing and (y) in all respects, be
no less subordinated, if applicable, to the rights of holders pursuant to the
Notes than was the Indebtedness or Disqualified Capital Stock to be refinanced
and (C) such Refinancing Indebtedness shall have no installment of principal (or
redemption) scheduled to come due earlier than the scheduled maturity of any
installment of principal (or redemption payment) of the Indebtedness (or
Disqualified Capital Stock) to be so refinanced which was scheduled to come due
prior to the Stated Maturity of the Notes.
"REGISTRAR" shall have the meaning specified in Section 2.3.
"REGULATING AUTHORITY" means the Louisiana Gaming Control Board.
"RELATED BUSINESS" means any gaming business conducted by the Company
and its Subsidiaries within the State of Louisiana and any and all related
businesses in support of and ancillary to any such gaming business, including
the development and build-out of the non-gaming space on the second floor of the
Casino for non-gaming entertainment purposes and for leasing such space to
tenants with non-gaming businesses.
"REQUIRED REGULATORY REDEMPTION" means a redemption by the Company,
any Guarantor or any Subsidiary of the Company or any Guarantor of any of such
person's securities pursuant to, and in accordance with, any order of any
Governmental Authority with appropriate jurisdiction and authority relating to a
Gaming License held by the Company or an Affiliate of the Company (including HET
and any Affiliate of HET) or a wholly owned Subsidiary of the Company, or to the
extent necessary in the reasonable, good faith judgment of the Board of
Directors of HET, in the case of HET or one of its affiliates, or the Manager of
the Company, to prevent the loss, failure to obtain or material impairment or to
secure the reinstatement of, any such Gaming License, where such redemption or
acquisition is required because the holder or beneficial owner of such security
is required to be found suitable or to otherwise qualify under any gaming laws
and is not found suitable or so qualified within a reasonable period of time.
"RESTRICTED FUNDS ACCOUNT" means a segregated bank account under the
control of the Company or a Subsidiary, the proceeds of which are invested in
cash or Cash Equivalents pending any use pursuant to Section 5.14.
"RESTRICTED INVESTMENT" means, in one or a series of related
transactions, any Investment other than in Cash Equivalents; provided, that the
extension of credit to
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customers of the Casino consistent with industry practice in the ordinary course
of business shall not be a Restricted Investment.
"RESTRICTED PAYMENT" means, with respect to any person, (a) the
declaration or payment of any dividend or other distribution in respect of
Capital Stock of such person, (b) any payment on account of the purchase,
redemption or other acquisition or retirement for value of Capital Stock of such
person or any Subsidiary of such person, (c) any purchase, redemption, or other
acquisition or retirement for value of, or any defeasance of, any subordinated
Indebtedness, directly or indirectly, by such person or a Subsidiary of such
person prior to the scheduled maturity, any scheduled repayment of principal, or
scheduled sinking fund payment, as the case may be, of such Indebtedness
(including any payment in respect of any amendment of the terms of any such
subordinated Indebtedness, which amendment is sought in connection with any such
acquisition of such Indebtedness or seeks to shorten any such due date), (d) any
Restricted Investment by such person, (e) any interest paid on Indebtedness
incurred in accordance with the provisions of clause (k) under Section 5.11, and
(f) any principal payments to HOC or HET (or any assignees thereof) pursuant to
the Subordinated Credit Facility, the Completion Loan Agreement, the Performance
Bond Indemnity Agreement, or the Indemnity Agreement; provided, however, that
the term "Restricted Payment" does not include (i) any dividend, distribution or
other payment on or with respect to Capital Stock of an issuer to the extent
payable solely in shares of Qualified Capital Stock of such issuer; (ii) any
dividend, distribution or other payment to the Company, or to any of its
directly or indirectly wholly owned Subsidiaries, by the Company or any of its
Subsidiaries; (iii) Investments in or loans to the Company or any of its wholly
owned Subsidiaries so long as all of the Capital Stock of such Subsidiary has
been pledged as collateral for the Notes in favor of the Holders; (iv)
Investments by the Company in a person, if as a result of such Investment (a)
such person becomes a wholly owned Subsidiary of the Company and all of the
Capital Stock of such person has been pledged as Collateral for the Notes in
favor of the Holders pursuant to the Pledge Agreement or (b) such person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
wholly owned Subsidiary of the Company; (v) payments of interest in respect of
the Subordinated Credit Facility; (vi) payments of interest in respect of the
Completion Loan Agreement; (vii) payments of interest in respect of the
Performance Bond Indemnity Agreement; (viii) payments of interest in respect of
the Indemnity Agreement; (ix) Credit Enhancement Fees, as defined in, and paid
pursuant to, the Credit Enhancement Fee Agreement; and (x) any payments to the
Minimum Payment Guarantor in connection with providing the Minimum Payment
Guaranty, including without limitation, (I) payments of principal and interest
in respect of Indebtedness incurred by the Company to the Minimum Payment
Guarantor as a result of drawings by the Regulating Authority under the Minimum
Payment Guaranty, (II) payments of fees to the Minimum Payment Guarantor in
connection with providing the Minimum Payment Guaranty, and (III) any
termination payment owing by the Company to the Minimum Payment Guarantor in
connection with the Minimum Payment Guaranty.
.
"REVOLVING LOANS" means the Revolving Loans under the Bank Credit
Facilities.
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"SEC" means the Securities and Exchange Commission.
"SECOND PERIOD CONTINGENT PAYMENTS" means the amounts payable in the
aggregate to the Holders of the Securities on the Interest Payment Date next
following the six-month period ending on ________ (the "Second Semiannual
Period"), in an amount (which may not be less than zero) equal to (A) the
product of (i) 75% of the Company's aggregate Consolidated EBITDA for the First
Semiannual Period and the Second Semiannual Period in excess of $65,000,000 and
less than $85,000,000, and (ii) a fraction (x) the numerator of which is the
aggregate principal amount of Securities (including Secondary Securities)
outstanding on the close of business on the Record Date corresponding to such
Interest Payment Date and (y) the denominator of which is the sum of (I)
$187,500,000 and (II) the total aggregate principal amount of Secondary
Securities issued to Holders in lieu of cash interest payments as of such Record
Date, LESS (B) the aggregate amount, if any, of First Period Contingent
Payments, whether paid or accrued, in respect of the immediately preceding First
Semiannual Period.
"SECONDARY MAKE-WHOLE AMOUNT" shall mean, as of any date, the present
value (determined using a discount rate equal to the Formula Rate at such time)
of the Maximum Contingent Payments less any negative amount determined according
to clause (b) of the definition of "Primary Make-Whole Amount."
"SECONDARY SECURITIES" has the meaning set forth in Section 2.2.
"SECURITIES" or "NOTES" means the Senior Subordinated Notes due 2009,
including any Secondary Securities issued as interest thereon, in each case,
issued under this Indenture, as the same may be amended or modified from time to
time in accordance with the terms hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SECURITY AGREEMENT" means the Security Agreement, dated as of
________, 1998, by and among the Company, the Trustee and
______________________, as Collateral Agent (the "Collateral Agent"), as the
same may be amended from time to time in accordance with the terms thereof.
"SECURITYHOLDER." See "HOLDER."
"SECURITY INTERESTS" means the Liens on the Collateral created by the
Collateral Documents in favor of the Trustee for the benefit of the Holders.
"SENIOR DEBT" means Indebtedness, including any obligation for
interest which would accrue but for any proceeding referred to in Section 13.2
at the relevant contractual rate, whether or not an allowed claim in any such
proceeding, of the Company in respect of
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the Tranche A Term Loans, the Revolving Loans, and any Refinancing (in whole or
in part) of the Tranche A Term Loans or the Revolving Loans (or any previous
Refinancing thereof).
"SENIOR SUBORDINATED DEBT" means Indebtedness, including any
obligation for interest which would accrue but for any proceeding referred to in
Section 13.2 at the relevant contractual rate, whether or not an allowed claim
in any such proceeding, of the Company in respect of the Tranche B Term Loans
and any Refinancing (in whole or in part) of such Indebtedness (or any previous
Refinancing thereof) which do not increase the principal amount of Indebtedness
outstanding and available thereunder (except to the extent (i) accrued and
unpaid interest and/or other amounts owing with respect to the refinanced
indebtedness is refinanced and/or (ii) of the fees and expenses incurred in
connection with the refinancing indebtedness) or decrease the weighted-average
maturity thereof.
"SIGNIFICANT SUBSIDIARY" of a person means a Subsidiary of such person
which, together with its Consolidated Subsidiaries, has assets or revenues equal
to or greater than 10% of the assets or revenues, respectively, of such person
and its Subsidiaries on a consolidated basis.
"SPECIFIED REAL ESTATE" means the parcels of real property owned by
the Company commonly known as 3 Canal Place (designated Parcel VII in [insert
reference to description of this property]) and Fulton Mall (designated Parcels
I, III, V and VI of [insert reference to description of this property]).
"STATED MATURITY" means _________, 2009.
"SUBORDINATED CREDIT FACILITY" means the credit agreement (the
"Subordinated Credit Agreement"), dated as of _________, 1998, among the
Company, the Parent Guarantor, HET and HOC, together with any related documents,
as such agreement may be amended, supplemented or modified from time to time.
"SUBORDINATED INDEBTEDNESS" means, with respect to any Notes,
Indebtedness of the Company that is subordinated in right of payment to such
Notes in any respect or has a stated maturity on or after the Stated Maturity of
such Notes.
"SUBORDINATED INDEBTEDNESS" means with respect to any Notes,
Indebtedness of the Company that is subordinated in right of payment to such
Notes in all respects and has no scheduled installment of principal due, by
redemption, sinking fund payment or otherwise, on or prior to the Stated
Maturity of such Notes.
"SUBORDINATION AGREEMENT" means that certain Manager Subordination
Agreement (Senior Subordinated Notes), dated as of ________, 1998, by and among
the Company, Harrah's Management and the Trustee.
"SUBSIDIARY," with respect to any person, means (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at
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the time, directly or indirectly, owned by such person, by such person and one
or more Subsidiaries of such person or by one or more Subsidiaries of such
person or (ii) any other person (other than a corporation) in which such person,
one or more Subsidiaries of such person, or such person and one or more
Subsidiaries of such person, directly or indirectly, at the date of
determination thereof has at least majority ownership interest. Notwithstanding
the foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of the
Company or any Guarantor.
"SUBSIDIARY GUARANTORS" means each existing or future Subsidiary of
the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the execution of this Indenture.
"TAX AMOUNT" means, with respect to any period, without duplication,
the amount of taxable income in respect of the income of the Company of any
member multiplied by the highest marginal combined federal, state and local tax
rates applicable to corporations for such period.
"TRANCHE A TERM LOANS" means, collectively, the Tranche A-1 Term Loan,
the Tranche A-2 Term Loan and the Tranche A-3 Term Loan.
"TRANCHE A-1 TERM LOAN" means the Tranche A-1 Term Loan under the Bank
Credit Facilities.
"TRANCHE A-2 TERM LOAN" means the Tranche A-2 Term Loans under the
Bank Credit Facilities.
"TRANCHE A-3 TERM LOAN" means the Tranche A-3 Term Loans under the
Bank Credit Facilities.
"TRANCHE B TERM LOANS" means, collectively, the Tranche B-1 Term Loan
and the Tranche B-2 Term Loan.
"TRANCHE B-1 TERM LOAN" means the Tranche B-1 Term Loan under the Bank
Credit Facilities.
"TRANCHE B-2 TERM LOAN" means the Tranche B-2 Term Loan under the Bank
Credit Facilities.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
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"TRUST OFFICER" means any officer within the corporate trust
department (or any successor group) of the Trustee including any vice president,
assistant vice president, secretary assistant secretary or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer of
the corporate trust department (or any successor group) of the Trustee to whom
such trust matter is referred because of his knowledge of and familiarity with
the particular subject.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that, at
the time of determination, shall be an Unrestricted Subsidiary (as designated by
the Manager of the Company, as provided below) provided that such Subsidiary
does not and shall not engage, to any substantial extent, in any line or lines
of business activity other than a Related Business. The Manager of the Company
may designate any person to be an Unrestricted Subsidiary if (a) no Default or
Event of Default is existing or will occur as a consequence thereof, (b)
immediately after giving effect to such designation, on a PRO FORMA basis, the
Company could incur at least $1.00 of additional Indebtedness pursuant to
paragraph (a) of Section 5.11 and (c) such Subsidiary does not own any Capital
Stock of, or own or hold any Lien on any property of, the Company or any other
Subsidiary. Any such designation also constitutes a Restricted Payment in an
amount equal to the net assets of such Subsidiary at the time of the designation
for purposes of Section 5.3. The Manager of the Company may designate any
Unrestricted Subsidiary to be a Subsidiary, provided, that (i) no Default or
Event of Default is existing or will occur as a consequence thereof and (ii)
immediately after giving effect to such designation, on a PRO FORMA basis, the
Company could incur at least $1.00 of Indebtedness pursuant to paragraph (a) of
Section 5.11. Each such designation shall be evidenced by filing with the
Trustee a certified copy of the resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public
and private debts.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to the Notes,
as of any date, the number of years obtained by dividing the then Remaining
Dollar-Years of the Notes by the aggregate outstanding principal amount of the
Notes. For purposes of this definition, "Remaining Dollar-Years" as of any
date, means the amount obtained by multiplying the aggregate outstanding
principal amount of the Notes as of such date by the number of years (calculated
at the nearest one-twelfth) which shall elapse between such date and Stated
Maturity.
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"WHOLLY OWNED" with respect to a Subsidiary of any person means (i)
with respect to a Subsidiary that is a limited liability company or similar
entity, a Subsidiary whose capital stock is 99% or greater beneficially owned by
such person and (ii) with respect to a Subsidiary that is other than a limited
liability company or similar entity, a Subsidiary whose capital stock or other
equity interest is 100% (other than director's qualifying shares) beneficially
owned by such person.
SECTION 1.2 INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITYHOLDER" means a Holder or a Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
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(vi) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(vii) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless stated otherwise.
ARTICLE II
THE SECURITIES
SECTION 2.1 FORM AND DATING.
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of EXHIBIT A hereto, which
is incorporated into and made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement on them. Any such notations, legends or endorsements not
contained in the form of Security attached as EXHIBIT A hereto shall be
delivered in writing to the Trustee. Each Security shall be dated the date of
its authentication.
The terms and provisions contained in the form of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company, the Parent Guarantor and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Any reference in this Indenture to "accrued interest" includes the
amount of unpaid Contingent Payments due and payable.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
The Securities shall be executed on behalf of the Company and the
Guaranty shall be executed on behalf of the Parent Guarantor by the Chairman of
the Board, the President or one of the Vice Presidents of each of them, under
the corporate seal of each respective company, reproduced thereon, and attested
by the Secretary or one of the Assistant Secretaries of each of them. The
signature of any of these officers on the Securities or Guarantees may be manual
or facsimile.
Securities or Guarantees bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company or the
Parent Guarantor shall bind the Company or the Guarantors, as the case may be,
notwithstanding that such individual or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities.
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A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security, but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Securities, excluding Secondary
Securities, for original issue in the aggregate principal amount of up to
$187,500,000 upon a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of Securities
to be authenticated and the date on which the Securities are to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed $187,500,000, except for any Securities that may be issued
pursuant to the immediately following paragraph and except as provided in
Sections 2.7 and 2.8. Upon the written order of the Company and the Parent
Guarantor in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company or the Parent Guarantor.
The Company shall pay Fixed Interest and Contingent Payments from
_________, 1998 or from the most recent Interest Payment Date to which
interest has been paid or provided for. The Company may, on any of the First
Interest Payment Date, the Second Interest Payment Date, the Third Interest
Payment Date, the Fourth Interest Payment Date, the Fifth Interest Payment
Date and the Sixth Interest Payment Date, at its option and in its sole
discretion, pay Fixed Interest in additional Securities ("Secondary
Securities") in lieu of the payment in whole or in part of Fixed Interest in
cash on the Securities as provided in paragraph 1 of the Securities;
provided, however, that if any Indebtedness is outstanding under the Tranche
A-1 Term Loan or the Tranche A-2 Term Loan on any of the First Interest
Payment Date, the Second Interest Payment Date, the Third Interest Payment
Date or the Fourth Interest Payment Date, the Company shall pay the Fixed
Interest due and payable on such Interest Payment Date in Secondary
Securities in lieu of the payment of such Fixed Interest in cash. In
addition, if the Company's Consolidated EBITDA is less than $28,500,000 for
any twelve-month period ending one month prior to an Interest Payment Date
occurring after the Sixth Interest Payment Date, the Company shall pay the
Fixed Interest due and payable on such Interest Payment Date in Secondary
Securities in lieu of the payment of such Fixed Interest in cash. The
Company shall give written notice to the Trustee of the amount of interest to
be paid in Secondary Securities not less than five Business Days prior to the
relevant Interest Payment Date, and the Trustee or an authenticating agent
(upon written order of the Company signed by an Officer of the Company given
not less than five nor more than 45 days prior to such Interest Payment Date)
shall authenticate for original issue (PRO RATA to each Holder of any
Securities on the applicable Record Date) Secondary Securities in an
aggregate principal amount equal to the amount of cash interest not paid on
such Interest payment Date. Except as set forth in the following paragraph,
each issuance of Secondary Securities in lieu of the payment of Fixed
Interest in cash on the Securities shall be made PRO RATA with respect to the
outstanding Securities, and the Company shall have the right to aggregate
amounts of interest payable in the form of Secondary Securities to a Holder
of outstanding Securities and issue to such holder a single Secondary
Security in payment thereof. Secondary Securities may be denominated a
separate series if the Company
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deems it necessary to do so in order to comply with any law or other applicable
regulation or requirement, with appropriate distinguishing designations.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company
or any of its Subsidiaries.
Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof, except that
Secondary Securities may be in denominations of other than $1,000 or any
integral multiple thereof; provided, however, that the Company may at its option
pay cash in lieu of issuing Secondary Securities in any denominations of less
than $1,000.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
in the Borough of Manhattan, The City of New York where Securities may be
presented for payment ("Paying Agent") and an office or agency where notices and
demands to or upon the Company in respect of the Securities may be served. The
Company may act as its own Registrar or Paying Agent, except that, for the
purposes of Articles III, IX, XI and Section 5.14, neither the Company nor any
Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-Registrars and one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. The Company hereby
initially appoints the Trustee as Registrar and Paying Agent, and the Trustee
hereby initially agrees so to act until such time as the Trustee has resigned or
a successor has been appointed. The Company may change any Registrar, Paying
Agent or co-Registrar without notice to any Holder.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
SECTION 2.4 PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets and/or Secondary Securities held by the Paying
Agent for the payment of principal of, or interest on, the Securities, and shall
notify the Trustee in writing of any Default by the Company in making any such
payment. If the Company or a Subsidiary of the Company
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acts as Paying Agent, it shall segregate such assets and hold them as a separate
trust fund for the benefit of the Holders or the Trustee. The Company at any
time may require a Paying Agent to distribute all assets and/or Secondary
Securities held by it to the Trustee and account for any assets disbursed and
the Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets and/or Secondary Securities held by it to the Trustee and to account for
any assets distributed. Upon distribution to the Trustee of all assets and/or
Secondary Securities that shall have been delivered by the Company to the Paying
Agent, the Paying Agent (if other than the Company) shall have no further
liability for such assets and/or Secondary Securities.
SECTION 2.5 SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before the third Business Day preceding each Interest Payment Date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee reasonably may require of the names and
addresses of Holders. The Trustee, the Registrar and the Company shall provide
a current securityholder list to any Gaming Authority upon demand.
SECTION 2.6 TRANSFER AND EXCHANGE.
When Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its reasonable requirements for such transaction
are met; PROVIDED, HOWEVER, that the Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's or co-Registrar's request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments, or similar governmental charge payable upon exchanges or transfers
pursuant to Section 2.2, 2.10, 3.6, 5.14, 10.5, or 11.1).
SECTION 2.7 REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company and the Parent Guarantor shall issue
and the Trustee shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the
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Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced. The Company may charge such Holder for its reasonable,
out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company
and the Guarantors.
SECTION 2.8 OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee, including Secondary Securities, except those
cancelled by it, those delivered to it for cancellation and those described in
this Section 2.8 as not outstanding. A Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security, except as provided in Section 2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds U.S. Legal Tender or U.S.
Government Obligations sufficient to pay all of the principal and interest
(including Contingent Payments) due on the Securities payable on that date and
payment of the Securities called for redemption is not otherwise prohibited,
then on and after that date such Securities cease to be outstanding and interest
(including Contingent Payments) on them ceases to accrue unless the Company
defaults in its obligations with respect thereto.
SECTION 2.9 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company, any Guarantor and Affiliates of the
Company, or of any Guarantor shall be disregarded, except that, for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, amendment, supplement, waiver or consent, only Securities that the
Trustee knows or has reason to know are so owned shall be disregarded.
SECTION 2.10 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company and
the Parent Guarantor may execute, and upon a written order of the Company in the
form of an Officer's Certificate, the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company
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reasonably and in good faith considers appropriate for temporary Securities.
Without unreasonable delay, the Company and the Parent Guarantor shall execute,
and upon written order of the Company in the form of an Officer's Certificate,
the Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until so exchanged, the temporary Securities shall in all respects
be entitled to the same benefits under this Indenture as permanent Securities
authenticated and delivered hereunder.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
cancel and, at the written direction of the Company, shall dispose of all
Securities surrendered for transfer, exchange, payment or cancellation. Subject
to Section 2.7, the Company may not issue new Securities to replace Securities
they have paid or delivered to the Trustee for cancellation. No Securities
shall be authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section 2.11, except as expressly permitted in the form of
Securities and as permitted by this Indenture. If the Company shall acquire any
of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the obligations represented by such Securities unless and until
surrendered to the Trustee pursuant to this Section 2.11.
SECTION 2.12 DEFAULTED INTEREST.
Interest (including Contingent Payments) on any Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the person in whose name that Security (or one or more
predecessor Securities) is registered at the close of business on Record Date
for such interest.
Any interest (including Contingent Payments) on any Security which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date plus, to the extent lawful, any interest payable on the defaulted
interest (herein called "Defaulted Interest") shall forthwith cease to be
payable to the registered holder on the relevant Record Date, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of Cash equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the
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proposed payment, such Cash when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as provided in
this clause (1). Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security register not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the persons in whose names the Securities (or their respective
predecessor Securities) are registered on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest (including Contingent
Payments) accrued and unpaid, and to accrue, which were carried by such other
Security.
ARTICLE III
REDEMPTION
SECTION 3.1 RIGHT OF REDEMPTION.
Except as provided in Section 3.2 and paragraph 5 of the Notes, the
Notes may not be redeemed prior to maturity.
SECTION 3.2 REDEMPTION PURSUANT TO APPLICABLE LAWS.
Notwithstanding any other provision of this Indenture, the Notes shall
be redeemable in whole or in part, at any time pursuant to, and in accordance
with, a Required Regulatory Redemption. If the Company requires the redemption
of any Security pursuant to this Section 3.2, then the Redemption Price shall be
the principal amount thereof, plus accrued and unpaid interest to the date of
redemption (or such lesser amount as may be required by applicable law or by
order of any Gaming Authority). The Company shall tender the Redemption Price
(together with any accrued and unpaid interest) to the Trustee
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no less than 30 and no more than 60 days after the Company gives the
Securityholder or owner of a beneficial or voting interest written notice of
redemption or such earlier date as may be required by applicable law. The
Company shall notify the Trustee (a "Trustee Redemption Notice") of any
disposition or redemption required under this Section 3.2, and upon receipt of
such notice, the Trustee shall not accord any rights or privileges under this
Indenture or any Security to any Securityholder or owner of a beneficial or
voting interest who is required to dispose of any Security or tender it for
redemption, except to pay the Redemption Price upon tender of such Security.
SECTION 3.3 NOTICES TO TRUSTEE.
If the Company is required to redeem Securities pursuant to Section
3.2, the Company shall notify the Trustee in writing of the Securities to be
redeemed, the aggregate principal amount of the Securities to be redeemed, the
date on which the applicable Securities are to be redeemed (the "Redemption
Date") and whether the Company would like the Trustee to give notice of
redemption to the Holders.
SECTION 3.4 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed (unless a shorter
notice period shall be required by applicable law). At the Company's request,
the Trustee shall give the notice of redemption in the Company's name and at the
Company' expense. Each notice for redemption shall identify the Securities to
be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued and
unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent at the address specified in such notice to collect the
Redemption Price;
(5) if any Security is being redeemed in part, the portion of
the principal amount, equal to $1,000 or any integral multiple thereof, of
such Security to be redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(6) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
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(7) the CUSIP number of the Securities to be redeemed;
(8) the circumstances pursuant to which the Required Regulatory
Redemption is being effected; and
(9) that the notice is being sent pursuant to this Section 3.4
and Paragraph 5 of the Securities.
SECTION 3.5 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price. Upon surrender to the Trustee or Paying Agent,
such Securities called for redemption shall be paid at the Redemption Price.
SECTION 3.6 DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of all
Securities to be redeemed on such Redemption Date. The Paying Agent shall
promptly return to the Company any U.S. Legal Tender so deposited which is not
required for that purpose upon the written request of the Company.
Interest (including Contingent Payments) on the Securities to be
redeemed will cease to accrue on the date on which the Trustee receives the
Trustee Redemption Notice, whether or not such Securities are presented for
payment.
SECTION 3.7 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge, a new Security or Securities equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
SECURITY
SECTION 4.1 SECURITY INTEREST.
(a) In order to secure the prompt and complete payment and
performance in full of the Indenture Obligations, the Company, the Parent
Guarantor and, as applicable, the Trustee and the Collateral Agent have entered
into this Indenture and the Collateral Documents. Each Holder, by accepting a
Security, agrees to all of the terms and provisions of this Indenture, the
Intercreditor Agreement and the Collateral Documents, and the Trustee agrees to
all of the terms and provisions of this Indenture, the Intercreditor Agreement
and
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the Collateral Documents, as this Indenture, the Intercreditor Agreement and the
Collateral Documents may be amended from time to time pursuant to the provisions
thereof and hereof.
(b) The Collateral as now or hereafter constituted shall be held for
the equal and ratable benefit of the Holders without preference, priority or
distinction of any thereof over any other by reason of difference in time of
issuance, sale or otherwise, as the only security for the Indenture Obligations.
The Collateral is to be held by the Collateral Agent for the benefit of the Bank
Lenders, the Holders and the Holders of Contingent Notes, subject to the terms
of the Intercreditor Agreement, the Collateral Documents and Section 4.6. The
Trustee and each Holder acknowledge that, as more fully set forth in the
Collateral Documents, the rights of the Holders (and of the Trustee on their
behalf) to receive proceeds from the disposition of the Collateral is
subordinated to the Bank Security Interests securing Senior Debt.
(c) The provisions of TIA Section 314(d), and the provisions of TIA
Section 314(c)(3) to the extent applicable by specific reference in this
Article IV, are hereby incorporated by reference herein as if set forth in their
entirety, except that, as set forth in Section 4.5, TIA Section 314(d) need not
be complied with in certain respects.
SECTION 4.2 RECORDING; OPINIONS OF COUNSEL.
(a) The Company represents that it has caused to be executed and
delivered, filed and recorded and covenants that it will promptly cause to be
executed and delivered, filed and recorded, all instruments and documents, and
has done and will do or will cause to be done all such acts and other things, at
the Company's expense, as are necessary to effect and maintain valid and
perfected security interests in the Collateral. The Company shall, as promptly
as practicable, cause to be executed and delivered, filed and recorded all
instruments and do all acts and other things as may be required by law to
perfect, maintain and protect the security interests under the Collateral
Documents and herein.
(b) The Company shall furnish to the Trustee, concurrently with the
execution and delivery of this Indenture and the Collateral Documents and
promptly after the execution and delivery of any amendment thereto or any other
instrument of further assurance, an Opinion(s) of Counsel stating that, in the
opinion of such counsel, subject to customary exclusions and exceptions
reasonably acceptable to the Trustee, either (i) this Indenture, the Collateral
Documents, any such amendment and all other instruments of further assurance
have been properly recorded, registered and filed and all such other action has
been taken to the extent necessary to make effective valid security interests
and to perfect the security interests intended to be created by this Indenture
and the Collateral Documents, and reciting the details of such action, or (ii)
no such action is necessary to effect and maintain in full force and effect the
validity and perfection of the security interests under the Collateral Documents
and hereunder.
(c) The Company shall furnish to the Trustee, on or prior to
_________, of each year commencing in 1999, an Opinion(s) of Counsel, dated as
of such date, stating
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that, in the opinion of such counsel, subject to customary exclusions and
exceptions reasonably acceptable to the Trustee, either (A) all such action has
been taken with respect to the recording, registering, filing, rerecording and
refiling of this Indenture, all supplemental indentures, the Collateral
Documents, financing statements, continuation statements and all other
instruments of further assurance as is necessary to maintain the validity and
perfection of security interests under the Collateral Documents and hereunder in
full force and effect and reciting the details of such action, and stating that
all financing statements and continuation statements have been executed and
filed and such other actions taken that are necessary fully to preserve and
protect the rights of the Holders and the Trustee hereunder and under the
Collateral Documents, or (B) no such action is necessary to maintain in full
force and effect the validity and perfection of the security interests under the
Collateral Documents and hereunder.
SECTION 4.3 DISPOSITION OF CERTAIN COLLATERAL.
(a) The Company may, without requesting the release or consent of the
Trustee or the Collateral Agent, but otherwise subject to the requirements of
this Indenture:
(i) sell, assign, transfer, license or otherwise dispose of,
free from the security interests under the Collateral Documents and
hereunder, any machinery, equipment, or other personal Property
constituting Collateral that has become worn out, obsolete, or
unserviceable or is being upgraded, upon replacing the same with or
substituting for the same, machinery, equipment or other Property
constituting Collateral not necessarily of the same character but being of
at least equal fair value and at least equal utility to the Company as the
Property so disposed of, which Property shall without further action become
Collateral subject to the security interests under the Collateral Documents
and hereunder;
(ii) (A) in the ordinary course of the Company's business and
consistent with industry practices, sell, assign, transfer, license or
otherwise dispose of, free from the security interests under the Collateral
Documents and hereunder, inventory held for resale that is at any time part
of the Collateral, (B) in the ordinary course of the Company's business and
consistent with industry practices, collect, liquidate, sell, factor or
otherwise dispose of, free from the security interests under the Collateral
Documents and hereunder, accounts receivable or notes receivable that are
part of the Collateral or (C) make ordinary course of business Cash
payments (including scheduled repayments of Indebtedness permitted to be
incurred hereby) from Cash that is at any time part of the Collateral;
(iii) abandon, sell, assign, transfer, license or otherwise
dispose of, free from the security interests under the Collateral Documents
and hereunder, any personal property the use of which is no longer
necessary or desirable in the proper conduct of the business of the Company
and its Subsidiaries and the maintenance of its earnings and is not
material to the conduct of the business of the Company and its
Subsidiaries;
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(iv) subject to the provisions of the Collateral Documents
pertaining to disposal of real property, sell, assign, transfer, license or
otherwise dispose of, free from the security interests under the Collateral
Documents and hereunder, any assets or property in accordance with Section
5.14 (including, without limitation, pursuant to the penultimate paragraph
in Section 5.14(a)); provided that the Collateral Agent shall have a valid
and perfected security interest in all net proceeds that are not Net Cash
Proceeds from such disposition (except those fees, commissions and other
expenses and taxes deducted in the definition of "Net Cash Proceeds") and
in any assets or property acquired with the proceeds from such disposition
in the same priority as such assets or property so disposed of; and
(v) sell, assign, transfer, license or otherwise dispose of,
free from the security interests under the Collateral Documents and
hereunder, the Specified Real Estate; provided that the Collateral Agent
shall have a valid and perfected security interest in all net proceeds from
such disposition or any assets or property acquired with the proceeds of
such disposition in the same priority as the Specified Real Estate so
disposed of;
PROVIDED; HOWEVER, that the Company may either (x) release from the leasehold
estate of the Ground Lease the surface rights with respect to a triangular piece
of land approximately 5,400 square feet in area which area is adjacent to
Poydras Street and Convention Center Boulevard and can be measured from the
corner of Poydras Street and Convention Center Boulevard moving along Poydras
Street approximately sixty-five feet and Convention Center Boulevard
approximately one hundred fifty-five feet (so long as no portion of the Casino
is constructed on such triangular piece of land) for the purpose of
reconfiguring the intersection of Convention Center Boulevard and Poydras
Street, or (y) grant, or consent to the grant of, a right of way, servitude or
other right of use over the aforesaid triangular piece of land (so long as no
portion of the Casino is constructed on such triangular piece) to the extent
necessary to reconfigure the intersection of Convention Center Boulevard and
Poydras Street, provided that the first priority lien of the Mortgage is
maintained (less and except a lien on that portion of the real property
underlying the aforesaid triangular piece to be released in the event of a
release or less and except a first priority lien on said triangular piece of
real property in the event of a grant of or consent to a right of way, servitude
or other right of use over said triangular piece of land). The Trustee agrees,
upon the reasonable request and at the sole expense of the Company, to promptly
execute, or cause the Collateral Agent to promptly execute such documentation as
may be necessary to effect any release, grant or consent permitted by this
subsection.
(b) Notwithstanding the provisions of subsection (a) above, the
Company shall not dispose of or transfer (by lease, assignment, license, sale or
otherwise) or pledge, mortgage or otherwise encumber Collateral pursuant to the
provisions of Section 4.3(a)(ii) or (iii) with a fair value of 10% or more of
the aggregate fair value of all Collateral then existing in any transaction or
any series of related transactions.
(c) In the event that the Company has sold, exchanged, or otherwise
disposed of or proposes to sell, exchange or otherwise dispose of any portion of
the
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Collateral which under the provisions of this Section 4.3 may be sold, exchanged
or otherwise disposed of by the Company without consent of the Trustee or the
Collateral Agent, and the Company requests the Trustee or the Collateral Agent
to furnish a written disclaimer, release or quitclaim of any interest in such
property under the Collateral Documents, the Trustee shall execute such an
instrument (or instruct the Collateral Agent to do so), prepared by the Company,
upon delivery to the Trustee of an Officers' Certificate by the Company reciting
the sale, exchange or other disposition made or proposed to be made and
describing in reasonable detail the property affected thereby, and certifying
that such property is property which by the provisions of this Section 4.3 may
be sold, exchanged or otherwise disposed of or dealt with by the Company without
any release or consent of the Trustee or the Holders. Each of the Trustee and
the Collateral Agent shall be authorized to conclusively rely on such
certification.
(d) Any disposition of Collateral made in compliance with the
provisions of this Section 4.3 shall be deemed not to impair the security
interests under the Collateral Documents and hereunder in contravention of the
provisions of this Indenture.
SECTION 4.4 NET CASH PROCEEDS ACCOUNT.
All Cash received by the Company or its subsidiaries as Net Cash
Proceeds from an Asset Sale or as Insurance Proceeds shall be deposited in the
Net Cash Proceeds Account, in which account there shall be, subject to the lien
subordination provisions set forth in the Intercreditor Agreement, the
Collateral Documents and Section 4.6, a perfected security interest in favor of
(i) the Collateral Agent for the benefit of the Bank Lenders as security for the
prompt and complete payment and performance in full of the obligations under the
Bank Credit Facilities, and (ii) the Holders, without preference, priority, or
distinction of any Holder over any other Holder by reason of difference in time
of issuance, sale or otherwise, as security for the prompt and complete payment
and performance in full of the Indenture Obligations. The funds from time to
time on deposit in the Net Cash Proceeds Account may be disbursed from such
account only for the purposes and in the manner provided for in the
Intercreditor Agreement, the Security Agreement, the Bank Credit Facilities and
this Indenture.
SECTION 4.5 CERTAIN RELEASES OF COLLATERAL.
Subject to applicable law, the release of any Collateral from Liens
created by the Collateral Documents or the release of, in whole or in part, the
Liens created by the Collateral Documents, will not be deemed to impair the
Collateral Documents in contravention of the provisions of this Indenture if and
to the extent the Collateral or Liens are released pursuant to, and in
accordance with, the applicable Collateral Documents or pursuant to, and in
accordance with, the terms hereof. To the extent applicable, without limitation
(except as provided in the last sentence of this paragraph), the Company, the
Parent Guarantor and each obligor on the Securities shall cause TIA Section
314(d), relating to the release of property or securities from the Liens of the
Collateral Documents, to be complied with. Any certificate or opinion required
by TIA Section 314(d) may be made by two Officers of the Company, except in
cases in which TIA Section 314(d) requires that such certificate or opinion
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be made by an independent person. The Company shall not be required under this
Indenture to deliver to the Trustee any certificates or opinions required to be
delivered pursuant to Section 314(d) of the TIA in connection with releases of
Collateral in accordance with Section 4.3(a)(ii) hereunder, unless TIA Section
314(d) would require such certificate or opinion to be made by an independent
person.
SECTION 4.6 LIEN SUBORDINATION.
(a) Bank Security Interests in the Collateral securing Senior Debt
shall be senior and prior in right to the Security Interests. The Trustee and
each Holder acknowledge that the rights of the Bank Lenders in respect of Senior
Debt to receive proceeds from the disposition of the Collateral is senior to the
rights of the Holders to receive proceeds from the disposition of the
Collateral. Bank Security Interests in the Collateral securing Senior
Subordinated Debt are PARI PASSU with the Security Interests, and the rights of
Bank Lenders in respect of Senior Subordinated Debt to receive proceeds from the
disposition of the Collateral is PARI PASSU with the rights of the Holders to
receive proceeds from the disposition of the Collateral.
(b) The priorities set forth in this Section 4.6 are applicable
irrespective of the order of creation, attachment or perfection of any Liens or
security interests or any priority that might otherwise be available to the
Holders, the Trustee, or any Bank Lender under the applicable law.
(c) The priorities set forth in this Section 4.6 are premised upon
the assumption that the Bank Security Interests are duly and properly created
and perfected and are not avoidable for any reason. Accordingly, to the extent
that (but only for so long as) any Bank Security Interests are not duly and
properly created and perfected or are avoidable for any reason, then the
subordinations provided for in this Section 4.6 shall not be effective as to the
particular Collateral subject to such Bank Security Interests; provided,
however, that the Trustee and each Holder, by accepting a Security, agree not to
contest, or to bring (or voluntarily join in) any action or proceeding for the
purpose of contesting the validity, perfection or priority (as herein provided)
of, or seeking to avoid, any Bank Security Interests, and provided further, that
nothing herein shall be deemed or construed to prevent any Bank Lender from
commencing an action or proceeding to assert any right or claim it may have
arising under or in connection with any Collateral Documents.
SECTION 4.7 PAYMENT OF EXPENSES.
On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for all reasonable expenditures incurred by the Trustee
and the Collateral Agent under this Article IV, including the reasonable fees
and expenses of counsel and all such sums shall be a Lien upon the Collateral
and shall be secured thereby.
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SECTION 4.8 SUITS TO PROTECT THE COLLATERAL.
Subject to Section 4.1 of this Indenture, the Intercreditor Agreement
and to the provisions of the Collateral Documents, the Trustee shall have power
to institute and to maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Collateral by any acts which may be unlawful or
in violation of the Collateral Documents or this Indenture, including the power
to institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid or if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interests in contravention of this Indenture or be prejudicial to the interests
of the Holders or of the Trustee. The Trustee shall give notice to the Company
promptly following the institution of any such suit or proceeding.
SECTION 4.9 TRUSTEE'S DUTIES.
The powers and duties conferred upon the Trustee by this Article IV
are solely to protect the security interests and shall not impose any duty upon
the Trustee to exercise any such powers and duties, except as expressly provided
in this Indenture or the TIA. The Trustee shall be under no duty to the Company
or any Guarantor whatsoever to make or give any presentment, demand for
performance, notice of nonperformance, protest, notice of protest, notice of
dishonor, or other notice or demand in connection with any Collateral, or to
take any steps necessary to preserve any rights against prior parties except as
expressly provided in this Indenture. The Trustee shall not be liable to the
Company or the Guarantors for failure to collect or realize upon any or all of
the Collateral, or for any delay in so doing, nor shall the Trustee be under any
duty to the Company or the Guarantors to take any action whatsoever with regard
thereto. The Trustee shall have no duty to the Company or the Guarantors to
comply with any recording, filing, or other legal requirements necessary to
establish or maintain the validity, priority or enforceability of the security
interests in, or the Trustee's rights in or to, any of the Collateral.
SECTION 4.10 COLLATERAL DOCUMENTS.
Notwithstanding any provision of this Indenture or the Collateral
Documents to the contrary, (A) this Indenture and the Collateral Documents shall
grant no security or other interest or right in or to (i) the Casino Operating
Contract, (ii) the House Bank (as defined in the Management Agreement), or (iii)
the Louisiana Gaming Gross Revenue Share Payments (including the Gaming Board's
Interest in Daily Collections) (as such terms are defined in the Casino
Operating Contract), and (B) the Security Interests in favor of the Holders, and
the Trustee on their behalf, granted by this Indenture and the Collateral
Documents are subordinated to the Minimum Payment Guarantor Security Interest.
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ARTICLE V
COVENANTS
SECTION 5.1 PAYMENT OF SECURITIES.
The Company shall duly and punctually pay the principal of and
interest (including Contingent Payments) on the Securities at the places, on the
dates and in the manner provided in the Securities and this Indenture. An
installment of principal of or interest (including Contingent Payments) on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 10:00 a.m. New York City time on that
date, U.S. Legal Tender and/or, to the extent permitted or required by
Section 2.2, Secondary Securities, deposited and designated for and sufficient
to pay the installment, and has not received instructions from the Company not
to make such payment and is not otherwise prohibited from paying such principal,
interest or Secondary Securities to the Holders pursuant to this Indenture. If
and to the extent that, the Company's Consolidated EBITDA for any Contingent
Payment Period is less than the amount required to cause the Maximum Contingent
Payments for such Contingent Payment Period to become due, the difference
between the amount of the Contingent Payments actually made and the amount of
such Maximum Contingent Payments will never be accrued or paid.
The Company shall pay interest (including post-petition interest in
any proceeding under any applicable Bankruptcy Law) on overdue principal and on
overdue installments of interest (including Contingent Payments) at the rate
of 8% per annum compounded semi-annually, to the extent lawful.
SECTION 5.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 15.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
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agency. The Company hereby initially designates the Corporate Trust Office of
the Trustee as such office.
SECTION 5.3 LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment if, after giving effect
thereto on a PRO FORMA basis, (l) a Default or an Event of Default shall have
occurred and be continuing, (2) immediately after giving effect to such
Restricted Payment on a PRO FORMA basis, the Consolidated Coverage Ratio of the
Company for the Reference Period immediately preceding the Restricted Payment
would be less than 2.0 to 1, (3) the aggregate amount of all Restricted Payments
made by the Company and its Subsidiaries, including after giving effect to such
proposed Restricted Payment, would exceed the sum of (a) 50% of the aggregate
Consolidated Net Income of the Company and its Consolidated Subsidiaries for the
period (taken as one accounting period) commencing on the first day of the first
full fiscal quarter commencing after the Casino Opening Date, to and including
the last day of the fiscal quarter ended immediately prior to the date of each
such calculation (or, in the event Consolidated Net Income for such period is a
deficit, then minus 100% of such deficit), minus 100% of the amount of any
writedowns, writeoffs, or negative extraordinary charges (other than any related
to the Casino prior to the Casino Completion Date) not otherwise reflected in
Consolidated Net Income during such period, plus (b) the aggregate Net Cash
Proceeds (including the fair market value of non-cash proceeds, as determined in
good faith by the Manager of the Company) received by the Company as a capital
contribution or from the sale of its Qualified Capital Stock (other than to a
Subsidiary of the Company and other than in connection with a Qualified
Exchange) after the Casino Completion Date, or (4) during each of the two full
consecutive Contingent Payment Periods preceding the proposed Restricted
Payment, the Company has not paid (a) the Maximum Contingent Payments with
respect to each such Contingent Payment Period and (b) the Maximum Contingent
Payments (in this instance only, as defined in the Contingent Notes Indenture)
with respect to the Contingent Notes with respect to each such Contingent
Payment Period.
The foregoing clauses (2), (3) and (4) of the immediately preceding
paragraph, however, will not prohibit (A) the payment of any dividend on or
redemption of Qualified Capital Stock within 60 days after the date of its
declaration or authorization, respectively, if such dividend or redemption could
have been made on the date of such declaration or authorization in compliance
with the foregoing provisions, (B) the redemption or distribution or other
Restricted Payment with respect to Capital Stock or Indebtedness pursuant to,
and in accordance with, any Required Regulatory Redemption effected in
accordance with this Indenture (including dividends and distributions to the
Parent Guarantor to permit the Parent Guarantor to effect a Required Regulatory
Redemption), (C) a Qualified Exchange, (D) dividends and distributions by the
Company to the Parent Guarantor in an amount equal to all Permitted Tax
Distributions, to the extent such are actually so applied by the Parent
Guarantor, and (E) dividends and distributions by the Company to the Parent
Guarantor to the extent necessary to permit the Parent Guarantor to pay the
Parent Guarantor's reasonable professional fees and expenses in connection with
complying with its reporting obligations (including its obligations set forth in
Section 5.8) and obligations to prepare and distribute
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business records, financial statements or other documents to any lender or other
persons having business dealings with the Parent Guarantor or as may be required
by law, the Parent Guarantor's costs and related expenses in connection with the
computation of federal, state, local or foreign taxes and other governmental
charges other than Permitted Tax Distributions, indemnification agreements,
insurance premiums, surety bonds and insurance brokers' fees, and the Parent
Guarantor's expenses for directors', officers' and employees' compensation and
benefits, and any other administrative expenses incurred in the ordinary course
of business practices (all, in the case of this clause (E) to be limited in an
amount proportionate to the percentage of the book value of the Parent
Guarantor's assets which is fairly attributable, at the time of such Restricted
Payment, to the Company and its Subsidiaries). The full amount of any
Restricted Payment made pursuant to either of clauses (A) and (B) (but not those
made pursuant to clauses (C), (D) or (E)) will be deducted in the calculation of
the aggregate amount of Restricted Payments thereafter available to be made
pursuant to clause (3) of the immediately preceding paragraph.
In addition to, and notwithstanding anything to the contrary in, the
foregoing, the Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment (other than pursuant to
clauses (B), (C), (D) and (E) of the immediately preceding paragraph) prior to
the last day of the Company's first full fiscal quarter during or prior to which
the Casino Completion Date shall have occurred.
SECTION 5.4 EXISTENCE.
Subject to Article VI, the Company and its Subsidiaries shall do or
cause to be done all things necessary to preserve and keep in full force and
effect their existence, rights (charter and statutory) and franchises and the
corporate or other existence of each of their Subsidiaries in accordance with
the respective organizational documents of each of them; provided, however, that
neither the Company nor any Guarantor shall be required to preserve, with
respect to itself or any of its Subsidiaries, any right or franchise if (a) the
Manager shall determine reasonably and in good faith that the preservation
thereof is no longer desirable in the conduct of the business of the Company or
Guarantors and (b) the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 5.5 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company and each of the Guarantors shall, and shall cause each of
its Subsidiaries to, pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company, any Guarantor or any
of their Subsidiaries or upon any of their material properties and assets and
(ii) all material lawful claims, whether for labor, materials, supplies,
services or anything else, which have become due and payable and which by law
have or may become a Lien upon the property and assets of the Company, any
Guarantor or any of their Subsidiaries; provided, however, that neither the
Company nor any Guarantor shall be required to pay or discharge or cause to be
paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in
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good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP.
SECTION 5.6 MAINTENANCE OF INSURANCE.
On the Issue Date, and at all times thereafter, the Company and its
Subsidiaries shall have in effect customary comprehensive general liability,
property and casualty and business interruption insurance, shall have
completion, payment or performance or similar bonds in place for the Casino and
shall cause the builders of the Casino to maintain builder's risk coverage
insurance, in each case on terms and in an amount reasonably believed by the
Company to be sufficient (taking into account, among other factors, the
creditworthiness of the insurer) to avoid a material adverse change in the
financial condition or results of operation of the Company and its Subsidiaries,
taken as a whole.
SECTION 5.7 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each of its fiscal year, an Officers' Certificate complying (whether
or not required) with Section 314(a)(4) of the TIA and stating that a review of
its activities and the activities of its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture and the Collateral Documents and
further stating, as to each such Officer signing such certificate, whether or
not the signer knows of any failure by the Company, any Guarantor or any
Subsidiary of the Company or any Guarantor to comply with any conditions or
covenants in this Indenture and, if such signer does know of such a failure to
comply, the certificate shall describe such failure with particularity. The
Officers' Certificate shall also notify the Trustee should the relevant fiscal
year end on any date other than the current fiscal year end date.
(b) So long as not contrary to the then current recommendation of the
American Institute of Certified Public Accountants, the Company shall deliver to
the Trustee within 120 days after the end of its fiscal year a written report of
a firm of independent certified public accountants with an established national
reputation stating that in conducting their audit for such fiscal year, nothing
has come to their attention that caused them to believe that of Company or any
Subsidiary of the Company was not in compliance with the provisions set forth in
Section 5.3, 5.11, 5.14, or 5.19 of this Indenture.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, immediately upon becoming aware of any
Default or Event of Default under this Indenture, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto. The Trustee shall not be
deemed to have knowledge of a Default or an Event of Default unless one of its
trust officers receives notice of the Default or Event of Default giving rise
thereto from the Company or any of the Holders.
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SECTION 5.8 REPORTS.
Whether or not the Company or any Guarantor is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
and JCC Holding shall file (which filing may be on a consolidated basis) with
the SEC (to the extent permitted under the Exchange Act) on or prior to the date
they are or would have been required to file such with the SEC (the "Required
Filing Date"), annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the SEC if the Company or JCC Holding, as applicable, were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by such
reporting entity's certified independent public accountants as such would be
required in such reports to the SEC and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations which would be so required. The Company and JCC Holding shall also
include in such reports the anticipated completion date of the Casino and, in
the case of quarterly reports, the Contingent Payments made, the Contingent
Payment Accrual amount and Consolidated EBITDA with respect to the most recently
ended fiscal quarter of the Company, and in the case of annual reports, the
audited Contingent Payments made, the audited Contingent Payment Accrual amount
and audited Consolidated EBITDA for the most recently ended fiscal year and for
each of the Semiannual Periods ending in such fiscal year. The Company and JCC
Holding shall also file all other reports and information that they are or would
have been required with the SEC prior to the Required Filing Date. The Company
and JCC Holding will also provide copies of such annual and quarterly reports to
the Trustee within 30 days after the Required Filing Date; provided, that the
Company and JCC Holding shall not be in default of the provisions of this
Section 5.8 for any failure to file reports with the SEC solely by refusal by
the SEC to accept the same for filing, it being understood that in such event,
such reports shall be delivered to the Trustee as described herein as if they
had been filed with the SEC.
SECTION 5.9 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company and each Guarantor covenant (to the extent that they may
lawfully do so) that they will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law wherever enacted which would
prohibit or forgive the Company or each Guarantor from paying all or any portion
of the principal of or interest (including Contingent Payments) on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that they may lawfully do so) the Company and each
Guarantor hereby expressly waive all benefit or advantage of any such law
insofar as such law applies to the Securities, and covenant that they shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
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SECTION 5.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
Neither the Company nor any of its Subsidiaries will enter into any
contract, arrangement, understanding or transaction with an Affiliate (an
"Affiliate Transaction") except for (i) transactions evidenced by an Officers'
Certificate addressed and delivered to the Trustee stating that such Affiliate
Transaction is made in good faith and that the terms of such Affiliate
Transaction are fair and reasonable to the Company or such Subsidiary, as the
case may be, and at least as favorable as the terms which could be obtained by
the Company or such Subsidiary, as the case may be, in a comparable transaction
made on an arm's length basis with persons who are not Affiliates; PROVIDED,
HOWEVER, that any such transaction shall be deemed to be on terms which are fair
and reasonable to the Company or such Subsidiary, as applicable, and on terms
which are at least as favorable as the terms which could be obtained on an arm's
length basis with persons who are not so affiliated, if such transaction is
approved by a majority of the members of the Manager's Board of Directors (or,
if the Company is a corporation, by the members of the Company's Board of
Directors) who are disinterested in the terms thereof; and, PROVIDED, FURTHER,
(a) that Affiliate Transactions during a single fiscal year involving HET or any
Subsidiary of HET shall not in the aggregate involve consideration to either
party in excess of a threshold to be determined by the Manager's Board of
Directors (or, if the Company is a corporation, by the Company's Board of
Directors) (including, without limitation, any decisions regarding the exercise,
waiver or modification of rights or obligations, or the determination of fees
with respect to project development services, under the Management Agreement),
unless such Affiliate Transactions (y) have been approved by the Board of
Directors of the Manager (or, if the Company is a corporation, of the Company)
or such Subsidiary, as applicable, in accordance with the applicable governance
documents of such entity, or (z) are pursuant to or in connection with
agreements or plans (including, without limitation, any business plans,
operating plans, financing plans or marketing plans) (I) approved by the Board
of Directors of the Manager (or, if the Company is a corporation, of the
Company) or such Subsidiary, as applicable, in accordance with the governance
documents of such entity, (II) approved by the Bankruptcy Court for the Eastern
District of Louisiana in connection with the Plan of Reorganization, or (III)
entered into by the Company prior to, on, or substantially concurrently with,
the Issue Date, and (b) that with respect to any Affiliate Transaction
(including any series of related transactions) involving consideration to either
party in excess of $2.5 million, the Company must, prior to the consummation
thereof, obtain a written favorable opinion as to the fairness of such
transaction to the Company or Subsidiary, as the case may be, from a financial
point of view from an independent investment banking firm of national
reputation, or (in the case of a real estate transaction) an independent
investment banking firm or a real estate appraisal firm of national reputation,
(ii) transactions solely between the Company and any wholly owned Subsidiaries
or solely among wholly owned Subsidiaries, (iii) transactions effected pursuant
to, and in accordance with the terms of, the Management Agreement, the
Completion Guarantees, the Administrative Services Agreement, the Licensing
Agreement, the Development Agreement, the Completion Loan Agreement, the
Indemnity Agreement, the Performance Bond Indemnity Agreement, the HET Loan
Guarantee, the Credit Enhancement Fee Agreement, the Minimum Payment Guaranty,
the HET/JCC Agreement, the HET Warrant, and any payments under the Bank Credit
Facilities, as such terms in such agreements exist on the Issue Date or, in the
case of
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the Bank Credit Facilities, as they may be subsequently amended, modified,
supplemented or replaced in a manner that is not disadvantageous to the Holders
in any material respect, and (iv) Restricted Payments to the extent permitted by
Section 5.3. Notwithstanding the foregoing, this covenant shall not restrict
the disposition of the Specified Real Estate to an Affiliate at a purchase price
no less than the lesser of the cost to the Company of such real estate or its
then current fair market value determined by the members of the Manager's Board
of Directors (or, if the Company is a corporation, the members of the Company's
Board of Directors) who are disinterested in the transaction.
SECTION 5.11 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND
DISQUALIFIED CAPITAL STOCK.
Except as set forth below, the Company will not, and the Company will
not permit any of its Subsidiaries to, directly or indirectly, issue, assume,
guaranty, incur, become directly or indirectly liable with respect to (including
as a result of an acquisition, merger or consolidation), or otherwise become
responsible for, contingently or otherwise (individually and collectively, to
"incur," or, as appropriate, an "incurrence"), any Indebtedness or any
Disqualified Capital Stock from and after the Issue Date. Notwithstanding the
foregoing:
(a) the Company and its Subsidiaries may incur Subordinated
Indebtedness and Disqualified Capital Stock (i) if no Default or Event of
Default shall have occurred and be continuing at the time of, or would
occur after giving effect on a PRO FORMA basis to, such incurrence of
Subordinated Indebtedness or Disqualified Capital Stock, (ii) in an
aggregate principal amount of up to $30 million if, on the date of such
incurrence (the "Incurrence Date"), the Consolidated Coverage Ratio of the
Company for the Reference Period immediately preceding the Incurrence Date,
after giving effect on a PRO FORMA basis to such incurrence of such
Subordinated Indebtedness or Disqualified Capital Stock, would be at least
2.5 to 1, and (iii) in an aggregate principal amount of up to $50 million
if, on the Incurrence Date, the Consolidated Coverage Ratio of the Company
for the Reference Period immediately preceding such Incurrence Date, after
giving effect on a PRO FORMA basis to such incurrence of such Subordinated
Indebtedness or Disqualified Capital Stock, would be at least 3.0 to 1;
(b) the Company and the Guarantors may incur (i) Indebtedness
evidenced by the Notes (including the issuance of Secondary Securities in
lieu of cash interest payments pursuant to the terms of this Indenture) and
represented by this Indenture up to the amounts specified herein and
therein as of the date hereof and thereof and (ii) Indebtedness evidenced
by the Contingent Notes and represented by the Contingent Notes Indenture
up to the amounts specified therein as of the dates thereof;
(c) the Company and any Subsidiary may incur Permitted FF&E Financing
in an aggregate principal amount of up to $25 million, provided, that in
each case the aggregate amount of Indebtedness incurred pursuant to this
paragraph (c) (including
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any Indebtedness issued to refinance, replace or refund such Indebtedness)
with respect to each item of FF&E shall not constitute more than 100% of
the cost to the Company and such Subsidiary of such item of FF&E so
purchased or leased;
(d) the Company and any Guarantor may incur Indebtedness the proceeds
of which are used for working capital pursuant to, or in respect of, the
Revolving Loans in an aggregate amount outstanding at any time (including
any Indebtedness issued to refinance, replace or refund such Indebtedness)
not to exceed $25 million;
(e) the Company and any Subsidiary may incur (i) Non-recourse
Indebtedness and (ii) up to $50 million in aggregate principal amount of
Subordinated Indebtedness, in each case in respect of the Project Cost of a
Project Expansion;
(f) the Company and any Guarantor may incur Refinancing Indebtedness
with respect to any Indebtedness or Disqualified Capital Stock, as
applicable, described in clauses (a) through (e) and (h) and (i) of this
covenant so long as, in the case of Indebtedness used to refinance, refund,
or replace Indebtedness in clauses (c), (d) and (e), such Refinancing
Indebtedness satisfies the applicable requirements of such clauses;
(g) the Company and any Subsidiary may incur Permitted Indebtedness;
(h) the Company or any Guarantor may incur Indebtedness pursuant to,
or in respect of, (i) the Tranche A-1 Term Loan in an aggregate principal
amount outstanding at any time not to exceed $10,000,000, (ii) the Tranche
A-2 Term Loan in an aggregate principal amount outstanding at any time not
to exceed $20,000,000, (iii) the Tranche A-3 Term Loan in an aggregate
principal amount outstanding at any time not to exceed $30,000,000,
(iv) the Tranche B-1 Term Loan in an aggregate principal amount outstanding
at any time not to exceed $30,000,000, and (v) the Tranche B-2 Term Loan in
an aggregate principal amount outstanding at any time not to exceed
$105,000,000 (in each case, less the amount of any permanent reductions in
amounts available to be borrowed thereunder pursuant to Section 5.14);
(i) the Company or any of its Subsidiaries may incur Indebtedness
incurred pursuant to the Completion Guarantees (including without
limitation under the Completion Loan Agreement), the HET Loan Guarantee,
the Indemnity Agreement and the Performance Bond Indemnity Agreement or
arising as a result of any payment made thereunder;
(j) the Company and any Subsidiary may accrue Management Fees and all
other amounts owing under the Management Agreement;
(k) the Company and any Subsidiary may incur Subordinated
Indebtedness to any of the stockholders of JCC Holding;
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(l) the Company and its Subsidiaries may incur Indebtedness under the
Interest Rate Agreements in the ordinary course of business;
(m) the Company and its Subsidiaries may incur Subordinated
Indebtedness pursuant to, or in respect of, the Subordinated Credit
Facility in an aggregate principal amount outstanding at any time not to
exceed $10,000,000;
(n) the Company and its Subsidiaries may incur Subordinated
Indebtedness evidenced by (i) the Convertible Junior Subordinated
Debentures in an aggregate principal amount outstanding at any time not to
exceed $27,000,000; and (ii) additional Junior Convertible Subordinated
Debentures in lieu of cash interest payments in accordance with the terms
of the Convertible Junior Subordinated Debentures Indenture;
(o) the Company and any Guarantor may incur Indebtedness pursuant to,
or in connection with, any Minimum Payment Guaranty including, without
limitation, the HET/JCC Agreement.
Notwithstanding the other provisions of this covenant, neither the
Company nor any of its Subsidiaries may incur any Indebtedness or issue any
Disqualified Capital Stock pursuant to clause (a), (c) or (e) until the Casino
Completion Date shall have occurred in accordance with the terms of this
Indenture.
SECTION 5.12 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, assume or suffer to exist any consensual
encumbrance or restriction on the ability of any of its Subsidiaries to pay
dividends or make other distributions to, or to pay any obligation to, or to
otherwise transfer assets or make or pay loans or advances to, the Company
except (a) restrictions imposed by the Bank Credit Facilities, the Notes, the
Contingent Notes, this Indenture, the Contingent Notes Indenture, the
Performance Bond Indemnity Agreement, the Subordinated Credit Facility, the
Convertible Junior Subordinated Debentures (or the indenture in respect of the
Convertible Junior Subordinated Debentures), the Ground Lease, the General
Development Agreement, the Casino Operating Contract, the Completion Loan
Agreement, the Indemnity Agreement, the Minimum Payment Guaranty or the HET/JCC
Agreement, (b) reasonable and customary provisions restricting subletting or
assignment of any agreement entered into in the ordinary course of business,
consistent with industry practices, (c) restrictions imposed by applicable law
or as a result of regulatory action, (d) restrictions under any Acquired
Indebtedness or any agreement relating to any property, asset, or business
acquired by the Company or any of its Subsidiaries, which restrictions existed
at the time of acquisition, were not put in place in connection with or in
anticipation of such acquisition and are not applicable to any person, other
than the person acquired or to any property, asset or business other than the
property, assets and business so acquired in each case, (e) any such encumbrance
or restriction in existence on the Issue Date and any such other encumbrance or
restriction no more restrictive than those in existence as
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of the Issue Date, including, without limitation, those contained in the
agreements (as of the Issue Date) referred to in clause (a) of this Section
5.12, (f) any restrictions with respect solely to a Subsidiary of the Company
imposed pursuant to a binding agreement (subject only to reasonable and
customary closing conditions and termination provisions) which has been entered
into for the sale or disposition of all or substantially all of the Capital
Stock or assets of such Subsidiary, provided such restrictions apply solely to
the Capital Stock or assets of such Subsidiary to be sold, (g) restrictions on
the transfer of collateral (1) used to secure Indebtedness permitted to be
incurred by this Indenture or (2) encumbered by Liens permitted by this
Indenture and (h) restrictions incurred in connection with any asset sale for
the benefit of the purchaser of such assets.
SECTION 5.13 LIMITATION ON LIENS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien in or
on any right, title or interest to any of their respective properties or assets,
except (a) Permitted Liens, (b) Liens on the Casino which secure the Notes and
the Contingent Notes, or Indebtedness other than the Notes and the Contingent
Notes, which Liens may secure such other Indebtedness junior, but not senior, to
the Notes and the Contingent Notes, provided that substantially concurrently
with the granting of such Lien all of the Net Proceeds from such Indebtedness
are used to finance at least 75% of the Project Costs of a Project Expansion,
(c) Liens incurred pursuant to Permitted FF&E Financing incurred in accordance
with the provisions of clause (c) under Section 5.11, which Liens may be
exclusive Liens on such Permitted FF&E Financing, (d) Liens incurred in respect
of the Minimum Payment Guaranty including, without limitation, the HET/JCC
Agreement, which Liens may secure Indebtedness incurred in connection with the
Minimum Payment Guaranty including, without limitation, the HET/JCC Agreement,
senior to the Liens in respect of the Notes, (e) Liens incurred in respect of
the Revolving Loans entered into in accordance with the provisions of clause (d)
under Section 5.11, which Liens may secure Indebtedness incurred pursuant to the
Revolving Loans senior to the Liens in respect of the Notes, (f) Liens securing
Subordinated Indebtedness that is incurred in accordance with the provisions of
clause (a) under Section 5.11, which Liens may secure such Subordinated
Indebtedness junior to the Liens in respect of the Notes, (g) Liens incurred in
connection with the incurrence of Refinancing Indebtedness in accordance with
the provisions of clause (f) under Section 5.11, provided, that such Liens are
not more adverse to the interests of the Holders of the Notes than the Liens
replaced or extended thereby, provided that such Liens replaced or extended were
permitted by the terms of this Indenture, (h) Liens securing Senior Debt which
Indebtedness is incurred in accordance with the provisions of clause (h) under
Section 5.11, which Liens may secure such Indebtedness senior to the Liens in
respect of the Notes; and (i) Liens securing Senior Subordinated Debt which
Indebtedness is incurred in accordance with the provisions of clause (h) under
Section 5.11, which Liens may secure such Indebtedness on an equal and ratable
basis with the Liens in respect of the Notes.
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SECTION 5.14 LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK;
EVENT OF LOSS.
(a) The Company and each of its Subsidiaries will not, in one or a
series of related transactions, convey, sell, transfer, assign or otherwise
suffer to dispose of, directly or indirectly, any of their property, business or
assets (other than the Capital Stock or other interests of an Unrestricted
Subsidiary), including without limitation upon any sale or other transfer or
issuance of any Capital Stock of any Subsidiary of the Company or any sale and
leaseback transaction, whether by the Company or a Subsidiary of the Company or
through the issuance, sale or transfer of Capital Stock by a Subsidiary of the
Company (an "Asset Sale"), unless (l) the Net Cash Proceeds from an Asset Sale
(the "Aggregate Amount") are (i) within 210 days after the date of such Asset
Sale applied (A) first, to amounts outstanding (and/or permanent reductions in
commitments) under, or in respect of, Senior Debt with a permanent reduction of
the amounts available under, or in respect of, Senior Debt, and (B) second, to
the extent that no amounts are outstanding, and there are no amounts available
under, or in respect of, Senior Debt, (I) to the repurchase of the Notes
pursuant to an irrevocable, unconditional offer (the "Asset Sale Offer") to
repurchase the Notes at the Asset Sale Offer Price made within 180 days of such
Asset Sale, and (II) to amounts outstanding (and/or permanent reductions in
commitments) under, or in respect of, Senior Subordinated Debt with a permanent
reduction of the amounts available under, or in respect of, Senior Subordinated
Debt (with the portion of the Aggregate Amount to be applied to the repurchase
of the Notes pursuant to the Asset Sale Offer (the "Asset Sale Offer Amount")
being equal to the Aggregate Amount (less that portion of the Aggregate Amount
applied as provided in clause (ii) below) multiplied by a fraction, the
numerator of which is the principal amount of the Notes then outstanding (less
an amount equal to the Accumulated Amount at such time, determined prior to any
increase thereto as a result of the respective Asset Sale) and the denominator
of which is the principal of Notes then outstanding (less an amount equal to the
Accumulated Amount at such time, determined prior to any increase thereto as a
result of the respective Asset Sale) plus the principal amount of Indebtedness
then outstanding and amounts available under, or in respect of, Senior
Subordinated Debt and/or (ii) the Aggregate Amount (less that portion of the
Aggregate Amount applied as provided in clause (i) above) is reinvested by the
Company to make replacements, improvements or additions to existing properties
or new properties directly related to a Related Business and such reinvestment
is made or committed to be made (such commitment to be established by (A) the
purchase of a new property, the ground-breaking or the commencement of
construction, in each case within 180 days of such Asset Sale or (B) promptly
placing the Net Cash Proceeds in a Restricted Funds Account, provided that such
Net Cash Proceeds are invested as aforesaid in existing properties or new
properties within three years of being placed in such Restricted Funds Account)
within 180 days of such Asset Sale, (2) at least 75% of the consideration for
such conveyance, sale, transfer or other disposition or issuance (treating for
this purpose as U.S. Legal Tender or Cash Equivalents (A) property that promptly
after such Asset Sale is converted into U.S. Legal Tender or Cash Equivalents
and (B) any liabilities that are assumed by the transferee in such Asset Sale)
consists of U.S. Legal Tender or Cash Equivalents, (3) no Default or Event of
Default shall have occurred and be continuing at the time of, or would occur
after giving effect, on a PRO FORMA basis, to, such Asset Sale and (4) the
Manager of the Company determines in good
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faith that the Company or such Subsidiary, as applicable, receives fair market
value for such Asset Sale. For purposes of this covenant and subject to the
provisions hereof as to the amount so received and the application of the
proceeds thereof, the receipt by the Company of proceeds due to an Event of Loss
shall constitute an Asset Sale.
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Subsidiaries may in the ordinary course
of business for the casino industry, convey, sell, lease, transfer, assign,
or otherwise dispose of assets acquired and held for resale in the ordinary
course of business;
(ii) the Company and its Subsidiaries may convey, sell or dispose
of, lease, transfer or otherwise dispose of assets pursuant to and in
accordance with the limitation on mergers, sales or consolidations
provisions in the Indenture;
(iii) the Company and its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Subsidiary as applicable;
and
(iv) the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of assets to the Company or any of its wholly
owned Subsidiaries.
The term "Asset Sale" shall not include (and this covenant shall not
apply to) any single sale of assets or series of related sales of assets, or
Event of Loss, at any time while the Notes are outstanding to the extent the Net
Proceeds therefrom do not exceed $15,000,000, and any dispositions as described
in the immediately preceding paragraph.
The Company shall accumulate all Net Cash Proceeds from Asset Sales
(to be maintained in the Net Cash Proceeds Account in which, subject to the lien
subordination provisions set forth in the Intercreditor Agreement, the
Collateral Documents and Section 4.6, the Collateral Agent shall have a
perfected security interest on behalf of the Bank Lenders and the Holders), and
the aggregate amount of such accumulated Net Cash Proceeds not used for the
purposes permitted by this Section 5.14(a) and within the time provided by this
Section 5.14(a) shall be referred to as the "Accumulated Amount."
(b) For the purposes of this Section 5.14, "Minimum Accumulation
Date" means each date on which the Accumulated Amount exceeds $15,000,000. Not
later than 10 Business Days after each Minimum Accumulation Date, the Company
shall apply such Accumulated Amount to amounts outstanding (and/or permanent
reductions in commitments) under, or in respect of, Senior Debt with a permanent
reduction of the amounts available under or in respect of, Senior Debt. To the
extent that there are no amounts outstanding, and there are no amounts available
under, or in respect of, Senior Debt, at such time, the Company shall commence
an Asset Sale Offer to the Holders to purchase, on a PRO RATA basis, for U.S.
Legal Tender Securities having a principal amount equal to the Asset Sale
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Offer Amount, at a purchase price (the "Asset Sale Offer Price") equal to 100%
of principal amount, plus accrued but unpaid interest (including Contingent
Payments) to, and including, the date (the "Asset Sale Purchase Date") the
Securities tendered are purchased and paid for in accordance with this Section
5.14. Notice of an Asset Sale Offer shall be sent, not later than 20 Business
Days prior to the close of business on the Asset Sale Put Date (as defined
below), by first-class mail, by the Company to each Holder at its registered
address, with a copy to the Trustee. The notice to the Holders shall contain
all information, instructions and materials required by applicable law or
otherwise material to such Holders' decision to tender Securities pursuant to
the Asset Sale Offer. The notice, which (to the extent consistent with this
Indenture) shall govern the terms of the Asset Sale Offer, shall state:
(1) that the Asset Sale Offer is being made pursuant to such
notice and this Section 5.14;
(2) the Asset Sale Offer Amount, the Accumulated Amount, the
Asset Sale Offer Price (including the amount of accrued and unpaid
interest), the Asset Sale Put Date, and the "Asset Sale Purchase Date,"
which Asset Sale Purchase Date shall be on or prior to 30 Business Days (or
later, if required by law) following the date the Accumulated Amount was
greater than $15,000,000;
(3) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest (including Contingent
Payments) if interest is then accruing;
(4) that, unless the Company defaults in depositing U.S. Legal
Tender with the Paying Agent (which may not for purposes of this Section
5.14, notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company) in accordance with the last
paragraph of this clause (b), any Security, or portion thereof accepted for
payment pursuant to the Asset Sale Offer shall cease to accrue interest
(including Contingent Payments) after the Asset Sale Purchase Date;
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Asset Sale Offer will be required to
surrender their Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent
(which may not for purposes of this Section 5.14, notwithstanding any other
provision of this Indenture, be the Company or any Affiliate of the
Company) at the address specified in the notice prior to the close of
business on the third Business Day prior to the Asset Sale Purchase Date
(the "Asset Sale Put Date");
(6) that Holders will be entitled to withdraw their elections,
in whole or in part, if the Paying Agent (which may not for purposes of
this Section 5.14, notwithstanding any other provision of this Indenture,
be the Company or any Affiliate of the Company) receives, up to the close
of business on the Asset Sale Put Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the
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Holder, the principal amount of the Securities the Holder is withdrawing
and a statement that such Holder is withdrawing his election to have such
principal amount of Securities purchased;
(7) that if Securities in a principal amount in excess of the
principal amount of Securities to be acquired pursuant to the Asset Sale
Offer are tendered and not withdrawn, the Company shall purchase Securities
on a PRO RATA basis (with such adjustments as may be deemed appropriate by
the Company so that only Securities in denominations of $1,000 or integral
multiples of $1,000 shall be acquired, except for Secondary Securities that
were issued in denominations other than $1,000 or an integral multiple
thereof);
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(9) the circumstances and relevant facts regarding such Asset
Sales.
Any such Asset Sale Offer shall comply with all applicable provisions
of Federal and state laws, including those regulating tender offers, if
applicable, and any provisions of this Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
No later than 12:00 noon New York City time on an Asset Sale Purchase
Date, the Company shall (i) accept for payment Securities or portions thereof
properly tendered pursuant to the Asset Sale Offer (on a PRO RATA basis if
required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent
U.S. Legal Tender sufficient to pay the Asset Sale Offer Price for all
Securities or portions thereof so accepted and (iii) deliver to the Trustee
Securities so accepted together with an Officers' Certificate setting forth the
Securities or portions thereof being purchased by the Company. The Paying Agent
shall promptly mail or deliver to Holders of Securities so accepted payment in
an amount equal to the Asset Sale Offer Price for such Securities, and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof.
(c) Notwithstanding the foregoing, if the amount required to acquire
all Securities tendered by Holders pursuant to the Asset Sale Offer (the
"Acceptance Amount") shall be less than the Asset Sale Offer Amount, the excess
of the Asset Sale Offer Amount over the Acceptance Amount may be used by the
Company for general corporate purposes without regard to the restrictions set
forth in this Section 5.14, unless otherwise restricted by the other provisions
of this Indenture. Upon consummation of any Asset Sale Offer made in accordance
with the terms of Section 5.14(b), the Accumulated Amount as of the Minimum
Accumulation Date shall be reduced to zero and accumulations thereof shall be
deemed to recommence from the day next following such Minimum Accumulation Date,
and all Liens in such Accumulated Amount created pursuant to Section 5.14(a)
shall be released.
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SECTION 5.15 CONSTRUCTION.
The Company shall cause construction of the Casino to be prosecuted
with diligence and continuity in a good and workmanlike manner in accordance
with the Plans, subject to Force Majeure (as defined in the General Development
Agreement).
SECTION 5.16 LIMITATION ON USE OF CERTAIN FUNDS.
The Company will use (i) borrowings under the Tranche A Term Loans,
the Tranche B Term Loans and the Subordinated Credit Facility (ii) proceeds from
the Convertible Junior Subordinated Debentures, and (iii) any equity
contributions it received in connection with the consummation of the Plan of
Reorganization, (a) to pay all regularly scheduled payments of, interest on,
fees and other amounts (other than principal payments until the regularly
scheduled date of repayment occurs with respect thereto as provided in the Bank
Credit Facilities) due and payable pursuant to the Bank Credit Facilities, (b)
to pay all regularly scheduled payments of Fixed Interest and Contingent
Payments due and payable on the Notes and Contingent Payments (in this instance
only, as defined in the Contingent Notes Indenture due and payable on the
Contingent Notes, (c) to pay all amounts, including without limitation, all fees
and payments of principal and interest, due and payable in connection with the
Minimum Payment Guaranty including, without limitation, the HET/JCC Agreement,
(d) to pay all amounts, including without limitation, all fees and payments of
interest due and payable on the Subordinated Credit Facility, the Completion
Loan Agreement, the Convertible Junior Subordinated Debentures, the Indemnity
Agreement and the Performance Bond Indemnity Agreement, (e) to pay all costs of
construction and development of the Casino (including, without limitation, the
costs set forth in the Pre-Opening Budget attached to the Management Agreement
as Exhibit H, including, without limitation, costs related to construction
management, architectural engineering and interior design, site work, utility
installations and hook-up fees, construction permits, certificates and bonds,
furniture, fixtures, furnishings, machinery and equipment (including gaming
equipment)), (f) to pay all amounts owing under the Ground Lease, the General
Development Agreement, the Casino Operating Contract and any other agreement
entered into in connection with the construction or development of the Casino,
as well as all amounts owing to the City, the State of Louisiana, the Regulating
Authority, the RDC or any other governmental authority, agency, board,
subdivision or special purpose corporation thereof, (g) to pay amounts due and
owing under the Management Agreement, (h) to pay Credit Enhancement Fees (as
defined in the Credit Enhancement Fee Agreement), (i) for the repurchase of any
securities of the Company, any Guarantor or any Subsidiary thereof, including
the Notes, pursuant to a Required Regulatory Redemption, (j) for repurchases of
Notes pursuant to an Offer to Purchase, and (k) after the Casino Opening Date,
for general corporate purposes.
SECTION 5.17 LIMITATION ON LINES OF BUSINESS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly engage to any substantial extent in any line or lines of
business activity other than in a Related Business.
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SECTION 5.18 LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company will not, and will not permit any of its Subsidiaries to,
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended), or otherwise be subject to
regulation under the Investment Company Act.
SECTION 5.19 RESTRICTIONS ON SALE AND ISSUANCE OF SUBSIDIARY STOCK.
The Company will not sell, and will not permit any of its Subsidiaries
to issue or sell, any shares of Disqualified Capital Stock of any Subsidiary to
any person other than the Company or a wholly owned Subsidiary of the Company.
SECTION 5.20 LIMITATION ON PAYMENT OF MANAGEMENT FEES.
(a) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, pay to any stockholder of the Company or any of such
stockholder's Affiliates, Management Fees in the aggregate (for all such
stockholders and Affiliates) in excess of 3% of Gross Revenues of the Casino
("Base Management Fees"); PROVIDED, HOWEVER, that if Consolidated EBITDA of the
Company exceeds $40,000,000 in any First Semiannual Period, additional
Management Fees ("Incentive Management Fees") may be paid for such First
Semiannual Period year up to an amount equal to 7% of Consolidated EBITDA for
such First Semiannual Period in excess of $40,000,000; and if Consolidated
EBITDA of the Company exceeds an aggregate of $75,000,000 for a Second
Semiannual Period and the immediately preceding First Semiannual Period,
Incentive Management Fees may be paid for such Second Semiannual Period up to an
amount equal to (a) 7% of the aggregated Consolidated EBITDA for such First
Semiannual Period and Second Semiannual Period in excess of $75,000,000, less
(b) an amount equal to the Incentive Management Fees, if any, paid with respect
to the immediately preceding First Semiannual Period. Incentive Management Fees
with respect to a Semiannual Period may be made no earlier than the next
Business Day following the date on which all accrued interest (including
Contingent Payments) has been paid for all periods through such Semiannual
Period; PROVIDED FURTHER, HOWEVER, that the Management Agreement shall provide
that Harrah's Management Company shall refund to the Company any Incentive
Management Fees paid by the Company to Harrah's Management Company in respect of
such First Semiannual Period if Consolidated EBITDA of the Company does not
exceed an aggregate of $75,000,000 for such First Semiannual Period and
immediately succeeding Second Semiannual Period. No Base Management Fees may be
paid, and no Incentive Management Fees may be accrued or paid, during or with
respect to any period in which the Company is in default with respect to
interest (including Contingent Payments) or principal payments on the Notes;
Base Management Fees accrued during such period may be paid in the event that
such default is cured.
(b) Notwithstanding subsection (a) above:
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(i) if the Company pays Fixed Interest in Secondary Securities in
lieu of paying Fixed Interest in cash on any of the First Interest Payment Date,
the Second Interest Payment Date, the Third Interest Payment Date and the Fourth
Interest Payment Date, Base Management Fees shall be deferred for the six month
period beginning on such Interest Payment Date if the Manager determines that
the cash that would otherwise have been required to pay Fixed Interest on such
Interest Payment Date is required by the Company to fund cash flow deficiencies
(other than cash flow deficiencies resulting from payments of principal or
interest in respect of the Tranche A-1 Term Loan or the Tranche A-2 Term Loan);
PROVIDED, HOWEVER, that such deferred Base Management Fees may be paid to
Harrah's Management Company at such time and to the extent that Consolidated
EBITDA exceeds $65,000,000 for the twelve-month period ending on the next
Interest Payment Date;
(ii) if the Company pays Fixed Interest in Secondary Securities
in lieu of paying Fixed Interest in cash on any of the Third Interest Payment
Date, the Fourth Interest Payment Date, the Fifth Interest Payment Date and the
Sixth Interest Payment Date, Incentive Management Fees shall be deferred for the
six month period beginning on such Interest Payment Date; PROVIDED, HOWEVER,
that such deferred Incentive Management Fees may be paid to Harrah's Management
Company at such time and to the extent that Consolidate EBITDA exceeds
$75,000,000 for the twelve-month period ending on the next Interest Payment
Date; and
(iii) if Consolidate EBITDA is less than $28,500,000 for any
twelve-month period ending one month prior to any Interest Payment Date
occurring after the Sixth Interest Payment Date, Base Management Fees shall be
deferred for the six-month period ending on such Interest Payment Date.
SECTION 5.21 LISTING OF SECURITIES.
The Company covenants and agrees that it will, as promptly as
practicable, use its best efforts to list the Notes on such securities exchanges
or quotation systems as may be required from time to time, by written order,
regulation or otherwise, in order for the Holders to maintain their suitability
under Louisiana gaming laws or regulations.
SECTION 5.22 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) The Company will comply, and will cause each of its subsidiaries
to comply, in all material respects with all Environmental Laws applicable to
the ownership or use of its Real Property now or hereafter owned or operated by
the Company or any of its subsidiaries, will within a reasonable time-period pay
or cause to be paid all costs and expenses incurred in connection with such
compliance and will keep or cause to be kept all such Real Property free and
clear of any Liens imposed pursuant to such Environmental Laws, except as could
not reasonably be expected to have a material adverse effect, singly or in the
aggregate, on the properties, business, results of operations, financial
condition, business affairs or prospects of the Company (a "Material Adverse
Effect"). Except as could not reasonably be expected to have a Material Adverse
Effect, neither the Company nor any of its subsidiaries will generate, use,
treat, store, release or dispose of, or permit the
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generation, use, treatment, storage, release or disposal of Hazardous Materials
on any Real Property now or hereafter owned or operated by the Company or any of
its subsidiaries, or transport or permit the transportation of Hazardous
Materials to or from any such Real Property except for Hazardous Materials used
or stored at any such Real Properties in material compliance with all applicable
Environmental Laws and reasonably required in connection with the operation, use
and maintenance of any such Real Property.
(b) At the written request of the Trustee or the Holders of a
majority in aggregate principal amount of the Securities at the time
outstanding, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time, the Company will provide, at its
expense, an environmental site assessment report concerning any Real Property
now or hereafter owned or operated by the Company or any of its subsidiaries,
prepared by an environmental consulting firm approved by the Trustee, indicating
the presence or absence of Hazardous Materials and the potential cost of any
removal or remedial action in connection with any Hazardous Materials on such
Real Property; provided that such request may be made only if (i) there has
occurred and is continuing an Event of Default, (ii) the Trustee or the Holders
of a majority in aggregate principal amount of the Securities at the time
outstanding reasonably believe that the Company or any such subsidiary or any
such Real Property is not in material compliance with any Environmental Law, or
(iii) circumstances exist that reasonably could be expected to form the basis of
a material Environmental Claim against the Company or any such subsidiary or any
such Real Property. If the Company fails to provide the same within 90 days
after such request was made, the Trustee may order the same, and the Company
shall grant and hereby grants to the Trustee and the Holders and their agents
access to such Real Property and specifically grants the Trustee and the Holders
an irrevocable non-exclusive license, subject to the rights of tenants, to
undertake such an assessment, all at the Company's expense.
SECTION 5.23 LIMITATION ON LAYERING DEBT.
Neither the Company nor the Parent Guarantor may create, incur, assume
or suffer to exist any Indebtedness, except for Senior Subordinated Debt, that
is subordinate in right of payment to any other Indebtedness of the Company or
the Parent Guarantor, as applicable, unless, by its terms or the terms of the
instrument creating or evidencing it, such Indebtedness is subordinate in right
of payment to the Securities or, in the case of the Parent Guarantor, the
Guaranty.
ARTICLE VI
SUCCESSORS
SECTION 6.1 LIMITATION ON MERGER, SALE OR CONSOLIDATION.
The Company shall not consolidate with or merge with or into another
person or, directly or indirectly, sell, lease or convey all or substantially
all of its assets (computed on a consolidated basis, including, without
limitation, as set forth in the last paragraph of this
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Section 6.1), whether in a single transaction or a series of related
transactions, to another person or group of affiliated persons, unless:
(i) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity is a corporation or partnership
organized under the laws of the United States, any state thereof or the
District of Columbia (provided that at all times at least one obligor with
respect to the Securities is such a corporation) and expressly assumes by
supplemental indenture all of the obligations of the Company in connection
with the Securities, this Indenture and the Collateral Documents;
(ii) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a PRO FORMA basis to such transaction;
(iii) immediately after giving effect to such transaction on
a PRO FORMA basis, the Consolidated Tangible Net Worth of the consolidated
surviving or transferee entity is at least equal to the Consolidated
Tangible Net Worth of the Company immediately prior to such transaction;
(iv) other than in the case of a transaction solely between the
Company and any wholly owned Subsidiary of the Company or solely between
wholly owned Subsidiaries of the Company, immediately after giving effect
to such transaction on a PRO FORMA basis, the consolidated surviving or
transferee entity would immediately thereafter be permitted to incur at
least $1.00 of additional Indebtedness pursuant to clause (a) under Section
5.11; and
(v) such transaction will not result in the loss of any Gaming
License relating to the Company.
For purposes of this Section 6.1, the Consolidated Coverage Ratio
shall be determined on a PRO FORMA consolidated basis (giving PRO FORMA effect
to the transaction and any related incurrence of Indebtedness or Disqualified
Capital Stock).
For purposes of the first sentence of this Section 6.1, the sale,
lease, conveyance or transfer of all or substantially all of the properties and
assets of one or more Subsidiaries of the Company, which properties and assets,
if held by the Company instead of such Subsidiaries, would constitute all or
substantially all of the properties and assets of the Company on a consolidated
basis, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
Notwithstanding the foregoing, the Company is permitted to reorganize
as a corporation in accordance with the procedures established in the Indenture,
PROVIDED that the Company shall have delivered to the Trustee an opinion of
counsel reasonably acceptable to the Trustee confirming that such reorganization
is not adverse to Holders of the Notes (it being recognized that such
reorganization shall not be deemed adverse to the Holders of the Notes solely
because (i) of the accrual of deferred tax liabilities resulting from such
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reorganization or (ii) the successor or surviving corporation (a) is subject to
income tax as a corporate entity or (b) is considered to be an "includible
corporation" of an affiliated group of corporations within the meaning of the
Internal Revenue Code of 1986, as amended, or any similar state or local law).
SECTION 6.2 SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger or any sale, lease, conveyance or
transfer of all or substantially all of the assets of the Company in accordance
with Section 6.1, the successor entity formed by such consolidation or into
which the Company is merged or to which such sale, lease, conveyance or transfer
is made, shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under the Notes, this Indenture and the Collateral
Documents with the same effect as if such successor corporation had been named
therein as the Company, and the Company will be released from its obligations
under this Indenture, the Collateral Documents and the Notes, except as to any
obligations that arise from or as a result of such transaction.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the failure by the Company to pay any installment of
interest on the Notes or the Contingent Notes as and when due and payable
and the continuance of any such failure for 30 days;
(2) the failure by the Company to pay all or any part of the
principal, or premium, if any, on the Notes when and as the same become due
and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, failure to pay any Offer to Purchase Price,
or otherwise;
(3) except as provided in clauses (1) or (2) of this Section
7.1, failure of the Company or any Guarantor to comply with any provision
of Section 5.10, 5.15, 5.16, 5.19, 5.20 or 6.1 or Article XI, which failure
continues for 30 days;
(4) except as otherwise provided herein, the failure by the
Company or any Guarantor to observe or perform any other covenant or
agreement contained in the Notes or the Indenture and the continuance of
such failure for a period of 30 days
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after written notice is given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding;
(5) the filing by the Company or any Significant Subsidiary of
the Company (in either case, a "Debtor") of a petition commencing a
voluntary case under section 301 of title 11 of the United States Code, or
the commencement by a Debtor of a case or proceeding under any other
Bankruptcy Law seeking the adjustment, restructuring, or discharge of the
debts of such Debtor, or the liquidation of such Debtor, including without
limitation the making by a Debtor of an assignment for the benefit of
creditors; or the taking of any corporate action by a Debtor in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing;
(6) the filing against a Debtor of a petition commencing an
involuntary case under section 303 of title 11 of the United States Code,
with respect to which case (a) such Debtor consents or fails to timely
object to the entry of, or fails to seeks the stay and dismissal of, an
order of relief, (b) an order for relief is entered and is pending and
unstayed on the 60th day after the filing of the petition commencing such
case, or if stayed, such stay is subsequently lifted so that such order for
relief is given full force and effect, or (c) no order for relief is
entered, but the court in which such petition was filed has not entered an
order dismissing such petition by the 60th day after the filing thereof; or
the commencement under any other Bankruptcy Law of a case or proceeding
against a Debtor seeking the adjustment, restructuring, or discharge of the
debts of such Debtor, or the liquidation of such Debtor, which case or
proceeding is pending without having been dismissed on the 60th day after
the commencement thereof;
(7) the entry by a court of competent jurisdiction or by the
Regulating Authority of a judgment, decree or order appointing a receiver,
liquidator, trustee, custodian or assignee of a Debtor or of the property
of a Debtor, or directing the winding up or liquidation of the affairs or
property of a Debtor, and (a) such Debtor consents or fails to timely
object to the entry of, or fails to seek the stay and dismissal of, such
judgment, decree, or order, or (b) such judgment, decree or order is in
full force and effect and is not stayed on the 60th day after the entry
thereof, or, if stayed, such stay is thereafter lifted so that such
judgment, decree or order is given full force and effect;
(8) a default in the payment of principal, premium or interest
when due at final maturity or an acceleration for any other reason of the
maturity of any Indebtedness (other than Non-recourse Indebtedness) of the
Company or any Significant Subsidiary with an aggregate principal amount in
excess of $15,000,000, including, without limitation, the Bank Credit
Facilities at such times as the aggregate principal amount of Indebtedness
thereunder exceeds $15,000,000; provided that an Event of Default shall not
be deemed to occur with respect to the failure to make such payment at
final maturity or the acceleration of the maturity of Indebtedness of the
Company or any Significant Subsidiary if the event that caused such
acceleration shall
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be cured, or such acceleration shall be rescinded, or the Indebtedness
shall be repaid in full, in each such case within 10 days;
(9) final unsatisfied judgments not covered by insurance (other
than with respect to Non-recourse Indebtedness) aggregating in excess of
$15,000,000, at any one time rendered against the Company or any
Significant Subsidiary of the Company and not stayed, bonded or discharged
within 60 days;
(10) the loss of the legal right of the Company to operate slot
machines at the Casino for gaming activities and such loss continuing for
more than 90 days;
(11) an event of default under, or if none is specified therein,
a failure to comply with the provisions of, the Collateral Documents (other
than the Security Agreement) and the continuance of such event of default
or failure to comply, as the case may be, for a period of 30 days after
written notice is given to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in aggregate principal amount of
the Notes outstanding, provided that if such event of default or failure to
comply, as the case may be, materially and adversely affects (1) the
Collateral, (2) the priority or perfection of the security interests
purported to be created with respect to any material portion of the
Collateral or (3) the rights and remedies of the Collateral Agent, the
Trustee or the respective secured creditors in respect of any material
portion of the Collateral, then the event of default or failure to comply,
as the case may be, need only continue after the applicable cure period
specified in the applicable Collateral Document;
(12) the occurrence of an event of default under the Security
Agreement and the continuance of such failure or event of default for a
period of 30 days after written notice is given to the Company by the
Collateral Agent or the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes
outstanding, provided, that if such failure or event of default materially
and adversely effects (a) the Collateral (as defined in the Security
Agreement), (b) the priority of perfection of the security interests
purported to be created with respect to any material portion of such
Collateral or (c) the rights and remedies of the Collateral Agent, the
Trustee or Holders of Notes in respect of any material portion of such
Collateral, then the failure or event of default need only continue after
the cure period specified in the Security Agreement;
(13) any Collateral Document fails to become or ceases to be in
full force and effect (other than in accordance with its terms or the terms
hereof) or ceases (once effective) to create in favor of the Trustee, with
respect to any material amount of Collateral, a valid and perfected Lien on
the Collateral to be covered thereby (unless a prior or exclusive Lien is
specifically permitted by this Indenture);
(14) the failure of the Casino Completion Date to have occurred
by 30 days following the date on which an event of default entitling the
City to terminate
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the Ground Lease has occurred under the Ground Lease as a result of the
failure to complete the Casino;
(15) an "Event of Default" (as defined in the Ground Lease) has
occurred; and
(16) an "Event of Default" (as defined in the Contingent Notes
Indenture) has occurred.
SECTION 7.2 ACCELERATION OF MATURITY DATE; RESCISSION AND ANNULMENT.
If (x) an Event of Default (other than an Event of Default specified
in Section 7.1(5), (6) or (7)), or (y) the acceleration of the maturity of
amounts owing under the Bank Credit Facilities occurs and is continuing, then,
and in every such case, unless the principal of all of the Securities shall have
already become due and payable, either the Trustee or the Holders of not less
then 25% in aggregate principal amount of then outstanding Securities, by a
notice in writing to the Company and the Guarantors (and to the Trustee if given
by Holders) (an "Acceleration Notice"), may declare all of the principal of the
Securities, determined as set forth below, together with accrued interest
thereon, to be due and payable immediately. If an Event of Default specified in
Section 7.1(5), (6) or (7) occurs, (i) all principal of, premium applicable to,
and accrued interest on, the Securities, and (ii) the Make-Whole Amount, shall
be immediately due and payable on all outstanding Securities without any
declaration or other act on the part of the Trustee or the Holders; PROVIDED,
HOWEVER, that (A) the Primary Make-Whole Amount shall rank PARI PASSU with any
Senior Subordinated Debt including, without limitation, any Senior Subordinated
Debt to which HET has succeeded to the rights of the lenders thereunder and (B)
the Secondary Make-Whole Amount shall be subordinate to any Senior Subordinated
Debt including, w ithout limitation, any Senior Subordinated Debt to which HET
has succeeded to the rights of the lenders thereunder.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VII, the Holders of a
majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences and may waive, on behalf of all Holders, an
Event of Default or an event which with notice or lapse of time or both would
become an Event of Default if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest (including Contingent Payments) on
all Securities,
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(B) principal of (and premium, if any, applicable to) any
Securities which would become due otherwise than by such declaration
of acceleration, and interest thereon at the rate borne by the
Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest (including Contingent Payments) at the
rate borne by the Securities,
(D) all sums paid or advanced by the Trustee hereunder and
the compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and
(2) all Events of Default, other than the nonpayment of amounts
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 7.12.
Notwithstanding the previous sentence of this Section 7.2, no rescission,
amendment or waiver shall be effective for any Event of Default or event which
with notice or lapse of time or both would be an Event of Default with respect
to any covenant or provision which cannot be modified or amended without the
consent of the Holder of each outstanding Security, unless all such affected
Holders agree, in writing, to rescind such acceleration or waive such Event of
Default or event. No such waiver shall cure or waive any subsequent default or
impair any right consequent thereon.
SECTION 7.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if an Event of Default in payment of
principal, premium, or interest (including Contingent Payments) specified in
Section 7.1(1) and (2) occurs and is continuing, the Company shall, upon demand
of the Trustee, pay to it, for the benefit of the Holders of such Securities,
the whole amount then due and payable on such Securities for principal and
interest (including Contingent Payments), and, to the extent that payment of
such interest shall be legally enforceable, interest on any overdue principal
and on any overdue interest (including Contingent Payments), at the rate borne
by the Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including compensation
to, and expenses, disbursements and advances of the Trustee, its agents and
counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
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If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 7.4 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest (including
Contingent Payments)) shall be entitled and empowered, by intervention in such
proceeding or otherwise to take any and all actions under the TIA, including
(i) to file and prove a claim for the whole amount of principal
and interest (including Contingent Payments) owing and unpaid in respect of
the Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel) and of
the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 8.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
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SECTION 7.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 7.6 PRIORITIES.
Subject to the Intercreditor Agreement, Section 4.6, Article XIII and
Article XIV, any money collected by the Trustee pursuant to this Article VII
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or interest (including Contingent Payments), upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 8.7:
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of and interest (including Contingent Payments) on, the Securities
in respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal and interest (including
Contingent Payments), respectively; and
THIRD: To whomsoever may be lawfully entitled thereto, the remainder,
if any.
SECTION 7.7 LIMITATION ON SUITS.
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of then
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
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(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities to be incurred or reasonably probable to be incurred in
compliance with such request;
(D) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(E) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 7.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND
INTEREST.
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and interest (including Contingent
Payments) on, such Security on the Maturity Dates of such payments as expressed
in such Security (in the case of Required Regulatory Redemption, the Redemption
Price on the applicable Redemption Date, in the case of the Change of Control
Offer Price, on the applicable Change of Control Purchase Date, and in the case
of the Offer Price on the Asset Sale Purchase Date) and to institute suit for
the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 7.9 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 7.10 DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such right or remedy or constitute a waiver of any such
Event of Default. Every right
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and remedy given by this Article VII or by law to the Trustee or to the Holders
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders, as the case may be.
SECTION 7.11 CONTROL BY HOLDERS.
Subject to the terms of the Intercreditor Agreement with respect to
actions taken under the Collateral Documents, the Holder or Holders of a
majority in aggregate principal amount of then outstanding Securities shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
upon the Trustee, provided, that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such
direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 7.12 WAIVER OF PAST DEFAULT.
Subject to Section 7.8, the Holder or Holders of not less than a
majority in aggregate principal amount of the outstanding Securities may, by
written notice to the Trustee on behalf of all Holders, prior to the declaration
of acceleration of the maturity of the Securities, waive any past default
hereunder and its consequences, except a default
(A) in the payment of the principal of, premium, if any, or
interest (including Contingent Payments) on, any Security as specified in
clauses (1) and (2) of Section 7.1, or
(B) in respect of a covenant or provision hereof which, under
Article X, cannot be modified or amended without the consent of the Holder
of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
SECTION 7.13 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security
by its acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in
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any suit against the Trustee for any action taken, suffered or omitted to be
taken by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 7.13 shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in aggregate
principal amount of the outstanding Securities, or to any suit instituted by any
Holder for enforcement of the payment of principal of, or premium (if any) or
interest (including Contingent Payments) on, any Security on or after the
Maturity Date of such Security.
SECTION 7.14 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VIII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 8.1 DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are
adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall
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examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 8.1.
(2) The Trustee shall comply with any order or directive of a
Gaming Authority that the Trustee submit an application for any license,
finding of suitability or other approval pursuant to any Gaming Law and
will cooperate fully and completely in any proceeding related to such
application, provided, however, that in the event the Trustee in its
reasonable judgment determines that complying with such order or directive
would subject it or its officers or directors to unreasonable or onerous
requirements, the Trustee may, at its option, resign as Trustee in lieu of
complying with such order or directive; and provided, FURTHER, that no
resignation shall become effective until a successor Trustee is appointed
and delivers a written acceptance in accordance with Section 8.8 hereof.
(3) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(4) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 7.11.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section 8.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
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SECTION 8.2 RIGHTS OF TRUSTEE.
Subject to Section 8.1:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 13.4 and 13.5. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture or the TIA.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Except with respect to Section 5.1, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article V.
In addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
7.1(1), 7.1(2) and 5.1, or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
(h) Unless otherwise specifically provided for in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
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SECTION 8.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of any of the Securities, may make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may otherwise
deal with the Company, any Guarantor, any of their respective Subsidiaries, or
their respective Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee must
comply with Sections 8.10 and 8.11.
SECTION 8.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities and it shall not be responsible for any
statement in the Securities, other than the Trustee's certificate of
authentication, or the use or application of any funds received by a Paying
Agent other than the Trustee.
SECTION 8.5 NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder notice of
the uncured Default or Event of Default within 90 days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal of, or interest (including Contingent Payments) on, any
Security (including the payment of the Change of Control Offer Price on the
Change of Control Purchase Date, the Redemption Price on the Redemption Date and
the Asset Sale Offer Amount on the Asset Sale Purchase Date, as the case may
be), the Trustee may withhold the notice if and so long as a Trust Officer in
good faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 8.6 REPORTS BY TRUSTEE TO HOLDERS.
If required by law, within 60 days after each May 15 beginning with
the May 15 following the date of this Indenture, the Trustee shall mail to each
Securityholder a brief report dated as of such May 15 that complies with TIA
Section 313(a). If required by law, the Trustee also shall comply with TIA
Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
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SECTION 8.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel.
The Company shall indemnify the Trustee (in its capacity as Trustee)
and each of its officers, directors, attorneys-in-fact and agents for, and hold
it harmless against, any claim, demand, expense (including but not limited to
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel), loss or liability incurred by them without negligence, bad faith or
willful misconduct on its part, arising out of or in connection with (a) the
administration of this trust and their rights or duties hereunder including the
reasonable costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder and (b) the actual or alleged presence of Hazardous Materials
in the air, surface water or groundwater or on the surface or subsurface of any
real property owned, leased or at any time operated by the Company or any of its
Subsidiaries, the release, generation, storage, transportation, handling or
disposal of Hazardous Materials at any location, whether or not owned or
operated by the Company or any of its Subsidiaries, the non-compliance of any
real property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any real
property, or any environmental claim relating in any way to the Company or any
of its Subsidiaries, their operations, or any real property owned, leased or at
any time operated by the Company or any of its Subsidiaries, including, in each
case, without limitation, the reasonable fees and disbursements of counsel and
other consultants incurred in connection with any such investigation,
litigation, or other proceeding (but excluding any losses, liabilities, claims,
damages or expenses to the extent incurred by reason of the gross negligence or
willful misconduct of the person to be indemnified). The Trustee shall notify
the Company promptly of any claim asserted against the Trustee for which it may
seek indemnity. The Company shall defend the claim and the Trustee shall
provide reasonable cooperation at the Company's expense in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel; provided, that the Company will not be required to
pay such fees and expenses if it assumes the Trustee's defense and there is no
conflict of interest between the Company and the Trustee in connection with such
defense. The Company need not pay for any settlement made without its written
consent. The Company need not reimburse any expense or indemnify against any
loss or liability to the extent incurred by the Trustee through its negligence,
bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 8.7, the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal of or interest (including Contingent Payments) on
particular Securities.
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.1(5), (6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 8.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article IX and any rejection or
termination of this Indenture under any Bankruptcy Law.
SECTION 8.8 REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 8.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver, Custodian, or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder
or Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the Trustee provided for in Section 8.7 have
been paid, the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided in Section 8.7,
the resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
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If the Trustee fails to comply with Section 8.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
8.8, the Company's obligations under Section 8.7 shall continue for the benefit
of the retiring Trustee.
SECTION 8.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 8.10 ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA Section
310(a)(1) and TIA Section 310(a)(5). The Trustee shall have a combined capital
and surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA Section 310(b).
SECTION 8.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE IX
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 9.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may elect to have either Section 9.2 or 9.3 be applied to
all outstanding Securities upon compliance with the conditions set forth below
in this Article IX.
SECTION 9.2 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 9.1 of the option applicable
to this Section 9.2, the Company shall be deemed to have been discharged from
their obligations with respect to all outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Securities, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 9.5 and the other Sections of this Indenture
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referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
Section 9.4, and as more fully set forth in such section, payments in respect of
the principal of, premium, if any, and interest (including Contingent Payments)
on such Securities when such payments are due, (b) the Company's obligations
with respect to such Securities under Sections 2.4, 2.6, 2.7, 2.10, 5.2 and 5.4,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith, and (d) this Article IX.
Subject to compliance with this Article IX, the Company may exercise its option
under this Section 9.2 notwithstanding the prior exercise of its option under
Section 9.3 with respect to the Securities.
SECTION 9.3 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 9.1 of the option applicable
to this Section 9.3, the Company shall be released from its obligations under
the covenants contained in Sections 5.3, 5.6, 5.7, 5.8, 5.10, 5.11, 5.12, 5.13,
5.14, 5.15, 5.16, 5.17, 5.19, 5.20. 5.21, 5.22 and 5.23 and Article VI with
respect to the outstanding Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "Covenant Defeasance"), and the
Securities shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Securities, the Company need not comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document, but, except as specified above,
the remainder of this Indenture and such Securities shall be unaffected thereby.
In addition, upon the Company's exercise under Section 9.1 of the option
applicable to this Section 9.3, Sections 7.1(3), 7.1(4) and 7.1(8), 7.1(9),
7.1(10), 7.1(11), 7.1(12), 7.1(13), 7.1(14), 7.1(15) and 7.1(16) shall not
constitute Events of Default.
SECTION 9.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 9.2 or Section 9.3 to the outstanding Securities:
(a) (1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 8.10 who shall agree to comply with the provisions of this Article IX
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, (i) U.S. Legal Tender in an
amount, or (ii) U.S. Government Obligations which through the
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scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, U.S. Legal Tender in an amount, or (iii) a combination thereof, in such
amounts, as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the principal of and
interest (including Maximum Contingent Payments for the current and all future
Contingent Payment Periods) on the outstanding Securities on the stated maturity
or on the applicable redemption date, as the case may be, of such principal or
installment of principal or interest (including Contingent Payments); provided
that the Trustee shall have been irrevocably instructed to apply such U.S. Legal
Tender or the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities and (2) the Holders must have a valid and perfected
exclusive security interest in such trust;
(b) In the case of an election under Section 9.2, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably satisfactory to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the Issue Date, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance has not occurred (assuming that the Maximum Contingent
Payments had been made for the current and all future Contingent Payment
Periods);
(c) In the case of an election under Section 9.3, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States to the
effect that the Holders of the outstanding Securities will not recognize income,
gain or loss for Federal income tax purposes as a result of such Covenant
Defeasance and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred (assuming that the Maximum Contingent Payments had
been made for the current and all future Contingent Payment Periods);
(d) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or, in so far
as Section 7.1(5), 7.1(6) or 7.1(7) is concerned, at any time in the period
ending on the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of such
period);
(e) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
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(f) In the case of an election under either Section 9.2 or 9.3, the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit made by the Company pursuant to its election under Section 9.2
or 9.3, as applicable, was not made by the Company with the intent of preferring
the Holders over other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and
(g) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating that
all conditions precedent provided for relating to either the Legal Defeasance
under Section 9.2 or the Covenant Defeasance under Section 9.3 (as the case may
be) have been complied with as contemplated by this Section 9.4.
SECTION 9.5 DEPOSITED U.S. LEGAL TENDER AND U.S. GOVERNMENT
OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 9.6, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 9.5, the "Trustee") pursuant
to Section 9.4 in respect of the outstanding Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
as the Trustee may determine, to the Holders of such Securities of all sums due
and to become due thereon in respect of principal, premium, if any, and interest
(including Contingent Payments), but such money need not be segregated from
other funds except to the extent required by law.
The Company agrees to pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 9.4 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Securities.
Anything in this Article IX to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any U.S. Legal Tender or U.S. Government Obligations held by it
as provided in Section 9.4 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
9.4(a)), are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 9.6 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest
(including Contingent Payments) on any Security and remaining unclaimed for two
years after such principal or interest has become due and payable shall be paid
to the Company on its request; and the
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Holder of such Security shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the NEW YORK TIMES and THE
WALL STREET JOURNAL (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 9.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 9.2 or 9.3, as
the case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to Section 9.2
or 9.3 until such time as the Trustee or Paying Agent is permitted to apply such
money in accordance with Section 9.2 and 9.3, as the case may be; provided,
however, that, if the Company makes any payment of principal of or interest
(including Contingent Payments) on any Security following the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
Paying Agent.
ARTICLE X
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder, the Company and any Guarantor, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, or may amend,
modify or supplement the Securities, this Indenture, or any of the Collateral
Documents, in form satisfactory to the Trustee and the Company, for any of the
following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or to make
any other provisions with respect to matters or questions arising under
this Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (1) shall not
adversely affect the interests of any Holder in any respect;
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon the
Company or to make any other change that does not adversely affect the
rights of any Holder; provided, that the Company has delivered to the
Trustee an Opinion of Counsel stating that such change does not adversely
affect the rights of any Holder;
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(3) to provide for additional collateral for or additional
Guarantors of the Securities;
(4) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(5) to evidence the succession of another person to the Company,
and the assumption by any such successor of the obligations of the Company,
herein and in the Securities in accordance with Article VI; or
(6) to comply with the TIA.
SECTION 10.2 AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH
CONSENT OF HOLDERS.
Subject to Section 7.8 and the last sentence of this paragraph, with
the consent of the Holders of not less than a majority in aggregate principal
amount of then outstanding Securities, by written act of said Holders delivered
to the Company and the Trustee, the Company and any Guarantor, when authorized
by Board Resolutions, and the Trustee may amend or supplement any of the
Collateral Documents, this Indenture or the Securities or enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
any of the Collateral Documents, this Indenture or the Securities or of
modifying in any manner the rights of the Holders under any of the Collateral
Documents, this Indenture or the Securities. Subject to Section 7.8 and the
last sentence of this paragraph, the Holder or Holders of a majority in
aggregate principal amount of then outstanding Securities may waive compliance
by the Company or any Guarantor with any provision of any of the Collateral
Documents, this Indenture or the Securities. Notwithstanding the foregoing
provisions of this Section 10.2, no such amendment, supplemental indenture or
waiver shall, without the consent of the Holder of each outstanding Security
affected thereby:
(1) change the Stated Maturity of, or the Change of Control
Offer Period or the Asset Sale Offer Period on, any Security;
(2) reduce the principal amount of any Security;
(3) reduce the rate or extend the time for payment of interest
(including Contingent Payments) on any Security;
(4) make the principal of, or the interest on, any Security
payable with anything or in any manner other than as provided for in this
Indenture and the Securities as in effect on the Issue Date;
(5) make any changes in Section 7.8 or this third sentence of
this Section 10.2 (except, in the case of this third sentence, to add any
additional provision of this Indenture to this sentence);
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(6) reduce any Purchase Price;
(7) alter the redemption provisions of Article III or the
Securities in a manner adverse to any Holder;
(8) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Securities or change the
percentage of principal amount of Securities whose Holders must consent to
an amendment, supplement or waiver of any provision of this Indenture or
the Securities (except to increase any required percentage) or make any
changes in the provisions concerning the rights of Holders to recover the
principal of, interest (including Contingent Payments) on, or redemption
payment with respect to, any Security; or
(9) make the Securities subordinated in right of payment to any
extent or under any circumstances (except as permitted by this Indenture)
to any other indebtedness.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
After an amendment, supplement or waiver under this Section 10.2 or
10.4 becomes effective, it shall bind each Holder, subject to the limitations
set forth above.
In connection with any amendment, supplement or waiver under this
Article X, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 10.3 COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 10.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or
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subsequent Holder may revoke the consent as to his Security or portion of his
Security by written notice to the Company or the person designated by the
Company as the person to whom consents should be sent if such revocation is
received by the Company or such person before the date on which the Trustee
receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Securities have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those persons who were Holders at such record date, and only those persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (9) of Section 10.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same (or a portion of the same) debt as the consenting Holder's Security
with respect to which a consent was given; provided, that any such waiver shall
not impair or affect the right of any Holder to receive payment of principal and
premium of and interest (including Contingent Payments) on a Security, on or
after the respective dates set for such amounts to become due and payable
expressed in such Security, or to bring suit for the enforcement of any such
payment on or after such respective dates.
SECTION 10.5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determine, the Company in exchange for the Security shall issue, the
Guarantors shall endorse and the Trustee shall authenticate a new Security that
reflects the changed terms. Any failure to make the appropriate notation or to
issue a new Security shall not affect the validity of such amendment, supplement
or waiver.
SECTION 10.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article X, provided, that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver which
affects the Trustee's own rights, duties or immunities under this Indenture.
The Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of any
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amendment, supplement or waiver authorized pursuant to this Article X is
authorized or permitted by this Indenture.
SECTION 10.7 CONSENT TO CERTAIN AMENDMENTS OF THE GROUND LEASE;
TRUSTEE'S ACTIONS.
To the extent required under the Ground Lease, the Collateral Agent
and the Trustee, on behalf of the Holders, hereby waive their right to consent
or shall be authorized to waive its consent, as the case may be, to any future
amendment, modification or change of such lease, and any and all other leases
now or hereafter subject to the Collateral Mortgage, provided that:
(a) such amendment, modification or change would not (i) have a
material adverse effect on the Collateral, (ii) have a material adverse
effect on the rights of the Holders or the Collateral Agent under the
Ground Lease or such other lease, as the case may be; or (iii) materially
increase the payment obligations under the Ground Lease, or such other
lease, as the case may be; and
(b) contemporaneously with the execution of such amendment,
modification or change, the Collateral Agent shall receive, at no cost to
the Holders or the Collateral Agent, an endorsement to the mortgagee's
title insurance policy insuring the Collateral Mortgage, assuring (i) that
such amendment does not impair or invalidate the lien of the Collateral
Mortgage and (ii) that such amendment does not affect the coverage afforded
by the above-referenced title insurance policy.
Except as set forth above, the Trustee may request the consent and
approval of the Holders as a condition to giving any consent or approval under
the Ground Lease, or any other lease or the Casino Operating Contract and shall
have no responsibility or liability for failing to give any such consent or
approval absent direction from the Holders.
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1 REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON
CHANGE OF CONTROL.
(a) In the event that a Change of Control (the date on which such
event occur being referred to as the "Change of Control Date") occurs, each
Holder of Securities shall have the right, at such Holder's option, subject to
the terms and conditions hereof, to require the Company to repurchase all or any
part of such Holder's Notes (provided, that the principal amount of such Notes
at maturity must be $1,000 or an integral multiple thereof, except for Secondary
Securities that were issued in denominations other than $1,000 or an integral
multiple thereof) on the date that is no later than 30 Business Days after the
occurrence of such Change of Control (the "Change of Control Payment Date"), at
a cash
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price (the "Change of Control Offer Price") equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the Change of
Control Payment Date.
(b) In the event that, pursuant to this Section 11.1, the Company
shall be required to commence an offer to purchase Notes (a "Change of Control
Offer"), the Company shall follow the procedures set forth in this Section 11.1
as follows:
(1) the Change of Control Offer shall commence within 10
Business Days following the Change of Control Date;
(2) the Change of Control Offer shall remain open for 20
Business Days and no longer, except to the extent that a longer period is
required by applicable law (the "Change of Control Offer Period");
(3) within 5 Business Days following the expiration of a Change
of Control Offer (and in any event not later than 35 Business Days
following the Change of Control Date), the Company shall purchase all of
the tendered Securities at the Change of Control Offer Price together with
accrued interest to the Change of Control Payment Date;
(4) if the Change of Control Payment Date is on or after an
interest payment record date and on or before the related interest payment
date, any accrued interest will be paid to the Person in whose name a
Security is registered at the close of business on such record date, and no
additional interest (including Contingent Payments) will be payable to
Securityholders who tender Securities pursuant to the Change of Control
Offer and who are paid on the Change of Control Payment Date;
(5) the Company shall provide the Trustee with notice of the
Change of Control Offer at least 5 Business Days before the commencement of
any Change of Control Offer; and
(6) on or before the commencement of any Change of Control
Offer, the Company or the Trustee (upon the request and at the expense of
the Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture) shall
govern the terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 11.1;
(ii) the Change of Control Offer Price (including the amount of
accrued and unpaid interest), the Change of Control Payment Date and
the Change of Control Put Date (as defined below);
(iii) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest (including
Contingent Payments);
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(iv) that, unless (a) the Company defaults in depositing U.S.
Legal Tender with the Paying Agent (which may not for purposes of this
Section 11.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company in accordance
with the last paragraph of this clause (b) or (b) such Change of
Control payment is prevented for any reason, any Security or portion
thereof accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest (including Contingent Payments) after
the Change of Control Payment Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Security completed, to
the Paying Agent (which may not for purposes of this Section 11.1,
notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company) at the address specified in
the notice prior to the close of business on the fifth Business Day
prior to the Change of Control Payment Date (the "Change of Control
Put Date");
(vi) that Holders will be entitled to withdraw their elections,
in whole or in part, if the Paying Agent (which, for purposes of this
Section 11.1, notwithstanding any other provision of this Indenture,
may not be the Company or an Affiliate of the Company) receives, up to
the close of business on the Change of Control Put Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the Holder is
withdrawing and a statement that such Holder is withdrawing his
election to have such principal amount of Securities purchased; and
(vii) a brief description of the events resulting in such
Change of Control.
No later than 12:00 noon, New York City Time, on a Change of Control
Payment Date, the Company shall (i) accept for payment Securities or portions
thereof properly tendered pursuant to the Change of Control Offer prior to the
close of business on the Final Change of Control Put Date, (ii) irrevocably
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Change of
Control Offer Price (including accrued and unpaid interest) of all Securities so
tendered and (iii) deliver to the Trustee Securities so accepted together with
an Officers' Certificate listing the Securities or portions thereof being
purchased by the Company. The Paying Agent shall on the Change of Control
Payment Date pay to the Holders of Securities so accepted an amount equal to the
Change of Control Offer Price (including accrued and unpaid interest), and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof.
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ARTICLE XII
GUARANTY
SECTION 12.1 GUARANTY.
(a) In consideration of good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and subject to Article III and
subsection (d) below, each of the Guarantors hereby irrevocably and
unconditionally guarantees (the "Guaranty") to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Securities or the obligations of the Company under this Indenture or the
Securities, that: (w) the principal and premium (if any) of and interest
(including Contingent Payments to the extent due and payable hereunder) on the
Securities will be paid in full when due, whether at the maturity or Interest
Payment Date, by acceleration, Required Regulatory Redemption, upon a Change of
Control, Offer to Purchase, or otherwise; (x) all other obligations of the
Company to the Holders or the Trustee under this Indenture or the Securities
will be promptly paid in full or performed, all in accordance with the terms of
this Indenture and the Securities; and (y) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration, Required Regulatory
Redemption, upon an Offer to Purchase or otherwise. Failing payment when due of
any amount so guaranteed for whatever reason, each Guarantor shall be obligated
to pay the same before failure so to pay becomes an Event of Default.
(b) Each Guarantor hereby agrees that its obligations with regard to
this Guaranty shall be unconditional, irrespective of the validity, regularity
or enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any delays in obtaining or realizing upon or failures to
obtain or realize upon collateral, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company or right to require
the prior disposition of the assets of the Company to meet its obligations,
protest, notice and all demands whatsoever and covenants that this Guaranty will
not be discharged except by complete performance of the obligations contained in
the Securities and this Indenture.
(c) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any Custodian,
Trustee, or similar official acting in relation to the Company or such
Guarantor, any amount paid by the Company or such Guarantor to the Trustee or
such Holder, this Guaranty, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that it will not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Guarantor further agrees that, as between such
Guarantor, on the one hand, and the Holders and the
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Trustee, on the other hand, (i) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Section 7.2 for the purposes of this
Guaranty, notwithstanding any stay, injunction or other prohibition preventing
such acceleration as to the Company of the obligations guaranteed hereby, and
(ii) in the event of any declaration of acceleration of those obligations as
provided in Section 7.2, those obligations (whether or not due and payable) will
forthwith become due and payable by each of the Guarantors for the purpose of
this Guaranty.
(d) It is the intention of each Guarantor and the Company that the
obligations of each Guarantor hereunder shall be, but not in excess of, the
maximum amount permitted by applicable law. Accordingly, if the obligations in
respect of the Guaranty would be annulled, avoided or subordinated to the
creditors of the Guarantor by a court of competent jurisdiction in a proceeding
actually pending before such court as a result of a determination both that such
Guaranty was made without fair consideration and, immediately after giving
effect thereto, or at the time that any demand is made thereupon, such Guarantor
was insolvent or unable to pay its debts as they mature or left with an
unreasonably small capital, then the obligations of such Guarantor under such
Guaranty shall be reduced by such an amount, if any, that would result in the
avoidance of such annulment, avoidance or subordination; PROVIDED, HOWEVER, that
any reduction pursuant to this paragraph shall be made in the smallest amount as
is necessary to reach such result. For purposes of this paragraph, "fair
consideration," "insolvency," "unable to pay its debts as they mature,"
"unreasonably small capital" and the effective times of reductions, if any,
required by this paragraph shall be determined in accordance with applicable
law.
(e) Each Guarantor shall be subrogated to all rights of the Holders
against the Company under the Securities, this Indenture or the Collateral
Documents in respect of any amounts paid by such Guarantor pursuant to the
provisions of such Guaranty or this Indenture; PROVIDED, HOWEVER, that the
Guarantor shall not be entitled to enforce or to receive any payments arising
out of, or based upon, such right of subrogation until the principal of,
premium, if any, and interest (including Contingent Payments to the extent due
and payable hereunder) on all Securities issued hereunder shall have been paid
in full.
SECTION 12.2 EXECUTION AND DELIVERY OF GUARANTY.
To evidence its Guaranty set forth in Section 12.1, each Guarantor
agrees that a notation of such Guaranty substantially in the form annexed hereto
as EXHIBIT B shall be endorsed on each Security authenticated and delivered by
the Trustee and that this Indenture shall be executed on behalf of such
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents, by manual or facsimile signature, under a facsimile of its seal
reproduced thereon and attested to by another Officer other than the Officer
executing the Indenture.
Each Guarantor agrees that its Guaranty set forth in Section 12.1
shall remain in full force and effect and apply to all the Securities
notwithstanding any failure to endorse on each Security a notation of such
Guaranty.
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If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security on which a Guaranty is
endorsed, the Guaranty shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guaranty set forth in
this Indenture on behalf of each Guarantor.
SECTION 12.3 FUTURE SUBSIDIARY GUARANTORS.
The Company shall cause each person that is or becomes a Subsidiary of
the Company after the Issue Date to execute a Guaranty in the form of Exhibit B
hereto and cause such Subsidiary to execute an Indenture supplemental hereto for
the purpose of adding such Subsidiary as a Guarantor hereunder.
SECTION 12.4 RELEASE OF GUARANTOR.
The Parent Guarantor shall be released from all of its obligations
under the Guaranty and under this Indenture if:
(a) (i) the Company or the Parent Guarantor has transferred all or
substantially all of its properties and assets to any Person (whether by
sale, merger or consolidation or otherwise), or has merged into or
consolidated with another Person, pursuant to a transaction in compliance
with this Indenture;
(ii) the corporation to whom all or substantially all of the
properties and assets of the Company or the Parent Guarantor are
transferred, or whom the Company or the Parent Guarantor has merged
into or consolidated with, has expressly assumed, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Parent
Guarantor under the Guaranty and this Indenture;
(iii) immediately before and immediately after giving effect
to such transaction, no Event of Default, and no event or condition
which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing; and
(iv) the Parent Guarantor has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture
comply with this Section 12.3 and that all conditions precedent herein
provided for relating to such transaction have been complied with; or
(b) the Parent Guarantor liquidates (other than pursuant to any
Bankruptcy Law) and complies, if applicable, with the provisions of this
Indenture; PROVIDED that if a Person and its Affiliates, if any, shall
acquire all or substantially all of the assets
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of the Parent Guarantor upon such liquidation the Parent Guarantor shall
liquidate only if:
(i) the Person and each such Affiliate (or the common corporate
parent of such Person and its Affiliates, if such Person and its
Affiliates are wholly owned by such parent) which acquire or will
acquire all or a portion of the assets of the Parent Guarantor shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Parent Guarantor, under the Guaranty and this
Indenture and such Person or any of such Affiliates (or such parent)
shall be a corporation organized and existing under the laws of the
United States or any State thereof or the District of Columbia;
(ii) immediately after giving effect to such transaction, no
Event of Default, and no event or condition which, after notice or
lapse of time or both, would become an Event of Default, shall have
occurred and be continuing; and
(iii) the Parent Guarantor has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such liquidation and such supplemental indenture comply with this
Section 12.3 and that all conditions precedent herein provided for
relating to such transaction have been complied with; or
(c) the Company ceases for any reason to be a "wholly owned
subsidiary" (as such term is defined in Rule 1-02(aa) of the Regulation S-X
promulgated by the Commission) of the Parent Guarantor.
Upon any assumption of the Guaranty by any Person pursuant to this
Section, such Person may exercise every right and power of the Parent Guarantor
under this Indenture with the same effect as if such successor corporation had
been named as the Parent Guarantor herein, and all the obligations of the Parent
Guarantor, hereunder and under such Parent Guaranty and the Indenture shall
terminate.
SECTION 12.5 WHEN THE GUARANTOR MAY MERGE, ETC.
The Parent Guarantor shall not consolidate with or merge with or into
any other Person or, directly or indirectly, sell, lease or convey all or
substantially all of its assets (computed on a consolidated basis), whether in a
single transaction or a series of related transactions, to another Person,
unless:
(a) either the Parent Guarantor shall be the continuing person, or
the Person (if other than the Parent Guarantor) formed by such
consolidation or into which the Parent Guarantor is merged or to which the
assets of the Parent Guarantor are transferred shall be a corporation
organized and validly existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
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in form satisfactory to the Trustee, all the obligations of the Parent
Guarantor under the Guaranty and this Indenture;
(b) immediately after giving effect to such transaction, no Event of
Default, and no event or condition which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing; and
(c) the Parent Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, conveyance or lease and such supplemental
indenture comply with this Section and that all conditions precedent herein
provided for relating to such transaction have been complied with.
Upon any consolidation or merger, or any sale, conveyance or lease of
all or substantially all of the assets of the Parent Guarantor, in accordance
with this Section, the successor corporation formed by such consolidation or
into which the Parent Guarantor is merged or to which such transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Parent Guarantor under this Indenture with the same effect as if such
successor corporation had been named as the Parent Guarantor herein, and all the
obligations of the predecessor Parent Guarantor hereunder and under the Guaranty
and the Indenture shall terminate.
SECTION 12.6 CERTAIN BANKRUPTCY EVENTS.
The Parent Guarantor hereby covenants and agrees that in the event of
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, the Parent Guarantor shall not file (or join in any filing of), or
otherwise seek to participate in the filing of, any motion or request seeking to
stay or to prohibit (even temporarily) execution on the Guaranty and hereby
waives and agrees not to take the benefit of any such stay of execution, whether
under Section 362 or 105 of the United States Bankruptcy Code or otherwise.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1 SECURITIES SUBORDINATED TO SENIOR DEBT.
The Company, for itself, its successors and assigns, covenants and
agrees, and each Holder of any Securities, by his or its acceptance thereof,
likewise covenants and agrees, that the indebtedness evidenced by the Securities
(and any renewals or extensions thereof), including the principal of, premium,
if any, and interest (including Contingent Payments) thereon and any interest
payable on such interest (including Contingent Payments), and requirements that
the Company make repurchases or redemptions shall be subordinate and subject in
right of payment, to the extent and in the manner hereinafter set forth, to the
prior payment in full in cash or Cash Equivalents of all Obligations in respect
of Senior Debt, and that each holder of Senior Debt whether now outstanding or
hereafter created,
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incurred, assumed or guaranteed shall be deemed to have acquired Senior Debt in
reliance upon the covenants and provisions contained in this Indenture and the
Securities.
SECTION 13.2 SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
DEBT ON DISSOLUTION, LIQUIDATION, REORGANIZATION, ETC. OF THE COMPANY.
Upon any payment or distribution of the assets of the Company of any
kind or character, whether in cash, property or securities (including any
Collateral at any time securing the Securities) to creditors upon any
dissolution, winding-up, total or partial liquidation, reorganization, or
recapitalization or readjustment of the Company or its property or securities
(whether voluntary or involuntary, or in bankruptcy, insolvency, reorganization,
liquidation, or receivership proceedings, or upon an assignment for the benefit
of creditors, or any other marshalling of the assets and liabilities of the
Company or otherwise), then in such event,
(i) all holders of Senior Debt shall first be entitled to
receive payment in full, in cash or Cash Equivalents, of all Obligations in
respect of Senior Debt before any payment is made on account of
Obligations, including, without limitation, the principal, premium, if any,
or interest (including Contingent Payments), in respect of the Securities
or in respect of the Change of Control Offer Price;
(ii) any payment or distribution of assets of the Company, of any
kind or character, whether in cash, property or securities (other than, to
the extent issued in exchange for the Securities, Qualified Capital Stock
of the Company and debt securities of the Company that are subordinated to
the Senior Debt (and any securities issued in exchange for Senior Debt) to
the same extent the Securities are subordinated to Senior Debt (and any
securities issued in exchange for Senior Debt)), to which the Holders, or
the Trustee on behalf of the Holders, would be entitled except for the
provisions of this Article XIII, shall be paid or delivered by any debtor
or other person making such payment or distribution, directly to the
holders of the Senior Debt or their representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any of such Senior Debt may have been issued,
ratably according to the aggregate amounts remaining unpaid on account of
the Senior Debt held or represented by each, for application to payment of
all Obligations in respect of Senior Debt remaining unpaid, to the extent
necessary to pay all Obligations in respect of Senior Debt in full, in cash
or Cash Equivalents, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 13.2, any payment or distribution of assets of
the Company, whether in cash, property or securities (other than, to the
extent issued in exchange for the Securities, Qualified Capital Stock of
the Company and debt securities of the Company that are subordinated to the
Senior Debt (and any securities issued in exchange for Senior Debt) to the
same extent the Securities are subordinated to Senior
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Debt (and any securities issued in exchange for Senior Debt)), shall be
received by the Trustee or the Holders before all Obligations in respect of
Senior Debt are paid in full, such payment or distribution (subject to the
provisions of Sections 13.6 and 13.7) shall be held in trust for the
benefit of, and shall be immediately paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of Senior Debt remaining
unpaid or unprovided for, or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any
instruments evidencing any of such Senior Debt may have been issued,
ratably according to the aggregate amounts remaining unpaid on account of
the Obligations in respect of Senior Debt held or represented by each, for
application to the payment of all Obligations in respect of Senior Debt
remaining unpaid, to the extent necessary to pay all Obligations in respect
of Senior Debt in full after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
Without limiting the foregoing, the Company shall give prompt written
notice to the Trustee and any Paying Agent of any action or plan of dissolution,
winding-up, liquidation or reorganization of the Company or any other facts
known to it which would cause a payment to violate this Article XIII.
Upon any payment or distribution of assets of the Company referred to
in this Article XIII, the Trustee, subject to the provisions of Section 8.1 and
Section 8.2, and the Holders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceeding is pending, or a
certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or to the Holders, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Senior Debt and other Debt of the Company, the amount thereof payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XIII.
SECTION 13.3 HOLDERS OF SECURITIES TO BE SUBROGATED TO RIGHT OF
HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all Obligations in respect of Senior
Debt in cash or Cash Equivalents, the Holders of the Securities shall be
subrogated (equally and ratably with the holders of all Senior Subordinated
Debt) to the rights of the holders of Senior Debt to receive payments or
distributions of assets of the Company applicable to the Senior Debt until the
principal of, premium, if any, and interest (including Contingent Payments) on,
the Securities, including the Change of Control Offer Price, if applicable,
shall be paid in full, and for purposes of such subrogation, no payments or
distributions to the holders of Senior Debt of assets, whether in cash, property
or securities, distributable to the holders of Senior Debt under the provisions
hereof to which the Holders would be entitled except for the provisions of this
Article XIII, and no payment over pursuant to the provisions of this Article
XIII to the holders of Senior Debt by the Holders shall, as between the Company,
its creditors (other than the holders of Senior Debt) and the Holders, be deemed
to be a payment by the Company to or on account of Senior Debt, it being
understood that the provisions of this Article XIII are, and are intended,
solely for the
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purpose of defining the relative rights of the Holders, on the one hand, and the
holders of Senior Debt, on the other hand.
SECTION 13.4 OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article XIII or elsewhere in this Indenture
or in any Security (but subject to the provisions of Section 3.2) is intended to
or shall impair or affect, as between the Company, its creditors (other than the
holders of Senior Debt) and the Holders, the obligation of the Company, which is
absolute and unconditional, to pay to the Holders the principal of, premium, if
any, and interest (including Contingent Payments) on, the Securities, and the
Change of Control Offer Price, if applicable, as and when the same shall become
due and payable in accordance with their terms, or to affect the relative rights
of the Holders and creditors of the Company other than the holders of Senior
Debt, nor shall anything herein or therein prevent or limit the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
the happening of an Event of Default hereunder, subject to the provisions of
Article VII hereof and to the rights, if any, under this Article XIII of the
holders of Senior Debt in respect of assets, whether in cash, property or
securities, of the Company received upon the exercise of any such remedy.
Nothing contained in this Article XIII or elsewhere in this Indenture or in the
Securities, shall, except during the pendency of any dissolution, winding-up,
total or partial liquidation, reorganization, recapitalization or readjustment
of the Company or its securities (whether voluntary or involuntary, or in
bankruptcy, insolvency, reorganization, liquidation or receivership proceedings,
or upon an assignment for the benefit of creditors, or any other marshalling of
assets and liabilities of the Company or otherwise), affect the obligation of
the Company to make, or prevent the Company from making, at any time (except
under the circumstances described in Section 13.5 hereof), payment of principal
of, premium, if any, or interest (including Contingent Payments) on, the
Securities, or the Change of Control Offer Price, if applicable, in respect of
any Securities.
SECTION 13.5 COMPANY NOT TO MAKE PAYMENTS WITH RESPECT TO SECURITIES
IN CERTAIN CIRCUMSTANCES.
(a) Upon the maturity of any Senior Debt by lapse of time,
acceleration or otherwise, but subject to the provisions of Section 3.2, all
principal thereof and interest thereon and all other Obligations in respect
thereof shall first be paid in full in cash or Cash Equivalents, or such payment
duly provided for, and, in the case of Senior Debt in respect of letters of
credit to the extent they have not been drawn upon, be fully secured by cash
collateral, before any payment is made on account of Obligations, including,
without limitation, principal of, premium, if any, or interest (including
Contingent Payments), in respect of the Securities in cash or property or to
acquire or repurchase any of the Securities.
(b) Upon the happening of a default or an event of default (as such
term is used in the documentation governing Senior Debt) in respect of the
payment of any Obligations in respect of Senior Debt ("Payment Default"), but
subject to the provisions of Section 3.2, then, unless and until such default or
event of default shall have been cured or waived by the holders of such Senior
Debt or shall have ceased to exist, no payment shall be
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made by or on behalf of the Company with respect to Obligations, including,
without limitation, the principal of, premium, if any, or interest (including
Contingent Payments), in respect of the Securities in cash or property or to
acquire or repurchase any of the Securities.
(c) Upon the happening of a default or an event of default with
respect to any Senior Debt as such terms are used in the documentation governing
Senior Debt), other than a default in payment of the principal of, premium, if
any, or interest on the Senior Debt, or if an event of default would result upon
any payment with respect to the Securities, but subject to the provisions of
Section 3.2, upon written notice, which notice shall specify that such notice
constitutes a payment blockage notice pursuant to and for purposes of, this
Section 13.5(c), of the default given to the Company and the Trustee by holders
of Designated Senior Debt representing a majority of the principal amount
thereof or their representative, then, unless and until such default or event of
default has been cured or waived or otherwise has ceased to exist, no payment
may be made by or no behalf of the Company with respect to Obligations,
including, without limitation, the principal of, premium, if any, or interest
(including Contingent Payments), in respect of the Securities in cash or
property, or to acquire or repurchase any of the Securities for cash or
property. Notwithstanding the foregoing, unless the Designated Senior Debt in
respect of which such default or event of default exists has been declared due
and payable in its entirety, in the case of a default, within 30 days and, in
the case of an event of default, within 180 days after the date written notice
of such default or event of default is delivered as set forth above (the
"Payment Blockage Period"), and such declaration has not been rescinded, the
Company is required (subject to the provisions of Section 13.2 and Sections
13.5(a) and (b), to the extent then applicable) then to pay all sums not paid to
the Holders of the Securities during the Payment Blockage Period due to the
foregoing prohibitions and to resume all other payments as and when due on the
Securities. Any number of such notices may be given; PROVIDED, HOWEVER, that
(i) during any 360 consecutive days, the aggregate of all Payment Blockage
Periods shall not exceed 180 days, (ii) there shall be a period of at least 180
consecutive days during each continuous 360-day period when no Payment Blockage
Period is in effect, and (iii) any default or event of default that resulted in
the commencement of a 180-day period may not be the basis for the commencement
of any other 180-day period.
In the event that, notwithstanding the foregoing provisions of this
Section 13.5, any payment or distribution of assets of the Company, whether in
cash, property or securities (other than, to the extent issued in exchange for
the Securities, Qualified Capital Stock of the Company and debt securities of
the Company that are subordinated to the Senior Debt (and any securities issued
in exchange for Senior Debt) to the same extent the Securities are subordinated
to Senior Debt (and any securities issued in exchange for Senior Debt)), shall
be received by the Trustee or the Holders at a time when such payment or
distribution should not have been made because of this Section 13.5, such
payment or distribution (subject to the provisions of Sections 13.6 and 13.7)
shall be held in trust for the benefit of the holders of, and shall be paid or
delivered by the Trustee or such Holders, as the case may be, to the holders of
the Senior Debt remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Debt may have been issued,
ratably according to the aggregate amounts remaining unpaid on account of
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the Senior Debt held or represented by each, for application to the payment of
all Obligations in respect of Senior Debt remaining unpaid, to the extent
necessary to pay all Obligations in respect of Senior Debt in full, in cash or
Cash Equivalents, after giving effect to any concurrent payment or distribution
to the holders of such Obligations in respect of Senior Debt.
SECTION 13.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee, unless and until the Trustee shall have received written notice
thereof at its Corporate Trust Office from the Company or any Guarantor or from
one or more holders of Senior Debt or from any representative thereof or trustee
therefor, and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Sections 8.1 and 8.2 hereof, shall be entitled to
assume conclusively that no such facts exist, and shall be fully protected in
making any such payment in any such event.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of
Senior Debt (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of Senior Debt or a trustee on behalf of any
such holder. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Debt to participate in any payment or distribution pursuant to this
Article XIII, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XIII, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 13.7 APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
Any deposit of monies by the Company with the Trustee or any Paying
Agent (whether or not in trust) for the payment of the principal of, premium, if
any, or interest (including Contingent Payments) on, any Securities or Change of
Control Offer Price in respect of any Securities shall be subject to the
provisions of Sections 13.1, 13.2, 13.3 and 13.5 hereof, except that, if prior
to the opening of business on the second Business Day next prior to the date on
which, by the terms of this Indenture, any such monies may become payable for
any purpose (including, without limitation, the payment of principal of,
premium, if any, or interest (including Contingent Payments) on, or Change of
Control Offer Price in respect of, any Security) the Trustee shall not have
received with respect to such monies the notice provided for in Section 13.6,
then the Trustee shall have the full power and authority to receive such monies
and to apply such monies to the purpose for which they were received, and shall
not be affected by any notice to the contrary which may be received by it on or
after such date; without, however, limiting any rights that holders of Senior
Debt
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may have to recover any such payments from the Holders in accordance with the
provisions of this Article XIII.
SECTION 13.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF COMPANY OR HOLDERS OF SENIOR DEBT.
No right of any present or future holder of any Senior Debt to enforce
subordination, as herein provided, shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Indenture, the
Securities, or any other agreement or instrument regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
Each Holder of any Securities, by his acceptance thereof, undertakes
and agrees for the benefit of each holder of Senior Debt to execute, verify,
deliver and file any proofs of claim, consents, assignments or other instruments
that any holder of Senior Debt may at any time require in order to prove and
realize upon any rights or claims pertaining to the Securities and to effectuate
the full benefit of the subordination contained in this Article XIII, and upon
failure of any Holder of any Security so to do, any such holder of Senior Debt
(or a trustee or representative on its behalf) shall be deemed to be irrevocably
appointed the agent and attorney-in-fact of the Holder of such Security to
execute, verify, deliver and file any such proofs of claim, consents,
assignments or other instrument.
Without limiting the effect of the first paragraph of this Section
13.8, any holder of Senior Debt may at any time and from time to time without
the consent of or notice to any Holder, without impairing or releasing any of
the rights of any such holder of Senior Debt hereunder, upon or without any
terms or conditions and in whole or in part:
(1) change the manner, place or terms of payment, or change or
extend the time of payment of or increase the amount of, renew or alter,
any Senior Debt or any other liability of the Company to such holder, any
security therefor, or any liability incurred directly or indirectly in
respect thereof, and the provisions hereof shall apply to the Senior Debt
of such holder as so changed, extended, renewed or altered;
(2) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or however securing,
any Senior Debt or any other liability of the Company to such holder or any
other liabilities incurred directly or indirectly in respect thereof or
hereof, or any offset against it;
(3) exercise or refrain from exercising any rights or remedies
against the Company or others or otherwise act or refrain from acting or
for any reason fail to file, record or otherwise perfect any security
interest in or lien on any property of the Company or any other Person;
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(4) settle or compromise any Senior Debt or any other liability
of the Company to such holder or any security therefor, or any liability
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Company to creditors of the Company
other than such holder; and
(5) apply any sums by whomsoever paid and however realized to
any liability or liabilities of the Company to such holder (other than in
respect of the Securities or any liability or liabilities which rank PARI
PASSU or junior in right of payment to the Securities) regardless of what
liability or liabilities of the Company to such holder remain unpaid.
SECTION 13.9 HOLDERS OF SECURITIES AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF SECURITIES.
Without purporting to limit the authority of the Trustee as may be
appropriate in other circumstances, each Holder by his or its acceptance thereof
irrevocably authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article XIII and appoints the Trustee his attorney-in-fact for
such purpose, including, in the event of any dissolution, winding-up or
liquidation or reorganization under Bankruptcy Law of the Company (whether in
bankruptcy, insolvency or receivership proceedings or otherwise), the timely
filing of a claim for the unpaid balance of its or his Securities in the form
required in such proceedings and the causing of such claim to be approved. If
the Trustee does not file a claim or proof of debt substantially in the form
required in such proceeding at least one day before the expiration of the time
to file such claims or proofs, then any of the holders of Senior Debt have the
right to file such proof of claim or debt on behalf of the Holders, and to take
any action with respect to such proof of claim or debt permitted to be taken by
the holders of Senior Debt pursuant to this Indenture, the Securities or by law;
PROVIDED, HOWEVER, that no such action by holders of Senior Debt shall in any
way limit or affect the rights of the Holders or the Trustee hereunder or under
the Securities or applicable law.
SECTION 13.10 RIGHT OF TRUSTEE TO HOLD SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee, in its individual capacity, shall be entitled to all of
the rights set forth in this Article Thirteen in respect of any Senior Debt at
any time held by it to the same extent as any other holder of Senior Debt, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder. Nothing in this Article XIII shall apply to claims
of, or payment to, the Trustee under or pursuant to Section 8.7.
SECTION 13.11 ARTICLE XIII NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium, if
any, or interest (including Contingent Payments) on, the Securities, the Change
of Control Offer
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Price in respect of the Securities, by reason by any provision in this Article
XIII shall not be construed as preventing the occurrence of an Event of Default
under Section 7.1 hereof.
SECTION 13.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The provisions of this Indenture are not intended to create, nor shall
they create, any trust or fiduciary relationship between the Trustee and the
holders of Senior Debt, nor shall any implied covenants or obligations with
respect to holders of Senior Debt (other than those expressly set forth herein)
be read into this Indenture against the Trustee. Accordingly, notwithstanding
any provision of this Article XIII to the contrary, the Trustee shall not be
liable to any such holders if it shall, in good faith, inadvertently pay over or
distribute to Holders or the Company or any other person monies or assets to
which any holders of Senior Debt shall be entitled by virtue of this Article
XIII or otherwise.
SECTION 13.13 TRUST MONIES NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary and subject
to the prior satisfaction of all of the conditions set forth in Article IX,
payments from money held in trust under Article IX by the Trustee for the
payment of principal of, premium, if any, or interest (including Contingent
Payments) on, the Securities, or Change of Control Purchase Price in respect of
the Securities shall not be subordinated to the prior payment of any Senior Debt
of the Company or subject to the restrictions set forth in this Article Thirteen
and none of the Holders shall be obligated to pay over any such amount to the
Company or any holder of Senior Debt of the Company or any other creditor of the
Company, in each case so long as (and only so long as) at the time the
respective amounts were deposited pursuant to Article IX, such amounts would
have been permitted to be paid directly in respect of Obligations, including
without limitation, principal of, premium, if any, and interest (including
Contingent Payments), in respect of the Securities in accordance with the
provisions (other than this Section 13.13) of this Article XIII.
ARTICLE XIV
SUBORDINATION OF GUARANTEE
SECTION 14.1 GUARANTEE SUBORDINATED TO GUARANTOR SENIOR DEBT.
Each Guarantor, for itself, its successors and assigns, covenants and
agrees, and each Holder of any Securities, by his or its acceptance thereof,
likewise covenants and agrees, that payments by such Guarantor in respect of the
Guaranty shall be subordinate and subject in right of payment, to the extent and
in the manner hereinafter set forth, to the prior payment in full, in cash or
Cash Equivalents, of all Obligations in respect of Guarantor Senior Debt, and
that each holder of Guarantor Senior Debt whether now outstanding or hereafter
created, incurred, assumed or guaranteed shall be deemed to have acquired
Guarantor Senior Debt in reliance upon the covenants and provisions contained in
this Indenture and the Securities. For purposes of this Article XIV, "payment
in respect of the Guaranty" means any payment made by or on behalf of a
Guarantor in respect of the
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Guaranty, including, but not limited to, any payment on account of the principal
of, premium, if any, or interest (including Contingent Payments) on the
Securities in cash or property or to acquire or repurchase any of the
Securities.
SECTION 14.2 GUARANTEE SUBORDINATED TO PRIOR PAYMENT OF ALL GUARANTOR
SENIOR DEBT ON DISSOLUTION, LIQUIDATION, REORGANIZATION, ETC. OF THE GUARANTOR.
Upon any payment or distribution of the assets of any Guarantor of any
kind or character, whether in cash, property or securities (including any
Collateral at any time securing the Securities) to creditors upon any
dissolution, or winding-up, or total or partial liquidation, or reorganization,
or recapitalization or readjustment of such Guarantor or its property or
securities (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation, or receivership proceedings, or upon an assignment
for the benefit of creditors, or any other marshalling of the assets and
liabilities of such Guarantor or otherwise), then in such event,
(i) the holders of all Guarantor Senior Debt shall first be
entitled to receive payment in full, in cash or Cash Equivalents, before
any payment of Obligations in respect of the Guaranty are made;
(ii) any payment or distribution of assets of any Guarantor of
any kind or character, whether in cash, property or securities (other than,
to the extent issued in exchange for the Securities, Qualified Capital
Stock of such Guarantor and debt securities that are subordinated to the
Guarantor Senior Debt (and any Securities issued in exchange for Guarantor
Senior Debt) to the same extent the Securities are subordinated to the
Guarantor Senior Debt (and any securities issued in exchange for Guarantor
Senior Debt)), to which the Holders, or the Trustee on behalf of the
Holders, would be entitled except for the provisions of this Article XIV,
shall be paid or delivered by any debtor or other person making such
payment or distribution, directly to the holders of the Guarantor Senior
Debt or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing
any of such Guarantor Senior Debt may have been issued, ratably according
to the aggregate amounts remaining unpaid on account of the Guarantor
Senior Debt held or represented by each, for application to payment of all
Obligations in respect of Guarantor Senior Debt remaining unpaid, to the
extent necessary to pay all Obligations in respect of Guarantor Senior Debt
in full, in cash or Cash Equivalents, after giving effect to any concurrent
payment or distribution to the holders of such Guarantor Senior Debt; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 14.2, any payment or distribution of assets of
any Guarantor of any kind or character, whether in cash, property or
securities (other than, to the extent issued in exchange for the
Securities, Qualified Capital Stock of such Guarantor and debt securities
that are subordinated to the Guarantor Senior Debt (and any Securities
issued in exchange for Guarantor Senior Debt) to the same extent the
Securities are subordinated to the Guarantor Senior Debt (and any
securities issued in exchange for
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Guarantor Senior Debt)), shall be received by the Trustee or the Holders
before all Obligations in respect of Guarantor Senior Debt are paid in
full, in cash or Cash Equivalents, such payment or distribution (subject to
the provisions of Sections 14.6 and 14.7) shall be held in trust for the
benefit of, and shall be immediately paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of Guarantor Senior Debt
remaining unpaid or unprovided for, or their representative or
representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing any of such Guarantor Senior Debt may
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Obligations in respect of Guarantor Senior Debt
held or represented by each, for application to the payment of all
Obligations in respect of Guarantor Senior Debt remaining unpaid, to the
extent necessary to pay all Obligations in respect of Guarantor Senior Debt
in full after giving effect to any concurrent payment or distribution to
the holders of such Guarantor Senior Debt.
Without limiting the foregoing, each Guarantor shall give prompt
notice to the Trustee and any Paying Agent of any dissolution, winding-up,
liquidation or reorganization of such Guarantor or any other facts known to it
which would cause a payment to violate this Article XIV.
Upon any payment or distribution of assets of any Guarantor referred
to in this Article XIV, the Trustee, subject to the provisions of Section 8.1
and Section 8.2, and the Holders shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceeding is pending, or a
certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or to the Holders, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Guarantor Senior Debt and other Debt of such Guarantor, the amount thereof
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XIV.
SECTION 14.3 HOLDERS OF SECURITIES TO BE SUBROGATED TO RIGHT OF
HOLDERS OF GUARANTOR SENIOR DEBT.
Subject to the payment in full of all Obligations in respect of
Guarantor Senior Debt in cash or Cash Equivalents, the Holders of the Securities
shall be subrogated (equally and ratably with the holders of all Debt of the
Guarantor that, by its terms, ranks PARI PASSU with the Guaranty) to the rights
of the holders of Guarantor Senior Debt to receive payments or distributions of
assets of each Guarantor applicable to the Guarantor Senior Debt until the
principal of, premium, if any, and interest (including Contingent Payments) on,
the Securities, including the Change of Control Offer Price, if any, shall be
paid in full, and for purposes of such subrogation, no payments or distributions
to the holders of Guarantor Senior Debt of assets, whether in cash, property or
securities, distributable to the holders of Guarantor Senior Debt under the
provisions hereof to which the Holders would be entitled except for the
provisions of this Article XIV, and no payment over pursuant to the provisions
of this Article XIV to the holders of Guarantor Senior Debt by the Holders
shall, as between such Guarantor, its creditors (other than the holders of
Guarantor Senior Debt) and the
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Holders, be deemed to be a payment by such Guarantor to or on account of
Guarantor Senior Debt, it being understood that the provisions of this Article
XIV are, and are intended, solely for the purpose of defining the relative
rights of the Holders, on the one hand, and the holders of Guarantor Senior
Debt, on the other hand.
SECTION 14.4 OBLIGATIONS OF THE GUARANTOR UNCONDITIONAL.
Nothing contained in this Article XIV or elsewhere in this Indenture
or in any Security (but subject to the provisions of Section 3.2) is intended to
or shall impair or affect, as between each Guarantor, its creditors (other than
the holders of Guarantor Senior Debt) and the Holders, the obligation of such
Guarantor under the Guaranty, or to affect the relative rights of the Holders
and creditors of such Guarantor, other than the holders of Guarantor Senior
Debt, nor shall anything herein or therein prevent or limit the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
the happening of an Event of Default hereunder, subject to the provisions of
Article VII hereof and to the rights, if any, under this Article XIV of the
holders of Guarantor Senior Debt in respect of assets, whether in cash, property
or securities, of the Guarantor, received upon the exercise of any such remedy.
Nothing contained in this Article XIV or elsewhere in this Indenture or in the
Securities, shall, except during the pendency of any dissolution, winding-up,
total or partial liquidation, reorganization, recapitalization or readjustment
of such Guarantor or its securities (whether voluntary or involuntary, or in
bankruptcy, insolvency, reorganization, liquidation or receivership proceedings,
or upon an assignment for the benefit of creditors, or any other marshalling of
assets and liabilities of the Guarantor or otherwise), affect the obligation of
such Guarantor to make, or prevent such Guarantor from making, at any time
(except under the circumstances described in Section 14.5 hereof), any payment
in respect of the Guaranty.
SECTION 14.5 GUARANTOR NOT TO MAKE PAYMENTS IN RESPECT OF THE
GUARANTY IN CERTAIN CIRCUMSTANCES.
(a) Upon the maturity of any Guarantor Senior Debt by lapse of time,
acceleration or otherwise, but subject to the provisions of Section 3.2, all
principal thereof and interest thereon and all other Obligations in respect
thereof shall first be paid in full in cash or Cash Equivalents, or such payment
duly provided for, and, in the case of Guarantor Senior Debt in respect of
letters of credit to the extent they have not been drawn upon, be fully secured
by cash collateral, before any payment on account of Obligations in respect of
the Guaranty are made.
(b) Upon the happening of a default or an event of default (as such
term is used in such instrument) in respect of the payment of any Guarantor
Senior Debt ("Payment Default"), but subject to the provisions of Section 3.2,
then, unless and until such default shall have been cured or waived by the
holders of such Guarantor Senior Debt or shall have ceased to exist, no payment
in respect of the Guaranty shall be made.
(c) No payment in respect of the Guaranty may be made during any
Payment Blockage period. Notwithstanding the foregoing, unless the Designated
Senior Debt
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or Guarantor Senior Debt in respect of which such default or event of default
exists has been declared due and payable in its entirety during the Payment
Blockage Period, and such declaration has not been rescinded, the Guarantors are
required (subject to the provisions of Section 14.2 and Sections 14.5(a) and
(b), to the extent then applicable) then to pay all sums not paid to the Holders
of the Securities during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Securities.
SECTION 14.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee, unless and until the Trustee shall have received written notice
thereof at its Corporate Trust Office from the Company or any Guarantor or from
one or more holders of Guarantor Senior Debt or from any representative thereof
or trustee therefor, and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Sections 8.1 and 8.2 hereof, shall be
entitled to assume conclusively that no such facts exist, and shall be fully
protected in making any such payment in any such event.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of
Guarantor Senior Debt (or a trustee on behalf of such holder) to establish that
such notice has been given by a holder of Guarantor Senior Debt or a trustee on
behalf of any such holder. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Guarantor Senior Debt to participate in any payment or
distribution pursuant to this Article XIV, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Guarantor Senior Debt held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article XIV, and, if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 14.7 APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
Any deposit of monies by any Guarantor with the Trustee or any Paying
Agent (whether or not in trust) for any payment in respect of the Guaranty shall
be subject to the provisions of Sections 14.1, 14.2, 14.3 and 14.5 hereof except
that, if prior to the opening of business on the second Business Day next prior
to the date on which, by the terms of this Indenture, any such monies may become
payable for any purpose (including, without limitation, the payment of principal
of, or premium (if any) or interest (including Contingent Payments) on, or the
Change of Control Offer Price in respect of, any Security) the Trustee shall not
have received with respect to such monies the notice provided for in Section
14.6, then the Trustee shall have the full power and authority to receive such
monies and to apply such monies to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such date; without, however,
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limiting any rights that holders of Guarantor Senior Debt may have to recover
any such payments from the Holders in accordance with the provisions of this
Article XIV.
SECTION 14.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF A GUARANTOR OR HOLDERS OF GUARANTOR SENIOR DEBT.
No right of any present or future holder of any Guarantor Senior Debt
to enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by such Guarantor with the terms, provisions and covenants of
this Indenture, the Securities, or any other agreement or instrument regardless
of any knowledge thereof any such holder may have or be otherwise charged with.
Each Holder of any Securities, by his acceptance thereof, undertakes
and agrees for the benefit of each holder of Guarantor Senior Debt to execute,
verify, deliver and file any proofs of claim, consents, assignments or other
instruments that any holder of Guarantor Senior Debt may at any time require in
order to prove and realize upon any rights or claims pertaining to the Guaranty
and to effectuate the full benefit of the subordination contained in this
Article XIV; and upon failure of any Holder of any Security so to do, any such
holder of Guarantor Senior Debt (or a trustee or representative on its behalf)
shall be deemed to be irrevocably appointed the agent and attorney-in-fact of
the Holder of such Security to execute, verify, deliver and file any such proofs
of claim, consents, assignments or other instrument.
Without limiting the effect of the first paragraph of this Section
14.8, any holder of Guarantor Senior Debt may at any time and from time to time
without the consent of or notice to any Holder, without impairing or releasing
any of the rights of any such holder of Guarantor Senior Debt hereunder, upon or
without any terms or conditions and in whole or in part:
(1) change the manner, place or terms of payment, or change or
extend the time of payment of or increase the amount of, renew or alter,
any Guarantor Senior Debt or any other liability of the Guarantors to such
holder, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the provisions hereof shall apply to the
Guarantor Senior Debt of such holder as so changed, extended, renewed or
altered;
(2) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or however securing,
any Guarantor Senior Debt or any other liability of the Guarantors to such
holder or any other liabilities incurred directly or indirectly in respect
thereof or hereof, or any offset against it;
(3) exercise or refrain from exercising any rights or remedies
against the Guarantors or others or otherwise act or refrain from acting or
for any
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reason fail to file, record or otherwise perfect any security interest in
or lien on any property of the Guarantors or any other Person;
(4) settle or compromise any Guarantor Senior Debt or any other
liability of the Company to such holder or any security therefor, or any
liability incurred directly or indirectly in respect thereof or hereof, and
may subordinate the payment of all or any part thereof to the payment of
any liability (whether due or not) of the Guarantors to creditors of the
Guarantors other than such holder; and
(5) apply any sums by whomsoever paid and however realized to
any liability or liabilities of the Guarantors to such holder (other than
in respect of the Guaranty or any liability or liabilities which rank PARI
PASSU or junior in right of payment to the Guaranty) regardless of what
liability or liabilities of the Guarantors to such holder remain unpaid.
SECTION 14.9 HOLDERS OF SECURITIES AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF GUARANTY.
Without purporting to limit the authority of the Trustee as may be
appropriate in other circumstances, each Holder by his or its acceptance thereof
irrevocably authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article XIV and appoints the Trustee his attorney-in-fact for
such purpose, including, in the event of any dissolution, winding-up or
liquidation or reorganization under Bankruptcy Law of any Guarantor (whether in
bankruptcy, insolvency or receivership proceedings or otherwise), the timely
filing of a claim for the unpaid balance of its or his Securities in the form
required in such proceedings and the causing of such claim to be approved. If
the Trustee does not file a claim or proof of debt substantially in the form
required in such proceeding at least one day before the expiration of the time
to file such claims or proofs, then any of the holders of Guarantor Senior Debt
have the right to file such proof of claim or debt on behalf of the Holders, and
to take any action with respect to such proof of claim or debt permitted to be
taken by the holders of Guarantor Senior Debt pursuant to this Indenture, the
Securities or by law; PROVIDED, HOWEVER, that no such action by holders of
Guarantor Senior Debt shall in any way limit or affect the rights of the Holders
or the Trustee hereunder or under the Guaranty or applicable law.
SECTION 14.10 RIGHT OF TRUSTEE TO HOLD GUARANTOR SENIOR DEBT;
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee, in its individual capacity, shall be entitled to all of
the rights set forth in this Article XIV in respect of any Guarantor Senior Debt
at any time held by it to the same extent as any other holder of Guarantor
Senior Debt, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder. Nothing in this Article XIV shall
apply to claims of, or payment to, the Trustee under or pursuant to Section 8.7.
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SECTION 14.11 ARTICLE XIV NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment in respect of the Guaranty, by reason by
any provision in this Article XIV shall not be construed as preventing the
occurrence of an Event of Default under Section 7.1 hereof.
SECTION 14.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF GUARANTOR SENIOR
DEBT.
The provisions of this Indenture are not intended to create, nor shall
they create, any trust or fiduciary relationship between the Trustee and the
holders of Guarantor Senior Debt, nor shall any implied covenants or obligations
with respect to holders of Guarantor Senior Debt (other than those expressly set
forth herein) be read into this Indenture against the Trustee. Accordingly,
notwithstanding any provision of this Article XIV to the contrary, the Trustee
shall not be liable to any such holders if it shall, in good faith,
inadvertently pay over or distribute to Holders or the Guarantor or any other
person monies or assets to which any holders of Guarantor Senior Debt shall be
entitled by virtue of this Article or otherwise.
SECTION 14.13 TRUST MONIES NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary and subject
to the prior satisfaction of all of the conditions set forth in Article IX,
payments from money held in trust under Article IX by the Trustee for any
payment in respect of the Guaranty shall not be subordinated to the prior
payment of any Guarantor Senior Debt or subject to the restrictions set forth in
this Article XIV and none of the Holders shall be obligated to pay over any such
amount to the Guarantors or any holder of Guarantor Senior Debt or any other
creditor of the Company, in each case so long as (and only so long as) at the
time the respective amounts were deposited pursuant to Article IX, such amounts
would have been permitted to be paid directly in respect of the Guaranty in
accordance with the provisions (other than this Section 14.13) of this Article
XIV.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
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SECTION 15.2 NOTICES.
Any notices or other communications to the Company, the Parent
Guarantor or the Trustee required or permitted hereunder shall be in writing,
and shall be sufficiently given if made by hand delivery, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company:
Jazz Casino Company, L.L.C.
512 South Peters
New Orleans, Louisiana 70130
Attention: Corporate Secretary
if to the Parent Guarantor:
[Insert JCC Holding's address]
if to the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center
6th and Marquette
Minneapolis, Minnesota 55479
The Company, JCC Holding or the Trustee by notice to each other party
may designate additional or different addresses as shall be furnished in writing
by such party. Any notice or communication to the Company, JCC Holding or the
Trustee shall be deemed to have been given or made as of the date so delivered,
if personally delivered; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and five Business Days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
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SECTION 15.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantors, the Trustee, the Registrar and any
other person shall have the protection of TIA Section 312(c).
SECTION 15.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 15.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with; PROVIDED,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
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SECTION 15.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 15.7 LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York are not required to be open. If a payment date is a Legal Holiday in New
York, New York, payment may be made at such place on the next succeeding day
that is not a Legal Holiday, and no interest (including Contingent Payments)
shall accrue for the intervening period.
SECTION 15.8 GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY SUBMIT TO
THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND THE GUARANTORS
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
SECTION 15.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, the Guarantors or any of their Subsidiaries. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
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SECTION 15.10 NO RECOURSE AGAINST OTHERS.
A direct or indirect stockholder, member, director, officer, partner,
employee, as such, of the Company or the Guarantors or any affiliate of either
(including, without limitation, Harrah's Investor, Harrah's Management Company,
HET and HOC, but excluding the Company and the Guarantors themselves) shall not
have any liability for any obligations of the Company or the Guarantors under
the Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations PROVIDED, HOWEVER, that nothing contained in this
Section 15.10 shall (i) impair the validity of the Indebtedness evidenced by
this Indenture or the Securities, (ii) prevent the taking of any action
permitted by law against the Company or the assets of the Company or the
proceeds of such assets, (iii) in any way affect or impair the right of the
Collateral Agent, the Trustee or any Holder to take any action permitted by law
to realize upon any of the Collateral or any other security which may secure the
Company's or the Guarantors' obligations, or (iv) be construed to limit in any
respect the validity and enforceability of (x) the Notes Completion Guarantee or
the obligations of HET or HOC thereunder or (y) the Subordination Agreement or
the obligations thereunder of the parties thereto. Notwithstanding the
foregoing, nothing in this Section 15.10 shall be deemed to release the Company
or any officer of the Company from liability under this Indenture, the Notes or
any of the Collateral Documents for its fraudulent actions, intentional material
misrepresentations, gross negligence or willful misconduct or for any of its
obligations or liabilities under any agreement, document, instrument or
certificate executed by such person in its individual capacity in connection
with the transactions contemplated by this Indenture, the Notes and the
Collateral Documents. Each Securityholder by accepting a Security waives and
releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 15.11 SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture and
the Securities shall bind their successors. All agreements of the Trustee in
this Indenture shall bind its successor.
SECTION 15.12 DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 15.13 SEVERABILITY.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
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SECTION 15.14 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 15.15 GAMING LAWS.
This Indenture, the Collateral Documents, the Securities and the
security interests thereunder are subject to the Louisiana Economic Development
and Gaming Corporation Act, La. R.S. 27:1 ET SEQ., La.R.S. 27:201 ET SEQ. and
the rules and regulations thereunder (the "Gaming Regulations") (and the Company
represents and warrants that all requisite approvals thereunder have been
obtained), and the exercise of remedies under the Collateral Documents with
respect to the Collateral will be subject to the Gaming Regulations.
SECTION 15.16 TAX TREATMENT.
The Company, each Guarantor, and each Holder of a Security by
acceptance of a Security, agree to (i) treat a Security as evidence of
indebtedness for federal, state and local income tax purposes; (ii) treat all
Contingent Payments with respect to the Security as "contingent" and not as
either "remote or incidental" for purposes of Treasury Regulation Sections
1.1275-4(a)(1) and (5); (iii) use a discount rate with respect to the
non-contingent component of a Security for purposes of Treasury Regulation
Section 1.1275-4(c) and 1.1274-2(c) & (g) such that the issue price of such
component will be equal to 100% of the original principal amount of such
component; and (iv) treat all Contingent Payments as consisting of principal
and interest such that each payment of principal is accompanied by a payment
of interest at 12% per annum (compounded semi-annually) such that the test
rate for the Securities for purposes of Treasury Regulation Section
1.1275-4(c)(4)(ii)(A) will be 12% per annum (compounded semi-annually).
SECTION 15.17 WAIVERS AND RELEASES.
(a) NO ASSURANCES
(i) As a condition to the effectiveness of the confirmation of
the Plan of Reorganization, HET and HOC (the "Initial Guarantors") have entered
into the HET/JCC Agreement in favor of the Regulating Authority. The HET/JCC
Agreement provides that the Initial Guarantors will provide the Minimum Payment
Guaranty required under the Casino Operating Contract for the Fiscal Years (as
defined in the Casino Operating Contract) ending March 31, 1999 and
March 31, 2000, renewable for the four Fiscal Years thereafter through March 31,
2004, subject to termination or non-renewal in accordance with the terms of the
HET/JCC Agreement. As a prerequisite to maintaining the effectiveness of the
Casino Operating Contract, the Casino Operating Contract requires that the
Company annually provide the Minimum Payment Guaranty to the Regulating
Authority. In entering
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into the HET/JCC Agreement, the Initial Guarantors have no obligation to provide
a Minimum Payment Guaranty for the entire term of the Casino Operating Contract,
but rather have agreed only to provide a Minimum Payment Guaranty for the period
and on terms and conditions specified therein. The Initial Guarantors have
expressly informed the Trustee on behalf of the Holders that the Initial
Guarantors have not agreed to renew the HET/JCC Agreement beyond March 31, 2004,
or in any prior year where the Initial Guarantors' obligation to furnish a
Minimum Payment Guaranty does not renew by the express terms of Section 1(b) of
the HET/JCC Agreement. The Initial Guarantors have informed the Trustee on
behalf of the Holders that any decision the Initial Guarantors make concerning
whether to renew any Minimum Payment Guaranty or the HET/JCC Agreement will be
made in the Initial Guarantors' sole discretion, acting only in their best
interests. The Trustee on behalf of the Holders hereby acknowledges that (A)
the Initial Guarantors are not obligated to, and have not given any assurances
to the Trustee that the Initial Holders will, renew the HET/JCC Agreement beyond
March 31, 2004, or renew any Minimum Payment Guaranty for any earlier Fiscal
Year in which the Initial Guarantors' obligation to furnish a Minimum Payment
Guaranty does not renew under the express terms of Section 1(b) thereof, (B) the
Initial Guarantors have the right to make any such renewal decision by
considering only their best interests, and (C) the Initial Guarantors need not
consider the interests of any other parties in making any such renewal decision,
notwithstanding that the Initial Guarantors are involved in a number of
capacities in respect of the Company.
(ii) The Trustee and the Holders hereby agree that the Initial
Guarantors, by entering into the HET/JCC Agreement or providing a Minimum
Payment Guaranty or otherwise, are not now, and in the past have not, made any
assurances or guarantees concerning the financial results of the Casino, nor are
or have the Initial Guarantors made any assurances or guarantees that the Casino
will be financially successful or will perform as projected in the projections
and/or feasibility studies included in the Disclosure Statement distributed in
connection with the Plan of Reorganization confirmation process.
(iii) The Trustee and the Holders hereby agree and acknowledge
that any future representation, warranty, assurance or other guaranty by the
Initial Guarantors or any of their subsidiaries or other affiliates to the
Trustee or the Holders concerning the renewal of any Minimum Payment Guaranty
or the HET/JCC Agreement, the operation of the Casino, the financial results
of the Casino, or any other matter concerning the Casino or the Plan of
Reorganization shall only be effective if set forth in writing and properly
executed by the party to be charged.
(b) RELEASES
(i) The Trustee and the Holders hereby release and waive and
agree not to bring any Claims against the Initial Guarantors, whether a known
Claim or an Unknown Claim, that may arise in any way, in whole or in part, out
of (A) the Initial Guarantors' decision either to renew or not renew any Minimum
Payment Guaranty or the HET/JCC Agreement, (B) the Initial Guarantors acting in
their own best interests in connection with the execution, renewal or failure to
renew any Minimum Payment Guaranty
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or the HET/JCC Agreement, and/or (C) any alleged assurance or guarantee by the
Initial Guarantors concerning the operation of the Casino, the financial results
of the Casino or any other matter concerning the Casino or the Plan of
Reorganization, unless such Claim is based on a writing (but in any event cannot
be based on the HET/JCC Agreement or any Minimum Payment Guaranty) properly
executed by the party against whom such a claim is being made.
(ii) The Trustee and the Holders also hereby specifically waive
any rights each might have under Louisiana Civil Code Article 3083 and all other
applicable or similar laws to this same or similar effect as the matters
described in Section 15.17(b)(i) hereof, including but not limited to, any
purported right to challenge the validity or seek rescission of, or to vitiate,
the releases set forth above in Section 15.17(b)(i) hereof on the ground that
any information was kept concealed from it and agrees that no remedy shall be
available for any such alleged non-disclosure, and that the right to rescind the
above release on any such ground is hereby expressly waived.
(c) DEFINITIONS. For the purposes of Sections 15.17(b)(i) and (ii)
hereof:
(i) "Claim" or "Claims" shall mean any action or actions, cause
or causes of action, in law or equity, suits, debts, liens, liabilities, claims,
demands, damages, punitive damages, losses, costs or expenses, and/or reasonable
attorneys' fees of any nature whatsoever.
(ii) "Initial Guarantors" shall include HET, HOC, Harrah's New
Orleans Investment Company, Harrah's Crescent City Investment Company, Harrah's
New Orleans Management Company, their successors and assigns, and all direct or
indirect subsidiaries, and each of their parents, subsidiaries, officers,
directors, corporate representatives, employees, agents, lawyers and accountants
and all persons acting or claiming through, under or in concert with any of
them.
(iii) "Unknown Claim" or "Unknown Claims" means any and all
Claims, including without limitation, any Claim which any of the parties
hereto does not know or even suspect to exist in his, her, or its favor at
the time of the giving of the releases and waivers set forth in Section 15.17
hereof which, if known by him, her or it might have affected his, her or its
decision regarding the releases and waivers. Each of the parties
acknowledges that he, she or it might hereafter discover facts in addition to
or different from those which he, she, or its now knows or believes to be
true with respect to the matters herein released and waived, but each shall
be deemed to have fully, finally and forever released any and all Claims.
(d) NO THIRD PARTY BENEFICIARIES. The Trustee and the Holders hereby
acknowledge that each Minimum Payment Guaranty and the HET/JCC Agreement provide
that there shall be no third party beneficiaries thereof. The Trustee and the
Holders also hereby agree that each shall not claim or assert it is a third
party beneficiary or possesses any derivative claims under any Minimum Payment
Guaranty or the HET/JCC Agreement.
118
<PAGE>
(e) DISCLOSURE. The Trustee on behalf of the Holders hereby
acknowledges that the Initial Guarantors have informed it (i) not to infer or
assume that the Initial Guarantors will renew any Minimum Payment Guaranty or
the HET/JCC Agreement; (ii) that the Initial Guarantors will consider only their
own best interests in determining whether to renew any Minimum Payment Guaranty
or the HET/JCC Agreement; (iii) that the Initial Guarantors are involved in a
number of different capacities in connection with the reorganization of Harrah's
Jazz Company, the governance of the Company and JCC Holding, and the operation
of the Casino; and (iv) that there can be no assurance that the Casino will
perform as set forth in the projections and/or feasibility study set forth in
the Disclosure Statement circulated in connection with the Plan of
Reorganization.
(f) AMENDMENT OF OBLIGATIONS. Each Minimum Payment Guaranty provided
under the HET/JCC Agreement is provided on the express condition that the
Company shall not amend or modify the Casino Operating Contract in any way to
increase the obligations under any Minimum Payment Guaranty or adversely affect
the Initial Guarantors without the prior written agreement of the Initial
Guarantors, and any such amendment or modification shall have no force or effect
in respect of the Initial Guarantors or any Minimum Payment Guaranty provided
thereby.
119
<PAGE>
SIGNATURE
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
JAZZ CASINO COMPANY, L.L.C.
a Louisiana limited liability company
By:
--------------------------------
Name:
Title:
JCC HOLDING COMPANY,
a Delaware corporation
By:
--------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:
--------------------------------
Name:
Title:
120
<PAGE>
Exhibit A
[FORM OF NOTE]
JAZZ CASINO COMPANY, L.L.C.
SENIOR SUBORDINATED NOTES
DUE 2009
No. $
Jazz Casino Company, L.L.C., a Louisiana limited liability company
(hereinafter called the "Company," which term includes any successor entity
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to ____________________________, or registered assigns, the
principal sum of $____________________ Dollars, on _________, 2009.
Interest Payment Dates: _________ and _________. The first Interest
Payment Date is _________, 1998.
Record Dates: _________ and _________. The first Record Date is
_________, 1998.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
A-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed.
Dated:
JAZZ CASINO COMPANY, L.L.C.
By:
--------------------------------
Name:
Title:
A-2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
-----------------------------------
Norwest Bank Minnesota,
National Association
By:
--------------------------------
Authorized Signatory
Dated:
A-3
<PAGE>
JAZZ CASINO COMPANY, L.L.C.
SENIOR SUBORDINATED NOTES
DUE 2009 WITH CONTINGENT PAYMENTS
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THE INTERCREDITOR
AGREEMENT (AS DEFINED IN THE INDENTURE), WHICH INTERCREDITOR AGREEMENT, AMONG
OTHER THINGS, ESTABLISHES CERTAIN RIGHTS WITH RESPECT TO THE SECURITY FOR THIS
NOTE AND THE SHARING OF PROCEEDS THEREOF WITH CERTAIN OTHER SECURED CREDITORS.
COPIES OF SUCH INTERCREDITOR AGREEMENT WILL BE FURNISHED TO ANY HOLDER OF THIS
NOTE UPON REQUEST TO THE COMPANY.
1. INTEREST.
Jazz Casino Company, L.L.C., a Louisiana limited liability company
(the "Company"), promises to pay Fixed Interest on the principal amount of this
Security, plus the Contingent Payments described below, from February 28, 1998
or from the most recent Interest Payment Date to which interest has been paid or
provided for. "Fixed Interest" means interest, payable semi-annually on the
Interest Payment Dates in accordance with this Indenture, at a rate per annum
of, for the indicated periods:
_________, 1998 through _________, 1998. . . . . . . . . . 5.867%
_________, 1998 through _________, 1999. . . . . . . . . . 5.927%
_________, 1999 through _________, 1999. . . . . . . . . . 5.987%
_________, 1999 through _________, 2000. . . . . . . . . . 6.046%
_________, 2000 through _________, 2000. . . . . . . . . . 6.103%
_________, 2000 through _________, 2001. . . . . . . . . . 6.159%
_________, 2001 through _________, 2003. . . . . . . . . . 6.214%
_________, 2003 through _________, 2009. . . . . . . . . . 8.000%
The Company may, on any of the First Interest Payment Date, the Second Interest
Payment Date, the Third Interest Payment Date, the Fourth Interest Payment Date,
the Fifth Interest Payment Date and the Sixth Interest Payment Date, at its
option and in its sole discretion, pay Fixed Interest in additional Securities
("Secondary Securities") in lieu of the payment in whole or in part of Fixed
Interest in cash on the Securities; provided, however, that if any Indebtedness
is outstanding under the Tranche A-1 Term Loan or the Tranche A-2 Term Loan on
any of the First Interest Payment Date, the Second Interest Payment Date, the
Third Interest Payment Date or the Fourth Interest Payment Date, the Company
shall pay the Fixed Interest due and payable on such Interest Payment Date in
Secondary Securities in lieu of the payment of such Fixed Interest in cash. In
addition, if the Company's Consolidated EBITDA is
A-4
<PAGE>
less than $28,500,000 for any twelve-month period ending one month prior to
an Interest Payment Date occurring after the Sixth Interest Payment Date, the
Company shall pay the Fixed Interest due and payable on such Interest Payment
Date in Secondary Securities in lieu of the payment of such Fixed Interest in
cash. If, pursuant to this paragraph, the Company issues Secondary Securities
in lieu of cash payment, in whole or in part, of Fixed Interest, it shall
give notice to the Trustee not less than 5 Business Days prior to the
relevant Interest Payment Date, and shall instruct the Trustee (upon written
order of the Company signed by an Officer of the Company given not less than
5 nor more than 45 days prior to such Interest Payment Date) to authenticate
a Secondary Security, dated such Interest Payment Date, in a principal amount
equal to the amount of Fixed Interest not paid in cash in respect of this
Security on such Interest Payment Date. Each issuance of Secondary
Securities in lieu of cash payments of Fixed Interest on the Securities shall
be made PRO RATA with respect to the outstanding Securities. Any such
Secondary Securities shall be governed by the Indenture and shall be subject
to the same terms (including the maturity date and the rate of interest from
time to time payable thereon) as this Security (except, as the case may be,
with respect to the title, issuance date and aggregate principal amount).
The term Securities shall include the Secondary Securities that may be issued
under the Indenture.
Interest on this Security will be payable semiannually on _________
and _________, commencing _________, 1998, to the person in whose name this
Security is registered at the close of business on _________ or _________,
preceding such Interest Payment Date (each, a "Record Date"). Interest on this
Security will be computed on the basis of a 360-day year, consisting of twelve
30-day months.
In addition to regular semiannual payments of Fixed Interest, the
Company will pay on each Interest Payment Date to the Holder of this Security at
the close of business on the immediately preceding Record Date such Holder's PRO
RATA amount of Contingent Payments.
Any reference in this Security to "accrued interest" includes the
amount of unpaid Contingent Payments due and payable. For purposes of
determining accrued Contingent Payments due and payable per $1,000 principal
amount of Notes with respect to a First Semiannual Period or a Second Semiannual
Period prior to the completion of such period, such Contingent Payments due and
payable per $1,000 principal amount of Notes shall be equal to the Partial
Period Contingent Payments. To the extent it is lawful, the Company promises to
pay interest on any interest payment due but unpaid on such principal amount at
a rate of 8% per annum compounded semi-annually.
2. METHOD OF PAYMENT.
The Company shall pay interest (including Contingent Payments) on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. Except as provided below, the Company shall pay
principal and interest in such coin or currency of the United States of America
as at the time of payment shall be legal tender for payment of
A-5
<PAGE>
public and private debts ("U.S. Legal Tender") (or, pursuant to Paragraph 1
hereof, in Secondary Securities). However, the Company may pay principal and
interest by wire transfer of Federal funds, or interest by its check payable in
such U.S. Legal Tender (or, pursuant to Paragraph 1 hereof, in Secondary
Securities). The Company may deliver any such interest payment to the Paying
Agent or the Company may mail any such interest payment to a Holder at the
Holder's registered address. Notwithstanding the preceding two sentences, in
the case of Securities of which The Depository Trust Company or its nominee is
the Holder, such payments must be made by wire transfer of Federal funds (or,
pursuant to Paragraph 1 hereof, in Secondary Securities).
3. PAYING AGENT AND REGISTRAR.
Initially, Norwest Bank Minnesota, National Association (the
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or Co-registrar without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Paying Agent, Registrar or Co-registrar.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of
________, 1998 (the "Indenture"), between the Company, the JCC Holding and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are secured
obligations of the Company limited in aggregate principal amount to
$187,500,000, except for Secondary Securities and except as otherwise provided
in the Indenture.
5. REDEMPTION.
The Securities may not be redeemed, except that the Securities may be
redeemed at any time pursuant to, and in accordance with, any order of any
Governmental Authority with appropriate jurisdiction and authority relating to a
Gaming License held by the Company or an Affiliate or wholly owned Subsidiary of
the Company, or to the extent necessary in the reasonable, good faith judgment
of the Board of Directors of Harrah's Entertainment, Inc. ("HET"), in the case
of HET or one of its affiliates, or the Board of Directors of the Company, to
prevent the loss, failure to obtain or material impairment or to secure the
reinstatement of, any such Gaming License, where such redemption or acquisition
is required because the Holder or beneficial owner of such Security is required
to be found suitable or to otherwise qualify under any gaming laws and is not
found suitable or so qualified within a reasonable period of time. In such
event, the Redemption Price shall be the principal amount thereof, plus accrued
and unpaid interest to the date of redemption (or such lesser amount as may be
required by applicable law or by order of any Gaming Authority).
A-6
<PAGE>
Any redemption of the Notes shall comply with Article III of the
Indenture.
6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the Redemption Date (unless a shorter
notice period shall be required by applicable laws or by order of any Gaming
Authority) to each Holder of Securities to be redeemed at his registered
address. Securities in denominations larger than $1,000 may be redeemed in
part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent (other than the Company or an
Affiliate thereof) on such Redemption Date, the Securities called for redemption
will cease to bear interest (including Contingent Payments) and the only right
of the Holders of such Securities will be to receive payment of the Redemption
Price, including any accrued and unpaid interest to the Redemption Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000 (other than Secondary
Securities which may be issued in denominations other than $1,000 or an integral
multiple thereof). A Holder may register the transfer of, or exchange
Securities in accordance with, the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal or interest (including
Contingent Payments) remains unclaimed for two years, the Trustee and the Paying
Agent(s) will pay the money back to the Company at its written request. After
that, all liability of the Trustee and such Paying Agent(s) with respect to such
money shall cease.
10. LEGAL DEFEASANCE OR COVENANT DEFEASANCE PRIOR TO REDEMPTION OR MATURITY.
If the Company at any time deposits with the Trustee, in trust, for
the benefit of the Holders, U.S. Legal Tender, U.S. Government Obligations or a
combination thereof in such amounts as will be sufficient in the opinion of a
nationally recognized firm of independent public accountants selected by the
Trustee, to pay and discharge the principal of
A-7
<PAGE>
and interest (including Maximum Contingent Payments) on the Securities to
redemption or maturity and comply with the other provisions of the Indenture
relating thereto, the Company may elect to have the obligations of the Company
and the Guarantors discharged (in which case the Indenture would cease to be of
further effect, except as to certain limited obligations and to the rights of
Holders to receive payments when due) or to be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding the obligation to pay the principal of and interest
(including Contingent Payments) on the Securities).
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding, and any existing
Default or Event of Default or compliance with any provision may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
Securities then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture, the Collateral Documents
or the Securities to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Securities in addition to or in place
of certificated Securities, or make any other change that does not adversely
affect the rights of any Holder of a Security.
12. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to, among other things, incur additional
Indebtedness and Disqualified Capital Stock, make payments in respect of its
Capital Stock, enter into transactions with Affiliates, incur Liens, sell
assets, merge or consolidate with any other person and sell, lease, transfer or
otherwise dispose of substantially all of its properties or assets. The
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
13. CHANGE OF CONTROL.
In the event there shall occur any Change of Control, each Holder of
Securities shall have the right, at such Holder's option but subject to the
limitations and conditions set forth in the Indenture, to require the Company to
purchase on the Change of Control Payment Date in the manner specified in the
Indenture, all or any part (in integral multiples of $1,000) of such Holder's
Securities at a Change of Control Offer Price equal to 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the Change
of Control Payment Date.
14. SECURITY.
In order to secure the obligations under the Indenture, the Company,
the Parent Guarantor and the Trustee or the Collateral Agent have entered into a
security
A-8
<PAGE>
agreement in order to create security interests in certain assets and properties
of the Company. As more fully set forth in the security agreement and Section
4.6 of the Indenture, the rights of the Holders (and the Trustee on their
behalf) to receive proceeds from the disposition such assets and properties are
subordinated to security interests in such assets and properties in favor of
other secured creditors, and rank pari passu with security interests in such
assets and properties in favor of other secured creditors.
15. SALE OF ASSETS.
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to sell assets. In the event the proceeds from a
permitted Asset Sale exceed certain amounts, as specified in the Indenture, the
Company will be required either to reinvest the proceeds of such Asset Sale in
its business or to repay certain senior indebtedness and, to the extent that no
amounts of such senior indebtedness are outstanding, and no amounts of such
indebtedness are available, to repay certain other indebtedness and to make an
offer to purchase each Holder's Securities at 100% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the purchase
date.
16. GAMING LAWS.
The rights of the Holder of this Security and any owner of any
beneficial interest in this Security are subject to the gaming laws, regulations
and the jurisdiction and requirements of the Gaming Authorities and the further
limitations and requirements set forth in the Indenture.
17. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
18. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the Securities then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of any continuing Default
or Event of Default (except a Default in payment of principal or interest
(including Contingent Payments)), if it determines that withholding notice is in
their interest.
A-9
<PAGE>
19. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of any of the Securities, make loans
to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company, the Guarantors or their
respective Affiliates with the same rights it would have if it were not the
Trustee.
20. NO RECOURSE AGAINST OTHERS.
An incorporator, director, officer, employee, stockholder or member,
as such, of the Company or any Guarantor or any affiliate thereof (including,
without limitation, Harrah's Investor, Harrah's Management Company, HET and HOC,
but excluding the Company and Guarantors themselves) shall not have any
liability for any obligation of the Company or the Guarantors under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations, subject to certain exceptions set forth in the
Indenture. Each Holder of a Security by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
21. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
22. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
23. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
24. TAX TREATMENT
The Company, each Guarantor, and each Holder of a Security by
acceptance of a Security, agree to (i) treat a Security as evidence of
indebtedness for federal, state and local income tax purposes; (ii) treat all
Contingent Payments with respect to the Security as "contingent" and not as
either "remote or incidental" for purposes of Treasury Regulation
A-10
<PAGE>
Sections 1.1275-4(a)(1) and (5); (iii) use a discount rate with respect to
the non-contingent component of a Security for purposes of Treasury
Regulation Section 1.1275-4(c) and 1.1274-2(c) & (g) such that the issue
price of such component will be equal to 100% of the original principal
amount of such component; and (iv) treat all Contingent Payments as
consisting of principal and interest such that each payment of principal is
accompanied by a payment of interest at 12% per annum (compounded
semi-annually) such that the test rate for the Securities for purposes of
Treasury Regulation Section 1.1275-4(c)(4)(ii)(A) will be 12% per annum
(compounded semi-annually).
A-11
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_______________________________ and irrevocably appoint ______________________
_____________________________________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Dated: Signed:
---------------------------- ----------------------------
(Sign exactly as your name appears on the other side of this Security)
- -----------------------------------------------------
Signature guarantee should be made by a guarantor institution participating in
the Securities Transfer Agents Medallion Program or in such other guarantee
program acceptable to the Trustee.
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to any of the following provisions of the Indenture, check the
appropriate box:
[ ] Section 5.14; [ ] Article XI.
If you want to elect to have only part of this Security purchased by the Company
pursuant to the Indenture, state the principal amount you want to be purchased:
$________________________
Date: Signature:
------------------------------ -------------------------
(Sign exactly as your name appears on the other side of this Security)
A-13
<PAGE>
Exhibit B
FORM OF GUARANTY
For value received, JCC Holding Company, a Delaware corporation,
hereby unconditionally guarantees (on a subordinated basis as provided in
Article XIV of the Indenture) to the Holder of the Security upon which this
Guaranty is endorsed the due and punctual payment, as set forth in the Indenture
pursuant to which such Security and this Guaranty were issued, of the principal
of, premium (if any) and interest (including Contingent Payments) on such
Security when and as the same shall become due and payable for any reason
according to the terms of such Security and Article XII of the Indenture. The
Guaranty of the Security upon which this Guaranty is endorsed will not become
effective until the Trustee signs the certificate of authentication on such
Security.
JCC HOLDING COMPANY
By:
-------------------------------------
Attest:
---------------------------------
B-1
<PAGE>
March 3, 1997
TO ALL CREDITORS OF HARRAH'S JAZZ COMPANY, HARRAH'S JAZZ FINANCE CORP. AND
HARRAH'S NEW ORLEANS INVESTMENT COMPANY:
The undersigned act as counsel to Harrah's Jazz Company, Harrah's Jazz
Finance Corp. and Harrah's New Orleans Investment Company (the "Debtors").
Together with Harrah's Entertainment, Inc., the Debtors have filed a plan of
reorganization, a copy of which is enclosed.
In the FRONT POCKET of the envelope containing these materials you will find
a ballot for use in voting on the Debtors' plan of reorganization. In
addition, you also should find enclosed:
A. Notice;
B. The Debtors' Third Amended Joint Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code dated February 26, 1997;
C. The Debtors' Third Amended Joint Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code dated February 26, 1997;
D. Order approving Disclosure Statement, Fixing Time for Filing Acceptances or
Rejections of Plan, Setting Bar Date for Filing Certain Bondholder Claims,
Setting Time and Date for Confirmation Hearing, Limiting Notice of
Confirmation Hearing, and Approving Notice Thereof;
E. Voting Procedures; and
F. A pre-addressed envelope for returning your executed ballot to the
balloting agent.
If you have not received all of these enclosures or require a replacement or
different ballot, please contact the balloting agent IN WRITING at the
following address: Mr. James Woodring, Price Waterhouse LLP, P.O. Box 81109,
Chicago, IL 60681. Please do NOT contact him with any questions about the
plan or disclosure statement, as the balloting agent is prohibited from
discussing the contents of the plan or disclosure statement with creditors.
Sincerely,
/s/ Daniel R. Murray /s/ Edward M. Heller
- ---------------------------- ---------------------------
Daniel R. Murray, Esq. Edward M. Heller, Esq.
Jenner & Block Bronfin & Heller
One IBM Plaza 650 Poydras St., Suite 2500
Chicago, IL 60611 New Orleans, LA 70130
Counsel for Harrah's New
/s/ William H. Patrick Orleans Investment Company
- ----------------------------
William H. Patrick, III
William H. Patrick, III, A
Professional Law Corporation
10636 Linkwood Drive
Baton Rouge, LA 70810
Counsel for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
<PAGE>
The Official Committee of Bondholders
of Harrah's Jazz Company
To the Holders of 14 1/4% First Mortgage Notes
due 2001 of Harrah's Jazz Company and
Harrah's Jazz Finance Corporation:
February 28, 1997
The official committee (the "Bondholders Committee") appointed in the
chapter 11 cases of Harrah's Jazz Company and Harrah's Jazz Finance Corporation
(the "Debtors") to represent the holders of the Debtors' 14 1/4% First Mortgage
Notes due 2001 (the "Bondholders") strongly urges all Bondholders to carefully
review the enclosed Third Amended Disclosure Statement (the "Disclosure
Statement") submitted by the Debtors, Harrah's New Orleans Investment Company,
and Harrah's Entertainment, Inc. (the "Proponents"). This Disclosure Statement
includes and describes the Proponents' Third Amended Plan (the "Plan") filed on
February 28, 1997 with the Bankruptcy Court in New Orleans, Louisiana in the
Debtors' chapter 11 cases.
The Bondholders Committee supports the Plan and believes that
acceptance of the Plan is in the best interests of the Bondholders.
Accordingly, each member of the Bondholders Committee intends to vote in favor
of the Plan and urges all Bondholders to vote in favor of the Plan on the
enclosed ballot in accordance with the instructions contained on the ballot.
In addition, the Plan offers all Bondholders the opportunity to elect
to release certain claims against certain entities and individuals and assign
certain claims to Jazz Casino Corporation ("JCC"), Harrah's Jazz Company's
successor under the Plan, in exchange for receiving additional consideration as
more fully described in the Plan and Disclosure Statement. Included with the
enclosed ballot are instructions concerning election of such releases and
assignment of claims to JCC. The Bondholders Committee supports the releases
and assignment of claims proposed by the Plan and each member of the Bondholders
Committee intends to elect such releases and assignment of claims.
THE OFFICIAL COMMITTEE OF BONDHOLDERS
OF HARRAH'S JAZZ COMPANY
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- -----------------------------------:
:
In the Matter of: : No. 95-14544
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
- -----------------------------------:
:
In the Matter of : : No. 95-14871
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, : Chapter 11
: Reorganization
Debtor. :
- -----------------------------------:
NOTICE
The United States Bankruptcy Court for the Eastern District of Louisiana
("Court") has entered an Order approving the adequacy of the Debtors' Third
Amended Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code
dated as of February 26, 1997 (as amended, the "Disclosure Statement"),
referring to the Third Amended Joint Plan Of Reorganization Under Chapter 11 Of
the Bankruptcy Code dated as of February 26, 1997 (as amended, the "Plan"),
proposed by the above-captioned debtors (the "Debtors") and Harrah's
Entertainment, Inc.
NOTICE IS HEREBY GIVEN THAT:
A. APRIL 1, 1997 is fixed as the last date for owners of 14 1/4% First
Mortgage Notes due 2001 issued by Harrah's Jazz Company and Harrah's Jazz
Finance Corp. (the "Notes") to file proofs of claim BASED UPON ANY CLAIMS OTHER
THAN CLAIMS FOR PRINCIPAL AND INTEREST DUE UNDER THE NOTES. Any such proofs of
claims must be filed with the Clerk of the Court, Room 601, Hale Boggs Federal
Building, 501 Magazine Street, New Orleans, Louisiana 70130, and served on
Jenner & Block at the address below, by this date. Owners of Notes should NOT
file proofs of claim for principal and interest due under the Notes; proofs of
claim for principal and interest due under the Notes already have been filed by
the indenture trustee for the Notes.
B. APRIL 7, 1997 is fixed as the last date for filing written acceptances
or rejections of the Plan.
C. The hearing on confirmation of the Plan ("Confirmation Hearing") shall
commence on APRIL 14, 1997 at 10:00 a.m. before the Hon. Thomas M. Brahney, III,
7th Floor, Hale Boggs Federal Building, 501 Magazine Street, New Orleans,
Louisiana, and may be continued from time to time and day to day by oral
announcement in open court without further written notice. At the Confirmation
Hearing, the Debtors will request that the Court approve the Plan and consider
all matters pertinent to confirmation of the Plan, including (but not limited
to):
1. A finding that the Plan complies with the applicable provisions of the
Bankruptcy Code, has been proposed in good faith and not by any means
forbidden by law, and satisfies all of the requirements of Section 1129 of
the Bankruptcy Code;
2. The approval of the transfer of all of the Debtors' interests in
property to Jazz Casino Corporation ("JCC"), a new entity formed in
accordance with the Plan, free and clear of all liens, encumbrances and
other interests to the extent provided for in the Plan;
3. The approval of financing for the Debtors' plan of reorganization,
including a determination that all secured borrowings are authorized under
the Plan and that all entities receiving liens and encumbrances on the
property transferred by the Debtors to JCC under the Plan acted in good
faith and are entitled to the protections afforded by Section 364(e) of the
Bankruptcy Code;
<PAGE>
4. A determination that all compromises provided for in the Plan are
fair, reasonable and in the best interests of the Debtors and their
respective bankruptcy estates; and
5. A determination that the Plan is feasible in all respects, including
but not limited to findings that all leases, contracts, zoning ordinances,
variances and other agreements, licenses, rights and privileges involving
the Debtors or JCC and the City of New Orleans, the State of Louisiana, and
all other governmental agencies, subdivisions and authorities are
constitutional, valid and binding obligations, in full force and effect and
legally enforceable as of the effective date of the Plan, to the extent
that such obligations are necessary and integral to transactions and
undertakings contemplated under the Plan.
D. APRIL 2, 1997 is fixed as the last date for filing and serving
pursuant to Fed. R. Bankr. P. 3020(b)(1) written objections to confirmation of
the Plan. All objections to confirmation shall be served upon the following
parties so as to be received by 5:00 p.m. C.S.T. on such date:
<TABLE>
<CAPTION>
<S> <C> <C>
Daniel R. Murray William H. Patrick, III Edward M. Heller, Esq.
Jenner & Block A Professional Corporation Bronfin & Heller
One IBM Plaza 10636 Linkwood Court 650 Poydras Street, Suite 2500
Chicago, IL 60611 Baton Rouge, LA 70810 New Orleans, LA 70130
Fax: (312) 527-0484 Fax: (504) 769-0010 Fax: (504) 522-0949
Robert J. Rosenberg, Esq. Joseph E. Friend, Esq. Rudy J. Cerone, Esq.
Latham & Watkins Breazeale, Sachse & Wilson, L.L.P. McGlinchey Stafford Lang
885 Third Avenue LL & E Tower, Suite 2400 643 Magazine Street
New York, NY 10022 909 Poydras St. New Orleans, LA 70130
Fax: (212) 751-4864 New Orleans, LA 70112-0500 Fax: (504) 596-2847
Fax: (504) 582-1164
Bruce R. Zirinsky, Esq. William Steffes, Esq. Diana Rachel, Esq.
Weil Gotshal & Manges Steffes & Macmurdo, LLP Office of the United States Trustee
767 Fifth Avenue 2237 Acadian Highway 400 Poydras Street
New York, NY 10153-0001 Suite 600 Suite 2110
Fax: (213) 310-8007 Baton Rouge, LA 70808 New Orleans, LA 70130
Fax: (504) 927-2189 Fax: (504) 589-4096
</TABLE>
E. Notwithstanding paragraph B above, the ballots of bondholders electing
to release and assign claims as provided for in the Plan may continue to be
accepted by the balloting agent beyond April 7, 1997 and tabulated solely for
purposes of effectuating such releases and assignments of claims (but not for
purposes of voting on the Plan), through the conclusion of the Confirmation
Hearing.
F. In accordance with Section 1127 of the Bankruptcy Code the Plan may be
modified at or prior to the Confirmation Hearing to accommodate objections
thereto. At the Confirmation Hearing, the Court may enter such orders as it
deems appropriate under applicable law and as required under the circumstances
of the Debtors' Chapter 11 cases.
Dated: February 28, 1997
Daniel R. Murray William H. Patrick, III
JENNER & BLOCK WILLIAM H. PATRICK III, a
One IBM Plaza Professional Law Corporation
Chicago, IL 60611 10636 Linkwood Drive
Baton Rouge, LA 70810
Counsel for Harrah's Jazz Company and Harrah's Jazz Finance Corp.
Edward M. Heller, Esq. Robert J. Rosenberg, Esq.
BRONFIN & HELLER LATHAM & WATKINS
650 Poydras St., Suite 2500 885 Third Avenue
New Orleans, LA 70130 New York, NY 10022
Counsel for Harrah's New Counsel for Harrah's
Orleans Investment Company Entertainment, Inc.
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- -----------------------------------:
:
In the Matter of: : No. 95-14544
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
- -----------------------------------:
:
In the Matter of: : No. 95-14871
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, : Chapter 11
: Reorganization
Debtor. :
- -----------------------------------:
NOTICE
The United States Bankruptcy Court for the Eastern District of Louisiana
("Court") has entered an Order approving the adequacy of the Debtors' Third
Amended Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code
dated as February 26, 1997 (as amended, the "Disclosure Statement"), referring
to the Third Amended Joint Plan Of Reorganization Under Chapter 11 Of the
Bankruptcy Code dated as of February 26, 1997 (as amended, the "Plan"), proposed
by the above-captioned debtors (the "Debtors") and Harrah's Entertainment, Inc.
NOTICE IS HEREBY GIVEN THAT:
A. APRIL 7, 1997 is fixed as the last date for filing written acceptances
or rejections of the Plan.
B. The hearing on confirmation of the Plan ("Confirmation Hearing") shall
commence on APRIL 14, 1997 at 10:00 a.m. before the Hon. Thomas M. Brahney, III,
7th Floor, Hale Boggs Federal Building, 501 Magazine Street, New Orleans,
Louisiana, and may be continued from time to time and day to day by oral
announcement in open court without further written notice. At the Confirmation
Hearing, the Debtors will request that the Court approve the Plan and consider
all matters pertinent to confirmation and consummation of the Plan, including
(but not limited to):
1. A finding that the Plan complies with the applicable provisions of the
Bankruptcy Code, has been proposed in good faith and not by any means
forbidden by law, and satisfies all of the requirements of Section 1129 of
the Bankruptcy Code;
2. The approval of the transfer of all of the Debtors' interests in
property to Jazz Casino Corporation ("JCC"), a new entity formed in
accordance with the Plan, free and clear of all liens, encumbrances and
other interests to the extent provided for in the Plan;
3. The approval of financing for the Debtors' plan of reorganization,
including a determination that all secured borrowings are authorized under
the Plan and that all entities receiving liens and encumbrances on the
property transferred by the Debtors to JCC under the Plan acted in good
faith and are entitled to the protections afforded by Section 364(e) of the
Bankruptcy Code;
4. A determination that all compromises provided for in the Plan are
fair, reasonable and in the best interests of the Debtors and their
respective bankruptcy estates; and
<PAGE>
5. A determination that the Plan is feasible in all respects, including
but not limited to findings that all leases, contracts, zoning ordinances,
variances and other agreements, licenses, rights and privileges involving
the Debtors or JCC and the City of New Orleans, the State of Louisiana, and
all other governmental agencies, subdivisions and authorities are
constitutional, valid and binding obligations, in full force and effect and
legally enforceable as of the effective date of the Plan, to the extent
that such obligations are necessary and integral to transactions and
undertakings contemplated under the Plan.
C. APRIL 2, 1997 is fixed as the last date for filing and serving
pursuant to Fed. R. Bankr. P. 3020(b)(1) written objections to confirmation of
the Plan. All objections to confirmation shall be served upon the following
parties so as to be received by 5:00 p.m. C.S.T. on such date:
<TABLE>
<CAPTION>
<S> <C> <C>
Daniel R. Murray William H. Patrick, III Edward M. Heller, Esq.
Jenner & Block A Professional Corporation Bronfin & Heller
One IBM Plaza 10636 Linkwood Court 650 Poydras Street, Suite 2500
Chicago, IL 60611 Baton Rouge, LA 70810 New Orleans, LA 70130
Fax: (312)527-0484 Fax: (504)769-0010 Fax: (504)522-0949
Robert J. Rosenberg, Esq. Joseph E. Friend, Esq. Rudy J. Cerone, Esq.
Latham & Watkins Breazcale, Sachse & Wilson, L.L.P. McGlinchey Stafford Lang
885 Third Avenue LL & E Tower, Suite 2400 643 Magazine Street
New York, NY 10022 909 Poydras St. New Orleans, LA 70130
Fax: (212)751-4864 New Orleans, LA 70112-0500 Fax: (504)596-2847
Fax: (504)582-1164
Bruce R. Zirinsky, Esq. William Steffes, Esq. Diana Rachel, Esq.
Weil Gotshal & Manges Steffes & Macmurdo, LLP Office of the United States Trustee
767 Fifth Avenue 2237 Acadian Highway 400 Poydras Street
New York, NY 10153-0001 Suite 600 Suite 2110
Fax: (213)310-8007 Baton Rouge, LA 70808 New Orleans, LA 70130
Fax: (504)927-2189 Fax: (504)589-4096
</TABLE>
D. In accordance with Section 1127 of the Bankruptcy Code, the Plan may
be modified at or prior to the Confirmation Hearing to accommodate objections
thereto. At the Confirmation Hearing, the Court may enter such orders as it
deems appropriate under applicable law and as required under the circumstances
of the Debtors' Chapter 11 cases.
Dated: February 28, 1997
Daniel R. Murray William H. Patrick, III
JENNER & BLOCK WILLIAM H. PATRICK III, a
One IBM Plaza Professional Law Corporation
Chicago, IL 60611 10636 Linkwood Drive
Baton Rouge, LA 70810
Counsel for Harrah's Jazz Company and Harrah's Jazz Finance Corp.
Edward M. Heller, Esq. Robert J. Rosenberg, Esq.
BRONFIN & HELLER LATHAM & WATKINS
650 Poydras St., Suite 2500 885 Third Avenue
New Orleans, LA 70130 New York, NY 10022
Counsel for Harrah's New Counsel for Harrah's
Orleans Investment Company Entertainment, Inc.
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
:
- ------------------------------
:
In the Matter of: : No. 95-14544
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
- ------------------------------
:
In the Matter of : No. 95-14871
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
VOTING PROCEDURES
A. RULES AND STANDARDS. The following rules and standards shall apply to all
ballots cast for or against the Debtors' Third Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, dated February 26,
1997 (as it may be amended, modified, or supplemented, the "PLAN"):
1. GENERALLY. To be counted, ballots must be: (a) received by the
Balloting Agent before 11:00 p.m. C.D.T. on April 7, 1997 (the "VOTING
DEADLINE"); and (b) properly signed by the creditor or authorized
agent.
2. AMBIGUOUS BALLOTS. Signed ballots marked in any class as both
accepting and rejecting the Plan shall be counted as voting for the
Plan in that class. Unsigned and/or unmarked ballots shall not be
counted as voting for the Plan, with the exception of signed
Bondholder Ballots marked as executing the release and assignment set
forth therein, but not marked as accepting or rejecting the Plan,
which shall be counted as accepting the Plan.
3. MULTIPLE BALLOTS. The Balloting Agent shall make a notation on each
ballot indicating the date on which the ballot is received. Unless
otherwise directed by the Court, whenever a creditor submits more than
one ballot voting the same claim
<PAGE>
before the Voting Deadline, the Balloting Agent shall deem as
reflecting the voter's intent, and shall only count, the last such
ballot received by the Balloting Agent prior to the Voting Deadline.
There shall be a rebuttable presumption that any creditor submitting
such superseding ballot has sufficient cause to do so within the
meaning of Rule 3018(a) of the Federal Rules of Bankruptcy Procedure
(the "BANKRUPTCY RULES").
4. DELIVERY OF BALLOTS TO BALLOTING AGENT. For voting purposes: (a) the
Balloting Agent shall be deemed in constructive receipt of any ballot
delivered prior to the Voting Deadline to any post office box (or
equivalent) the Balloting Agent establishes to receive ballots cast
for or against the Plan; (b) any ballots received by the Balloting
Agent by mail, facsimile or hand delivery prior to the Voting Deadline
shall be deemed timely; and (c) any ballot postmarked before but
received after the Voting Deadline shall be deemed late and shall not
be counted.
5. SIGNATURE. The signature of the person executing each ballot shall be
presumed genuine and duly authorized.
6. DELIVERY OF BALLOTS BY FACSIMILE. Any creditor who casts a ballot by
facsimile must deliver the original ballot to the Balloting Agent
within 5 days thereafter. If the Balloting Agent does not receive the
original ballot within 5 days, the Debtors or any other party in
interest may move to have such ballots disallowed for voting purposes.
B. CLASSIFICATION AND ALLOWANCE FOR VOTING PURPOSES.
1. CLASSIFICATION. Unless otherwise ordered by the Court, each Claim*
shall be counted by the Balloting Agent in a class or classes in
accordance with the designation contained in the Ballot timely
received by the Balloting Agent.
2. AMOUNT. Subject to all subsections in this section B, and unless
otherwise ordered by the Court, the amount of each Claim for voting
purposes shall be equal to:
(a) For all non-Bondholder claims:
i. when no proof of claim has been timely filed, the amount
listed for such Claim in the Debtors' Schedules of Assets
and Liabilities, as amended, but only if such Claim is not
listed as contingent, unliquidated, or disputed;
- --------------------
* Each capitalized term used but not otherwise defined herein shall have the
meaning ascribed to such term in the Plan.
2
<PAGE>
ii. when a proof of claim has been timely filed and no objection
thereto has been filed, the amount asserted in the
underlying proof of claim; and
(b) For Bondholder claims, the amounts set forth in the List and
Beneficial Information (as those terms are defined in the
Debtors' Motion to Appoint Balloting Agent, to Set Record Date
for Bondholders, and to Establish Procedures for Dissemination of
Disclosure Materials) or, if such information is not available,
the amount specified in the Bondholder Ballot.
Notwithstanding the foregoing, when a Court order has fixed the amount
of a Claim, the Court order shall control the amount of the Claim for
voting purposes.
3. MULTIPLE CLAIMS. Any Person who is or may be holding more than one
Claim against the Debtors should receive a ballot or ballots
permitting such Person to vote in each class in which such Person is
or may be entitled to vote. Any Person holding more than one Claim
against the Debtors, within one class under the Plan, will receive
only one ballot permitting such Person to vote in such class, but the
ballot will be counted for the aggregate dollar amount of all Claims
of such Person in such class. Thus, all Claims held by the same
Person or affiliate thereof in one class will be aggregated and
treated as one Claim in such class.
4. DISPUTED CLAIMS. A Claim that is the subject of an objection of any
of the Debtors filed and served at least ten days before the Voting
Deadline, shall be disallowed for voting purposes, except to the
extent and in the manner the Debtors state the Claim should be allowed
in such objection or as otherwise ordered by the Bankruptcy Court
after notice and hearing pursuant to Bankruptcy Rule 3018(a).
5. UNLIQUIDATED AND/OR CONTINGENT CLAIMS. Subject to Sections B.2 and
B.4 above, to the extent a proof of claim has been filed asserting a
wholly unliquidated, contingent and/or undetermined Claim, the holder
of such Claim shall be entitled to one vote valued at $1.00 in the
appropriate class, unless ordered otherwise by the Bankruptcy Court.
Any Claim asserted as partially unliquidated, contingent and/or
undetermined shall be treated as a Claim for only the liquidated,
non-contingent amount asserted. Solely for purposes of voting on the
Plan, all WARN Act Claims shall be deemed to be wholly unliquidated,
contingent and/or undetermined, and shall be valued at $1.00 each.
6. DUPLICATE AND AMENDED CLAIMS. Creditors shall not be entitled to vote
Claims to the extent such Claims duplicate or have been superseded by
other Claims of such creditors.
3
<PAGE>
7. LATE-FILED CLAIMS. A Claim that was untimely (I.E., filed after May
15, 1996 or such other date as may have been set by the Bankruptcy
Court with respect to any particular Claim) according to the records
of the Clerk of the Bankruptcy Court shall be disallowed for voting
purposes unless such Claim has been deemed timely filed by an order of
the Bankruptcy Court; provided, however, that any untimely-filed claim
which purports to amend a timely-filed claim shall be deemed, solely
for purposes of voting on the Plan, to be a permissible and proper
amendment of such timely-filed claim.
8. ESTIMATED CLAIMS. The amount and classification of a Claim estimated
or otherwise allowed for voting purposes by order of the Bankruptcy
Court shall be as set by the Bankruptcy Court.
9. GENERAL. Nothing herein shall affect the rights of any party under
the Bankruptcy Code or Bankruptcy Rules to raise or defend against
objections to the validity of any vote cast in connection with the
Plan.
4
<PAGE>
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE MATERIALS ACCOMPANYING
AND CONTAINED WITHIN THIS BALLOT BEFORE COMPLETING
EACH SECTION AND MARKING YOUR CHOICES CLEARLY.
- --------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
In re: ) No. 95-14545
) Section A
HARRAH'S JAZZ COMPANY, )
) Chapter 11
Debtor. ) Reorganization
)
- ------------------------------
)
In re: ) No. 95-14544
) Section A
HARRAH'S JAZZ FINANCE CORP., )
) Chapter 11
Debtor. ) Reorganization
)
- ------------------------------
)
In re: )
) No. 95-14871
HARRAH'S NEW ORLEANS ) Section A
INVESTMENT COMPANY, )
) Chapter 11
Debtor. ) Reorganization
)
- ------------------------------
GENERAL BALLOT FOR ACCEPTING OR REJECTING DEBTORS' PLAN (CLASS A3),
AND FOR MAKING PARTICIPATING BANK OR FNBC SETTLEMENT ELECTION
Only creditors holding Bank Claims and Old Bank Collateral Agent
Claims against Harrah's Jazz Company (as defined in the Third Amended
Joint Plan of Reorganization) should use this ballot. If you are not
such a creditor, please contact Mr. James Woodring, Price Waterhouse
LLP, P.O. Box 81109, Chicago, IL 60681, (312) 540-2597, and request
the appropriate ballot for your class of claim.
THE PLAN REFERRED TO IN THIS BALLOT CAN BE CONFIRMED BY THE COURT AND THEREBY
MADE BINDING ON YOU IF IT IS ACCEPTED BY THE HOLDERS OF TWO-THIRDS IN AMOUNT AND
MORE THAN ONE-HALF IN NUMBER OF CLAIMS IN EACH CLASS AND THE HOLDERS OF TWO-
THIRDS IN AMOUNT OF EQUITY SECURITY INTERESTS IN EACH CLASS VOTING ON THE PLAN.
IN THE EVENT THE REQUISITE ACCEPTANCES ARE NOT OBTAINED, THE COURT NEVERTHELESS
MAY CONFIRM THE PLAN IF THE COURT FINDS THAT THE PLAN ACCORDS FAIR AND EQUITABLE
TREATMENT TO THE CLASS OR CLASSES REJECTING IT AND OTHERWISE SATISFIES THE
REQUIREMENTS OF SECTION 1129(b) OF THE BANKRUPTCY CODE.
To have your vote count, you must fully and accurately complete this ballot
and return it to the following address so as to be received no later than 11:00
p.m., Central Daylight Savings Time, on April 7, 1997:
<PAGE>
(for regular mail) Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
c/o Price Waterhouse LLP
P.O. Box 81109
Chicago, Illinois 60681
(for overnight or Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
other courier c/o Price Waterhouse LLP
delivery) Attn: Mr. James Woodring
200 E. Randolph Drive
Chicago, Illinois 60601
The above-captioned debtors (the "Debtors"), together with Harrah's
Entertainment, Inc., have proposed the Third Amended Joint Plan of
Reorganization, dated February 26, 1997 (the "Plan"). (Capitalized terms not
otherwise defined in this Ballot have the meaning assigned to them by the Plan.)
There are 25 classes of claims and interests under the Plan. Classes of claims
against the Debtors' estates designated by the Plan as classes A1, A2, A3(a),
A3(b), A4, A5, A6, A7, B1, B2, B3, B4, B5, C1, C2, C3, C4, C5 and C6 are
entitled to vote on the Plan. You are receiving this ballot because you have
been scheduled as a creditor of the Debtors or because you have filed a proof of
claim against the Debtors. Under the Plan, your claim against the estates has
been placed in class A3. Provided that your claim against the Debtors' estates
is not unliquidated, disputed, or contingent or is not subject to an objection
filed with the Bankruptcy Court, you are entitled to vote on the Plan as a
member of class A3. In addition, provided that such claims are not
unliquidated, disputed, or contingent or are not subject to an objection filed
with the Bankruptcy Court, you also may be entitled to vote on the Plan as a
member of Class B2 and/or C4.
Below you will be asked to make two decisions. FIRST, you must decide whether
you accept or reject the Plan. To accept or reject the Plan, please mark the
appropriate boxes in Part I below. SECOND, you must decide: (i) if you are a
Bank other than FNBC, whether you elect to be a Participating Bank; or (ii) if
you are FNBC, whether you elect to make the FNBC Settlement Election. To make a
Participating Bank election or the FNBC Settlement Election, please mark the
appropriate box in Part II below.
I. VOTE TO ACCEPT OR REJECT PLAN
SECURED CLAIMS OF BANKS AND OLD BANK COLLATERAL AGENT
AGAINST HARRAH'S JAZZ COMPANY-- CLASS A3
/ / ACCEPT / / REJECT
SECURED BANK CLAIMS -- CLASS B2 (HARRAH'S JAZZ FINANCE CORP.)
/ / ACCEPT / / REJECT
GENERAL UNSECURED CREDITORS -- CLASS C4 (CLAIMS AGAINST HARRAH'S NEW
ORLEANS INVESTMENT COMPANY FOR WHICH HARRAH'S JAZZ COMPANY ALSO IS LIABLE)
/ / ACCEPT / / REJECT
2
<PAGE>
II. PARTICIPATING BANK AND FNBC SETTLEMENT ELECTION
Under the Plan, the claim of a Bank other than FNBC electing to be treated as a
Participating Bank, and FNBC if its makes the FNBC Settlement Election, is
classified as a Class A3(a) claim; such Banks shall be allowed a claim in the
amount set forth in Section 4.3(a)(ii) of the Plan, and shall receive all of the
releases and waivers set forth in Sections 5.2, 5.5, 5.6 and 5.8 of the Plan.
The claim of any Non-Participating Banks and FNBC if does not makes the FNBC
Settlement Election is classified as a Class A3(b) claim; such Banks shall be
allowed a claim in the amount set forth in Section 4.3(b)(ii) of the Plan, and
shall not receive any of the releases and waivers set forth in Sections 5.2,
5.5, 5.6 and 5.8 of the Plan.
THE FOREGOING DESCRIPTION DOES NOT PURPORT TO, NOR SHOULD IT BE DEEMED TO, AMEND
THE PROVISIONS OF THE PLAN. FOR A COMPLETE EXPLANATION OF THE PARTICIPATING
BANK ELECTION AND THE FNBC SETTLEMENT ELECTION, YOU SHOULD REFER TO THE PLAN.
YOU SHOULD CAREFULLY CONSIDER WHETHER TO EXECUTE THE FOLLOWING ELECTION, AS THIS
ELECTION WILL BE BINDING UPON YOU.
PARTICIPATING BANK ELECTION
/ / I am a Bank other than FNBC, elect to be a Participating Bank, and
agree to be bound by all of the terms, conditions and obligations in
the Plan pertaining to Participating Banks, including but not limited
to any terms, conditions and obligations contained in any exhibits to
the Plan.
FNBC SETTLEMENT ELECTION
/ / I am FNBC, elect to make the FNBC Settlement Election, and agree to be
bound by all of the terms, conditions and obligations in the Plan
pertaining to the FNBC Settlement Election, including but not limited
to any terms, conditions and obligations contained in any exhibits to
the Plan.
III. CERTIFICATIONS
By returning this Ballot, the undersigned creditor certifies that:
a. It has not submitted any other General Ballot For Accepting Or
Rejecting Debtors' Plan (Class A3) And For Making Participating Bank Or FNBC
Settlement Election (a "General Ballot"), or if it has submitted other General
Ballots such earlier General Ballots are hereby revoked;
b. It has been provided with a copy of the Debtors' Third Amended Joint
Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code, dated
February 26, 1997 (the "Disclosure Statement"), and the Plan;
c. It has the full power and authority to vote to accept or reject the
Plan; and
d. It acknowledges that this solicitation is subject to all the terms and
conditions set forth in the Disclosure Statement.
3
<PAGE>
[PRE-PRINTED LABEL CONTAINING
CREDITOR IDENTITY, ADDRESS
AND CLAIM AMOUNT]
Dated: , 1997 Signature:
---------- ---------------------------------
By (if applicable):
------------------------------------
(print or type)
Title (if applicable):
---------------------------------
(print or type)
IF ANY OF THE INFORMATION CONTAINED ON THE ABOVE
PRE-PRINTED LABEL IS INCORRECT, PLEASE MAKE THE
APPROPRIATE CORRECTIONS BELOW.
NAME:
----------------------------------------
ADDRESS:
----------------------------------------
----------------------------------------
----------------------------------------
CLAIM
AMOUNT:
----------------------------------------
YOUR BALLOT WILL NOT BE COUNTED UNLESS RECEIVED BY PRICE WATERHOUSE LLP
AT THE ADDRESS LISTED ABOVE BY 11:00 P.M. (CDT) ON APRIL 7, 1997.
THIS BALLOT DOES NOT CONSTITUTE AND SHALL NOT BE DEEMED A PROOF OF CLAIM
OR AN ASSERTION OF A CLAIM AGAINST THE DEBTORS.
4
<PAGE>
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE MATERIALS ACCOMPANYING
AND CONTAINED WITHIN THIS BALLOT BEFORE COMPLETING
EACH SECTION AND MARKING YOUR CHOICES CLEARLY.
- --------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
In re: ) No. 95-14545
) Section A
HARRAH'S JAZZ COMPANY, )
) Chapter 11
Debtor. ) Reorganization
)
- ------------------------------
)
In re: ) No. 95-14544
) Section A
HARRAH'S JAZZ FINANCE CORP., )
) Chapter 11
Debtor. ) Reorganization
)
- ------------------------------
)
In re: )
) No. 95-14871
HARRAH'S NEW ORLEANS ) Section A
INVESTMENT COMPANY, )
) Chapter 11
Debtor. ) Reorganization
)
- ------------------------------
GENERAL BALLOT FOR ACCEPTING OR
REJECTING DEBTORS' PLAN (CLASS A8)
Only creditors with Penalty Claims against Harrah's Jazz Company (as
defined in the Third Amended Joint Plan of Reorganization) should use
this ballot. If you are not such a creditor, please contact Mr. James
Woodring, Price Waterhouse LLP, P.O. Box 81109, Chicago, IL 60681,
(312) 540-2597, and request the appropriate ballot for your class of
claim.
THE PLAN REFERRED TO IN THIS BALLOT CAN BE CONFIRMED BY THE COURT AND THEREBY
MADE BINDING ON YOU IF IT IS ACCEPTED BY THE HOLDERS OF TWO-THIRDS IN AMOUNT AND
MORE THAN ONE-HALF IN NUMBER OF CLAIMS IN EACH CLASS AND THE HOLDERS OF
TWO-THIRDS IN AMOUNT OF EQUITY SECURITY INTERESTS IN EACH CLASS VOTING ON THE
PLAN. IN THE EVENT THE REQUISITE ACCEPTANCES ARE NOT OBTAINED, THE COURT
NEVERTHELESS MAY CONFIRM THE PLAN IF THE COURT FINDS THAT THE PLAN ACCORDS FAIR
AND EQUITABLE TREATMENT TO THE CLASS OR CLASSES REJECTING IT AND OTHERWISE
SATISFIES THE REQUIREMENTS OF SECTION 1129(b) OF THE BANKRUPTCY CODE.
<PAGE>
To have your vote count, you must fully and accurately complete this ballot
and return it to the following address so as to be received no later than 11:00
p.m., Central Standard Time, on April __, 1997:
(for regular mail) Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
c/o Price Waterhouse LLP
P.O. Box 81109
Chicago, Illinois 60681
(for overnight or Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
other courier c/o Price Waterhouse LLP
deliveries) Attn: Mr. James Woodring
200 E. Randolph Drive
Chicago, Illinois 60601
The above-captioned debtors (the "Debtors"), together with Harrah's
Entertainment, Inc., have proposed the Third Amended Joint Plan of
Reorganization, dated February __, 1997 (the "Plan"). (Capitalized terms not
otherwise defined in this Ballot have the meaning assigned to them by the Plan.)
There are 25 classes of claims and interests under the Plan. Classes of claims
against the Debtors' estates designated by the Plan as classes A1, A2, A3(a),
A3(b), A4, A5, A6, A7, A8, B1, B2, B3, B4, B5, C1, C2, C3, C4, C5 and C6 are
entitled to vote on the Plan. You are receiving this ballot because you have
been scheduled as a creditor of the Debtors or because you have filed a proof of
claim against the Debtors. Under the Plan, your claim against the estates has
been placed in class A8. Provided that your claim against the Debtors' estates
is not unliquidated, disputed, or contingent or is not subject to an objection
filed with the Bankruptcy Court, you are entitled to vote on the Plan as a
member of class A8.
Below you will be asked to make a decision -- whether, as a creditor, you accept
or reject the Plan. To accept or reject the Plan, please mark the appropriate
box(es) below.
2
<PAGE>
I. VOTE TO ACCEPT OR REJECT PLAN
PENALTY CLAIMS -- CLASS A8 (HARRAH'S JAZZ COMPANY)
/ / ACCEPT / / REJECT
II. CERTIFICATIONS
By returning this Ballot, the undersigned creditor certifies that:
a. It has not submitted any other General Ballot For Accepting Or
Rejecting Debtors' Plan (Class A8) (a "General Ballot"), or if it has submitted
other General Ballots such earlier General Ballots are hereby revoked;
b. It has been provided with a copy of the Debtors' Third Amended Joint
Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code, dated
February __, 1997 (the "Disclosure Statement"), and the Plan;
c. It has the full power and authority to vote to accept or reject the
Plan; and
d. It acknowledges that this solicitation is subject to all the terms and
conditions set forth in the Disclosure Statement.
YOUR BALLOT WILL NOT BE COUNTED UNLESS RECEIVED BY PRICE WATERHOUSE
LLP AT THE ADDRESS LISTED ABOVE BY 11:00 P.M. (CST) ON APRIL ___, 1997.
THIS BALLOT DOES NOT CONSTITUTE AND SHALL NOT BE DEEMED A PROOF OF
CLAIM OR AN ASSERTION OF A CLAIM AGAINST THE DEBTORS
3
<PAGE>
[PRE-PRINTED LABEL CONTAINING
CREDITOR IDENTITY AND ADDRESS]
Dated: , 1997 Signature:
---------- ---------------------------------
By (if applicable):
------------------------------------
(print or type)
Title (if applicable):
---------------------------------
(print or type)
Claim Amount:------------------------------------------
IF ANY OF THE INFORMATION CONTAINED ON THE ABOVE
PRE-PRINTED LABEL IS INCORRECT, PLEASE MAKE THE
APPROPRIATE CORRECTIONS BELOW.
NAME:
----------------------------------------
ADDRESS:
----------------------------------------
----------------------------------------
----------------------------------------
CLAIM
AMOUNT:
----------------------------------------
4
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
:
- ---------------------------------------:
:
In the Matter of: : No. 95-14544
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
- ---------------------------------------:
:
In the Matter of: : No. 95-14871
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, : Chapter 11
: Reorganization
Debtor. :
:
- ---------------------------------------:
NOTICE
The United States Bankruptcy Court for the Eastern District of Louisiana
("Court") has entered an Order approving the adequacy of the Debtors' Fourth
Amended Summary Joint Disclosure Statement Pursuant to Sections 1125 and 1127 of
the Bankruptcy Code dated as of July 24, 1997 (the "Summary Disclosure
Statement"), referring to the Third Amended Joint Plan Of Reorganization Under
Chapter 11 of the Bankruptcy Code, as Modified Pre- and Post-Petition (the
"Modified Plan").
NOTICE IS HEREBY GIVEN THAT:
A. SEPTEMBER 8, 1997 is fixed as the last date for returning ballots
changing votes on the plan of reorganization previously confirmed by the Court
on April 28, 1997 ("Confirmed Plan").
B. The hearing on confirmation of the Modified Plan ("Confirmation
Hearing") shall commence on SEPTEMBER 24, 1997 at 10:00 a.m. before the Hon.
Thomas M. Brahney, III, 7th Floor, Hale Boggs Federal Building, 501 Magazine
Street, New Orleans, Louisiana, and may be continued from time to time and day
to day by oral announcement in open court without further notice.
C. SEPTEMBER 8, 1997 is fixed as the last date for filing and serving
pursuant to Fed. R. Bankr. P. 3020(b)(1) written objections to confirmation of
the Modified Plan. All objections to confirmation shall be served upon the
following parties so as to be received by 5:00 p.m. C.D.T. on such date:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Daniel R. Murray, Esq. William H. Patrick, III, Esq. Edward M. Heller, Esq.
Jenner & Block A Professional Corporation Bronfin & Heller
One IBM Plaza 10636 Linkwood Court 650 Poydras Street, Suite 2500
Chicago, IL 60611 Baton Rouge, LA 70810 New Orleans, LA 70130
Fax: (312) 527-0484 Fax: (504) 769-0010 Fax: (504) 522-0949
Robert J. Rosenberg, Esq. Joseph E. Friend, Esq. Rudy J. Cerone, Esq.
Latham & Watkins Breazeale, Sachse & Wilson, L.L.P. McGlinchey Stafford
885 Third Avenue LL & E Tower, Suite 2400 643 Magazine Street
New York, NY 10022 909 Poydras St. New Orleans, LA 70130
Fax: (212) 751-4864 New Orleans, LA 70112-0500 Fax: (504) 596-2847
Fax: (504)584-5452
Bruce R. Zirinsky, Esq. Diana Rachal, Esq.
Weil Gotshal & Manges Office of the United States Trustee
767 Fifth Avenue 400 Poydras Street, Suite 2110
New York, NY 10153-0001 New Orleans, LA 70130
Fax: (213) 310-8007 Fax: (504) 589-4096
</TABLE>
D. Any Bondholder seeking to revoke a Release previously given in
accordance with Section 5.2 of the Confirmed Plan and who has the right to do
so must file a motion with the Court seeking entry of an order granting it
authority to revoke its Release, and give notice of its motion to the persons
identified in paragraph C above, on or before SEPTEMBER 8, 1997. If no party in
interest objects to the relief sought by such Bondholder within 10 days of
notice of its request, the Court may enter an order giving effect to such
revocation of Release without further notice or a hearing.
E. In accordance with Section 1127 of the Bankruptcy Code, the Modified
Plan may be further modified at or prior to the Confirmation Hearing to
accommodate objections thereto. At the Confirmation Hearing, the Court may
enter such orders as it deems appropriate under applicable law and as required
under the circumstances of the Debtors' Chapter 11 cases.
Dated: August 5, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Daniel R. Murray, Esq. Edward M. Heller, Esq. Robert J. Rosenberg, Esq.
Jenner & Block Bronfin & Heller Latham & Watkins
One IBM Plaza 650 Poydras St., Suite 2500 885 Third Avenue
Chicago, IL 60611 New Orleans, LA 70130 New York, NY 10022
Counsel for Harrah's Jazz Co. Counsel for Harrah's New Counsel for Harrah's
and Harrah's Jazz Finance Corp. Orleans Investment Company Entertainment, Inc.
</TABLE>
-2-
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE MATERIALS ACCOMPANYING
AND CONTAINED WITHIN THIS BALLOT BEFORE COMPLETING
EACH SECTION AND MARKING YOUR CHOICES CLEARLY.
YOU SHOULD NOT RETURN THIS BALLOT IF YOU DO NOT WISH
TO CHANGE THE VOTE THAT YOU PREVIOUSLY CAST IN THESE CASES.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
In re: ) No. 95-14545
) Section A
HARRAH'S JAZZ COMPANY, )
) Chapter 11
Debtor. ) Reorganization
- ----------------------------------------)
)
In re: ) No. 95-14544
) Section A
HARRAH'S JAZZ FINANCE CORP., )
) Chapter 11
Debtor. ) Reorganization
- ----------------------------------------)
)
In re: )
) No. 95-14871
HARRAH'S NEW ORLEANS ) Section A
INVESTMENT COMPANY, )
) Chapter 11
Debtor. ) Reorganization
- ----------------------------------------)
BALLOT FOR CHANGING VOTE ON DEBTORS' ORIGINAL PLAN
Holders of claims against the above-captioned debtors should use this
ballot only if they wish to change the votes that they previously cast
in these cases. If you do not wish to change your previous vote(s),
please do not return this ballot.
A PLAN OF REORGANIZATION CAN BE CONFIRMED BY THE COURT AND THEREBY MADE BINDING
ON YOU IF IT IS ACCEPTED BY THE HOLDERS OF AT LEAST TWO-THIRDS IN AMOUNT AND
MORE THAN ONE-HALF IN NUMBER OF CLAIMS IN EACH CLASS AND THE HOLDERS OF AT LEAST
TWO-THIRDS IN AMOUNT OF EQUITY SECURITY INTERESTS IN EACH CLASS VOTING ON THE
PLAN. THE "ORIGINAL PLAN" REFERRED TO IN THIS BALLOT RECEIVED THE REQUISITE
VOTES FOR CONFIRMATION BY THE COURT. VOTES CAST ON THE ORIGINAL PLAN WILL BE
DEEMED TO HAVE BEEN VOTED WITH RESPECT TO THE "MODIFIED PLAN" REFERRED TO IN
THIS BALLOT IN THE SAME MANNER IN WHICH THEY WERE CAST ON THE ORIGINAL PLAN,
UNLESS CREDITORS ELECT TO CHANGE THEIR VOTES.
<PAGE>
ACCORDINGLY, UNLESS A SUFFICIENT AMOUNT AND NUMBER OF CREDITORS CHANGE THEIR
VOTES WITH RESPECT TO THE MODIFIED PLAN SUCH THAT ANY CLASS HAS NOT ACCEPTED THE
MODIFIED PLAN BY THE REQUISITE MAJORITIES (AS SET FORTH ABOVE), THE MODIFIED
PLAN CAN BE CONFIRMED BY THE COURT AND THEREBY MADE BINDING ON YOU. IN THE
EVENT THAT SUFFICIENT VOTES ARE CHANGED AND THUS THE REQUISITE ACCEPTANCES ARE
NOT OBTAINED, THE COURT NEVERTHELESS MAY CONFIRM THE MODIFIED PLAN IF THE COURT
FINDS THAT THE MODIFIED PLAN ACCORDS FAIR AND EQUITABLE TREATMENT TO THE CLASS
OR CLASSES REJECTING IT AND OTHERWISE SATISFIES THE REQUIREMENTS OF
SECTION 1129(B) OF THE BANKRUPTCY CODE.
The above-captioned debtors (the "Debtors"), together with Harrah's
Entertainment, Inc., proposed the Third Amended Joint Plan of Reorganization,
dated February 26, 1997 (the "Original Plan"). The Debtors distributed to
creditors the Debtors' Third Amended Joint Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code, dated February 26, 1997, along with copies
of the Original Plan, voting instructions and ballots. After a vote by the
Debtors' creditors and a hearing on confirmation of the Original Plan, the
United States Bankruptcy Court for the Eastern District of Louisiana confirmed
the Debtors' Original Plan on April 28, 1997. The Effective Date of the
Original Plan was conditioned upon, among other things, the execution and
delivery of an Amended Casino Operating Contract and all necessary approvals, if
any, from the State of Louisiana. Although the Louisiana Gaming Control Board
approved the Amended Casino Operating Contract and related documents, the State
has taken the position that the State legislature must also give its approval,
which the State legislature failed to do in its regular session which adjourned
on June 23, 1997. To insure that the State legislature's failure to act with
respect the Amended Casino Operating Contract does not impair the Debtors'
efforts to reorganize, the Proponents have proposed the Third Amended Joint Plan
of Reorganization as Amended Pre- and Post-Confirmation (the "Modified Plan").
(Capitalized terms not otherwise defined in this Ballot have the meanings
assigned to them by the Original Plan or the Modified Plan as the context
requires.) Pursuant to Section 1127(d) of the Bankruptcy Code, the Debtors are
distributing this ballot in order to give holders of claims an opportunity to
change their previously cast votes accepting or rejecting the Original Plan.
You are receiving this ballot because you returned a ballot with respect to the
Original Plan and are, therefore, entitled to change the vote(s) that you
previously cast in these cases. However, if your claim against the Debtors'
estates is unliquidated, disputed, or contingent or is subject to an objection
filed with the Bankruptcy Court, your vote will not be counted.
Below you will be asked to make a decision -- whether, as a creditor, you wish
to change your previous vote(s) to accept or reject the Original Plan. To
change the vote(s) that you previously cast to accept or reject the Original
Plan, please mark the appropriate boxes below.
UNDER SECTION 1127 OF THE BANKRUPTCY CODE, IF YOU DO NOT CHANGE YOUR VOTE, YOU
WILL BE DEEMED TO HAVE VOTED IN THE MANNER IN WHICH YOU VOTED ON THE ORIGINAL
PLAN. ACCORDINGLY IF YOU DO NOT WISH TO CHANGE YOUR VOTE(S), YOU NEED NOT AND
SHOULD NOT RETURN THIS BALLOT.
-2-
<PAGE>
To change your previously cast vote(s), you must fully and accurately complete
this ballot and return it to the following address so as to be received no later
than 11:00 p.m., Central Daylight Savings Time, on September 8, 1997:
Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
c/o Price Waterhouse LLP
P.O. Box 81109
Chicago, Illinois 60681
I. CHANGE OF PREVIOUSLY CAST VOTE(S)
If you wish to change your vote(s), please mark your previous vote(s) on the
Original Plan next to the class or classes in which you voted and then mark your
new vote(s) on the Modified Plan in the corresponding box.
- --------------------------------------------------------------------------------
Name of Class Vote on Original Plan Vote on Modified Plan
- --------------------------------------------------------------------------------
Class A1 (Other Priority / / Accept / / Reject / / Accept / / Reject
Claims Against HJC)
- --------------------------------------------------------------------------------
Class A2 (Non-Bondholder / / Accept / / Reject / / Accept / / Reject
Secured Claims Against HJC)
- --------------------------------------------------------------------------------
Class A3 (Bank Claims and / / Accept / / Reject / / Accept / / Reject
Old Bank Collateral Agent
Claims Against HJC)
- --------------------------------------------------------------------------------
Class A4 (Bondholder Claims / / Accept / / Reject / / Accept / / Reject
Against HJC)
- --------------------------------------------------------------------------------
Class A5 (Old Indenture / / Accept / / Reject / / Accept / / Reject
Predecessor Trustee and Old
Indenture Predecessor
Collateral Agent Claims
Against HJC)
- --------------------------------------------------------------------------------
Class A6 (WARN Act Claims / / Accept / / Reject / / Accept / / Reject
Against HJC)
- --------------------------------------------------------------------------------
Class A7 (General Unsecured / / Accept / / Reject / / Accept / / Reject
Claims Against HJC)
- --------------------------------------------------------------------------------
Class B1 (Other Priority / / Accept / / Reject / / Accept / / Reject
Claims Against Finance
Corp.)
- --------------------------------------------------------------------------------
Class B2 (Bank Claims / / Accept / / Reject / / Accept / / Reject
Against Finance Corp.)
- --------------------------------------------------------------------------------
-3-
<PAGE>
- --------------------------------------------------------------------------------
Name of Class Vote on Original Plan Vote on Modified Plan
- --------------------------------------------------------------------------------
Class B3 (Bondholder Claims / / Accept / / Reject / / Accept / / Reject
Against Finance Corp.)
- --------------------------------------------------------------------------------
Class B4 (WARN Act Claims / / Accept / / Reject / / Accept / / Reject
Against Finance Corp.)
- --------------------------------------------------------------------------------
Class B5 (General Unsecured / / Accept / / Reject / / Accept / / Reject
Claims Against Finance
Corp.)
- --------------------------------------------------------------------------------
Class C1 (Other Priority / / Accept / / Reject / / Accept / / Reject
Claims Against HNOIC)
- --------------------------------------------------------------------------------
Class C2 (Secured Claims / / Accept / / Reject / / Accept / / Reject
Against HNOIC)
- --------------------------------------------------------------------------------
Class C3 (WARN Act Claims / / Accept / / Reject / / Accept / / Reject
Against HNOIC)
- --------------------------------------------------------------------------------
Class C4 (Unsecured Claims / / Accept / / Reject / / Accept / / Reject
Against HNOIC For Which HJC
Is Liable)
- --------------------------------------------------------------------------------
Class C5 (General Unsecured / / Accept / / Reject / / Accept / / Reject
Claims Against HNOIC)
- --------------------------------------------------------------------------------
Class C6 (NOLDC/Showboat / / Accept / / Reject / / Accept / / Reject
Claims Against HNOIC)
- --------------------------------------------------------------------------------
II. CERTIFICATIONS
By returning this Ballot For Changing Vote on Debtors' Original Plan ("Ballot"),
the undersigned creditor certifies that:
a. It / / does // / does not, as of the date below, hold a claim against
one or more of the Debtors;
b. It has previously cast one or more votes on the Debtors' Original Plan
in the class(es) set forth above and it wishes to change such vote(s) as set
forth above;
c. It has not submitted any other Ballots, or if it has submitted other
Ballots, such earlier Ballots are hereby revoked;
d. It has been provided with a copy of the Debtors' Fourth Amended
Summary Joint Disclosure Statement Pursuant to Section 1125 of the Bankruptcy
Code, dated as of July 24, 1997 (the "Summary Disclosure Statement");
-4-
<PAGE>
e. It has the full power and authority to change its previous vote(s) to
accept or reject the Original Plan; and
f. It acknowledges that this solicitation is subject to all the terms and
conditions set forth in the Summary Disclosure Statement.
YOUR BALLOT WILL NOT BE COUNTED UNLESS RECEIVED BY PRICE WATERHOUSE
LLP AT THE ADDRESS LISTED ABOVE BY 11:00 P.M. (CDT) ON SEPTEMBER 8, 1997.
THIS BALLOT DOES NOT CONSTITUTE AND SHALL NOT BE DEEMED A PROOF OF
CLAIM OR AN ASSERTION OF A CLAIM AGAINST THE DEBTORS
Dated: ________________ Signature:
-----------------------------------
By (if applicable):
-----------------------------------
(print or type)
Title (if applicable):
---------------------------------
(print or type)
NAME:
-----------------------------------------------
ADDRESS:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
CLAIM
AMOUNT:
-----------------------------------------------
-5-
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- ----------------------------------:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
DEBTORS' FIFTH AMENDED JOINT DISCLOSURE STATEMENT
PURSUANT TO SECTIONS 1125 AND 1127 OF THE BANKRUPTCY CODE
December 10, 1997
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- ----------------------------------
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
DEBTORS' FIFTH AMENDED JOINT DISCLOSURE STATEMENT
PURSUANT TO SECTIONS 1125 AND 1127 OF THE BANKRUPTCY CODE
Dated: December 10, 1997
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
<PAGE>
WILLIAM HARDY PATRICK, III
A Professional Corporation
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
BRONFIN & HELLER, LLC
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's
Entertainment, Inc.
<PAGE>
TABLE OF CONTENTS
I. INTRODUCTION..............................................................1
II. OVERVIEW OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . 6
III. GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 21
A. Description of HJC and Events Leading
to Commencement of Chapter 11 Cases. . . . . . . . . . . . . 21
B. Description of the Casino. . . . . . . . . . . . . . . . . . 23
C. Construction . . . . . . . . . . . . . . . . . . . . . . . . 25
D. Description of the Manage. . . . . . . . . . . . . . . . . . 25
E. Certain Prepetition Legal Proceedings. . . . . . . . . . . . 25
1. McCall Litigation . . . . . . . . . . . . . . . . . 26
2. Tucker Litigation . . . . . . . . . . . . . . . . . 28
3. Landmarks Litigation (Joan of Arc). . . . . . . . . 28
4. Tucker Litigation (Joan of Arc) . . . . . . . . . . 29
5. HNOIC/NOLDC Litigation. . . . . . . . . . . . . . . 30
F. Regulation . . . . . . . . . . . . . . . . . . . . . . . . . 30
G. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 35
IV. EVENTS DURING THE CHAPTER 11 CASES . . . . . . . . . . . . . . . . . 35
A. Filing of the Chapter 11 Petitions . . . . . . . . . . . . . 35
B. Retention of Professionals by the Debtors. . . . . . . . . . 36
C. Appointment of the Official Committees . . . . . . . . . . . 37
D. Litigation With the City of New Orleans and the RDC. . . . . 39
E. HJC's Use of Cash Collateral . . . . . . . . . . . . . . . . 42
F. Enclosure of the Casino Structure. . . . . . . . . . . . . . 44
G. Debtor In Possession Financing Provided by
HET or Its Affiliates. . . . . . . . . . . . . . . . . . . . 44
H. Debtors' Exclusive Right to File Plan(s) . . . . . . . . . . 47
I. Discovery of the Proponents and Others . . . . . . . . . . . 47
J. Litigation with HJC's Prepetition Contractors. . . . . . . . 47
1. Centex Lawsuit. . . . . . . . . . . . . . . . . . . 47
2. Other Litigation With Centex. . . . . . . . . . . . 48
3. Broadmoor's Motion to Compel
Assumption or Rejection . . . . . . . . . . . . . . 49
4. Broadmoor's Motions for Relief from
the Automatic Stay. . . . . . . . . . . . . . . . . 49
K. Bondholders Committee's Application for Order
Permitting Securities Trading in Certain Circumstances . . . 49
L. WARN Act Litigation. . . . . . . . . . . . . . . . . . . . . 49
M. Bondholder Class Actions . . . . . . . . . . . . . . . . . . 51
N. Sapir Litigation . . . . . . . . . . . . . . . . . . . . . . 53
O. Bar Date . . . . . . . . . . . . . . . . . . . . . . . . . . 54
P. Claims Analysis. . . . . . . . . . . . . . . . . . . . . . . 54
Q. Negotiations With Other Parties. . . . . . . . . . . . . . . 55
R. Filing of Plan on April 3, 1996 and
Confirmation of Third Amended Plan . . . . . . . . . . . . . 55
S. United States Trustee's Motion to Convert or Dismiss . . . . 56
T. Filing of Certain Lawsuits by Debtors and NOLDC. . . . . . . 56
i
<PAGE>
V. THE PLAN OF REORGANIZATION. . . . . . . . . . . . . . . . . . . . . . 57
A. Classification and Treatment of Claims and
Equity Interests . . . . . . . . . . . . . . . . . . . . . . 57
1. Administrative Expense Claims . . . . . . . . . . . 57
2. Priority Tax Claims . . . . . . . . . . . . . . . . 58
3. Class A1 -- Other Priority Claims (Impaired). . . . 58
4. Class A2 -- Non-Bondholder Secured
Claims (Impaired) . . . . . . . . . . . . . . . . . 59
5. Class A3 -- Bank Claims and Old Bank Collateral
Agent Claims (Impaired) . . . . . . . . . . . . . . 59
6. Class A4 -- Bondholder Claims (Impaired). . . . . . 61
7. Class A5 -- Old Indenture Predecessor Trustee
and Old Indenture Predecessor Collateral Agent
Claims (Impaired) . . . . . . . . . . . . . . . . . 63
8. Class A6 -- WARN Act Claims (Impaired). . . . . . . 63
9. Class A7 -- General Unsecured Claims (Impaired) . . 64
10. Class A8 -- Penalty Claims (Impaired) . . . . . . . 64
11. Class A9 -- HJC Equity Interests (Impaired) . . . . 65
12. Class B1 -- Other Priority Claims (Impaired). . . . 65
13. Class B2 -- Bank Claims (Impaired). . . . . . . . . 65
14. Class B3 -- Bondholder Claims (Impaired). . . . . . 65
15. Class B4 -- WARN Act Claims (Impaired). . . . . . . 66
16. Class B5 -- General Unsecured Claims (Impaired) . . 66
17. Class B6 -- Penalty Claims (Impaired) . . . . . . . 66
18. Class B7 -- Equity Interests (Impaired) . . . . . . 66
19. Class C1 -- Other Priority Claims (Impaired). . . . 66
20. Class C2 -- Secured Claims (Impaired) . . . . . . . 67
21. Class C3 -- WARN Act Claims (Impaired). . . . . . . 67
22. Class C4 -- Unsecured Claims (for which
HJC is liable) (Impaired) . . . . . . . . . . . . . 67
23. Class C5 -- General Unsecured Claims (Impaired) . . 67
24. Class C6 -- NOLDC/Showboat Claim (Impaired) . . . . 68
25. Class C7 -- Penalty Claims (Impaired) . . . . . . . 68
26. Class C8 -- Equity Interests (Impaired) . . . . . . 68
B. Settlement of Certain Claims and Prosecution and
Assignment of Certain Claims . . . . . . . . . . . . . . . . 68
1. NOLDC Shareholders/HET Settlement Agreement;
GPCI and Hemmeter/HET Settlement Agreement;
Froelich/HET Settlement Agreement; NOLDC/Grand
Palais Settlement Agreement . . . . . . . . . . . . 79
2. Release by Debtors of Causes of Action Against
the HET Group, the Debtors Group, the
Bondholders Committee Group, NOLDC Group and
Grand Palais Group. . . . . . . . . . . . . . . . . 81
3. Release by Bondholders of Causes of Action
Against HET Group, Debtors Group, Bondholders
Committee Group, City Group, State Group,
NOLDC Group, Grand Palais Group, and
Bank/Underwriter Group. . . . . . . . . . . . . . . 82
4. Release by Debtors of Causes of Action Against
Bank/Underwriter Group. . . . . . . . . . . . . . . 83
5. Release by Debtors of Causes of Action Against
the State Group . . . . . . . . . . . . . . . . . . 84
6. Release by Debtors of Causes of Action Against
the City and RDC. . . . . . . . . . . . . . . . . . 84
7. Release by Grand Palais Bondholders of Causes of
Action Against the HET Group, the Debtors Group,
the Bondholders Committee Group, the City Group,
the State Group, the NOLDC Group, the Grand Palais
Group and the Bank/Underwriter Group. . . . . . . . 85
8. Injunction Against Commencement of Individual
Actions Against the HET Group, the Debtors Group,
the Bondholders Committee Group, the City Group,
ii
<PAGE>
the State Group, the NOLDC Group, the Grand Palais
Group and the Bank/Underwriter Group. . . . . . . . 86
9. Assigned Litigation Claims. . . . . . . . . . . . . 87
10. Extinguishment of Certain Causes of Action
Under the Avoiding Power Provisions . . . . . . . . 87
11. Assignment and Prosecution of Assigned
Litigation Claims, Judgment Reduction Protection
and Distribution of Recoveries from Assigned
Litigation Claims . . . . . . . . . . . . . . . . . 88
12. Approval of Other Settlement Agreements . . . . . . 89
C. Executory Contracts and Unexpired Leases . . . . . . . . . . 90
1. General Development Agreement . . . . . . . . . . . 91
2. Canal Street Casino Lease . . . . . . . . . . . . . 93
3. Casino Operating Contract . . . . . . . . . . . . . 95
4. Management Agreement. . . . . . . . . . . . . . . . 96
5. Completion Guarantees . . . . . . . . . . . . . . . 98
6. Completion Loan Agreement . . . . . . . . . . . . . 101
7. Construction Lien Indemnity Obligation Agreement. . 101
8. Basin Street Casino Lease . . . . . . . . . . . . . 101
9. Title Insurance . . . . . . . . . . . . . . . . . . 103
10. Broadmoor Contract. . . . . . . . . . . . . . . . . 103
11. Architect Contract. . . . . . . . . . . . . . . . . 103
12. Audubon Contract. . . . . . . . . . . . . . . . . . 103
13. Centex Contract . . . . . . . . . . . . . . . . . . 104
D. Means for Implementation and Execution of the Plan . . . . . 104
1. General Corporate Matters . . . . . . . . . . . . . 104
2. Effective Date Transactions . . . . . . . . . . . . 104
3. Distributions Generally . . . . . . . . . . . . . . 113
4. Services of Old Indenture Trustee . . . . . . . . . 114
5. Distributions to be Made to Bondholders as of
Distribution Record Date. . . . . . . . . . . . . . 114
6. Cancellation and Surrender of Existing
Securities and Agreements . . . . . . . . . . . . . 114
7. Distributions of Cash . . . . . . . . . . . . . . . 114
8. Timing of Distributions . . . . . . . . . . . . . . 114
9. Hart-Scott-Rodino Compliance. . . . . . . . . . . . 115
10. Minimum Distributions; No Duplicative
Distributions; No Interest. . . . . . . . . . . . . 115
11. Fractional Shares . . . . . . . . . . . . . . . . . 115
12. Delivery of Distributions . . . . . . . . . . . . . 115
13. Fees and Expenses of Disbursing Agents. . . . . . . 115
14. Time Bar to Cash Payments . . . . . . . . . . . . . 116
15. Transfer of Release Pool Distributions. . . . . . . 116
16. Objection Deadline. . . . . . . . . . . . . . . . . 116
17. Authority to Oppose Claims. . . . . . . . . . . . . 116
18. No Distributions Pending Allowance. . . . . . . . . 117
19. Determination by Bankruptcy Court . . . . . . . . . 117
20. Treatment of Disputed Claims. . . . . . . . . . . . 117
E. Effect of Confirmation of Plan . . . . . . . . . . . . . . . 117
1. Revesting of Assets . . . . . . . . . . . . . . . . 117
2. Discharge of Debtor . . . . . . . . . . . . . . . . 118
3. Dissolution of Debtors. . . . . . . . . . . . . . . 119
4. Exculpations. . . . . . . . . . . . . . . . . . . . 119
iii
<PAGE>
F. Conditions Precedent to Confirmation and Effective Date. . . 119
1. Effective Date. . . . . . . . . . . . . . . . . . . 119
2. Condition Precedent to Confirmation of the Plan . . 120
3. Conditions Precedent to Effective Date. . . . . . . 120
4. Waiver of Conditions. . . . . . . . . . . . . . . . 122
5. Effect of Failure of Conditions . . . . . . . . . . 122
6. Status of Satisfaction of Conditions. . . . . . . . 123
G. Miscellaneous Provisions . . . . . . . . . . . . . . . . . . 124
1. Retention of Jurisdiction . . . . . . . . . . . . . 124
2. Exemption from Transfer Taxes . . . . . . . . . . . 124
3. Post-Confirmation Date Fees and Expenses of
Professional Persons. . . . . . . . . . . . . . . . 124
4. Committees. . . . . . . . . . . . . . . . . . . . . 124
5. Amendment or Modification
of the Plan; Severability . . . . . . . . . . . . . 124
6. Revocation or Withdrawal of the Plan. . . . . . . . 125
7. Binding Effect. . . . . . . . . . . . . . . . . . . 125
8. JCC Intermediary. . . . . . . . . . . . . . . . . . 125
VI. CONFIRMATION AND CONSUMMATION PROCEDURE. . . . . . . . . . . . . . . 125
A. Solicitation of Votes. . . . . . . . . . . . . . . . . . . . 125
B. The Confirmation Hearing . . . . . . . . . . . . . . . . . . 126
C. Confirmation . . . . . . . . . . . . . . . . . . . . . . . . 127
1. Acceptance. . . . . . . . . . . . . . . . . . . . . 127
2. Unfair Discrimination
and Fair and Equitable Tests. . . . . . . . . . . . 128
3. Feasibility . . . . . . . . . . . . . . . . . . . . 128
4. Best Interests Test . . . . . . . . . . . . . . . . 130
D. Consummation . . . . . . . . . . . . . . . . . . . . . . . . 131
E. Term Loans and Working Capital Facility. . . . . . . . . . . 131
F. Junior Subordinated Credit Facility. . . . . . . . . . . . . 133
G. Convertible Junior Subordinated Debentures . . . . . . . . . 133
H. HET Warrant. . . . . . . . . . . . . . . . . . . . . . . . . 133
I. HET/JCC Agreement. . . . . . . . . . . . . . . . . . . . . . 134
VII. MANAGEMENT OF THE REORGANIZED DEBTORS . . . . . . . . . . . . . . . 135
A. Entity Structure . . . . . . . . . . . . . . . . . . . . . . 135
B. Board of Directors and Management. . . . . . . . . . . . . . 136
1. Composition of the Board of Directors . . . . . . . 136
2. Identity, Affiliations, and
Nature of Certain Compensation. . . . . . . . . . . 138
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
THE SECURITIES TO BE DISTRIBUTED UNDER THE PLAN . . . . . . . . . . 138
IX. CERTAIN RISK FACTORS TO BE CONSIDERED. . . . . . . . . . . . . . . . 139
A. Overall Risks to Recovery by Holders of Claims . . . . . . . 140
1. Uncertainty Regarding Gaming Regulation . . . . . . 140
2. Ability to Commence Operations as Scheduled . . . . 141
3. Suitability . . . . . . . . . . . . . . . . . . . . 141
4. Litigation. . . . . . . . . . . . . . . . . . . . . 142
5. Conflicts of Interest . . . . . . . . . . . . . . . 142
iv
<PAGE>
6. Financial Forecast. . . . . . . . . . . . . . . . . 142
7. No Operating History; Lack
of Prior Gaming Experience. . . . . . . . . . . . . 143
8. Availability of Term Loans
and Working Capital Facility . . . . . . . . . . . 143
9. Negotiations with the State . . . . . . . . . . . . 143
10. Competition . . . . . . . . . . . . . . . . . . . . 143
11. Reliance on Single Market . . . . . . . . . . . . . 144
12. Lack of Experienced Personnel . . . . . . . . . . . 144
13. Repurchase of Securities
Relating to Gaming Matters. . . . . . . . . . . . . 144
14. Absence of Public Trading Market. . . . . . . . . . 145
15. Uncertainty Regarding Tax Treatment
of the New Bonds, New Contingent Bonds. . . . . . . 145
16. Uncertainty Regarding Objections to Claims. . . . . 145
17. Uncertainty Regarding Amount of Certain Claims. . . 145
18. Uncertainty Regarding City and State Approvals. . . 146
19. Uncertainty Regarding Termination of City
Agreement and Canal Street Casino Lease . . . . . . 146
B. Hart-Scott-Rodino Act Requirements . . . . . . . . . . . . . 146
X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN . . . . . . . . . 147
A. Tax Consequences to Holders of Claims in
Classes A1, A2, A3(a), A3(b), A5, A6, A7, A8,
B1, B2, B4, B5, B6, C1, C2, C3, C4, C5, C6 and C7. . . . . . 148
B. Tax Consequences to Holders of
Claims in Classes A4 and B3 (Bondholders). . . . . . . . . . 148
1. Treatment of JCC Holding, JCC and JCC
Intermediary as a Single Taxable Entity . . . . . . 149
2. Exchange of Old Bonds by Bondholders. . . . . . . . 149
3. Classification of New Bonds and New
Contingent Bonds as Equity Rather Than Debt . . . . 151
4. Tax Treatment of New Bonds
and New Contingent Bonds. . . . . . . . . . . . . . 152
5. Tax Treatment of Receipt of
Common Stock for Certain Releases . . . . . . . . . 158
6. Tax Treatment of Penalties for Failure
to Register Class A New Common Stock,
New Bonds and New Contingent Bonds. . . . . . . . . 159
7. Backup Withholding and Reporting Requirements . . . 159
C. Tax Consequences to JCC Holding. . . . . . . . . . . . . . . 159
XI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN. . . . . . 160
A. Liquidation Under Chapter 7. . . . . . . . . . . . . . . . . 160
B. Alternative Plan or Plans of Reorganization. . . . . . . . . 160
XII. CONCLUSION AND RECOMMENDATION . . . . . . . . . . . . . . . . . . . 161
v
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I. INTRODUCTION
Harrah's Jazz Company, a Louisiana general partnership and debtor in
possession ("HJC"), Harrah's Jazz Finance Corp., a Delaware corporation and
debtor in possession ("FINANCE CORP."), Harrah's New Orleans Investment Company,
a Nevada corporation and debtor in possession ("HNOIC" and, together with HJC
and Finance Corp., the "DEBTORS"), and Harrah's Entertainment, Inc., a Delaware
corporation ("HET" and, together with the Debtors, the "PROPONENTS"), submit
this Fifth Amended Joint Disclosure Statement (the "DISCLOSURE STATEMENT")
pursuant to Sections 1125 and 1127 of title 11 of the United States Code (the
"BANKRUPTCY CODE") to holders of Claims against and Equity Interests in the
Debtors in connection with (i) the solicitation of acceptances or rejections of
the Debtors' Third Amended Joint Plan of Reorganization, As Modified Through
December 10, 1997 (the "PLAN") filed by the Proponents with the United States
Bankruptcy Court for the Eastern District of Louisiana (the "BANKRUPTCY COURT")
and (ii) the hearing to consider approval of the proposed plan modifications
(the "CONFIRMATION HEARING") scheduled for the date set forth in the
accompanying notice. Unless otherwise defined herein, all capitalized terms
contained herein have the meanings ascribed to them in the Plan.
On April 28, 1997, the Bankruptcy Court granted an order confirming the
Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code, as Modified, dated February 26, 1997 (the "EXISTING PLAN") filed by the
Proponents. The Effective Date of (and as defined in) the Existing Plan is
conditioned upon, among other things, the execution and delivery of a new Casino
Operating Contract and all necessary approvals, if any, from the State of
Louisiana (the "STATE"). Although the Louisiana Gaming Control Board ("LGCB")
approved a new Casino Operating Contract and related documents in connection
with the Existing Plan, the State has taken the position that the State
legislature must also give its approval, which the State legislature failed to
do in its regular session which adjourned on June 23, 1997. The Proponents have
elected to modify the Existing Plan to provide, among other things, for a
guaranty of the annual minimum payments due under the Modified Casino Operating
Contract. On December 9, 1997, the LGCB, among other things, unanimously
approved the Amended Proposed New Casino Operating Contract (the "MODIFIED
CASINO OPERATING CONTRACT") for submission to the Governor of the State with the
request that he submit the Modified Casino Operating Contract to the State
legislature for its approval.
The primary modifications made in the Existing Plan and contained in
the accompanying Plan are as follows:
- GUARANTY OF MINIMUM ANNUAL PAYMENT OF $100 MILLION UNDER THE MODIFIED
CASINO OPERATING CONTRACT. The Plan provides that for each fiscal year
ending March 31, JCC will cause to be provided a guaranty of the $100
million minimum payment, and a failure to do so will result in a
termination of the Modified Casino Operating Contract (a "MINIMUM
PAYMENT GUARANTY"). The Plan further provides that HET and Harrah's
Operating Company, Inc., a Delaware corporation and a wholly-owned
subsidiary of HET ("HOCI"), will provide a Minimum Payment Guaranty,
which guarantees for fiscal years ending March 31, 1999 and March 31,
2000, the reorganized Debtors' annual, minimum payment obligation of
$100 million to the LGCB pursuant to the Modified Casino Operating
Contract, which guaranty will be renewable (subject to certain
non-renewal conditions) through the fiscal year ending March 31, 2004
pursuant to that
<PAGE>
certain HET/JCC Agreement among HET, HOCI and the reorganized Debtor
(the "HET/JCC AGREEMENT "). In exchange for providing a guaranty of
the minimum payment due under the Casino Operating Contract pursuant to
the HET/JCC Agreement, HET and HOCI will receive, among other things,
annual payments from the reorganized Debtors and a first lien on
substantially all property of the reorganized Debtors, all as more
fully set forth in the Plan and the exhibits thereto, to secure the
reorganized Debtor's obligations under the HET/JCC Agreement.
- MODIFIED TERMS FOR DEBT SECURITIES ISSUED TO BONDHOLDERS PURSUANT TO
THE PLAN. The Plan provides that Senior Subordinated Notes with
Contingent Interest issued to the Bondholders (as defined below) in
partial satisfaction of their claims will bear fixed interest, payable
semi-annually, at a rate of 5.867% per annum (rather than 8% under
prior versions of the Plan) increasing over the first three years to
6.214% per annum in the third through fifth years (as set forth in the
Bondholder Term Sheet) and increasing to 8% per annum after the first
five years (collectively, "FIXED INTEREST"), plus contingent interest
based upon satisfaction of certain earnings criteria. All payments in
respect of the Senior Subordinated Contingent Notes will be limited to
75% of EBITDA (as defined below) of JCC over $85 million and under
approximately $109.4 million (rather than under $106.1 million under
the Existing Plan) calculated on an annual basis. The first six
semi-annual payments of Fixed Interest (instead of the first four
payments under prior Plan versions) may be made in kind, rather than in
cash. In addition, thereafter, Fixed Interest may be paid in kind,
management fees may be deferred, fees under the HET/JCC Agreement may
be deferred and principal on the bank debt may be deferred if EBITDA
for the prior twelve months is less than $28.5 million. Accrual of
interest on the Senior Subordinated Notes with Contingent Interest will
begin on the Effective Date (as defined below) of the Plan (instead of
November 15, 1996 under the Existing Plan) and will have a maturity
date of eleven years after the Effective Date (rather than eight).
These notes will be secured by a lien on substantially all of the
assets of the reorganized Debtors, but will be junior to the liens
securing the reorganized Debtors' obligation to reimburse HET and HOCI
with respect to draws on any Minimum Payment Guaranty. These liens
will also be junior to or PARI PASSU with liens securing certain
tranches of the bank loans to be provided to the reorganized Debtors
under the Plan. See Section V.D.2., "The Plan of
Reorganization--Means for Implementation and Execution of the
Plan--Effective Date Transactions," and Section VI.E.,
"Confirmation and Consummation Procedure--Term Loans and Working
Capital Facility."
- MODIFIED CREDIT FACILITIES FOR THE REORGANIZED DEBTORS. The credit
facilities for the reorganized Debtors will consist of $195 million in
term loans in two tranches. Both tranches of debt will be secured by
substantially all of the assets of the reorganized Debtors. Tranche A
(with up to $60 million of availability) will rank senior to Tranche B
(with up to $135 million of availability), and both will rank junior to
the obligations of the reorganized Debtors to reimburse HET and HOCI
with respect to draws by the LGCB under the HET/JCC Agreement. HET and
HOCI will guarantee portions of each of the two tranches. The
reorganized Debtors will also have a working capital facility of $25
million, which will be secured by substantially all of the assets of
the reorganized Debtors (ranking junior to liens securing Tranche A and
ranking senior to liens securing
2
<PAGE>
Tranche B) and will be guaranteed by HET and HOCI. In addition, HET
will provide a junior subordinated credit facility in the amount of $10
million. See Section VI.E., "Confirmation and Consummation
Procedure--Term Loans and Working Capital Facility" and Section VI.F.,
"--Junior Subordinated Credit Facility."
PURSUANT TO SECTION 1127(d) OF THE BANKRUPTCY CODE, IF YOU HAVE ALREADY
TIMELY VOTED TO ACCEPT OR REJECT THE EXISTING PLAN, YOU WILL BE DEEMED TO HAVE
ACCEPTED OR REJECTED, AS THE CASE MAY BE, THE ACCOMPANYING MODIFIED PLAN UNLESS
YOU AFFIRMATIVELY CHANGE YOUR VOTE ON THE ACCOMPANYING BALLOT. Bondholders as
of May 5, 1997 will be deemed to have given or not given the releases in the
manner elected with respect to the Existing Plan for purposes of this Plan,
unless such Bondholders affirmatively change their release election by the
procedure approved by the Bankruptcy Court. Again, the accompanying modified
Plan will become effective only if the Existing Plan does not become effective.
In March 1997, copies of the Existing Plan and a third amended version of the
Disclosure Statement were distributed to holders of Claims against and interests
in the Debtors, and holders of Claims that were entitled to vote on the Existing
Plan were sent ballots on which they could indicate their acceptance or
rejection of the Existing Plan. The Existing Plan received the requisite votes
for acceptance by creditors and was confirmed by order of the Bankruptcy Court
dated April 28, 1997. The Proponents are proposing the modifications contained
in the accompanying Plan pursuant to Section 1127(b) of the Bankruptcy Code, and
have sought and obtained approval of this Fifth Amended Disclosure Statement in
support of the Plan, as modified. Accompanying the copies of this Disclosure
Statement distributed to holders of Claims entitled to vote are ballots for
acceptance or rejection of the Plan, as modified, to be returned to the Ballot
Agent (as defined below), all in accordance with the procedures set out in the
accompanying notice.
Attached as Exhibits to this Disclosure Statement are copies of the
following:
- The Plan and the exhibits thereto (Exhibit A);
- Projected Financial Information (Exhibit B); and
- Debtors' Liquidation Analysis (Exhibit C).
In addition, a ballot for the acceptance or rejection of the Plan is enclosed
with the Disclosure Statement submitted to the holders of Claims that are
entitled to vote to accept or reject the Plan.
After notice and a hearing, the Bankruptcy Court approved this
Disclosure Statement as containing adequate information of a kind and in
sufficient detail to enable hypothetical, reasonable investors typical of the
Debtors' creditors to make an informed judgment whether to accept or reject
(including whether to change their acceptance or rejection of) the Plan.
APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A
DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN.
EACH OF THE DEBTORS' CREDITORS THAT IS ENTITLED TO VOTE TO ACCEPT OR
REJECT THE PLAN SHOULD READ THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR
ENTIRETY BEFORE VOTING OR DETERMINING WHETHER TO CHANGE THEIR VOTE ON THE PLAN
OR CHANGING THEIR RELEASE ELECTION WITH RESPECT TO THE EXISTING PLAN.
3
<PAGE>
Pursuant to the provisions of the Bankruptcy Code, only holders of
allowed claims or equity interests in classes of claims or equity interests that
are impaired under the terms and provisions of a chapter 11 plan are entitled to
vote to accept or reject the plan. Classes of claims or equity interests in
which the holders of claims or interests will not receive or retain any property
under a chapter 11 plan are deemed to have rejected the plan and are not
entitled to vote to accept or reject the plan. Classes of claims or equity
interests in which the holders of claims or interests are unimpaired under a
chapter 11 plan are deemed to have accepted the plan and are not entitled to
vote to accept or reject the plan.
Classes A1, A2, A3(a) and A3(b), A4, A5, A6, A7, B1, B2, B3, B4, B5,
C1, C2, C3, C4, C5 and C6 of the Plan are impaired and, to the extent such
Claims are Allowed Claims, the holders of such Claims will receive distributions
under the Plan. Holders of Claims in those Classes are entitled to vote to
accept or reject the Plan. Classes A8, A9, B6, B7, C7 and C8 do not receive any
distributions under the Plan and the holders of those Claims and Equity
Interests are conclusively presumed to have rejected the Plan. Therefore, the
Debtors are soliciting acceptances only from holders of Claims in Classes A1,
A2, A3(a) and A3(b), A4, A5, A6, A7, B1, B2, B3, B4, B5, C1, C2, C3, C4, C5 and
C6. See Section V.A., "The Plan of Reorganization--Classification and Treatment
of Claims and Equity Interests."
The Bankruptcy Code defines "acceptance" of a plan by a class of claims
as acceptance by creditors in that class that hold at least two-thirds in dollar
amount and more than one-half in number of the claims that cast ballots for
acceptance or rejection of the plan. For a complete description of the
requirements for confirmation of the Plan, see Section VI., "Confirmation and
Consummation Procedure."
If a Class of Claims or Equity Interests rejects the Plan or is deemed
to reject the Plan, the Debtors have the right to request confirmation of the
Plan pursuant to Section 1129(b) of the Bankruptcy Code. Section 1129(b)
permits the confirmation of a plan notwithstanding the nonacceptance of such
plan by one or more impaired classes of claims or equity interests. Under that
section, a plan may be confirmed by a bankruptcy court if it does not
"discriminate unfairly" and is "fair and equitable" with respect to each
nonaccepting class. For a more detailed description of the requirements for
confirmation of a nonconsensual plan, see Section VI.C.2., "Confirmation and
Consummation Procedure--Confirmation--Unfair Discrimination and Fair and
Equitable Tests."
With respect to those Classes of Claims and Equity Interests that are
deemed to have rejected the Plan, the Proponents intend to request confirmation
of the Plan pursuant to Sections 1127 and Section 1129(b) of the Bankruptcy
Code. If one or more of the Classes entitled to vote on the Plan votes to
reject the Plan, the Proponents reserve the right to request confirmation of the
Plan over the rejection of the Plan by such Class or Classes (however, the
Proponents acknowledge that the Plan, in the form of the "Third Amended Joint
Plan of Reorganization, As Modified Through December 10, 1997", cannot be
confirmed under the cramdown requirements of Section 1129(b) if Class A4 does
not accept the Plan). The determination as to whether to seek confirmation of
the Plan under such circumstances will be announced before or at the
Confirmation Hearing.
After carefully reviewing this Disclosure Statement, including the
Exhibits, each holder of an Allowed Claim in Classes A1, A2, A3(a) and A3(b),
A4, A5, A6, A7, B1, B2, B3, B4, B5, C1, C2, C3, C4, C5 and C6 should vote on the
Plan. THE INDENTURE TRUSTEE FOR THE 14-1/4% FIRST MORTGAGE NOTES DUE 2001 WITH
CONTINGENT INTEREST OF HJC AND FINANCE CORP. (THE "OLD BONDS") IS NOT PERMITTED
TO VOTE ON BEHALF OF THE HOLDERS OF THE OLD BONDS AND, CONSEQUENTLY, EACH HOLDER
OF OLD BONDS (A "BONDHOLDER") MUST
4
<PAGE>
SUBMIT ITS OWN BALLOT.
THE PROPONENTS BELIEVE THAT ACCEPTANCE OF THE PLAN IS IN THE BEST
INTERESTS OF THE DEBTORS AND THEIR CREDITORS AND URGE THAT CREDITORS VOTE TO
ACCEPT THE PLAN.
THE COMMITTEE OF UNSECURED CREDITORS APPOINTED IN HJC's CHAPTER 11 CASE
SUPPORTS THE PLAN.
THE COMMITTEE OF BONDHOLDERS APPOINTED IN HJC'S CHAPTER 11 CASE
SUPPORTS THE PLAN.
If you are entitled to vote to accept or reject the Plan, a ballot is
enclosed for the purpose of voting on the Plan. If you hold a Claim in more
than one Class and you are entitled to vote Claims in more than one Class, you
will receive a ballot or ballots which will permit you to vote in all
appropriate Classes of Claims. Please vote and return your ballot(s) to the
"BALLOT AGENT" as follows:
Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
c/o Price Waterhouse, LLP
P.O. Box 81109
Chicago, Illinois 60681
BONDHOLDERS SHOULD NOT RETURN THEIR OLD BONDS WITH THEIR BALLOTS.
TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION OF THE
PLAN MUST BE RECEIVED NO LATER THAN THE TIME AND DATE SET FORTH IN THE
ACCOMPANYING NOTICE.
IF YOU HAVE ALREADY TIMELY VOTED TO ACCEPT OR REJECT THE EXISTING PLAN,
YOU WILL BE DEEMED TO HAVE ACCEPTED OR REJECTED, AS THE CASE MAY BE, THE
ACCOMPANYING MODIFIED PLAN UNLESS YOU AFFIRMATIVELY CHANGE YOUR VOTE ON THE
ACCOMPANYING BALLOT.
If you are a creditor entitled to vote on the Plan and you did not
receive a ballot, received a damaged ballot or lost your ballot, or if you have
any questions concerning the procedures for voting on the Plan, please call
Vincent E. Lazar (of Jenner & Block, counsel to HJC and Finance Corp.) at (312)
923-8497. The Ballot Agent cannot provide any advice with respect to voting for
or against the Plan and no information provided by the Ballot Agent shall alter,
supplement or amend any disclosure contained in this Disclosure Statement.
Pursuant to Section 1128 of the Bankruptcy Code, the Confirmation
Hearing will be held on the date and at the time set forth in the accompanying
notice before the Honorable Thomas M. Brahney, III, United States Bankruptcy
Judge, at the United States Bankruptcy Court, 501 Magazine Street, 709 Hale
Boggs Building, New Orleans, Louisiana. The Bankruptcy Court has directed that
objections, if any, to confirmation of the Plan be served and filed so that they
are received on or before the time and date set forth
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in the accompanying notice, in the manner described below in Section VI.B.,
"Confirmation and Consummation Procedure--The Confirmation Hearing." The
Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court
without further notice except for the announcement of the adjournment date made
at the Confirmation Hearing or at any subsequent adjourned Confirmation Hearing.
II. OVERVIEW OF THE PLAN
THE DESCRIPTION OF THE PLAN SET FORTH BELOW CONSTITUTES A SUMMARY ONLY.
CREDITORS, HOLDERS OF EQUITY INTERESTS AND OTHER PARTIES IN INTEREST ARE URGED
TO REVIEW THE MORE DETAILED DESCRIPTION OF THE PLAN CONTAINED IN SECTION V OF
THIS DISCLOSURE STATEMENT AS WELL AS THE PLAN ITSELF.
The primary purposes of the Plan are to:
- provide for an expeditious emergence from chapter 11 by the
Debtors to allow for the opening of a land-based casino in New
Orleans scheduled to open twelve months after the Effective
Date;
- enable the Debtors immediately to re-commence construction of a
first-class gaming facility with substantial revenue-generating
potential and thereby provide jobs and income for the people of
the City of New Orleans and the State of Louisiana;
- provide for a guaranty of the annual minimum payment to be made
to the LGCB pursuant to a Modified Casino Operating Contract;
- de-leverage the Debtors significantly by converting a substantial
portion of the claims of Bondholders into new common stock of the
reorganized entity;
- provide the Debtors' creditors with the highest possible
recoveries under the circumstances, including payment in full, in
cash of Allowed, general, unsecured claims against HJC; and
- bring an end to the significant costs and delay associated with
the litigation that has plagued the Debtors and other parties.
Under the Plan, the assets and business of the Debtors will vest in
Jazz Casino Company, L.L.C. ("JCC"), a newly formed Louisiana limited liability
company, on the effective date of the Plan as defined in Section 1.97 of the
Plan (the "EFFECTIVE DATE"). The Plan provides that, for federal income tax
purposes, such vesting shall be deemed to have occurred as a deemed exchange by
the Bondholders of the Old Bonds for such assets and business, and deemed
exchanges by the Bondholders of such assets and business for the Class A New
Common Stock (as defined below), the New Bonds (as defined below), and the New
Contingent Bonds (as defined below). See Section X.B.1., "Certain Federal
Income Tax Consequences of the Plan--Tax Consequences to Holders of Claims in
Classes A4 and B3 (Bondholders)--Exchange of Old Bonds by the Bondholders." JCC
will fund the completion of construction of the land-based casino facility to be
located on the site of the former Rivergate Convention Center in New Orleans
(the "CASINO") from the following sources: (i) a $60 million term loan (the "A
TERM LOAN") from a syndicate of lenders led by Bankers Trust Company ("BTCO"),
(ii) a $135 million term loan from BTCo (the "B TERM LOAN" and,
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together with the A Term Loan, the "TERM LOANS"), (iii) the sale to the
Participating Banks (as defined in Section V.B.4. below), Salomon Brothers Inc
("SALOMON"), Donaldson, Lufkin & Jenrette ("DLJ") and BT Securities Corporation
of approximately $26 million aggregate principal amount of Convertible Junior
Subordinated Debentures of JCC (the "CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES"), (iv) a credit facility pursuant to which HET has agreed to make
available up to $10 million of subordinated indebtedness (the "JUNIOR
SUBORDINATED CREDIT FACILITY") to fund project costs to the extent that such
costs exceed amounts available under the Term Loans (excluding Tranche A-1 and
Tranche A-2 (both as defined below)), the proceeds from the sale of the
Convertible Junior Subordinated Debentures and the Harrah's New Equity
Investment (as defined below), and (v) an equity investment by HET, Harrah's
Crescent City Investment Company, a Nevada corporation and wholly-owned
subsidiary of HET, and/or another affiliate of HET (the "HARRAH'S INVESTOR") in
an amount equal to the difference between $75 million and the then outstanding
principal amount of debtor-in-possession financing provided at any time on or
before the Effective Date (as defined below) (including any then outstanding
portion of any Future DIP Loan (as defined below) which is approved by the
Bankruptcy Court) by HOCI or an affiliate thereof (the "DIP LENDER") to HJC (the
"HARRAH'S NEW EQUITY INVESTMENT"). The Junior Subordinated Credit Facility
shall be applied to project costs prior to amounts under Tranche A-1 and
Tranche A-2 of the Term Loans. JCC will also have up to $25 million available
for working capital purposes under a working capital line of credit (the
"WORKING CAPITAL FACILITY" and, together with the Term Loans, the
"BANK LOANS").
The Bank Loans will be secured by substantially all of the assets of
JCC (excluding the Modified Casino Operating Contract, the Casino's bankroll and
the Gross Revenue Share Payments (as defined below)). The Bank Loans will be
secured on a second lien priority basis, junior only to a lien securing certain
obligations of JCC under the HET/JCC Agreement. Within the Bank Loans, the A
Term Loan will be senior to the Working Capital Facility, and the Working
Capital Facility will be senior to the B Term Loan. The B Term Loan will be
PARI PASSU with the New Bonds and the New Contingent Bonds (each as defined
below). The A Term Loan will consist of three tranches: (i) an A-1 tranche with
up to $10 million of availability ("TRANCHE A-1"); (ii) an A-2 tranche with up
to $20 million of availability ("TRANCHE A-2"); and (iii) an A-3 tranche with up
to $30 million of availability ("TRANCHE A-3"). The B Term Loan will consist of
two tranches: (i) a B-1 tranche with up to $30 million of availability ("TRANCHE
B-1"); and (ii) a B-2 tranche with up to $105 million of availability ("TRANCHE
B-2"). HET and HOCI will provide a payment guarantee or a "put" agreement with
respect to Tranche A-2 of the A Term Loan, Tranche B-2 of the B Term Loan and
the Working Capital Facility. Each of the A Term Loan, the B Term Loan and the
Working Capital Facility will be obtained by HJC pursuant to Section 364 of the
Bankruptcy Code and assumed by JCC, and the Convertible Junior Subordinated
Debentures will be sold by HJC pursuant to Section 364 of the Bankruptcy Code
and HJC's obligations thereunder will be assumed by JCC. See Section VI.E.,
"Confirmation and Consummation Procedure--Term Loans and Working Capital
Facility," Section VI.F., "--Junior Subordinated Credit Facility," Section
VI.G., "--Convertible Junior Subordinated Debentures" and Section IX.A.8.,
"Certain Risk Factors to be Considered--Overall Risks to Recovery by Holders of
Claims--Availability of Term Loans and Working Capital Facility."
JCC will be a single member limited liability company, wholly-owned by
JCC Intermediary Company, L.L.C., a Louisiana limited liability company ("JCC
INTERMEDIARY"), which, in turn, will be a single member limited liability
company, wholly-owned by JCC Holding Company, a Delaware corporation ("JCC
HOLDING" and, together with JCC and JCC Intermediary, the "JCC ENTITIES").
Pending the resolution of certain structural considerations, JCC Intermediary
may be eliminated prior to the Effective Date. In such case, JCC will be
wholly-owned by JCC Holding. Upon consummation of the Plan, the capital stock
of JCC Holding will consist of shares of Class A common stock, par value $.01
per share ("CLASS A NEW COMMON
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STOCK"), and shares of Class B common stock, par value $.01 per share ("CLASS B
NEW COMMON STOCK" and, together with the Class A New Common Stock, the "NEW
COMMON STOCK"). Under the Plan, the Harrah's Investor will purchase, among
other things, shares of Class B New Common Stock in exchange for the Harrah's
New Equity Investment. The Class B New Common Stock issued on account of the
Harrah's New Equity Investment and other consideration will constitute 49.9% of
the New Common Stock. Also under the Plan, shares of Class A New Common Stock
which constitute 37.1% of the New Common Stock will be distributed on a PRO RATA
basis to the Bondholders, and shares of Class A New Common Stock which
constitute 13% of the New Common Stock will be issued to a disbursing agent for
the benefit of Bondholders who consent to certain releases as provided in the
Plan. See Section V.B., "Plan of Reorganization--Settlement of Certain Claims
and Prosecution and Assignment of Certain Claims--Consensual Non-Debtor
Releases," and the release description chart contained therein. The Harrah's
Investor will contribute a number of its shares equal to 2% of the New Common
Stock to a disbursing agent for the benefit of Bondholders who consent to
certain releases as provided in the Plan (which shares will become shares of
Class A New Common Stock upon receipt by such Bondholders). In addition, under
certain settlement agreements contemplated under the Plan, the Harrah's Investor
will transfer from its distribution (i) options to purchase a number of shares
of Class B New Common Stock constituting 4.5% of the New Common Stock to the
shareholders of New Orleans/Louisiana Development Corporation ("NOLDC") or their
designees, and (ii) a number of its shares constituting 3 1/2% of the New Common
Stock to the senior secured bondholders of Grand Palais Casino, Inc. ("GRAND
PALAIS") (which shares will become shares of Class A New Common Stock upon
receipt by such bondholders).
In consideration of HET's payment guarantee or "put" agreement in
respect of Tranche A-2 of the A Term Loan, Tranche B-2 of the B Term Loan, and
the Working Capital Facility, Harrah's Investor will receive, among other
things, the HET Warrant (as defined below) to purchase additional shares of New
Common Stock such that, upon exercise of the HET Warrant in its entirety,
Harrah's Investor would own 50.0% of the New Common Stock, subject to certain
adjustments. The number of shares issuable upon exercise of the HET Warrant
will be adjusted as necessary to reflect the transfer of shares upon exercise of
the options held by NOLDC shareholders to purchase from HET up to 4.5% of the
common stock of JCC Holding. The HET Warrant will be exercisable at any time
after the Transition Date (as defined below) until the sixth anniversary of the
opening of the Casino, in whole or in part on a PRO RATA basis at a price of
$15.00 per share of New Common Stock. If the shareholders of NOLDC and/or their
designees have not exercised their options to purchase 4.5% of the New Common
Stock, Harrah's Investor will not be permitted to exercise the HET Warrant with
respect to that number of shares which would cause Harrah's Investor to own more
than 50.0% of the New Common Stock until such time as such exercise would not
cause Harrah's Investor to own more than 50.0% of the New Common Stock. If at
any time after the Transition Date, the closing bid price of New Common Stock
has exceeded $20.00 per share for sixty consecutive trading days, JCC Holding's
board of directors may elect to give written notice to Harrah's Investor of an
election to redeem 75% of the warrants at $0.05 per warrant unless Harrah's
Investor exercises the warrant within 45 days after the date of such notice.
See Section VI.E., "Confirmation and Consummation Procedure--Term Loans and
Working Capital Facility," and Section VI.H., "--HET Warrant."
In addition, the Bondholders will receive (i) $187.5 million in
aggregate principal amount of Senior Subordinated Notes due 2009 with Contingent
Payments of JCC (the "NEW BONDS"), which will pay Fixed Interest semi-annually
at a rate of 5.867% per annum increasing over the first three years to a rate of
6.214% per annum in the third through fifth years (as set forth in the
Bondholder Term Sheet), and increasing to 8% per annum after the first five
years, and contingent payments based on a percentage of
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EBITDA (as defined below) of JCC; and (ii) a PRO RATA share of Senior
Subordinated Contingent Notes due 2009 of JCC (the "NEW CONTINGENT BONDS"), on
which all payments will be contingent based on a percentage of EBITDA of JCC.
JCC will have the option of making the first six semi-annual payments of Fixed
Interest on the New Bonds in kind ("PIK") rather than in cash; provided,
however, that JCC must pay the first four semi-annual payments of Fixed Interest
in kind if Tranche A-1 and/or Tranche A-2 is outstanding when such payments are
due. JCC will have the option to pay the fifth and sixth semi-annual payments
of Fixed Interest in kind. If JCC pays Fixed Interest in kind on any of the
first six semi-annual interest payment dates, HNOMC will defer its Base
Management Fees and HET and HOCI will defer their fees under the HET/JCC
Agreement to the extent that the cash savings from paying Fixed Interest in kind
is needed for cash flow deficiencies other than for repayment of Tranche A-1 and
Tranche A-2. If JCC is required to pay Fixed Interest in kind with respect to
the third, fourth, fifth or sixth semi-annual interest payment because of the
terms of the Term Loans, or if JCC elects to pay Fixed Interest in kind during
such periods, the Incentive Management Fee payable to HNOMC will be deferred
during such corresponding period. The Term Loans provide for quarterly
amortization; however, such payments on principal will be deferred during an
initial period of operations to be agreed upon if (i) JCC has elected to pay
Fixed Interest in kind during the interest period ending prior to the current
quarter, (ii) HNOMC has deferred both Base Management Fees and Incentive
Management Fees for the corresponding interest period and (iii) HET and HOCI
have deferred their fees under the HET/JCC Agreement. After repayment of Tranche
A-1 and Tranche A-2, deferred Base Management Fees and deferred guaranty fees
shall be due and payable PRO RATA to HNOMC out of excess cash flow at such time
and to the extent that EBITDA exceeds $65 million; deferred Incentive Management
Fees shall be due and payable to HNOMC out of excess cash flow after repayment
of any deferred Base Management Fees and deferred guaranty fees at such times
and to the extent that EBITDA exceeds $75 million.
Payments of Fixed Interest in kind or deferrals of fees and other
obligations are possible if JCC does not meet certain EBITDA targets starting
with the fourth year after the Effective Date. If EBITDA for JCC is not in
excess of $28.5 million for the twelve months ending one month prior to each
semi-annual interest payment date, Fixed Interest on the New Bonds will be paid
in kind, the Base and Incentive Management Fees will be deferred, amortization
under the Term Loans will be deferred and the fees due under the HET/JCC
Agreement will be deferred. See Section V.C.4., "The Plan of
Reorganization--Executory Contracts and Unexpired Leases--Management
Agreement." Interest payments not made in kind are payable in cash.
The New Bonds and the New Contingent Bonds will be secured by a lien on
all of the assets of JCC (excluding the Modified Casino Operating Contract, the
Casino's bankroll and the Gross Revenue Share Payments) junior to the liens
securing certain obligations of JCC under the Minimum Payment Guaranty, the A
Term Loan, the Working Capital Facility, and any refinancings thereof which do
not increase the principal amount of indebtedness outstanding and available
thereunder (except to the extent (x) accrued and unpaid interest and/or other
amounts owing with respect to the refinanced indebtedness is refinanced and/or
(y) of the fees and expenses incurred in connection with the refinanced
indebtedness) or decrease the weighted-average maturity thereof, and PARI PASSU
with the liens securing the B Term Loan, and any refinancings thereof which do
not increase the principal amount of indebtedness outstanding and available
thereunder (except to the extent (x) accrued and unpaid interest and/or other
amounts owing with respect to the refinanced indebtedness is refinanced and/or
(y) of the fees and expenses incurred in connection with the refinanced
indebtedness) or decrease the weighted-average maturity thereof. See Section
V.D.2.c., "Plan of Reorganization--Means for Implementation and Execution of the
Plan--Effective Date Transactions--New Bond Documents--New Bonds" and "--New
Contingent Bonds."
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JCC Holding's board of directors will consist of an equal number of (i)
directors elected by the holders of a majority of the shares of Class B New
Common Stock (the "HET DIRECTORS") and (ii) directors elected by the holders of
a majority of the shares of the Class A New Common Stock (the "INDEPENDENT
DIRECTORS" or as initially selected by the Bondholders Committee, the
"BONDHOLDERS DIRECTOR NOMINEES"). JCC Holding will pay reasonable directors'
fees to all of the Independent Directors and HET Directors who are not employees
of HET (or its subsidiaries) (including without limitation annual and
per-meeting fees and, in the discretion of JCC Holding's board of directors,
long-term compensation awards), will pay out-of-pocket expenses for all
directors, and will carry adequate and long-term compensation directors'
insurance for the benefit of all directors. The HET Directors will generally
supervise the day-to-day activities with respect to the JCC Entities, except
upon the occurrence of certain Flip Events (as defined below) relating to
bankruptcy filings by or against HNOMC (as defined below), HET, or certain
related entities or certain defaults under material agreements, in which event
the Independent Directors will supervise the day-to-day activities with respect
to the JCC Entities. Certain Flip Events will require the addition of an
Independent Director, and events constituting a Change of Control (as defined
below) will generally require the addition of an HET Director. Certain
significant transactions relating to the JCC Entities will generally require the
approval of a majority of both the HET Directors and the Independent Directors.
See Section VII.B., "Management of the Reorganized Debtors--Board of Directors
and Management."
Under the Plan, each holder of an Allowed, general, unsecured claim
against HJC will receive payment of 100% of its Allowed claim in cash.
On March 6, 1996, HJC and the City of New Orleans (the "CITY") and the
Rivergate Development Corporation (the "RDC") reached an agreement (the "MARCH 6
AGREEMENT") with respect to amendments to (i) the long-term lease for the
Rivergate site (the "CANAL STREET CASINO LEASE"), (ii) the General Development
Agreement (the "GDA"), which governs the design, development and construction of
the Casino and related facilities, (iii) the lease of the City's municipal
auditorium, where HJC operated a casino on a temporary basis prior to the
chapter 11 filing (the "BASIN STREET CASINO LEASE"), (iv) that certain Agreement
by and between the City and HJC dated as of October 5, 1994 (the "OCTOBER 5
AGREEMENT") concerning additional City payments and (v) other contracts and
plans, including the "open access" program and plans. Subsequent to entering
into the March 6 Agreement, HJC, the City and the RDC engaged in negotiations on
the form of an agreement that would implement the terms of the March 6
Agreement. HJC, the City and the RDC have executed, and on September 12, 1996
the Bankruptcy Court deemed effective upon such execution (see Section IV.D.,
"Events During the Chapter 11 Cases--Litigation with the City of \New Orleans
and the RDC"), the Agreement Regarding Modifications and Related Agreements in
Respect of Amended and Restated Canal Street Casino Lease, Termination of Basin
Street Casino Lease, Amended and Restated General Development Agreement, the
Conditional Use Ordinances and Other Regulatory Matters (as such agreement may
be amended, amended and restated, supplemented or otherwise modified from time
to time, including, without limitation, any modifications included in the forms
of the Lease Documentation (as defined therein) submitted to the Council for the
City on September 12, 1996, and approved by the Council of the City on October
3, 1996, and any forbearance agreement related thereto, the "CITY AGREEMENT"), a
copy of which is attached as Exhibit "A" to the Existing Plan, which agreement
implements and, in some respects, supplements the March 6 Agreement, and
provides for the modification of the Canal Street Casino Lease and the GDA, and
the termination of the Basin Street Casino Lease. Modifications of agreements
as provided in the City Agreement reflect, among other things, (a) the fact that
the Debtors have been the subject of chapter 11 proceedings, (b) the new
ownership and capital structure (including the Term Loans, the Working Capital
Facility, and the Harrah's New Equity Investment), and (c) the revised design
and opening schedule for the Casino. The Plan reflects the terms of the City
Agreement.
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The time periods for various approvals contemplated by the City
Agreement did not timely occur, and each of the City, the RDC and HJC have the
right to terminate the City Agreement. None of such parties has exercised such
rights. The parties are negotiating regarding the terms of the City Agreement
or a forbearance agreement. Pursuant to the City Agreement, the City Council on
October 3, 1996 approved the form of the amended Canal Street Casino Lease and
exhibits, amended General Development Agreement and exhibits, and the Basin
Street Casino Termination Agreement and exhibits. Prior to confirmation of the
Plan, HJC anticipates that it will submit further revisions to the City Council
of the amended Canal Street Casino Lease and amended General Development
Agreement and certain of the exhibits thereto with respect to technical changes
in such documentation and related follow-up approvals. There is no assurance
that the parties will agree to an amended City Agreement or a forbearance
agreement or not exercise their rights to terminate the City Agreement. Any
such termination or a refusal by the City and RDC to execute and deliver the
amended Canal Street Casino Lease and exhibits and amended General Development
Agreement and exhibits would prevent consummation of the Plan.
Descriptions of agreements contained in this Disclosure Statement
between the City and/or the RDC, on one hand, and HJC or JCC, on the other,
constitute the Debtors' understanding of the documents which is not necessarily
shared by the City or the RDC. Furthermore, in all cases, it is the terms of
the agreements as adopted by these parties and approved by the appropriate
governmental authorities that will govern, rather than these descriptions.
On November 4, 1997, the Governor of the State of Louisiana (the
"STATE") publicly expressed his support for the project with a rolling guaranty
concept. On December 9, 1997, the LGCB, among other things, unanimously
approved the Modified Casino Operating Contract for submission to the Governor
of the State with the request that he submit the Modified Casino Operating
Contract to the State legislature for its approval. SEE Section IX.A.1.,
"Certain Risk Factors to be Considered--Overall Risks to Recovery by Holders of
Claims--Uncertainty Regarding Gaming Regulation." The Plan and the Projected
Financial Information (attached to this Disclosure Statement as Exhibit B) were
prepared in accordance with the terms of the State Term Sheet (attached to the
Plan as Exhibit B thereto). The Modified Casino Operating Contract reflects the
reduced size of the Casino (as compared with the original plans), the revised
opening schedule for the Casino and certain other non-economic modifications.
The Plan does not provide for any concessions regarding the minimum compensation
to the State mandated by the Gaming Act (as defined below).
Current holders of equity interests in the Debtors will not receive any
distributions on account of such equity interests under the Plan.
The Plan provides for releases by the Debtors of claims against other
parties in interest and consensual releases by non-debtors of claims against
other non-debtor persons or entities. Such releases, and injunctions in support
of such releases, are summarized and described in greater detail in Section V.B.
below.
In connection with the Plan, HET and HOCI will execute and deliver
guarantees for the completion of the Casino for the benefit of (i) the City and
the RDC, (ii) the LGCB, (iii) the holders of New Bonds and New Contingent Bonds,
and (iv) the lenders under the Bank Loans (the "NEW COMPLETION GUARANTEES"). In
addition, HET and HOCI will guarantee payment in full of Allowed Unsecured
Claims of HJC. The failure of the lenders under the Term Loans to disburse
funds will not terminate the obligations of HET and HOCI under the New
Completion Guarantees. See Section V.C.5., "The Plan of
Reorganization--Executory Contracts and Unexpired Leases--Completion
Guarantees."
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Also, as discussed above, HET and HOCI have proposed to provide a
Minimum Payment Guaranty for the fiscal years ending March 31, 1999 and March
31, 2000, which is renewable on a yearly basis through March 31, 2004, subject
to certain non-renewal conditions and early termination provisions. By entering
into the HET/JCC Agreement and providing a Minimum Payment Guaranty, HET and
HOCI are not obligated to provide a Minimum Payment Guaranty for the entire term
of the Modified Casino Operating Contract, but rather have proposed only to
provide it for the period and on terms and conditions specified therein. HET
and HOCI have expressly informed JCC, the State and the LGCB that they have not
agreed to renew a Minimum Payment Guaranty beyond March 31, 2004, or in any
prior year in which HET's and HOCI's obligation to furnish a Minimum Payment
Guaranty does not renew by the express terms of the HET/JCC Agreement. HET and
HOCI have informed the Debtors, JCC, the State and the LGCB that any decision
they make concerning whether to renew any Minimum Payment Guaranty or the
HET/JCC Agreement will be made in their sole discretion, acting only in their
best interests. The State and the LGCB acknowledge and the JCC Entities will
acknowledge that (i) HET and HOCI are not obligated to and have not given any
assurances to the Debtors, JCC, the State or the LGCB that they will renew the
HET/JCC Agreement beyond March 31, 2004, or renew any Minimum Payment Guaranty
for any earlier fiscal year in which HET's and HOCI's obligation to furnish a
Minimum Payment Guaranty does not renew under the express terms of the HET/JCC
Agreement, (ii) HET and HOCI have the right to make any such renewal decision by
considering only their best interests, and (iii) HET and HOCI need not consider
the interests of any other parties in making any such renewal decision,
notwithstanding that HET and HOCI are involved in a number of capacities in
respect of the JCC Entities. Upon termination of the HET/JCC Agreement, JCC
will be required to secure a substitute guarantor to provide a Minimum Payment
Guaranty or the Casino will be unable to open under the terms of the Modified
Casino Operating Contract. Such substitute guarantor may or may not be HET and
there can be no assurance that JCC will be able to locate a substitute guarantor
on satisfactory terms.
In accordance with the provisions of the Bankruptcy Code, claims
against, and equity interests in, the Debtors are divided into classes in the
Plan. The classification of claims and interests and their treatment under the
Plan may be summarized as follows:
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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ADMINISTRATIVE CLAIMS Each holder of an Allowed Administrative
(Unclassified) Expense Claim against a Debtor will receive
(i) the amount of such holder's Allowed Claim
Costs of the bankruptcy in one cash payment on, or as soon as
proceeding and expenses of practicable after, the later of the Effective
operating Debtors' businesses Date and the day on which such Claim becomes an
as specified in Section 503(b) Allowed Claim (but in no event later than the
of the Bankruptcy Code. tenth Business Day after the later of those two
dates) , or (ii) such other treatment as may be
agreed upon in writing by the applicable Debtor
and such holder; PROVIDED, HOWEVER, that an
Administrative Expense Claim representing a
liability incurred in the ordinary course of
business of a Debtor may be paid in the
ordinary course of business by such Debtor, and
PROVIDED FURTHER, that the payment of an
Allowed Administrative Expense Claim
representing a right to payment under Sections
365(b)(l)(A), 365(b)(l)(B), or Section
365(d)(3) of the Bankruptcy Code may be made in
one or more cash payments over a period of time
as is determined to be appropriate by the
Bankruptcy Court.
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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PRIORITY TAX CLAIMS
(Unclassified) Except to the extent that the holder of an
Allowed Priority Tax Claim agrees to a
Allowed Claims entitled to different treatment, each holder of an
priority under Sections 502(i) Allowed Priority Tax Claim, at the sole
and 507(a)(8) of the option of JCC, will receive (i) cash in an
Bankruptcy Code. amount equal to such Allowed Priority Tax
Claim on the later of the Effective Date and
the date such Priority Tax Claim becomes an
Allowed Priority Tax Claim, or as soon
thereafter as is practicable (but in no
event later than the tenth Business Day
after the later of those two dates), or (ii)
equal quarterly cash payments in an aggregate
amount equal to such Allowed Priority Tax
Claim, together with inetrest at a fixed
annual rate to be determined by the
Bankruptcy Court or otherwise agreed to by
JCC and such holder, over a period through
the sixth anniversary of the date of
assessment of such Allowed Priority Tax
Claim, or upon such other terms determined
by the Bankruptcy Court to provide the holder
of such Allowed Priority Tax Claim deferred
cash payments having a value, as of the
Effective Date, equal to such Allowed
Priority Tax Claim.
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CLASS A1: OTHER PRIORITY IMPAIRED: Each holder of an Allowed Class A1
CLAIMS AGAINST HJC Claim will receive cash in an amount equal to
such Allowed Claim on the later of the
Class A1 consists of all Effective Date and the date such Claim becomes
Allowed Other Priority Claims an Allowed Claim, or as soon as practicable
against HJC. thereafter.
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CLASS A2: NON-BONDHOLDER IMPAIRED: Each Allowed Class A2 Claim, except
SECURED CLAIMS AGAINST HJC as provided in the immediately following two
sentences, notwithstanding any contractual
Class A2 consists of all provision or applicable law that entitles the
Allowed Secured Claims against holder of an Allowed Claim in Class A2 to
HJC other than the Secured demand or receive payment of such Claim prior
Claims specified in Class A3, to the stated maturity of such Claim from and
A4 or A5. after the occurrence of a default, will be
reinstated and rendered unimpaired in
accordance with Section 1124(2) of the
Bankruptcy Code. JCC may, in its discretion,
assign, abandon or surrender any property
securing any Secured Claim in Class A2 to the
holder of such Secured Claim, which will result
in impaired treatment under the Bankruptcy
Code. The Court will determine the value of any
such property so assigned, abandoned or
surrendered, and any Deficiency Claim resulting
therefrom will be paid as a Class A7 or A8
Claim.
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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CLASS A3: BANK CLAIMS AND OLD IMPAIRED: The Claim of each holder in Class
BANK COLLATERAL AGENT CLAIMS A3(a) shall be allowed in an amount equal to:
AGAINST HJC (i) with respect to any holder that
participated in the pre-petition standby letter
Class A3 consists of two of credit issued by BTCo in the amount of
separate subclasses. Class $5,000,000 and previously drawn in full by
A3(a) consists of all Allowed Broadmoor as the beneficiary, such holder's
Secured Claims of the Pro Rata Share of the sum of $5,000,000 plus
Participating Banks and Old all unpaid interest thereon (at the nondefault
Bank Collateral Agent against rate specified in the Old Bank Credit
HJC and Class A3(b) consists Documents) and unpaid fees in respect of such
of all Allowed Secured Claims letter of credit that accrue through the
of the Non-Participating Banks Effective Date; (ii) with respect to any holder
against HJC. that participated in the undrawn Standby Letter
of Credit S10269 issued by BTCo in the amount
of $1,500,000 in favor of the City, such
holder's Pro Rata Share of the unpaid fees in
respect of such letter of credit that accrue
through the Effective Date; (iii) the amount
paid by such holder respect of the Wachtell
Fees and Expenses (as defined below) which
shall not include any fees and expenses in
connection with the Convertible Junior
Subordinated Debentures, the A Term Loan, the
B Term Loan and/or the Working Capital
Facility), provided that such holder purchases
on the Effective Date additional Convertible
Junior Subordinated Debentures in an amount
equal to its Pro Rata Share of the Wachtell
Fees and Expenses; and (iv) in the case of the
Administrative Agent, all the unpaid facing
fees arising under the Old Bank Credit
Agreement through the Effective Date;
provided, however, that Class A3(a) Claims
of FNBC as a Participating Bank and Old Bank
Collateral Agent will be allowed and
otherwise treated in accordance with the
provisions of the FNBC Settlement Agreement.
Each Allowed Class A3(a) Claim will be
paid from the Withheld Funds on the
Effective Date by the Administrative Agent,
and, to the extent such Withheld Funds are
insufficient to pay Allowed Class A3(a)
Claims of FNBC, the unpaid portion of
FNBC's Allowed Class A3(a) Claim will be
paid by JCC. Any remaining Withheld Funds
will be remitted by the Administrative Agent
to the Old Bank Collateral Agent for
distribution pursuant to Section 4.3(b)(ii)
of the Plan. The Participating Banks and
FNBC as the Old Bank Collateral Agent will
waive all of their other Class A3(a) Claims
against the Debtor and will not receive any
distributions on account thereof. As a
condition to the allowance of their
respective Class A3(a) Claims, the holders
of Class A3(a) Claims will purchase on the
Effective Date Convertible Junior
Subordinated Debentures in an aggregate
principal amount equal to the sum of (x)
$11,000,000 plus (y) in the case of any
holders of Class A3(a) Claims electing to
have the portion of their Class A3(a) Claim
described in clause (iii) above allowed, the
aggregate amount of Class A3(a) Claims
allowed pursuant to clause (iii). The
$11,000,000 portion of the Convertible
Junior Subordinated Debentures to be
purchsed by each holder of a Class A3(a)
Claim pursuant to clause (x) in the
immediately preceding sentence will be based
on the ratio of the amount of fees and
expenses paid
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14
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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Claim pursuant to clause (x) in the
immediately preceding sentence shall be
based on the ratio of the amount of fees and
expenses paid to such holder in connection
with the credit facility under the Old Bank
Credit Documents to the aggregate amount of
fees and expenses paid to all holders of
Class A3(a) Claims in connection with such
credit . Notwithstanding anything to the
contrary in the Plan, FNBC will be obligated
to purchase the principal amount of
Convertible Junior Subordinated Debentures
specified in the FNBC Settlement Agreement,
and $357,150 of such principal amount will
be deemed to have been purchased by FNBC as
a holder of Class A3(a) Claims and will be
credited against the $11,000,000 in
aggregate principal amount of Convertible
Junior Subordinated Debentures to be
purchased by holders of Class A3(a) Claims
pursuant to the terms of Section 4.3(a)(ii)
of the Plan. Each holder of an Allowed
Class A3(b) Claim (i) will receive from the
Withheld Funds remitted to the Old Bank
Collateral Agent pursuant to the Plan as
soon as practicable after the later of the
Effective Date and the date on which all of
the Allowed Secured Claims in Class A3(b)
have been estimated pursuant to the
Estimation Order, an amount of cash equal to
the lesser of (A) the portion of such
holder's estimated Allowed Secured Claim
that has been liquidated as of the date of
such Estimation Order and (B) the product of
(x) the amount of such Withheld Funds and
(y) a fraction, the numerator of which is
the amount specified in the immediately
preceding clause (A) above and the
denominator of which is the aggregate amount
of each holder's estimated Allowed Secured
Claim that has been liquidated as of the
date of the Estimation Order, (ii) will
retain a portion of the Withheld Funds equal
to the aggregate amount of each such
holder's estimated Class A3(b) Claim that
remains Contingent as of such date, which
retained funds shall secure the unliquidated
portion of each holder's unliquidated
estimated Class A3(b) Claims, and (iii) will
remit promptly to JCC the balance of such
Withheld Funds. The Plan provides for
subsequent distributions from the Withheld
Funds to holders of Allowed Class A3(b)
Claims on account of their Class A3(b)
Claims after each six-month anniversary of
the Effective Date as estimated Allowed
Class A3(b) claims are liquidated. In the
event the Claims of the holders in Class
A3(b) are allowed as Secured Claims in an
aggregate amount in excess of the amount of
Withheld Funds distributed to the Old Bank
Collateral Agent pursuant to the Plan, then
each such holder will receive the
"indubitable equivalent" as determined by
Final Order of the Bankruptcy Court with
respect to that portion of such holder's
Allowed Secured Claim in excess of the Pro
Rata Share of such Withheld Funds.
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15
<PAGE>
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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CLASS A4: BONDHOLDER CLAIMS
AGAINST HJC IMPAIRED: Each record holder of an Allowed
Class A4 Claim will receive (i) 8.529 shares
Class A4 consists of all of Class A New Common Stock for each $1,000
Allowed Secured and Unsecured of the principal amount of the Old Bonds held
Claims of the Bondholders by such holder on the Distribution Record Date,
against HJC. (ii) $431 in principal amount of New Bonds for
each $1,000 of the principal amount of the
Old Bonds held by such holder on the
Distribution Record Date, (iii) its Pro Rata
Share of the New Contingent Bonds, (iv) its
Pro Rata Share of the interests in the
proceeds of the Assigned Litigation Claims
allocated to holders of Allowed Class A4
Claims (as of the Distribution Record Date)
and/or Releasing Bondholders, as applicable,
under Section 5.9 of the Plan and (v) in the
case of any holder which is a Releasing
Bondholder (as defined below), from the
Release Pool (as defined below) (as of the
Release Pool Distribution Record Date), as
consideration for its release of claims
against the HET Group, the Debtors Group,
the Bondholders Committee Group, the City
Group, the State Group, the NOLDC Group, the
Grand Palais Group and the Bank/Underwriter
Group (each as defined below) if such holder
specifically elects to release such claims
as provided in Section 5.2 of the Plan,
3.448 shares of Class A New Common Stock for
each $1,000 in principal amount of Old Bonds
held by such holder on the Release Pool
Distribution Record Date plus its Pro Rata
Share (based on the total principal amount
of Old Bonds held by all Releasing
Bondholders) of Class A New Common Stock
consisting of 86.67% of the Unsubscribed
Release Pool Shares (as defined below)
(subject to the Plan's restriction on the
issuance of fractional shares). The
foregoing distributions are deemed to
include the distribution to which each
holder of an Allowed Claim in Class A4 is
entitled as a holder of an Allowed Claim in
Class B3.
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CLASS A5: OLD INDENTURE IMPAIRED: All of FNBC's Claims as Old Indenture
PREDECESSOR TRUSTEE AND OLD Predecessor Trustee and Old Indenture
INDENTURE PREDECESSOR Predecessor Collateral Agent will be allowed
COLLATERAL AGENT CLAIMS and otherwise treated in accordance with the
AGAINST HJC provisions of the FNBC Settlement Agreement.
Class A5 consists of all
Allowed Secured Claims of the
Old Indenture Predecessor
Trustee and the Old Indenture
Predecessor Collateral Agent
against HJC.
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16
<PAGE>
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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CLASS A6: WARN ACT CLAIMS
IMPAIRED: On or as soon as practicable after
Class A6 consists of all the Effective Date, JCC shall pay the sum of
Allowed WARN Act Claims $2.265 million MINUS the fees and expenses of
against HJC of holders who are WARN Act Counsel incurred in connection with
part of the Certified WARN Act its representation of the holders of WARN Act
Class and are bound by the Claims, and a portion of certain taxes
WARN Act Settlement. attributable to the WARN Act settlement (all
as more fully described in the February 20,
1997 Bankruptcy Court order approving the
settlement of WARN Act Claims), to holders
of Allowed 11/95 WARN Act Claims based on
their respective Pro Rata Interests in the
balance of the $2.265 million payment,
subject to any tax or other withholdings
required by law. The Allowed amount of the
WARN Act Claim of each 11/95 WARN Act
Claimant for purposes of determining his or
her Pro Rata Interest shall be determined by
WARN Act Counsel in its reasonable
discretion pursuant to a set of objective
and nondiscriminatory criteria to be filed
with the Bankruptcy Court on or before the
Effective Date. In addition, to the extent
such positions are or become available, JCC
shall offer each 11/95 WARN Act Claimant
re-employment to his or her former position
or, if his or her former position no longer
exists or is not then available, to a
substantially equivalent position, prior to
offering employment to such position to any
other Person other than any 11/95 WARN Act
Claimant.
As for the 8/95 WARN Act Claimants, JCC (A)
shall place each 8/95 WARN Act Claimant on a
preferential re-hire list for one year
following the date on which the Casino opens
for business, and (B) to the extent such
positions are or become available, shall
offer re-employment to his or her former
position or, if his or her former position
no longer exists or is not then available,
to a substantially equivalent position,
prior to offering employment to such
position to any Person other than 11/95 WARN
Act Claimant, any 8/95 WARN Act Claimant or
any Person who was formerly employed and laid
off by the Flamingo Casino.
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CLASS A7: GENERAL UNSECURED IMPAIRED: JCC will pay to each holder of an
CLAIMS AGAINST HJC Allowed Class A7 Claim cash in an amount
equal to such Allowed Claim on the later of the
Class A7 consists of all of Effective Date and the date on which such
Allowed Unsecured Claims Claim becomes an Allowed Claim, or as soon as
against HJC other than the practicable thereafter.
Unsecured Claims of the
Bondholders and the Unsecured
Claims in Class A6 or A8.
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17
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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CLASS A8: CLAIMS AGAINST HJC IMPAIRED: Holders of Class 8 Claims will not
receive any distributions on account of such
Class A8 consists of all Claims, and on the Effective Date, all Class
Allowed Penalty Claims (as A8 Claims will be extinguished; provided,
defined below) against HJC. however, that if a Valuation Order (as defined
below) is entered on or before the Effective
Date, each holder of an Allowed Claim in
Class A8 will receive its Pro Rata Share of
the interests in the proceeds of Assigned
Debtor Litigation Claims as allocated to
holders of Allowed Class A8 Claims under
Section 5.9 of the Plan. Each holder of a
Class A8 Claim is conclusively presumed to
have rejected the Plan as a holder of a
Class A8 Claim and is not entitled to vote
to accept or reject the Plan.
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CLASS A9: EQUITY INTERESTS IMPAIRED: Holders of Allowed HJC Equity
IN HJC Interests will not receive any distributions
on account of such Equity Interests; and on
Class A9 consists of all the Effective Date, all Equity Interests in
Allowed Equity Interests in HJC will be extinguished.
HJC, and any option, warrant
or other agreement requiring
the issuance of any such
Equity Interest.
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CLASS B1: OTHER PRIORITY IMPAIRED: Each holder of an Allowed Class B1
CLAIMS AGAINST FINANCE CORP. Claim will receive cash in an amount equal to
such Allowed Claim on the later of the
Class B1 consists of all Effective Date and the date such Claim becomes
Allowed Other Priority Claims an Allowed Claim, or as soon as practicable
against Finance Corp. thereafter.
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CLASS B2: BANK CLAIMS AGAINST IMPAIRED: Each holder of an Allowed Class B2
FINANCE CORP. Claim will receive, as soon as practicable
after the later of the Effective Date and the
Class B2 consists of all date on which all of the Allowed Secured
Allowed Secured Claims of the Claims in Class B2 have been allowed or
Banks and the Old Bank disallowed by Final Order, its PRO RATA share
Collateral Agent against (based on the ratio of its Allowed Class B2
Finance Corp. Claim to the aggregate amount of all Allowed
Secured Claims in Class B2 and Class B3) of
$1,000 in cash. The distribution to which
each holder of an Allowed Class B2 Claim
which is also a holder of an Allowed Class
A3(a) Claim is entitled shall be deemed part
of, and satisfied upon receipt of, the
distributions which such holder is entitled
to receive as a holder of an Allowed Class
A3(a) Claim.
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CLASS B3: BONDHOLDER CLAIMS IMPAIRED: Each holder of an Allowed Class B3
AGAINST FINANCE CORP. Claim will receive its Pro Rata Share of
shares of Class A New Common Stock and New
Class B3 consists of all Bonds which, in the aggregate, have a value
Allowed Secured and Unsecured equal to the product of (i) $1,000 and (ii) a
Claims against Finance Corp. fraction, the numerator of which is the
of the Bondholders. aggregate amount of Allowed Secured Claims in
Class B3, and the denominator of which is
the aggregate amount of Allowed Secured
Claims in Class B2 and Class B3. The
distribution to which each holder of an
Allowed Class B3 Claim is entitled shall be
deemed part of, and satisfied upon receipt
of, the distributions which such holder is
entitled to receive as a holder of an
Allowed Class A4 Claim.
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18
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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CLASS B4: WARN ACT CLAIMS
AGAINST FINANCE CORP.
IMPAIRED: Each holder of an Allowed Claim in
Class B4 consists of all Class B4 will be deemed to have received on
Allowed WARN Act Claims account of his or her Class B4 Claims, and in
against Finance Corp. of full satisfaction thereof, the distribution
holders who are part of the and/or other treatment he or she receives as
Certified WARN Act Class and a holder of a Class A6 Claim pursuant to
are bound by the WARN Act Section 4.6 of the Plan, and no other
Settlement. distribution will be provided to such holder
on account of his or her Class B4 Claims.
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CLASS B5: GENERAL UNSECURED IMPAIRED: JCC will pay to each holder of an
CLAIMS AGAINST FINANCE CORP. Allowed Claim in Class B5 cash in an amount
equal to such Allowed Claim on the later of
Class B5 consists of all the Effective Date and the date on which such
Allowed Unsecured Claims Claim becomes an Allowed Claim, or as soon as
against Finance Corp. other practicable thereafter.
than the Unsecured Claims of
the Bondholders.
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CLASS B6: PENALTY CLAIMS IMPAIRED: Holders of Class B6 Claims will not
AGAINST FINANCE CORP. receive any distributions on account of such
Claims, and on the Effective Date, all
Class B6 consists of all Class B6 Claims will be extinguished; provided,
Allowed Penalty Claims against however, that if a Valuation Order is entered
Finance Corp. on or before the Effective Date, each holder of
an Allowed Class B6 Claim will be deemed to
have received on account of its Class B6 Claim,
and in full satisfaction thereof, the
distribution it receives as a holder of a Class
A8 Claim pursuant to Section 4.8 of the Plan.
Each holder of a Class B6 Claim is conclusively
presumed to have rejected the Plan as a holder
of a Class B6 Claim and is not entitled to
vote to accept or reject the Plan.
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CLASS B7: EQUITY INTERESTS IMPAIRED: Holders of Allowed Finance Corp.
IN FINANCE CORP. Equity Interests will not receive any
distributions on account of such Equity
Class B7 consists of all Interests. On the Effective Date, all Equity
Allowed Equity Interests in Interests in Finance Corp. will be
Finance Corp., and any option, extinguished.
warrant or other agreement
requiring the issuance of any
such Equity Interest.
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CLASS C1: OTHER PRIORITY
CLAIMS AGAINST HNOIC IMPAIRED: Each holder of an Allowed Class C1
Claim will receive cash in an amount equal to
Class C1 consists of all such Allowed Claim on the later of the
Allowed Other Priority Claims Effective Date and the date such Claim becomes
against HNOIC. an Allowed Claim, or as soon as practicable
thereafter.
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19
<PAGE>
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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CLASS C2: SECURED CLAIMS
AGAINST HNOIC
IMPAIRED: Each Allowed Class C2 Claim, except
Class C2 consists of all as provided in the immediately following two
Allowed Secured Claims against sentences, notwithstanding any contractual
HNOIC. provision or applicable law that entitles
the holder of an Allowed Claim in Class C2
to demand or receive payment of such Claim
prior to the stated maturity of such Claim
from and after the occurrence of default,
will be reinstated and rendered unimpaired
in accordance with Section 1124(2) of the
Bankruptcy Code. JCC may, in its
discretion, assign, abandon or surrender any
property securing any Secured Claim in Class
C2 to the holder of such Secured Claim,
which will result in impaired treatment
under the Bankruptcy Code. The Court will
determine the value of any such property so
assigned, abandoned or surrendered, and any
Deficiency Claim resulting therefrom will be
paid as a Class C5 or C7 Claim.
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CLASS C3: WARN ACT CLAIMS IMPAIRED: Each holder of an Allowed Claim in
AGAINST HNOIC Class C3 will be deemed to have received on
account of his or her Class C3 Claims, and in
Class C3 consists of all full satisfaction thereof, the distribution
Allowed WARN Act Claims and/or other treatment he or she receives
against HNOIC of holders who as a holder of a Class A6 Claim pursuant to
are part of the Certified WARN Section 4.6 of the Plan, and no other
Act Class and are bound by the distribution will be provided to such holder
WARN Act Settlement. on account of his or her Class C3 Claims.
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CLASS C4: UNSECURED CLAIMS IMPAIRED: Each holder of an Allowed Class C4
AGAINST HNOIC (FOR WHICH HJC Claim will be deemed to have received on
IS LIABLE) account of its Class C4 Claim the distribution
it receives as a holder of a Class A7 Claim
Class C4 consists of all pursuant to Section 4.7 of the Plan, and no
Allowed Unsecured Claims other distribution will be provided to such
against HNOIC for which HJC is holder on account of its Class C4 Claims.
also liable.
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CLASS C5: GENERAL UNSECURED IMPAIRED: Each holder of an Allowed Class C5
CLAIMS AGAINST HNOIC Claim will receive the lesser of the amount of
its Allowed Class C5 Claim or its Pro Rata
Class C5 consists of all Share of $1,000 in cash.
Allowed Unsecured Claims
against HNOIC other than
Unsecured Claims in Class C3,
C4, C6 or C7.
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CLASS C6: NOLDC/SHOWBOAT IMPAIRED: In accordance with the terms of the
CLAIM AGAINST HNOIC NOLDC Plan and the NOLDC Shareholders/HET
Settlement Agreement, consideration will be
Class C6 consists of the furnished directly to Showboat in exchange
Allowed Claim of NOLDC against for a full release from Showboat to NOLDC. This
HNOIC for reimbursement of a transaction will result in a release of NOLDC's
portion of the amount owing by Class C6 Claim. No distributions will be
NOLDC to Showboat. provided to NOLDC on account of its Class C6
Claim.
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<PAGE>
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CLASS DESCRIPTION TREATMENT UNDER THE PLAN
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CLASS C7: PENALTY CLAIMS
AGAINST HNOIC
IMPAIRED: Holders of Class C7 Claims will not
Class C7 consists of all receive any distributions on account of such
Allowed Penalty Claims against Claims, and on the Effective Date, all Class C7
HNOIC. Claims will be extinguished; provided, however,
that if a Valuation Order is entered on or
before the Effective Date, each holder of an
Allowed Claim in Class C7 will be deemed to
have received on account of its Class C7 Claim,
and in full satisfaction thereof, the
distribution it receives as a holder of a
Class A8 Claim pursuant to Section 4.8 of the
Plan. Each holder of a Class C7 Claim is
conclusively presumed to have rejected the Plan
as a holder of Class C7 Claim and is not
entitled to vote to accept or reject the Plan.
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CLASS C8: EQUITY INTERESTS
IN HNOIC
IMPAIRED: The holder of Allowed Equity
Class C8 consists of all Interests in HNOIC will not receive any
Allowed Equity Interests in distributions on account of such Equity
HNOIC, and any option, warrant Interests. On the Effective Date, all Equity
or other agreement requiring Interests in HNOIC will be extinguished.
the issuance of any such
Equity Interest.
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III. GENERAL INFORMATION
A. DESCRIPTION OF HJC AND EVENTS LEADING TO COMMENCEMENT OF CHAPTER 11 CASES
HJC is a Louisiana general partnership comprised of (i) HNOIC, a
wholly-owned subsidiary of HOCI, which, in turn, is a wholly-owned subsidiary of
HET, (ii) NOLDC and (iii) Grand Palais (collectively, the "PARTNERS"). HJC was
formed on November 29, 1993 for the purposes of developing, owning and operating
the Casino. HJC entered into an exclusive contract (the "CASINO OPERATING
CONTRACT") with the Louisiana Economic Development and Gaming Corporation (the
"LEDGC") to develop and operate the sole land-based casino currently permitted
by law in Orleans Parish, Louisiana and entered into the Canal Street Casino
Lease with the City and the RDC for the site in New Orleans designated by law
for the Casino's development. The site for the Casino is in downtown New
Orleans on the site of the former Rivergate Convention Center at the foot of
Canal and Poydras Streets, adjacent to the City's French Quarter (the
"RIVERGATE"). HJC, the RDC and the City also entered into the GDA which
governed the design, development and construction of the Casino and related
facilities, and the Open Access Program and Plans regarding hiring goals and
programs (the "OPEN ACCESS PROGRAM AND PLANS"). Pursuant to a Casino Management
Agreement (the "CASINO MANAGEMENT AGREEMENT"), HJC engaged Harrah's New Orleans
Management Company ("HNOMC"), a wholly-owned subsidiary of HOCI, to manage the
operations of the Casino. Under the Casino Management Agreement, HNOMC employed
the employees of the Basin Street Casino as agent for HJC.
Certain executives and/or directors of the Debtors are also executives
and/or directors of HET. Among others, Philip G. Satre is the Chairman of the
Board, President and Chief Executive Officer of HET, a member of the Executive
Committee of HJC, a Director and President of Finance Corp., and a Director and
President of HNOIC; and Colin V. Reed is Executive Vice-President and Chief
Financial Officer of HET, a member of the Executive Committee of HJC, a Director
and Senior Vice-President of Finance Corp, and a Director and Senior
Vice-President of HNOIC.
21
<PAGE>
On November 16, 1994, HJC closed a series of transactions to finance
development of the Casino, including (i) a $170 million equity contribution by
the Partners which consisted of cash, fixed assets and project development
expenses incurred by the Partners, (ii) the sale of $435 million of the Old
Bonds, and (iii) bank credit facilities providing for loans of up to $175
million aggregate principal amount (the "BANK CREDIT FACILITIES"). The Old
Bonds and the Bank Credit Facilities were senior obligations of HJC, ranked PARI
PASSU in right of payment, and were secured on an equal and ratable basis (with
certain exceptions) by a substantial portion of HJC's assets, including a first
mortgage and security agreement covering all of the real property interests and
personal property owned by HJC (except the Casino Operating Contract, the
Casino's bankroll and the Gross Revenue Share Payments). The Old Bonds were
also secured, pending disbursement to HJC, by a pledge of a cash collateral
account into which the proceeds from the offering of the Old Bonds were
deposited. In addition to the equity contribution, the Bank Credit Facilities,
and the offering of the Old Bonds, the Partners anticipated that approximately
$72 million of cash would be available from cash flow generated by the
operations of a casino (the "BASIN STREET CASINO") to be operated by HJC in the
City's Municipal Auditorium until the Casino at the Rivergate site was
completed.
In January 1995, HJC began construction of the Casino. The Casino was
scheduled to open early in the second quarter of 1996 and was scheduled to
contain approximately 200,000 square feet of gaming space with at least 5,500
slot machines and approximately 200 table games. At the same time, HJC also
began renovating the Municipal Auditorium adjacent to the north end of the
French Quarter for use as the Basin Street Casino until the Casino opened at the
Rivergate site.
On May 1, 1995, the Basin Street Casino opened with approximately
76,000 square feet of net gaming space, 3,046 slot machines and approximately 85
table games. The Basin Street Casino was open 24 hours a day, seven days a
week, except for approximately 65 hours from May 9 to May 11, 1995, when HJC was
forced to close the Basin Street Casino because of a flood in the New Orleans
area.
HJC had originally projected that the Basin Street Casino would have
gross gaming revenues of approximately $395 million per year, or an average of
approximately $33 million a month. Instead, gross gaming revenues from the
Basin Street Casino for the months of May, June and July 1995 were $11.2
million, $13.2 million and $14.8 million, respectively, and HJC suffered net
losses of $15.2 million, $14.0 million and $14.2 million, respectively, in those
three months. In an attempt to reduce such losses, in August, 1995 HJC reduced
the work force in the Basin Street Casino by approximately 15%. HJC also
reduced the number of its slot machines in the Basin Street Casino from 3,046 to
2,150. Gross gaming revenues were not adversely affected by these changes.
Gross revenues for August, September and October 1995 were $13.3 million, $12.0
million and $14.4 million, respectively. Operating results did not improve,
however. HJC posted net losses in August, September and October 1995 of $13.5
million, $12.3 million and $12.0 million, respectively.
HJC believes that the Basin Street Casino's results were principally
impacted by the location of the Basin Street Casino (which is outside the
traditional area of entertainment activity and tourist visitation in New
Orleans), the competition from the established Mississippi Gulf Coast gaming
marketplace, a slower than usual summer tourist season in New Orleans, and the
availability of dockside riverboat gaming in Louisiana. HJC believes that such
riverboats, when permitted to remain moored to their docks and allow continuous
ingress and egress of customers, provided enhanced and direct competition with
the Basin Street Casino as land-based casinos.
By November 1995, all of the Partners' equity contribution and
substantially all of the
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proceeds from the offering of the Old Bonds had been depleted. HJC had spent
approximately $607 million on the construction of the Casino and renovation of
the Basin Street Casino, the purchase of equipment and operating systems, the
payment of interest expense on the Old Bonds and the Bank Credit Facilities, and
the payment of rent and compensation to the City and the State. Construction of
the Casino was approximately 60% complete and, as a result of design
modifications and project cost overruns, including the addition of hard cost
contingencies, the approved project budget for the Casino and the Basin Street
Casino had increased from the original amount of $815 million to $823.5 million;
however, the actual cost of constructing the Casino as originally designed is
likely to have exceeded this amount. In addition, as set forth above, the Basin
Street Casino had suffered significant operating losses in every month of
operation.
During a meeting on November 19, 1995, BTCo, acting as agent for the
lending banks under the Bank Credit Facilities, informed HNOIC, the partner of
HJC responsible for financing matters under HJC's Partnership Agreement, that
the lending banks would not disburse funds to HJC under the terms of the Bank
Credit Facilities. BTCo advised HNOIC that after reviewing certain financial
information of HJC, including HJC's forecasts of reduced gross gaming revenues
for the Casino, it believed that there was a material adverse change in the
financial prospects of HJC under the Bank Credit Facilities. Subsequently,
HNOIC advised Grand Palais and NOLDC, the other partners of HJC, of such
developments. Faced with an absence of funding because of BTCo's action, on
November 21, 1995, HJC decided to close the Basin Street Casino and suspend
construction of the Casino. HJC also decided to file for bankruptcy protection.
On November 21, 1995, BTCo declared the Bank Credit Facilities in default,
accelerated the maturity of and terminated the bank loans, and withdrew
$157 million of the cash on deposit in the bank's cash collateral account at
First National Bank of Commerce (together with its successors and assigns,
"FNBC"), the collateral agent under the Bank Credit Facilities. Thereafter, on
November 22, 1995, HJC and Finance Corp. filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy Code. On December 22, 1995, HNOIC filed a
voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code. The
filing by HNOIC was made to facilitate efforts to reorganize HJC.
B. DESCRIPTION OF THE CASINO
Under the Plan, the Basin Street Casino will not re-open. See
Section V.C.8., "The Plan of Reorganization--Executory Contracts and
Unexpired Leases--Basin Street Casino Lease." The Casino is scheduled to
open, subject to receipt of the appropriate regulatory approvals, 12 months
after the Effective Date and will include 100,000 square feet of net gaming
space, a 250-seat buffet, the Poydras Tunnel Area (as defined below), two
parking garages and approximately 15,000 square feet of multi-function,
special event, food service and meeting-room space on the first floor of the
premises (collectively, "CASINO--PHASE I"). JCC may elect to include an
additional 30,000 square feet of net gaming space (for a total of 130,000
square feet of net gaming space) if JCC elects to proceed with such
additional 30,000 square feet of net gaming space and if JCC's EBITDA and
customer demand reach levels appropriate to justify further expansion of the
Casino.
Concurrent with the construction of Casino--Phase I, approximately
150,000 square feet of multipurpose non-gaming entertainment space on the second
floor of the premises will be constructed to the point at which the shell of the
structure is complete and the space is suitable for tenant build-out ("SECOND
FLOOR SHELL CONSTRUCTION--PHASE II"). Subject to entering into tenant leases,
the build-out of non-gaming tenant improvements on the second floor will begin
during or following completion of Second Floor Shell Construction--Phase II.
Second Floor Shell Construction--Phase II is scheduled to be completed before or
substantially concurrently with the opening of Casino--Phase I.
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The completion and opening of the Casino in accordance with the
foregoing schedule is subject to, among other things, timely receipt of
State, City and other regulatory approvals, customary commercial conditions,
timely confirmation of the Plan, and other considerations. See Section
IX.A., "Certain Risk Factors to Be Considered--Overall Risks to Recovery By
Holders of Claims--Uncertainty Regarding Gaming Regulation," "--Ability to
Commence Operations as Scheduled," and "--Uncertainty Regarding City and
State Approvals."
As redesigned pursuant to the Plan, the Casino will contain four
themed areas named The Jazz Court, The Mardi Gras Court, The Smuggler's Court
and The Court of Good Fortune. The remaining space will be used for additional
gaming activities, a food service area, casino support facilities, and
multi-function, special event and meeting-room space. The Jazz Court will have
a raised domed ceiling and occupy the center of the Casino. The Casino's design
will continue to reflect the architectural heritage of 19th Century New Orleans
and will be designed to complement the City's many tourist highlights. To
maintain operational efficiency and a dynamic atmosphere, the Casino will be
designed so that individual gaming areas can be opened or closed to patrons
depending on volume. Parking for between 400 and 500 cars and approximately
145,000 square feet of back-of-house and support areas will be provided
underneath the main gaming floor. Across Poydras Street and connected to the
Casino by an underground tunnel will be a newly constructed parking facility
which will contain approximately 1,550 parking spaces.
As part of the redesigned Casino, the second floor will be initially
developed for non-gaming uses. A group consisting of representatives of the RDC
and JCC will develop a master plan for the initial build-out and leasing of the
second floor for the non-gaming uses. The master plan is expected to be
approved following the Effective Date. The master plan is intended to establish
(i) leasing guidelines regarding rent, tenant improvements and concessions,
(ii) permissible uses, (iii) guidelines for brokerage fees, (iv) an initial
capital improvement budget, and (v) an operating budget for the first year of
second-floor operation. The second floor of the Casino is anticipated to be
ready for leasing following the opening of Casino--Phase I. The tenant
improvement build-out and development is scheduled to begin following the
completion of Second Floor Shell Construction--Phase II. The initial non-gaming
tenant improvement build-out and development will be consistent with the master
plan. The LGCB shall have approval rights over such master plan based upon the
terms of the Gaming Act. The LGCB shall also have the authority to approve all
subleases and uses on the second floor to ensure that such use is consistent
with the Gaming Act and the Rules and Regulations.
JCC will be permitted to lease the second floor to JCC Development
Company, L.L.C., a single member limited liability company that will, directly
or indirectly, be wholly-owned by JCC Holding ("JCC DEVELOPMENT"). See Section
V.C.2., "The Plan of Reorganization--Executory Contracts and Unexpired
Leases--Canal Street Casino Lease." JCC Development will manage and lease the
second floor development in a manner consistent with the master plan. JCC may
convert any portion of the second floor in the future to gaming use, subject to
approval of the LGCB and the Modified Casino Operating Contract. If, however,
such conversion were to reduce the sublease revenue payable to the RDC, JCC
would be required to compensate the RDC for such reduction.
Subject to the approval of the LGCB, all games typically available in
Las Vegas casinos, except sports betting, will be permitted at the Casino,
which, under existing law, will be open 24 hours per day, 365 days per year and
will extend credit, with no loss or wagering limits. See Section IX.A.1.,
"Certain Risk Factors to Be Considered--Overall Risks to Recovery by Holders of
Claims--Uncertainty Regarding Gaming Regulation" and Section III.F., "General
Information--Regulation."
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C. CONSTRUCTION
On November 22, 1995, HJC suspended construction of the Casino.
Since the commencement of HJC's bankruptcy case, and pursuant to an order by
the Bankruptcy Court, HJC has negotiated an agreement with Centex Landis
Construction Co., Inc. ("CENTEX"), the primary contractor for the Casino
prior to the filing of HJC's bankruptcy petition, to resume construction to
enclose the Casino. See Section IV.F., "Events During the Chapter 11
Cases--Enclosure of the Casino Structure." HJC has also reached an agreement
with Centex with respect to full-scale construction of the Casino (which
agreement is attached to the Existing Plan as Exhibit "L"). HJC also reached
an agreement with Broadmoor with respect to construction of the Casino's
parking facilities (which agreement is attached to the Existing Plan as
Exhibit "H"). The settlement agreement provides that if the Effective Date
did not occur by July 31, 1997 thereby preventing the issuance of a notice to
proceed, Broadmoor has the right to have its contract deemed rejected and to
pursue its proof of claim, a right Broadmoor has not yet exercised. In the
event Broadmoor exercises that right, HJC would have to negotiate a new
settlement agreement with Broadmoor or have to retain a replacement
contractor to complete the parking facility.
D. DESCRIPTION OF THE MANAGER
Under the Plan, JCC will engage HNOMC to manage the Casino. HNOMC is
an indirect wholly-owned subsidiary of HET and was formed in May 1993 for the
purpose of acting as the manager of the Casino.
HET, though its operating subsidiaries and other affiliates, currently
operates casino entertainment facilities in eight states and Auckland, New
Zealand. Such facilities include: casino hotels in the five traditional U.S.
gaming markets of Reno, Lake Tahoe, Las Vegas and Laughlin, Nevada, and Atlantic
City, New Jersey; riverboat casinos in Joliet, Illinois, Vicksburg and Tunica,
Mississippi, Shreveport, Louisiana, and North Kansas City and St. Louis,
Missouri; casinos on Indian lands near Phoenix, Arizona and Seattle, Washington;
and a land-based casino in Auckland, New Zealand. The marketing strategy for
such facilities is generally designed to appeal primarily to the broad
middle-market gaming customer segment. As of December 31, 1996, HET, through
its operating subsidiaries and other affiliates, operated a total of
approximately 701,200 square feet of casino space, 19,011 slot machines, 941
table games, 6478 hotel rooms or suites, approximately 131,400 square feet of
convention space, 56 restaurants, 6 showrooms and 6 cabarets.
E. CERTAIN PREPETITION LEGAL PROCEEDINGS
An immediate effect of the filing of the above-captioned cases (the
"CHAPTER 11 CASES") by the Debtors was the imposition of the automatic stay
under the Bankruptcy Code which, with limited exceptions, enjoins the
commencement or continuation of litigation against the Debtors. This injunction
remains in effect unless modified or lifted by order of the Bankruptcy Court.
As of the Petition Date (as defined below), the Debtors had been named
as defendants in litigation in which monetary damages were sought. Any Claims
based upon such litigation may be liquidated in the Bankruptcy Court, afforded
the treatment to which such liquidated Claims are entitled under the Plan and
discharged in accordance with the Bankruptcy Code.
In addition, the Debtors were parties to prepetition litigation in
which relief other than, or
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in addition to, monetary damages was sought. A summary of the history and
status of certain of such litigation is set forth below.
1. MCCALL LITIGATION
On April 26, 1993, a lawsuit was filed in the Civil District Court for
the Parish of Orleans (the "CIVIL DISTRICT COURT") captioned MCCALL V. MCCALL,
ET AL. (the "MCCALL LITIGATION"). Plaintiffs asserted an ownership interest in
certain land underlying the Rivergate site and also sought permanent injunctive
relief prohibiting the use of such land for the Casino. The lawsuit also
challenged the manner in which the RDC was formed and its authority to enter
into the Canal Street Casino Lease and the Basin Street Casino Lease. HJC
intervened in the lawsuit and aligned itself with the City and the RDC. On
February 22, 1994, the Civil District Court granted the motion for summary
judgment filed by the City, the RDC and HJC, thereby dismissing all claims. On
February 23, 1995, the state appellate court unanimously affirmed the Civil
District Court's ruling that plaintiffs did not have an ownership interest in
any land underlying the Rivergate site and remanded the case to the Civil
District Court to determine whether plaintiffs had standing to assert the other
claims concerning the authority of the RDC to enter into the Canal Street Casino
Lease and the Basin Street Casino Lease. On April 28, 1995, all parties to the
litigation applied to the Louisiana Supreme Court for writs of certiorari. On
June 30, 1995, the Louisiana Supreme Court unanimously denied all writ
applications. The property claims in this litigation have been resolved in
favor of HJC, the City and the RDC. On December 5, 1995, the Civil District
Court dismissed the cause of action challenging the constitutionality of the RDC
for lack of standing. Harry McCall then filed a notice of appeal.
On March 12, 1996, Harry McCall, one of the claimants in the McCall
Litigation, filed a motion in the Bankruptcy Court seeking relief from the
automatic stay in bankruptcy to pursue this appeal. A hearing on Mr. McCall's
motion for relief from the stay was held on April 2, 1996, following which the
Bankruptcy Court modified the automatic stay to permit the McCall Litigation to
proceed. On April 18, 1996, HJC, the City and the RDC filed a joint motion
asking the Bankruptcy Court to amend and restate its order granting Mr. McCall's
motion for relief from the automatic stay. A hearing on the joint motion was
held on May 13, 1996, and the Bankruptcy Court granted the joint motion.
Specifically, the Bankruptcy Court amended the order granting relief from the
stay to clarify that the automatic stay did not apply, and had never applied, to
the McCall Litigation or any appeal taken therefrom. On October 10, 1996, the
Fourth Circuit Court of Appeals for the State of Louisiana voted 2-1 to reverse
the trial court's dismissal for lack of standing. Under the Louisiana
Constitution, this non-unanimous decision required that the appeal be heard
before a five-judge panel of the same court. Oral argument before the
five-judge panel took place on October 29, 1996 and that panel also reversed the
trial court's dismissal for lack of standing with respect to the cause of action
challenging the constitutionality of the RDC. The City, the RDC and HJC each
applied for a writ of certiorari with the Louisiana Supreme Court, which was
denied without comment.
In addition, on April 6, 1994, Harry McCall filed a motion in Civil
District Court to enforce a purported settlement agreement of the McCall
Litigation entered into with HJC, asserting that he was entitled to receive
settlement proceeds based upon a settlement agreement. HJC does not believe
that a binding settlement agreement was reached with Mr. McCall. On July 8,
1994, the Civil District Court ruled that Mr. McCall's motion was procedurally
defective. He subsequently failed to cure the deficiency and, on September 12,
1994, the court dismissed Mr. McCall's motion to enforce the settlement. Mr.
McCall filed a notice of appeal and, on October 12, 1995, the Fourth Circuit
Court of Appeals for the State of Louisiana reversed the district court's
ruling, allowing Mr. McCall to pursue his claim. On March 12, 1996, Harry and
Henry McCall filed a proof of claim against HJC in the amount of $2,000,000
which appeared to be based
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upon the purported settlement that was the subject of the April 1994 motion in
Civil District Court. They also filed an adversary proceeding in the Bankruptcy
Court in late May of 1996 seeking to enforce the purported settlement agreement.
HJC filed an objection to the McCalls' claim on May 2, 1996. Since then, the
Bankruptcy Court ordered that HJC's objection to the proof of claim and the
adversary proceeding be consolidated for purposes of trial and discovery. At a
hearing on September 16, 1996, the Bankruptcy Court ruled that Thomas Tucker,
attorney for the McCalls, could not be both a witness and attorney in the
matter. The trial was adjourned to give Mr. Tucker time to decide which role he
would take. On September 26, 1996, the McCalls filed a motion seeking an
interlocutory appeal on this decision of the Bankruptcy Court. At that time,
the Bankruptcy Court stayed the underlying action pending a decision on the
appeal. On October 16, 1996, the District Court denied the motion for an
interlocutory appeal. The McCalls' motion for reconsideration of the decision
was also denied. Subsequently, Mr. Tucker elected to be a witness.
On April 18, 1997, the Debtors and Thomas Tucker, Harry McCall,
Henry McCall and Susan LaFaye (an attorney who claims an interest in proceeds of
the McCall Litigation) (the "MCCALL CLAIMANTS") reached a tentative agreement to
settle various litigation and other legal claims, demands and causes of action
(the "MCCALL SETTLEMENT AGREEMENT"). The McCall Settlement Agreement provides,
among other things, that:
(i) The McCall Claimants and the law firm of Tucker & West will withdraw
and dismiss with prejudice any and all proofs of claim and other demands for
payment filed by any one or more of them in the Chapter 11 Cases, including any
adversary proceedings, and also will release any and all claims, demands, suits
and causes of action of any type they have against HJC and other persons
identified in the McCall Settlement Agreement.
(ii) The McCall Claimants will file in HJC's case an amended proof of
claim in which they will jointly assert against HJC an unsecured claim in the
amount of $145,500, which HJC will recognize as a valid and enforceable general,
unsecured claim against HJC.
(iii) On the later of (a) the Effective Date or (b) the date on which a
court of competent jurisdiction enters judgments dismissing all of the
litigation described in (iv) below with prejudice, HJC will deliver payment of
the amended claim to an escrow agent designated in the McCall Settlement
Agreement. Thereafter, the escrow agent will distribute to Ms. LaFaye the sum
of $9,500, and will distribute to the other McCall Claimants, as their interests
may appear, the sum of $87,985. The balance, or $48,015, will be held in
escrow, and will be disbursed together with any accrued interest on the earlier
of (a) the first anniversary of the Effective Date or (b) the date of
commencement of gaming at the Casino. If, however, prior to the date of
commencement of gaming at the Casino, HJC advises the escrow agent that there
has been a default under the McCall Settlement Agreement, there will be no
distribution from escrow until the escrow agent receives an appropriate order or
judgment from the Bankruptcy Court authorizing distribution and identifying the
recipients.
(iv) The McCall Claimants will dismiss with prejudice their adversary
proceeding in HJC's bankruptcy proceeding and all the actions they have filed
relating to HJC and the Casino.
(v) The McCall Claimants and Tucker & West will not, individually or
collectively, take any action, whether directly or acting through any other
person or entity, to oppose the conducting of casino gaming operations
including, but not limited to (a) filing of any suits, actions or other
proceedings against HJC and its successors, (b) seeking to retard, delay or deny
the issuance to HJC and its successors of any
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licenses, orders, grants or other awards by any governmental entity or (c)
assisting any other person with respect to the foregoing.
(vi) Each of the McCall Claimants and Tucker & West will release any and
all claims, demands, suits and causes of action of any type they have against
HJC and other persons identified in the McCall Settlement Agreement.
The parties to the McCall Settlement Agreement are currently engaged
in the preparation of a definitive agreement to resolve their disputes, which
will then be executed and submitted to the Bankruptcy Court for its approval.
The McCall Settlement Agreement contemplates that Harry McCall will
dismiss the McCall Litigation with prejudice on the Effective Date.
2. TUCKER LITIGATION
A lawsuit captioned TUCKER V. CITY OF NEW ORLEANS was filed on
October 5, 1994 against the City (the "TUCKER LITIGATION") in the Civil District
Court for the Parish of Orleans by a resident of the Parish challenging the
validity of three casino-related ordinances adopted by the City Council on
September 23, 1994 which authorized, among other things, amendments to the Canal
Street Casino Lease. The lawsuit also challenges the constitutionality of a
clarifying amendment to the Louisiana Economic Development and Gaming
Corporation Law ("GAMING ACT"). The clarifying amendment addresses a provision
of the Canal Street Casino Lease which requires at least 80% of the persons
employed by the Casino to be residents of Orleans Parish. The effects of the
ordinances and the amendment to the Gaming Act were, among other things, (i) to
clarify the intent of the Gaming Act that a provision of a contract (to which
the gaming operator is a party) that requires more than 50% of the persons
employed to be residents of any one parish is void, but that the contract as an
entirety would not be void under the Gaming Act, and (ii) to reduce the
residency requirement in the Canal Street Casino Lease if necessary to comply
with applicable law. On November 18, 1994, the City filed preliminary
exceptions contending that the plaintiff had failed to name indispensable and
necessary parties as defendants. On March 13, 1995 and August 17, 1995, the
plaintiff filed supplemental amended petitions. On September 22, 1995, the City
requested the plaintiff consider its prior filed exceptions as applicable.
There has been no activity in the case since that time.
Mr. Tucker and the law firm of Tucker & West filed proofs of claims
against the estates of HJC and HNOIC for amounts which they allege were owed to
them with respect to the Tucker Litigation and other litigations, including the
McCall Litigation. HJC and HNOIC filed objections to these proofs of claims.
Subsequently, on August 13, 1996, the claimants consented to disallowance of
these claims.
The McCall Settlement Agreement contemplates that the Tucker
Litigation will be dismissed with prejudice as of the Effective Date.
3. LANDMARKS LITIGATION (JOAN OF ARC)
On December 6, 1994, a lawsuit captioned LOUISIANA LANDMARKS
SOCIETY, INC. V. CITY OF NEW ORLEANS, RIVERGATE DEVELOPMENT CORPORATION, AND
HARRAH'S JAZZ COMPANY (the "LANDMARKS LITIGATION") was filed seeking to prevent,
among other things, HJC from moving the Joan of Arc statue or using any part of
the Place de France without the approval of the Secretary of the United States
Department of the Interior.
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The Place de France is located adjacent to the Casino. The original design
plans for the Casino contemplated locating the main access areas for the Casino
in the area currently in use as the Place de France. The plaintiff alleged that
the Place de France was developed with federal funds for historic purposes and
that, therefore, the statue could not be relocated and that the Place de France
could not be converted to another use without the approval of the Secretary of
the Interior. The plaintiff also alleged a pendent state law claim that the
Place de France had been dedicated as a park by the City and that the conversion
of the Place de France to another use would require the approval of the
Louisiana State Legislature. On January 27, 1995, the United States District
Court for the Eastern District of Louisiana (the "DISTRICT COURT") issued an
order permanently restraining the City, the RDC and HJC from removing the Joan
of Arc statue or using any part of the Place de France without the approval of
the United States Secretary of the Interior. The City, the RDC and HJC filed
notices of appeal. The plaintiff filed a cross-appeal regarding the scope of
the injunction. Oral argument on the appeal took place on February 7, 1996
after HJC sought, and received, relief from the automatic stay to proceed with
the appeal. On June 7, 1996, the United States Court of Appeals for the Fifth
Circuit reversed the decision of the District Court, vacated the permanent
injunction entered by the District Court, rendered a judgment of dismissal
against the plaintiff for failure to state a cause of action on the grounds that
there is no implied private right of action under the applicable federal
statute, and dismissed the plaintiff's cross-appeal regarding the scope of the
injunction as moot. On July 12, 1996, the Fifth Circuit denied plaintiff's
petition for rehearing.
Because of this litigation, HJC had to redesign the southern part of
the Casino, at substantial cost. As a result of the modification, the size of
the Casino was decreased by approximately 2,400 square feet.
The City has requested the written approval of the United States
Secretary of the Interior to remove the Joan of Arc statue from the Place de
France. Such approval has not yet been received and may not be forthcoming. If
such approval is received and the Joan of Arc statue is removed, HJC may decide
to make further modifications to the entrance to the Casino.
Louisiana Landmarks Society, Inc., James Logan and the law firm of
Tucker & West filed proofs of claims against the estates of HJC and HNOIC for
amounts they alleged were owed to them as a result of the Landmarks Litigation.
HJC and HNOIC filed objections to these proofs of claims. On August 13, 1996,
Louisiana Landmarks Society, Inc. and the others consented to disallowance of
their claims.
4. TUCKER LITIGATION (JOAN OF ARC)
On July 24, 1996, Thomas Tucker filed another lawsuit entitled, TUCKER
V. CITY OF NEW ORLEANS AND RIVERGATE DEVELOPMENT CORPORATION, seeking to enjoin
alteration of the Place de France absent the express written approval of the
United States Secretary of the Interior. None of the Debtors has been named as
a defendant. The lawsuit, however, could affect the development of the Casino.
Mr. Tucker has characterized his claim as one based upon section 1983 of title
42 of the United States Code for purported violations of his rights of due
process and equal protection. The factual allegations of the complaint are
virtually identical to those asserted in the Landmarks Litigation. Mr. Tucker
served as counsel of record for the plaintiff in the Landmarks Litigation, and
he is both a member and trustee of that plaintiff. On October 14, 1996, Tucker
filed an amended complaint naming First American Title Insurance Company as an
additional defendant. Upon information and belief, all the defendants were
thereafter served with the complaint. HJC sought and received permission to
intervene in the action on January 21, 1997.
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The McCall Settlement Agreement contemplates that this suit will be
dismissed with prejudice on the Effective Date.
5. HNOIC/NOLDC LITIGATION
On September 26, 1995, HNOIC brought a lawsuit against NOLDC in the
District Court seeking a declaratory judgment that (i) HNOIC was a 52.93% owner
of HJC, (ii) the 1994 option agreement with NOLDC had expired, and (iii) NOLDC
was not a "material partner" of HJC. This lawsuit is pending as Civil Action
No. 95-3165.
On September 28, 1995, NOLDC brought a lawsuit against, among other
parties, HNOIC and HJC in the Civil District Court for the Parish of Orleans
seeking (i) a temporary restraining order enjoining the expiration of the 1994
option agreement and removal of NOLDC from its status as a material partner of
HJC, (ii) a rescission of the fourth amendment to HJC's partnership agreement
(governing, among other matters NOLDC's dilution of interest in HJC and NOLDC's
status as a material partner of HJC), (iii) restoration of NOLDC to a full 33.3%
ownership in HJC, and (iv) unspecified damages against all defendants except
HJC. This lawsuit was filed as Civil Action No. 95-14653.
On September 29, 1995, NOLDC obtained a temporary restraining order
from the Louisiana Civil District Court, directing HNOIC and HJC to treat NOLDC
as a material partner until a hearing on an injunction could be held on October
9, 1995. On October 5, 1995, the defendants removed NOLDC's state court
complaint to the District Court, where it is now pending as Civil Action No.
95-3272. On October 6, 1995, NOLDC sought to obtain an extension of its
temporary restraining order from the District Court. NOLDC's request was
denied, and no date for any further hearing was set. Following the filing of
bankruptcy by NOLDC, the litigation was placed on inactive status by the court.
At the time of the filing of NOLDC's bankruptcy, no discovery on the merits had
been taken.
It is contemplated that, pursuant to the NOLDC Shareholders/HET
Settlement Agreement (described in Section V.B.1. below), all of the litigation
among NOLDC, HNOIC and HJC will be dismissed on the Effective Date.
F. REGULATION
RECENT LEGISLATION
On March 18, 1996, the Governor of the State of Louisiana called a
special session of the State legislature to consider a number of topics,
including topics relating to the Casino. The special session convened on March
24, 1996 and ended on April 19, 1996. Several laws were enacted as a result of
the special session which may impact the Plan and/or JCC's rights under the
Gaming Act and the Modified Casino Operating Contract.
One such law called for parish-by-parish referenda during the November
5, 1996 election (the "LOCAL OPTION ELECTION") to decide, on an item-by-item
basis, whether riverboat gaming, video poker gaming, and in Orleans Parish, the
land-based casino, should be permitted to operate in the particular parish. On
November 5, 1996, voters in Orleans Parish elected to permit land-based casino
gaming in that parish. Nevertheless, the Proponents believe that this law had a
material adverse effect on HJC and the Plan even prior to voter action because
it impaired the Proponents' ability to obtain financing for the Plan until after
the
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Local Option Election and by increasing the costs related to the Plan. See
Sections IX.A.1., IX.A.8., "Certain Risk Factors to be Considered--Overall Risks
to Recovery by Holders of Claims--Uncertainty Regarding Gaming Regulation" and
" Availability of Term Loans and Working Capital Facility."
Another such law purports to affect certain rights of the casino
operator under the Casino Operating Contract. This law purports to provide (i)
the State and all its political subdivisions (including LGCB) with retroactive
immunity from liability and from suit for any action or failure to act on the
part of the State, or any political subdivision of the State (including LGCB),
and (ii) authority to the Governor by executive order, subject to legislative
approval, or to the State legislature by act or resolution, to set aside or
order renegotiation or revocation of a casino operating contract when the casino
operator is either voluntarily or involuntarily placed in bankruptcy,
receivership, conservatorship, or some similar status.
Another such law, among other things, purports to retroactively amend
the Gaming Act: (i) to state that the conduct of gaming operations upon
riverboats in accordance with the provisions of the Louisiana Riverboat Economic
Development and Gaming Control Act or otherwise while upon a designated waterway
while temporarily at dockside does not constitute the authorization of
additional land-based casino gaming operations which relieves the casino gaming
operator of the obligation to pay compensation to the LGCB; and (ii) to provide
that governmental inaction which results in the operation of another land-based
casino in Orleans Parish shall not relieve the operator of the Casino of the
obligation to pay compensation to the LGCB. This law also purports to provide
that in the event of litigation between the casino gaming operator and either
LEDGC or the State or any of its political subdivisions, the casino gaming
operator must continue to make all payments to the LGCB and to the State and any
of its political subdivisions as required by law during the pendency of such
litigation, and that any failure to make the required payments will render the
casino gaming operator unsuitable.
The Proponents believe that each of these pieces of legislation may be
unconstitutional, unenforceable, or otherwise legally infirm.
In addition, on May 1, 1996, the Governor signed into law a bill which
dissolves the separate boards that had governed riverboat gaming and land-based
casino gaming, including the LEDGC, and purports to substitute in their place
the LGCB. This single board, consisting of nine voting members and two EX
OFFICIO members, is empowered to regulate most forms of gambling in the State,
including the land-based casino. Although the existing rules and regulations
promulgated by the LEDGC remain in force and effect at this time, the LGCB has
been empowered to repeal any such rules and regulations and promulgate its own
rules and regulations. This law also authorizes the Louisiana State Police to,
among other things, conduct investigations and audits of gaming license
applicants and to assist the LGCB in determining compliance with the gaming laws
and regulations. Given their lack of experience in dealing with the LGCB and
the new regulatory framework established by the State legislature, the
Proponents are unable at this time to determine what effect, if any, this
legislative change will have on the likelihood that the Proponents will be
successful in negotiating with the LGCB with respect to the Casino Operating
Contract and the impact of future rules and regulations on the Plan and JCC.
Further, on March 31, 1997, the State legislature convened a general
session which was concluded on June 23, 1997. During the legislative session,
the State legislature authorized the use of slot machines at race tracks located
in three parishes in the State (but not Orleans Parish), subject to a 15,000
square foot limitation. The authorization for this bill was subject to a local
option election in each of the parishes where the race tracks are located and
remains subject to further legislative action on the fees to be
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imposed. The voters in two of the three parishes approved the use of slot
machines at race tracks located in those parishes. See Section IX.A.9.,
"Certain Risk Factors to be Considered--Overall Risk to Recovery by Holders of
Claims--Competition."
On April 29, 1997, the LGCB unanimously approved for submission to the
Governor and the State legislature a new Casino Operating Contract with respect
to the Existing Plan. Although the State legislature considered the approval of
such a new Casino Operating Contract, the State legislature did not approve or
disapprove this contract during the 1997 Regular Session. During the 1997
Regular Session, the House of Representatives of the State legislature (the
"HOUSE") approved a resolution which purports to preclude the use of a mail
ballot for approval of the Modified Casino Operating Contract by the House.
Further, the resolution purports to require a special session of the House
called by the House, instead of the mail ballot procedure, if a Modified Casino
Operating Contract is put forward for approval by the House.
On November 4, 1997, the Governor of the State publicly expressed his
support for the project with a rolling guaranty concept. On December 9, 1997,
the LGCB, among other things, unanimously approved the Modified Casino Operating
Contract for submission to the Governor of the State with the request that he
submit the Modified Casino Operating Contract to the State legislature for its
approval.
EXISTING REGULATION
The ownership and operation of the Casino are subject to pervasive
governmental regulation, including regulation by the LGCB (as successor to the
LEDGC) in accordance with the terms of the Gaming Act, the rules and regulations
promulgated thereunder from time to time (the "RULES AND REGULATIONS"), and the
Casino Operating Contract. The LGCB is empowered to regulate a wide spectrum of
gaming and non-gaming related activities.
The Gaming Act authorized the LEDGC (the LGCB's predecessor), among
other things, to enter into a casino operating contract with a casino
operator for the conduct of casino gaming operations at a single land-based
gaming establishment, having at least 100,000 square feet of useable space,
to be located at a facility at the Rivergate site. The term of the contract
is not to exceed a total of 20 years with one ten-year renewal option. Under
the Plan, the minimum compensation payable to the LGCB from gaming operations
at the Casino will be 18 1/2% of gross gaming revenues, or $100 million
annually, whichever is greater. See Section V.C.3., "The Plan of
Reorganization--Executory Contracts and Unexpired Leases--Casino Operating
Contract."
The Gaming Act and the Rules and Regulations establish significant
regulatory requirements with respect to gaming activities and the casino
operator, including, without limitation, requirements with respect to minimum
accounting and financial practices, standards for gaming devices and
surveillance, licensure requirements for vendors and employees, standards for
credit extension and collection, and permissible food services. Failure to
comply with the Gaming Act and the Rules and Regulations could result in
disciplinary action, including fines and suspension or revocation of a license
or suitability. Certain regulatory violations could also constitute an event of
default under the Casino Operating Contract.
Under the Gaming Act, no person is eligible to receive a license or
enter into a contract to conduct casino gaming operations unless, among other
things, the LGCB is satisfied the applicant is suitable. The Gaming Act and the
Rules and Regulations also require suitability findings for, among others, the
casino manager, anyone with a direct ownership interest or the ability to
control the casino operator or casino
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manager (as well as their intermediary and holding companies), certain officers
and directors of such companies, and certain vendors and employees of the casino
operator. Suitability requires a demonstration by each applicant, by clear and
convincing evidence, that, among other things, (i) he is a person of good
character, honesty and integrity, (ii) his prior activities, criminal record, if
any, reputation, habits and associations do not pose a threat to the public
interest of the State or the regulation and control of casino gaming or create
or enhance the dangers of unsuitable, unfair or illegal practices, methods and
activities in the conduct of gaming or the carrying on of the business and
financial arrangements incidental thereto, and (iii) he 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,
the casino operator must demonstrate by clear and convincing evidence that:
(i) it has or guarantees acquisition of adequate business competence and
experience in the operation of casino gaming operations; (ii) the proposed
financing is adequate for the proposed operation and is from suitable sources;
and (iii) it has or is capable of and guarantees the obtaining of a bond or
satisfactory financial guarantee of sufficient amount, as determined by the
LGCB, to guarantee successful completion of and compliance with the Casino
Operating Contract or such other projects that are regulated by the LGCB.
Under the Gaming Act and Rules and Regulations, the LGCB can also
require that the holder of debt securities issued by the casino operator or its
affiliated companies and the holders of equity interests in holding companies of
the casino operator be found suitable. Any person holding or controlling a five
percent or more equity interest in a non-publicly traded, direct or indirect,
holding company of the casino operator or casino manager or ten percent or more
equity interest in a publicly traded direct or indirect holding company of the
casino operator or casino manager, is presumed to have the ability to control
the casino operator or casino manager, as the case may be, requiring a finding
of suitability, unless, among other things: (i) the presumption is rebutted by
clear and convincing evidence; or (ii) the holder is one of several specified
passive institutional investors holding a stated minimum amount of assets and,
upon request, such institution files a certification stating that they do not
have an intention to influence the affairs of the casino operator or casino
manager.
Under the Gaming Act and Rules and Regulations, the LGCB has the
authority to deny, revoke, suspend, limit, condition, or restrict any finding of
suitability. Under the Rules and Regulations, the LGCB also has the authority
to take further action on the grounds that the person found suitable is
associated with, or controls, or is controlled by, or is under common control
with, an unsuitable or disqualified person. Under the Rules and Regulations and
the Casino Operating Contract, if at any time the LGCB finds that any person
required to be and remain suitable has failed to demonstrate suitability, the
LGCB may, consistent with the Gaming Act and the Casino Operating Contract, take
any action that the LGCB deems necessary to protect the public interest. Under
the Rules and Regulations, however, if a person associated with the casino
operator or an affiliate, intermediary, or holding company thereof has failed to
be found or remain suitable, the LGCB shall not declare the casino operator or
its affiliate, intermediary, or holding company, as the case may be, unsuitable
if such companies comply with the conditional licensing provisions, take
immediate good faith action and comply with any order of the LGCB to cause such
person to dispose of its interest, and, before such disposition, ensure that the
disqualified person does not receive any ownership benefits. The above safe
harbor protections do not apply if: (i) the casino manager has failed to remain
suitable, (ii) the casino operator is engaged in a relationship with the
unsuitable person and had actual or constructive knowledge of the wrongdoing
causing the LGCB's action, (iii) the casino operator is so tainted by such
person that it affects the suitability of the casino operator under the
standards of the Gaming Act, or (iv) the casino operator cannot meet the
suitability standard contained in the Gaming Act and the Rules and Regulations.
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In June 1992, the State legislature authorized a single land-based
casino in New Orleans and designated the Rivergate site as the location of the
casino. In April 1992, prior to the enactment of the legislation, the City
issued a request for proposals ("RFP") for a casino lease on that site. In June
1992, HET submitted a proposal along with a number of other applicants. The
City narrowed the list to a group of four bidders, including HET, and issued a
second RFP in September 1992. The City awarded the lease to a joint venture
which included Grand Palais. The State then issued a RFP to select the entity
to receive the license to operate gaming at the Rivergate site. A joint venture
between HET and NOLDC responded to the RFP and to a second RFP issued by the
State in July 1993 and the HET/NOLDC joint venture was awarded the license.
Thereafter, HNOIC, Grand Palais and NOLDC formed HJC. After the State's
attorney general declared the original RFP process flawed, the State issued a
third RFP in April 1994 and HJC was awarded the license to operate a casino at
the Rivergate site.
On July 15, 1994, the LEDGC entered into the Casino Operating Contract
with HJC, which sets forth the general parameters of, among other things, the
location and design and construction requirements of the Basin Street Casino and
the Casino, the agreed upon compensation requirements due to the LEDGC from
gaming operations, the requirements for financing the Casino, and other
contractual and regulatory requirements. In connection with the execution of
the Casino Operating Contract, the LEDGC found HJC, HNOMC and certain related
intermediary and holding companies and certain of their officers and directors
to be suitable. In addition, at the time of the issuance of the Old Bonds, the
LEDGC issued certain orders concerning the suitability of the holders thereof.
Since the filing of the Chapter 11 Cases, neither the LEDGC nor the LGCB has
informed HJC or any other person required to be found suitable that it is taking
action to revoke any finding of suitability in accordance with the Gaming Act or
Rules and Regulations, nor has the LEDGC or the LGCB given any notice of default
under the Casino Operating Contract.
Under the Gaming Act, the LGCB has the right to set aside or
renegotiate the provisions of the Casino Operating Contract if the casino
operator is voluntarily or involuntarily placed in bankruptcy, receivership,
conservatorship or similar status. HJC believes that certain provisions of this
statute are unenforceable pursuant to Sections 365(e)(1) and 525 of the
Bankruptcy Code. Nevertheless, the LGCB maintains the right to renegotiate the
Casino Operating Contract in connection with the Plan. In addition, a law
enacted as a result of the special session of the State legislature purports to
provide authority to the Governor, subject to legislative approval, or to the
State legislature, to set aside or order renegotiation or revocation of the
Casino Operating Contract when the casino operator is placed in bankruptcy.
Under the Plan and subject to certain approvals from the LGCB, the
Casino Operating Contract requirements would be amended in certain respects,
including the elimination of temporary casino operations, alterations of the
size and scope of the Casino and permission for a revised opening schedule
for the Casino. See Section V.C.3., "The Plan of Reorganization--Executory
Contracts and Unexpired Leases--Casino Operating Contract." In addition, in
connection with the Plan, certain rulings, approvals and findings of
suitability will be required, including, findings of suitability with respect
to any directors of the JCC Entities and any persons having the ability to
significantly affect the affairs thereof and certain other approvals relating
to the modified design of the Casino and the revised opening schedule.
FEDERAL REGULATION
In August 1996, the President signed into law a bill that creates a
federal commission to examine the rapid growth of the gaming industry and its
impact on American society. The law creates a nine-member National Gambling
Impact and Policy Commission to study the economic and social impact of
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gaming and report its findings to Congress and the President within two years.
The commission could recommend changes in state or federal gaming policies.
Additional federal regulation or taxation of the gaming industry could occur as
a result of investigations or hearings by the committee.
ZONING AND LAND USE
The Proponents have obtained certain conditional use approvals from
the City for the Casino and the parking facilities for the Casino. Certain of
such approvals, however, are subject to further review and additional approvals
may be required. Although JCC expects to obtain all required conditional use
approvals for the Casino and its operations, no assurances can be given that JCC
will receive the required approvals.
Because the Casino does not comply with all requirements of the City's
zoning ordinance, the Proponents have requested and received a number of waivers
from the City Council. Some uncertainty exists, however, as to the City
Council's authority to grant such waivers. In addition, the zoning ordinance
may be subject to differing interpretations and, depending upon the
interpretation, certain required waivers may or may not be requested or granted.
Accordingly, no assurances can be given that the Casino will comply with the
zoning ordinance in all material respects. See Section IX.A.2., "Certain Risk
Factors to be Considered--Ability to Commence Operations as Scheduled."
G. EMPLOYEES
JCC will recruit and train employees to operate the Casino. Upon the
opening of Casino--Phase I, JCC expects to employ approximately 3,000 new
employees. See Section IX.A.12., "Certain Risk Factors to be Considered--Overall
Risks to Recovery by Holders of Claims--Lack of Experienced Personnel." Under
the settlement with the WARN Act Claimants (as discussed in Section IV.L. below
and as reflected in the Plan), former casino employees will be offered
preferential re-employment to their former positions or substantially equivalent
positions to the extent that such jobs are or become available.
IV. EVENTS DURING THE CHAPTER 11 CASES
A. FILING OF THE CHAPTER 11 PETITIONS
HJC and Finance Corp. filed petitions for relief under chapter 11 of
the Bankruptcy Code on November 22, 1995 in the United States Bankruptcy Court
for the District of Delaware. On November 30, the Bankruptcy Court (in
Louisiana), upon the consent of HJC and Finance Corp., ordered that their cases
be transferred from Delaware to the Bankruptcy Court. HNOIC filed its chapter
11 petition in the Bankruptcy Court on December 22, 1995. (As used herein, the
term "PETITION DATE" means November 22, 1995 with respect to HJC and Finance
Corp., and December 22, 1995 with respect to HNOIC.) The Bankruptcy Court has
ordered that HJC's and Finance Corp.'s cases be jointly administered.
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B. RETENTION OF PROFESSIONALS BY THE DEBTORS
HJC and Finance Corp. have retained the following professionals, as
indicated, to represent and advise them in connection with their chapter 11
cases:
ATTORNEYS (FOR HJC AND FINANCE CORP.)
Jenner & Block
One IBM Plaza, Suite 4400
Chicago, IL 60611
William Hardy Patrick, III
A Professional Corporation
10636 Linkwood Court
Baton Rouge, LA 70810-2854
FINANCIAL ADVISOR (FOR HJC ONLY)
Jefferies & Company, Inc.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, CA 90025
-- and --
400 Poydras Street
New Orleans, LA 70130
ACCOUNTANTS (FOR HJC ONLY)
Price Waterhouse
2001 Ross Avenue, Suite 1800
Dallas, TX 75201-2997
ACCOUNTANTS (FOR VARIOUS SPECIAL PURPOSES)
Arthur Andersen LLP
201 St. Charles Avenue, Suite 4500
New Orleans, LA 70170-4500
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In addition, HJC has retained special counsel for specific purposes pursuant to
orders of the Bankruptcy Court.
HNOIC has retained the following law firm to represent it in
connection with its chapter 11 case:
Bronfin & Heller, LLC
650 Poydras Street, Suite 2500
New Orleans, LA 70130
C. APPOINTMENT OF THE OFFICIAL COMMITTEES
On January 10, 1996, the United States Trustee appointed (i) a
committee of unsecured creditors (the "CREDITORS COMMITTEE") to represent the
interests of unsecured creditors of HJC, and (ii) the Bondholders Committee
(together with the Creditors Committee, the "COMMITTEES") to represent the
interests of the Bondholders. Since their formation, the Committees have
consulted with the Debtors concerning the administration of the Chapter 11
Cases.
The members of the Committees, as of the date of filing of this
Disclosure Statement, are set forth below:
CREDITORS COMMITTEE
Centex Landis Construction Co., Inc.
c/o James Landis
300 Lafayette St., Suite 100
New Orleans, LA 70130
Broadmoor
c/o John F. Lipani, Esq.
730 S. Tonti St.
P.O. Drawer 53266
New Orleans, LA 70153
Culinary Design & Fixture, Inc.
c/o Richard J. Tomeny, Jr.
202 Veterans Boulevard
Metairie, LA 70005
The Elwyn Gee Group, Inc.
c/o Elwyn Gee
27 Commercial Blvd.
Suite D
Movato, CA 94949
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Michael Demling Associates
c/o Michael Demling
701 W. Delilah Rd., Suite A
Pleasantville, NJ 08232
Angelica Uniform Group,
a Div. of Angelica Corporation
c/o Walter W. Timm, Corp. Counsel
424 So. Woods Mill Road, Suite 300
Chesterfield, MO 63017
HJV, a Joint Venture
c/o Walter A. Mullins
826 Perdido Street
New Orleans, LA 70112
ATTORNEYS
Breazeale, Sachse & Wilson, L.L.P.
LL & E Tower, Suite 2400
909 Poydras St.
New Orleans, LA 70112-0500
FINANCIAL ADVISOR
The Blackstone Group L.P.
345 Park Avenue
New York, NY 10154
BONDHOLDERS COMMITTEE
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, NJ 08536
Harris Associates L.P.
2 North LaSalle Street, Suite 500
Chicago, IL 60602-3790
Standard Mortgage Company
300 Plaza, One Shell Square
New Orleans, LA 70139
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ATTORNEYS
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153-0001
McGlinchey Stafford
643 Magazine Street
New Orleans, LA 70130
FINANCIAL ADVISOR
Ladenburg Thalmann Co., Inc.
590 Madison Avenue
New York, New York 10022
D. LITIGATION WITH THE CITY OF NEW ORLEANS AND THE RDC
Shortly after HJC's chapter 11 filing, the City and the RDC filed two
motions seeking to compel HJC's performance under the Basin Street Casino Lease
and the Canal Street Casino Lease: (i) Motion to Require the Debtor in
Possession to Comply With Lease Obligations Under Unexpired Lease of
Non-Residential Real Property (the "BASIN STREET CASINO MOTION"); and (ii)
Motion to Require the Debtor in Possession to Comply With Lease Obligations to
Prevent Loss or Damage to Casino Structure (the "CASINO MOTION"). Through the
Basin Street Casino Motion, the City and RDC sought, among other things, to
compel HJC to make postpetition rental and other payments under the Basin Street
Casino Lease and to reopen the Basin Street Casino. Through the Casino Motion,
they sought to compel HJC to take certain actions to protect the Casino site and
structure from loss or damage. Both motions were resolved (on an interim basis
with respect to the Basin Street Casino Motion) by consent orders between the
City, the RDC and HJC.
The consent order with respect to the Basin Street Casino Motion
required HJC to furnish the City and the RDC with certain financial and other
information they had sought and to pay up to $100,000 in warehouse charges to
secure the release of certain of the City's property. The Court's consideration
of the remainder of the relief sought by the City and the RDC, including an
order compelling HJC to reopen the Basin Street Casino, was adjourned until a
later date and, as set forth below, the remainder of the Basin Street Casino
Motion was resolved by agreement between HJC, the City and the RDC announced in
open court on March 4, 1996.
The consent order with respect to the Casino Motion (the "DECEMBER 12
CONSENT ORDER") required HJC to take certain measures and expend certain amounts
to protect and preserve the Casino structure, including completing the enclosure
of the structure, performing work on the streets and sidewalks by the Casino
construction site (the "PERIMETER WORK"), providing security for the premises
and maintaining certain insurance coverage.
Meanwhile, the City and the RDC, on the one hand, and HJC, on the
other, engaged in other litigation, including litigation over HJC's ability to
retain its rights under the leases for the Basin Street Casino and Casino sites.
Under the Bankruptcy Code, a debtor is entitled to "assume" or "reject" certain
types of contracts, including unexpired leases of real property. In order to
assume a contract, a debtor must, among
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other things, cure (or provide "adequate assurance" of prompt cure of) existing
defaults and provide the other party(ies) to the contract with "adequate
assurance of future performance" under the contract; a debtor's rejection of a
contract is treated as a breach by the debtor which occurred just prior to the
bankruptcy filing. Under the Bankruptcy Code, HJC had until 60 days after it
filed its chapter 11 case, or January 22, 1996, to assume or reject the Basin
Street Casino Lease and the Canal Street Casino Lease, unless the Bankruptcy
Court extended that deadline (the "ASSUMPTION DEADLINE"). Prior to January 22,
1996, HJC filed a motion seeking an extension of the Assumption Deadline through
the time provided for in a confirmed chapter 11 plan of reorganization for HJC,
which motion the City and the RDC opposed. After a hearing on HJC's motion held
on January 17, 1996, the Bankruptcy Court extended the Assumption Deadline
through March 4, 1996.
At a hearing held on March 4, 1996, HJC, the City and the RDC
announced the terms of a global settlement, which was reflected in the March 6
Agreement, and which included, among other things, (i) a schedule for lease
payments to be made by HJC under the Basin Street Casino Lease, including an
immediate payment of the $4.3 million and additional amounts totaling
approximately $5.7 million to be placed in escrow on April 3, 1996 (see Section
V.C.8., "The Plan of Reorganization--Executory Contracts and Unexpired
Leases--Basin Street Casino Lease"), (ii) an agreement in principle on certain
terms of a plan of reorganization for HJC, including a waiver by the City of any
requirement to reopen the Basin Street Casino, (iii) a stay of litigation
between the City and HJC (and HJC's partners and their affiliates) through June
30, 1996, (iv) a requirement that HJC file a plan of reorganization on or before
April 3, 1996, (v) an agreement that a $2 million deposit by HJC would be
applied by the City in full payment of all prepetition claims and certain
postpetition claims of the City and the RDC under the Basin Street Casino Lease,
including payments under the Open Access Program and Plans, and (vi) a release
by the City and the RDC of any damages as a result of rejection of the Basin
Street Casino Lease, except in certain circumstances. Provided that certain
conditions were satisfied under the March 6 Agreement, the City also agreed to
support HJC's plan of reorganization and not to take any action inconsistent
with confirmation of such plan. Based upon that agreement, which the Bankruptcy
Court formally approved on March 12, 1996, the Bankruptcy Court granted HJC the
right to seek to assume the Basin Street Casino Lease and the Canal Street
Casino Lease, and other contracts, through the time provided for in the chapter
11 plan of reorganization to be confirmed in HJC's case.
On March 28, 1996, HJC, the City and the RDC filed a Joint Motion to
Supplement and Restate Order Granting Debtor's Motion for Extension of Time to
Assume or Reject Unexpired Leases of Non-Residential Real Property (the "JOINT
AMENDMENT MOTION"). Through the Joint Amendment Motion, HJC, the City and the
RDC sought to amend the order extending the Assumption Deadline to provide that,
with respect to any lease or other agreement constituting an unexpired lease of
non-residential real property with the City and/or the RDC, such deadline would
extend through June 30, 1996, or as otherwise provided by the Bankruptcy Court,
rather than through the time provided in HJC's plan of reorganization. The
Joint Amendment Motion was granted by order of the Bankruptcy Court dated March
30, 1996. Through subsequent orders of the Bankruptcy Court, such deadline has
been extended through the earlier of (i) the date of confirmation of the Plan,
with any assumption to be effective as of the Effective Date, and (ii) 27 days
after the effective date of any termination of the City Agreement in the event
of a termination of the City Agreement prior to confirmation of the Plan.
In addition to resolving issues raised by the Basin Street Casino
Motion and litigation with respect to the Assumption Deadline, the March 6
Agreement resolved other pending litigation between the City and the RDC and
HJC, including litigation over HJC's obligations under the Basin Street Casino
Lease
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that arose after the Petition Date. In that litigation, HJC had sought a
determination by the Bankruptcy Court that HJC was entitled to offset $2 million
that HJC asserted it was owed by the City against HJC's postpetition obligations
under the Basin Street Casino Lease. The March 6 Agreement resolved this
litigation.
The March 6 Agreement called for, among other things, completion of
(i) lease documentation to reflect the points agreed upon by HJC, the City and
the RDC, and (ii) documentation and plans (in coordination with State
authorities) for the return of the Basin Street Casino to the City. Subsequent
to their entry into the March 6 Agreement, HJC, the City and the RDC engaged in
negotiations on the form of an agreement that would implement the terms of the
March 6 Agreement (which form is attached as Exhibit "A" to the Existing Plan).
The City Agreement implements and, in some respects, supplements the March 6
Agreement and sets forth a procedure to modify the Canal Street Casino Lease and
the GDA and to terminate the Basin Street Casino Lease. Among its provisions,
the City Agreement:
(a) establishes the amount and terms of HJC's obligations under the
Amended Canal Street Casino Lease (as defined below) and the
Amended GDA (as defined below);
(b) establishes an acceptable format for reorganized HJC's corporate
structure and financing;
(c) modifies HJC's rights to use the Casino property for certain
non-gaming functions;
(d) provides the terms and a schedule for construction and
development of the Casino property;
(e) quantifies HJC's obligations with respect to its return of the
Basin Street Casino to the City and the termination of the Basin
Street Casino Lease; and
(f) calls for amendments to the conditional use ordinances governing
the development and operation of the Casino.
(The amendments of HJC's agreements with the City and the RDC which are called
for by the City Agreement are reflected in the summaries of such agreements, as
amended, set forth in Section V.C. below. As set forth above, descriptions of
agreements contained in this Disclosure Statement between the City and/or the
RDC, on one hand, and HJC or JCC, on the other, constitute the Debtors'
understanding of the documents which is not necessarily shared by the City or
the RDC. Furthermore, in all cases, it is the terms of the agreements as
adopted by these parties and approved by the appropriate governmental
authorities that will govern, rather than these descriptions.)
By motion dated August 6, 1996, HJC sought the Bankruptcy Court's
approval of the City Agreement and authorization for HJC to enter into such
agreement (the "APPROVAL MOTION"). Following a hearing held on August 26, 1996,
the Bankruptcy Court granted the Approval Motion, subject to certain conditions.
In addition, on September 12, 1996, the Bankruptcy Court ordered that, for
purposes of the order granting the Approval Motion, "the City Agreement shall be
deemed effective upon the execution thereof by the Debtor and the RDC, and the
Debtor shall thereupon be authorized to perform all actions required under the
City Agreement including, but not limited to, the release of rent from the `Rent
Escrow' as provided in Section A.11.c. of the City Agreement." HJC and the RDC
have executed the City Agreement, and on
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October 3, 1996, the City Council approved the amendments and agreements called
for under the City Agreement.
Subsequent to the Bankruptcy Court order granting the Approval Motion,
the Orleans Parish School Board filed a motion seeking a determination of the
Bankruptcy Court (i) that it is a third party beneficiary of the Basin Street
Casino Lease and the Amended Canal Street Casino Lease, (ii) that neither the
order approving the March 6 Agreement nor the order granting the Approval Motion
is enforceable as to the School Board, and (iii) that the School Board is
entitled to receipt of all rental payments pursuant to the Basin Street Casino
Lease and the Amended Canal Street Casino Lease. The School Board maintains
that HJC has failed to pay the sum of $1,036,000 for the year 1995. In
addition, the School Board maintains that HJC is obligated to make annual
payments of $2,000,000 upon the termination of the Basin Street Casino Lease and
that the City and RDC may not modify the School Board's alleged right to such
payment without the School Board's consent. HJC and the City dispute the School
Board's assertions. HJC and the City objected to the School Board's motion on
the procedural ground that the issues raised by the School Board could be
presented only by means of an adversary proceeding under applicable Bankruptcy
Rules. On November 6, 1996, the Bankruptcy Court sustained HJC's and the City's
objection and denied the School Board's motion.
By a stipulation dated April 30, 1997, the School Board and the
Debtors resolved their disputes. The stipulation provides, among other things,
that the School Board has an Allowed unsecured claim against HJC in the amount
of $300,000. Such amount will be paid in monthly installments out of the rent
received by JCC for use of the second floor of the Casino.
In addition, the City has filed a Motion for Payment of Administrative
Claims asserting administrative claims in the amount of $2,872,275.89
purportedly on account of real estate and personal property taxes and interest
for 1996. The City and the Debtors negotiated a resolution to this claim which
provides that the City is granted an administrative expense claim for payment of
certain real estate and personal property taxes and that such amounts will be
paid within 60 days of the Effective Date; provided that if the Effective Date
did not occur prior to September 1, 1997, the City would have the right to renew
its request for immediate payment and the Debtor retained the right to object to
such request. To date, the City has not made such a request of the Bankruptcy
Court.
On October 28, 1997, the City and RDC filed a motion with the
Bankruptcy Court to require HJC to negotiate in good faith pursuant to the City
Agreement to reimburse the City and RDC for their professional fees and expenses
incurred from January 1, 1997 through September 30, 1997 (in the amount of
$603,151.04), and to reimburse the City and RDC for the cost of curtains
(approximately $156,100) in connection with the restoration of the Municipal
Auditorium, the site of the former Basin Street Casino. HJC has agreed in
principle to reimburse the City and RDC for the professional fees and expenses
incurred since January 1, 1997. HJC is discussing with the City the schedule
for making such reimbursements.
E. HJC'S USE OF CASH COLLATERAL
Almost immediately upon the filing of HJC's chapter 11 petition, HJC
needed to use funds to satisfy certain postpetition obligations, such as those
relating to protecting the Casino structure (described above in Section IV.D.,
"Events During the Chapter 11 Cases--Litigation With the City of New Orleans and
the RDC"). On the Petition Date, HJC held funds in accounts at FNBC and
Hibernia National Bank
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("HIBERNIA"). The Bondholders have contended that funds on deposit at both
banks were, and are, subject to their liens and, therefore, that such funds
constitute "cash collateral," as that term is used in the Bankruptcy Code. The
Bankruptcy Code prohibits HJC from using the Bondholders' cash collateral unless
(i) the Bondholders consent to such use, or (ii) the Bondholders are provided
with "adequate protection" of their interest in the cash collateral in
connection with such use.
Therefore, in order to ensure that it would have adequate funds
available to comply with orders of the Bankruptcy Court requiring, among other
things, certain payments in connection with protecting the Casino structure,
HJC, in December 1995, filed an Emergency Motion for Authority to Use Cash
Collateral or, in the Alternative, to Surcharge Secured Creditors. Through that
motion, HJC sought authorization for the immediate use of up to $1.65 million in
cash collateral (i) to make approximately $250,000 in improvements to Poydras
Street, (ii) to make an estimated $1.3 million in improvements to the Basin
Street Casino and Casino sites, and (iii) to pay up to $100,000 to secure the
release of certain property of the City. HJC's request for immediate use of
such funds was resolved through an agreed order between HJC and Fidelity
Management & Research Company and Fidelity Management Trust Company
(collectively, "FIDELITY"), the Bondholder with the largest holdings of Old
Bonds at such time. (The Bondholders Committee had not yet been appointed at
the time). That agreed order authorized HJC's immediate use of up to $1.65
million for the purposes set forth above, granted the Bondholders certain
priority claim and lien rights as "adequate protection," and preserved the
parties' rights with respect to characterization of the funds at issue as "cash
collateral" or not.
In January 1996, HJC filed an Amended Motion for Authority to Use Cash
Collateral or, in the Alternative, to Surcharge Secured Creditors, seeking
authorization for the use of cash collateral to carry out orders of the
Bankruptcy Court, including the order requiring enclosure of the Casino
structure and the satisfaction of certain other postpetition obligations in
accordance with a proposed budget. Upon the consent of the Bondholders
Committee and FNBC, as indenture trustee and collateral agent for the
Bondholders, the Bankruptcy Court entered an order (the "FIRST CASH COLLATERAL
ORDER") with respect to HJC's amended motion which (i) authorized HJC's use of
funds on deposit at Hibernia and FNBC for payment of expenses incurred from
November 22, 1995 through March 4, 1996 in accordance with HJC's proposed
budget, (ii) specified the accounts from which certain payments were to be made,
(iii) granted the Bondholders "adequate protection" in the form of priority
claims and lien rights, (iv) preserved the parties' rights with respect to the
characterization of the funds at issue as "cash collateral" or not, and (v)
required HJC to issue reports on expenditures made pursuant to the order.
Because HJC's authorization to use cash collateral under the terms of
the First Cash Collateral Order was to expire on March 4, 1996, HJC, prior to
that date, filed another motion, which sought authorization to use funds on
deposit at Hibernia and FNBC in accordance with an updated budget through April
8, 1996. Again, with the consent of the Bondholders Committee and FNBC, the
Bankruptcy Court granted an order (the "SECOND CASH COLLATERAL ORDER")
authorizing such use on terms similar to those of the First Cash Collateral
Order.
In addition, on March 29, 1996, HJC filed a Preliminary Motion to
Modify Final Cash Collateral Order to Implement Settlement Agreement with
Rivergate Development Corporation and City of New Orleans to enable HJC to make
certain escrow payments required to be made on or before April 3, 1996 under the
March 6 Agreement. Following a hearing on such motion held on April 3, 1996 and
negotiations with the Bondholders Committee, the Bankruptcy Court, by order
dated April 9, 1996, approved the use of $1.352 million of HJC's cash on hand to
make a portion of such payments.
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For the period subsequent to April 8, 1996 (through which the Second
Cash Collateral Order authorized HJC's use of cash collateral), HJC has obtained
continued authority to use cash collateral consistent with the First and Second
Cash Collateral Orders by filing motions seeking such relief and by submitting
stipulated orders to the Bankruptcy Court for entry.
Following approval by the LGCB and the Bankruptcy Court, Norwest Bank
Minnesota, N.A. has become the successor indenture trustee, collateral agent,
registrar and paying agent for the Bondholders.
F. ENCLOSURE OF THE CASINO STRUCTURE
Soon after the Petition Date, HJC was determined to complete the
enclosure of the Casino and, accordingly, entered into the consent order with
respect to the Casino Motion which provided for such enclosure work, among other
things. (As discussed above in Section IV.E., "Events During the Chapter 11
Cases--HJC's Use of Cash Collateral", HJC sought and obtained authorization to
use funds that might constitute the Bondholders' cash collateral to pay for such
enclosure work.) In order to comply with the Bankruptcy Court's orders, HJC
then entered into negotiations with its prepetition general contractor, Centex,
on the terms of an agreement for the completion of the enclosure work. Those
negotiations resulted in a "Close In Agreement" under which Centex would be paid
$8.5 million to enclose the Casino structure over a six-month period. HJC
sought approval of the Close In Agreement by the Bankruptcy Court, which was
granted at a hearing held on February 23, 1996. Construction under the Close In
Agreement commenced on or about March 11, 1996 to protect the interior of the
Casino. The work to protect the interior of the Casino is substantially
complete.
G. DEBTOR IN POSSESSION FINANCING PROVIDED BY HET OR ITS AFFILIATES
In order to make the initial $4.3 million payment to the RDC required
under the March 6 Agreement, HJC sought and received authorization to incur
debtor in possession financing to supplement the $1.8 million of its own funds
that were available for such payment in the principal amount of $2.5 million
(the "FIRST DIP LOAN") from the DIP Lender. The Bankruptcy Court approved the
First DIP Loan by final order dated April 9, 1996.
The DIP Lender subsequently agreed to fund up to an additional $10
million in debtor-in-possession financing (the "SECOND DIP LOAN"), to fund (i)
certain of the payments under the March 6 Agreement, and (ii) certain costs
associated with resumed construction of the Casino. On April 9, 1996, the
Bankruptcy Court entered an interim order authorizing HJC to borrow from the DIP
Lender $4.416 million of the $10 million agreed to be funded by the DIP Lender
through the Second DIP Loan. The Second DIP Loan, to the extent of $4.416
million, was approved by the Bankruptcy Court by final order entered April 30,
1996.
Because of the delay in the Chapter 11 Cases associated with the State
of Louisiana's legislation requiring an election in Orleans Parish in November,
1996 to determine whether to permit gaming activities to be conducted at the
Casino, HJC lacked sufficient funds to pay for the remaining work under the
Close In Agreement (discussed above in Section IV.F., "Events During the Chapter
11 Cases--Enclosure of the Casino Structure.") and the other administrative
expenses which HJC would incur prior to the effective date of any confirmed plan
of reorganization in the Chapter 11 Cases (even if the Joint Cash Collateral
Motion, discussed above in Section IV.E., "Events During the Chapter 11
Cases-HJC's Use of Cash Collateral," were granted). Thus, HJC sought to obtain
additional debtor in possession financing from the
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DIP Lender in the aggregate principal amount, including the First DIP Loan and
the Second DIP Loan, of up to $18 million (the "THIRD DIP LOAN").
At a final hearing held on August 26, 1996, the Bankruptcy Court
approved the Third DIP Loan pursuant to an order (the "THIRD DIP LOAN ORDER")
which provides for, among other things: (i) authorization for HJC to borrow
from the DIP Lender up to $18,000,000 (including the First DIP Loan and the
Second DIP Loan); (ii) interest on all Existing DIP Indebtedness at the rate of
8% per annum, payable upon maturity; (iii) maturity of all Existing DIP
Indebtedness upon the earliest to occur of November 15, 1996 (or such later date
to which the DIP Lender consents), the effective date of any confirmed plan of
reorganization, the date on which the Bondholders Committee enters into an
agreement with any third-party proponent of any plan of reorganization not
supported by the DIP Lender which agreement provides for the Bondholders
Committee's support of such plan, the dismissal of HJC's chapter 11 case, the
conversion of HJC's chapter 11 case to a chapter 7 case, the appointment of a
trustee, or any stay, reversal, modification or other amendment (except to the
extent acceptable to the DIP Lender) of the Third DIP Loan Order (except for the
possible earlier maturity of a portion of the Second DIP Loan, in accordance
with the terms of the order approving such loan); (iv) the granting of
administrative priority status for all of the Existing DIP Indebtedness; and (v)
the granting of security for all of the Existing DIP Indebtedness in the form of
a first priority, non-avoidable, valid, enforceable and automatically perfected
lien and security interest on and in all of HJC's assets, subject only to (a)
all non-avoidable, valid, enforceable and perfected liens and security interests
in HJC's property (other than personal property, certain parcels of real estate
and cash and cash equivalents) that existed on the Petition Date other than the
prepetition and postpetition liens and security interest in favor of the
Bondholders, the indenture trustee, the predecessor indenture trustee, the
prepetition bank lenders or their collateral agent, predecessor collateral agent
or administrative agent on any of HJC's property, (b) any and all non-avoidable,
valid, enforceable and perfected liens, security interests and/or rights of
setoff in favor of the indenture trustee and the predecessor indenture trustee
on $1.5 million previously deposited with them (subject to reduction for fees
and expenses of the predecessor indenture trustee), (c) any and all postpetition
liens and security interests in favor of any or all of the Bondholders and their
indenture trustee on any causes of action of HJC against any "insiders" (as
defined in Section 101(31) of the Bankruptcy Code) arising under Sections
544(b), 547, 548, 550 or 553 of the Bankruptcy Code, (d) certain, specified
allowed administrative expense claims for the fees, expenses and costs of
professionals retained by HJC and the official committees, and (e) subject to
the terms of the Third DIP Loan Order, any existing or future rights of setoff,
compensation and/or recoupment in favor of the City, the RDC, the State and/or
the LEDGC.
Subsequently, HJC sought and received permission to incur up to an
additional $7,000,000 in debtor-in-possession financing (the "FOURTH DIP LOAN").
The DIP Lender agreed to extend the maturity date of the First, Second and Third
DIP Loans to the date set forth in the order approving the Fourth DIP Loan. In
that order, dated December 18, 1996, the maturity date is set as the earliest of
the following: (i) February 28, 1997 or such later date to which the DIP Lender
consents; (ii) the effective date of any confirmed plan of reorganization; (iii)
the date on which the Bondholders Committee enters into an agreement with any
third-party proponent of any plan of reorganization not supported by the DIP
Lender, which agreement provides for the Bondholders Committee's support of such
plan of reorganization; (iv) the dismissal of HJC's chapter 11 case; (v) the
conversion of HJC's chapter 11 case to a case under chapter 7; (vi) the
appointment of a trustee; (vii) any stay, reversal, modification or other
amendment in any respect (except to the extent acceptable to the DIP Lender) or
termination or expiration of the order; (viii) the date on which HJC's right to
file a plan of reorganization or solicit acceptances to any such plan is no
longer exclusive pursuant to section 1121(c) of the Bankruptcy Code. In June of
1997, HJC received authorization to borrow up to an additional $5,000,000 from
the DIP Lender (for an aggregate amount of $30,000,000) under
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substantially the same terms and conditions as the existing DIP loans (the
"FIFTH DIP LOAN" and together with the First DIP Loan, the Second DIP Loan, the
Third DIP Loan, and the Fourth DIP Loan the "EXISTING DIP INDEBTEDNESS").
Payments by HJC to the DIP Lender on account of the Existing DIP
Indebtedness and any future debtor-in-possession loans are to be made in cash;
however, under the Plan, the principal amount of the Existing DIP Indebtedness
and any future debtor-in-possession loans will be waived and the accrued and
unpaid interest on such loans will be paid in cash.
By letter dated July 10, 1997, HET notified HJC that HET was not
prepared to commit to extend any additional debtor in possession financing
beyond the earlier to occur of (i) HET's provision of a total of $30 million in
debtor in possession financing (the amount of debtor in possession financing HJC
is currently authorized to obtain), and (ii) September 30, 1997. Debtor in
possession financing ceased on September 30, 1997.
Subsequently, on November 4, 1997, HET announced that the DIP Lender
would provide an additional debtor in possession financing under substantially
the same terms as the Existing DIP Indebtedness subject to the occurrence of
certain specified conditions during the following months. The conditions
precedent to funding up to an additional $2 million by the DIP Lender have
occurred. Certain milestones related to the progress of the Chapter 11 Cases
will have to occur prior to the first of December, January and February before
additional debtor in possession financing will be made available by the DIP
Lender. If these milestones are met, the DIP Lender will provide the Debtors
with up to an additional $9 million in the aggregate (for a cumulative total
with the Existing DIP Indebtedness of up to $39 million). The Debtors have
filed a motion with the Bankruptcy Court seeking authorization to incur such
additional debtor in possession financing. A preliminary hearing took place on
November 12, 1997, at which time, the Bankruptcy Court entered an interim order
approving up to an additional $4.5 million in debtor-in-possession financing. A
final hearing took place on December 2, 1997, at which time the Bankruptcy Court
granted a final order approving such debtor-in-possession financing.
In addition, HNOIC filed a motion on October 22, 1996 seeking
authorization to incur debtor in possession financing in the amount of up to
$25,000 from HET or an affiliate and to grant the lender security interests and
priority claims pursuant to Section 364(c) of the Bankruptcy Code.
Specifically, the loan would (i) bear interest at 8% per annum, (ii) be secured
by first-priority, non-avoidable, valid, enforceable and automatically perfected
liens and security interests on all of HNOIC's assets, and (iii) be granted a
super administrative priority, all pursuant to Section 364(c). The loan (and
all accrued and unpaid interest thereon) would become due and payable upon the
earliest to occur of the following: (i) December 31, 1996, or such other date
to which the lender in its sole discretion consents in writing; (ii) the
effective date of any plan of reorganization; (iii) the conversion of HNOIC's
Chapter 11 Case to case under Chapter 7 of Bankruptcy Code; (iv) the dismissal
of HNOIC's Chapter 11 Case; (v) the appointment of a trustee; and (vi) any stay,
reversal, modification, or other amendment of the order proposed to authorize
this loan (except to the extent acceptable to the lender). This loan will be
used to fund administrative expenses, including United States Trustee fees and
filing fees required by various state taxing authorities. On November 13, 1996,
the Bankruptcy Court granted HNOIC's motion to incur debtor in possession
financing.
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H. DEBTORS' EXCLUSIVE RIGHT TO FILE PLAN(S)
Under the Bankruptcy Code, a debtor has the exclusive right during the
first 120 days of the chapter 11 case to file a plan of reorganization (the
"EXCLUSIVE FILING PERIOD") and, if a plan is filed during the Exclusive Filing
Period, the first 180 days of the case within which to obtain acceptance of a
plan (the "EXCLUSIVE SOLICITATION PERIOD"). Thus, the Exclusive Filing Period
for HJC and Finance Corp. was originally scheduled to expire on March 21, 1996.
However, prior to that date, HJC and Finance Corp. sought extensions of (i) the
Exclusive Filing Period through April 3, 1996, the date by which HJC had agreed
with the City and the RDC under the March 6 Agreement to file a plan of
reorganization, and (ii) the Exclusive Solicitation Period through June 30,
1996. At a hearing held on March 19, 1996, the Bankruptcy Court extended the
Exclusive Filing Period and the Exclusive Solicitation Period for HJC and
Finance Corp. through April 4, 1996 and June 30, 1996, respectively. By
subsequent orders of the Bankruptcy Court, HJC's and Finance Corp.'s Exclusive
Solicitation Period was extended through April 30, 1997. Prior to that date,
the Bankruptcy Court had confirmed the Existing Plan.
HNOIC's Exclusive Filing Period was scheduled to expire on April 22,
1996; however, by virtue of HNOIC's filing of the first version of the Plan on
April 3, 1996, HNOIC's Exclusive Solicitation Period was not scheduled to expire
until June 19, 1996. Prior to that date, HNOIC filed a motion with the
Bankruptcy Court seeking an extension of its Exclusive Solicitation Period
through June 30, 1996, so as to be on the same timetable as HJC and Finance
Corp. with respect to the Plan, which motion was granted. By subsequent orders
of the Bankruptcy Court, HNOIC's Exclusive Solicitation Period was extended
through April 30, 1997. Prior to that date, the Bankruptcy Court had
confirmed the Existing Plan.
I. DISCOVERY OF THE PROPONENTS AND OTHERS
Early in the Debtors' Chapter 11 Cases, Fidelity sought to obtain
documents from, and depose witnesses on behalf of, HJC, Finance Corp., HET and
others under Rule 2004 of the Federal Rules of Bankruptcy Procedure (the
"BANKRUPTCY RULES"). Pursuant to discovery procedures approved by the
Bankruptcy Court, other parties in interest have been permitted to join in such
discovery and restrictions have been imposed to ensure the proper use of
discovered information and to maintain the confidentiality of information
designated as "confidential" by the producing parties. The Proponents and other
individuals and entities have produced over 31,000 pages of documents in
response to such requests, and numerous depositions have been taken.
J. LITIGATION WITH HJC'S PREPETITION CONTRACTORS
1. CENTEX LAWSUIT
On December 6, 1995, Centex filed a Petition for Damages in the Civil
District Court, naming as defendants HET and Ronald A. Lenczycki, president of
HNOMC (the "CENTEX STATE ACTION"). On or about December 18, 1995, Centex filed
an Amended Petition for Damages (the "AMENDED PETITION"). The Amended Petition
purports to state claims for breach of contract and quasi-contract, asserting
that both HET and Mr. Lenczycki assumed the primary obligations of HJC under the
Construction Agreement between HJC and Centex, dated October 10, 1994 (the
"CENTEX CONSTRUCTION AGREEMENT"). The Amended Petition also (i) contains a
claim for breach of a surety agreement, alleging that both HET and Mr. Lenczycki
guaranteed the obligations of HJC under the Centex Construction Agreement, and
(ii) raises claims for fraudulent and negligent misrepresentations, unfair trade
practices, and false advertising.
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On January 4, 1996, defendants removed the Centex State Action to the
United States District Court for the Eastern District of Louisiana and, on
January 5, 1996, the Honorable Helen G. Berrigan referred the proceeding to the
Bankruptcy Court. On January 16, 1996, HET and Mr. Lenczycki filed an Answer to
the Amended Petition with the Bankruptcy Court. On or about January 24, 1996,
Centex filed a Motion to Withdraw Reference and Motion for Remand or Abstention.
The District Court denied the Motion to Withdraw the Reference. A hearing on
the Motion for Remand was held on November 5, 1996 and a decision is pending.
To the extent there is any recovery by Centex in the Centex State
Action, there will be no effect on distributions to creditors (other than
Centex) under the Plan. That is, to the extent of any such recovery by Centex,
Centex's claims against HJC would be reduced accordingly and the amount
contributed by HET or an affiliate to fund distributions under the Plan would be
reduced accordingly.
Pursuant to the settlement agreement between HJC and Centex, attached
as Exhibit "L" to the Existing Plan (the "CENTEX SETTLEMENT AGREEMENT"), and
subject to the terms of that agreement, the Centex State Action was stayed until
the earlier of (i) the Effective Date, and (ii) February 1, 1997 (which date is
subject to extension in accordance with the terms of the Centex Settlement
Agreement). No action has been taken by any party in the case since the Centex
Settlement Agreement was signed. In addition, immediately upon the occurrence
of the Effective Date and the receipt by Centex of the "cure amount" (as
discussed in Section V.C.13. below), the Centex State Action will be dismissed
with prejudice.
2. OTHER LITIGATION WITH CENTEX
On or about December 19, 1995, Centex filed an emergency motion in the
Bankruptcy Court seeking to compel HJC to assume or reject the Centex
Construction Agreement or, in the alternative, seeking payment of an
administrative expense claim pending assumption or rejection of that contract.
(Under the Bankruptcy Code, HJC would have until the time of confirmation of a
plan of reorganization within which to assume or reject executory contracts such
as the Centex Construction Agreement, unless the Bankruptcy Court ordered
otherwise.) Assumption of the Centex Construction Agreement would have required
HJC to cure all defaults under that agreement, which Centex has alleged total
approximately $40,000,000, and which amount HJC believes is substantially lower.
After an evidentiary hearing on Centex's request for payment of administrative
expenses (on account of expenses purportedly incurred by Centex after the
Petition Date) held on February 1, 1996, the Bankruptcy Court awarded only a
portion of the administrative expenses sought by Centex. In addition, at a
hearing before the Bankruptcy Court held on March 4, 1996, HJC was granted until
the time provided in its plan of reorganization within which to assume or reject
the Centex Construction Agreement. On or about October 8, 1996, Centex filed a
motion seeking to compel HJC to assume or reject the Centex Construction
Agreement at or prior to the hearing on the approval of this Disclosure
Statement. As set forth in Section V.C.13. below and as reflected in the Plan,
HJC and Centex have entered into the Centex Settlement Agreement with respect to
the terms on which the Centex Construction Agreement will be modified and
assumed as of the Effective Date. On December 16, 1996, the Bankruptcy Court
approved the Centex Settlement Agreement.
On or about January 29, 1996, Centex filed a motion with the
Bankruptcy Court seeking relief from the automatic stay in order to take steps
to preserve any prepetition privileges on immovables it may have had under
Louisiana law as a result of its performance under the Centex Construction
Agreement, including registering and recording such privileges in the public
record. Under the Centex Construction Agreement, Centex had waived such
privileges, among other things. Accordingly, the Bankruptcy Court, at
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a hearing held on February 27, 1996, denied Centex's motion, without prejudice
to Centex's right to re-file such a motion.
3. BROADMOOR'S MOTION TO COMPEL ASSUMPTION OR REJECTION
On or about February 6, 1996, Broadmoor, the general contractor
engaged by HJC to construct parking facilities adjacent to the Casino, filed a
motion seeking to compel HJC to assume or reject the construction agreement
between HJC and Broadmoor, dated October 10, 1994 (the "BROADMOOR CONSTRUCTION
AGREEMENT"), and for allowance of an administrative expense claim. After
negotiations, HJC and Broadmoor agreed upon the amount of the administrative
expense claim to which Broadmoor was entitled (approximately $178,000) and
reimbursement for ongoing insurance premiums, which agreement was approved on
March 8, 1996. Also, on March 4, 1996, the Bankruptcy Court granted HJC until
the time specified in HJC's plan of reorganization within which to assume or
reject the Broadmoor Construction Agreement. On October 15, 1996 Broadmoor and
HJC entered into the "Broadmoor Settlement Agreement" attached as Exhibit "H" to
the Existing Plan. The Settlement Agreement provides that if the Effective Date
did not occur by July 31, 1997, Broadmoor has the option to have the contract
deemed rejected and to pursue its Proof of Claim. Debtors will negotiate with
Broadmoor toward a resolution that will allow for an assumption of the contract,
failing which a replacement contractor will be retained.
4. BROADMOOR'S MOTIONS FOR RELIEF FROM THE AUTOMATIC STAY
On October 10 and 17, 1997, Broadmoor filed motions on behalf of two
of its subcontractors seeking relief from the automatic stay to compel HJC to
accept shipment or to permit disposal of certain building materials that had
been produced for use in the construction of a parking garage adjacent to the
Rivergate site. A hearing on these motions took place on November 5, 1997 and
HJC and Broadmoor amicably resolved these issues by agreeing to initiate
discussions immediately and, if a satisfactory arrangement could not be reached
within thirty days, allow for the disposition of the building materials under
the supervision of the Bankruptcy Court.
K. BONDHOLDERS COMMITTEE'S APPLICATION FOR ORDER PERMITTING SECURITIES TRADING
IN CERTAIN CIRCUMSTANCES
On or about February 14, 1996, the Bondholders Committee filed an
application for an order determining that the members of the Bondholders
Committee would not be violating their duties as members of an official
committee (and, therefore, would not subject their claims to possible
disallowance, subordination or other adverse treatment) by trading in HJC's
securities during the pendency of HJC's chapter 11 case, provided that any
member carrying out such trades established and effectively implemented policies
and procedures, such as an "Ethics Wall," to prevent the misuse of non-public
information obtained through its activities as a committee member. The
Bankruptcy Court granted such an order on February 21, 1996.
L. WARN ACT LITIGATION
RUSSELL M. SWODY, ET AL. V. HARRAH'S NEW ORLEANS MANAGEMENT COMPANY
AND HARRAH'S ENTERTAINMENT, INC., Civil No. 95-4118, was filed against HET on
December 13, 1995 in the District Court and subsequently amended. Swody is a
class action under the Worker Adjustment and Retraining Notification Act ("WARN
ACT") and seeks damages for the alleged failure to timely notify workers laid
off at the time of the HJC bankruptcy. Plaintiffs seek unspecified damages, as
well as costs of legal proceedings,
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for themselves and all members of the class. An answer has been filed denying
all of plaintiffs' allegations. HET and HNOMC have answered numerous document
requests and interrogatories. After a hearing, the District Court certified the
class on April 22, 1996.
Early in 1996, SWODY was consolidated with SUSAN N. POIRIER, DARLENE
A. MOSS, ET AL. V. HARRAH'S ENTERTAINMENT, INC., HARRAH'S NEW ORLEANS MANAGEMENT
COMPANY, AND HARRAH'S OPERATING COMPANY, Civil No. 96-0215, which was filed in
the United States District Court for the Eastern District of Louisiana on
January 17, 1996, and subsequently amended. An answer was filed on March 15,
1996. The POIRIER Class was certified with SWODY on April 22, 1996. Discovery
has taken place in POIRIER as well. The consolidated POIRIER and SWODY cases
were set for trial on May 5, 1997.
Similar complaints were filed by Ms. Poirier in the Bankruptcy Court
in the HJC, HNOIC and Finance Corp. bankruptcy cases (Adversary Nos. 96-1015,
96-1014, and 96-1013). The POIRIER adversary proceedings purport to be class
actions, asserting claims under the WARN Act, as well as ERISA. On or about
February 23, 1996, HJC and HNOIC each filed a motion in its respective adversary
proceeding to dismiss the Poirier litigation. A hearing on such motions to
dismiss was held on March 19, 1996. Later, Finance Corp. also filed a similar
motion. The Bankruptcy Court granted the motions to dismiss with respect to
each of the Debtors on or about June 28, 1996.
Proofs of claims, on behalf of individual, alleged, terminated
employees and purportedly on behalf of all alleged former employees, were filed
in the Chapter 11 Cases. The plaintiffs in the litigation (the "WARN ACT
CLAIMANTS") moved to certify three classes on whose behalf the plaintiffs seek
to act as class representatives for purposes of the proofs of claims. The
Bankruptcy Court heard arguments on such motions on July 11, 1996, and denied
the motions by Memorandum Opinion and Order dated October 10, 1996. However, in
order to facilitate a proposed settlement reached by the Debtors and the WARN
Act Claimants (discussed below), the WARN Act Claimants filed motions to
reconsider that ruling. On December 10, 1996, the Bankruptcy Court certified
classes for settlement purposes only.
The WARN Act Claimants contend that the Debtors and the defendants in
the District Court cases operated as a single business enterprise with respect
to operations in New Orleans and contend that, under this alleged arrangement,
HJC may be liable to the claimants under the WARN Act along with the defendants
in the District Court cases. The Proponents believe, however, that such claims
have no merit whatsoever.
In order to avoid the expense, delay and risks associated with
additional litigation, the Debtors and the WARN Act Claimants have now agreed to
compromise and settle all of the WARN Act Claimants' claims on the terms
summarized below, which proposed settlement is reflected in the Plan. Under the
proposed settlement, JCC will pay to those individuals laid off on or about
November 22, 1995 the sum of $2,265,000, which amount includes the fees and
costs of the WARN Act Claimants' attorneys and certain taxes attributable to the
WARN Act settlement. The amounts paid to these individual WARN Act Claimants
will be based upon instructions from the WARN Act Claimants' attorneys. The
individual awards will be based upon information obtained through the payroll
records for the time period of October 1 through November 22, 1995. In addition
to this monetary settlement, the individuals laid off on or about November 22,
1995 will be offered preferential re-employment to their former positions or, if
their former positions no longer exist or are not presently available, to
substantially equivalent positions to the extent that such jobs are or become
available. "Preferential re-employment" means that they will be offered
employment before employment is offered to any person who was not laid off on or
about November 22, 1995. WARN
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Act Claimants who were laid off in August of 1995 will not receive a monetary
award, but will be placed on a secondary preferential re-hire list. These
claimants will be offered re-employment after those employees laid off on or
about November 22, 1995 and employees laid off by the Flamingo Casino. They
will remain on the preferential re-hire list for one year following the date of
the opening of the Casino. The terms of this proposed settlement are reflected
in the Plan, with the WARN Act Claimants' claims placed in Classes A6, B4 and
C3. A motion seeking approval of this compromise and settlement was filed and
the Bankruptcy Court preliminarily approved the settlement on December 10, 1996.
A final hearing on the settlement took place on February 3, 1997, at which time
the Bankruptcy Court approved the settlement subject to the occurrence of the
Effective Date.
The WARN Act Claimants have also filed a motion requesting that the
Bankruptcy Court order HJC to amend its schedules of creditors to include all
alleged, former employees and to extend the deadline for such alleged, former
employees to file proofs of claims. As part of the settlement described above,
the WARN Act Claimants have withdrawn such motion.
M. BONDHOLDER CLASS ACTIONS
Beginning on November 28, 1995, eight separate class action suits were
filed against HET and various of its corporate affiliates, officers and
directors in the United States District Court for the Eastern District of
Louisiana. They were BEN F. D'ANGELO, TRUSTEE FOR BEN F. D'ANGELO REVOCABLE
TRUST V. HARRAH'S ENTERTAINMENT CORP., MICHAEL D. ROSE, PHILIP G. SATRE AND RON
LENCZYCKI; MAX FENSTER V. HARRAH'S ENTERTAINMENT, INC., HARRAH'S NEW ORLEANS
INVESTMENT COMPANY, GRAND PALAIS CASINO, INC., PHILIP G. SATRE, COLIN V. REED,
MICHAEL N. REGAN, CHRISTOPHER B. HEMMETER, DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION, SALOMON BROTHERS, INC., AND BT SECURITIES CORP.; GOLDIE
ROSENBLOOM V. HARRAH'S ENTERTAINMENT CORP., MICHAEL D. ROSE, PHILIP G. SATRE AND
RON LENCZYCKI; BARRY ROSS V. HARRAH'S NEW ORLEANS INVESTMENT COMPANY, PHILIP G.
SATRE, COLIN V. REED, LAWRENCE L. FOWLER, MICHAEL N. REGAN, CEZAR M. FROELICH,
ULRIC HAYNES, JR., WENDELL GAUTHIER, T. GEORGE SOLOMON, JR., DUPLAIN W. RHODES,
III, HARRAH'S ENTERTAINMENT, INC., DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION, SALOMON BROTHERS INC., AND BT SECURITIES CORP.; LOUIS SILVERMAN V.
HARRAH'S ENTERTAINMENT, INC., HARRAH'S NEW ORLEANS INVESTMENT COMPANY, GRAND
PALAIS CASINO, INC., PHILIP G. SATRE, COLIN V. REED, MICHAEL N. REGAN,
CHRISTOPHER B. HEMMETER, AND DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION; FLORENCE KESSLER V. PHILIP G. SATRE, COLIN V. REED, CHARLES A.
LEDSINGER, JR., MICHAEL N. REGAN, LAWRENCE L. FOWLER, CHRISTOPHER B. HEMMETER,
CEZAR M. FROELICH, ULRIC HAYNES, JR., WENDELL H. GAUTHIER, T. GEORGE SOLOMON,
JR., DUPLAIN W. RHODES, III, DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION, SALOMON BROTHERS INC., AND BT SECURITIES CORPORATION; WARREN
ZEILLER AND JUDITH M. R. ZEILLER V. HARRAH'S ENTERTAINMENT CORP., MICHAEL D.
ROSE, PHILIP G. SATRE, AND RON LENCZYCKI; and CHARLES ZWERVING AND HELENE
ZWERVING V. HARRAH'S ENTERTAINMENT CORP., PHILIP G. SATRE, COLIN V. REED,
CHRISTOPHER B. HEMMETER, AND DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION. Pursuant to a District Court order of January 26, 1996,
plaintiffs, on May 24, 1996, filed a consolidated complaint in the action
numbered 95-3925, entitled IN RE HARRAH'S ENTERTAINMENT, INC. SECURITIES
LITIGATION (the "BONDHOLDERS CLASS ACTION").
The plaintiffs in the Bondholders Class Action (who purport to
represent all persons, other than defendants and their affiliates, who purchased
Old Bonds between November 9, 1994 and November 21, 1995) have characterized the
allegations in their complaint as follows: The complaint alleges violations of
Sections 11 and 12(2) of the Securities Act of 1933, 15 U.S.C. Sections 77k and
77l(2); Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Section
78j(b); and Rule 10b-5 promulgated thereunder by the Securities and Exchange
Commission, 17 C.F.R. Section 240.10b-5. The complaint asserts that the
registration statement and prospectus filed in connection with the offering of
the Old Bonds contained untrue statements
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of material fact and omitted to state material facts necessary in order to make
the statements not misleading. The complaint also alleges that the defendants
engaged in a scheme to defraud plaintiffs and the alleged class by knowingly or
recklessly releasing false and misleading information that was designed to and
did (i) deceive the investing public, including plaintiffs and other members of
the alleged class, regarding the Debtors' financial condition and future
business prospects, (ii) artificially inflate the market price of the Old Bonds
during the relevant period, and (iii) cause plaintiffs and other alleged class
members to purchase or otherwise acquire the Old Bonds at inflated prices.
In addition, certain of the Debtors' officers and directors and other
entities that have claimed or may claim defense, indemnification and/or
contribution rights against the Debtors are named as defendants in the
Bondholders Class Action.
The Proponents believe that the plaintiffs' allegations have no merit
whatsoever. Defendants filed motions to dismiss and a motion to have the matter
referred to the Bankruptcy Court. The referral motion was denied; the motion to
dismiss is pending. Plaintiffs have filed a motion for class certification. No
ruling has been made on this motion. Nonetheless, discovery has begun.
Proofs of claim, purportedly on behalf of these plaintiffs, have been
filed in each of the Chapter 11 Cases. Such proofs of claim assert claims based
upon damages caused by alleged violations of federal securities laws in
connection with the purchase and sale of the Old Bonds. The Debtors have
objected to such proofs of claim. Under the Plan, to the extent that such
claims are allowed, they will fall within the Classes of Penalty Claims under
the Plan, and will be treated accordingly. In addition, certain of the
individuals named as defendants in the Bondholders Class Action are officers and
directors of the Debtors or of other entities and have claimed or may claim
defense, indemnification and/or contribution rights against the Debtors.
Plaintiffs in the Bondholders Class Action filed motions in the
Chapter 11 Cases seeking the appointment of an examiner. A hearing on the
motions was held on November 6, 1996. On November 20, 1996, the Bankruptcy
Court denied the motion to appoint an examiner. In denying the motion, the
Bankruptcy Court found that the request for an examiner was both untimely and
for an improper purpose.
While the Proponents and the other defendants in the Bondholders Class
Action do not believe that there is any merit to these claims, they nonetheless
believe that a negotiated settlement of such claims is in their best interests.
Accordingly, counsel for the class and the defendants named in the Bondholders
Class Action have settled the litigation on the following basic terms:
(1) a class was certified for settlement purposes in the Bondholders
Class Action consisting of all individuals who purchased Old Bonds between
November 8, 1994 and November 22, 1995 (the "SETTLEMENT CLASS");
(2) as set forth herein and in the Plan, Harrah's Investor will
contribute 200,000 shares of Class A New Common Stock to the Release Pool to be
distributed as set forth in the Plan to those members of the Settlement Class
who are current Bondholders;
(3) the sum of $3.8 million in cash will be contributed by
defendants and/or their
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insurance carriers toward the settlement, which funds will be distributed as
determined by plaintiffs' counsel and approved by the District Court to members
of the Settlement Class, as well as for the payment of costs and fees;
(4) plaintiffs will provide releases to the defendants, dismiss the
Bondholders Class Action with prejudice, and support the Plan.
Given the terms of this settlement, Bondholders Class Action counsel
believe that it is in the best interests of the Settlement Class to participate
in this settlement.
The parties to the Bondholders Class Action entered into a stipulation
effectuating the basic terms of the settlement on April 16, 1997. On June 26,
1997, the District Court conducted a fairness hearing to determine whether to
approve the proposed settlement. No member of the Settlement Class opted out of
the settlement. On July 31, 1997, the District Court approved the settlement,
which is contingent on the occurrence of the Effective Date of the Existing Plan
or an effective date of a plan of reorganization supported by HET in the Chapter
11 Cases.
N. SAPIR LITIGATION
On June 6, 1997, Eddie L. Sapir and the Eddie L. Sapir Inter Vivos
Trust filed a civil action captioned EDDIE L. SAPIR AND THE EDDIE L. SAPIR INTER
VIVOS TRUST VERSUS GRAND PALAIS ENTERPRISES, INC., in the Civil District Court.
In that action, plaintiffs allege, among other things, that one of HJC's three
general partners, Grand Palais, through its principal Christopher B. Hemmeter
("HEMMETER") and its former counsel Cezar M. Froehlich ("FROEHLICH"), has
negotiated or is negotiating a compromise with HET and others which improperly
benefits Hemmeter and Froehlich to the detriment of the creditors and
shareholders of Grand Palais. Plaintiffs sought and obtained an EX PARTE
temporary restraining order prohibiting the disposition of any property of Grand
Palais, including prohibition of Grand Palais's execution of the releases and
other agreements among Grand Palais, HET and others described in the Existing
Plan and this Plan. Plaintiffs also moved for the EX PARTE appointment of a
temporary receiver for Grand Palais, among others, which was granted by the
Civil District Court.
On June 18, 1997, Grand Palais filed a notice of removal of the
litigation to the Bankruptcy Court. On July 1, 1997, plaintiffs filed a motion
in the Bankruptcy Court to remand the litigation to Civil District Court. On
July 2, 1997, the Bankruptcy Court granted HJC leave to intervene in the
litigation and continued plaintiff's motion to remand the litigation to Civil
District Court. The Bankruptcy Court's order also included provisions by which
one of the plaintiffs and/or the receiver could participate in HJC's weekly
"steering committee" conferences and present objections to the Bankruptcy Court
with respect to any significant decision requiring the approval of HJC's general
partners. Thereafter, plaintiffs filed a motion to reconsider the Court's order
permitting HJC to intervene in the litigation. On October 6, 1997, the
Bankruptcy Court remanded the litigation to Civil District Court. On that date,
the Bankruptcy Court also reconsidered its order permitting HJC to intervene in
the litigation and rescinded without prejudice its order permitting HJC to
intervene.
On November 21, 1997, Eddie L. Sapir and the Eddie L. Sapir Inter
Vivos Trust filed a civil action captioned EDDIE L. SAPIR AND THE EDDIE L. SAPIR
INTER VIVOS TRUST V. BANKER'S TRUST COMPANY, CEZAR M. FROELICH, ABC INSURANCE
COMPANY, FIRST NATIONAL BANK OF COMMERCE, HARRAH'S ENTERTAINMENT INCORPORATED,
SHEFSKY & FROELICH, LTD., DEF INSURANCE COMPANY, GHI INSURANCE COMPANY, JKL
INSURANCE
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COMPANY, THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, MERRILL LYNCH SENIOR HIGH
INCOME FUND, MERRILL LYNCH SENIOR HIGH INCOME II FUND, MERRILL LYNCH SENIOR
STRATEGIC FUND, PRIME INCOME TRUST, AND VAN KAMPEN MERITT PRIME RATE INCOME
TRUST, No. 97-20643, in the Civil District Court. In that action, the
plaintiffs allege, among other things, that defendants committed breaches of
contract and fiduciary duty with respect to actions taken in connection with the
Chapter 11 Cases.
O. BAR DATE
The deadline (the "BAR DATE") for filing proofs of claims against or
interest in the Debtors occurred on May 15, 1996, except for (i) claims which
were included in the HJC's schedules filed with the Bankruptcy Court, which
claims were not listed in such schedules as "disputed," "unliquidated" or
"contingent," and to which such scheduled amounts the holders of such claims
agree, and (ii) those claims arising from the rejection of executory contracts
or unexpired leases, for which the Bar Date will be the date which is thirty
days after entry of the Confirmation Order. In addition, the Bankruptcy Court
has entered orders extending the Bar Date for (i) claims asserted by Bondholders
or FNBC, acting solely in its capacity as indenture trustee and/or collateral
agent on behalf of the Bondholders, other than contractual claims based upon
principal of, or interest on, the Old Bonds, and (ii) certain claims against
HNOIC asserted by NOLDC, HJC, Finance Corp., Grand Palais and/or their
stockholders to April 1, 1997 (subject to revocation under certain
circumstances).
P. CLAIMS ANALYSIS
Since the Bar Date, the Debtors have worked diligently to analyze the
claims that were filed in the Chapter 11 Cases and have been able to reconcile
the bulk of the filed claims (in number) with the claim amounts reflected in the
Debtors' bankruptcy schedules. Some creditors have agreed to reduce the claims
asserted in their proofs of claims, as reflected in stipulations which have been
or will be presented to the Bankruptcy Court for approval.
In addition, the Debtors have identified those claims which are
objectionable and have already filed most, though not all, of the claims
objections they intend to file. Categories of claims objected to by the Debtors
include (i) duplicate claims, (ii) claims asserted by subcontractors to whom the
Debtors have no liability, (iii) claims asserted by former casino employees to
whom the Debtors have no liability, (iv) other claims which the Debtors dispute,
and (v) claims which the Debtors believe are overstated and should be reduced.
As a result of the Debtors' objections, many claims have already been
disallowed, reduced or otherwise amended.
As a result of the Debtors' analysis of the claims asserted against
them, they have determined to provide in the Plan for PAYMENT IN FULL, IN CASH,
on account of each Allowed, general, unsecured claim against HJC on the later of
the Effective Date and the date on which a claim, if disputed, becomes an
Allowed claim, or as soon as practicable thereafter. The Debtors do not believe
that there will be any Allowed, general, unsecured claims against Finance Corp.
or HNOIC (after giving effect to certain waivers of claims as provided under the
Plan). (It should be noted that general, unsecured claims do not include claims
asserted by plaintiffs in the Bondholders Class Action, or claims for
indemnification and contribution relating to such claims, as any such claims, if
Allowed, will fall within the classes of "Penalty Claims" under the Plan and
will be treated accordingly.)
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Q. NEGOTIATIONS WITH OTHER PARTIES
Throughout the Debtors' Chapter 11 Cases, the Proponents have been
actively engaged, at various times, with each of the major parties in interest
and/or their counsel, including, but not limited to, the State, the LEDGC and
the LGCB, the City and the RDC, the Bondholders Committee, the Creditors
Committee, and certain major unsecured creditors, to attempt to achieve
consensus on the terms of a plan of reorganization for the Debtors. These
negotiations have resulted in significant progress toward agreements with all of
the major parties as to the plan treatment for all of the Debtors' creditors and
other parties in interest (such as parties to the Debtors' significant contracts
and leases). To date, such negotiations have resulted in a term sheet and
letter of intent with the Bondholders Committee, the City Agreement, a term
sheet with BTCo regarding the Term Loans and the Working Capital Facility, a
term sheet with BTCo, Salomon, BT Securities Corporation and DLJ regarding the
Convertible Junior Subordinated Debentures, support for the Plan by the
Creditors Committee, the Broadmoor Settlement Agreement (as defined in Section
V.C.10 below), the Audubon Settlement Agreement (as defined in Section V.C.12
below), the First American Settlement Agreement, the Centex Settlement Agreement
and the settlement with the WARN Act Claimants. On November 4, 1997, the
Governor of the State expressed his public support for the project with a
rolling guaranty concept. On December 9, 1997, the LGCB, among other things,
unanimously approved the Modified Casino Operating Contract for submission to
the Governor of the State with the request that he submit the Modified Casino
Operating Contract to the State legislature for its approval.
In the event that there is a superior offer with respect to the Old
Bonds which the Bondholders Committee's fiduciary duties require it to support,
the Bondholders Committee has retained a right to withdraw from any agreement
between the Bondholders' Committee and the Proponents. Pursuant to the letter
of intent between HET, HJC and the Bondholders Committee, executed August 23,
1996 (the "NO SHOP DATE"), the Bondholders Committee has agreed not to solicit
any other sponsors of a plan of reorganization after the No Shop Date. After
the No Shop Date, if the Bondholders Committee supports a plan of reorganization
not supported by HET, or withdraws its support for a plan of reorganization
supported by HET, then at such time, the DIP Lender will be entitled to receive
the immediate repayment of its DIP loan (including all amounts advanced
thereunder and accrued interest on such advances). In addition, if after the
date on which HET, the City, the State and the Bondholders Committee are
definitively committed to support a plan of reorganization supported by HET, (i)
the Bondholders Committee supports a plan of reorganization not supported by
HET, or (ii) withdraws its support for a plan of reorganization supported by
HET, then HET will be entitled to receive from HJC a "break-up" fee of $2.5
million at such time, and the Bondholders Committee will not support any plan
that does not provide that HET will be entitled to receive from HJC $5 million
at the time of the confirmation of such other plan, and $5 million at the time
of the consummation of such other plan. The Proponents acknowledge that the
proposed break-up fee is not enforceable unless and until it has been approved
by the Bankruptcy Court upon proper application.
R. FILING OF PLAN ON APRIL 3, 1996 AND CONFIRMATION OF THIRD AMENDED PLAN
On April 3, 1996, the Proponents filed the first version of the Plan,
along with the first version of this Disclosure Statement. Since that time, the
legislative developments (discussed above in Section IV.G.) as well as further
negotiations with key constituents in the Chapter 11 Cases have necessitated
certain amendments in the Plan and Disclosure Statement, which have resulted in
the filing of a first amended Disclosure Statement and a first amended Plan on
June 17, 1996, the filing of a second amended Disclosure Statement and a second
amended Plan on August 28, 1996 and the filing of a third amended Disclosure
Statement and a third amended Plan (the Existing Plan), each dated February 26,
1997. On April 28, 1997,
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the Bankruptcy Court confirmed the Existing Plan, which reflected agreements
with all major parties and constituencies except the State and was predicated
upon receiving all necessary approvals, if any, of a Modified Casino Operating
Contract by the State and the LGCB. A copy of the Existing Plan and the
disclosure statement related thereto can be obtained by contacting Vincent E.
Lazar in writing at Jenner & Block.
While the LGCB did approve the modified contract, the State
legislature did not approve or disapprove such contract. Because the Existing
Plan was predicated on receiving all necessary approvals, if any, of a Modified
Casino Operating Contract by the State and the LGCB, and the State legislature
did not approve or disapprove it, the Existing Plan was not consummated.
In June of this year, the Proponents filed a modified version of the
Existing Plan, which modification provided for the assumption of the original
Casino Operating Contract (with certain modifications). A summary disclosure
statement describing such modification was approved by the Bankruptcy Court, and
acceptances of the modifications were sought of the Bondholders. While
sufficient acceptances were obtained, a confirmation hearing on the modified
Plan has not yet been held. Instead, further negotiations have resulted in the
proposed HET/JCC Agreement and the requirement in the Casino Operating Contract
for a Minimum Payment Guaranty and agreement on the terms of a Modified Casino
Operating Contract. Consequently, the Proponents have modified the Existing
Plan to reflect such changes, among others, resulting in the filing of this
Fifth Amended Disclosure Statement and the Plan which is attached.
S. UNITED STATES TRUSTEE'S MOTION TO CONVERT OR DISMISS
On October 6, 1997, the United States Trustee filed a motion to
convert the HJC and HJFC chapter 11 cases to cases under Chapter 7 of the
Bankruptcy Code or to dismiss these cases. This motion was originally scheduled
to be heard on November 5, 1997; but, it has been rescheduled to December 17,
1997.
T. FILING OF CERTAIN LAWSUITS BY DEBTORS AND NOLDC
In view of the fact that certain two-year statutes of limitations
under Sections 108 and 546 of the Bankruptcy Code and applicable state law were
to expire on November 22, 1997, Harrah's Jazz Company has filed certain
complaints against multiple defendants on or before such date to preserve the
Debtors' claims. In the event that the Effective Date occurs, virtually all of
such claims will be settled and released pursuant to the Plan. Although the
Debtors have indicated that they may have no valid claims for avoidance of
transfers as preferential or fraudulent transfers because the Debtors may not
have been insolvent at the time such transfers were made and, to the extent such
avoidance claims may exist, there may be defenses such as that the transfers
were made in the ordinary course of business, other parties in interest have
expressed contrary views and contended that the Debtors were or may have been
insolvent at the time transfers to creditors were made and that the transferees
may not have valid defenses to avoidance actions. Harrah's Jazz Company and
Harrah's Jazz Finance Corp. sought and obtained a court order authorizing and
ordering Harrah's Jazz Company and Harrah's Jazz Finance Corp. to abandon and
not pursue recovery of charitable donations and small preferences. As a result
of said order, Harrah's Jazz Company is not required to pursue the recovery or
avoidance of charitable donations and small preferences (under $5,000.00).
Accordingly, it will not be necessary for Harrah's Jazz Company to preserve
potential avoidance claims against approximately 837 recipients of payments of
less than $5,000 made within ninety days of the bankruptcy filing. However, the
United States Trustee and the Bondholders Committee recommended that
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as a matter of prudence, Harrah's Jazz Company should preserve for the estate in
the event the plan is not consummated avoidance actions of $5,000.00 and more.
Since the Plan provides for the release of virtually all of such claims and to
avoid the expense to all concerned of pursuing and defending such claims, the
Debtors are requesting, in connection with filing such complaints, orders
excusing service of the complaints at this time and staying the proceedings
pending confirmation and consummation of the Plan at which time those claims
which are settled or released by the Plan (virtually all of the claims) will be
dismissed.
NOLDC, which is the subject of its own chapter 11 case, in order to
preserve its right to do so before the lapsing of statutes of limitations, has
filed a lawsuit, captioned NEW ORLEANS LOUISIANA DEVELOPMENT CORPORATION V.
BANKERS TRUST COMPANY, FIRST NATIONAL BANK OF COMMERCE, INC., HARRAH'S
ENTERTAINMENT, HARRAH'S NEW ORLEANS INVESTMENT COMPANY, HARRAH'S NEW ORLEANS
MANAGEMENT COMPANY AND HARRAH'S OPERATING COMPANY, INC., No. 97-1176, in the
Bankruptcy Court, alleging breach of fiduciary duty and other causes of action.
NOLDC, however, states in its complaint that it is "actively pursuing
confirmation and consummation of a plan of reorganziation" and upon occurrence
of these events "expects to waive, release or otherwise resolve" these claims.
V. THE PLAN OF REORGANIZATION
THIS IS A SUMMARY OF THE PROVISIONS OF THE PLAN AND, ACCORDINGLY, IS
NOT AS COMPLETE AS THE FULL TEXT OF THE PLAN THAT ACCOMPANIES THIS
DISCLOSURE STATEMENT. THE PLAN ITSELF SHOULD BE READ IN ITS ENTIRETY.
IN THE EVENT OF ANY INCONSISTENCIES BETWEEN THE DESCRIPTION OF THE
PLAN CONTAINED IN THIS DISCLOSURE STATEMENT AND THE PLAN ITSELF, THE
PROVISIONS OF THE PLAN SHALL CONTROL.
A. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS
The Proponents believe that the classification of Claims and Equity
Interest provided by the Plan is consistent with the requirements of the
Bankruptcy Code. Under the Bankruptcy Code, only the holders of Allowed Claims
or Allowed Equity Interests that are impaired and that receive distributions
under the Plan are entitled to vote on the Plan.
1. ADMINISTRATIVE EXPENSE CLAIMS
Each holder of an Allowed Administrative Expense Claim against a
Debtor will receive (i) the amount of such holder's Allowed Claim in one cash
payment on, or as soon as practicable thereafter, the later of the Effective
Date and the day on which such Claim becomes an Allowed Claim (but in no event
after the tenth Business Day after the later of those dates), or (ii) such other
treatment as may be agreed upon in writing by the applicable Debtor (prior to
the Effective Date) or JCC (from and after the Effective Date) and such holder;
PROVIDED, HOWEVER, that an Administrative Expense Claim representing a liability
incurred in the ordinary course of business of a Debtor (including fees payable
to the United States Trustee) may be paid in the ordinary course of business by
such Debtor, and PROVIDED FURTHER, that the payment of an Allowed Administrative
Expense Claim representing a right to payment under Sections 365(b)(l)(A),
365(b)(l)(B) or Section 365(d)(3) of the Bankruptcy Code may be made in one or
more cash payments over a period of time as is determined to be appropriate by
the Bankruptcy Court.
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Solely for purposes of this Plan, and subject to the occurrence of the
Effective Date, HET, NOLDC and Grand Palais and their Affiliates and Insiders
will be deemed to have waived any Administrative Expense Claim other than, (i)
any Administrative Expense Claim covered by any insurance policy assumed
pursuant to Section 8.1(c) of the Plan (provided, however, that any such
Administrative Claim will be payable only from available coverage under such
insurance policy (and not payable by any Debtor) and only to the extent
permitted under the NOLDC Shareholders/HET Settlement Agreement or Grand
Palais/HET Settlement Agreement, as applicable) and (ii) in the case of HET and
its Affiliates, the DIP Loan Claim (a portion of which is waived pursuant to
Section 2.1(f) of the Plan) or any Administrative Expense Claim for unreimbursed
premiums or other unreimbursed amounts paid for insurance coverage provided to
any Debtor under any insurance policy assumed pursuant to Section 8.1(c) of the
Plan. The "DIP LOAN CLAIM" means, collectively, any and all Claims based on the
Existing DIP Indebtedness and any Future DIP Loan. The distributions to which
the Bondholders and, if applicable, the Old Indenture Trustee are entitled under
Article IV of the Plan will be deemed to be in complete satisfaction, discharge
and release of any Administrative Expense Claim or any superpriority
administrative expense claim or any lien securing any of the foregoing of the
Bondholders or the Old Indenture Trustee, as applicable, other than the
Administrative Expense Claims of Fidelity, the respective claims for
compensation or reimbursement of expenses of the members of the Bondholders
Committee and the professionals retained by the Bondholders Committee, any
Bondholder or the Old Indenture Trustee, which claims will be governed by the
applicable provisions of the Plan and the Bankruptcy Code.
In consideration of, among other things, the execution and delivery of
releases provided pursuant to or in connection with the Plan and the issuance of
New Common Stock in accordance with Sections 6.2(e) and (f) of the Plan, the
outstanding principal amount of the DIP Loan Claim will be waived in its
entirety as of the Effective Date. The portion of the DIP Loan Claim consisting
of accrued and unpaid interest will be paid in full in cash on the Effective
Date.
2. PRIORITY TAX CLAIMS
Except to the extent that the holder of an Allowed Priority Tax Claim
agrees to a different treatment, JCC will pay to each holder of an Allowed
Priority Tax Claim, at the sole option of JCC, (a) cash in an amount equal to
such Allowed Priority Tax Claim on the later of the Effective Date and the date
such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon
thereafter as is practicable (but in no event after the tenth Business Day after
the later of those two dates), or (b) equal quarterly cash payments in an
aggregate amount equal to such Allowed Priority Tax Claim, together with
interest at a fixed annual rate to be determined by the Bankruptcy Court or
otherwise agreed to by JCC and such holder, over a period through the sixth
anniversary of the date of assessment of such Allowed Priority Tax Claim, or
upon such other terms determined by the Bankruptcy Court to provide the holder
of such Allowed Priority Tax Claim deferred cash payments having a value, as of
the Effective Date, equal to such Allowed Priority Tax Claim.
HJC CLASSIFICATION
3. CLASS A1 -- OTHER PRIORITY CLAIMS (IMPAIRED)
Class A1 consists of all Allowed Claims against HJC that are entitled
to priority in right of payment under any or all of Sections 507(a)(3) through
(a)(7) of the Bankruptcy Code. JCC will pay
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to each holder of an Allowed Claim in Class A1 cash in an amount equal to such
Allowed Claim on the later of the Effective Date and the date such Claim becomes
an Allowed Claim, or as soon as practicable thereafter.
4. CLASS A2 -- NON-BONDHOLDER SECURED CLAIMS (IMPAIRED)
Class A2 consists of all Allowed Secured Claims against HJC other than
the Secured Claims specified in Class A3 or A4 of the Plan. Except as provided
in the immediately following two sentences, notwithstanding any contractual
provision or applicable law that entitles the holder of an Allowed Claim in
Class A2 to demand or receive payment of such Claim prior to the stated maturity
of such Claim from and after the occurrence of a default, each Allowed Claim in
Class A2 will be reinstated and rendered unimpaired in accordance with Section
1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign, abandon or
surrender any property securing any Secured Claim in Class A2 to the holder of
such Secured Claim, which will result in impaired treatment under the Bankruptcy
Code. The Bankruptcy Court will determine the value of any such property so
assigned, abandoned or surrendered, and any Deficiency Claim resulting therefrom
will be paid as a Class A6 or A7 Claim.
5. CLASS A3 -- BANK CLAIMS AND OLD BANK COLLATERAL AGENT CLAIMS
(IMPAIRED)
Class A3 consists of two separate subclasses. Class A3(a) consists of
all Allowed Secured Claims of the Participating Banks and FNBC and its
successors and assigns, as collateral agent for the Banks under the Old Bank
Credit Documents (the "OLD BANK COLLATERAL AGENT"), against HJC and Class A3(b)
consists of all Allowed Secured Claims of the Non-Participating Banks against
HJC. Solely for voting purposes, each Participating Bank will be deemed to have
an Allowed Class A3(a) Claim in the aggregate amount set forth in clauses (i)
through (iv) below.
The Claim of each holder in Class A3(a) shall be allowed in an amount
equal to: (i) with respect to any holder that participated in the pre-petition
standby letter of credit issued by BTCo in the amount of $5,000,000 and
previously drawn in full by Broadmoor as the beneficiary, such holder's Pro Rata
Share of the sum of $5,000,000 plus all unpaid interest thereon (at the
nondefault rate specified in the Old Bank Credit Documents) and unpaid fees in
respect of such letter of credit that accrue through the Effective Date; (ii)
with respect to any holder that participated in the undrawn Standby Letter of
Credit S10269 issued by BTCo in the amount of $1,500,000 in favor of the City,
such holder's Pro Rata Share of the unpaid fees in respect of such letter of
credit that accrue through the Effective Date; (iii) the amount paid by such
holder in respect of the fees and expenses of Wachtell, Lipton, Rosen & Katz, as
the restructuring counsel of the Administrative Agent that accrue through the
Effective Date (the "WACHTELL FEES AND EXPENSES") (which shall not include any
fees and expenses in connection with the Convertible Junior Subordinated
Debentures, the A Term Loan, the B Term Loan and/or the Working Capital
Facility), provided that such holder purchases on the Effective Date additional
Convertible Junior Subordinated Debentures in an amount equal to its Pro Rata
Share of the Wachtell Fees and Expenses; and (iv) in the case of the
Administrative Agent, all unpaid facing fees arising under the Old Bank Credit
Agreement through the Effective Date; provided, however, that the Class A3(a)
Claims of FNBC as a Participating Bank and as Old Bank Collateral Agent will be
allowed and otherwise treated in accordance with the provisions of the FNBC
Settlement Agreement. Each Allowed Class A3(a) Claim will be paid from the
Withheld Funds on the Effective Date by the Administrative Agent and, to the
extent such Withheld Funds are insufficient to pay the Allowed Class A3(a)
Claims of FNBC, the unpaid portion of
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FNBC's Allowed Class A3(a) Claims will be paid by JCC. Any remaining Withheld
Funds will be remitted by the Administrative Agent to the Old Bank Collateral
Agent for distribution pursuant to Section 4.3(b)(ii) of the Plan. The
Participating Banks and FNBC as the Old Bank Collateral Agent will waive all of
their other Class A3(a) claims against the Debtor and will not receive any
distributions on account thereof. As a condition to the allowance of their
respective Class A3(a) Claims, the holders of Class A3(a) Claims will purchase
on the Effective Date Convertible Junior Subordinated Debentures in an aggregate
principal amount equal to the sum of (x) $11,000,000 plus (y) in the case of any
holders of Class A3(a) Claims electing to have the portion of their Class A3(a)
Claim described in clause (iii) above allowed, the aggregate amount of Class
A3(a) Claims allowed pursuant to such clause (iii). The $11,000,000 portion of
the Convertible Junior Subordinated Debentures to be purchased by each holder of
a Class A3(a) Claim pursuant to clause (x) in the immediately preceding sentence
will be based on the ratio of the amount of fees and expenses paid to such
holder in connection with the credit facility under the Old Bank Credit
Documents to the aggregate amount of fees and expenses paid to all holders of
Class A3(a) Claims in connection with such credit facility. Notwithstanding
anything to the contrary in the Plan, FNBC will be obligated to purchase the
principal amount of Convertible Junior Subordinated Debentures specified in the
FNBC Settlement Agreement, and $357,150 of such principal amount will be deemed
to have been purchased by FNBC as a holder of Class A3(a) Claims and will be
credited against the $11,000,000 in aggregate principal amount of Convertible
Junior Subordinated Debentures to be purchased by holders of Class A3(a) Claims
pursuant to Section 4.3(a)(ii) of the Plan.
"FNBC SETTLEMENT AGREEMENT" means the letter agreement, dated April 24,
1997, among HJC, HET, FNBC, the Bondholders Committee and BTCo attached to
the Existing Plan as Exhibit M.
The amount of the Allowed Secured Claim of each holder in Class A3(b)
will be estimated for distribution purposes on or before the Effective Date.
The effect of estimation on final allowance of a claim, as well as on the
affected creditor's rights against the estate, other creditors and third
parties, is to be determined by the Bankruptcy Court under applicable law. As
soon as practicable after the later of the Effective Date and the date on which
all of the Allowed Secured Claims in Class A3(b) have been estimated pursuant to
an order of the Bankruptcy Court (the "ESTIMATION ORDER"), the Old Bank
Collateral Agent (i) will distribute to each such holder from the Withheld Funds
(as defined below) remitted to the Old Bank Collateral Agent pursuant to Section
4.3(a)(ii) of the Plan an amount of cash equal to the lesser of (A) the portion
of such holder's estimated Allowed Secured Claim that has been liquidated as of
the date of such Estimation Order, and (B) the product of (x) the amount of such
Withheld Funds and (y) a fraction, the numerator of which is the amount
specified in the immediately preceding clause (A) above and the denominator of
which is the aggregate amount of each holder's estimated Allowed Secured Claim
that has been liquidated as of the date of the Estimation Order, (ii) will
retain a portion (the "BANK RESERVE FUND") of the Withheld Funds equal to the
aggregate amount of each such holder's estimated Class A3(b) Claim that remains
Contingent as of such date, which Bank Reserve Fund will secure the unliquidated
portion of each holder's unliquidated estimated Class A3(b) Claims, and (iii)
will remit promptly to JCC the balance of such Withheld Funds. "WITHHELD FUNDS"
means the funds withdrawn by or on behalf of any or all of the Banks from one or
more accounts of HJC on November 21 or November 22, 1995 (less the amount of any
such funds which were subsequently returned to HJC), to the extent such funds
were not, prior to the commencement of HJC's Chapter 11 Case, legally and
properly setoff or otherwise legally and properly applied against the
outstanding balance of the prepetition indebtedness (exclusive of contingent
indebtedness or obligations) owing to the Banks under the Old Bank Credit
Documents as of the commencement of HJC's Chapter 11 Case, plus interest
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thereon either (i) in the amount of interest actually credited to the account(s)
at which the Withheld Funds have been deposited if HET, on behalf of the Plan
Proponents, the Bondholders Committee and BTCo so agree in their respective sole
discretion, or (ii) if there is no such agreement, at a rate to be determined by
the Bankruptcy Court. On the tenth (10th) Business Day ("SUBSEQUENT BANK
DISTRIBUTION DATE") after each six-month anniversary of the Effective Date, and
upon receipt of the appropriate documentation from the applicable holder, the
Old Bank Collateral Agent will distribute to each holder of an estimated or
actual Allowed Class A3(b) Claim an amount equal to the lesser of (A) the
portion of such Claim, if any, that has been liquidated during the six-month
period ending on such sixth (6th) month anniversary date, and (B) the product of
(x) the remaining amount of funds in the Bank Reserve Fund times (y) a fraction,
the numerator of which is the amount specified in the immediately preceding
clause (A) and the denominator of which is the aggregate amount of all such
estimated or actual Allowed Secured Claims that have been liquidated during such
six month period. In the event the Claims of the holders in Class A3(b) are
allowed as Secured Claims in an aggregate amount in excess of the amount of
Withheld Funds distributed to the Old Bank Collateral Agent pursuant to Section
4.3(a)(ii) of the Plan, then each such holder will receive the "indubitable
equivalent" (within the meaning of Section 1129(b)(2)(A)(iii) of the Bankruptcy
Code) as determined by Final Order of the Bankruptcy Court with respect to that
portion of such holder's Allowed Secured Claim in excess of its Pro Rata Share
of such Withheld Funds. In the event that the Secured Claim of any holder in
Class A3(b) is, pursuant to a Final Order, disallowed or allowed in an amount
less than the amount of distributions previously made on account of such Claim,
such holder is required promptly to remit to JCC the excess of any such
distributions over the amount of its Allowed Secured Claim, if any. Upon the
liquidation and payment in full of all Allowed Class A3(b) Claims, the Old Bank
Collateral Agent will remit promptly to JCC the remaining balance in the Bank
Reserve Fund.
6. CLASS A4 -- BONDHOLDER CLAIMS (IMPAIRED)
Class A4 consists of all Allowed Secured and Unsecured Claims of the
Bondholders against HJC. The Claim of each record holder of Old Bonds as of the
Distribution Record Date or the Release Pool Distribution Record Date, as
applicable, to the extent such Claim is based on the principal of and accrued
interest on the Old Bonds owned as of the Distribution Record Date or the
Release Pool Distribution Record Date, as applicable, will be allowed in the
aggregate amount of the principal of such Old Bonds plus accrued interest
(calculated in accordance with the provisions of the Old Indenture) through and
including the Effective Date. On the Effective Date or as soon as practicable
thereafter, but in no event after the tenth Business Day after the Effective
Date (or in the case of clause (v), as provided in Section 5.2 of the Plan),
each record holder of an Allowed Claim in Class A4 will receive (i) 8.529 shares
of Class A New Common Stock for each $1,000 of the principal amount of the Old
Bonds held by such holder on the Distribution Record Date, (ii) $431 in
principal amount of New Bonds for each $1,000 of the principal amount of the Old
Bonds held by such holder on the Distribution Record Date, (iii) its Pro Rata
Share of the New Contingent Bonds, (iv) its Pro Rata Share of the interests in
the proceeds of Assigned Litigation Claims allocated to holders of Allowed Class
A4 Claims (as of the Distribution Record Date) and/or Releasing Bondholders, (as
of the Release Pool Distribution Record Date) as applicable, under Section 5.9
of the Plan, and (v) in the case of any holder which is a Releasing Bondholder,
as consideration for its release of claims against the Released Parties, if such
holder specifically elects to release such claims as provided in Section 5.2 of
the Plan, from the Release Pool, 3.448 shares of Class A New Common Stock, for
each $1,000 in principal amount of Old Bonds held by such holder on the Release
Pool Distribution Record Date plus its Pro Rata Share (based on the total
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principal amount of Old Bonds held by all Releasing Bondholders) of Class A New
Common Stock consisting of 86.67% of the Unsubscribed Release Pool Shares
(subject to the Plan's restriction on the issuance of fractional shares). The
foregoing distributions will be deemed to include the distribution to which each
holder of an Allowed Claim in Class A4 is entitled as a holder of an Allowed
Claim in Class B3. "RELEASED PARTIES" means the Debtors and the JCC Entities
and each Person in any or all of the HET Group, the Debtors Group, the
Bondholders Committee Group, the City Group, the State Group, the
Bank/Underwriter Group, the NOLDC Group (if the applicable Persons in the NOLDC
Group execute and deliver on or before the Effective Date the NOLDC
Shareholders/HET Settlement Agreement) and the Grand Palais Group (if the
applicable Persons in the Grand Palais Group execute on or before the Effective
Date the Grand Palais/HET Settlement Agreement). The terms used above have the
following meanings:
"BANK/UNDERWRITER GROUP" means each Participating Bank and Underwriter
which executes the Bank/Underwriter Release and FNBC in any capacity and
their respective Affiliates, predecessors, successors and assigns and the
officers, directors, employees, attorneys, financial advisors, accountants,
agents or other representatives of each of the foregoing.
"BONDHOLDERS COMMITTEE GROUP" means the Bondholders Committee, and each of
the current and former members thereof in its capacities as a member of the
Bondholders Committee and as a Bondholder, and each professional retained
by the Bondholders Committee.
"CITY GROUP" means the City, the Mayor of the City, the City Council of the
City, the members of the City Council, the RDC, all boards, commissions,
agencies and other instrumentalities of the City and the officers,
directors, employees, staff members, attorneys, financial advisors,
accountants, agents and other representatives of each of the foregoing.
"DEBTORS GROUP" means each Debtor's officers, directors, employees,
attorneys, financial advisors, accountants and, in the case of HJC, the
members of its Executive Committee and its Reorganization Steering
Committee.
"GRAND PALAIS GROUP" means Grand Palais, and its Affiliates (other than the
Debtors), predecessors, successors and assigns and the officers, directors,
employees, attorneys, financial advisors, accountants, agents and other
representatives of each of the foregoing.
"HET GROUP" means HET, HOCI, HNOMC, the Harrah's Investor and their
respective Affiliates (other than the Debtors), predecessors, successors
and assigns and the officers, directors, employees, attorneys, financial
advisors, accountants, agents and other representatives of each of the
foregoing.
"NOLDC GROUP" means NOLDC, the NOLDC Shareholders, and their respective
Affiliates (other than the Debtors), predecessors, successors and assigns
and the officers, directors, employees, attorneys, financial advisors,
accountants, agents and other representatives of each of the foregoing.
"RELEASE POOL" means 1,500,000 shares of Class A New Common Stock (or Class
B New Common Stock with respect to any shares distributed to Harrah's
Investor) to be distributed to
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Bondholders or Harrah's Investor in accordance with Sections 4.5(b) and 5.2
of the Plan.
"RELEASING BONDHOLDER" means a Bondholder (including, without limitation,
each Major Bondholder), that through an appropriate indication on the
ballot provided to such Bondholder in connection with the Existing Plan or
in such other manner as may be prescribed by order of the Bankruptcy Court,
has affirmatively evidenced its intent to release the persons in the HET
Group, the Debtors Group, the Bondholders Committee Group, the City Group,
the State Group, the NOLDC Group, the Grand Palais Group and the
Bank/Underwriter Group.
"STATE GROUP" means the State, the Governor of the State, the LEDGC, the
LGCB, the Riverboat Gaming Commission, the Attorney General of the State,
all boards, commissions, agencies, and other instrumentalities of the
State, and all of their respective predecessors, successors, and assigns,
and the officers, directors, employees, staff, members, attorneys,
financial advisors, accountants, agents, and other representatives of each
of the foregoing.
"UNSUBSCRIBED RELEASE POOL SHARES" means the shares of New Common Stock in
the Release Pool equal to the product of (i) 1,500,000 times (ii) a
fraction, the numerator of which is the aggregate principal amount of Old
Bonds held by Bondholders on the Release Pool Distribution Record Date that
are not Releasing Bondholders, and the denominator of which is $435
million. All Unsubscribed Release Pool Shares which are distributed to the
Releasing Bondholders in accordance with the provisions of the Plan will be
shares of Class A New Common Stock, and all Unsubscribed Release Pool
Shares which are distributed to Harrah's Investor in accordance with the
provisions of the Plan will be shares of Class B New Common Stock.
7. CLASS A5 -- OLD INDENTURE PREDECESSOR TRUSTEE AND OLD INDENTURE
PREDECESSOR COLLATERAL AGENT CLAIMS (IMPAIRED)
Class A5 consists of all Allowed Secured Claims of (i) FNBC as
predecessor trustee under the Old Indenture and its successors and assigns (the
"OLD INDENTURE PREDECESSOR TRUSTEE"), and (ii) FNBC and its successors and
assigns, as the predecessor collateral agent for the Old Indenture Trustee and
the Bondholders under the Old Bond Documents (the "OLD INDENTURE PREDECESSOR
COLLATERAL AGENT") against HJC.
All of FNBC's Claims as Old Indenture Predecessor Trustee and Old
Indenture Collateral Agent will be allowed and otherwise treated in accordance
with the provisions of the FNBC Settlement Agreement.
8. CLASS A6 -- WARN ACT CLAIMS (IMPAIRED)
Class A6 consists of all Allowed WARN Act Claims against HJC of
holders who are part of the Certified WARN Act Class and are bound by the WARN
Act Settlement. "WARN ACT CLAIM" means any Claim against any or all of the
Debtors arising under the Worker Adjustment and Retraining Notification Act of
1988, 29 U.S.C. Section 2101 ET SEQ. and/or the Employee Retirement Income
Security Act of 1974 as amended, 29 U.S.C. Section 1001 ET SEQ. "CERTIFIED
WARN ACT CLASS" means the class of holders of WARN Act Claims to be certified
for settlement purposes by the Bankruptcy Court pursuant to Bankruptcy Rule 7023
by order dated December 10, 1996. "WARN ACT SETTLEMENT" means the settlement
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agreement approved by the Bankruptcy Court by order dated February 20, 1997
providing for the settlement of the respective WARN Act Claims of the members of
the Certified WARN Act Class against any or all of the Debtors, HNOMC and
Affiliates of HNOMC.
Solely for purposes of voting, each holder of a WARN Act Claim will be
deemed to have an Allowed WARN Act Claim in the amount of $1.00. On or as soon
as practicable after the Effective Date, JCC shall pay the sum of $2.265 million
MINUS the fees and expenses of WARN Act Counsel incurred in connection with its
representation of the holders of WARN Act Claims, and a portion of certain taxes
attributable to the WARN Act Settlement (all as more fully described in the
February 20, 1997 Bankruptcy Court order approving the settlement of WARN Act
Claims), to holders of Allowed 11/95 WARN Act Claims based on their respective
Pro Rata Interests in the balance of the $2.265 million payment, subject to any
tax or other withholdings required by law. The Allowed amount of the WARN Act
Claim of each 11/95 WARN Act Claimant for purposes of determining his or her Pro
Rata Interest shall be determined by WARN Act Counsel in its reasonable
discretion pursuant to a set of objective and nondiscriminatory criteria to be
filed with the Bankruptcy Court on or before the Effective Date. In addition,
to the extent such positions are or become available, JCC shall offer each 11/95
WARN Act Claimant re-employment to his or her former position or, if his or her
former position no longer exists or is not then available, to a substantially
equivalent position, prior to offering employment to such position to any other
Person other than any 11/95 WARN Act Claimant.
"11/95 WARN ACT CLAIMANT" means a holder of a WARN Act Claim who was
terminated from his or her casino position on or about November 22, 1995.
As for the holders of WARN Act Claims who were terminated from their
casino positions in August, 1995 ("8/95 WARN ACT CLAIMANTS"), JCC (A) shall
place each 8/95 WARN Act Claimant on a preferential re-hire list for one year
following the date on which the Casino opens for business, and (B) to the extent
such positions are or become available, shall offer re-employment to his or her
former positions or, if his or her former position no longer exists or is not
then available, to a substantially equivalent position, prior to offering
employment to such position to any Person other than any 11/95 WARN Act
Claimant, any 8/95 WARN Act Claimant or any Person who was formerly employed and
laid off by the Flamingo Casino.
9. CLASS A7 -- GENERAL UNSECURED CLAIMS (IMPAIRED)
Class A7 consists of all Allowed Unsecured Claims against HJC other
than the Unsecured Claims of Bondholders and the Unsecured Claims in Class
A6(a), A6(b) or A8. JCC will pay to each holder of an Allowed Claim in Class A7
cash in an amount equal to such Allowed Claim on the later of the Effective Date
and the date on which such Claim becomes an Allowed Claim, or as soon as
practicable thereafter. Solely for purposes of the Plan, and subject to the
occurrence of the Effective Date, HNOIC, Finance Corp., HET, NOLDC, Grand Palais
and all of their respective Affiliates and Insiders will be deemed to have
waived any Class A7 Claim except (i) any Allowed Class A7 Claim covered by any
insurance policy assumed pursuant to Section 8.1(c) of the Plan (provided that
any such Allowed Class A7 Claim will be payable only from available coverage
under such insurance policy (and not payable by any Debtor) and only to the
extent permitted under the NOLDC Shareholders/HET Settlement Agreement or Grand
Palais/HET Settlement Agreement or Grand Palais/HET Settlement Agreement, as
applicable), (ii) in the case of HET and its Affiliates and Insiders, any Class
A7 Claim for unreimbursed
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premiums or other unreimbursed amounts paid for insurance coverage provided to
any Debtor under any insurance policy assumed pursuant to Section 8.1(c) of the
Plan, and (iii) the Allowed Class A7 Claim of Deborah Sulzer in the amount of
$39,579.52 as reflected in Claim No. 490.
10. CLASS A8 -- PENALTY CLAIMS (IMPAIRED)
Class A8 consists of all Allowed Penalty Claims against HJC. "PENALTY
CLAIMS" are defined as (a) Claims for fines, penalties or forfeiture or for
multiple, exemplary or punitive damages, to the extent that such fine, penalty,
forfeiture or damages are not compensation for actual pecuniary loss suffered by
the holders of such Claims, (b) Claims filed after the Bar Date, (c) Claims
increased through amendment after the Bar Date which the Bankruptcy Court
determines do not relate back to the applicable original timely filed Claim, but
only to the extent of the amount of such increase, (d) Claims subject to
subordination under Section 510 of the Bankruptcy Code, including, without
limitation, Securities Law Claims and (e) Claims for postpetition attorneys'
fees except to the extent allowed under Section 506(b) of the Bankruptcy Code.
A "SECURITIES LAW CLAIM" is defined as an Allowed Claim held by any person for
rescission, damages or reimbursement, indemnification or contribution arising
out of a purchase or sale of any security (including, without limitation, any
Old Bonds) of any of the Debtors or any Affiliate thereof. The holders of Class
A8 Claims will not receive any distributions on account of such Claims, and on
the Effective Date, all Class A8 Claims will be extinguished; provided, however,
that if a Valuation Order is entered on or before the Effective Date, each
holder of an Allowed Claim in Class A8 will receive its Pro Rata Share of the
interests in the proceeds of Assigned Debtor Litigation Claims as allocated to
holders of Allowed Class A8 Claims under Section 5.9 of the Plan. Each holder
of a Class A8 Claim is conclusively presumed to have rejected the Plan as a
holder of a Class A8 Claim and is not entitled to vote to accept or reject the
Plan. "VALUATION ORDER" means the order, if any, entered by the Bankruptcy
Court on or before the Effective Date determining that the value of the Assigned
Debtor Litigation Claims (net of all estimated Litigation Costs and the
estimated aggregate amount of all Third Party Claims) is greater than the sum of
(i) the Bondholder Deficiency Amount, plus (ii) the $2,265,000 to be distributed
to the applicable holders of Allowed Class A6 Claims, plus (iii) the aggregate
amount of all Allowed Claims in Class A7, plus (iv) the aggregate amount of all
cure payments made as provided in Section 8.1(c) of the Plan.
11. CLASS A9 -- HJC EQUITY INTERESTS (IMPAIRED)
Class A9 consists of all Allowed Equity Interests in HJC, and any
option, warrant or other agreement requiring the issuance of any such Equity
Interest. The holders of Equity Interests in Class A9 will not receive any
distributions on account of such Equity Interests; and on the Effective Date,
all Equity Interests in HJC will be extinguished.
FINANCE CORP. CLASSIFICATION
12. CLASS B1 -- OTHER PRIORITY CLAIMS (IMPAIRED)
Class B1 consists of all Allowed Claims against Finance Corp. that are
entitled to priority in right of payment under any or all of Sections 507(a)(3)
through (a)(7) of the Bankruptcy Code. JCC will pay to each holder of an
Allowed Claim in Class B1 cash in an amount equal to such Allowed Claim on the
later of the Effective Date and the date such Claim becomes an Allowed Claim, or
as soon as practicable thereafter.
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13. CLASS B2 -- BANK CLAIMS (IMPAIRED)
Class B2 consists of all Allowed Secured Claims of the Banks and the
Old Bank Collateral Agent against Finance Corp. Collateral for such claims
consists of $1,000 held in an account of Finance Corp. As soon as practicable
after the later of the Effective Date and the date on which all of the Allowed
Secured Claims in Class B2 have been allowed or disallowed by Final Order, each
holder of an Allowed Class B2 Claim is entitled to receive from JCC its PRO RATA
share (based on the ratio of its Allowed Class B2 Claim to the aggregate amount
of all Allowed Secured Claims in Class B2 and Class B3) of $1,000 in cash. The
distribution to which each holder of an Allowed Class B2 Claim which is also a
holder of an Allowed Class A3(a) Claim is entitled shall be deemed part of, and
satisfied upon receipt of, the distributions which such holder is entitled to
receive as a holder of an Allowed Class A3(a) Claim.
14. CLASS B3 -- BONDHOLDER CLAIMS (IMPAIRED)
Class B3 consists of all Allowed Secured and Unsecured Claims of the
Bondholders against Finance Corp. Each holder of an Allowed Claim in Class B3
is entitled to receive its Pro Rata Share of shares of Class A New Common Stock
and New Bonds which, in the aggregate, have a value equal to the product of (i)
$1,000 and (ii) a fraction, the numerator of which is the aggregate amount of
Allowed Secured Claims in Class B3, and the denominator of which is the
aggregate amount of Allowed Secured Claims in Class B2 and Class B3. The
distribution to which each holder of an Allowed Class B3 Claim is entitled will
be deemed part of, and satisfied upon receipt of, the distributions which such
holder is entitled to receive as a holder of an Allowed Class A4 Claim.
15. CLASS B4 -- WARN ACT CLAIMS (IMPAIRED)
Class B4 consists of all Allowed WARN Act Claims against Finance Corp.
of holders who are part of the Certified WARN Act Class and are bound by the
WARN Act Settlement. Each holder of an Allowed Claim in Class B4 will be deemed
to have received on account of his or her Class B4 Claims, and in full
satisfaction thereof, the distribution and/or other treatment he or she receives
as a holder of a Class A6 Claim pursuant to Section 4.6 of the Plan. No other
distribution will be provided to such holder on account of his or her Class B4
Claims.
16. CLASS B5 -- GENERAL UNSECURED CLAIMS (IMPAIRED)
Class B5 consists of all Allowed Unsecured Claims against Finance
Corp. other than the Unsecured Claims of the Bondholders. JCC will pay to each
holder of an Allowed Claim in Class B5 cash in an amount equal to such Allowed
Claim on the later of the Effective Date and the date on which such Claim
becomes an Allowed Claim, or as soon as practicable thereafter. Solely for
purposes of the Plan, and subject to the occurrence of the Effective Date,
HNOIC, HJC, HET, NOLDC, Grand Palais and all of their respective Affiliates and
Insiders will be deemed to have waived their right to receive any distribution
as a holder of a Class B5 Claim.
17. CLASS B6 -- PENALTY CLAIMS (IMPAIRED)
Class B6 consists of all Allowed Penalty Claims against Finance Corp.
The holders of Class B6 Claims will not receive any distributions on account of
such Claims, and on the Effective Date, all Class B6 Claims will be
extinguished; provided, however, that if a Valuation Order is entered on or
before the
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Effective Date, each holder of an Allowed Class B6 Claim will be deemed to have
received on account of its Class B6 Claim, and in full satisfaction thereof, the
distribution it receives as a holder of a Class A8 Claim pursuant to Section 4.8
of the Plan. Each holder of a Class B6 Claim is conclusively presumed to have
rejected the Plan as a holder of a Class B6 Claim and is not entitled to vote to
accept or reject the Plan.
18. CLASS B7 -- EQUITY INTERESTS (IMPAIRED)
Class B7 consists of all Allowed Equity Interests in Finance Corp.,
and any option, warrant or other agreement requiring the issuance of any such
Equity Interest. The holders of Equity Interests in Class B7 will not receive
any distributions on account of such Equity Interests. On the Effective Date,
all Equity Interests in Finance Corp. will be extinguished.
HNOIC CLASSIFICATION
19. CLASS C1 -- OTHER PRIORITY CLAIMS (IMPAIRED)
Class C1 consists of all Allowed Claims against HNOIC that are
entitled to priority in right of payment under any or all of Sections 507(a)(3)
through (a)(7) of the Bankruptcy Code. JCC will pay to each holder of an
Allowed Claim in Class C1 cash in an amount equal to such Allowed Claim on the
later of the Effective Date and the date such Claim becomes an Allowed Claim, or
as soon as practicable thereafter.
20. CLASS C2 -- SECURED CLAIMS (IMPAIRED)
Class C2 consists of all Allowed Secured Claims against HNOIC. Except
as provided in the immediately following two sentences, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Claim in Class C2 to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of default, each Allowed
Claim in Class C2 will be reinstated and rendered unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign,
abandon or surrender any property securing any Secured Claim in Class C2 to the
holder of such Secured Claim, which will result in impaired treatment under the
Bankruptcy Code. The Bankruptcy Court will determine the value of any such
property so assigned, abandoned or surrendered, and any Deficiency Claim
resulting therefrom will be paid as a Class C4 or C6 Claim.
21. CLASS C3 -- WARN ACT CLAIMS (IMPAIRED)
Class C3 consists of all Allowed WARN Act Claims against HNOIC of
holders who are part of the Certified WARN Act Class and are bound by the WARN
Act Settlement. Each holder of an Allowed Claim in Class C3 will be deemed to
have received on account of his or her Class C3 Claims, and in full satisfaction
thereof, the distribution and/or other treatment he or she receives as a holder
of a Class A6 Claim pursuant to Section 4.6 of the Plan. No other distribution
will be provided to such holder on account of his or her Class C3 Claims.
22. CLASS C4 -- UNSECURED CLAIMS (FOR WHICH HJC IS LIABLE) (IMPAIRED)
Class C4 consists of all Allowed Unsecured Claims against HNOIC for
which HJC is also liable. Each holder of an Allowed Claim in Class C4 will be
deemed to have received on account of its Class C4 Claims, and in full
satisfaction thereof, the distribution it receives as a holder of a Class A7
Claim
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<PAGE>
pursuant to Section 4.7 of the Plan. No other distribution will be provided to
such holder on account of its Class C4 Claims.
23. CLASS C5 -- GENERAL UNSECURED CLAIMS (IMPAIRED)
Class C5 consists of all Allowed Unsecured Claims against HNOIC other
than Unsecured Claims in Class C3, C4, C6 or C7. Each holder of an Allowed
Claim in Class C5, if any, will receive the lesser of the amount of its Allowed
Class C5 Claim or its Pro Rata Share of $1,000 in cash to be provided by JCC.
Section 4.21 of the Plan provides a mechanism by which initial distributions to
holders of Allowed Class C5 Claims will be made on the ninetieth day after the
Effective Date or as soon as practicable thereafter, and subsequent
distributions will be made as Class C5 Claims, which are not Allowed Claims as
of the Effective Date, become liquidated. Solely for purposes of this Plan, and
subject to the occurrence of the Effective Date, HJC, Finance Corp., HET, NOLDC,
Grand Palais and all of their Affiliates and Insiders will be deemed to have
waived any right to receive any distribution as a holder of a Class C5 Claim.
The Proponents do not believe that there will be any allowed claims in
Class C5 (based upon the likely outcome of claims objections HNOIC has filed or
intends to file shortly and after giving effect to certain waivers of claims
held by entities related to HNOIC) and, thus, believe that $1,000 will be more
than sufficient to satisfy any allowed claims in Class C5.
24. CLASS C6 -- NOLDC/SHOWBOAT CLAIM (IMPAIRED)
Class C6 consists of the Claim of NOLDC against HNOIC for
reimbursement of a portion of the amount owing by NOLDC to Showboat, Inc.
(together with its successors and assigns, "SHOWBOAT"). Such claim of NOLDC, if
any, would have arisen out of transactions involving Showboat and Louisiana Jazz
Company, a partnership formed by HNOIC and NOLDC prior to HJC's formation, with
respect to development costs for the Casino project. Louisiana Jazz Company has
since dissolved. In accordance with the terms of the NOLDC Plan and the NOLDC
Shareholders/HET Settlement Agreement, consideration will be furnished directly
to Showboat in exchange for a full release from Showboat to NOLDC. This
transaction will result in a release of NOLDC's Class C6 Claim. No
distributions will be provided to NOLDC on account of its Class C6 Claim.
25. CLASS C7 -- PENALTY CLAIMS (IMPAIRED)
Class C7 consists of all Allowed Penalty Claims against HNOIC. The
holders of Class C7 Claims will not receive any distributions on account of such
Claims, and on the Effective Date, all Class C7 Claims will be extinguished;
provided, however, that if a Valuation Order is entered on or before the
Effective Date, each holder of an Allowed Claim in Class C7 will be deemed to
have received on account of its Class C7 Claim, and in full satisfaction
thereof, the distribution it receives as a holder of a Class A8 Claim pursuant
to Section 4.8 of the Plan. Each holder of a Class C7 Claim is conclusively
presumed to have rejected the Plan as a holder of Class C7 Claim and is not
entitled to vote to accept or reject the Plan.
26. CLASS C8 -- EQUITY INTERESTS (IMPAIRED)
Class C8 consists of all Allowed Equity Interests in HNOIC, and any
option, warrant or other agreement requiring the issuance of any such Equity
Interest. The holder of Equity Interests in Class C8 will not receive any
distributions on account of such Equity Interests. On the Effective Date, all
Equity Interests
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<PAGE>
in HNOIC will be extinguished.
B. SETTLEMENT OF CERTAIN CLAIMS AND PROSECUTION AND ASSIGNMENT OF CERTAIN
CLAIMS
As set forth in greater detail below, the Plan provides for numerous
releases of claims among the Debtors and various other parties in interest and
injunctions in support of such releases. The releases fall generally into two
categories: (i) releases by the Debtors of other parties in interest; and (ii)
consensual releases by non-debtors of claims against other non-debtor persons or
entities. The Plan does NOT purport to create non-consensual releases of any
direct claims any third parties may have against any non-debtor persons or
entities. (Two tables summarizing the releases in the Plan follow this
introduction.)
RELEASES BY DEBTORS
A plan of reorganization may "provide for -- (A) the settlement or
adjustment of any claim or interest belonging to the debtor or to the estate
. . . ." 11 U.S.C. Section 1123(b)(3). To obtain approval of such settlements
by the Bankruptcy Court, the Debtors must demonstrate that the settlement, from
the perspective of their estates, is fair and equitable as a whole. Bankruptcy
Rule 9019; WATTS V. WILLIAMS (IN RE WATTS), 154 B.R. 56, 59 (S.D. Tex. 1993); IN
RE BEST PRODS. CO., 168 B.R. 35, 50 (Bankr. S.D.N.Y. 1994) (settlement must fall
within range of reasonableness). The Proponents have analyzed the claims the
Debtors are releasing as compared to the value their estates are receiving in
return for such releases.
The Debtors believe that the claims they are releasing have no value
or have value less than or equal to the consideration being provided for the
releases.
- AVOIDANCE CLAIMS. While any payments or transfers that could form the
basis for avoidance claims are disclosed in the Debtors' schedules and
statements of financial affairs, the Debtors do not believe that they
have any valid claims for avoidance of transfers as preferential or
fraudulent transfers. Avoidance under either such theory would
require that the Debtors be shown to have been insolvent at the time
of the transfers, and the Debtors believe that they were solvent until
immediately prior to the commencement of their Chapter 11 Cases, when
the Banks withdrew their financing. In addition, to the extent that
any such claims might potentially exist, there may be other defenses,
such as that the transfers in question were made in the ordinary
course of business.
- CLAIMS AGAINST BANKS AND OTHERS BASED ON ACCELERATION OF BANK LOANS OR
RELATED CIRCUMSTANCES. The Debtors and their creditors have taken
extensive document and deposition discovery under Bankruptcy Rule 2004
throughout the Chapter 11 Cases to explore the relationships between
certain Released Parties and the Banks relating to the acceleration of
the Banks' loans to HJC and Finance Corp. and related circumstances.
To the extent that the Debtors have any claims against the Released
Parties related to the acceleration of the Banks' loans to HJC and
Finance Corp. and related circumstances, the Debtors believe that the
consideration being provided by the parties being released at least
equals the value of any claims being released (as well as the value of
any other benefits received by any of the Released Parties under the
Plan). For example, the Participating Banks (as defined below) (in
conjunction with the Underwriters (as defined below)) will provide to
JCC construction financing with terms substantially more favorable
than would otherwise be available to JCC in the market. The benefits
of this financing include: (i)
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<PAGE>
subordination to a lien securing obligations of JCC to HET and HOC
pursuant to the HET/JCC Agreement, (ii) limitation of senior status
for the construction financing to $30 million, (iii) financing of
approximately $26 million from the sale of Convertible Junior
Subordinated Debentures to the Participating Banks and the
Underwriters on terms favorable to JCC (including the subordination of
such Convertible Junior Subordinated Debentures to the New Bonds and
New Contingent Bonds), (iv) a reduction in the project cost of
approximately $5 million, (v) a projected annual savings to JCC,
estimated to be approximately $5 million in the first year after the
Effective Date and decreasing to a projected savings of approximately
$2.5 million in the seventh year after the Effective Date (due to
reduced financing costs including the subsidy of the credit support
fee payable to the guarantors of Tranche A-2 of A Term Loan, Tranche
B-2 of the B Term Loan and the Working Capital Facility), (vi) a lower
cost of working capital and enhanced working capital availability (due
to increased availability under the Working Capital Facility and a
reduction in the amount of excess cash flow that must be paid to
lenders under the Term Loans), (vii) later dates of maturity on the
Term Loans, (viii) forbearance of reimbursement with respect to
substantial legal fees, and (ix) other favorable financing conditions.
All these benefits should enhance the feasibility of the Plan, the
financial stability of JCC, and the value of the New Bonds and New
Contingent Bonds. HET and its affiliates are providing, among other
things (i) the HET Loan Guarantee, the New Completion Guarantees and
the Surety Bond (as defined below), (ii) debtor in possession
financing of up to $25 million (the repayment of the principal amount
of which they have agreed to waive), which financing no other lender
has been willing to provide, (iii) the Harrah's New Equity Investment
of $75 million (less the principal amount of the debtor in possession
financing provided, including any portion of the Future DIP Loan which
may be approved by the Bankruptcy Court and funded by the DIP Lender),
(iv) waivers of their substantial prepetition claims (which have been
asserted in amounts that could exceed $125 million) and certain
administrative claims that would otherwise be entitled to
administrative priority, and (v) pre-development and development
services without compensation performed prior to the Effective Date.
In addition to the consideration being furnished by the Participating
Banks, the Underwriters, and HET and its affiliates for the releases
of the Released Parties, NOLDC, Grand Palais and their affiliates are
waiving claims asserted in excess of $80 million. With respect to all
parties receiving releases from the Debtors under the Plan, the
Debtors believe that the consideration being provided by such parties
provides sufficient consideration to purchase their releases.
The sufficiency of such consideration is even more obvious when the
costs and uncertainties of litigation are taken into account. The
potential defendants with respect to such claims have indicated that
they would vigorously oppose all such claims, and their resources far
exceed those available to the Debtors. Indeed, HJC is the only Debtor
with any funds, and those limited funds constitute the cash collateral
of the DIP Lender, the Bondholders and the Old Indenture Trustee under
Section 363 of the Bankruptcy Code. The Debtors cannot use such cash
collateral without the consent of the DIP Lender, the Bondholders and
the Old Indenture Trustee or the approval of the Bankruptcy Court,
which in turn would require the Debtors to provide adequate protection
to the Bondholders and the Old Indenture Trustee for the use of such
cash collateral. The Debtors do not believe that adequate protection
could be furnished for the use of cash collateral to fund any such
speculative litigation. Any such litigation at the trial and
appellate level would likely take years to resolve, and the present
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<PAGE>
value of any litigation recoveries would be far less than the
consideration provided by or on behalf of the potential defendants.
- CLAIMS ARISING OUT OF UNDERWRITING ACTIVITIES AND ISSUANCE OF OLD
BONDS. To the extent that there are claims of the Debtors against the
Underwriters, including, but not limited to, claims based on
activities in connection with the issuance of the Old Bonds, the
Debtors believe that the purchase of approximately $15 million of the
Convertible Junior Subordinated Debentures by the Underwriters on
terms much more favorable than would otherwise be available in the
market (including the subordination of such Convertible Junior
Subordinated Debentures to the New Bonds and New Contingent Bonds to
be distributed to the Bondholders under the Plan) is adequate
consideration for the release of such claims.
- CLAIMS AGAINST LEDGC, STATE, CITY AND OTHERS. The following claims
of the Debtors' estates are being released under the Plan: (a) claims
against members of the State Group for all events and claims arising
prior to the Effective Date, with the exception of certain tax claims,
including (i) claims against the LEDGC, the Riverboat Gaming
Commission, the State and/or others for breach of exclusivity with
respect to the right to conduct land-based gaming in metropolitan New
Orleans, and (ii) claims against the LEDGC and the State, among
others, with regard to breaches of representations, wrongful conduct
in regard to the scope of the project, and violation of legal rights
by recent legislation; and (b) claims against the City based upon,
among other things, the validity of the Canal Street Casino Lease and
the enforcement of the Open Access Program and Plans. The Proponents
believe that the release of such claims is part of the price to pay
for a successful reorganization, inasmuch as such releases are
necessary to obtain the consent of the parties being released to a
restructuring of HJC's lease arrangements with the City and the RDC, a
Modified Casino Operating Contract, and other accommodations. Absent
the release of such claims, the Debtors believe that no reorganization
would be possible and that the estates would be embroiled in costly
litigation for many years. The Debtors further believe that the value
in obtaining a successful reorganization now for all parties in
interest exceeds the present value of the proceeds the estates could
hope to obtain from litigating such claims for many years in a
liquidation scenario (assuming that the Debtors ever had the funds
available to undertake such protracted litigation).
- OTHER CLAIMS. As to other types of claims, neither the Debtors nor
any of the parties who objected to the adequacy of this Disclosure
Statement has identified any valid claims that could be pursued by the
Debtors as against the parties receiving releases under the Plan
beyond those set forth in the Notes to the Liquidation Analysis
(Exhibit C to the Disclosure Statement) and in the immediately
preceding paragraph.
It should be noted that the Plan provides for an injunction with
respect to Derivative Claims of the Debtors' estates. Such claims belong to the
estates, and cannot be litigated by creditors, equity interest holders or other
parties in interest. It is within the province of the Debtors, as debtors in
possession, to settle or release such claims. SEE SOBCHACK V. AMERICAN NAT'L
BANK & TRUST CO. (IN RE IONOSPHERE CLUBS, INC.) 17 F.3d 600, 604 (2d Cir. 1994)
(derivative claims are property of estate and are extinguished when settled in
bankruptcy case); AMERICAN NAT'L BANK V. MORTGAGEAMERICA CORP. (IN RE
MORTGAGEAMERICA CORP.), 714 F.2d 1266, 1276 (5th Cir. 1983) (derivative action
upon bankruptcy passes to trustee for benefit of all creditors and equity
holders). Thus, the Debtors' analysis of the release of certain of their claims
set forth above
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<PAGE>
includes their analysis of any Derivative Claims.
The Proponents believe that the best indication that the release of
claims by the Debtors contained in the Plan fall well within the range of
reasonableness is the "market check" resulting from the informal auction process
that effectively has occurred in these cases. During these bankruptcy cases, at
least two major companies in the gaming industry (i.e., ITT Corporation and
Hilton Hotels Corporation) examined the possibility of acquiring the Debtors'
assets (through a plan of reorganization or a sale transaction under Section 363
of the Bankruptcy Code), and engaged in discussions with the Bondholders
Committee, the City, the State and perhaps other parties in interest concerning
the terms of such a transaction. In addition, given the wide publicity
surrounding these bankruptcy cases and the negotiations concerning this Plan
(and prior versions), as well as the considerable passage of time since the
filing of these cases, the Debtors believe that all other potential acquirors
have had ample opportunity to make a competing bid. The Debtors believe that
the failure of any potential acquiror to make a competing bid (or even to oppose
the recent extensions of the exclusivity period in these cases) convincingly
demonstrates both the sufficiency of the consideration to be provided for the
releases of the Debtors' claims as well as the superiority of the distributions
to creditors under the Plan. Indeed, the Proponents believe that if the
consideration for the releases of the Debtors' claims were inadequate, one or
more potential acquirors would have proposed a competing plan of reorganization
providing distributions to creditors at least comparable to those provided by
the Plan but without providing for any release of claims of the Debtors.
CONSENSUAL NON-DEBTOR RELEASES
In addition to releases of claims by the Debtors, the Plan features an
array of consensual releases among non-debtor parties. A plan of reorganization
may provide for consensual releases of claims by third parties against other
non-debtor parties. SEE IN RE AOV INDUS., INC., 792 F.2d 1140 (D.C. Cir. 1986)
(holding that voluntary discharge of non-debtor does not violate Section 524(e)
where non-debtor made financial contribution to the plan of reorganization); IN
RE SAINT MARY HOSP., 155 B.R. 345 (Bankr. E.D. Pa. 1993) (finding that release
did not violate the Bankruptcy Code where each creditor in one class had the
voluntary decision to release the non-debtors and opt into a separate class
which the non-debtors funded); IN RE RIVER VILLAGE ASSOCS., 1993 Bankr. LEXIS
870, at *7 (Bankr. E.D. Pa. June 25, 1993) (holding that a release does not
violate section 524(e) if creditors affirmatively and voluntarily agree to it,
after receipt of notice of their rights); IN RE RESORTS INT'L, INC., 145 B.R.
412, 467-68 (Bankr. D.N.J. 1990) ("[P]ermitting individual creditors the option
of providing a voluntary release to non-debtor plan funders and other third
parties does not violate Section 524(e)."); IN RE MONROE WELL SERV., INC., 80
B.R. 324, 334-35 (Bankr. E.D. Pa. 1987) (holding that if a creditor is given the
opportunity to render its own decision to provide a release to a non-debtor in
return for contribution by the non-debtor, the release does not violate Section
524(e)). The controlling law of the Fifth Circuit Court of Appeals does not
preclude such third-party releases where the releasing parties provide their
consent. FELD V. ZALE CORP. (IN RE ZALE CORP.), 62 F.3d 746 (5th Cir. 1995).
The consensual non-debtor releases under the Plan, in turn, fall into
two categories. First, the Plan contemplates a number of releases among
non-debtors in which the parties to the releases will provide mutual releases of
claims and, in some instances, other consideration. Such releases, as discussed
in greater detail below and in the Plan, are: the City/RDC Release; the
State/LGCB Release; the Centex-
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Landis Release; the Broadmoor Release*; the NOLDC Shareholders/HET Settlement
Agreement; the Grand Palais/HET Settlement Agreement; the NOLDC/Grand Palais
Settlement Agreement; and the Bank/Underwriter Settlement Agreement.**
Second, the Plan contains a mechanism for obtaining consensual
releases of certain claims by Bondholders. Because the Old Bonds are publicly
held, it would be impossible to obtain separate, negotiated releases from each
holder, as is contemplated with respect to the settlement agreements described
in the preceding paragraph. Instead, each Bondholder will be offered a choice,
on its ballot for accepting or rejecting the Plan, to elect to receive
additional stock in the reorganized company (which will otherwise be distributed
to Harrah's Investor and/or its Affiliates) in exchange for providing a release
(and assigning its non-released claims as a Bondholder to JCC).*** If a
Bondholder elects to provide the release, it will receive an amount of stock
calculated in accordance with a formula set forth below. If not, it will retain
its claims that would have otherwise been released, but will not receive any
additional stock (above the amount it receives on its claim for principal and
interest on account of the Old Bonds it holds).
Given the terms of the settlement described above in Section IV.M.,
Bondholders Class Action counsel believe that it is in the best interest of the
Settlement Class, consisting of all purchasers of Old Bonds between November 8,
1994 and November 22, 1995, to participate in the settlement of the Bondholders
Class Action.
Set forth below are two tables summarizing the releases provided for
under the Plan. For a more complete description of the releasing parties, the
released parties, the consideration being given for the releases and the claims
being released, please refer to the text following the tables as well as the
Plan, which is attached as Exhibit "A" hereto.
- -------------------------
* The Centex-Landis Release and the Broadmoor Release are non-mutual
releases; they provide releases of various groups.
** Certain of these releases are still being negotiated by the applicable
non-debtor parties. The Debtors believe that all such releases will
be finalized on or before the Effective Date. The execution and
delivery of these Releases is a condition to the Effective Date, which
may be waived pursuant to Section 10.3 of the Plan.
*** Pursuant to Section 5.2 of the Plan, the Major Bondholders (consisting
of each member of the Bondholders Committee as of the Voting Record
Date) are conclusively deemed to have elected to provide this release.
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<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Plan Releases
- --------------------------------------------------------------------------------
Releasing Parties Released Parties Consideration for Releases
- --------------------------------------------------------------------------------
1. Debtors HET Group - HET Loan Guarantee, New
(Plan Section 5.1) Completion Guarantees and
NOLDC Surety Bond
Group****
- DIP Financing (and waiver of
Grand Palais principal amount)
Group****
- Harrah's New Equity
Debtors Group Investment
Bondholders - Pre-development and
Committee Group development services
performed by HET and its
Affiliates prior to the
Effective Date
- Waiver by HET Group, NOLDC
Group and Grand Palais Group
of unsecured claims
- Waivers of certain
administrative claims by
HET, NOLDC, Grand Palais and
their Affiliates
- Other consideration
- --------------------------------------------------------------------------------
- -------------------------
**** Note that, with respect to each of the releases of the NOLDC Group
and the Grand Palais Group set forth in this and the following table,
such releases are effective as against the NOLDC Group and the Grand
Palais Group only if they have executed on or before the Effective
Date the NOLDC Shareholders/HET Settlement Agreement and/or the Grand
Palais/HET Settlement Agreement, respectively. As previously noted,
however, the execution and delivery of the NOLDC Shareholders/HET
Agreement and the Grand Palais/HET Settlement Agreement is a condition
to the Effective Date, which may be waived pursuant to Section 10.3 of
the Plan.
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<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Plan Releases
- --------------------------------------------------------------------------------
Releasing Parties Released Parties Consideration for Releases
- --------------------------------------------------------------------------------
2. Releasing HET Group - Harrah's Investor's
Bondholders (Plan contribution of 200,000
Section 5.2) NOLDC Group shares of New Common Stock
to Release Pool
Grand Palais
Group - JCC Holding's contribution
of 1,300,000 shares of New
Debtors Group Common Stock to Release
Pool, which, in turn, is in
Bondholders consideration of, among
Committee Group other things, certain
consideration provided by
City Group HET and others
State Group - Value of New Bonds and New
Contingent Bonds enhanced by
Bank/Underwriter favorable terms of financing
Group provided by certain members
of Bank/Underwriter Group
(resulting in a decrease in
the project cost, increase
in cash flow and an increase
in working capital
availability)
- --------------------------------------------------------------------------------
3. Debtors State - State/LGCB Release
(Plan Section
5.3) LGCB - Modified Casino Operating
Contract
- --------------------------------------------------------------------------------
4. Debtors City - City/RDC Release
(Plan Section
5.4) RDC - Documents set forth in
Section 6.2(o) of Plan
- --------------------------------------------------------------------------------
5. Debtors Bank/Underwriter - Provision of financing to
(Plan Section Group JCC with terms more
5.5) favorable than would
otherwise be available to
JCC in the market (resulting
in a decrease in the project
cost, increase in cash flow
and an increase in working
capital availability)
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Plan Releases
- --------------------------------------------------------------------------------
Releasing Parties Released Parties Consideration for Releases
- --------------------------------------------------------------------------------
6. Grand Palais HET Group - Grand Palais Settlement
Releasing Consideration (consisting of
Bondholders (Plan NOLDC Group New Common Stock otherwise
Section 5.6) distributable to Harrah's
Grand Palais Investor)
Group
- HET Loan Guarantee, New
Debtors Group Completion Guarantees and
Surety Bond
Bondholders - DIP Financing (and waiver of
Committee Group principal amount)
City Group - Harrah's New Equity
Investment
State Group
- Pre-development and
Bank/Underwriter development services
Group performed by HET and its
Affiliates prior to the
Effective Date
- Waiver by HET Group, NOLDC
Group and Grand Palais Group
of unsecured claims
- Waivers of certain
administrative claims by
HET, NOLDC, Grand Palais and
their Affiliates
- Provision by certain members
of Bank/Underwriter Group of
financing to JCC with terms
more favorable than would be
available to JCC in the
market (resulting in a
decrease in the project
cost, increase in cash flow
and an increase in working
capital availability)
- Other consideration
- --------------------------------------------------------------------------------
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<PAGE>
In addition, as described above, the Plan contemplates certain
consensual, mutual releases, through which the mutually releasing parties also
release certain third parties, as summarized below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Plan Releases
- ------------------------------------------------------------------------------------
Mutual Releasing Releasing Party Additional Parties
Releases Party #1 #2 Released
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. City/RDC Release Debtors City Bank/Underwriter
Group
Debtors Group RDC
JCC Entities Affiliates
HET Group
Bondholders
Committee Group
NOLDC Group
Grand Palais Group
- ------------------------------------------------------------------------------------
2. State/LGCB Release Debtors State Bank/Underwriter
Group
JCC Entities LGCB
HET Group Affiliates
Debtors Group
Bondholders
Committee Group
NOLDC Group
Grand Palais Group
- ------------------------------------------------------------------------------------
3. Centex-Landis Centex Debtors
Release
Affiliates Debtors Group
HET Group
NOLDC Group
Grand Palais
Group
- ------------------------------------------------------------------------------------
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Plan Releases
- ------------------------------------------------------------------------------------
Mutual Releasing Releasing Party Additional Parties
Releases Party #1 #2 Released
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
4. Broadmoor Release Broadmoor Debtors
Affiliates Debtors Group
HET Group
NOLDC Group
Grand Palais
Group
- ------------------------------------------------------------------------------------
5. NOLDC Shareholders/ Debtors NOLDC Bondholders
HET Settlement Committee Group
Agreement JCC Entities NOLDC
Shareholders Debtors Group
HET
Affiliates City Group
Affiliates State Group
Bank/Underwriter
Group
- ------------------------------------------------------------------------------------
6. GPCI and Debtors Grand Palais Bondholders
Hemmeter/HET Committee Group
Settlement JCC Entities Hemmeter
Agreement Debtors Group
HET Affiliates
City Group
Affiliates State Group
Bank/Underwriter
Group
- ------------------------------------------------------------------------------------
7. Froelich/HET Debtors Froelich Bondholders
Settlement Committee Group
Agreement JCC Entities Affiliates
Debtors Group
HET
City Group
Affiliates State Group
Bank/Underwriter
Group
- ------------------------------------------------------------------------------------
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Plan Releases
- ------------------------------------------------------------------------------------
Mutual Releasing Releasing Party Additional Parties
Releases Party #1 #2 Released
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. NOLDC/Grand Palais NOLDC Grand Palais
Settlement
Agreement NOLDC Shareholders Affiliates
Affiliates
- ------------------------------------------------------------------------------------
9. Bank/Underwriter Participating Banks Debtors Debtors Group
Settlement
Agreement Underwriters Bondholders
Committee Group
HET Group
City Group
State Group
NOLDC Group
Grand Palais
Group
- ------------------------------------------------------------------------------------
10. First American First American, HJC JCC Group
Settlement its reinsurers
Agreement and related parties Debtors Group
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
1. NOLDC SHAREHOLDERS/HET SETTLEMENT AGREEMENT; GPCI AND HEMMETER/HET
SETTLEMENT AGREEMENT; FROELICH/HET SETTLEMENT AGREEMENT; NOLDC/GRAND
PALAIS SETTLEMENT AGREEMENT
The Plan contemplates the agreements described below. No such
settlement agreement provides for any of the NOLDC Shareholders, GPCI, its
shareholders, its bondholders, Hemmeter or Froelich to have any management
position with any JCC Entity or any role in the management of the Casino. In
addition, no such settlement agreement provides for the transfer of property
from the Debtors to any of the NOLDC Shareholders, GPCI, its shareholders, its
bondholders, Hemmeter or Froelich, and the Debtors' estates shall not have any
obligation to any of the NOLDC Shareholders, GPCI, its shareholders, its
bondholders, Hemmeter or Froelich.
a. The "NOLDC SHAREHOLDERS/HET SETTLEMENT AGREEMENT" means
collectively, (i) the settlement agreement to be executed on or before
the Effective Date by the NOLDC Shareholders, HET, HOCI and HNOMC,
(ii) the mutual releases, in the forms attached as exhibits to such
settlement agreement, pursuant to which the NOLDC, the NOLDC
Shareholders and certain Affiliates thereof, on the one hand, and the
Debtors, the JCC
79
<PAGE>
Entities, HET and certain Affiliates thereof, on the other hand,
release certain claims and causes of action against each other and
provide a mechanism by which mutual releases will be executed by NOLDC
and the NOLDC Shareholders with the Bondholders Committee Group, the
Debtors Group, the Bank/Underwriter Group, the State Group and the
City Group, and (iii) all other agreements, instruments or documents
executed or to be executed in connection with the settlement
agreement. The NOLDC Shareholders/HET Settlement Agreement will be in
form and substance satisfactory to the NOLDC Shareholders and HET, and
will be approved by the Bankruptcy Court in the Chapter 11 case of
NOLDC. Under the terms of this settlement agreement, the NOLDC
Shareholders will receive consideration from HET and HOCI in exchange
for their release in favor of the Debtors, the JCC entities and HET
and certain Affiliates. Such consideration shall include certain
payments from HOCI to the NOLDC Shareholders. In consideration of a
release and certain other undertakings by NOLDC, payments will be paid
by HOCI directly to certain creditors of NOLDC to satisfy obligations
of NOLDC. Each of the nine (9) NOLDC Shareholders or their designees
will also receive an option and put agreement which shall entitle each
NOLDC Shareholder together with any designee to acquire from HET
shares of Class B New Common Stock of JCC Holding equal to one half of
one percent (0.5%) of the stock of JCC Holding determined as of the
Effective Date for an aggregate of four and one half percent (4 1/2%)
of the New Common Stock of JCC Holding. Such option shall be
exercisable at any time up until sixty-two (62) months following the
Effective Date. Each NOLDC Shareholder shall be entitled to put its
stock of JCC Holding to HET in exchange for One Million Five Hundred
Thousand Dollars ($1,500,000) at any time during the period beginning
sixty (60) months following the Effective Date and ending two (2)
months thereafter. The NOLDC Shareholders and HET continue to
negotiate the terms of the NOLDC Shareholders/HET Settlement
Agreement.
b. The "GPCI AND HEMMETER/HET SETTLEMENT AGREEMENT" means,
collectively, (i) the settlement agreement to be executed on or before
the Effective Date by Grand Palais, Hemmeter, HET, HOCI and HNOMC,
(ii) the mutual releases, in the forms attached as exhibits to such
settlement agreement, pursuant to which Grand Palais, Hemmeter and
certain Affiliates thereof, on the one hand, and the Debtors, the JCC
Entities, HET and certain Affiliates thereof, on the other hand, will
release certain claims and causes of action against each other and
against the Bondholders Committee Group, the Debtors Group, the
Bank/Underwriter Group, the State Group and the City Group, and (iii)
all other agreements, instruments and documents executed or to be
executed in connection with such settlement agreement. The GPCI and
Hemmeter/HET Settlement Agreement will be in form and substance
satisfactory to Grand Palais and HET. Under the terms of this
settlement agreement, the Grand Palais bondholders and Hemmeter will
receive consideration from HET and HOCI in the form of certain
payments (in the case of Hemmeter) and stock (in the case of the Grand
Palais bondholders), in exchange for their release in favor of the
Debtors, the JCC entities, and HET and certain Affiliates. The Grand
Palais bondholders will receive from HET shares of Class B (to become
Class A upon receipt by such bondholders) New Common Stock of JCC
Holding in an amount equal to three and one-half percent (3 1/2%) of
the New Common Stock of JCC Holding determined as of the Effective
Date. HET and Hemmeter continue to negotiate the terms of the GPCI
and Hemmeter/HET Settlement Agreement.
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c. The "FROELICH/HET SETTLEMENT AGREEMENT" means collectively, (i)
the settlement agreement to be executed on or before the Effective
Date by Froelich, HET, HOCI and HNOMC, (ii) the mutual releases, in
the forms attached as exhibits to such settlement agreement, pursuant
to which Froelich and certain Affiliates thereof, on the one hand, and
the Debtors, the JCC Entities, HET and certain Affiliates thereof, on
the other hand, release certain claims and causes of action against
each other and against the Bondholders Committee Group, the Debtors
Group, the Bank/Underwriter Group, the State Group and the City
Group, and (iii) all other agreements, instruments or documents
executed or to be executed in connection with the settlement
agreement. The Froelich/HET Settlement Agreement will be in form and
substance satisfactory to Froelich and HET. Under the terms of this
settlement agreement, Froelich will execute releases in favor of the
Debtors, the JCC Entities, and HET and certain Affiliates. Such
consideration shall be certain payments from HOCI to Froelich. HET
and Froelich continue to negotiate the terms of the Froelich/HET
Settlement Agreement. (The GPCI and Hemmeter/HET Settlement Agreement
and the Froelich/HET Settlement Agreement are referred to collectively
herein and in the Plan as the "GRAND PALAIS/HET SETTLEMENT
AGREEMENT.")
d. The "NOLDC/GRAND PALAIS SETTLEMENT AGREEMENT" means collectively,
(i) the settlement agreement to be executed on or before the Effective
Date by the NOLDC Shareholders and Grand Palais, (ii) mutual releases,
in the forms attached as exhibits to such settlement agreement,
pursuant to which NOLDC, the NOLDC Shareholders and certain Affiliates
thereof, on the one hand, and Grand Palais and certain Affiliates
thereof, on the other hand, release certain claims and causes of
action against each other, and (iii) all other agreements, instruments
or documents executed or to be executed in connection with such
settlement agreement. The NOLDC/Grand Palais Settlement Agreement
will be in form and substance satisfactory to the NOLDC Shareholders
and Grand Palais.
2. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST THE HET GROUP, THE
DEBTORS GROUP, THE BONDHOLDERS COMMITTEE GROUP, NOLDC GROUP AND GRAND
PALAIS GROUP
In consideration of, among other things, (i) the execution and
delivery of the HET Loan Guarantee by HET and the New Completion Guarantees by
HET and HOCI and the provision of a surety bond to assure completion of the
construction of the Casino (the "SURETY BOND"), (ii) the provision by the DIP
Lender of debtor-in-possession financing and its willingness to waive the
principal amount thereof, (iii) the purchase of the Harrah's New Equity
Investment by Harrah's Investor, (iv) the waiver by Persons in the HET Group,
the NOLDC Group or the Grand Palais Group of any right to distributions as
holders of certain Class A7 and/or Class C5 Claims, (v) certain pre-development
and development services performed by HET and its Affiliates prior to the
Effective Date, and (vi) other good and valuable consideration, without which
the Plan could not be confirmed and consummated, on the Effective Date, each
Debtor will be conclusively and irrevocably deemed to have released any and all
Release Claims (as defined below) of such Debtor or its estate against,
respectively, (i) each Person in the HET Group, (ii) each person in the Debtors
Group, (iii) each person in the Bondholders Committee Group, (iv) each Person in
the NOLDC Group but only if the applicable Persons in the NOLDC Group execute
and deliver on or before the Effective Date the NOLDC Shareholders/HET
Settlement Agreement, and (v) each Person in the Grand Palais Group but only if
the applicable Persons in the Grand Palais Group execute and deliver on or
before the Effective Date the Grand Palais/HET Settlement Agreement.
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"HET LOAN GUARANTEE" means, collectively, the payment guarantees or "put"
agreements by HET and HOCI with respect to Tranche A-2 of the A Term Loan,
Tranche B-2 of the B Term Loan and the Working Capital Facility on terms
satisfactory to such lenders and HET. The forms of the HET Loan Guarantee
will be filed with the Bankruptcy Court as Plan Documents pursuant to
Section 6.2(f) of the Plan.
"RELEASE CLAIMS" means any actions, causes of action, in law or in equity,
suits, debts, Liens, liabilities, claims, demands, damages, punitive
damages, losses, costs or expenses and reasonable attorneys' fees of any
kind or nature whatsoever, whether fixed or contingent, known or unknown,
and whenever arising (including, without limitation, claims based on legal
fault, misrepresentations or omissions, negligence, offense, quasi-offense,
contract, quasi-contract or any other theory) which in any way relate to
any Debtor, the business affairs or operations of any Debtor, issuance by
any Debtor of any securities or the Casino or the Temporary Casino (as
defined in the Basin Street Casino Lease) including but not limited to the
licensing, leasing, financing, arranging, development, construction,
promotion, management, or operation thereof, or other matters relating to
any Debtor or any successor to any of them in connection with the Casino or
the Temporary Casino, except to the extent any of the foregoing arises
under any of the Plan Documents on or after the Effective Date.
3. RELEASE BY BONDHOLDERS OF CAUSES OF ACTION AGAINST HET GROUP, DEBTORS
GROUP, BONDHOLDERS COMMITTEE GROUP, CITY GROUP, STATE GROUP, NOLDC
GROUP, GRAND PALAIS GROUP, AND BANK/UNDERWRITER GROUP
In consideration of (i) Harrah's Investor's contribution of 200,000
shares of Class A New Common Stock to the Release Pool, and (ii) JCC Holding's
contribution of 1,300,000 shares of New Common Stock to the Release Pool on the
Effective Date, each Releasing Bondholder will be conclusively and irrevocably
deemed to have (i) released each Person in the HET Group, the Debtors Group, the
Bondholders Committee Group, the City Group, the State Group, the NOLDC Group,
the Grand Palais Group and the Bank/Underwriter Group, respectively, from any
and all Release Claims that such Releasing Bondholder, or any of its
predecessors-in-interest, successors or assigns, has or may have as of the
Effective Date arising in whole or in part from any acts, omissions, activities
and/or events prior to the Effective Date, and (ii) released, waived and agreed
not to bring any Claims against HET or HOCI whether a known Claim or an Unknown
Claim, that may arise in any way, in whole or in part, out of (a) HET's or
HOCI's decision either to renew or not renew the HET/JCC Agreement or any
Minimum Payment Guaranty, (b) HET's or HOCI's acting in their own best interests
in connection with the execution of, renewal of or failure to renew the HET/JCC
Agreement or any Minimum Payment Guaranty, and/or (c) any alleged assurance or
guarantee by HET or HOCI concerning the operation of the Casino, the financial
results of the Casino or any other matter concerning the Casino or the Plan,
unless such Claim is based on a writing (but in any event cannot be based on the
HET/JCC Agreement or any Minimum Payment Guaranty) properly executed by the
party against whom such a Claim is being made, PROVIDED, HOWEVER, that the
release described in this clause (ii) will not bar or release any Claims against
HET or HOCI for (x) any breach of the HET/JCC Agreement or any Minimum Payment
Guaranty to which HET or HOCI is a party, (y) mismanagement of the Casino after
the Effective Date, or (z) any other conduct, act or omission occuring after the
Effective Date which is not directly related to the matters set forth in this
clause (ii)(a) through (c) above; further, however, the foregoing release by the
Releasing Bondholders will not be effective or enforceable as to (i) any Person
in the NOLDC Group unless the applicable Persons in the NOLDC Group execute and
deliver on or before the Effective Date the NOLDC Shareholders/HET Settlement
Agreement, (ii) any Person in the Grand Palais Group unless the applicable
Persons in the Grand Palais Group execute and deliver on or before the Effective
Date the Grand
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Palais/HET Settlement Agreement. Under the Plan, each "MAJOR BONDHOLDER"
(defined as each member of the Bondholders Committee in its capacity as a
Bondholder or a member of the Bondholders Committee) is conclusively and
automatically deemed to be a Releasing Bondholder without the necessity of
taking the action otherwise required of any Bondholder to become a Releasing
Bondholder and regardless of the manner in which such Major Bondholder fills out
its ballot with respect to the Plan or with respect to the Existing Plan.
Nothing in the foregoing release by the Releasing Bondholders constitutes a
release of any claims or causes of action of any Releasing Bondholders against
any Persons other than Released Parties, including, without limitation, any
claims or causes of action against any or all of the Non-Participating Banks and
any Underwriter which fails to execute and deliver the Bank/Underwriter Release.
The release provisions in any ballot or other writing previously
executed by any Bondholder to evidence its agreement to the release, unless
revoked as set forth below, will be binding on such Bondholder and any
transferee of the Old Bonds held by such Bondholder. Any Bondholder who agreed
to the release in connection with the Existing Plan will be entitled to revoke
such agreement by evidencing in writing its intent to do so in any manner and
subject to such conditions and within any time period set by the Bankruptcy
Court.
On, or as soon as practicable after the Effective Date, (i) each
Releasing Bondholder will receive from the Release Pool 3.448 shares of Class A
New Common Stock for each $1,000 in principal amount of Old Bonds held by such
Releasing Bondholder on the Release Pool Distribution Record Date plus its Pro
Rata Share (based on the total principal amount of Old Bonds held by all
Releasing Bondholders on the Release Pool Distribution Record Date) of Class A
New Common Stock consisting of 86.67% of the Unsubscribed Release Pool Shares
(subject to the Plan's restriction on the issuance of fractional shares), and
(ii) Harrah's Investor will receive from the Release Pool Class B New Common
Stock consisting of 13.33% of the Unsubscribed Release Pool Shares.
Notwithstanding the foregoing, and except as otherwise provided for in Section
6.20 of the Plan, (i) no Releasing Bondholder will be entitled to any
distribution from the Release Pool unless such holder is a Bondholder of record
on the Release Pool Distribution Record Date (or, in the case of a beneficial
owner of any Old Bonds, is the beneficial owner of Old Bonds on the Release Pool
Distribution Record Date that are held on its behalf by a Person which is a
holder of record on the Release Pool Distribution Record Date) and has not
assigned or otherwise transferred its claims, if any, against any Person in the
HET Group, the Debtors Group, the Bondholders Committee Group, the City Group,
the NOLDC Group, the Grand Palais Group or the Bank/Underwriter Group to be
released pursuant to Section 5.2 of the Plan, except that any Releasing
Bondholder may transfer its Old Bonds on or after the Release Pool Distribution
Record Date subject to clause (ii) below, (ii) the foregoing release by each
Releasing Bondholder will be binding on any subsequent transferee of the Old
Bonds held by such Releasing Bondholder on the Release Pool Distribution Record
Date, and (iii) the foregoing release by each Releasing Bondholder which is a
beneficial owner of any Old Bonds will be binding on any record holder,
participant or nominee with respect to such Old Bonds.
4. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST BANK/UNDERWRITER GROUP.
In consideration of, and subject to, the execution and delivery by
each Participating Bank, FNBC and each Underwriter of the Bank/Underwriter
Release and the provision by certain Persons in the Bank/Underwriter Group of
the A Term Loan, the B Term Loan and the Working Capital Facility and the
purchase of the Convertible Junior Subordinated Debentures by the Underwriters,
FNBC, BTCo and any other Participating Banks, all as more particularly described
in the Bank Term Sheet, the FNBC Settlement Agreement and the Underwriter Term
Sheet, on the Effective Date, each Debtor will be conclusively and
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irrevocably deemed to have released any and all Release Claims of such Debtor or
its estate against each Person in the Bank/Underwriter Group. As set forth in
the Bank/Underwriter Release, other than pursuant to Section 4.3 and 4.11 of the
Plan, each Person in the Bank/Underwriter Group will be deemed to have waived
any Claim against any Debtor or NOLDC (except for FNBC with respect to NOLDC as
set forth in the NOLDC Plan and the NOLDC Shareholders/HET Settlement Agreement)
and any right to receive any distribution on account of any such Claim against
any Debtor. Without limiting the foregoing and except for its Lien on the FNBC
Cash Collateral, FNBC will be deemed to have released all of its Liens
(including without limitation, its Indenture Trustee Charging Lien) on any and
all (i) assets of each Debtor (including, without limitation, all cash
collateral held by the Old Indenture Trustee) and (ii) any distributions made or
to be made under the Plan.
"BANK/UNDERWRITER RELEASE" means the mutual releases described in the Bank
Term Sheet, the Underwriter Term Sheet and the FNBC Settlement Agreement,
including without limitation, mutual releases between the Participating
Banks, the Underwriters, the Old Bank Collateral Agent, the Old Indenture
Predecessor Trustee and the Old Indenture Predecessor Collateral Agent on
the one hand, and the other Released Parties, on the other hand. The
Bank/Underwriter Release shall be in form and substance satisfactory to the
non-Debtor parties thereto in their sole discretion, HJC (which shall not
unreasonably withhold or delay its approval), HET (in its sole discretion)
on behalf of the other Proponents and the Bondholders Committee (in its
sole discretion).
"FNBC CASH COLLATERAL" means the $100,000 plus any interest accruing
thereon from and after the Effective Date that FNBC is authorized to retain
as security for certain indemnification obligations of HJC that are to be
assumed by JCC.
"PARTICIPATING BANKS" means BTCo, as Bank and Administrative Agent, and any
other Bank which elects through an appropriate indication on the ballot
provided to such Bank or otherwise in writing on or before the Effective
Date to be treated as a "Participating Bank" pursuant to Section 4.3(a) of
the Plan and for all other purposes under the Plan. No Bank will be
treated as a Participating Bank for voting purposes unless it makes such
election prior to the deadline for submitting completed ballots. The term
"Participating Bank" will include FNBC, provided that FNBC will not have
any obligations under the Bank Term Sheet but will instead be subject to
the provisions of the FNBC Settlement Agreement.
"UNDERWRITERS" means Salomon, DLJ and BT Securities Corporation as
underwriters of the Old Bonds.
5. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST THE STATE GROUP
In consideration of and subject to, the execution and delivery of the
State/LGCB Release and the Modified Casino Operating Contract by the LGCB and/or
the State, as applicable, on the Effective Date, each Debtor will be
conclusively and irrevocably deemed to have released each Person in the State
Group from any and all Release Claims of such Debtor or its estate only to the
extent set forth in the State/LGCB Release.
6. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST THE CITY AND RDC
In consideration of, and subject to, the execution and delivery by the
City and the RDC of
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the City/RDC Release and the other documents set forth in Section 6.2(o) of the
Plan, on the Effective Date, each Debtor will be conclusively and irrevocably
deemed to have released each of the City and the RDC from any and all Release
Claims of such Debtor or its estate (including, without limitation, claims
relating to title to the land underlying the Casino and to the Landmarks (Joan
of Arc) litigation discussed above in Section III.E.) only to the extent set
forth in the City/RDC Release.
7. RELEASE BY GRAND PALAIS BONDHOLDERS OF CAUSES OF ACTION AGAINST THE
HET GROUP, THE DEBTORS GROUP, THE BONDHOLDERS COMMITTEE GROUP, THE
CITY GROUP, THE STATE GROUP, THE NOLDC GROUP, THE GRAND PALAIS GROUP
AND THE BANK/UNDERWRITER GROUP
In consideration of, among other things, (i) the Grand Palais
Settlement Consideration (as defined in Section V.D.2.f. below), (ii) the
execution and delivery of the HET Loan Guarantee and the New Completion
Guarantees by HET and HOCI and the provision of the Surety Bond, (iii) the
provision by the DIP Lender of debtor-in-possession financing and its
willingness to waive the principal amount thereof, (iv) the purchase of the
Harrah's New Equity Investment by Harrah's Investor, (v) the waiver by Persons
in the HET Group, the NOLDC Group and the Grand Palais Group of any right to
distributions as holders of certain Class A7 and/or Class C5 Claims, (vi)
certain pre-development and development services performed by HET and its
Affiliates prior to the Effective Date, (vii) the provision by certain Persons
in the Bank/Underwriter Group of certain financing to JCC, and (viii) other good
and valuable consideration, without which the Plan could not be confirmed and
consummated, on the Effective Date, each Grand Palais Bondholder (as defined
below) that, through an appropriate indication on the release solicitation
statement provided to such Grand Palais Bondholder by the Disbursing Agent or in
such other manner as may be prescribed by an applicable order of the Bankruptcy
Court, has affirmatively evidenced its intent to release the Persons in the HET
Group, the Debtors Group, the Bondholders Committee Group, the City Group, the
State Group, the NOLDC Group, the Grand Palais Group and the Bank/Underwriter
Group, respectively (each, a "GRAND PALAIS RELEASING BONDHOLDER") will be
conclusively and irrevocably deemed to have (i) released each Person in the HET
Group, the Debtors Group, the Bondholders Committee Group, the City Group, the
State Group, the NOLDC Group, the Grand Palais Group and the Bank/Underwriter
Group, respectively, from any and all Release Claims that such Grand Palais
Releasing Bondholder, or any of its predecessors-in-interest, successors or
assigns, has or may have as of the Effective Date arising in whole or in part
from any acts, omissions, activities and/or events prior to the Effective Date
and (ii) released, waived and agreed not to bring any Claims against HET or
HOCI, whether a known Claim or an Unknown Claim, that may arise in any way, in
whole or in part, out of (a) HET's or HOCI's decision either to, renew or not
renew the HET/JCC Agreement or any Minimum Payment Guaranty, (b) HET's or HOCI's
acting in their own best interests in connection with the execution, renewal or
failure to renew the HET/JCC Agreement or any Minimum Payment Guaranty, and/or
(c) any alleged assurance or guarantee by HET or HOCI concerning the financial
results of the Casino, unless such Claim is based on a writing (but in any event
cannot be based on the HET/JCC Agreement or any Minimum Payment Guaranty)
properly executed by the party against whom such a Claim is being made. Such
release by the Grand Palais Releasing Bondholders will not be effective or
enforceable as to (i) any Person in the NOLDC Group unless the applicable
Persons in the NOLDC Group execute and deliver on or before the Effective Date
the NOLDC Shareholders/HET Settlement Agreement, and (ii) any Person in the
Grand Palais Group unless the applicable Persons in the Grand Palais Group
execute and deliver on or before the Effective Date the Grand Palais/HET
Settlement Agreement.
On, or as soon as practicable after the Effective Date, each Grand
Palais Releasing Bondholder will receive its PRO RATA share of the Grand Palais
Settlement Consideration (with respect to each Grand Palais Releasing
Bondholder, such PRO RATA share for such Grand Palais Releasing Bondholder will
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be determined by the ratio between the aggregate principal amount of Grand
Palais Senior Secured Bonds beneficially owned by such Grand Palais Releasing
Bondholder and the aggregate principal amount of Grand Palais Senior Secured
Bonds beneficially owned by all of the Grand Palais Releasing Bondholders, each
calculated as of the Distribution Record Date). Notwithstanding the foregoing,
(i) no Grand Palais Releasing Bondholder will be entitled to any distribution of
the Grand Palais Settlement Consideration unless such holder is a Grand Palais
Bondholder of record on the Distribution Record Date (or, in the case of a
beneficial owner of any Grand Palais Senior Secured Bonds, is the beneficial
owner of Grand Palais Senior Secured Bonds on the Distribution Record Date that
are held on its behalf by a Person which is a holder of record on the
Distribution Record Date) and has not assigned or otherwise transferred its
claims, if any, against any Person in the HET Group, the Debtors Group, the
Bondholders Committee Group, the City Group, the State Group, the NOLDC Group,
the Grand Palais Group or the Bank/Underwriter Group to be released pursuant to
Section 5.6 of the Plan, except that any Grand Palais Releasing Bondholder may
transfer its Grand Palais Senior Secured Bonds, subject to clause (ii) below,
(ii) the foregoing release by each Grand Palais Releasing Bondholder will be
binding on any subsequent transferee of the Grand Palais Senior Secured Bonds
held by such Grand Palais Releasing Bondholder on the Distribution Record Date,
and (iii) the foregoing release by each Grand Palais Releasing Bondholder which
is a beneficial owner of any Grand Palais Senior Secured Bonds will be binding
on any record holder, participant or nominee with respect to such Grand Palais
Senior Secured Bonds.
"GRAND PALAIS SENIOR SECURED BONDS" means the 18.25% Senior Secured
Pay-In-Kind Notes, due November 1, 1997, issued by Grand Palais pursuant to
that certain Amended and Restated Indenture, dated as of November 16, 1994,
between Grand Palais and Fleet National Bank of Connecticut (formerly known
as Shawmut Bank Connecticut, National Association), as trustee, governing
the Grand Palais Senior Secured Bonds, as the same may be amended from time
to time.
"GRAND PALAIS BONDHOLDERS" means the holders and beneficial owners of the
Grand Palais Senior Secured Bonds.
8. INJUNCTION AGAINST COMMENCEMENT OF INDIVIDUAL ACTIONS AGAINST THE HET
GROUP, THE DEBTORS GROUP, THE BONDHOLDERS COMMITTEE GROUP, THE CITY
GROUP, THE STATE GROUP, THE NOLDC GROUP, THE GRAND PALAIS GROUP AND
THE BANK/UNDERWRITER GROUP
To implement the Releases (as defined below) and the release
provisions of Sections 5.1, 5.2, 5.3, 5.4, 5.5 and 5.6 of the Plan, the
Confirmation Order will constitute and provide for an injunction by the
Bankruptcy Court as of the Effective Date against (a) any Releasing
Bondholder or any Grand Palais Releasing Bondholder from (i) commencing or
continuing in any manner any action or other proceeding of any kind against
any Released Party or any property of any Released Party, (ii) enforcing,
attaching, collecting and/or recovering by any manner or means any judgment,
award, decree or order against any Released Party or any property of any
Released Party, (iii) creating, perfecting or enforcing any Encumbrance of
any kind against any Released Party or any property of any Released Party, or
(iv) asserting any right of setoff, right of subrogation or recoupment
against any Released Party or any property of any Released Party, in each
case to the extent any of the foregoing is released, waived or otherwise
prohibited by the release provisions of Section 5.2 or 5.6 of the Plan, as
applicable; (b) except as provided in the FNBC Settlement Agreement or
Section 6.1(k)(ii), 6.2(l)(i) or 6.2(l)(ii) of the Plan any party to any of
the Releases from (i) commencing or continuing in any manner any action or
other proceeding of any kind against any Released Party or any property of
any Released Party, (ii) enforcing, attaching, collecting and/or recovering
by any manner or means any judgment, award, decree or order against any
Released Party or any property of any
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Released Party, (iii) creating, perfecting or enforcing any Encumbrance of
any kind against any Released Party or any property of any Released Party, or
(iv) asserting any right of setoff, right of subrogation or recoupment
against any Released Party or any property of any Released Party, in each
case to the extent any of the foregoing is released, waived or otherwise
prohibited by the applicable Release(s); and (c) any Creditor, any holder of
an Equity Interest or any other party in interest in any of the Chapter 11
Cases from commencing or continuing any Derivative Claim against any Released
Party; however, the foregoing injunction against the Releasing Bondholders
and the Grand Palais Releasing Bondholders will not be effective or
enforceable as to (i) any Person in the NOLDC Group unless the applicable
Persons in the NOLDC Group execute and deliver on or before the Effective
Date the NOLDC Shareholders/HET Settlement Agreement, (ii) any Person in the
Grand Palais Group unless the applicable Persons in the Grand Palais Group
execute and deliver on or before the Effective Date the Grand Palais/HET
Settlement Agreement, (iii) any Claim or cause of action other than a Release
Claim that is released pursuant to Section 5.2 or 5.6 of the Plan or a
Derivative Claim.
"RELEASES" means the City/RDC Release, the State/LGCB Release, the
Centex-Landis Release, the Broadmoor Release, the NOLDC Shareholders/HET
Settlement Agreement, the Grand Palais/HET Settlement Agreement, the
NOLDC/Grand Palais Settlement Agreement and the Bank/Underwriter Release
(each as defined herein or in the Plan).
9. ASSIGNED LITIGATION CLAIMS
On the Effective Date, the Debtors and the Releasing Bondholders (to
the extent provided in the definition of Assigned Litigation Claims) will be
deemed to have assigned their respective Assigned Litigation Claims (as defined
below) to JCC, without any representations or warranties (except as to
ownership).
10. EXTINGUISHMENT OF CERTAIN CAUSES OF ACTION UNDER THE AVOIDING POWER
PROVISIONS
On the Effective Date, Avoidance Claims against any Released Party,
any Bondholder or any other Person other than the Non-Participating Banks and
any Underwriter which fails to execute and deliver the Bank/Underwriter Release
will be released, discharged and extinguished, whether or not then pending.
"AVOIDANCE CLAIMS" means all rights, claims, causes of action, avoiding
powers, suits and proceedings of or brought by or on behalf of any Debtor
or any Person and arising under any or all of Sections 510 and 544 through
554 of the Bankruptcy Code.
While any payments or transfers that could form the basis for
Avoidance Claims are disclosed in the Debtors' schedules and statements of
financial affairs, the Debtors do not believe that they have any valid claims
for avoidance of transfers as preferential or fraudulent transfers. Avoidance
under either such theory would require that the Debtors be shown to have been
insolvent at the time of the transfers, and the Debtors believe that they were
solvent until immediately prior to the commencement of their Chapter 11 Cases,
when the Banks withdrew their financing. In addition, to the extent that any
such claims might potentially exist, there may be other defenses, such as that
the transfers in question were made in the ordinary course of business.
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11. ASSIGNMENT AND PROSECUTION OF ASSIGNED LITIGATION CLAIMS, JUDGMENT
REDUCTION PROTECTION AND DISTRIBUTION OF RECOVERIES FROM ASSIGNED
LITIGATION CLAIMS.
On the Effective Date, the Debtors and the Releasing Bondholders will
be deemed to have assigned their respective Assigned Litigation Claims to JCC.
"ASSIGNED LITIGATION CLAIMS" means all Assigned Debtor Litigation Claims and all
Assigned Bondholder Litigation Claims. "ASSIGNED BONDHOLDER LITIGATION CLAIMS"
means any and all claims and causes of action, including without limitation,
Avoidance Claims, of any Releasing Bondholder (in its capacity as a Bondholder)
which, as of the Effective Date, exists or may exist against any or all of (i)
the Non-Participating Banks and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release and to the extent such Releasing Bondholder, through
appropriate indication on the ballot provided to such holder or in such other
manner as may be prescribed by an applicable order of the Bankruptcy Court, has
affirmatively evidenced its intent to be a Releasing Bondholder and as a
consequence to assign all such claims and causes of action to JCC. "ASSIGNED
DEBTOR LITIGATION CLAIMS" means any and all claims and causes of action,
including without limitation, Avoidance Claims, of any Debtor which, as of the
Effective Date, exists or may exist against any or all of (i) the
Non-Participating Banks and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release.
At the direction of (i) approval of the majority of the Bondholders
Director Nominees in the case of any and all Assigned Bondholder Litigation
Claims and (ii) both a majority of all directors of JCC and a majority of the
Bondholders Director Nominees in the case of any and all Assigned Debtor
Litigation Claims, JCC, in its sole discretion will have the exclusive right to
prosecute or otherwise enforce, settle or release all Assigned Litigation
Claims, subject to certain conditions. JCC cannot settle any Assigned
Litigation Claim without either obtaining a written release in favor of each
Released Party of all Third Party Claims or the consent of the Released Party.
JCC will pay all Litigation Costs.
In the event any Third Party Claim is brought against any Released
Party or such Released Party is otherwise required to participate in litigation
in connection with any Assigned Litigation Claim, the Released Party will select
counsel from a list of attorneys previously approved by the Bondholders
Committee and HET (on behalf of the Proponents). Unless a conflict of interest
precludes such joint representation, and subject to certain specified
exceptions, the same counsel will represent all Released Parties involved in the
same action. Subject to certain conditions, JCC will pay for all reasonable
legal fees, costs and expenses of the Released Party and indemnify the Released
Party for any liability incurred with respect to any judgment or settlement of a
Third Party Claim. The liability of JCC under such indemnity to each Released
Party is limited to the aggregate proceeds of the Assigned Litigation Claims to
the extent such proceeds are available under the distribution scheme set forth
below. The Plan limits the out-of-pocket cost of this indemnity by reducing
judgments and settlements by an amount equal to the aggregate recovery to which
such defendants are entitled against a Released Party on a Third Party Claim.
To facilitate this judgment/settlement reduction mechanism, the Confirmation
Order will provide that each Litigation Defendant must assert all Third Party
Claims on or before the earlier of (i) 170 days after the commencement of an
action by JCC and (ii) the entry of a Final Order adjudicating all claims
asserted in such action, and all Third Party Claims must be asserted and
maintained exclusively in such action. Furthermore, each Litigation Defendant
will be forever barred from asserting in any other forum or action any Third
Party Claim not asserted in accordance with the provisions of the Plan and the
Confirmation Order.
Any proceeds recovered by JCC on account of any and all Assigned
Litigation Claims shall be held in escrow in an interest bearing account and
will be applied and/or distributed as follows: (1) to the payment of all
accrued and unpaid Litigation Costs (or the reimbursement of JCC for any
litigation costs
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previously paid by JCC); (2) to a reserve in the amount of $2,000,000 (which
amount may be reduced under certain circumstances) for payment of future
Litigation Costs (and the amount in this reserve will be distributed in the
manner set forth below at such time as all litigation of Assigned Litigation
Claims has been completed and certain other conditions have been satisfied); (3)
to satisfy the liability of any Released Party as set forth above; and (4) to
the extent that any pending Third Party Claim has not been conclusively resolved
or any Assigned Litigation Claim has been pending for less than six months, then
the proceeds in the escrow will be held as a reserve to satisfy the liability of
any Released Party in respect of any Third Party Claim. If the above amounts
have been paid or fully reserved and if there are no pending Third Party Claims
that have not been conclusively resolved and no Assigned Litigation Claims have
been pending for less than six months, the remaining proceeds of any Assigned
Bondholder Litigation Claims will be distributed to the Releasing Bondholders
PRO RATA based upon the aggregate amount of Old Bonds held by Releasing
Bondholders.
If the above amounts have been paid or fully reserved and if there are
no pending Third Party Claims that have not been conclusively resolved and no
Assigned Litigation Claims have been pending for less than six months, then any
remaining distributable funds in the escrow account (other than the proceeds of
any Assigned Bondholder Litigation Claims) will be retained by JCC; provided,
however, that if the Bankruptcy Court enters a Valuation Order, the remaining
funds in the escrow account will be distributed as follows: (1) the holders of
Allowed Class A4 Claims will receive their Pro Rata Interests in the
distributable funds in an aggregate amount up to $435 million plus accrued
interest thereon (unless the Bankruptcy Court otherwise orders) less the sum of
$187.5 million and the estimated value of the Class A New Common Stock to be
distributed to the holders of Allowed Class A4 Claims; (2) the Harrah's Investor
will receive any remaining distributable funds up to the sum of the aggregate
amount of Allowed Claims in Class A7, plus the aggregate amount of cure payments
made under Section 8.1(e) of the Plan, plus the $2,265,000 to be distributed to
the applicable holders of Allowed Class A6 Claims; (3) the holders of Allowed
Class A8 Claims will receive their Pro Rata Interests in any of the remaining
distributable funds in an aggregate amount necessary to pay all such Allowed
Claims in full (without post-petition interest thereon unless the Bankruptcy
Court orders otherwise); provided that the Bankruptcy Court may allocate the
funds under this clause in any other manner which the Bankruptcy Court
determines is required by the Bankruptcy Code; and (4) the holders of Allowed
Claims in Classes A4 and A8 and Harrah's Investor will receive their respective
pro rata interests (based on the ratio of their respective Allowed Claims (or in
the case of Harrah's Investor, the aggregate amount of Allowed Claims in Class
A7 plus the aggregate amount of cure payments made under Section 8.1(c) of the
Plan, plus the $2,265,000 to be distributed to the applicable holders of Allowed
Class A6 Claims) to the aggregate amount of the Allowed Claims in Classes A4,
A7 and A8 plus the aggregate amount of cure payments made under Section 8.1(c)
of the Plan, plus the $2,265,000 to be distributed to the applicable holders of
Allowed Class A6 Claims) in any remaining distributable proceeds.
12. APPROVAL OF OTHER SETTLEMENT AGREEMENTS
Subject to the provisions of Section 12.15 of the Plan, and except to
the extent the Bankruptcy Court has entered a separate order providing for such
approval, the Confirmation Order shall constitute an order (a) approving as a
compromise and settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy
Code, the Broadmoor Settlement Agreement, the Broadmoor Release, the Centex
Settlement Agreement, the Centex-Landis Release, the First American Settlement
Agreement, the NOLDC Shareholders/HET Settlement Agreement, the NOLDC/Grand
Palais Settlement Agreement, the Grand Palais/HET Settlement Agreement, the FNBC
Settlement Agreement and all other settlement agreements entered into or to be
entered into by any Debtor and any other Person as contemplated by the Plan and
all
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other agreements, instruments or documents relating to any of the foregoing to
which any Debtor is a party and (b) authorizing the Debtors' execution and
delivery of the Broadmoor Settlement Agreement, the Broadmoor Release, the
Centex Settlement Agreement, the Centex-Landis Release, the First American
Settlement Agreement, the NOLDC Shareholders/HET Settlement Agreement, the
NOLDC/Grand Palais Settlement Agreement, the Grand Palais/HET Settlement
Agreement, the FNBC Settlement Agreement and all other settlement agreements
entered into or to be entered into by any Debtor and any other Person as
contemplated by the Plan and all related agreements, instruments or documents to
which any Debtor is a party.
C. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
The Bankruptcy Code gives the Debtors the power, subject to the
approval of the Bankruptcy Court, to assume or reject executory contracts and
unexpired leases. If an executory contract or unexpired lease is rejected, the
other party to the agreement may file a claim for damages incurred by reason of
the rejection. Claims resulting from the rejection of executory contracts and
unexpired leases will fall within Class A7, A8, B5, B6, C4, C5, C6 or C7, as
appropriate. In the case of rejection of leases of real property, such damage
claims are subject to certain limitations imposed by the Bankruptcy Code. Under
the Plan, all of the Debtors' executory contracts and leases are rejected,
except for any executory contract or unexpired lease (i) which is to be assumed
(in certain instances, as modified) by JCC, as HJC's successor, pursuant to
Section 8.1(a) or 8.1(c) of the Plan, (ii) which has been assumed (in certain
instances, as modified) pursuant to an order of the Bankruptcy Court entered
prior to and is pending on the Confirmation Date, (iii) which has been entered
into by HJC after the Petition Date in the ordinary course of business or
pursuant to an order of the Bankruptcy Court, (iv) as to which a motion for
approval of the assumption of such contract (in certain instances, as modified)
has been filed prior to and is pending on the Confirmation Date or (v) which (in
certain instances, as modified) is set forth in a schedule (acceptable to the
Bondholders Committee (in its sole discretion) and acceptable to HET (in its
sole discretion) on behalf of the Proponents) to be filed prior to the
conclusion of the Confirmation Hearing.
In addition, the directors and officers liability insurance policy of
HJC and all other insurance policies and any agreements or instruments related
thereto, (including, without limitation, any retrospective premium rating plans
relating to such policies), except for the Existing Owner's Title Insurance
Policy (as defined below) and those policies (and any agreements, documents or
instruments) set forth in a schedule to be filed prior to commencement of the
Confirmation Hearing, are treated as executory contracts under the Plan and will
be assumed by JCC on the Effective Date.
If that certain settlement agreement by and between HJC and First
American Title Insurance Company, dated as of December 18, 1996, providing for
the issuance of new owner's and lender's title insurance policies (the "FIRST
AMERICAN SETTLEMENT AGREEMENT") becomes effective on or before the Effective
Date (including, without limitation, the issuance of new owner's and lender's
title insurance policies on or before the Effective Date), the existing title
insurance policy issued by First American Title Insurance Company, dated March
14, 1994, Policy Number D 102631, as superseded and replaced by a policy of the
same number with an effective date of November 16, 1994 (together with all
reinsurance agreements, endorsements and supplements thereto, the "EXISTING
OWNER'S TITLE INSURANCE POLICY") will be deemed rejected and terminated as of
the Effective Date in accordance with the terms of the First American Settlement
Agreement. HJC has sought and obtained approval to enter into the First
American Settlement Agreement. If the First American Settlement Agreement does
not become effective on or before April 30,1998 (or such later date as agreed to
by the parties) for any reason or has become ineffective for any reason, then
HJC or
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JCC (as HJC's successor), with the consent of HET (in its sole discretion) on
behalf of the Proponents, will be entitled, upon ten days' prior notice, to seek
to assume the Existing Owner's Title Insurance Policy pursuant to Section 365(a)
of the Bankruptcy Code. If the First American Settlement Agreement does not
become effective by the time at which all other conditions to the Effective Date
have been satisfied or waived, then HJC or JCC (as HJC's successor), with the
consent of HET (in its sole discretion) on behalf of the Proponents, will be
entitled, upon ten days' prior notice, to seek to assume the Existing Owner's
Title Insurance Policy pursuant to Section 365(a) of the Bankruptcy Code. To
the extent HJC or JCC seeks to assume the Existing Owner's Title Insurance
Policy in accordance with the provisions of the Plan, First American Title
Insurance Company will be entitled to oppose such assumption on any grounds
other than on the grounds that the Confirmation Date has already occurred.
With respect to any executory contracts to be assumed by the Debtors,
the Debtors will, among other things, cure (or provide adequate assurance that
they will promptly cure) existing defaults and provide adequate assurance of
future performance under such contracts in accordance with the requirements of
the Bankruptcy Code. The Proponents believe that the budget for completing the
Casino, and the financing being arranged to make the payments contemplated under
such budget, are sufficient to make the cure payments and provide adequate
assurance of future performance of any executory contracts the Debtors are
likely to assume through the Plan. Indeed, built into the Debtors' budget are
sufficient funds to satisfy in full the cure amounts agreed upon by HJC to be
paid to (i) Broadmoor as to the Broadmoor Construction Agreement, and (ii)
Centex as to the Centex Construction Agreement.
Any cure payments required to be made by the Debtors will be made as
set forth in Section 8.1(e) of the Plan. Any dispute as to the amount of any
cure payment required to be made will be resolved by the Bankruptcy Court.
The following is a description of the material executory contracts and
unexpired leases which may be assumed (in certain instances, as modified)
pursuant to the Plan. The modified versions of such agreements or term sheets
thereof are attached as exhibits to the Plan.
1. GENERAL DEVELOPMENT AGREEMENT
The GDA sets forth the obligations of HJC, the RDC and the City, as
intervenor, and the procedures to be followed relating to the design,
development and construction of the Casino and certain related facilities (the
"CASINO DEVELOPMENT"). Pursuant to the Plan, JCC (as successor to HJC), the RDC
and the City, as intervenor, will enter into an Amended and Restated General
Development Agreement (the "AMENDED GDA"), which will be effective upon
execution and delivery by the parties thereto and the occurrence of the
Effective Date. The Amended GDA reflects, among other things, the modified
ownership, equity, financing and capital structure of JCC, and the RDC's and the
City's approval of the revised opening schedule of the Casino and its modified
design. See Section III.B., "General Information--Description of the Casino."
The Amended GDA reflects a new completion guarantee from HET and HOCI
(HET and HOCI together, the "COMPLETION GUARANTORS") in favor of the RDC and the
City. Such completion guarantee supersedes and replaces the completion
guarantee granted by the Completion Guarantors in November 1994 in favor of the
City and the RDC and contains no financing conditions. See Section V.D.2.g.,
"Means for Implementation and Execution of the Plan--Effective Date
Transactions--New Completion Guarantees, Amended and Restated Construction Lien
Indemnity Obligation Agreement."
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Under the Amended GDA, the hard construction costs for the Casino
Development expended to date are represented to be not less than $153,345,000
and remaining to be expended are represented to be $113,092,000. The Amended
GDA continues to impose responsibility on JCC for the location, identification
and condition of all utilities serving the Casino Development and obligates JCC
to provide traffic signals and intersection improvements in accordance with
plans and specifications approved by the City Department of Public Works (as
described in Exhibit A to the Amended GDA) as a part of the cost of the project.
No other transportation or roadway improvements will be required of JCC and the
RDC. The Amended GDA also obligates JCC to reimburse the RDC for reasonable
fees and expenses of the RDC commencing on the date as of which the Amended GDA
is executed and delivered by the parties and the Effective Date has occurred for
the services of the project manager and his or her staff. Project manager and
staff reimbursement amounts vary depending on the phase and certain other timing
conditions.
The Amended GDA establishes scheduling parameters for the construction
and completion of the Casino Development. It also contains the RDC's approval
of the preliminary schedule attached to the Amended GDA for the recommencement
of construction and a recognition by the parties that the preliminary schedule
is subject to development of more specific schedules (including a working
development schedule, a development schedule and a construction schedule) as the
design documents for each Component (as defined below) and phase are prepared
and approved and as construction planning evolves. "COMPONENT" means the
individual components comprising the leased premises and the improvements, which
are the Casino, the Poydras Tunnel Area, the Poydras Street Support Facility,
the Employee and Bus Parking Support Facility, the Landscape Improvements and
the Pedestrian Bridge Areas (each as defined in the Amended GDA), and other
facilities that may be added as Components by amendment to the Amended GDA.
Under the Amended GDA, JCC is required to reactivate the Casino site
no later than 30 days after the Effective Date. The site is considered
reactivated on the date when personnel and/or equipment first enter the Casino
site for the purpose of preparing the property for construction of the
improvements that the Amended GDA requires (the "SITE REACTIVATION DATE"). Work
on Phase I and II Construction (as defined in the Amended GDA) is required to
begin on the Site Reactivation Date; provided that all necessary permits and
other government authorizations (the "PERMITS") have been received. For all
phases of Casino Development, the RDC must approve the construction documents
and, provided that there is no outstanding event of default under the Amended
Canal Street Casino Lease (as defined below), must thereafter issue to JCC
notice to proceed with the particular phase of Casino Development within 10 days
of such approval.
The construction and development schedules, JCC's obligation to cause
the completion of any phase or Component of the Casino by the applicable
deadline, and any other duty or obligation of JCC under the Amended GDA, shall
be adjusted for "Force Majeure" events, but only for the number of days due to
such causes and only to the extent that such occurrences actually delay the
performance of such duty or obligation. "FORCE MAJEURE" will be defined as (a)
strikes, lockouts, labor disputes, inability to procure materials, failure of
power; (b) changes in governmental requirements applicable to the construction
of a Component or a phase of the Casino, first effective after the submission
and approval of the design, and the orders of any governmental authority having
jurisdiction over a party, the project area, or the development (not including
stop work orders due to a building or other code violation); (c) acts of God,
tornadoes, hurricanes, floods, sinkholes, fires and other casualties,
landslides, earthquakes, epidemics, quarantine, pestilence, abnormal inclement
weather and extended periods of rainfall during periods of any material
excavation; (d) acts of a public enemy, acts of war, terrorism, effects of
nuclear radiation, blockades, insurrections, riots, civil disturbances,
governmental preemption in connection with a national emergency,
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or national or international calamities; (e) any litigation not filed or
fomented by JCC, the Completion Guarantors, or any affiliates of the Completion
Guarantors or any leasehold mortgagee in which any judgment, directive, ruling
or order is entered that restrains or substantially interferes with substantial
completion of the Phases I and II Construction; and (f) any other causes beyond
the reasonable control of the party claiming delay and not the fault of the
party claiming the delay.
If JCC does not construct the Casino and the Completion Guarantors
fail to cause the Casino to be constructed pursuant to the completion guarantee
before termination of the Amended Canal Street Casino Lease by default or
otherwise, except upon default by the RDC or the City, JCC shall either restore
the demolished improvements to the condition existing prior to JCC's demolition
or pay to the RDC the fair market value of the demolished improvements
immediately prior to JCC's demolition as liquidated damages.
The Amended GDA will terminate upon the earlier of (i) the last of the
final completion dates of all Components and phases of the Casino or (ii) the
termination of the Amended Canal Street Casino Lease, whether by default or
otherwise. If the Amended GDA is terminated upon termination of the Amended
Canal Street Casino Lease as a result of the occurrence of an event of default
by JCC thereunder, the RDC may have the work completed, repaired or replaced at
the expense of JCC.
The Amended GDA and the Amended Canal Street Casino Lease obligate JCC
to comply with an amended Open Access Program and the Open Access Plans adopted
thereunder (the "AMENDED OPEN ACCESS PROGRAM AND PLANS"). The Amended Open
Access Program and Plans will address a streamlined reporting format and the
extent to which the "best efforts" criteria will be used in the administration
of such program and plans.
2. CANAL STREET CASINO LEASE
As part of the Plan, it is proposed that JCC (as successor to HJC),
the RDC and the City, as intervenor, enter into an Amended and Restated Canal
Street Casino Lease (the "AMENDED CANAL STREET CASINO LEASE"). The City
Agreement sets forth certain terms and conditions which have been reflected in
an Amended Canal Street Casino Lease, which the parties expect will be effective
as of the Effective Date. The Amended Canal Street Casino Lease will have an
initial term of 30 years plus the amount of time between April 27, 1993 and the
Effective Date of the Plan, with three ten-year renewal options. If the initial
term of the Casino Operating Contract expires prior to the expiration of the
initial term of the Amended Canal Street Casino Lease or the Casino Operating
Contract fails to be renewed or extended following due application, JCC and the
RDC each have the right to terminate the Amended Canal Street Casino Lease and
upon such termination the parties will have no further rights or obligations
thereunder. If RDC or JCC elects not to terminate the Amended Canal Street
Casino Lease in such circumstance, JCC is obligated to pay only the rent,
impositions, and certain other payments, and JCC will be excused from complying
with all obligations of the Amended Canal Street Casino Lease which directly or
indirectly require operation of the development for Casino gaming operations
until such time as a casino operating contract is re-acquired by JCC. The
Amended Canal Street Casino Lease will entitle JCC to possess the Rivergate site
and obligate JCC to construct, build and operate the Casino, the support
facilities, and the other improvements in accordance with the terms of the
Amended Canal Street Casino Lease and the Amended GDA. The Amended Canal Street
Casino Lease also reflects, among other things, the modified ownership, equity,
financing and capital structure of JCC and the revised opening schedule of the
Casino.
The RDC and the City have been paid $736,000 per month since January
1, 1997 as pre-
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opening day rent (the "PRE-OPENING DATE RENT"). HJC initially deposited
$2,208,000 in escrow to secure this rental obligation through May 31, 1997, all
of which has been paid to the City, and the Pre-Opening Date Rent has been paid
to the RDC and the City each month thereafter through and including November
1997. Under the Amended Canal Street Casino Lease, the above rate of rent will
continue until the day on which the Casino is open for business to the general
public (the "OPENING DATE"). After the Opening Date, the rent will be $5
million per year for the first five years after the Opening Date and will
increase by $2.5 million every 5 years; provided that these increases do not
result in yearly rent exceeding 3% of the Gross Gaming Revenue (as defined in
the Amended Canal Street Casino Lease) for the fiscal year preceding the
increase. If the rent exceeds the 3% threshold, the rent for the five-year
period will be the greater of the rent for the preceding fiscal year or 3% of
Gross Gaming Revenue for the preceding fiscal year. In addition to the above
rent payments, payments will also be made based upon a varying percentage of
the Gross Gaming Revenue. This percentage has been modified from that which was
contained in the Canal Street Casino Lease and is set forth in the City
Agreement attached to the Existing Plan as Exhibit "A."
JCC will also be obligated to pay additional sums pursuant to the
Amended Canal Street Casino Lease, including annual payments of $2 million to
the City to be allocated to the Orleans Parish School Board, an annual
contribution of $200,000 to be allocated to the Audubon Park Commission, two
payments of $875,000 to be allocated to the New Orleans Police Department and a
variable monthly payment to the RDC based upon certain non-gaming revenue. The
Amended Canal Street Casino Lease provides that the minimum of the rent
payments, the payments based upon gross revenue (both gaming and non-gaming) and
the payment allocated to the Audubon Park Commission must equal $12.5 million
per year to be payable in monthly installments. JCC will also be obligated to
pay the City $1.25 million for each fiscal year in which JCC receives gross
gaming revenue in excess of $350 million. Certain other payments are to be made
by JCC including a one time payment, at a time elected by the RDC, based upon
the aggregate value of the stock of JCC Holding, payments based upon dividends
and/or distributions made to shareholders of JCC Holding, and a yearly
contribution of $1.0 million to the City for its tourism marketing program in
which JCC will be permitted to participate by, among other things, controlling,
with certain exceptions, the expenditure of the $1.0 million contribution.
Also, the City will agree, as part of the Amended Canal Street Casino Lease, to
take all necessary actions to move the Joan of Arc statue to a location other
than the Rivergate site. As set forth more fully in the Amended Canal Street
Casino Lease, JCC will make a payment to the City to assist in the relocation as
provided in the City's conditional use ordinance for the Casino.
The Amended Canal Street Casino Lease provides that either the RDC or
the City Council may, for any reason, refuse to consent or financially condition
any assignment, sale or transfer of JCC's interest in the Amended Canal Street
Casino Lease, the sublease of the second floor of the Casino between JCC and JCC
Development (the "SECOND FLOOR SUBLEASE"), or the Amended Management Agreement
to any entity (including a subsidiary or affiliate thereof) that has previously
operated a licensed gaming establishment (including a riverboat) within Orleans
Parish.
The Amended Canal Street Casino Lease provides that the Casino workers
shall be employed by JCC. On the Opening Date, not less than 55% of the
employees of JCC and JCC Development shall live and reside in Orleans Parish.
The minimum percentage of JCC and JCC Development employees that are Orleans
Parish residents will increase by 2% on the anniversary of the Opening Date
until the residency requirement reaches 65%. JCC has agreed to use its best
efforts to maximize hiring in Orleans Parish with the goal being that 80% of
employees of JCC and JCC Development, in the aggregate, live and reside in
Orleans Parish.
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The Amended Canal Street Casino Lease permits JCC to enter into a
sublease with JCC Development under which the entire second floor will initially
be available for non-gaming uses upon the completion of Second Floor Shell
Construction--Phase II. As rent, JCC Development will pay 50% of net operating
income from the second floor development to the RDC. The remaining net
operating income shall be paid by JCC Development to JCC as sublease rent. JCC
may convert any portion of the second floor in the future to a gaming use,
subject to the approval of LGCB; provided, that if such conversion would result
in less sublease revenue to the RDC, JCC will compensate the RDC for such
reduction in the sublease revenue. In the event that such a conversion to
gaming use takes place, such space will be removed from the Second Floor
Sublease and be subject to the terms of the Amended Canal Street Casino Lease
that apply to the first floor.
The City Agreement provides that a group composed of RDC and HJC
representatives will develop a master plan for the initial build-out and leasing
of the second floor for non-gaming use. The initial non-gaming tenant build-out
and development will be consistent with such master plan.
3. CASINO OPERATING CONTRACT
Pursuant to the Casino Operating Contract, which commenced on July 15,
1994, the LEDGC granted to HJC the right to conduct gaming operations at the
Casino. Under the Plan, it is proposed that JCC (as successor to HJC) and the
LGCB enter into a Modified Casino Operating Contract (the "MODIFIED CASINO
OPERATING CONTRACT"). The term of the Modified Casino Operating Contract will
continue 20 years with one 10 year renewal option.
The Modified Casino Operating Contract will not require any
concessions by the State regarding State minimum compensation provisions as
required by the Gaming Act and will provide for annual payments to the LGCB in
an amount equal to the greater of $100 million or the sum of the following
percentages of Gross Gaming Revenue from the Casino in that fiscal year: (A)
eighteen and one-half percent (18.5%) of Gross Gaming Revenue up to and
including Six Hundred Million Dollars ($600,000,000); plus (B) twenty percent
(20%) of Gross Gaming Revenue in excess of Six Hundred Million Dollars
($600,000,000) up to and including Seven Hundred Million Dollars ($700,000,000);
plus (C) twenty two percent (22%) of Gross Gaming Revenue in excess of Seven
Hundred Million Dollars ($700,000,000) up to and including Eight Hundred Million
Dollars ($800,000,000); plus (D) twenty four percent (24%) of Gross Gaming
Revenue in excess of Eight Hundred Million Dollars ($800,000,000) up to and
including Nine Hundred Million Dollars ($900,000,000); plus (E) twenty five
percent (25%) of Gross Gaming Revenue in excess of Nine Hundred Million Dollars
($900,000,000). (the "GROSS REVENUE SHARE PAYMENTS"). JCC will be required to
make a daily payment to the LGCB equal to $100 million divided by 365 days with
a year-end settling up of Gross Revenue Share adjustments. Any unpaid portion
due to the State in any one fiscal year (including any short fiscal year for the
period immediately following opening of the Casino) in which JCC might cease
operations other than in the ordinary course of business whether or not in
connection with a filing for relief (after the closing of the present
proceedings) in the United States Bankruptcy Court (the "MINIMUM PAYMENTS") will
be guaranteed by a Minimum Payment Guaranty. A failure by JCC to cause to be
provided a Minimum Payment Guaranty before the first day of a new fiscal year
will result in a termination with no cure period of the Modified Casino
Operating Contract. For any partial fiscal year of operation ending March 31,
1999 and for the five (5) subsequent full fiscal years, HET and HOCI have
proposed to provide a Minimum Payment Guaranty, subject to the terms and
conditions set forth in the HET/JCC Agreement. The obligations of JCC, HET and
HOCI under the HET/JCC Agreement will be secured by a first priority lien on
JCC's leasehold interest in the Casino site, the Casino building, the parking
garages and all Casino assets
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of JCC and JCC Holding, including, but not limited to, the FF&E and all
moveables owned by JCC and JCC Holding. Pursuant to the terms of the HET/JCC
Agreement, after the second full fiscal year, JCC may terminate the HET/JCC
Agreement by providing notice of its intent to HET and HOCI. If JCC elects to
terminate the HET/JCC Agreement for the year beginning April 1, 2001, JCC will
pay a termination fee of one million dollars ($1,000,000) to HET. For a
termination in the years beginning April 1, 2002 and April 1, 2003, no such fee
shall be payable. A Minimum Payment Guaranty will guarantee JCC's obligation to
pay the Minimum Payments only during the fiscal year JCC abandons operations of
the Casino, fails to make daily payments to the LGCB or files for bankruptcy and
has ceased casino operations (each a "MINIMUM PAYMENT DEFAULT") and will not
secure any obligations during, or otherwise apply to, any subsequent fiscal
year. Upon termination of the HET/JCC Agreement on March 31, 2004, JCC will be
required to secure a substitute guarantor to provide a Minimum Payment Guaranty.
Such guarantor may or may not be HET. In the proposed Modified Casino Operating
Contract, the State and the LGCB will acknowledge that HET and HOCI have no
legal obligation or duty, express or implied, to provide a Minimum Payment
Guaranty for any fiscal year following a fiscal year in which a Minimum Payment
Default has occurred or any other non-renewal condition under the HET/JCC
Agreement has occurred, for any fiscal year after March 31, 2004, or if the
HET/JCC Agreement has otherwise terminated pursuant to its terms.
The Modified Casino Operating Contract will continue to be exclusive
in Orleans Parish and will contain provisions affording certain specified relief
to JCC as set forth in Exhibit B to the Plan. In such event, JCC will not be
relieved of the obligation to pay any additional charges or to perform its
non-monetary obligations under the Modified Casino Operating Contract, including
construction and operation of the Casino. See Section IX.A., "Certain Risk
Factors to be Considered--Overall Risks of Recovery by Holders of
Claims--Uncertainty Regarding Gaming Regulations" and "--Negotiations with the
State."
The Modified Casino Operating Contract will reflect the redesign of
the Casino and the revised opening schedule of the Casino in accordance with the
Plan. Subject to the receipt of appropriate regulatory approvals, the Modified
Casino Operating Contract will modify the original Casino Operating Contract to
permit the modified size and design of the Casino and the revised opening
schedule. The Modified Casino Operating Contract will also provide for a new
completion guarantee and certain other non-economic changes, all of which are
permissible under current law.
Upon the Effective Date, JCC will provide complete releases of any and
all claims, demands and causes of action, that any of the participants in the
Chapter 11 Cases have against the State, the LGCB, and the LEDGC, their
predecessors, successors, officers, directors, employees, attorneys, financial
advisors, agents, and other representatives, other than certain tax claims.
4. MANAGEMENT AGREEMENT
The Management Agreement grants HNOMC the right to manage and operate
the Casino. As part of the Plan, it is proposed that a Second Amended and
Restated Management Agreement (the "AMENDED MANAGEMENT AGREEMENT") be entered
into between JCC (as successor to HJC) and HNOMC, and approved by LGCB. Under
the Amended Management Agreement, HNOMC will continue to be responsible for and
have authority over, among other things: (a) gaming and entertainment
operations including security and internal control procedures; (b) public
relations and promotion; (c) all accounting, budgeting, financial and treasury
functions at the Casino; (d) retaining certain contractors; and (e) other
responsibilities to be negotiated by the parties. During the term of the
Amended Management Agreement, JCC will be required to fund the cost of operating
the Casino and will be responsible for,
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among other things, equipping and furnishing the Casino, maintaining JCC's
leasehold estate, and obtaining and maintaining licenses and permits to conduct
business.
Under the Amended Management Agreement, as consideration for managing
the Casino, HNOMC will receive an annual payment equal to 3.0% of the gross
revenues of JCC (the "BASE MANAGEMENT FEE") and 7.0% of EBITDA of JCC above (i)
$40 million for the six month period ending on the date which is six months
after the opening of Casino - Phase I and each anniversary of such date, and
(ii) $75 million for the twelve month period ending on the date which is twelve
months after the opening of Casino - Phase I and each anniversary of such date,
less the Incentive Fee paid to HNOMC for the prior six months (the "INCENTIVE
MANAGEMENT FEE" and, together with the Base Management Fees, the "MANAGEMENT
FEES"); provided, however, that HNOMC will refund to JCC all fees paid by JCC
under subsection (i) if EBITDA does not exceed $75 million for the twelve month
period ending on the date which is twelve months after the opening of Casino -
Phase I and each anniversary of such date. "EBITDA" means earnings before
interest, taxes, depreciation and amortization but after payment of the Base
Management Fee (and including, solely for purposes of calculating Contingent
Payments (as defined herein) and the Incentive Management Fee, the proceeds, if
any, from the exercise of the HET Warrant). The Base Management Fee will be
paid monthly. The Incentive Management Fee, if any, will be paid at six-month
intervals on the next business day following actual cash payment of all accrued
Fixed Interest and Contingent Payments (each as defined below), if any, on the
New Bonds and the New Contingent Bonds. No Base Management Fee will be paid,
and no Incentive Management Fee will be accrued or paid, during or with respect
to any period in which JCC is in default with respect to interest or principal
payments on the New Bonds, the New Contingent Bonds or the Bank Loans. Any
unpaid Base Management Fees shall be deferred and payable to HNOMC out of the
first available funds.
The New Bonds provide for six elections by JCC to pay semi-annual
Fixed Interest in kind rather than in cash for the first three years of the New
Bonds and for further elections by JCC to pay semi-annual Fixed Interest in kind
thereafter if the EBITDA for the prior twelve (12) months have not exceeded
$28.5 million. If JCC elects to pay Fixed Interest in kind during the first six
interest payment periods, HNOMC will defer its Base Management Fee if the cash
savings from paying Fixed Interest in kind is needed for cash flow deficiencies
other than for repayment of Tranche A-1 or Tranche A-2. If JCC is required to
pay Fixed Interest in kind during the third, fourth, fifth or sixth interest
payment periods because of the terms of the Term Loans or if JCC elects to pay
Fixed Interest in kind during such periods, the Incentive Management Fee will be
deferred during such corresponding period. Any such election or elections will
be by written notice from JCC to HNOMC specifying the amount, if any, of cash
savings resulting from paying Fixed Interest in kind that is needed for the
above cash flow deficiencies (the "DEFERRAL AMOUNT"). Such Deferral Amount
shall first be applied to offset any Base Management Fees then unpaid and
thereafter accruing during the applicable six month period. To the extent any
such Deferral Amount exceeds the projected amount of any unpaid and thereafter
accruing Base Management Fees for the applicable six month period or if such six
month deferral period has already elapsed, HNOMC will repay to JCC the remaining
amount of such Deferral Amount not to exceed the amount of any Base Management
Fees previously paid to HNOMC with respect to any portion of the applicable six
month period accruing prior to JCC's election to pay Fixed Interest in kind. To
the extent HNOMC is required to refund to JCC any deferred Management Fees as
described above, HET will guarantee HNOMC's obligation to make such refund.
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5. COMPLETION GUARANTEES
Under the Plan, it is proposed that the Completion Guarantors enter
into separate New Completion Guarantees in favor of each of (i) the RDC and the
City, (ii) the LGCB, (iii) the holders of the New Bonds and New Contingent
Bonds, and (iv) the lenders under the Term Loans and the Working Capital
Facility (collectively, the "BENEFICIARIES"). Under such New Completion
Guarantees, the Completion Guarantors will agree to guarantee the Completion
Obligations (as defined below), the Carry Obligations (as defined below) and the
Preservation Obligations (as defined blow). The "COMPLETION OBLIGATIONS" mean
the obligations of JCC to complete the construction of and timely and fully pay
for all costs and expenses of completion when due for the Phase I and II
Construction, to equip the Casino with the required furniture, fixtures and
equipment so that the Casino is ready to open to the public as a casino gaming
operation and the Components, respectively, in accordance with the terms of the
Amended Canal Street Casino Lease, the Amended GDA, the New Indentures and any
applicable requirements of the LGCB including, without limitation: (i) the
payment of any and all costs of completing the Phase I and II Construction
including without limitation all labor, materials, supplies and equipment
related thereto, to be paid and satisfied when due including, without
limitation, all cost overruns not paid by JCC; (ii) the payment, satisfaction or
discharge of liens arising from injuries or damages to persons or property in
connection with Phase I and II Construction, and all such liens, charges and
claims, other than permitted liens, arising from the furnishing of labor,
material, supplies or equipment for the Phase I and II Construction, that are or
may be imposed upon or asserted against the Casino or any portion thereof; and
(iii) the defense and indemnification of the Beneficiaries against all such
liens arising from injuries or damages to persons or property in connection with
the Phase I and II Construction, and all such liens, charges and claims, other
than permitted liens, arising from the furnishing of labor, materials, supplies
or equipment for the Phase I and II Construction. The "CARRY OBLIGATIONS" mean
the full and complete payment and performance of all obligations of JCC to pay
on a timely basis all amounts due from or incurred by or otherwise payable by
JCC to any person, including without limitation, any rent, interim rent,
escalated interim rent, liquidated damages or other amounts payable to the City
and the RDC under the Amended Canal Street Casino Lease or the Amended GDA
(including but not limited to JCC Development's obligation to pay rent directly
to the City and the RDC under the Second Floor Sublease), and all project costs
(other than any costs which are included as a part of the Completion
Obligations), including without limitation, the payment of interest and
scheduled principal payments (excluding principal on the New Bonds and New
Contingent Bonds), taxes (prior to delinquency), amounts owing to the LGCB under
the Casino Operating Contract, amounts owing to the City and the RDC under the
Amended Canal Street Casino Lease, assessments, utilities, insurance,
maintenance expenses, and amounts owing from injuries or damages to person or
property to be funded, paid and satisfied on or prior to the Termination of
Construction Date (as defined below), as the case may be, in accordance with the
terms of the Amended Canal Street Casino Lease and the Amended GDA. The Carry
Obligations will include, without limitation, the obligation of JCC upon the
Termination of Construction Date to have available for working capital at least
$5.0 million of cash and the Working Capital Facility Maximum Amount (as defined
below) of availability for immediate drawdown(s) under the Working Capital
Facility, subject to the terms thereof, it being understood that this provision
may require the Completion Guarantors to contribute working capital directly to
JCC or to pay down the Working Capital Facility. The "WORKING CAPITAL FACILITY
MAXIMUM AMOUNT" equals $25 million reduced by the amount of funds, if any, not
to exceed $2 million, available under any letter of credit sub-facility under
the Working Capital Facility for purposes other than those relating to project
costs of the Casino and a drawing of $10.0 million to fund a certain Casino bank
account on or before the Termination of Construction Date. The "PRESERVATION
OBLIGATIONS" include the Completion Guarantors' obligations, after notices of
failure of JCC to fulfill the Completion Obligations in a timely manner, to pay
any of the Carry Obligations or to be the subject of a voluntary or involuntary
bankruptcy proceeding, to take
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all necessary steps to maintain insurance coverage and to secure the Casino to
prevent deterioration and unauthorized access.
"TERMINATION OF CONSTRUCTION DATE" means that date by which all of the
following have occurred: (i) a temporary certificate of occupancy has been
issued for Casino--Phase I by the building department and other relevant
agencies; (ii) all required permits with respect to the Phase I and II
Construction have been received by JCC; (iii) a notice of completion has
been recorded with respect to the Phase I and II Construction; (iv) an
officers' certificate of the Completion Guarantors has been delivered to
the Beneficiaries certifying that the Termination of Construction Date has
occurred; (v) the Casino is equipped with the required furniture, fixtures
and equipment and ready to open for business as a casino gaming operation;
(vi) a certificate has been delivered by the general contractor and the
project architect to the Beneficiaries for the Phase I and II Construction
certifying that the Phase I and II Construction has been substantially
completed in accordance with the plans and specifications therefor and all
applicable building laws, ordinances and regulations; and (vii) Casino--
Phase I has opened for business as a casino gaming operation so long as any
necessary regulatory approvals from the LGCB or any other State regulatory
authorities have been received, or, if such approvals have not been
received, even though timely receipt of any such approvals has been
diligently pursued by or on behalf of JCC in accordance with the Rules and
Regulations for such approvals, Casino--Phase I is in a condition to
receive customers in the ordinary course of business.
The New Completion Guarantees are subject to a number of important
exceptions and qualifications. The Completion Guarantors' obligation to
complete the Casino does not take effect until and unless JCC fails or neglects
to complete any phase of the Casino, fails in any other manner to prosecute with
diligence and continuity the Completion Obligations, fails timely to pay any of
the Carry Obligations, or files or has filed against it a petition for
bankruptcy or similar relief. In addition, the Completion Guarantor's
obligations under the New Completion Guarantees are suspended during the
pendency of any Force Majeure. The New Completion Guarantees are not for the
benefit of, and are not enforceable by, the holders of equity interest in JCC
Holding, including holders of Class A New Common Stock.
The New Completion Guarantees terminate upon the occurrence of any of
the following: (i) the termination of the Amended Canal Street Casino Lease or
the Amended GDA other than as a result of a breach or default by JCC; (ii)
casino gaming operations are no longer permitted to be conducted at the Casino
or are modified, restricted or limited in a manner that materially diminishes
the benefits afforded to JCC or the gaming activities permitted to be conducted
at the Casino pursuant to the Gaming Act by reason of a change of law or the
enactment of a new law or by reason of JCC's rights under the Casino Operating
Contract having been terminated in any material respect, other than as a result
of a breach of default by JCC or the Completion Guarantors; provided that, upon
the occurrence of any of the events described in this clause (ii) prior to the
Termination of Construction Date, the Completion Guarantors are nevertheless
obligated to complete the Poydras Street Support Facility, the Poydras Street
Tunnel Area, exterior site and street work, and certain improvements which may
be required under the Amended Canal Street Casino Lease; (iii) only as to the
Carry Obligations but not as to the Completion Obligations, a Force Majeure
shall have continued for more than one year from the receipt of a notice from
any of the Beneficiaries to the Completion Guarantors that the Completion
Guarantors' obligation to complete the Casino has taken effect, notwithstanding
the Completion Guarantors' actual and continuous best efforts to remove such
Force Majeure; provided, however, that the Completion Guarantors will remain
liable for all Carry Obligations that actually come due through the expiration
of such one year period to the extent not satisfied by JCC; and, provided
further, that the Completion Guarantors shall have used their best efforts to
remove such Force Majeure within such one year
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period; or (iv) as to the Carry Obligations, as of and upon the Termination of
Construction Date and as to the Completion Obligations upon the date on which
all such payments or satisfactory provisions for all such payments have been
made, all lien periods with respect to the Phase I and II Construction have
expired and no liens or privileges arising from the furnishing of labor,
materials, supplies or equipment for the Phase I and II Construction affecting
or purporting to affect the Casino remain of record in Orleans Parish. JCC
expects to obtain the Surety Bond from a surety for the benefit of the
Beneficiaries for construction of the Casino.
The remedy of specific performance and the remedies described below
are not intended to be exclusive of remedies that Beneficiaries may have against
JCC under the New Completion Guarantees or other documents or agreements. If,
after notice and opportunity to cure, the Completion Guarantors fail timely to
pay the Carry Obligations (a "CARRY OBLIGATION DEFAULT") or if, after notice and
an opportunity to cure, the Completion Guarantors fail to commence and
diligently thereafter continue to perform the Completion Obligations (a
"COMPLETION OBLIGATION DEFAULT"), or if after notice and an opportunity to cure,
the Completion Guarantors shall fail to perform the Preservation Obligations (a
"PRESERVATION OBLIGATION DEFAULT"), then the Beneficiaries, subject to certain
provisions, may elect to require specific performance by the Completion
Guarantors of either or both of the Carry Obligations after a Carry Obligation
Default, the Completion Obligations after a Completion Obligation Default and
the Preservation Obligations after a Preservation Obligation Default. After a
Completion Obligation Default or a Preservation Obligation Default, the
Beneficiaries, at their option, have the right, but have no obligation, to
require the surety to perform the Completion Obligations or the Preservation
Obligations pursuant to the Surety Bond. The Beneficiaries' election to require
the surety to perform the Completion Obligations will not release, diminish or
extinguish the liability of JCC or the Completion Guarantors to the extent the
surety fails to perform the Completion Obligations or the Preservation
Obligations. The Completion Guarantors will remain obligated to perform the
Carry Obligations notwithstanding any such election and notwithstanding the
surety's performance of the Completion Obligations or the Preservation
Obligations. In addition to the Beneficiaries' right to require specific
performance by the Completion Guarantors of any and/or all of the Completion
Obligations after a Completion Obligation Default, the Carry Obligations after a
Carry Obligation Default or the Preservation Obligations after a Preservation
Obligation Default, and whether or not the Beneficiaries have called on the
surety pursuant to the Surety Bond, (i) the Beneficiaries have the right to
recover from the Completion Guarantors all unreimbursed costs and expenses,
including but not limited to attorneys' fees, incurred by the Beneficiaries in
protecting, preserving, enforcing or defending their interests both as against
JCC and as against the Completion Guarantors under the New Completion
Guarantees; (ii) after a Carry Obligation Default, the Completion Guarantors
shall be liable for the joint benefit of the Beneficiaries as their interests
may appear for any interest or delinquency costs arising from such Carry
Obligation Default; provided that the Completion Guarantors shall not be liable
for more than one payment of any such interest or delinquency costs of JCC
regardless of whether multiple demands are made by any or all of the
Beneficiaries; (iii) after a Completion Obligation Default, the Completion
Guarantors shall be liable, for the joint benefit of the Beneficiaries as their
interests may appear, for damages to pay for the costs of performance of the
Completion Obligations arising from such Completion Obligation Default or for
such other damages as may otherwise be available under applicable law and (iv)
after a Preservation Obligation Default, the Completion Guarantors shall be
liable for the joint benefit of the Beneficiaries as their interests may appear
for damages to pay for the costs of performance of the Preservation Obligations
arising from such Preservation Obligation Default; provided that in no event
shall the Completion Guarantors be liable for duplicate payments in respect of
damages nor for more than one performance of the Preservation Obligations.
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6. COMPLETION LOAN AGREEMENT
Under the Plan, it is proposed that pursuant to an Amended and
Restated Completion Loan Agreement (the "AMENDED COMPLETION LOAN AGREEMENT")
among JCC and the Completion Guarantors, any expenditures made by the Completion
Guarantors under the New Completion Guarantees will be deemed loans by the
Completion Guarantors in favor of JCC. In addition, the Completion Guarantors
will be required to make Completion Loans to the extent that the total cost to
complete the Casino (to the point at which the Casino contains 100,000 square
feet of gaming space) exceeds the budgeted cost to complete the Casino. The
obligation of JCC to repay amounts advanced by the Completion Guarantors will be
an unsecured obligation of JCC and junior in right of payment to the principal
and interest due and payable with regard to the New Bonds and the Bank Loans.
Such repayment obligation will have an interest rate of 8% per annum and will
mature six months after the maturity of the New Bonds and the New Contingent
Bonds; provided, however, that early repayment of such obligation will be
permitted if allowed pursuant to a "restricted payments" covenant in the New
Indentures and in the Term Loan and Working Capital Facility documents. Such
payment will only be allowed if JCC achieves a specified interest coverage ratio
and will not be allowed in any event until JCC has paid the maximum amount of
contingent payments under the New Bonds and the New Contingent Bonds for two
consecutive years. At such time that there is a demand, call, notice or
requirement for performance of any completion guarantee, the Completion
Guarantors shall be entitled to control the disbursement and use of, and apply
toward the cost to complete the Casino, certain available funds of JCC without
any further action or consent by JCC, including, without limitation, drawing and
use of any portion of the Term Loans, up to the total amount available
thereunder, to receive from HNOMC the available cash flow from the Casino but
not until such time that at least 100,000 square feet of net gaming space has
been constructed, until all obligations of the Completion Guarantors in respect
of the New Completion Guarantees have been fully satisfied. The Amended
Completion Loan Agreement shall also provide that JCC shall use all of its
available funds other than available cash flow for the construction and
development of the Casino. Certain mechanisms will be in place to ensure that
revenues from the Casino are not utilized to fund the project costs of
constructing the Casino until the Casino has opened at least 100,000 square feet
of net gaming space. Such mechanisms will include a requirement that JCC
maintain separate accounts for construction and operations.
7. CONSTRUCTION LIEN INDEMNITY OBLIGATION AGREEMENT
Under an amended and restated construction lien indemnity obligation
agreement between HOCI and JCC, any expenditures made by HOCI under any
indemnity agreement as may be required to be delivered to title insurers in
favor of the lenders under the Term Loans will be deemed unsecured limited
recourse indebtedness ("INDEMNITY OBLIGATIONS") of JCC due and payable on demand
if allowed pursuant to a "restricted payments" covenant in the New Indentures
and in the Term Loan and Working Capital Facility documents. See Section V.C.6.,
"--Completion Loan Agreement." In the event such an indemnity agreement is
required, any Indemnity Obligations will bear interest at the rate of 8%.
8. BASIN STREET CASINO LEASE
HJC entered into a Basin Street Casino Lease Termination Agreement
with the RDC and the City, as intervenor (the "BASIN STREET TERMINATION
AGREEMENT"). The RDC and the City, on the one hand, and HJC, on the other hand,
have mutually released all rights and obligations under the Basin Street Casino
Lease; provided that such release does not affect any rights or obligations of
the parties under the City Agreement in respect of the Municipal Auditorium.
The RDC and the City will have no claim for damages
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as a result of such termination. The LGCB has approved the termination of the
Basin Street Casino Lease. Pursuant to the Basin Street Termination Agreement,
the Basin Street Casino Lease automatically terminated on the date the LGCB
approved the termination of the Basin Street Casino Lease.
HJC has previously agreed to pay $1,036,000 for the benefit and use of
the Orleans Parish School Board, of which $500,000 of such amount has been paid
pursuant to the terms of the March 6 Agreement, which settlement was ratified by
the Bankruptcy Court. See Section IV.G., "Events During Chapter 11
Cases--Debtor in Possession Financing Provided by HET or Its Affiliates."
Pursuant to the March 6 Agreement, the balance of such amount was to be paid to
the City in two equal installments of $268,000, which installments were made in
accordance with the March 18 Order.
On March 4, 1996 and March 6, 1996, HJC remitted (i) $1.8 million from
cash on hand and (ii) $2.5 million from the proceeds of the First DIP Loan,
respectively, directly to the RDC. Of such amounts, $500,000 was for the
benefit and use of the Orleans Parish School Board, and the remainder was in
partial payment of HJC's rent obligations for the period of December 1995
through June 1996. See Section IV.G., "Events During Chapter 11 Cases--Debtor
in Possession Financing Provided by HET or Its Affiliates." In addition, HJC
paid into escrow an additional $1,352,000 for the balance of rent payments due
through June 30, 1996. See Section IV.D., "Events During Chapter 11
Cases--Litigation With the City of New Orleans and the RDC." The RDC has been
paid from the escrow in accordance with the terms of the March 6 Agreement and
the March 18 Order.
The Basin Street Casino Lease Termination Agreement required HJC to
restore the Municipal Auditorium to its previous use whether or not the
Effective Date occurred. In accordance with the terms of the Basin Street
Casino Lease Termination Agreement, HJC deposited $3,475,399 into escrow on
October 3, 1996 to fund the restoration work and commenced and substantially
performed the restoration work. Pursuant to an Assignment and Assumption
Agreement dated as of September 9, 1997, HJC assigned, and the City and the RDC
assumed, all of HJC's rights regarding performance of all remaining restoration
work under the Basin Street Casino Lease Termination Agreement, thus releasing
HJC from any obligation under the Basin Street Casino Lease Termination
Agreement to complete and fund the remaining restoration work at the Municipal
Auditorium. In addition, in connection with such assignment and assumption,
certain funds on deposit in the escrow account were returned to HJC and all
remaining rights and obligations of HJC with respect to the escrow account were
assigned and transferred to the City and the RDC.
HJC currently leases real property, which formerly served as a part of
the patron parking lot for the Basin Street Casino and which was intended to
serve as part of the employee and bus parking support facility premises for the
Casino, under a lease between the Alabama Great Southern Railroad Company and
Grand Palais, dated November 10, 1993, (as modified and subsequently assigned to
HJC, the "PARKING LOT LEASE"). A portion of the land which forms the parking
lot was also leased to HJC under the Basin Street Casino Lease (and under the
Canal Street Casino Lease). Under the City Agreement, a portion of the parking
lot which was leased from the RDC was surrendered to it effective upon
Bankruptcy Court approval of the City Agreement. HJC exercised its right to
terminate its lease of the northerly portion of the Parking Lot Lease premises
on August 1, 1997. Also under the City Agreement, HJC has sought, at the
request of the City, to assume and assign portions of the Parking Lot Lease to
the City and/or to the RDC. This motion was denied by the Bankruptcy Court.
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9. TITLE INSURANCE
As described above, under the Plan, JCC will seek to assume the
Existing Owner's Title Insurance Policy, unless the parties enter into the First
American Settlement Agreement subject to certain conditions (in which case the
Existing Owner's Title Insurance Policy will be deemed rejected and terminated).
In December 1996, the parties reached agreement on the terms of the
First American Settlement Agreement, the form of which the Bankruptcy Court
subsequently approved on January 21, 1997. If the First American Settlement
Agreement becomes effective, it will resolve certain of the parties' claims
against each other, cause the cancellation of the Existing Owner's Title
Insurance Policy, and provide for the issuance of new title insurance to JCC and
its lenders at reduced "re-issue" rates.
10. BROADMOOR CONTRACT
Under the Plan, JCC will assume the Broadmoor Construction Agreement,
as modified by the settlement agreement between HJC and Broadmoor attached as
Exhibit "H" to the Existing Plan (the "BROADMOOR SETTLEMENT AGREEMENT") or JCC
will contract with another company to perform that same work under the same or
substantially similar terms. Among other things, the Broadmoor Settlement
Agreement provides for the assumption of the Broadmoor Construction Agreement,
with certain specified modifications, as of the Effective Date, payment of a
"cure amount" of $2,365,533 to Broadmoor, and certain adjustments to the
contract price under the Broadmoor Construction Agreement. HJC sought and
obtained approval by the Bankruptcy Court of the Broadmoor Settlement Agreement
and of the assumption of the Broadmoor Construction Agreement, to become
effective on the Effective Date. The Settlement Agreement provides that if the
Effective Date did not occur by July 31, 1997, thereby preventing the issuance
of a notice to proceed, Broadmoor has the right to have its contract deemed
rejected and to pursue its proof of claim, a right Broadmoor has not yet
exercised. In the event Broadmoor exercises that right, HJC would have to
negotiate a new settlement agreement with Broadmoor or would have to retain a
replacement contractor to complete the parking facility.
11. ARCHITECT CONTRACT
Under the Plan, JCC will assume HJC's Design Agreement with Perez
Ernst Farnet/Modus, Inc., Architects and Planners ("PEREZ ERNST"), dated January
16, 1995 (and effective November 15, 1994), as modified, if necessary, with the
amount required to cure defaults, if any, under such agreement to be resolved by
settlement or by order of the Bankruptcy Court. Negotiations are in process
with Perez Ernst to revise such contract to accommodate the redesign of the
Casino as contemplated by the Plan.
12. AUDUBON CONTRACT
HJC and The Audubon Institute entered into a letter agreement on or
about July 19, 1995 (the "AUDUBON TICKET AGREEMENT") pursuant to which HJC
agreed, among other things, to purchase in excess of 1 million tickets from The
Audubon Institute from 1995 through 2001. Under the Plan, JCC will assume the
Audubon Ticket Agreement, as modified by the settlement agreement between HJC
and The Audubon Institute attached as Exhibit "I" to the Existing Plan (the
"AUDUBON SETTLEMENT AGREEMENT"). Among other things, the Audubon Settlement
Agreement provides for the assumption of the Audubon Ticket Agreement
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as of the Effective Date, payment of a "cure amount" of $250,000, and certain
modifications of the Audubon Ticket Agreement, including adjustments of JCC's
ticket purchase obligations going forward.
13. CENTEX CONTRACT
Under the Plan, JCC will assume the Centex Construction Agreement, as
modified by the Centex Settlement Agreement, a copy of which is attached as
Exhibit "L" to the Existing Plan. Among other things, the Centex Settlement
Agreement provides for the assumption of the Centex Construction Agreement, with
certain specified modifications, as of the Effective Date, payment of a "cure
amount" of $34,000,000 to Centex, and certain adjustments to the guaranteed
maximum price under the Centex Construction Agreement. HJC filed motions
seeking approval of the Centex Settlement Agreement and of the assumption of the
Centex Construction Agreement to become effective on the Effective Date. The
Court granted these motions on December 5, 1996. The Centex Settlement
Agreement provides that it will be a condition precedent to such assumption that
the Plan shall become effective, and that the effective date of such assumption
will be the Effective Date of the Plan. Negotiations are in process to revise
the Centex Settlement Agreement to accommodate the construction schedule
contemplated by the Plan.
D. MEANS FOR IMPLEMENTATION AND EXECUTION OF THE PLAN
GENERAL IMPLEMENTATION MATTERS
1. GENERAL CORPORATE MATTERS
On or before the Effective Date, each JCC Entity will take such action
as is necessary under the laws of the State of Delaware, or in the cases of JCC
and JCC Intermediary (if formed), under the laws of the State of Louisiana,
federal law and other applicable law to effect the terms and provisions of the
Plan. Among other actions, on or before the Effective Date, each JCC Entity
will (i) file the JCC Organizational Documents, the JCC Intermediary
Organizational Documents and the JCC Holding Certificate of Incorporation, as
applicable, with the Secretary of State of Delaware (in the case of JCC
Holding), or the State of Louisiana (in the cases of JCC and JCC Intermediary),
in accordance with the laws of the State of Delaware or Louisiana, as
applicable, and (ii) in the case of JCC and JCC Intermediary, enter into the JCC
Operating Agreement or the JCC Intermediary Operating Agreement, as applicable.
2. EFFECTIVE DATE TRANSACTIONS
a. JCC MEMBERSHIP INTEREST(S). On the Effective Date, (i) if JCC
Intermediary is formed, JCC Intermediary will form JCC and receive all the
membership interest(s) of JCC, or (ii) if JCC Intermediary is not formed, JCC
Holding will form JCC and receive all the membership interest(s) of JCC. See
Section V.G.8., " Miscellaneous Provisions--Structure of Reorganized Debtors."
b. JCC INTERMEDIARY MEMBER'S INTEREST(S). If JCC Intermediary is
formed, on the Effective Date, JCC Holding will form JCC Intermediary and
receive all membership interest(s) of JCC Intermediary.
c. NEW BOND DOCUMENTS. On the Effective Date, (i) JCC and the New
Indenture Trustee will enter into the New Indentures and will execute and
deliver all instruments, agreements, legal opinions and other operative
documents contemplated by the New Indentures, and (ii) JCC will execute and
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deliver all other New Bond Documents, which include, without limitation, the New
Bonds and the New Contingent Bonds.
I. NEW BONDS
Upon the Effective Date, JCC will issue to holders of Allowed Class A4
claims $187.5 million aggregate principal amount of New Bonds maturing in 2009.
The New Bonds will pay fixed interest semi-annually at a rate of 5.867% per
annum increasing over the first three years to a rate of 6.214% per annum in the
third through fifth years (as set forth in the Bondholder Term Sheet) and
increasing to 8% per annum after the first five years. JCC will have the option
of making the first six semi-annual payments of Fixed Interest on the New Bonds
in kind rather than in cash; provided, however, that JCC must pay the first four
semi-annual payments of Fixed Interest in kind if Tranche A-1 and/or Tranche A-2
is outstanding when such payments are due. JCC will have the option to pay the
fifth and sixth semi-annual payments of Fixed Interest in kind. If JCC pays
Fixed Interest in kind on any of the first six semi-annual interest payment
dates, HNOMC will defer its Base Management Fees and HET and HOCI will defer
their fees under the HET/JCC Agreement to the extent that the cash saving from
paying Fixed Interest in kind is needed for cash flow deficiencies other than
for repayment of Tranche A-1 and Tranche A-2. If JCC is required to pay Fixed
Interest in kind with respect to the third, fourth, fifth or sixth semi-annual
interest payment, because of the terms of the Term Loans or if JCC elects to pay
Fixed Interest in kind during such periods, the Incentive Management Fee payable
to HNOMC will be deferred during such corresponding period. The Term Loans
provide for quarterly amortization; however, such payments on principal will be
deferred for any of the first six semi-annual interest payment periods if (i)
JCC has elected to pay Fixed Interest in kind during the interest period ending
prior to the current quarter, (ii) HNOMC has deferred both Base Management Fees
and Incentive Management Fees for the corresponding interest period and (iii)
HET and HOCI have deferred their fees under the HET/JCC Agreement. Deferred
Base Management Fees and deferred guaranty fees shall be due and payable PRO
RATA to HNOMC out of excess cash flow remaining after repayment of Tranches A-1
and A-2 required by the Credit Agreement at such time and to the extent that
EBITDA exceeds $65 million; deferred Incentive Management Fees shall be due and
payable to HNOMC out of excess cash flow after repayment of any deferred Base
Management Fees and deferred guaranty fees at such times and to the extent that
EBITDA exceeds $75 million.
Other payments of Fixed Interest in kind or deferrals of fees and
other obligations are possible if JCC does not meet certain EBITDA targets
starting with the fourth year after the Effective Date. If EBITDA for JCC is
not in excess of $28.5 million for the twelve months ending one month prior to
each semi-annual interest payment date, Fixed Interest on the New Bonds will be
paid in kind, the Base and Incentive Management Fees will be deferred,
amortization under the Term Loans will be deferred and the fees due under the
HET/JCC Agreement will be deferred. See Section V.C.4., "The Plan of
Reorganization--Executory Contracts and Unexpired Leases--Management Agreement."
Payments of Fixed Interest not made in kind are payable in cash.
The New Bonds will also require contingent payments ("CONTINGENT
PAYMENTS"), payable semi-annually and limited to 75% of EBITDA (including,
solely for purposes of calculating Contingent Payments and the Incentive
Management Fee, the proceeds, if any, from the exercise of the HET Warrant) of
JCC over $65 million and under $85 million, calculated on an annual basis. If,
and to the extent that, JCC's EBITDA results for any year are less than the
amount required to cause the maximum contingent payments for such year to become
due, such payments will never be made. Procedures to address seasonality and
tax considerations in connection with semi-annual payments will be developed.
For federal income tax purposes,
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all Contingent Payments in respect of New Bonds will be recharacterized as
principal and interest using a 12% discount factor.
The New Bonds will be secured by a lien on all assets of JCC (other
than the Modified Casino Operating Contract, the Casino's bankroll and the Gross
Revenue Share Payments), junior to the liens securing certain obligations of JCC
under the HET/JCC Agreement, the A Term Loan, the Working Capital Facility and
any refinancings of the A Term Loan and the Working Capital Facility which do
not increase the principal amount of indebtedness outstanding and available
thereunder (except to the extent (x) accrued and unpaid interest and/or other
amounts owing with respect to the refinanced indebtedness is refinanced and/or
(y) of the fees and expenses incurred in connection with the refinancing
indebtedness) or decrease the weighted-average maturity thereof (collectively,
the "SENIOR PERMITTED REFINANCINGS"), and PARI PASSU with the liens securing the
New Contingent Bonds, the B Term Loan and any refinancings of the B Term Loan
which do not increase the principal amount of indebtedness outstanding and
available thereunder (except to the extent (x) accrued and unpaid interest
and/or other amounts owing with respect to the refinanced indebtedness is
refinanced and/or (y) of the fees and expenses incurred in connection with the
refinancing indebtedness) or decrease the weighted-average maturity thereof
(collectively, the "SENIOR SUBORDINATED PERMITTED REFINANCINGS"). The New Bonds
will not be redeemable or subject to mandatory prepayment prior to maturity.
The holders of New Bonds, however, will, subject to certain conditions, be able
to require JCC to repurchase such New Bonds upon a change in the manager of the
Casino or other similar events. With the exception of the New Contingent Bonds,
the Term Loans, the Working Capital Facility, Senior Permitted Refinancings,
Senior Subordinated Permitted Refinancings, and certain special purpose
indebtedness, any other indebtedness for borrowed money of JCC must be
subordinated to the New Bonds. The indenture for the New Bonds will include
covenants regarding change of control and limitations on restricted payments,
dividends affecting subsidiaries, indebtedness, payment of management fees,
asset sales, transactions with affiliates (except for transactions with
affiliates approved by the board of directors of JCC Holding within limitations
to be established by the board of directors of JCC Holding), liens and mergers
and consolidations. The New Bonds will also contain provisions such that in the
event of a payment default or bankruptcy, the holders will be made whole for any
accelerated maturity, accrued and unpaid interest, all Fixed Interest and
Contingent Payments in respect of future periods and any other costs and
expenses; provided, however, that the amount of future Contingent Payments shall
be subordinated in right of payment to certain obligations of JCC under the
HET/JCC Agreement, the Bank Loans, the Senior Permitted Refinancings and the
Senior Subordinated Permitted Refinancings
II. NEW CONTINGENT BONDS
Upon the Effective Date, JCC will also issue to holders of Allowed
Class A4 claims a PRO RATA share of New Contingent Bonds. All payments in
respect of the New Contingent Bonds will be Contingent Payments and will be
limited to 75% of EBITDA (including, solely for purposes of calculating
Contingent Payments and the Incentive Management Fee, the proceeds, if any, from
the exercise of the HET Warrant) over $85 million and under approximately $109.4
million calculated on an annual basis. If, and to the extent that, JCC's EBITDA
results for any year are less than the amount required to cause the maximum
contingent payments for such year to become due, such payments will never be
made. Subject to the contingency described above, the New Contingent Bonds will
be self-amortizing with semi-annual payments, and all payments thereunder will
be recharacterized as part principal and part interest. The terms of the New
Contingent Bonds will treat the Contingent Payments as being comprised of
principal and interest thereon at a 16% annual rate from the date of issue (with
semi-annual compounding). Procedures to address seasonality and tax
considerations in connection with semi-annual payments will be developed. See
Section
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X.B.3., "Certain Federal Income Tax Consequences of the Plan--Tax Consequences
to Holders of Claims in Classes A4 and B3 (Bondholders)--Tax Treatment of New
Bonds and New Contingent Bonds."
The New Contingent Bonds will be secured by a lien on all assets of
JCC (except the Modified Casino Operating Contract, the Casino's bankroll and
the Gross Revenue Share Payments), junior to the liens securing certain
obligations of JCC under the HET/JCC Agreement, the A Term Loan, the Working
Capital Facility and Senior Permitted Refinancings, and PARI PASSU with the
liens securing the New Bonds, the B Term Loan and Senior Subordinated Permitted
Refinancings. The New Contingent Bonds will not be redeemable or subject to
mandatory prepayment prior to maturity. With the exception of the New Bonds,
the Term Loans, the Working Capital Facility, Senior Permitted Refinancings,
Senior Subordinated Permitted Refinancings, and certain special purpose
indebtedness, any other indebtedness for borrowed money of JCC must be
subordinated to the New Contingent Bonds. The indenture for the New Contingent
Bonds will include covenants regarding limitations on restricted payments,
dividends affecting subsidiaries, indebtedness, payment of management fees,
asset sales, transactions with affiliates (except for transactions with
affiliates approved by the board of directors of JCC Holding within limitations
to be established by the board of directors of JCC Holding), liens and mergers
and consolidations. The New Contingent Bonds will also contain provisions such
that in the event of a payment default or bankruptcy, the holders will be made
whole for any accelerated maturity (which shall consist solely of Contingent
Payments that are due but have not yet been paid), all Contingent Payments in
respect of future periods or any other expenses or costs; provided, however,
that the amount of future Contingent Payments shall be subordinated in right of
payment to certain obligations of JCC under the HET/JCC Agreement, the Bank
Loans, the Senior Permitted Refinancings and the Senior Subordinated Permitted
Refinancings.
d. DISTRIBUTION TO CREDITORS. On, or as soon as practicable after,
the Effective Date but in no event after the tenth (10th) Business Day after the
Effective Date (or in the case of holders of Allowed Class C5 Claims, on or as
soon as practicable after the ninetieth day after the Effective Date), or as
otherwise provided in the Plan, JCC and, in the case of the New Common Stock,
JCC Holding will issue and deliver to the Disbursing Agents for distribution to
the applicable holders of Allowed Claims in accordance with the Plan (i) the New
Bonds, New Contingent Bonds and Convertible Junior Subordinated Debentures, (ii)
cash in the amount determined pursuant to the provisions of Article IV of the
Plan, and (iii) shares of Class A and Class B New Common Stock in the respective
amounts determined pursuant to the provisions of Article IV of the Plan.
e. PURCHASE OF NEW COMMON STOCK BY HARRAH'S INVESTOR. On the
Effective Date, Harrah's Investor will pay to JCC Holding, as an equity
contribution, the Harrah's New Equity Investment. In consideration of the
Harrah's New Equity Investment, and the waiver of the principal amount of the
Existing DIP Indebtedness then outstanding (and, subject to Bankruptcy Court
approval, any Future DIP Loan), on the Effective Date, JCC Holding will sell to
Harrah's Investor 4,990,000 shares of New Common Stock, a portion of which will
be issued by JCC Holding to certain other persons in accordance with the
provisions of Section 6.2(f) of the Plan (summarized in Section V.D.2.f. below).
All shares of New Common Stock purchased by Harrah's Investor and issued by JCC
Holding to Harrah's Investor or to the Disbursing Agent for the benefit of
Harrah's Investor pursuant to Section 6.2(f) of the Plan will be shares of Class
B New Common Stock, and all shares purchased by Harrah's Investor and issued by
JCC Holding directly to the Disbursing Agent for the benefit of the Releasing
Bondholders or the Grand Palais Releasing Bondholders pursuant to Section 6.2(f)
will be shares of Class A New Common Stock.
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On the Effective Date, all proceeds from the Harrah's New Equity
Investment will be contributed as an equity contribution by JCC Holding (i) if
JCC Intermediary has been formed, to JCC Intermediary, which in turn, will
contribute such amounts as an equity contribution to JCC, or (ii) if JCC
Intermediary has not been formed, to JCC.
f. TRANSFER OF NEW COMMON STOCK TO CERTAIN PERSONS IN SETTLEMENT OF
CLAIMS.
(i) NOLDC SHAREHOLDERS AND GRAND PALAIS. On the later of
the Effective Date and the date on which the NOLDC Shareholders/HET Settlement
Agreement is executed and delivered by all of the parties thereto and is
approved by the Bankruptcy Court in the Chapter 11 Case of NOLDC, the nine NOLDC
Shareholders or their designee will have an option, on the terms set forth in
the NOLDC Shareholders/HET Settlement Agreement, to purchase an aggregate number
of shares of Class B New Common Stock to be specified in the NOLDC
Shareholders/HET Settlement Agreement (with each NOLDC Shareholder or his
designee receiving one-ninth thereof), which shares are to be initially
distributed to Harrah's Investor pursuant to Section 6.2(e) of the Plan. On the
later of the Effective Date and the date on which the Grand Palais/HET
Settlement Agreement is executed and delivered by all of the parties thereto,
JCC Holding will, in accordance with the provisions of the Grand Palais/HET
Settlement Agreement, issue directly to the Disbursing Agent on behalf of the
Grand Palais Releasing Bondholders a number of shares of Class A New Common
Stock to be specified in the Grand Palais/HET Settlement Agreement (the "GRAND
PALAIS SETTLEMENT CONSIDERATION"), which shares would otherwise be distributed
to Harrah's Investor pursuant to Section 6.2(e) of the Plan (summarized in
Section V.D.2.e. above). In no event will the aggregate number of such shares
of Class B New Common Stock distributed to the NOLDC Shareholders and Grand
Palais Releasing Bondholders exceed 800,000 shares.
(ii) RELEASING BONDHOLDERS. On the Effective Date, JCC
Holding will issue directly to the Disbursing Agent on behalf of the Releasing
Bondholders and, if applicable, Harrah's Investor, the 1,500,000 shares of New
Common Stock which constitute the Release Pool. The Release Pool will include
200,000 shares of New Common Stock to which Harrah's Investor would otherwise be
entitled pursuant to Section 6.2(e) of the Plan. The remaining 1,300,000 shares
of New Common Stock in the Release Pool will be issued by JCC Holding in
consideration of, among other things, (A) the execution and delivery of the HET
Loan Guarantee and the New Completion Guarantees by HET and HOCI and the
provision of the Surety Bond, (B) the provision by the DIP Lender of
debtor-in-possession financing and its willingness to waive the principal amount
thereof, (C) the purchase of the Harrah's New Equity Investment by Harrah's
Investor, (D) the waiver by persons in the HET Group, the NOLDC Group and the
Grand Palais Group of any right to distributions as holders of certain Class A7
and/or Class C5 Claims, (E) certain pre-development and development services
performed by HET and its Affiliates prior to the Effective Date, (F) the
execution and delivery by the City and the RDC of the agreements referenced in
Section 6.2(o) of the Plan and the City/RDC Release, (G) the execution and
delivery by the LGCB and/or the State of the agreements referenced in Section
6.2(n) of the Plan and the State/LGCB Release, and (viii) and (H) other good and
valuable consideration from the various beneficiaries of the releases provided
by the Releasing Bondholders pursuant to Section 5.2 of the Plan, without which
this Plan could not be confirmed and consummated. The 1,500,000 shares of New
Common Stock in the Release Pool will be distributed in accordance with the
provisions of Sections 4.4(b) and 5.2 of the Plan (discussed in Sections V.A.7.
and V.B.3. above, respectively).
g. NEW COMPLETION GUARANTEES, AMENDED AND RESTATED CONSTRUCTION LIEN
INDEMNITY OBLIGATION AGREEMENT; MINIMUM PAYMENT GUARANTY. On the Effective
Date, HET, HOCI (in the case of clauses (i) through (v)) and JCC (in the case of
clauses (iii) through (v)) will execute and deliver (i) the HET
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Loan Guarantee, (ii) the New Completion Guarantees, (iii) the Amended and
Restated Construction Lien Indemnity Obligation Agreement, (iv) the Amended and
Restated Completion Loan Documents and (v) a Minimum Payment Guaranty for fiscal
years ending March 31, 1999 and March 31, 2000. On the Effective Date, the Old
Completion Guarantees will be terminated and cancelled to the extent any of such
guarantees has not been previously terminated and cancelled. On the Effective
Date, the Surety Bond will be obtained to assure completion of the construction
of the Casino subject to any non-renewal or early termination pursuant to the
HET/JCC Agreement. As consideration for providing the HET Loan Guarantee, HET
will be paid an annual credit support fee based on the average aggregate
principal amount of indebtedness outstanding and guaranteed by HET pursuant
thereto as set forth in Exhibit J to the Plan, and JCC Holding will issue to
Harrah's Investor or its designee the HET Warrant. Pursuant to the HET/JCC
Agreement, and subject to the non-renewal and termination provisions thereof, as
consideration for providing a Minimum Payment Guaranty, HET and HOCI, among
other things, will be paid an annual guarantee fee of $6 million for the fiscal
years ending March 31, 2000 and 2001 and $5 million for the fiscal years ending
March 31, 2002, 2003 and 2004, all payable quarterly; provided, however, that
HET and HOCI will be paid a PRO RATA fee based on an annual fee of $6 million
for any partial fiscal year ending March 31, 1999 or for the fiscal year ending
March 31, 2000, if it is a partial fiscal year, as set forth in Exhibit B to the
Plan.
"HET WARRANT" means warrants to purchase additional shares of New Common
Stock such that, upon exercise of the warrants in their entirety (and
assuming that the NOLDC Shareholders and/or their designees have exercised
their options to purchase from Harrah's Investor 4.5% of the New Common
Stock), Harrah's Investor would own 50.0% of the New Common Stock issued on
the Effective Date, subject to certain adjustments. The number of shares
issuable upon exercise of the HET Warrant will be adjusted as necessary to
reflect the transfer of shares upon exercise of the options held by NOLDC
Shareholders to purchase from HET up to 4.5% of the New Common Stock. The
HET Warrant will be exercisable at any time in whole or in part on a PRO
RATA basis at a price of $15.00 per share of New Common Stock. If the
NOLDC Shareholders and/or their designees have not exercised their options
to purchase 4.5% of the New Common Stock, Harrah's Investor will not be
permitted to exercise the HET Warrant with respect to that number of shares
which would cause Harrah's Investor to own more than 50.0% of the New
Common Stock until such time as such exercise would not cause Harrah's
Investor to own more than 50.0% of the New Common Stock. If at any time
after the Transition Date the closing bid price of the New Common Stock has
exceeded $20.00 per share for sixty consecutive trading days, JCC Holding's
board of directors may elect to give written notice to Harrah's Investor of
an election to redeem 75% of the warrants at $0.05 per warrant unless
Harrah's Investor exercises the warrants within forty-five days after the
date of such notice. The HET Warrant will be satisfactory in form and
substance to HET (in its sole discretion) on behalf of the Proponents and
the Bondholders Committee (in its sole discretion). The form of the HET
Warrant will be filed with the Bankruptcy Court as a Plan Document pursuant
to Section 6.2(t) of the Plan.
h. BANK/UNDERWRITER FINANCING. On or before the Effective Date, JCC
and the applicable Persons in the Bank/Underwriter Group will execute and
deliver the A Term Loan Documents, the B Term Loan Documents, the Working
Capital Loan Documents and the Convertible Junior Subordinated Debenture
Documents, pursuant to which JCC will obtain the A Term Loan, the B Term Loan
and the Working Capital Credit Facility and issue the Convertible Junior
Subordinated Debentures.
i. HET AFFILIATE FINANCING AND DEVELOPMENT SERVICES AGREEMENT. On
or before the Effective Date, JCC and HET (or an Affiliate of HET) will execute
and deliver, the Junior Subordinated Loan
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Documents pursuant to which JCC shall obtain the Junior Subordinated Credit
Facility. On or before the Effective Date, JCC and the Harrah's Investor will
execute and deliver the Development Services Agreement which will contain the
terms and conditions described in Exhibit "N" to the Plan and in form and
substance satisfactory to HET, a subsidiary of HOCI, and the Bondholders
Committee (the "DEVELOPMENT SERVICES AGREEMENT").
j. RELEASES. On the Effective Date, each of the State, LEDGC, the
LGCB, the City, the RDC, Centex, Broadmoor, the Debtors, JCC and the applicable
Persons in the HET Group, the NOLDC Group and the Grand Palais Group will
execute and deliver the State/LGCB Release, the City/RDC Release, the
Centex-Landis Release, or the Broadmoor Release, as the case may be. On or
before the Effective Date, (i) the NOLDC Shareholders, HET, the Debtors, JCC and
the other parties thereto will execute and deliver the NOLDC Shareholder/HET
Settlement Agreement, (ii) Grand Palais, HET, the Debtors, JCC and the other
parties thereto will execute and deliver the Grand Palais/HET Settlement
Agreement, and (iii) Grand Palais, NOLDC, the NOLDC Shareholders and the other
parties thereto will execute and deliver the NOLDC/Grand Palais Settlement
Agreement. On or before the Effective Date, the Debtors, the Underwriters, the
Participating Banks, FNBC (in all capacities) and the other parties thereto, as
the case may be, will execute and deliver the Bank/Underwriter Release.
k. CANCELLATION OF OLD INDENTURE, OLD BOND DOCUMENTS AND EXISTING
LENDERS' TITLE INSURANCE POLICY.
(i) On the Effective Date, except as otherwise provided in
Sections 6.2, 6.9 and 6.10 of the Plan, (A) the Old Indenture will be terminated
and canceled, (B) the other Old Bond Documents, and all Liens granted under the
Old Bond Documents, will be terminated and canceled, and (C) all collateral
pledged or otherwise granted as security pursuant to the Old Bond Documents will
be released by the Old Indenture Trustee or the Old Indenture Collateral Agent,
as applicable, and will be repledged to secure the obligations secured by the
Minimum Payment Guarantor Lien, Term Loans, the Working Capital Facility, the
New Bonds and the New Contingent Bonds pursuant to the A Term Loan Documents,
the B Term Loan Documents, the Working Capital Loan Documents and the New Bond
Documents, as applicable; PROVIDED, HOWEVER, that except for the termination of
the Indenture Trustee Charging Lien, nothing in the Plan will terminate or
impair the rights, if any, of FNBC under the Old Bond Documents against any
Persons other than the Debtors or the JCC Entities. The Old Indenture
Predecessor Trustee, the Old Indenture Predecessor Collateral Agent, and any
other holder of any liens under the Old Bond Documents and/or the Old Bank
Credit Documents will execute and deliver all termination statements, mortgage
releases and other instruments or documents reasonably requested by JCC to
effectuate or evidence the release of any such Liens.
"MINIMUM PAYMENT GUARANTOR LIEN" means the lien securing certain
obligations of JCC under the HET/JCC Agreement.
(ii) On the Effective Date, all of FNBC's claims or other
rights to indemnity and/or reimbursement under the Old Indenture and the other
Old Bond Documents and all Liens securing same (including the Indenture Trustee
Charging Lien) will be canceled and extinguished except as follows: On the
Effective Date, JCC (A) will assume on an unsecured basis any obligation of HJC
under the Old Bond Documents to indemnify FNBC for attorneys' fees or other
costs of defense incurred in connection with any claim asserted by any Person
against FNBC and (B) will assume as an IN REM obligation limited in recourse
solely to the FNBC Cash Collateral any other indemnification obligations of HJC
under the Old Bond
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Documents. As security for the assumed indemnification obligations of JCC set
forth in the immediately preceding sentence and in Section 6.2(l)(ii) of the
Plan, FNBC will be authorized to retain the FNBC Cash Collateral until the later
of (x) the first anniversary of the Effective Date or (y) the date of resolution
by final unappealable judgment of any litigation filed against FNBC within one
year of the Effective Date to which FNBC is entitled to indemnity under the Old
Bank Credit Documents and/or Old Bond Documents, at which time the then
remaining balance of the FNBC Cash Collateral shall be released to JCC.
(iii) If pursuant to the First American Settlement Agreement,
First American Title Insurance Company issues one or more new lender's title
insurance policies satisfactory to the Persons in the Bank/Underwriter Group
which are parties to the A Term Loan Documents, B Term Loan Documents and/or
Working Capital Loan Documents, then the Existing Lender's Title Insurance
Policy shall be deemed terminated as of the Effective Date, and First American
Title Insurance Company shall not have any further liability thereunder.
l. CANCELLATION OF OLD BANK CREDIT DOCUMENTS. On the Effective
Date, except as otherwise provided in Section 6.2 of the Plan, the Old Bank
Credit Documents, and all Liens granted thereunder, will be terminated and
canceled to the extent the foregoing have not been previously terminated and
canceled and all collateral pledged or otherwise granted as security pursuant to
the Old Bond Documents will be released by the Banks and, in the case of any
collateral held by any Bank or the Old Bank Collateral Agent, promptly returned
to JCC; PROVIDED, HOWEVER, that to the extent provided in Section 4.3 of the
Plan, the Administrative Agent and the Old Bank Collateral Agent may retain, for
application to any Allowed Secured Claim of any Bank or Old Bank Collateral
Agent or as security for any Disputed Secured Claims of any Bank or Old Bank
Collateral Agent, a portion of the Withheld Funds as specified in Section 4.3 of
the Plan; provided, further, that nothing in the Plan will terminate or impair
the rights, if any, of FNBC under the Old Bank Credit Documents against any
persons other than the Debtors or the JCC Entities.
On the Effective Date, all of FNBC's claims or other rights to
indemnity and/or reimbursement under the Old Bank Credit Documents and all Liens
securing same will be canceled and extinguished except as follows: On the
Effective Date, JCC (A) will assume on an unsecured basis any obligation of HJC
under the Old Bank Credit Documents to indemnify FNBC for any attorney's fees or
other costs of defense incurred in connection with any claim asserted by any
Person against FNBC, and (B) will assume as an IN REM obligation limited in
recourse solely to the FNBC Cash Collateral any other indemnification
obligations of HJC under the Old Bank Credit Documents. As set forth in Section
6.2(k)(ii) of the Plan, the FNBC Cash Collateral will secure, among other
things, the assumed indemnification obligations of JCC set forth in Section
6.2(l)(ii) of the Plan
m. CANCELLATION OF EQUITY INTERESTS. On the Effective Date, all
Equity Interests in each Debtor will be canceled.
n. AGREEMENTS WITH THE LGCB. On the Effective Date, JCC and the
LGCB will enter into the Modified Casino Operating Contract and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein, including contractual and
regulatory approvals relating to the plan transactions.
o. AGREEMENTS WITH CITY AND RDC. Provided that the City Council
shall have enacted the ordinance(s) approving the Lease Documentation (as
defined in the City Agreement), on the Effective Date, JCC, the City and RDC
will enter into the Amended Canal Street Casino Lease, the Amended GDA
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and all other agreements, instruments and documents necessary or appropriate to
evidence or consummate the transactions contemplated therein. On or before the
Effective Date, the Basin Street Casino Lease will have been terminated in
accordance with the provisions of the City Agreement and the Basin Street
Termination Agreement. Unless earlier terminated in accordance with the
provisions thereof, the City Agreement will remain in full force and effect
through the occurrence of the Effective Date.
p. AGREEMENTS WITH HNOMC. On the Effective Date, JCC and HNOMC will
enter into the Amended Management Agreement and all other agreements,
instruments and documents necessary or appropriate to evidence or consummate the
transactions contemplated therein.
q. REGISTRATION AND LISTING OF CLASS A NEW COMMON STOCK. The JCC
Entities must use their best efforts to cause the Class A New Common Stock to be
listed on a national securities exchange or quoted on NASDAQ upon the Effective
Date. JCC Holding must also use its best efforts to be, on or prior to the
Effective Date, a reporting company under the Securities Exchange Act of 1934,
as amended (the "34 ACT") with respect to the Class A New Common Stock. JCC
Holding must file a registration statement under the 34 Act (the "CLASS A 34 ACT
REGISTRATION STATEMENT") no later than promptly after the date of entry of the
Final Order approving the Disclosure Statement. If the Class A 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of such registration statement with the Securities and Exchange
Commission (the "SEC") (provided, however, that this clause (i) is not
applicable if JCC Holding did not file such registration statement prior to the
date which is five days after the date of entry of the Final Order approving the
Disclosure Statement), (ii) 60 days after the date of entry of the Final Order
approving the Disclosure Statement, (iii) 30 days after receipt of any SEC
comments on such registration statement, and (iv) the Effective Date, then the
JCC Entities shall pay to the Bondholders an amount equal to $.05 per week for
each $1,000 of Class A New Common Stock (based on the greater of (x) the market
value of such Class A New Common Stock at such time and (y) $15.00 per share) to
be registered, which amount shall increase by $.05 every 45 days to a maximum of
$.30 per week.
In addition, to the extent that it is reasonably determined that the
registration of public resales by any Bondholder of any Class A New Common Stock
received by such Bondholder under the Plan is required by law, JCC Holding will
file a registration statement (the "CLASS A 33 ACT REGISTRATION STATEMENT") with
respect to such resales promptly after the Effective Date. If such Class A 33
Act Registration Statement is not effective within 120 days after it is filed,
then the JCC Entities must pay to the Bondholders an amount equal to $.05 per
week for each $1,000 of Class A New Common Stock (based on the greater of (x)
the market value of such Class A New Common Stock at such time and (y) $15.00
per share) to be registered, which amount will increase by $.05 every 45 days to
a maximum of $.30 per week.
r. REGISTRATION OF CLASS B NEW COMMON STOCK. On the Effective Date,
the JCC Entities and Harrah's Investor will enter into a Registration Rights
Agreement (the "CLASS B REGISTRATION RIGHTS AGREEMENT") containing such terms
and conditions as are customary under the circumstances, including the
following:
(i) upon the request of Harrah's Investor, which request
may not be made prior to the second anniversary of the opening of the Casino,
the JCC Entities must promptly file with the SEC and cause to become effective
as soon as reasonably practicable thereafter a registration statement on the
appropriate form (the "CLASS B REGISTRATION STATEMENT") relating to all shares
of Class B New Common Stock held by Harrah's Investor including any shares of
Class B New Common Stock obtained by Harrah's Investor pursuant to the exercise
of the HET Warrant; and
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(ii) the JCC Entities will cause such Class B Registration
Statement to be continually effective, subject to customary exceptions, through
the third anniversary of the day on which the Class B Registration Statement
first becomes effective.
s. REGISTRATION OF NEW BONDS. To the extent that it is reasonably
determined that the registration of public resales by any Bondholder of any New
Bonds or New Contingent Bonds received by such Bondholder under the Plan is
required by law, the JCC Entities will file a registration statement (the "NEW
BONDS 33 ACT REGISTRATION STATEMENT") with respect to such resales promptly
after the Effective Date. If such New Bonds 33 Act Registration Statement is
not effective within 120 days after it is filed, then the JCC Entities must pay
to the Bondholders an amount equal to $.05 per week for each $1,000 securities,
which amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
t. FILING OF PLAN DOCUMENTS. The forms of the respective Bylaws,
Certificates of Incorporation and Organizational Documents of the JCC Entities
and any shareholders' agreements relating to any JCC Entity will be filed with,
and approved by, the Bankruptcy Court on or before the Effective Date. The
Proponents will file with the Bankruptcy Court the forms of all of the other
Plan Documents on or before the Effective Date. All Plan Documents will be in
form and substance satisfactory to the Bondholders Committee in its sole
discretion and to HET (in its sole discretion) on behalf of the Proponents, and
if a party thereto, HJC (which consent will not be unreasonably withheld or
delayed).
u. CONTINUED DIP FINANCING. During the period from the Confirmation
Date through the Effective Date, and subject to any necessary additional
approval by the Bankruptcy Court, HJC will request, and the DIP Lender will
provide to HJC, additional debtor-in-possession financing in an aggregate
principal amount, together with all other outstanding Existing DIP Indebtedness,
up to $39 million (plus any Future DIP Loan) and on terms and conditions similar
to those set forth in the Final Order (1) Authorizing Debtor-in-Possession To
Incur Post-Petition Secured Indebtedness, (2) Granting Security Interests And
Priority Pursuant to 11 U.S.C. Section 364, And (3) Modifying The Automatic
Stay entered by the Bankruptcy Court on December 4, 1997. Such additional
debtor-in-possession financing will be used to fund expenditures necessary to
recommence construction of the Casino and any other amounts necessary for the
completion of the Chapter 11 Case of HJC and the consummation of the Plan.
DISTRIBUTIONS
3. DISTRIBUTIONS GENERALLY
All distributions required to be made under the Plan to holders of
Allowed Claims will be made by a Disbursing Agent pursuant to a Disbursing
Agreement; however, no Disbursing Agreement will be required if any JCC Entity
makes such distributions or if Norwest Bank Minnesota, N.A., as successor
indenture trustee under the Old Indenture (together with its successors and
assigns, the "OLD INDENTURE SUCCESSOR TRUSTEE") makes such distributions
pursuant to Section 6.11 of the Plan.
4. SERVICES OF OLD INDENTURE TRUSTEE
The Old Indenture Successor Trustee (or its nominee, designee or
affiliate) is designated a Disbursing Agent for purposes of effecting
distributions to the Bondholders pursuant to the Plan. All distributions to be
made to the Bondholders under the Plan will be made to the Old Indenture
Successor Trustee in accordance with the Old Indenture, applicable law and the
Plan, and the Old Indenture Successor
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Trustee will, as soon as reasonably practicable, in accordance with the Old
Indenture, applicable law and the Plan, deliver the distributions, free and
clear of any Indenture Trustee Charging Lien, which Lien will be canceled and
extinguished on the Effective Date.
5. DISTRIBUTIONS TO BE MADE TO BONDHOLDERS AS OF DISTRIBUTION RECORD DATE
Only Bondholders of record as of the Distribution Record Date, or the
Release Pool Distribution Record Date as to distributions from the Release Pool
will be entitled to receive the distributions provided for in Article IV of the
Plan.
6. CANCELLATION AND SURRENDER OF EXISTING SECURITIES AND AGREEMENTS
a. On the Effective Date, the promissory notes, share certificates
and other instruments evidencing any Claim or Equity Interest will be deemed
canceled without further act or action under any applicable agreement, law,
regulation, order, or rule, and the obligations of any Debtor under the
agreements, indentures and certificates of designations governing such Claims
and Equity Interests, as the case may be, will be discharged.
b. Each holder of a promissory note, share certificate or other
instrument evidencing a Claim or Equity Interest will surrender such promissory
note, share certificate or instrument to JCC. Any holder that fails within one
year after the date of entry of the Confirmation Order (i) to surrender or cause
to be surrendered such promissory note or instrument, (ii) to execute and
deliver an affidavit of loss and indemnity reasonably satisfactory to JCC, and
(iii) if requested, to furnish a bond reasonably satisfactory to JCC upon
request will be deemed to have forfeited all rights, Claims, and interests and
will not participate in any distribution under the Plan.
7. DISTRIBUTIONS OF CASH
Any payment of cash made by JCC pursuant to the Plan will be made by
check drawn on a domestic bank, or at the option of JCC, by wire transfer from a
domestic bank; except that payment to foreign holders of Allowed Claims may be
in such funds and by such means (as determined by JCC) as are customary or
necessary in a particular foreign jurisdiction.
8. TIMING OF DISTRIBUTIONS
Any payment or distribution required to be made under the Plan on a
day other than a Business Day will be due on the next succeeding Business Day.
9. HART-SCOTT-RODINO COMPLIANCE.
Any shares of Class A or Class B New Common Stock to be distributed
under the Plan to any Person required to file a Pre-Merger Notification and
Report Form under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, will not be distributed until the notification and waiting periods
applicable under such Act to such Person shall have expired or been terminated.
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10. MINIMUM DISTRIBUTIONS; NO DUPLICATIVE DISTRIBUTIONS; NO INTEREST
No payment of cash less than ten dollars is required to be made by JCC
to any holder of a Claim unless a request for such payment is made in writing to
JCC. Notwithstanding anything to the contrary in this Plan, to the extent more
than one Debtor is liable for any Allowed Claim (including, without limitation,
any Allowed WARN Act Claim), any distribution to which a holder of such Allowed
Claim is entitled from any Debtor under the Plan will be reduced PRO TANTO by
any distribution received from any other Debtor on account of such Allowed
Claim, and the portion of the Allowed Claim to which the received distribution
relates will be deemed satisfied and discharged. Except as otherwise expressly
provided in the Plan, no holder of any Allowed Claim will be entitled to any
post-Petition Date interest on such Claim.
11. FRACTIONAL SHARES
Except as otherwise provided in Section 6.16 of the Plan, no
fractional shares of New Common Stock or cash in lieu thereof will be
distributed.
12. DELIVERY OF DISTRIBUTIONS
Subject to Bankruptcy Rule 9010, distributions to holders of Allowed
Claims will be made at the address of each such holder as set forth on the
schedules filed by the applicable Debtor with the Bankruptcy Court, unless
superseded by the address as set forth on proofs of claim filed by such holders
or other writing notifying the applicable Debtor of a change of address (or at
the last known address of such a holder if no proof of claim is filed or if the
applicable Debtor has not been notified in writing of a change of address), or
in the case of the Bondholders, may be made at the addresses of the registered
Bondholders contained in the records of the Registrar as of the Distribution
Record Date or the Release Pool Distribution Record Date, as applicable. If any
distribution to a holder of an Allowed Claim is returned as undeliverable, no
further distributions to such holder will be made, unless and until JCC or the
Disbursing Agent is notified of such holder's then current address, at which
time all missed distributions will be made to such holder together with any
interest or dividends earned thereon. Amounts in respect of the undeliverable
distributions made through the Disbursing Agent will be returned to the
Disbursing Agent making such distribution until such distributions are claimed.
All Claims for undeliverable distributions will be made on or before the later
of the first anniversary of the Effective Date and the date ninety days after
such Claim is Allowed. After such date, all unclaimed property held for
distribution to any holder of an Allowed Claim will be revested in, and returned
to, JCC, and the Claim of any holder with respect to such property will be
discharged and forever barred.
13. FEES AND EXPENSES OF DISBURSING AGENTS
Except as otherwise ordered by the Bankruptcy Court, the amount of any
reasonable fees and expenses incurred by a Disbursing Agent, including, but not
limited to, the Old Indenture Successor Trustee, on or after Confirmation Date,
and any compensation and expense reimbursement claims (including reasonable fees
and expenses of its attorneys and other agents) made by such Disbursing Agent
will be repaid by JCC in accordance with the applicable Disbursing Agreement or
the Old Indenture, as the case may be, without further order of the Bankruptcy
Court; however, the Bankruptcy Court will hear and determine any disputes in
respect of such fees and expenses. In addition, the amount of any reasonable
fees and expenses incurred by FNBC as Old Bank Collateral Agent, Old Indenture
Predecessor Trustee and/or Old Indenture Predecessor Collateral Agent on or
after the Confirmation Date to consummate the transactions contemplated
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by the Plan will be paid by JCC without further order of the Bankruptcy Court;
PROVIDED, HOWEVER, that the Bankruptcy Court will hear and determine any
disputes in respect of such fees and expenses.
14. TIME BAR TO CASH PAYMENTS
Checks issued by JCC in respect of Allowed Claims will be null and
void if not negotiated within ninety days after the date of issuance thereof.
Any amounts paid to the Disbursing Agent in respect of such a check must be
promptly returned to JCC by the Disbursing Agent.
15. TRANSFER OF RELEASE POOL DISTRIBUTIONS
Upon request of the Debtors or the Bondholders Committee, the
Bankruptcy Court may enter an order with or without notice or hearing
establishing a form (the "RELEASE POOL TRANSFER FORM") and procedure whereby
Releasing Bondholders who, on or after the Release Pool Distribution Record Date
but prior to the Distribution Record date, sold, assigned or otherwise
transferred their rights under the Plan to receive distributions in accordance
with Section 4.4(b)(v) of the Plan to a third party (each such third party, a
"RELEASE POOL TRANSFEREE") may designate a Release Pool Transferee to directly
receive such Releasing Bondholder's distribution of New Common Stock from the
Release Pool pursuant to Section 4.4(b)(v) of the Plan; provided, however, that
no person (including a Disbursing Agent, any of the Proponents or any of the JCC
Entities) shall have any liability to a Release Pool Transferee in the event
that a distribution of New Common Stock from the Release Pool is for any reason
whatsoever made to the Releasing Bondholder instead of the Release Pool
Transferee designated in such Release Pool Transfer Form; provided, further,
that any Release Pool Transfer Form shall contain an acknowledgment by the
Release Pool Transferee that it is the legal or beneficial owner of the Old
Bonds to which such Release Pool Transfer Form relates as of the Distribution
Record Date.
PROCEDURE FOR RESOLVING DISPUTED CLAIMS
16. OBJECTION DEADLINE
As soon as practicable, but in no event later than ninety days after
the Effective Date, unless otherwise ordered by the Bankruptcy Court, objections
to Claims will be filed with the Bankruptcy Court and served upon the holders of
each of the Claims to which objections are made.
17. AUTHORITY TO OPPOSE CLAIMS
On and after the Effective Date, except for the Assigned Litigation
Claims, the objecting to, disputing, defending against, and otherwise opposing,
and the making, asserting, filing, litigation, settlement or withdrawal of all
objections to, Claims will be the exclusive responsibility of JCC. The managing
member of JCC will have the power, without notice to or approval of the
Bankruptcy Court, in the exercise of its business judgment to preserve, fail to
preserve, settle, compromise or litigate any claim or cause of action (except
for any claims or causes of action released under the Plan and any Assigned
Litigation Claims) in any applicable or appropriate forum that JCC may have
against any Person based on acts, omissions or events prior to the Effective
Date.
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18. NO DISTRIBUTIONS PENDING ALLOWANCE
Notwithstanding any other provision in the Plan, no payment or
distribution will be made with respect to any Claim to the extent it is a
Disputed Claim unless and until such Claim becomes an Allowed Claim.
19. DETERMINATION BY BANKRUPTCY COURT
The amount of any Disputed Claim, and the rights of the holder of such
Claim, if any, to payment in respect thereof will be determined by the
Bankruptcy Court, unless it shall have sooner become an Allowed Claim.
20. TREATMENT OF DISPUTED CLAIMS
Cash, shares of New Common Stock, New Bonds and/or New Contingent
Bonds, as applicable, will be distributed by JCC or JCC Holding (in the case of
the New Common Stock) to a holder of a Disputed Administrative Expense Claim or
Disputed Claim when, and to the extent that, such Disputed Administrative
Expense Claim or Disputed Claim becomes an Allowed Administrative Expense Claim
or Allowed Claim pursuant to a Final Order. Such distribution will be made in
accordance with the Plan to the holder of such Claim based upon the amount in
which such Disputed Administrative Expense Claim or Disputed Claim becomes an
Allowed Administrative Expense Claim or Allowed Claim, as the case may be.
E. EFFECT OF CONFIRMATION OF PLAN
1. REVESTING OF ASSETS
a. The property of the estates (including, without limitation, all
present and future claims and causes of action) of the Debtors will vest in JCC
on the Effective Date, and JCC will be deemed to be the successor to each of the
Debtors; provided that none of the JCC Entities or any of their respective
property will be subject to any of the Claims or Equity Interests against or in
any Debtor except as expressly provided in the Plan.
b. From and after the Effective Date, the JCC Entities may operate
their business, and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code.
c. As of the Effective Date, all property of the Debtors will be
free and clear of all Claims and Equity Interests of holders thereof, except as
provided in the Plan.
d. Pursuant to Section 1123(b)(3) of the Bankruptcy Code, except for
those rights, causes of action and claims released or to be released under the
Plan, and except as otherwise provided in Section 5.9 of the Plan with respect
to Assigned Litigation Claims, JCC, in its sole discretion, and either in its
own name or in the name, place and stead of the Debtors and their estates, will
have the exclusive right to enforce or waive or release any and all present or
future rights or causes of action against any Person and rights of the Debtors
that arose before or after the Petition Date, and will be entitled to retain all
proceeds thereof.
There may be claims that could be asserted by JCC after the Effective
Date, unless such
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claims are otherwise settled through the Plan. The Plan reflects settlements of
certain of such claims, including:
- - claims against the City and/or the RDC, including, but not limited to,
claims for overpayment of support services and breach of covenant of quiet
enjoyment;
- - claims against the LEDGC, LGCB and/or the State, including, but not
limited to, claims relating to overpayments and breach of the Casino Operating
Contract;
- - claims against the Participating Banks and the Underwriters,
including, but not limited to, claims based upon the excess sweep of funds from
HJC's accounts, claims based on the underwriting activities of the Underwriters
and/or other actions taken prior to the commencement of the Chapter 11 Cases;
- - claims against First American Title Insurance Company relating to the
McCall Litigation, the Tucker Litigation and the Landmarks Litigation, which
claims will be released if the First American Settlement Agreement becomes
effective on or before the Effective Date; and
- - claims against FNBC for the excess sweep of funds from HJC's accounts
and/or other actions taken prior to the commencement of the Chapter 11 Cases.
e. The Plan provides that, for federal income tax purposes, such
vesting shall be deemed to have occurred as a deemed exchange by the Bondholders
of the Old Bonds for such assets and business and deemed exchanges by the
Bondholders of such assets and business for the Class A New Common Stock, the
New Bonds and the New Contingent Bonds. See Section X.B.2., "Certain Federal
Income Tax Consequences of the Plan--Tax Consequences to Holders of Claims in
Classes A4 and B3 (Bondholders)--Exchange of Old Bonds by Bondholders."
2. DISCHARGE OF DEBTOR
The rights afforded in the Plan and the treatment of all Claims and
Equity Interests in the Plan will be in exchange for and in complete
satisfaction, discharge, and release of Claims and Equity Interests of any
nature whatsoever, including any interest accrued on such Claims from and after
the Petition Date, against any or all Debtors, or any of their assets or
properties. Except as otherwise provided in the Plan, on the Effective Date (a)
all such Claims against, and Equity Interests in, the Debtors will be satisfied,
discharged, and released in full and (b) all Persons will be precluded from
asserting against any Debtor or JCC Entity, or its successors, or their
respective assets or properties any other or further Claims or Equity Interests
based upon any act or omission, transaction, or other activity of any kind or
nature, whether known or unknown, that occurred prior to the Effective Date,
whether or not (i) a proof of claim or interest based upon such Claim or Equity
Interest is filed or deemed filed under Section 501 of the Bankruptcy Code, (ii)
such Claim or Equity Interest is allowed under Section 502 of the Bankruptcy
Code, or (iii) the holder of such Claim or Equity Interest has accepted the
Plan. Except as provided in the Plan, the Confirmation Order will be a judicial
determination of discharge of all liabilities of the Debtors. As provided in
Section 524 of the Bankruptcy Code, such discharge will void any judgment
against any Debtor or any JCC Entity at any time obtained to the extent it
relates to a Claim or Equity Interest discharged, and will operate as an
injunction against the prosecution of any
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action against any Debtor or any JCC Entity, or the property of any of them, to
the extent it relates to a Claim or Equity Interest discharged.
3. DISSOLUTION OF DEBTORS
On or as of the Effective Date, each Debtor shall be dissolved,
liquidated or otherwise terminated under applicable law.
4. EXCULPATIONS
Subject to the occurrence of the Effective Date, neither the Debtors,
the JCC Entities, the Committees, nor any of their respective members
(including, in the case of HJC, its executive committee members and
reorganization steering committee members), officers, directors, employees,
agents or professionals will have or incur any liability to any holder of a
Claim or Equity Interest for any act, event or omission in connection with, or
arising out of, the Chapter 11 Cases (including the activities and deliberations
of the Committees), the confirmation of the Plan, the consummation of the Plan,
or the administration of the Plan or the property to be distributed under the
Plan, except for willful misconduct or gross negligence. Such exculpation will
not extend to any prepetition act, event or omission of any party nor will it
extend to any post-petition act of any party other than in connection with that
party's official capacity in the Chapter 11 Cases.
The Proponents believe that this exculpation of certain entities and
individuals associated with the reorganization for activities related to the
Chapter 11 Cases implements the qualified immunity which courts have found to
exist for those who act in a fiduciary capacity with respect to a chapter 11
reorganization. SEE IN RE DREXEL BURNHAM LAMBERT GROUP, INC., 138 B.R. 717
(Bankr. S.D.N.Y. 1992) (expressly approving of provision implementing qualified
immunity in a plan of reorganization). Such a provision was included within the
plan of reorganization that was ultimately confirmed by the court in the ZALE
case. Furthermore, to the extent this exculpation provision covers claims that
could be asserted by the Debtor, such exculpation is adequately supported by the
consideration set forth in the discussion of the Releases.
F. CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVE DATE
1. EFFECTIVE DATE
The Effective Date will be a Business Day selected by HET (in its sole
discretion) on behalf of the Proponents after the first Business Day (A) which
is on or after the date of the entry of the Confirmation Order and (B) on which
(i) the Confirmation Order is not stayed and (ii) all conditions to the
effectiveness of the Plan have been satisfied or waived as provided in Article X
of the Plan, but not later than April 30, 1998, which date may be extended by
HET (in its sole discretion) on behalf of the Proponents with the written
consent of the Bondholders Committee (in its sole discretion) and the City.
2. CONDITION PRECEDENT TO CONFIRMATION OF THE PLAN
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Confirmation of the Plan will not occur unless all of the following
conditions precedent have been satisfied or have been waived by HET (in its sole
discretion) on behalf of the Proponents subject to the provisions of Section
10.3 of the Plan (and described in Section V.F.4. below):
a. The Confirmation Order and the Plan as confirmed pursuant to the
Confirmation Order must be in form and substance satisfactory to HJC (which may
not unreasonably withhold or delay its approval) and HET (in its sole
discretion) on behalf of the other Proponents, and must confirm the Plan as to
each of the Debtors. Without limiting the foregoing, the Confirmation Order
must expressly provide that pursuant to Section 364(f) and Section 1145 of the
Bankruptcy Code, all New Common Stock, New Bonds, New Contingent Bonds,
Convertible Junior Subordinated Debentures, the HET Warrant and all other
securities issued in connection with the Plan (including, without limitation,
all shares of New Common Stock in the Release Pool which are distributed to the
Releasing Bondholders or Harrah's Investor pursuant to Section 5.2 of the Plan
or to the NOLDC Shareholders and Grand Palais Releasing Bondholders pursuant to
Section 6.2(f) of the Plan) will be (i) exempt from Section 5 of the Securities
Act of 1933, as amended, and any state or local law requiring registration for
offer or sale of a security or registration for offer or sale of a security or
registration or licensing of an issuer of, underwriter of, or broker or dealer
in, a security, and (ii) otherwise entitled to all of the benefits and
protections afforded by Section 1145 of the Bankruptcy Code.
3. CONDITIONS PRECEDENT TO EFFECTIVE DATE
The Effective Date of the Plan will not occur unless all of the
following conditions precedent have been satisfied or waived by HET (in its sole
discretion) on behalf of the Proponents, but only as permitted by Section 10.3
of the Plan:
a. Each of the conditions precedent set forth in Section 10.1 of the
Plan shall have been satisfied or waived by HET (in its sole discretion) on
behalf of the Proponents subject to the provisions of Section 10.3 of the Plan.
b. The Confirmation Order shall have been entered and shall not be
stayed.
c. The Effective Date shall occur no later than April 30, 1998
unless extended pursuant to Section 10.4 of the Plan.
d. All those transactions described in Section 6.2 of the Plan shall
have been effected, and all of the agreements and instruments described in
Section 6.2 hereof shall have been executed and delivered, and all other
agreements and instruments to be delivered under or necessary to effectuate the
Plan shall have been executed and delivered and all executory contracts and
unexpired leases to be assumed by JCC as provided in Section 8.1 of the Plan
shall have been assumed by JCC. The Modified Casino Operating Contract, the
State/LGCB Release, and all other agreements, instruments and documents
necessary to evidence or consummate the transactions contemplated therein shall
be executed and delivered by the parties thereto. All other cure or other
payments required to be paid in connection with the assumption of any executory
contract or unexpired lease shall be acceptable to HET (in its sole discretion)
on behalf of the Proponents and the Bondholders Committee (in its sole
discretion).
e. The New Indentures shall have been qualified under the Trust
Indenture Act.
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f. The $10 million Tranche A-1 of the A Term Loan, the $30 million
Tranche A-3 of the A Term Loan and the $30 million Tranche B-1 of the B Term
Loan shall be fully funded, and the Convertible Junior Subordinated Debentures
shall be issued, concurrently with the occurrence of the Effective Date and the
documentation of the A Term Loan, the B Term Loan, the Working Capital Facility
and the Convertible Junior Subordinated Debentures shall have been executed and
delivered.
g. The documentation of the Junior Subordinated Credit Facility
shall have been executed and delivered.
h. The Bankruptcy Court shall have entered (i) an order (which may
be the Confirmation Order) estimating, for purposes of distribution, the maximum
amount of the Allowed Secured Claims of the Non-Participating Banks in an
aggregate amount no greater than the amount of the Withheld Funds which the
Administrative Agent is obligated to remit to the Old Bank Collateral Agent
pursuant to Section 4.3(a)(ii) of the Plan, or (ii) to the extent such Allowed
Secured Claims of the Non-Participating Banks are estimated by the Bankruptcy
Court to exceed the amount of such portion of the Withheld Funds, an order
(which may be the Confirmation Order) granting the Banks the indubitable
equivalent of that portion of the Allowed Secured Claims in excess of the amount
of such portion of the Withheld Funds, which indubitable equivalent shall be
acceptable to HET (in its sole discretion) on behalf of all Proponents.
i. The LGCB, the State, and the City and their respective agencies
and instrumentalities, shall have given or issued all approvals, consents,
waivers, permits and licenses or modifications thereof (including any
modification to any conditional use ordinances), if any, and, in the case of the
LGCB, shall have made all suitability determinations required by the Louisiana
Economic Development and Gaming Control Act, the rules and regulations of the
LGCB and the Modified Casino Operating Contract, in each case to the extent
necessary to enter into the agreements contemplated by the Plan. The City
Council shall have enacted the ordinance(s) approving the Lease Documentation
(as defined in the City Agreement).
j. HET shall have received all approvals, consents and waivers from
its board of directors or its lenders or any other third parties which HET
determines in its sole discretion to be necessary or appropriate in order for it
or any of its Affiliates to take any of the actions, execute and deliver any of
the agreements, instruments or documents, or consummate any of the transactions
contemplated by the Plan.
k. The NOLDC Plan shall have been confirmed by a Final Order (in
form and substance satisfactory to the NOLDC Shareholders and HET), and the
NOLDC Shareholders/HET Settlement Agreement and the Grand Palais/HET Settlement
Agreement shall have been executed and delivered by all of the parties thereto,
and the NOLDC Shareholders/HET Settlement Agreement shall have been approved by
the Bankruptcy Court in the Chapter 11 Case of NOLDC.
l. The Bankruptcy Court shall have entered an order (which may be
the Confirmation Order) approving the A Term Loan, the B Term Loan, the Working
Capital Facility, the Convertible Junior Subordinated Debentures and the Junior
Subordinated Credit Facility, respectively, which order shall be in form and
substance satisfactory to HET (in its sole discretion) on behalf of the
Proponents, the non-debtor parties providing such financing (in their sole
discretion).
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m. The Bondholders Committee shall have approved in its sole
discretion all of the Plan Documents.
n. Except as provided in the FNBC Settlement Agreement or Sections
6.2(k)(ii), 6.2(l)(i) or 6.2(l)(ii) of the Plan, the assets of JCC shall not be
subject to any Liens other than the Minimum Payment Guarantor Lien and the Liens
securing the A Term Loan, the B Term Loan, the Working Capital Facility, the New
Bonds, and the New Contingent Bonds and if applicable, the Convertible Junior
Subordinated Debentures and the Junior Subordinated Credit Facility, or any
Liens expressly permitted under the HET/JCC Agreement, the A Term Loan Documents
and B Term Loan Documents, the Working Capital Loan Documents, the Junior
Subordinated Loan Documents, the Convertible Junior Subordinated Debenture
Documents, or the New Indenture or any other Liens as may be approved by the
Bondholders Committee (in its sole discretion) and HET (in its sole discretion)
on behalf of the Proponents.
o. The Debtors and the Bondholders Committee shall have requested a
determination by the Bankruptcy Court that the value of the Assigned Debtor
Litigation Claims (net of all estimated Litigation Costs and the estimated
aggregate amount of all Third Party Claims) is no greater than the sum of (i)
Bondholder Deficiency Amount, plus (ii) the aggregate amount of the Allowed
Class A7 Claims, plus (iii) the aggregate amount of the cure payments made as
provided in Section 8.1(e) of the Plan, plus (v) the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims pursuant to
Section 4.6 of the Plan, and the Bankruptcy Court shall have entered an order
(which may be the Confirmation Order) adjudicating this issue.
p. The First American Settlement Agreement shall have become
effective or JCC shall have assumed the Existing Owner's Title Insurance Policy.
q. The LGCB shall have found suitable (or deemed exempt or waived
from such suitability requirements) in accordance with its rules and regulations
at least one proposed officer of JCC Holding and at least two of the proposed
directors of JCC Holding (including at least one Bondholders Director Nominee
and one Harrah's Director Nominee).
4. WAIVER OF CONDITIONS
HET (in its sole discretion) on behalf of the Proponents may waive any
condition or any portion of any of the conditions to confirmation or
effectiveness of the Plan, without notice and without leave or order of the
Bankruptcy Court but only with the written consent of both the Bondholders
Committee (which consent may be withheld in its sole discretion) and HJC (which
consent may not be unreasonably withheld or delayed) and to extent such waiver
is inconsistent with the City Agreement, the written consent of the City;
PROVIDED, HOWEVER, that HET on behalf of the Proponents may not waive without
the consent of the City, any condition to the Effective Date set forth in
Sections 10.2(b), (c) or (i) of the Plan or Section 10.2(d) of the Plan (but
only to the extent Section 10.2(d) requires the execution and delivery of the
City/RDC Release, the Amended Canal Street Casino Lease, and the other
agreements, instruments and documents referenced in Section 6.2(o) of the Plan)
and (ii) without the consent of LGCB, any condition to the Effective Date set
forth in Section 10.2(b), (c) or (i) of the Plan or Section 10.2(d) of the Plan
(but only to the extent Section 10.2(d) relates to execution and delivery
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of the Modified Casino Operating Contract, the State/LGCB Release and the other
agreements, instruments and documents referred to in Section 6.2(n) of the Plan.
5. EFFECT OF FAILURE OF CONDITIONS
In the event that all of the conditions specified in Section 10.1 or
10.2 of the Plan have not been satisfied or waived in accordance with the
provisions of Article X of the Plan on or before April 30, 1998 (which date may
be extended by HET (in its sole discretion) on behalf of the Proponents with the
written consent of the Bondholders Committee (which consent may be withheld in
its sole discretion) and the City (which consent may be withheld in its sole
discretion)), and upon notification submitted by HET to the Bankruptcy Court and
counsel for the Committees, (a) the Confirmation Order will be vacated, (b) no
distributions under the Plan will be made, (c) the Debtors and all holders of
Claims and Equity Interests will be restored to the STATUS QUO ANTE as of the
day immediately preceding the Confirmation Date as though the Confirmation Date
never occurred, and (d) all of the Debtors' respective obligations with respect
to the Claims and Equity Interests will remain unchanged and nothing contained
herein or in the Plan will be deemed an admission or statement against interest
or to constitute a waiver or release of any claims by or against the Debtor or
any other Person or to prejudice in any manner the rights of any Debtor or any
Person in any further proceedings involving any Debtor or Person.
6. STATUS OF SATISFACTION OF CONDITIONS
The Proponents are presently engaged in discussion with prospective
lenders under the Term Loans and the Working Capital Facility and prospective
purchasers of the Convertible Junior Subordinated Debentures with respect to
documentation of the parties' intentions as set forth in the Plan and the
exhibits thereto. The Proponents are also presently in discussions with the
LGCB regarding the terms of the Modified Casino Operating Contract and the
required consents, waivers, permits, approvals and licenses to be received from
the State and the LGCB.
Ordinances were adopted by the City Council on October 3, 1996
approving the Amended GDA and the exhibits thereto, including the form of the
Completion Guarantee in favor of the City and the RDC, the Amended Canal Street
Casino Lease and the exhibits thereto, including the form of the Amended
Management Agreement and the form of the Second Floor Sublease, and the Basin
Street Termination Agreement and the exhibits thereto with respect to the
Amended Canal Street Lease and related documentation contemplated by the
Existing Plan. The City Council, also on October 3, 1996, adopted ordinances
approving changes in conditional use and zoning ordinances to accommodate the
modified design of the Casino with respect to the Amended Canal Street Lease and
related documentation contemplated by the Existing Plan. The Mayor has signed
these approved ordinances. Proponents must now obtain such approvals with
respect to the Amended Canal Street Lease and related documentation contemplated
by the Plan, and there can be no assurance that such approvals will be obtained.
It is a condition precedent to the Effective Date that the
Underwriters execute a Bank/Underwriter Release that includes a release of all
claims against HET and purchase approximately $15 million in Convertible Junior
Subordinated Debentures. Certain Underwriters have indicated that they are not
willing to execute a Bank/Underwriter Release to the extent it releases claims
of the Underwriters against HET or to purchase the approximately $15 million in
Convertible Junior Subordinated Debentures.
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HET has received from certain of its lenders the consents necessary
for HET and its Affiliates to take the actions contemplated by the Plan.
The Proponents believe that it is likely that all of the conditions
precedent to the Effective Date will be satisfied or waived.
G. MISCELLANEOUS PROVISIONS
1. RETENTION OF JURISDICTION
As more specifically provided in the Plan, after the Confirmation Date
the Bankruptcy Court (to the maximum extent permitted by the Bankruptcy Code or
other applicable law) will retain jurisdiction of all matters arising out of,
and related to, the Chapter 11 Cases and the Plan.
2. EXEMPTION FROM TRANSFER TAXES
Pursuant to Section 1146(c) of the Bankruptcy Code, the issuance,
transfer or exchange of notes or equity securities under the Plan, the creation
of any mortgage, deed of trust or other security interest, the making or
assignment of any lease or sublease, or the making or delivery of any deed or
other instrument of transfer under, in furtherance of, or in connection with the
Plan, including any merger agreements or agreements of consolidation, deeds,
bills of sale or assignments executed in connection with any of the transactions
contemplated under the Plan will not be subject to any stamp, real estate
transfer, mortgage recording or other similar tax.
3. POST-CONFIRMATION DATE FEES AND EXPENSES OF PROFESSIONAL PERSONS
After the Confirmation Date, each Debtor (before the Effective Date)
and JCC (from and after the Effective Date) will, in the ordinary course of
business and with such approval of the Bankruptcy Court as it may require, pay
the reasonable fees and expenses incurred after the Confirmation Date by the
Professional Persons employed by such Debtor or in the case of HJC, either
Committee, to the extent such fees and expenses are related to implementation
and consummation of the Plan. No such fees and expenses will be paid, however,
except upon receipt by such Debtor or JCC, as applicable, of a written invoice
from the Professional Person seeking fee and expense reimbursement.
4. COMMITTEES
The appointment of the Committees will terminate on the Effective Date
except that the professionals of the Committees will be entitled to prosecute
their respective applications for final allowances of compensation and
reimbursement of expenses.
5. AMENDMENT OR MODIFICATION OF THE PLAN; SEVERABILITY
The Plan may not be altered, amended or modified without the written
consent of HET (in its sole discretion) on behalf of the Proponents and the
written consent of the Bondholders Committee (which consent may be withheld in
its sole discretion) and the consent of HJC (which consent may be unreasonably
withheld or delayed by HJC). Subject to the preceding sentence, the treatment
of any Claim
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provided for under the Plan may be modified with the consent of such holder of
such Claim or the approval of the Bankruptcy Court. In the event that the
Bankruptcy Court determines, prior to the Confirmation Date, that any provision
in the Plan is invalid, void or unenforceable, such provision will be invalid,
void or unenforceable with respect to the holder or holders of such Claims or
Equity Interests as to which the provision is determined to be invalid, void or
unenforceable. The invalidity, voidness or unenforceability of any such
provision will in no way limit or affect the enforceability and operative effect
of any other provision of the Plan.
6. REVOCATION OR WITHDRAWAL OF THE PLAN
HET (in its sole discretion) on behalf of the Proponents and with the
written consent of HJC (which consent may not be unreasonably withheld or
delayed) reserves the right to revoke or withdraw the Plan prior to the
Confirmation Date. If the Plan is so revoked or withdrawn prior to the
Confirmation Date, then the Plan will be deemed null and void. In such event,
(i) the Debtors and all holders of Claims and Equity Interests will be restored
to the STATUS QUO ANTE as of the day immediately preceding the Confirmation Date
as though the Confirmation Date never occurred, and (ii) all the Debtors'
respective obligations with respect to the Claims and Equity Interests will
remain unchanged and nothing contained herein or in the Plan will be deemed an
admission or statement against interest or to constitute a waiver or release of
any claims by or against any Debtor or any other Person or to prejudice in any
manner the rights of any Debtor or any Person in any further proceedings
involving any Debtor or Person. Notwithstanding anything to the contrary in the
Plan, (i) none of HET, HOCI, HNOMC, HNOIC, Harrah's Investor, the DIP Lender and
their respective Affiliates will have any obligations or liabilities (including,
without limitation, any obligation to provide the Harrah's New Equity
Investment) under the Plan or any Plan Documents at any time prior to the
Effective Date, and (ii) HET and HNOIC expressly reserve their respective rights
in their sole discretion to withdraw as Proponents of the Plan or to otherwise
terminate their support for the Plan.
7. BINDING EFFECT
The Plan will be binding upon and inure to the benefit of the Debtors,
the holders of Claims and Equity Interests, Harrah's Investor, the Persons in
the HET Group, the Bondholders Committee Group, the NOLDC Group, the Grand
Palais Group, the other Released Parties and their respective successors and
assigns.
8. JCC INTERMEDIARY
Notwithstanding anything to the contrary in the Plan or any Plan
Document, any provisions herein or therein relating to JCC Intermediary will be
applicable only if JCC Intermediary is formed at the election of HET (in its
sole discretion) on behalf of the Proponents. If JCC Intermediary is not
formed, JCC will be owned directly by JCC Holding.
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VI. CONFIRMATION AND CONSUMMATION PROCEDURE
Under the Bankruptcy Code, the following steps must be taken to
confirm the Plan:
A. SOLICITATION OF VOTES
In accordance with Sections 1126 and 1129 of the Bankruptcy Code, the
Claims in Classes A1, A2, A3(a) and A3(b), A4, A5, A6, A7, B1, B2, B3, B4, B5,
C1, C2, C3, C4, C5, and C6 of the Plan are impaired and the holders of Allowed
Claims in each of such Classes are entitled to vote to accept or reject the
Plan. The Plan provides that the holders of Equity Interests in Classes A8, A9,
B6, B7, C7 and C8 will not receive any distributions of property or retain any
interest in the Debtors. In accordance with Section 1126(g) of the Bankruptcy
Code, such Classes of Equity Interests are conclusively presumed to have
rejected the Plan.
As to classes of claims entitled to vote on a plan, the Bankruptcy
Code defines acceptance of a plan by a class of creditors as acceptance by
holders of at least two-thirds in dollar amount and more than one-half in number
of the claims of that class that have timely voted to accept or reject a plan.
For purposes of calculating the number of Allowed Claims in a Class of Claims
held by holders of Allowed Claims in such Class that have voted to accept or
reject the Plan under Section 1126(c) of the Bankruptcy Code, the Plan provides
that all Allowed Claims in such Class held by the same entity or affiliate
thereof (as defined in the Securities Act of 1933 and the rules and regulations
promulgated thereunder) will be aggregated and treated as one Allowed Claim in
such Class. A vote may be disregarded if the Bankruptcy Court determines, after
notice and a hearing, that such acceptance or rejection was not solicited or
procured in good faith or in accordance with the provisions of the Bankruptcy
Code.
Any creditor of an impaired Class (i) whose Claim has been listed by
the Debtors in the schedules filed with the Bankruptcy Court (provided that such
Claim has not been scheduled as disputed, contingent or unliquidated) or (ii)
who filed a proof of claim on or before May 15, 1996 (or, if not filed by such
date, any proof of claim filed within any other applicable period of limitations
or with leave of the Bankruptcy Court), which Claim is not the subject of an
objection and who timely voted on the Existing Plan, is entitled to vote.
Holders of Claims which are disputed, contingent and/or unliquidated are
entitled to vote their Claims only to the extent that such Claims are allowed
for the purpose of voting pursuant to an order of the Bankruptcy Court. Any
holder of an Old Bond as of the close of business on November 25, 1996 who
timely voted on the Existing Plan is also entitled to vote to accept or reject
the Plan.
If you have already timely voted to accept or reject the Existing
Plan, you will be deemed to have accepted or rejected, as the case may be, the
accompanying modified Plan unless you affirmatively change your vote on the
accompanying ballot. Only (i) holders of Old Bonds as of November 25, 1996 who
timely voted to accept or reject the Existing Plan and who continue to hold such
Old Bonds as of December 10, 1997 and (ii) holders as of December 10, 1997 who
purchased Old Bonds (directly or indirectly) from such holders and who properly
execute a notice of transfer of claim as prescribed by the Bankruptcy Court are
entitled to change their acceptances or rejections of the Plan.
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B. THE CONFIRMATION HEARING
The Bankruptcy Code requires the Bankruptcy Court, after notice, to
hold a confirmation hearing with respect to the accompanying Plan. The
Confirmation Hearing in respect of the Plan has been scheduled for the date and
time set forth in the accompanying notice before the Honorable Thomas M.
Brahney, III, United States Bankruptcy Judge at the United States Bankruptcy
Court, 501 Magazine Street, 709 Hale Boggs Building, New Orleans, Louisiana.
The Confirmation Hearing may be adjourned from time to time by the Bankruptcy
Court without further notice, except for an announcement of the adjourned date
made at the Confirmation Hearing. Any objection to confirmation must be made in
writing and specify in detail the name and address of the objector, all grounds
for the objection and the amount of the Claim or a description of the interest
in the Debtors held by the objector, and must be made in accordance with any
pre-trial or scheduling orders entered by the Bankruptcy Court. Any such
objection must be filed with the Bankruptcy Court (with a copy to Chambers) and
served so that it is received by the Bankruptcy Court, Chambers and the
following parties on or before the date and time set forth in the accompanying
notice:
COUNSEL TO HJC AND FINANCE CORP.:
Jenner & Block
One IBM Plaza
Suite 4400
Chicago, IL 60611
Attn: Daniel R. Murray, Esq.
William Hardy Patrick, III, Esq.
A Professional Corporation
10636 Linkwood Court
Baton Rouge, LA 70810-2854
COUNSEL TO HNOIC:
Bronfin & Heller, LLC
650 Poydras Street
Suite 2500
New Orleans, LA 70130
Attn: Edward M. Heller, Esq.
COUNSEL TO HET:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Attn: Robert J. Rosenberg, Esq.
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C. CONFIRMATION
At the Confirmation Hearing, the Bankruptcy Court will confirm the
Plan only if all of the requirements of Section 1129 of the Bankruptcy Code are
met. Among the requirements for confirmation of a plan are that the plan is (i)
accepted by all impaired classes of claims and equity interests or, if rejected
by an impaired class, that the plan "does not discriminate unfairly" and is
"fair and equitable" as to such class, (ii) feasible and (iii) in the "best
interests" of creditors and interest holders that are impaired under the plan.
1. ACCEPTANCE
Classes A1, A2, A3(a) and A3(b), A4, A5, A6, A7, B1, B2, B3, B4, B5,
C1, C2, C3 C4, C5 and C6 of the Plan are impaired under the Plan and are
entitled to vote to accept or reject the Plan. Classes A8, A9, B6, B7, C7 and
C8 of the Plan are conclusively deemed to have voted to reject the Plan; as to
such Classes, the Proponents intend to seek nonconsensual confirmation of the
Plan under Section 1129(b) of the Bankruptcy Code. In addition, the Debtors
reserve the right to seek nonconsensual confirmation of the Plan with respect to
any Class of Claims that is entitled to vote to accept or reject the Plan if
such Class rejects the Plan (however, the Proponents acknowledge that the Plan,
in the form of the "Third Amended Joint Plan of Reorganization, As Modified
Through December 10, 1997" cannot be confirmed under the cramdown requirements
of Section 1129(b) of the Bankruptcy Code if Class A4 does not accept the Plan).
2. UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS
To obtain nonconsensual confirmation of the Plan, it must be
demonstrated to the Bankruptcy Court that the Plan "does not discriminate
unfairly" and is "fair and equitable" with respect to each impaired,
nonaccepting Class. The Bankruptcy Code provides a non-exclusive definition of
the phrase "fair and equitable." The Bankruptcy Code establishes "cram down"
tests for secured creditors, unsecured creditors and equity holders, as follows:
(a) SECURED CREDITORS. Either (i) each impaired secured
creditor retains its liens securing its secured claim and receives on
account of its secured claim deferred cash payments (x) totaling at
least the allowed amount of the secured claim and (y) having a present
value at least equal to the value of the secured creditor's
collateral, (ii) each impaired secured creditor realizes the
"indubitable equivalent" of its allowed secured claim or (iii) the
property securing the claim is sold free and clear of liens with the
secured creditor's lien to attach to the proceeds of the sale and such
lien on proceeds is treated in accordance with clause (i) or (ii) of
this subparagraph.
(b) UNSECURED CREDITORS. Either (i) each impaired unsecured
creditor receives or retains under the plan property of a value equal
to the amount of its allowed claim or (ii) the holders of claims and
interests that are junior to the claims of the dissenting class will
not receive any property under the plan.
(c) EQUITY INTERESTS. Either (i) each holder of an equity
interest will receive or retain under the plan property of a value
equal to the greatest of the fixed liquidation
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preference to which such holder is entitled, the fixed redemption
price to which such holder is entitled or the value of the interest or
(ii) the holder of an interest that is junior to the nonaccepting
class will not receive or retain any property under the plan.
In addition, the "cram down" standards of the Bankruptcy Code prohibit "unfair
discrimination" with respect to the claims of an impaired, nonaccepting class.
While the existence of "unfair discrimination" under a plan of reorganization
depends upon the particular facts of a case and the nature of the claims at
issue, in general, courts have interpreted the standard to mean that the
impaired, nonaccepting class must receive treatment under a plan of
reorganization which allocates value to such class in a manner that is
consistent with the treatment given to other classes with similar legal claims
against the debtor.
The Proponents believe that the Plan and the treatment of all Classes
of Claims and Equity Interests under the Plan satisfy the foregoing requirements
for nonconsensual confirmation of the Plan.
3. FEASIBILITY
The Bankruptcy Code requires that confirmation of a plan is not likely
to be followed by liquidation or the need for further financial reorganization.
For purposes of determining whether the Plan meets this requirement, the
Proponents have analyzed the ability of the Debtors, and upon and after the
Effective Date, the JCC Entities, to meet their obligations under the Plan. As
part of this analysis, HET, on behalf of the Proponents, in consultation with
HJC's financial advisor, Jefferies & Company, Inc., has prepared projections of
JCC Holding's financial performance for each of the twelve month periods ending
February 28, 1999, February 29, 2000, February 28, 2001 and February 28, 2002
(the "PROJECTION PERIOD"). These projections, and the assumptions on which they
are based, are annexed hereto as Exhibit "B" (the "FINANCIAL FORECAST").
In developing an estimate of the reorganization value of JCC Holding,
the Proponents have been advised by Jefferies & Company, Inc. (the "FINANCIAL
ADVISOR"). The Financial Advisor developed a range of reorganization values by
employing both comparable market capitalization and net present value discounted
cash flow methodologies, which the Financial Advisor believes are considered by
the financial community to be the most appropriate valuation techniques for
estimating the going concern value of a business undergoing a chapter 11 plan of
reorganization. The Financial Advisor's estimate of JCC Holding's
reorganization value is based upon a number of assumptions which the Financial
Advisor believes are reasonable, including a successful reorganization of HJC's
business and finances in a timely manner in accordance with the Plan, HET's
estimates of the JCC Entities' future operations, and the Financial Forecast.
Many of such assumptions are beyond the control of the Proponents and the
Financial Advisor. Actual events may vary from such assumptions and the
variations may be material. See Section IX, "Certain Risk Factors to Be
Considered." The reorganization value utilized by the Proponents is considered
to be reasonable by the Financial Advisor based upon the methodologies employed
and utilizing the Financial Forecast and HET's estimates of the Company's future
operations. The Financial Advisor will provide testimony at the Confirmation
Hearing as to the reasonableness of the reorganization value utilized by the
Proponents, the valuation approaches undertaken and the assumptions underlying
such valuation.
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The Financial Forecast is based on the assumption that the Plan will
be confirmed by the Bankruptcy Court and, for projection purposes, that the
Effective Date under the Plan and the initial distributions thereunder take
place on February 28, 1998.
Based upon the Financial Forecast, the Proponents believe that JCC
will be able to make all payments required pursuant to the Plan and, therefore,
that confirmation of the Plan is not likely to be followed by liquidation or the
need for further reorganization. The Proponents further believe that JCC will
be able to repay or refinance any and all of the then-outstanding indebtedness
under the Plan at or prior to the maturity of such indebtedness. See Section
IX.A.6., "Certain Risk Factors to Be Considered--Overall Risks to Recovery by
Holders of Claims--Financial Forecast."
HET has prepared the Financial Forecast based upon certain
assumptions which it believes to be reasonable under the circumstances.
Those assumptions considered to be significant are described in the Financial
Forecast. The Financial Forecast has not been examined or compiled by
independent accountants. The Proponents make no representation as to the
accuracy of the projections or their ability to achieve the projected
results. Many of the assumptions on which the projections are based are
subject to significant uncertainties. Inevitably, some assumptions will not
materialize and unanticipated events and circumstances may affect the actual
financial results. Therefore, the actual results achieved throughout the
Projection Period may vary from the projected results and the variations may
be material. All holders of Claims that are entitled to vote to accept or
reject the Plan are urged to examine carefully all of the assumptions on
which the Financial Forecast is based in evaluating the Plan.
4. BEST INTERESTS TEST
With respect to each impaired Class of Claims and Equity Interests,
the standards for confirmation under the Bankruptcy Code require that each
holder of such a Claim or Equity Interest either (i) accept the Plan or (ii)
receive or retain under the Plan property of a value, as of the Effective Date,
that is not less than the value such holder would receive or retain if the
Debtors were liquidated under chapter 7 of the Bankruptcy Code. To determine
what holders of Claims and Equity Interests of each impaired Class would receive
if the Debtors were liquidated under chapter 7, the Bankruptcy Court must
determine the dollar amount that would be generated from the liquidation of the
Debtors' assets and properties in the context of a chapter 7 liquidation case.
The cash amount available for satisfaction of Unsecured Claims and Equity
Interests would consist of the proceeds resulting from the disposition of the
unencumbered assets of the Debtors, augmented by the unencumbered cash held by
the Debtors at the time of the commencement of the liquidation case. Such cash
amount would be reduced by the amount of the costs and expenses of the
liquidation and by such additional administrative and priority claims that may
result from the termination of the Debtors' business and the use of chapter 7
for the purposes of liquidation.
The Debtors' costs of liquidation under chapter 7 would include the
fees payable to a trustee in bankruptcy, as well as those which might be payable
to attorneys and other professionals that such a trustee might engage. The
foregoing types of claims and other claims that may arise in a liquidation case
or result from the pending Chapter 11 Cases, including any unpaid expenses
incurred by the Debtors during the Chapter 11 Cases, such as compensation for
attorneys, financial advisors and accountants, would be paid in full from the
liquidation proceeds before the balance of those proceeds would be made
available to pay prepetition Unsecured Claims.
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To determine if the Plan is in the best interests of each impaired
class, the present value of the distributions from the proceeds of the
liquidation of the Debtors' unencumbered assets and properties, after
subtracting the amounts attributable to the chapter 7 and chapter 11
administrative claims described in the preceding paragraph, are then compared
with the value of the property offered to such Classes of Claims and Equity
Interests under the Plan.
After considering the effects that a chapter 7 liquidation would have
on the ultimate proceeds available for distribution to creditors in a chapter 11
case, including (i) the increased costs and expenses of a liquidation under
chapter 7 described above, (ii) the erosion in value of assets in a chapter 7
case in the context of the expeditious liquidation required under chapter 7 and
the "forced sale" atmosphere that would prevail and (iii) the substantial
increases in claims that would be satisfied on a priority basis or on parity
with creditors in the Chapter 11 Cases, the Debtors have determined that
confirmation of the Plan will provide each holder of an Allowed Claim or Equity
Interest with a recovery that is not less than such holder would receive
pursuant to liquidation of the Debtors under chapter 7 of the Bankruptcy Code.
The Debtors also believe that the value of any distributions to each
class of Allowed Claims in a chapter 7 case, including all Secured Claims, would
be less than the value of distributions under the Plan because such
distributions in a chapter 7 case would not occur for a substantial period of
time. In the likely event litigation was necessary to resolve claims asserted
in the chapter 7 case, the delay could be prolonged.
The Debtors' Liquidation Analysis is attached hereto as Exhibit "C"
(the "LIQUIDATION ANALYSIS"). The information set forth in Exhibit "C" provides
a summary of the liquidation values of the Debtors' assets assuming a chapter 7
liquidation in which a trustee appointed by the Bankruptcy Court would liquidate
the assets of the Debtors' estates. Reference should be made to the Liquidation
Analysis for a complete discussion and presentation of the Debtors' analysis.
Underlying the Liquidation Analysis are a number of estimates and
assumptions that, although developed and considered reasonable by management,
are inherently subject to significant economic and competitive uncertainties and
contingencies beyond the control of the Debtors and management. The Liquidation
Analysis is also based upon assumptions with regard to liquidation decisions
that are subject to change. Accordingly, the values reflected may not be
realized if the Debtors were, in fact, to undergo such a liquidation. The
chapter 7 liquidation period is assumed to be a period of one year.
D. CONSUMMATION
The Plan will be consummated on the Effective Date. For a more
detailed discussion of the conditions precedent to the effectiveness of the Plan
and the impact of a failure to meet such conditions. See Section V.F., "The
Plan of Reorganization--Conditions Precedent to Confirmation and Effective
Date."
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E. TERM LOANS AND WORKING CAPITAL FACILITY
The Plan provides that JCC will fund the completion of construction of
the Casino in part through the Term Loans. In addition, as of the Effective
Date, JCC will have up to $25 million available under the Working Capital
Facility to meet its short-term working capital requirements. See Section
V.C.5., "The Plan of Reorganization--Executory Contracts and Unexpired
Leases--Completion Guarantees." The Term Loans and the Working Capital Facility
may be a single combined credit facility.
The A Term Loan will consist of a $60 million term loan from a
syndicate of banks led by BTCo which generally will rank senior to all existing
and future indebtedness of JCC except certain obligations of JCC under the
HET/JCC Agreement. The A Term Loan will consist of three tranches: (i) a $10
million Tranche A-1; (ii) a $20 million Tranche A-2; and (iii) a $30 million
Tranche A-3. The Bank Loans will be secured on a second priority basis (junior
only to a lien securing certain obligations of JCC under the HET/JCC Agreement).
Within the Bank Loans, the A Term Loan and related Senior Permitted Refinancings
will be senior to the Working Capital Facility; the Working Capital Facility and
related Senior Permitted Refinancings will be senior to the B Term Loan. The B
Term Loan and the Senior Subordinated Permitted Refinancings will be PARI PASSU
with the New Bonds and the New Contingent Bonds. The Bank Loans will be secured
by a lien on substantially all of the assets of JCC (other than the Modified
Casino Operating Contract, the Casino's bankroll and the Gross Revenue Share
Payments).
The B Term Loan will consist of two tranches: (i) a $30 million
Tranche B-1, and (ii) a $105 million Tranche B-2. HET and HOCI will provide a
payment guarantee or a "put" agreement with respect to Tranche B-2. The B Term
Loan will rank junior to certain obligations of JCC under the HET/JCC Agreement,
the A Term Loan, the Working Capital Facility and Senior Permitted Refinancings,
rank PARI PASSU with the New Bonds, the New Contingent Bonds and Senior
Subordinated Permitted Refinancings, and generally rank senior to all other
existing and future indebtedness of JCC. The scheduled quarterly amortization
payments under the Term Loans will be deferred for any of the first six
semi-annual interest payment periods if (i) Fixed Interest on the New Bonds is
paid in kind for the period ending prior to such quarterly amortization date,
(ii) HNOMC has deferred Base Management Fees for the corresponding interest
payment period, (iii) HNOMC has deferred Incentive Management Fees for the
corresponding interest payment periods and (iv) HET and HOCI have deferred their
fees under the HET/JCC Agreement.
The Working Capital Facility will provide JCC with up to $25 million
of availability to meet short-term working capital requirements, including up to
$10 million of availability for letters of credit. The Working Capital Facility
will rank junior to certain obligations of JCC under the HET/JCC Agreement, the
A Term Loan and any portion of Senior Permitted Refinancings relating to the A
Term Loan, and rank senior to the New Bonds, the New Contingent Bonds, the B
Term Loan, Senior Subordinated Permitted Refinancings and all other existing and
future indebtedness of JCC.
HET and HOCI will provide a payment guarantee or a "put" agreement
with respect to Tranche A-2, Tranche B-2 and the Working Capital Facility
(provided, however, that any payments by HET or HOCI in respect of the Working
Capital Facility prior to the termination of the Carry Obligations of HET and
HOCI under the New Completion Guarantees shall be made pursuant to the New
Completion Guarantees). In exchange for providing the HET Loan Guarantee, BTCo
will pay to HET an annual credit support fee (the "BTCO CREDIT SUPPORT FEE")
equal to 2%, and JCC will pay to HET an annual
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credit support fee (the "JCC CREDIT SUPPORT FEE") equal to 0.75%, of the average
aggregate principal amount of loans and/or stated amount of letters of credit
outstanding from time to time under Tranche A-2, Tranche B-2 (in the case of
Tranche B-2, only to the extent the aggregate outstanding principal amount
thereof from time to time is in excess of $10 million) and the Working Capital
Facility; provided, however, that (1) the BTCo Credit Support Fee and the JCC
Credit Support Fee shall be subject to adjustment as provided in the Indicative
Term Sheet attached as Exhibit J to the Plan; (2) HET shall not receive credit
support fees based on amounts outstanding, or stated amounts of letters of
credit relating to project costs of the Casino, under the Working Capital
Facility until the Carry Obligations of HET and HOCI under the New Completion
Guarantees have terminated; and (3) the BTCo Credit Support Fee will be payable
only to the extent such fee is actually received by BTCo from JCC as interest
under Tranche A-2, Tranche B-2 and the Working Capital Facility, and so long as
HET and HOCI are not in default under the HET Loan Guarantee. The net effect of
JCC's payment of the credit support fee combined with the applicable interest
rate for Tranche A-2, Tranche B-2 and the Working Capital Facility is that JCC
would pay in credit support fees and interest a sum equal to Libor plus 3.25%
which under certain circumstances could increase to Libor plus 3.50%. Also in
consideration of the HET Loan Guarantee, Harrah's Investor will receive the HET
Warrant. See Section VI.H., "--HET Warrant."
The $10 million Tranche A-1 of the A Term Loan, the $30 million
Tranche A-3 of the A Term Loan and the $30 million Tranche B-1 of the B Term
Loan will be funded on the Effective Date. The $105 million Tranche B-2 of the
B Term Loan and the $20 million Tranche A-2 of the A Term Loan will be funded as
required for the construction of the Casino with Tranche B-2 to be drawn prior
to Tranche A-2. The $10 million Junior Subordinated Credit Facility will be
funded prior to Tranche A-2. If any amount of Tranche B-2 of the B Term Loan
remains undrawn upon completion of the construction of the Casino, it shall be
drawn to pay down Tranche A-1 of the A Term Loan. The failure of the lenders
under Tranche A-2 of the A Term Loan or Tranche B-2 of the B Term Loan to
disburse funds will not terminate the Completion Guarantors' obligations under
the New Completion Guarantees. See Section V.C.5, "The Plan of
Reorganization--Executory Contracts and Unexpired Leases--Completion
Guarantees."
HJC has not yet obtained an enforceable commitment letter from a
lender to provide financing under the Term Loans and the Working Capital
Facility, and the availability of such financing is a condition precedent to the
confirmation of the Plan. See Section IX.A.8., "Certain Risk Factors to be
Considered--Overall Risks to Recovery by Holders of Claims--Availability of Term
Loans and Working Capital Facility."
F. JUNIOR SUBORDINATED CREDIT FACILITY
On the Effective Date, JCC will enter into the Junior Subordinated
Credit Facility pursuant to which HET has agreed to make available up to $10
million of subordinated indebtedness to fund project costs to the extent that
such costs exceed amounts available under the Term Loans (excluding Tranche A-1
and Tranche A-2), the proceeds from the sale of the Convertible Junior
Subordinated Debentures and the Harrah's New Equity Investment. The Junior
Subordinated Credit Facility will be applied to project costs prior to
Tranche A-1 and Tranche A-2, will be unsecured, and amounts outstanding
thereunder will be subordinated in right of payment to certain obligations of
JCC under the HET/JCC Agreement, the Term Loans, the New Bonds, the New
Contingent Bonds, the Working Capital Facility, Senior Permitted Refinancings
and Senior Subordinated Permitted Refinancings. The terms of
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the Junior Subordinated Credit Facility will be no less favorable to JCC than
the terms of the obligation of JCC to repay amounts advanced by the Completion
Guarantors under the New Completion Guarantees and the Amended Completion Loan
Agreement. See Section V.C.6., "Plan of Reorganization--Executory Contracts and
Unexpired Leases--Completion Loan Agreement." The Junior Subordinated Credit
Facility will have such terms and conditions as may be agreed to by the
Bondholders Committee, the lender under such facility, HET (in its sole
discretion) on behalf of the Proponents, and the lenders under the Term Loans
and the Working Capital Facility and, if HJC is a party to such documents, with
the consent of HJC, which consent may not be unreasonably withheld or delayed.
G. CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
On the Effective Date, the Participating Banks and the Underwriters
will purchase approximately $26 million aggregate principal amount of the
Convertible Junior Subordinated Debentures. The aggregate principal amount of
Convertible Junior Subordinated Debentures may increase if Banks in addition to
BTCo elect to become Participating Banks and pursuant to the FNBC Settlement
Agreement. See Section V.A.5., "The Plan of Reorganization--Classification and
Treatment of Claims and Equity Interests--Class A3--Bank Claims and Old Bank
Collateral Agent Claims (Impaired)." The Convertible Junior Subordinated
Debentures will be unsecured obligations of JCC and will be subordinated in
right of payment to certain obligations of JCC under the HET/JCC Agreement, the
Term Loans, the New Bonds, the New Contingent Bonds, the Working Capital
Facility, Senior Permitted Refinancings and Senior Subordinated Permitted
Refinancings. The Convertible Junior Subordinated Debentures will have such
other terms and conditions as shall be agreed upon by the Bondholders Committee,
BTCo, Salomon, BT Securities Corporation, DLJ, HET (in its sole discretion) on
behalf of the Proponents, and if HJC is a party to the Convertible Junior
Subordinated Debenture Documents, with the consent of HJC, which consent may not
be unreasonably withheld or delayed.
H. HET WARRANT
In consideration of the HET Loan Guarantee, Harrah's Investor will
receive, among other things, the HET Warrant entitling it to purchase additional
shares of New Common Stock such that, upon exercise of the HET Warrant in its
entirety (and assuming that the shareholders of NOLDC and/or their designees
have exercised their options to purchase from HET 4.5% of the New Common Stock),
Harrah's Investor would own 50.0% of the New Common Stock, subject to certain
adjustments. The number of shares issuable upon exercise of the HET Warrant
will be adjusted as necessary to reflect the transfer of shares upon exercise of
the options held by NOLDC shareholders to purchase from HET up to 4.5% of the
New Common Stock. The HET Warrant will be exercisable at any time after the
Transition Date until the sixth anniversary of the opening of the Casino, in
whole or in part on a PRO RATA basis at a price of $15.00 per share of New
Common Stock. If the shareholders of NOLDC and/or their designees have not
exercised their options to purchase 4.5% of the New Common Stock, Harrah's
Investor will not be permitted to exercise the HET Warrant with respect to that
number of shares which would cause Harrah's Investor to own more than 50.0% of
the New Common Stock until such time as such exercise would not cause Harrah's
Investor to own more than 50.0% of the New Common Stock. If at any time after
the Transition Date the closing bid price of the New Common Stock has exceeded
$20 per share for sixty consecutive trading days, JCC Holding's board of
directors may elect to give written notice to Harrah's Investor of an election
to redeem 75% of the warrants at $0.05 per warrant unless Harrah's Investor
exercises the warrants within forty-five days after the date of such notice.
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I. HET/JCC AGREEMENT
HET and HOCI propose to enter into the HET/JCC Agreement with JCC to
provide a Minimum Payment Guaranty in the maximum stated amount of $100 million
for the benefit of the LGCB to assure payment of the Minimum Payment, subject to
renewal or early termination in accordance with the terms of the HET/JCC
Agreement. Any drawing on a Minimum Payment Guaranty provided by HET or HOCI
shall bear interest at the Tranche A-3 interest rate. The Casino's fiscal year
for purposes of the calculation of the Minimum Payment will begin on April 1.
HET and HOCI will commit to provide a Minimum Payment Guaranty through
the fiscal year ending March 31, 2004; provided that a Minimum Payment Guaranty
shall not renew for any of the fiscal years beginning April 1, 2000, 2001, 2002
or 2003 if: (a) there has been a JCC bankruptcy or a cessation of Casino
operations; (b) there are any unpaid guarantee fees (other than fees deferred as
agreed in the HET/JCC Agreement,) (c) there are any unreimbursed guarantee
drawings; (d) in the case of the renewal of the Minimum Payment Guaranty for the
fiscal year beginning April 1, 2000, the project has failed to generate positive
EBITDA for the period of operations ending January 31, 2000, however, there
shall be no EBITDA test for the period of operations ending January 31, 2000 if
such period of operations commenced after August 1, 1999; (e) in the case of the
renewal of the Minimum Payment Guaranty for the fiscal years beginning April 1,
2001, 2002, and 2003, the project has failed to generate positive EBITDA as of
the twelve month period ending November 30, 2000, $20 million as of the twelve
month period ending November 20, 2001, and $25 million as of the twelve month
period ending November 30, 2001, and $25 million as of the twelve month period
ending November 30, 2002; (f) HET, HOCI or HNOMC or any of HET's affiliates has
been determined to be unsuitable or HNOMC has been removed as manager of the
Casino; or (g) the Modified Casino Operating Contract has been terminated. For
purposes of clauses (d) and (e) above, EBITDA shall mean operating income
determined according to generally accepted accounting principles plus
depreciation and amortization according to generally accepted accounting
principles, but will not include any extraordinary non-cash items such as the
write down of assets or pre-opening expenses.
Commencing with the fiscal year ending March 31, 2002, upon ninety
days written notice prior to the first day of the respective fiscal year, JCC
may cancel the commitment of HET and HOCI to renew the HET/JCC Agreement for the
fiscal year ending March 31, 2002 upon payment of a termination fee of $1
million in cash and may cancel the commitment of HET and HOCI to renew the
HET/JCC Agreement for the fiscal years ending March 31, 2003 and 2004 without
any fee. Notwithstanding any other provision hereof, JCC will be restricted
from terminating the HET/JCC Agreement unless JCC has obtained a replacement
guaranty or letter of credit which meets the requirements of the Modified Casino
Operating Contract and which does not result in increased cost to JCC (after
giving effect to payment to HET and HOCI of the termination fee, if applicable),
the Modified Casino Operating Contract no longer requires JCC to provide a
guaranty or letter of credit, or the LGCB waives the requirement that JCC
provide a guaranty or letter of credit.
HET and HOCI, collectively, will receive a $6 million per annum
guaranty fee for the fiscal years ending March 31, 2000 and 2001 and a $5
million per annum guaranty fee for the fiscal years ending March 31, 2002, 2003
and 2004, all payable quarterly. HET and HOCI, collectively, shall receive a
PRO RATA fee based on an annual fee of $6 million for any partial fiscal year
ending March 31, 1999 or for the fiscal year ending March 31, 2000 if it is a
partial fiscal year. HET and HOCI shall not receive a guaranty fee for any
fiscal year in which a Minimum Payment Guaranty is not provided and shall repay
to JCC any guaranty
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fee previously advanced to it in respect of such fiscal year. If EBITDA is less
than $28.5 million for the twelve month reporting period ending one month prior
to each semi-annual New Bond interest payment date beginning with the fourth
year after the Effective Date, the guaranty fee to HET and HOCI will be
deferred, the bondholders will receive PIK interest, Management Fees will be
deferred and bank principal will be deferred. JCC's obligation to pay the per
annum guaranty fee and any termination fee to HET and HOCI and to reimburse HET
and HOCI for any drawings (including interest thereon) by the State under any
Minimum Payment Guaranty will be secured by a first lien on the Casino assets.
The lien documents and the collateral to HET and HOCI to secure JCC's
obligation under the HET/JCC Agreement are to be substantially as provided to
the LGCB pursuant to the State Mortgage and Security Documents attached as
exhibits to the LGCB April, 1997 approved Casino Operating Contract. The
HET/JCC Agreement shall contain covenants in favor of HET and HOCI (i) requiring
JCC to maintain insurance, pay taxes and impositions, repair and maintain the
Casino, and keep the lease in effect, as was the case for the LGCB pursuant to
Section 20.4(d) of the version of the Amended Casino Operating Contract approved
by the LGCB, and (ii) on terms and conditions to be agreed by the parties,
restricting indebtedness and liens by JCC and restricting dividends, merger and
asset disposition. The parties agree that any successor guarantor may be
secured by the first lien position of HET and HOCI, subject to payment of any
unpaid fees or obligations to HET and HOCI in respect of the HET/JCC Agreement.
VII. MANAGEMENT OF THE REORGANIZED DEBTORS
A. ENTITY STRUCTURE
Pursuant to the Plan, on the Effective Date, the assets and business
of the Debtors (except for property distributed pursuant to the Plan) will vest
in a single entity, JCC, as successor to each of the Debtors. The Plan provides
that, for federal income tax purposes, such vesting shall be deemed to have
occurred as a deemed exchange by the Bondholders of the Old Bonds for such
assets and business, and a deemed exchanged by the Bondholders of such assets
and business for the Class A New Common Stock, the New Bonds and the New
Contingent Bonds. Prior to or concurrent with such vesting, (i) JCC Holding
will become the sole and managing member of JCC Intermediary and (ii) JCC
Intermediary will become the sole and managing member of JCC. Accordingly, JCC
will be wholly-owned by JCC Intermediary, and JCC Intermediary will be
wholly-owned by JCC Holding. Pending the resolution of certain structural
considerations, JCC Intermediary may be eliminated prior to the Effective Date.
In such case, JCC Holding would be the sole and managing member of JCC. The
Class A New Common Stock and the Class B New Common Stock distributed to holders
of certain classes of Claims in accordance with the Plan will constitute all of
the outstanding shares of common stock of JCC Holding.
B. BOARD OF DIRECTORS AND MANAGEMENT
1. COMPOSITION OF THE BOARD OF DIRECTORS
The board of directors of JCC Holding (the "BOARD") will consist of an
equal number of HET Directors and Independent Directors. JCC Holding will pay
reasonable directors' fees to all of the Independent Directors and HET Directors
who are not employees of HET (or its subsidiaries), will pay out-of-pocket
expenses for all directors, and will carry adequate directors' insurance for the
benefit of all of their directors. Generally, the HET Directors will supervise
the day-to-day activities with respect
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to the JCC Entities unless one of the following events ("FLIP EVENTS") occurs:
(i) (a) an event of default has occurred under the Term Loans, the Working
Capital Facility, the Convertible Junior Subordinated Debentures, or any other
financing agreement pursuant to which any of the JCC Entities or any of their
subsidiaries is a borrower and under which the aggregate amount outstanding
exceeds $2.5 million and (b) such default by the JCC Entities is caused by HET
or HNOMC related events; (ii) (a) an Event of Default (as defined in the New
Bonds or New Contingent Bonds Indentures) has occurred under the New Bonds or
the New Contingent Bonds and (b) such default by the JCC Entities is caused by
HET or HNOMC related events; (iii) (a) an Event of Default (as defined in the
Amended Canal Street Casino Lease) in respect of payments due and owing by JCC
under the Amended Canal Street Casino Lease, or any other material Event of
Default under the Amended Canal Street Casino Lease in response to which any
other party to the Amended Canal Street Casino Lease would be entitled to
terminate, rescind, or otherwise deprive JCC of the benefits of, the Amended
Canal Street Casino Lease, and (b) such default by the JCC Entities is caused by
HET or HNOMC related events; (iv) (a) an Event of Default (as defined in the
Modified Casino Operating Contract) in respect of payments due and owing by JCC
under the Modified Casino Operating Contract, or any other material Event of
Default under the Modified Casino Operating Contract in response to which any
other party to the Modified Casino Operating Contract would be entitled to
terminate, rescind, or otherwise deprive JCC of the benefits of, the Modified
Casino Operating Contract and (b) such default by the JCC Entities is caused by
HET or HNOMC related events; (v) a material Event of Default (as defined in the
Amended Management Agreement) has occurred under the Amended Management
Agreement and HET or HNOMC is the Defaulting Party (as defined in the Amended
Management Agreement) and in response to which Event of Default any party to the
Amended Management Agreement would be entitled to terminate or rescind the
Amended Management Agreement; (vi) HET or an affiliate of HET has not fulfilled
its obligations, or is in default, under any of the New Completion Guarantees or
under any material agreement relating to the Casino between HET and the City or
the State or any agency or instrumentality of the City or State; (vii) (a) any
of the JCC Entities is in violation of its corporate governance documents or
organizational documents, as applicable, in any material respect and (b) such
violation is caused by HET or HNOMC related events; (viii) the LGCB, or any
successor thereto, makes a determination that HET is unsuitable to own an equity
interest in the JCC Entities; or (ix) a filing for bankruptcy by or against HET,
HNOMC, any direct or indirect parent thereof or any affiliate of HET which is
controlled by HET (a "CONTROLLED AFFILIATE") if the filing by or against such
Controlled Affiliate has or is reasonably likely to have an adverse effect on
JCC, the Casino or the suitability of any person required to be found suitable
under the Gaming Act or the Rules and Regulations. Upon the occurrence of a
Flip Event, the Independent Directors will supervise the day-to-day activities
with respect to the JCC Entities; provided, however, that if all defaults set
forth in clauses (i) through (viii) of the previous sentence are cured, the HET
Directors will resume supervising the day-to-day activities with respect to the
JCC Entities. In addition, if a Flip Event occurs (including a Flip Event
resulting from HNOMC bankruptcy events, but excluding a Flip Event resulting
from HET bankruptcy events) as the result of a willful action or failure to act
by the HET Directors, HET, HNOMC, or a Controlled Affiliate as determined in a
speedy arbitration process (an "EXTRAORDINARY FLIP EVENT"), one additional
Independent Director will be added to the Board; provided, however, that such
additional Independent Director will be removed from the Board if such
Extraordinary Flip Event is cured. Unless an Extraordinary Flip Event has
occurred and has not been cured, one HET Director will be added to the board in
the event that at least 20% of the outstanding shares of Class A New Common
Stock are acquired (a "CHANGE OF CONTROL") by any entity (including any parent
and any controlled affiliates) (a "CONFLICTED ENTITY") (a) which controls or
operates, or is licensed or qualified in any of Illinois, Indiana, Louisiana,
Mississippi, Missouri, Nevada or New Jersey to control or operate, as of the
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Effective Date, a casino or casino hotel facility, or (b) which has been
involved in material litigation with HET within the five years prior to the
Effective Date; provided, however, that such additional HET Director will be
removed if (x) the percentage of Class A New Common Stock owned by such
Conflicted Entity falls below 20%, or (y) an Extraordinary Flip Event occurs
after such Change of Control. In addition, the Board will be divided into
three classes of directors with staggered terms of office (with an equal number
of Independent Directors and HET Directors in each class). When an Independent
Director's term of office expires, the remaining Independent Directors will
constitute the committee authorized to nominate the candidate for such
Independent Director's position, and when a HET Director's term of office
expires, the remaining HET Directors will constitute the committee authorized to
nominate the candidate for such HET Director's position.
Notwithstanding the foregoing, approval by the Independent Directors
will be required if any of the JCC Entities (or any subsidiary thereof) proposes
to engage in a Significant Transaction (as defined below). If a Flip Event has
not occurred or has occurred other than as the result of a willful action or
failure to act by the HET Directors, HET or HNOMC, the approval by the HET
Directors will be required if any of the JCC Entities (or any subsidiary
thereof) proposes to engage in a Significant Transaction. If a Flip Event has
occurred and the approval of the HET Directors is not required for a Significant
Transaction, any action or inaction by the Independent Directors during the
period after the Flip Event and prior to the cure of all defaults giving rise
thereto shall not disproportionately affect any group of holders of equity of
JCC Holding. Such approval by the Independent Directors and the HET Directors,
respectively, will, in certain cases, require a majority thereof and in other
cases will require unanimity. "SIGNIFICANT TRANSACTIONS" shall include, without
limitation, (a) amendments of corporate governance documents or organizational
documents of any JCC Entity, (b) any merger, consolidation or sale of a material
portion of its business or assets, (c) any material transaction or transactions,
except for certain excluded transactions, during a single fiscal year with HET
or its affiliates (including, without limitation, any decisions regarding the
exercise, waiver or modification of rights or obligations, or the determination
of fees with respect to project development services, under the Amended
Management Agreement), which in the aggregate involve consideration in excess of
a threshold to be determined by the Board, (d) declarations of dividends, (e)
amendment of any material agreements with the City or the State, or any agency
or instrumentality of the City or the State, (f) any filing for protection under
bankruptcy or other insolvency laws, (g) incurrence of, or assumption of
liability for, indebtedness for borrowed money, other than the Term Loans, the
Working Capital Facility, the Subordinated Credit Facility, the Convertible
Junior Subordinated Debentures, the New Bonds, and the New Contingent Bonds, any
Completion Loans, the amendment of the terms of any indebtedness for borrowed
money or any modification, determination, consent or waiver thereunder, (h) any
issuance of securities, or any options, warrants or other rights to obtain
securities of the JCC Entities, (i) any repurchase of securities of a JCC
Entity, (j) any change in the independent auditors, (k) approval of JCC's annual
operating plan and annual capital budget, and (l) the authorization or
ratification of any such actions by any subsidiary of any JCC Entity. All
changes to the JCC Entities' capital budget prior to termination of the New
Completion Guarantees, except for changes which reduce the scope and character
of the Casino, as in the plans and specifications outlined in the Amended GDA,
or which exceed $5 million or such other threshold as may be determined by the
Board (including a majority of the Independent Directors), will be approved by
the Gaming Committee of the Board; thereafter, all changes to the JCC Entities'
capital budget up to $250,000 will be approved by the Gaming Committee of the
Board and all changes to the JCC Entities' capital budget between $250,000 and
$2 million will be approved by the Capital Committee of the Board
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(consisting of a single Independent Director and a single HET director). The
capital budget itself will be approved by the Board.
The above governance provisions shall terminate upon the earliest of
(i) the third anniversary of the date on which the Casino is open to customers,
(ii) the end of two consecutive 12-month periods in each of which the Contingent
Payments under the New Bonds and the New Contingent Bonds equals or exceeds $15
million, (iii) the end of a period consisting of 30 consecutive trading days
during which the average daily closing Minimum Market Value (as defined below)
equals or exceeds $435 million. The "MINIMUM MARKET VALUE" is, for each trading
day, the sum of (i) the closing bid price of a share of Class A New Common Stock
multiplied by the number of such shares issued to the Bondholders on the
Effective Date in connection with the Plan, plus (ii) the closing bid price per
$1,000 of New Bonds and New Contingent Bonds, divided by $1,000, and multiplied
by the aggregate principal amount of such bonds outstanding.
2. IDENTITY, AFFILIATIONS, AND NATURE OF CERTAIN COMPENSATION
At or prior to the Confirmation Hearing, the Proponents will disclose
the identity and affiliations of the officers and directors of the JCC Entities,
as well as the identity and nature of compensation of any insiders to be
employed or retained by the JCC Entities.
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO THE SECURITIES
TO BE DISTRIBUTED UNDER THE PLAN
In reliance upon an exemption from the registration requirements of
the Securities Act of 1933, as amended (the "33 ACT"), and state securities and
"blue sky" laws afforded by Section 1145 of the Bankruptcy Code and available
exemptions under the 33 Act, the New Common Stock, the New Bonds, the New
Contingent Bonds, the Convertible Junior Subordinated Debentures and the HET
Warrant to be issued on the Effective Date pursuant to the Plan will not need to
be registered under the 33 Act or any state securities or "blue sky" laws.
Shares of Class B New Common Stock and the HET Warrant will be restricted
securities and may be resold pursuant to a registration statement or available
exemptions under the 33 Act. Shares of Class A New Common Stock, New Bonds and
New Contingent Bonds generally may be resold by any holder without registration
under the 33 Act or other federal securities laws pursuant to the exemption
provided by section 4(l) of the 33 Act, unless the holder is an "underwriter"
with respect to such securities, as that term is defined in the Bankruptcy Code
(a "STATUTORY UNDERWRITER"). In addition, such securities generally may be
resold by the recipients thereof without registration on the state level
pursuant to various exemptions provided by the respective laws of the several
states. However, recipients of securities issued under the Plan are advised to
consult with their own counsel as to the availability of any such exemption from
registration under federal or state law in any given instance and as to any
applicable requirements or conditions to the availability thereof.
Section 1145(b) of the Bankruptcy Code defines a Statutory Underwriter
for purposes of the 33 Act as one who (i) purchases a claim with a view to
distribution of any security to be received in exchange for the claim,
(ii) offers to sell securities issued under a plan for the holders of such
securities, (iii) offers to buy securities issued under a plan from persons
receiving such securities, if the offer to buy is made with a view to
distribution of such securities, or (iv) is a controlling person of the issuer
of the securities.
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Entities deemed to be Statutory Underwriters may be able to sell
securities without registration pursuant to the provisions of Rule 144 under the
33 Act which, in effect, permit the public sale of securities received pursuant
to the Plan by Statutory Underwriters subject to the availability of public
information concerning JCC Holding and JCC, volume limitations and certain other
conditions. Entities who believe they may be Statutory Underwriters under the
definition contained in Section 1145 of the Bankruptcy Code are advised to
consult their own counsel with respect to the availability of the exemption
provided by such Rule.
The JCC Entities must use their best efforts to cause the Class A New
Common Stock to be listed on a national securities exchange or quoted on NASDAQ
upon the Effective Date. JCC Holding must also use its best efforts to be, on
or prior to the Effective Date, a reporting company under the 34 Act, with
respect to the Class A New Common Stock. JCC Holding must file the Class A 34
Act Registration Statement no later than promptly after the date of entry of the
Final Order approving the Disclosure Statement. If the Class A 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of such registration statement with the SEC (provided, however, that this
clause (i) is not applicable if JCC Holding did not file such registration
statement prior to the date which is five days after the date of entry of the
Final Order approving the Disclosure Statement), (ii) 60 days after the date of
entry of the Final Order approving the Disclosure Statement, (iii) 30 days after
receipt of any SEC comments on such registration statement, and (iv) the
Effective Date, then the JCC Entities shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of securities to be registered, which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
In addition, to the extent that it is reasonably determined that the
registration of public resales by any Bondholder of any shares of Class A New
Common Stock, New Bonds or New Contingent Bonds received by such Bondholder
under the Plan is required by law, JCC Holding will file a registration
statement with respect to such resales promptly after the Effective Date. If
such registration statement is not effective within 120 days after it is filed,
then the JCC Entities shall pay to the Bondholders an amount equal to $.05 per
week for each $1,000 of securities to be registered, which amount shall increase
by $.05 every 45 days to a maximum of $.30 per week. See Section V.D.2.q., "The
Plan of Reorganization--Means for Implementation and Execution of the
Plan--Effective Date Transactions--Registration and Listing of Class A New
Common Stock" and "--Registration of New Bonds."
IX. CERTAIN RISK FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST THE DEBTORS SHOULD READ AND CONSIDER
CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET
FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS DELIVERED TOGETHER
HEREWITH AND/OR INCORPORATED BY REFERENCE), PRIOR TO VOTING TO ACCEPT OR REJECT
THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING
THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.
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A. OVERALL RISKS TO RECOVERY BY HOLDERS OF CLAIMS
The ultimate recoveries under the Plan to holders of Claims (other
than those holders who are paid in cash under the Plan) will depend upon the
realizable value of the New Common Stock, the New Bonds, the New Contingent
Bonds and the Convertible Junior Subordinated Debentures to be issued pursuant
to the Plan. The New Common Stock, the New Bonds and the New Contingent Bonds
to be issued pursuant to the Plan are subject to a number of material risks,
including, but not limited to, those specified below. The factors specified
below assume that the Plan is approved by the Bankruptcy Court and that the
Effective Date occurs on or before February 28, 1998. Prior to voting on the
Plan, each holder of a Claim should carefully consider the risk factors
specified or referred to below, including the Exhibits annexed hereto, as well
as all of the information contained in the Plan.
1. UNCERTAINTY REGARDING GAMING REGULATION
On March 18, 1996, the Governor of the State of Louisiana called a
special session of the State legislature to consider a number of topics,
including topics relating to the Casino. The special session convened on March
24, 1996 and ended on April 19, 1996. Several bills were enacted into law as a
result of the special session which may impact JCC's rights under the Gaming Act
and the Modified Casino Operating Contract.
One such bill called for the Local Option Election during the November
5, 1996 election to decide, on an item-by-item basis, whether riverboat gaming,
video poker gaming, and in Orleans Parish, the land-based casino, should be
permitted to operate in their parish. In addition, another law enacted as a
result of the special session purports to provide the State and all its
political subdivisions with retroactive immunity from liability and from suit
for any action or failure to act on the part of the State, or any political
subdivision of the State (including the LEDGC and the LGCB). See Section
III.F., "General Information--Regulation." Although voters in Orleans Parish
voted on November 5, 1996 to permit land-based casino gaming in that parish,
there can be no assurance that the State legislature will not enact other
similar legislation. In addition, the Proponents believe that the law providing
for the Local Option Election had a material adverse effect on HJC and the Plan
even prior to voter action, by impairing the Proponents' ability to obtain
financing for the Plan and by increasing the costs relating to the Plan. See
Section IX.A.8., "--Availability of Term Loans and Working Capital Facility."
In addition, state laws generally requiring riverboats to sail in
accordance with their schedules and safety conditions are frequently unenforced.
Another law enacted as a result of the special session, among other things,
purports to retroactively amend the Gaming Act: (i) to state that the conduct
of gaming operations upon riverboats in accordance with the provisions of the
Louisiana Riverboat Economic Development and Gaming Control Act or otherwise
while upon a designated waterway while temporarily at dockside does not
constitute the authorization of additional land-based casino gaming operations
which relieves the operator of the Casino of the obligation to pay compensation
to the LGCB; and (ii) to provide that governmental inaction which results in the
operation of another land-based casino in Orleans Parish shall not relieve the
operator of the Casino of the obligation to pay compensation to the LGCB. This
law also purports to provide that in the event of litigation between the
operator of the Casino and the State or any of its political subdivisions
(including the LGCB), the operator of the Casino must continue to make all
payments to the State and any of its political subdivisions (including the LGCB)
as required by law during the pendency of such litigation, and that any failure
to make the required
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payments will render the operator of the Casino unsuitable. See Section III.F.,
"General Information--Regulation."
Although the Proponents believe that each of these pieces of
legislation may be unconstitutional, unenforceable, or otherwise legally infirm,
there can be no assurance that the Proponents' beliefs with respect to such
legislation will prevail.
In addition, on May 1, 1996, also as a result of the special session
of the State legislature, the Governor signed into law a bill which, among other
things, dissolves the separate boards that had governed riverboat gaming and
land-based casino gaming, including the LEDGC, and purports to substitute in
their place the LGCB with the assistance of the Louisiana State Police. See
Section III.F., "General Information--Regulation." Although the existing Rules
and Regulations promulgated by the LEDGC remain in force and effect at this
time, the LGCB has been empowered to repeal such Rules and Regulations and
promulgate its own rules and regulations. This law also authorizes the
Louisiana 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. Given the lack of experience in dealing with
the LGCB and the new regulatory framework established by the State legislature,
the Proponents are unable at this time to determine what effect, if any, this
legislative change will have on the likelihood that the Proponents will be
successful in negotiating with the LGCB with respect to the Modified Casino
Operating Contract and the impact of future rules and regulations on the Plan.
On April 29, 1997, the LGCB unanimously approved for submission to the
Governor and the State legislature a new Casino Operating Contract with respect
to the Existing Plan. Although the State legislature considered the approval of
such a new Casino Operating Contract, the State legislature did not approve or
disapprove this contract during the 1997 Regular Session. During the 1997
Regular Session, the House approved a resolution which purports to preclude the
use of a mail ballot for approval of the Modified Casino Operating Contract by
the House. Further, the resolution purports to require a special session of the
House instead of the mail ballot procedure if a Modified Casino Operating
Contract is put forward for approval by the House.
On December 9, 1997, the LGCB, among other things, unanimously
approved the Modified Casino Operating Contract for submission to the Governor
of the State with the request that he submit the Modified Casino Operating
Contract to the State legislature for its approval. There can be no assurance
that the State Legislature will approve the Modified Casino Operating Contract.
2. ABILITY TO COMMENCE OPERATIONS AS SCHEDULED
Casino--Phase I is scheduled to open and Second Floor Shell
Construction--Phase II is scheduled to be completed within twelve months after
the Effective Date but only after receipt of the appropriate regulatory
approvals. Construction projects, such as the Casino, can entail significant
development and construction risks including, but not limited to, labor
disputes, shortages of material and skilled labor, weather interference,
unforeseen engineering problems, environmental problems, geological problems
(including those resulting from construction activities below sea level),
construction, demolition, excavation, zoning or equipment problems,
unanticipated cost increases litigation and other events beyond JCC's control,
any of which could give rise to delays or cost overruns. During the past nine
months, HJC has significantly increased its estimates of the cost to complete
construction of the Casino and the adjoining
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parking facilities, primarily as a result of (i) increases in general
construction costs in the region and (ii) physical deterioration to the
partially-completed Casino and parking lot structures caused in large part by
high humidity and moisture levels. HJC has not yet assessed the extent of the
physical deterioration to determine the cost of the remediation work that will
be necessary to complete the construction projects
3. SUITABILITY
The JCC Entities, HNOMC and certain of their respective shareholders,
members, officers, and directors will be required to undergo extensive
investigation and review by the LGCB, including character and financial
responsibility reviews, to be found suitable and qualified under the Gaming Act
and to obtain the requisite authorizations, permits and licenses. The Plan
cannot become effective unless and until such persons and entities are found
suitable or licensed (or deemed exempt or waived from such requirements) by the
LGCB. JCC, HNOMC and all other persons and entities required to be found
suitable, including those already found suitable, will have an ongoing
obligation to maintain their suitability throughout the term of the Modified
Casino Operating Contract. The failure of JCC or HNOMC to maintain its
suitability and other defaults under the Modified Casino Operating Contract
could result in fines or the suspension or revocation of the Modified Casino
Operating Contract. In addition, certain employees and vendors of JCC will also
have to be found suitable prior to the opening of the Casino. The failure of
such employees and vendors employees of JCC to obtain such findings prior to the
opening of the Casino could delay the opening of the Casino.
4. LITIGATION
For a summary of pending material litigation involving JCC outside the
Bankruptcy Court, see Section III.E., "General Information--Certain Prepetition
Legal Proceedings."
5. CONFLICTS OF INTEREST
HNOMC will be exclusively responsible for supervising and managing the
Casino. However, HET, through its operating subsidiaries and other affiliates,
has also developed and currently operates dockside casinos in Vicksburg and
Tunica, Mississippi and Shreveport, Louisiana and HET, through its operating
subsidiaries and other affiliates, may develop other casinos that may compete
with the Casino (collectively, the "COMPETING CASINOS"). Due to the Competing
Casinos' proximity to the Casino, they may compete directly with the Casino for
patrons. HET, through its operating subsidiaries and other affiliates, also
operates casinos in the five major Nevada and New Jersey gaming markets which
may compete with the Casino on a national basis.
6. FINANCIAL FORECAST
The Financial Forecast attached as Exhibit "B" was prepared as of
February 28, 1998 and is based upon HET's current best estimate of the results
it expects for the Casino. The Proponents do not intend to update or otherwise
revise the Financial Forecast to reflect events or circumstances existing or
arising after the date of this Disclosure Statement or to reflect the occurrence
of unanticipated events, except as required by applicable law. Arthur
Andersen LLP, independent certified public accountants for the Debtors, has not
examined, compiled or applied agreed-upon procedures to the Financial Forecast
and consequently, assumes no responsibility for the Financial Forecast. The
Financial Forecast
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necessarily is based upon a number of estimates and assumptions that, while
presented with numerical specificity and considered reasonable by the
Proponents, are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond the
control of the Proponents, and upon assumptions with respect to future business
decisions which are subject to change. The Financial Forecast assumes, among
other things, that the Casino will open as scheduled and will be successful.
The success and the expected opening date of the Casino are subject to
uncertainties and contingencies beyond the Proponents' control. Accordingly,
there can be no assurance that the forecast results will be realized. The
Financial Forecast and actual results will vary, and those variations may be
material. The inclusion of the Financial Forecast herein should not be regarded
as a representation by the Debtors, the Proponents or any other person that the
Financial Forecast will be achieved. Holders of Claims are cautioned not to
place undue reliance on the Financial Forecast. See Section VI.C.3.,
"Confirmation and Consummation Procedure--Confirmation--Feasibility."
7. NO OPERATING HISTORY; LACK OF PRIOR GAMING EXPERIENCE
The success of gaming in a market that has never supported significant
gaming operations, such as New Orleans, cannot be guaranteed or accurately
predicted. The number of visitors to a land-based casino in a new gaming
jurisdiction and their propensity to wager cannot be predicted with any degree
of certainty and there can be no assurance that JCC will be able to operate the
Casino in a profitable manner. In addition, in connection with HJC's bankruptcy
filing, HJC has received a significant amount of negative publicity in and
around Louisiana. Such negative publicity may reduce the number of patrons from
Louisiana and surrounding areas.
JCC has no operating history and has never been involved in
constructing or operating a land-based casino. Although HET, through its
operating subsidiaries and other affiliates, has experience operating casinos,
HET, through its operating subsidiaries and other affiliates, has not operated a
casino as large as the anticipated size of the Casino or a land-based casino
without the full array of services many customers require, such as full-service
hotel and food operations and public transportation services. JCC will rely on
HNOMC to manage the Casino and will grant it a significant degree of
independence in operating matters. There is no assurance that JCC and HNOMC
will be able to operate and manage the Casino on a profitable basis or that cash
flow from operations will be sufficient to pay the principal of, or interest on,
the Term Loans, the New Bonds, the New Contingent Bonds, the Working Capital
Facility, the Subordinated Credit Facility, the Convertible Junior Subordinated
Debentures, JCC's obligations under the HET/JCC Agreement, and JCC's obligations
to the RDC and the LGCB.
8. AVAILABILITY OF TERM LOANS AND WORKING CAPITAL FACILITY
The availability of the Term Loans and the Working Capital Facility is
a condition precedent to the Effective Date of the Plan. The Proponents are
presently attempting to obtain such financing, but neither the Term Loans nor
the Working Capital Facility is presently in place. No assurance can be given
that such facilities will be in place by the Effective Date.
9. NEGOTIATIONS WITH THE STATE
The execution and delivery of the Modified Casino Operating Contract
is a condition precedent to the Effective Date of the Plan. The Modified Casino
Operating Contract will address the
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revised opening schedule for the Casino, the modified size and design of the
Casino, the payments due to the LGCB pursuant to such contract, and other
considerations. On November 9, 1997, the LGCB, among other things, unanimously
approved the Modified Casino Operating Contract for submission to the Governor
of the State with the request that he submit the Modified Casino Operating
Contract to the State legislature for its approval. It is unclear what other
approvals may be required in connection with the Modified Casino Operating
Contract. There can be no assurance that the necessary approvals will be
obtained.
10. COMPETITION
The gaming industry is characterized by intense competition among
companies that, in many instances, have greater resources than will JCC. JCC
will face significant competition on a national, regional and local scale from
gaming operations in Mississippi and, on a regional and local scale, from gaming
operations in Louisiana. In particular, the Mississippi Gulf Coast has recently
emerged as a major gaming destination. There have been several announcements
regarding major gaming destinations on the Mississippi Gulf Coast which will
include lodging, entertainment and food and beverage services. JCC will also
compete for patrons on a national and international scale with large casino
hotel facilities in Las Vegas, Nevada and Atlantic City, New Jersey. Such
facilities operate without pricing restrictions or restrictions on lodging, food
and beverage services, and entertainment, and several of such facilities have
recently expanded to enhance such services. Unlike JCC, the vast majority of
JCC's competitors operate without restrictions on lodging, food and beverage
services, and entertainment. The Proponents believe that the ability to provide
such amenities is a considerable competitive advantage for JCC's competitors.
Further, during the 1997 Regular Session, the State legislature
authorized the use of slot machines at race tracks located in three parishes in
the State (but not Orleans Parish), subject to a 15,000 square foot limitation.
The authorization for this bill was subject to a local option election in each
of the parishes where the race tracks are located and remains subject to further
legislative action on the fees to be imposed. The voters in two of the three
parishes approved the use of slot machines at the race tracks located in those
parishes. There can be no assurance that this authorization will not negatively
impact JCC should slot machines ultimately be permitted at these race tracks.
11. RELIANCE ON SINGLE MARKET
Since JCC has no present intention to have operations other than the
Casino and will be dependent upon visitors to New Orleans and, to a lesser
extent, New Orleans area residents, a decline in the New Orleans economy, a
decline in the convention and tourist travel to New Orleans, a decline in the
New Orleans gaming market or an increase in competition could have a material
adverse effect on JCC. In addition, a reduction or cessation of activities at
the Casino due to flood, severe weather, natural disaster or otherwise could
have a material adverse effect on JCC.
12. LACK OF EXPERIENCED PERSONNEL
A shortage of skilled labor exists in the gaming industry, which may
make it more difficult and expensive to attract and retain qualified employees.
While JCC and HNOMC believe that they will be able to attract and train
qualified individuals to staff the Casino, there is no assurance that
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they will be able to do so. In addition, the Amended GDA and the Amended Canal
Street Casino Lease obligate JCC to comply with the Amended Open Access Program
and Plans to facilitate participation by minorities, women, and disadvantaged
persons and business enterprises in developing, constructing and operating the
Casino. This program may increase the costs of attracting qualified
individuals. In addition, HJC's closure of the Basin Street Casino and
bankruptcy filing may negatively affect JCC's ability to attract qualified
employees.
13. REPURCHASE OF SECURITIES RELATING TO GAMING MATTERS
The Gaming Act, the rules and regulations thereunder, and the Modified
Casino Operating Contract impose certain suitability requirements with respect
to the holding of the New Common Stock, the New Bonds and the New Contingent
Bonds (collectively, the "NEW SECURITIES"). To the extent any holder of New
Securities is required to be found suitable and fails to be so found, such
holder may be required to divest such New Securities at prices substantially
below the market-prices for such securities; to the extent such holder fails to
divest, JCC will have the right to redeem such New Securities and, prior
thereto, such holder will forfeit all benefits of ownership. Any failure to
obtain required qualifications or approvals may, by virtue of requirements
imposed on JCC or JCC Holding, subject such holders to certain requirements,
limitations or prohibitions, including a requirement that such holders liquidate
their New Securities at a time or at a cost that is otherwise unfavorable for
such holders. There can be no assurance that the Gaming Act will not be
interpreted, that additional rules and regulations will not be implemented, or
that new legislation will not be enacted to impose additional restrictions on,
or otherwise prohibit, certain persons from holding securities of the JCC
Entities, including the New Common Stock, the New Bonds and New Contingent
Bonds, or cause such holders to liquidate their New Securities at a time or at a
cost that is otherwise unfavorable for such holders.
14. ABSENCE OF PUBLIC TRADING MARKET
Each of the New Securities are new issues of securities, have no
established trading market and may not be widely distributed. There can be no
assurance that a trading market for any of the New Securities will develop. If
a market does develop, the price of the New Securities may fluctuate and
liquidity may be limited. If a market for any of the New Securities does not
develop, purchasers may be unable to resell such securities for an extended
period of time, if at all. Future trading prices of the New Securities will
depend upon many factors, including, among other things, prevailing interest
rates, JCC's operating results, competitive factors and the market for similar
securities which is subject to various pressures, including, but not limited to,
fluctuating interest rates.
15. UNCERTAINTY REGARDING TAX TREATMENT OF THE NEW BONDS, NEW CONTINGENT
BONDS AND CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
As described below in Section X., "Certain Federal Income Tax
Consequences of the Plan," there exist various uncertainties with respect to the
proper federal income tax treatment of the New Bonds, New Contingent Bonds and
Convertible Junior Subordinated Debentures. As a result, there can be no
assurance that the JCC Entities will obtain the anticipated tax benefits
associated with payments under the New Bonds, New Contingent Bonds and
Convertible Junior Subordinated Debentures, or that the tax consequences to the
Claimholders (as defined below) receiving the New Bonds and New Contingent Bonds
will be as described therein.
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16. UNCERTAINTY REGARDING OBJECTIONS TO CLAIMS
The Plan provides that objections to claims can be filed with the
Bankruptcy Court as late as ninety days after the Effective Date. Although the
Debtors intend to file most of their claims objections prior to the confirmation
hearing, and have, in fact, filed the bulk of them already, it is possible that
a claimant may not know that its claim will be objected to until after the
Effective Date.
17. UNCERTAINTY REGARDING AMOUNT OF CERTAIN CLAIMS
The State has filed proofs of claim in Finance Corp.'s and HNOIC's
Chapter 11 Cases seeking in excess of $3.0 million in franchise taxes. The
Debtors believe these claims to be completely without merit. However, a
settlement offer has been made to the State.
18. UNCERTAINTY REGARDING CITY AND STATE APPROVALS
It is a condition precedent to the Plan that, to the extent required
by the Bankruptcy Code, the LGCB, the State and the City and their respective
agencies and instrumentalities have given or issued, all approvals, consents,
waivers, and permits and licenses or modifications thereof, in each case to the
extent necessary or appropriate to consummate the transactions contemplated by
the Plan. There can be no assurance that the LGCB, the State and the City and
their respective agencies and instrumentalities will give or issue, all of such
approvals, consents, waivers, permits and licenses, or that the LGCB, the State
and the City and their respective agencies and instrumentalities will give or
issue, such approvals, consents, waivers, permits and licenses within the time
period required for the Casino to open in accordance with the present schedule.
See Section III.B., "General Information--Description of the Casino," and
Section IX.A.2, "--Ability to Commence Operations as Scheduled."
19. UNCERTAINTY REGARDING TERMINATION OF CITY AGREEMENT AND CANAL STREET
CASINO LEASE
Various approvals contemplated by the City Agreement were not secured
within the time set forth in the City Agreement with the result that each of the
City, the RDC and HJC has the right to terminate the City Agreement. In
addition, the City and the RDC may now have the right to terminate the City
Agreement, as well as the Canal Street Casino Lease, because, among other
reasons, the Effective Date did not occur by October 1, 1997. None of the
parties has exercised such rights, however. HJC has continued to make rent
payments each month, and the City as a consequence has not exercised its
termination rights. There is no assurance that one or more of the parties to
the City Agreement will not exercise its rights to terminate the City Agreement
or that the City will not terminate the Canal Street Casino Lease. Any such
termination, or a refusal by the City or the RDC to execute and deliver the
Amended Canal Street Casino Lease, would prevent the Effective Date from
occurring.
On October 28, 1997, the City and RDC filed a motion with the
Bankruptcy Court to require HJC to negotiate in good faith pursuant to the City
Agreement to reimburse the City and RDC for their professional fees and expenses
incurred from January 1, 1997 through September 30, 1997 (in the amount of
$603,151.04), and to reimburse the City and RDC for the cost of curtains
(approximately $156,100) in connection with the restoration of the Municipal
Auditorium, the site of the former Basin Street Casino. HJC
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has agreed in principle to reimburse the City and RDC for the professional fees
and expenses incurred since January 1, 1997. HJC is discussing with the City
the schedule for making such reimbursements.
B. HART-SCOTT-RODINO ACT REQUIREMENTS
Any shares of Class A New Common Stock or Class B New Common Stock to
be distributed under the Plan to any entity required to file a Pre-Merger
Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvement
Act 1976, as amended, shall not be distributed until the notification and
waiting periods applicable under such Act to such entity have expired or been
terminated.
X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following summarizes the material federal income tax consequences
expected to result to the holders of Claims ("CLAIMHOLDERS") in Classes A1
(Other Priority Claims), A2 (Non-Bondholder Secured Claims), A3(a)
(Participating Bank and Old Bank Collateral Agent Claims), A3(b)
(Non-Participating Bank Claims), A4 (Bondholder Claims), A5 (Old Indenture
Predecessor Trustee and Old Indenture Predecessor Collateral Agent Claims), A6
(WARN Act Claims), A7 (General Unsecured Claims), B1 (Other Priority Claims), B2
(Bank Claims), B3 (Bondholder Claims), B4 (WARN Act Claims), B5 (General
Unsecured Claims), C1 (Other Priority Claims), C2 (Secured Claims), C3 (WARN Act
Claims), C4 (Unsecured Claims), C5 (General Unsecured Claims) and C6
(NOLDC/Showboat Claim) from the Plan. This summary does not address the tax
consequences to holders of Claims on which there will be no Plan distributions
(Classes A8, A9, B6, B7, C7 and C8, except with respect to Classes A8, B6 and C7
to the extent that holders of Allowed Claims in such Classes receive any amounts
in respect of Assigned Debtor Litigation Claims) or to the purchasers of the
Convertible Junior Subordinated Debentures. This summary is based on the
current provisions of the Internal Revenue Code of 1986, as amended (the
"CODE"), applicable Treasury Regulations, judicial authority and administrative
rulings and practice. There can be no assurance that the Internal Revenue
Service (the "IRS") will not take a contrary view. No ruling from the IRS has
been or will be sought with respect to any aspect of the Plan described herein.
Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements and conclusions set
forth herein. Any such changes or interpretations may or may not be retroactive
and could affect the tax consequences to the Claimholders and the Debtors. It
cannot be predicted at this time whether any tax legislation will be enacted or,
if enacted, whether any tax law changes contained therein would affect the tax
consequences to the Claimholders and the Debtors.
The following summary is for general information only. The tax
treatment of a Claimholder may vary depending upon its particular situation, and
certain Claimholders (including insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, and persons who are not citizens or
residents of the United States or who are foreign corporations, foreign
partnerships or foreign estates or trusts as to the United States) may be
subject to special rules not discussed below.
The IRS has issued various final and proposed regulations dealing with
the inclusion of original issue discount in income and the recognition of income
with respect to contingent payments by holders of debt instruments (the "DEBT
REGULATIONS"). The Debt Regulations are ambiguous in certain respects, and
their precise application to the New Bonds and the New Contingent Bonds is
unclear absent
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additional guidance from the IRS. Accordingly, the ultimate federal income tax
treatment of the New Bonds and New Contingent Bonds may differ from that
described herein.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX.
ACCORDINGLY, EACH CLAIMHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF THE PLAN, INCLUDING THE APPLICABILITY AND
EFFECT OF THE DEBT REGULATIONS AND ANY STATE, LOCAL OR FOREIGN TAX LAWS.
A. TAX CONSEQUENCES TO HOLDERS OF CLAIMS IN CLASSES A1, A2, A3(A), A3(b), A5,
A6, A7, A8, B1, B2, B4, B5, B6, C1, C2, C3, C4, C5, C6 AND C7
A holder of a Claim in these Classes (to the extent such holder
receives any distribution under the Plan) will generally recognize gain or loss
equal to the cash received (plus the fair market value of any other property
received) with respect to its Claim (other than for accrued but unpaid interest)
less its adjusted basis in its Claim (other than for accrued but unpaid
interest). The character of such gain or loss as long-term or short-term
capital gain or loss or as ordinary income or loss will be determined by a
number of factors, including the tax status of the holder, whether the Claim
constitutes a capital asset in the hands of the holder, whether the Claim has
been held for more than one year, whether the Claim was purchased at a discount,
and whether and to what extent the holder had previously claimed a bad debt
deduction.
Holders of Allowed Claims in Classes A8, B6 and C7 will not receive
any distributions under the Plan unless a Valuation Order is entered on or
before the Effective Date. If a Valuation Order is entered on or before the
Effective Date and the fair market value of an interest in the proceeds of the
Assigned Debtor Litigation Claims (net of estimated Litigation Costs and Third
Party Claims) is ascertainable at the Effective Date, each Class A8 Claimholder
will generally recognize gain or loss equal to the fair market value of its
interest in the proceeds of the Assigned Debtor Litigation Claims (net of
estimated Litigation Costs and Third Party Claims (and except to the extent
attributable to accrued but unpaid interest)) less its adjusted basis in its
Claim (other than for accrued but unpaid interest). Each Class B6 and C7
Claimholder will be deemed to receive on account of its Claim any distribution
it may receive as a Class A8 Claimholder. Each Class A8 Claimholder would then
generally recognize capital gain or loss on receipt of the proceeds of the
Assigned Debtor Litigation Claims equal to the amount of such proceeds less such
holder's allocable tax basis therein. If the fair market value of an interest
in the proceeds of the Assigned Debtor Litigation Claims (net of estimated
Litigation Costs and Third Party Claims) is not ascertainable at the Effective
Date (even though a Valuation Order has been entered), then it is possible that
each Class A8 Claimholder would not recognize any gain or loss with respect to
its Claim until the actual receipt of the proceeds of the Assigned Debtor
Litigation Claims. EACH CLASS A8 CLAIMHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR
AS TO WHETHER THE FAIR MARKET VALUE OF THE ASSIGNED DEBTOR LITIGATION CLAIMS
(NET OF ESTIMATED LITIGATION COSTS AND THIRD PARTY CLAIMS) IS ASCERTAINABLE AT
THE EFFECTIVE DATE.
B. TAX CONSEQUENCES TO HOLDERS OF CLAIMS IN CLASSES A4 AND B3 (BONDHOLDERS)
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This discussion assumes that the Bondholders hold the Old Bonds as
"capital assets" within the meaning of Code Section 1221. Based on this
assumption and except as specifically noted below, any gain or loss recognized
by a Bondholder on the disposition of the Old Bonds would be long-term capital
gain or loss if the Bondholder's holding period with respect to the Old Bonds
exceeds one year. Otherwise, any such gain or loss would be short-term capital
gain or loss. The maximum federal income tax rate applicable to capital gains
and ordinary income for corporations is currently 35%. The maximum ordinary
federal income tax rate for individuals, estates and trusts is currently 39.6%,
whereas the maximum long-term capital gains rate for such taxpayers is currently
20% for most capital assets (including the Old Bonds) held for more than 18
months and 28% for such assets held for more than one year but not more than 18
months. Capital losses generally may be used only to offset capital gains.
1. TREATMENT OF JCC HOLDING, JCC AND JCC INTERMEDIARY AS A SINGLE TAXABLE
ENTITY
Because JCC and JCC Intermediary (if formed) will each be organized as
a limited liability company with all of its membership interests held by a
single owner, under recently issued Treasury Regulations, each entity may be
ignored for federal income tax purposes. As a result, for federal income tax
purposes, the New Bonds and the New Contingent Bonds will be treated as
indebtedness of JCC Holding, and all of the assets of HJC will be considered to
be assets of JCC Holding. JCC Holding, JCC Intermediary (if formed) and JCC
intend to file tax returns and elections consistent with such treatment.
2. EXCHANGE OF OLD BONDS BY BONDHOLDERS
Under the Plan, the assets of HJC will vest in JCC, and the
Bondholders will receive shares of Class A New Common Stock representing 50.1%
of the value of JCC Holding's outstanding New Common Stock, the New Bonds and
the New Contingent Bonds in exchange for their canceled Old Bonds (and for
entering into certain releases). HJC, JCC Holding and JCC have agreed, and the
Plan provides, that these transfers will be treated, for federal income tax
purposes, as (1) a deemed exchange by the Bondholders of the Old Bonds for all
of the assets of HJC (including any HJC claims assigned to JCC) and (2) a deemed
exchange by the Bondholders of such HJC assets (not including any HJC claims
assigned to JCC) with JCC Holding for shares of newly-issued Class A New Common
Stock, the New Bonds and the New Contingent Bonds (each of which shall be
considered obligations of JCC Holding as described above). The parties'
agreement as to the tax treatment of these transfers is not binding on the IRS
or the courts, and there can be no assurance that the IRS would not assert
another characterization of the transfers that could have different (possibly
less favorable) federal income tax consequences to JCC Holding or the
Bondholders. Certain of such characterizations could result in certain
Bondholders recognizing gains (but no Bondholders recognizing losses) on the
asset transfers. EACH BONDHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR AS TO
THE IMPACT ON IT OF A POSSIBLE RECHARACTERIZATION OF THESE TRANSFERS.
Upon a deemed exchange of an Old Bond for an allocable portion of
HJC's assets (including any HJC claims assigned to JCC), a Bondholder would
recognize gain or loss equal to the difference between (i) the fair market
value of such portion of the HJC assets (including its proportionate interest
in the proceeds of the Assigned Litigation Claims (net of estimated
Litigation Costs and Third Party Claims) (and except to the extent
attributable to, and taxable as, accrued interest)) and (ii) the Bondholder's
tax basis in the Old Bond. If the fair market value of an interest in the
proceeds of the
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Assigned Litigation Claims (net of estimated Litigation Costs and Third Party
Claims) is not ascertainable at the Effective Date, then it is possible that
a Bondholder would recognize gain or loss with respect to its Claim without
regard to such interest. EACH BONDHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR
AS TO WHETHER THE FAIR MARKET VALUE OF THE ASSIGNED LITIGATION CLAIMS (NET OF
ESTIMATED LITIGATION COSTS AND THIRD PARTY CLAIMS) IS ASCERTAINABLE AT THE
EFFECTIVE DATE.
HJC, JCC Holding and JCC have agreed to commission an appraisal of
HJC's assets as of the Effective Date and to treat the fair market value of such
assets as being equal to the appraised amounts. There can be no assurance that
the IRS will not assert a higher or lower valuation of the HJC assets. Gain or
loss recognized by a holder generally will be capital gain or loss, unless the
Old Bond was acquired at a "market discount" (I.E., generally at a price below
its face amount, subject to a statutory DE MINIMIS exception), in which case a
Bondholder would recognize ordinary interest income equal to the lesser of (i)
the amount of gain recognized with respect to such Old Bond (other than the
amount thereof attributable to, and taxable as, accrued stated interest) or (ii)
the portion of the market discount that accrued while the Bondholder held the
Old Bond. This rule would not apply if the Bondholder had previously elected to
include market discount in income as the discount accrued or elected to treat
all interest on the Old Bond as original issue discount.
A Bondholder generally would recognize capital gain or loss on receipt
of the proceeds of the Assigned Litigation Claims equal to the amount of such
proceeds less such holder's allocable tax basis therein. However, if the fair
market value of an interest in the proceeds of the Assigned Litigation Claims
(net of estimated Litigation Costs and Third Party Claims) was not ascertainable
at the Effective Date, then a Bondholder generally would increase any capital
gain (or amount of ordinary income under the market discount rules discussed
below), or decrease any capital loss, recognized previously with respect to the
Old Bonds by the amount of the Assigned Litigation Claims actually received.
A Bondholder may recognize gain on the deemed contribution of such
Bondholder's allocable portion of the HJC assets to JCC Holding if, and to the
extent that, (a) the sum of (i) the fair market value of the Class A New Common
Stock plus (ii) the amount realized with respect to the New Bonds and New
Contingent Bonds (determined in accordance with the discussion below) received
in exchange therefor exceeds (b) such Bondholder's basis in such assets (which
should be equal to the fair market value of such assets, as determined in
accordance with the second preceding paragraph). However, any such gain
recognized will not exceed the amount realized with respect to the New Bonds and
New Contingent Bonds received by such Bondholder. It is possible that the IRS
may require that this gain recognition calculation be performed on an
asset-by-asset basis (requiring the allocation of a portion of the Class A New
Common Stock, the New Bonds and the New Contingent Bonds to each asset
contributed to JCC Holding) rather than on an aggregate basis, although such an
approach should not materially affect the amount or character of any gain
recognized. Bondholders may not recognize a loss on such deemed contribution.
The amount realized by a Bondholder with respect to the New Bonds and
New Contingent Bonds would generally be their respective issue prices (I.E., the
face amount for the New Bonds and zero for the New Contingent Bonds, as set
forth in Section X.B.4., "--Tax Treatment of New Bonds and New Contingent
Bonds"), plus, if reasonably ascertainable, the fair market value of the
contingent payments payable on the New Bonds and New Contingent Bonds. It is
not anticipated that such contingent
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payments will be considered to have a reasonably ascertainable fair market value
on the Effective Date. Alternatively, it is possible that the IRS would assert
that the amount realized with respect to the New Bonds and New Contingent Bonds
should be determined by reference to their respective fair market values on the
Effective Date rather than to their respective issue prices. EACH BONDHOLDER
SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE DETERMINATION OF THE AMOUNT
REALIZED WITH RESPECT TO THE NEW BONDS AND NEW CONTINGENT BONDS ON THE EFFECTIVE
DATE.
A Bondholder's basis in the Class A New Common Stock should be equal
to (a) the fair market value of its portion of the HJC assets (as determined in
accordance with the fourth preceding paragraph) deemed contributed to JCC
Holding, less (b) the amount realized with respect to the New Bonds and New
Contingent Bonds it receives, plus (c) the gain (if any) recognized by the
Bondholder on the deemed contribution of assets to JCC Holding. A Bondholder's
holding period with respect to the Class A New Common Stock would begin on the
day after the Effective Date.
A Bondholder's tax basis in a New Bond and a New Contingent Bond
should be equal to the amount realized with respect to each Bond on the
Effective Date and its tax basis in its proportionate interest in the Assigned
Litigation Claims should be equal to the fair market value thereof on the
Effective Date (or zero if such value is not ascertainable at such time). A
Bondholder's holding period with respect to the New Bonds, the New Contingent
Bonds and its proportionate interest in the Assigned Litigation Claims should
begin on the day after the Effective Date.
The discussion herein assumes that none of the Old Bonds, the New
Bonds or the New Contingent Bonds will be treated for purposes of the Debt
Regulations as "publicly traded" property during a 60-day period beginning 30
days before the Effective Date. The application of the Debt Regulations in this
regard is ambiguous. If any of such bonds were treated as so "publicly traded,"
the Bondholders' gain or loss on the deemed exchanges described above may be
derived from the fair market value of such bonds based on trading prices on or
about the Effective Date instead of the appraised asset values and the
respective issue prices of the New Bonds and New Contingent Bonds as determined
below.
3. CLASSIFICATION OF NEW BONDS AND NEW CONTINGENT BONDS AS EQUITY RATHER
THAN DEBT
The New Bonds and New Contingent Bonds have legal and other economic
terms typically associated with indebtedness and are intended to create a
debtor-creditor relationship between JCC and the holders thereof. Consequently,
JCC and JCC Holding intend to treat the New Bonds and the New Contingent Bonds
as debt of JCC Holding for federal income tax purposes, and the discussion
herein assumes such treatment. Nevertheless, the IRS may assert that, because
all payments on the New Contingent Bonds (and certain payments on the New Bonds)
are contingent upon future positive cash flows being generated by JCC, the New
Contingent Bonds (or, possibly, both types of Bonds) should be classified as
equity, rather than debt, for federal income tax purposes. There can be no
assurance that the IRS would not so challenge the characterization of the Bonds
or that a court would not sustain such a challenge. If it were determined that
either type of Bond constitutes equity for federal income tax purposes, the tax
consequences to the holders of such instrument would be substantially different
from those described herein. Among other effects, such a recharacterization
would result in stated interest payments and/or contingent payments being
recharacterized as corporate dividends, resulting in the loss of substantial
interest deductions and other tax benefits for JCC Holding. EACH BONDHOLDER IS
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URGED TO CONSULT ITS OWN TAX ADVISORS AS TO THE IMPACT ON IT OF A POSSIBLE
RECHARACTERIZATION OF THE NEW BONDS AND/OR THE NEW CONTINGENT BONDS AS EQUITY.
Moreover, if the New Bonds or the New Contingent Bonds (or the
Convertible Junior Subordinated Debentures) were to be treated as equity for
federal income tax purposes, then it is possible that JCC will not be ignored
for federal income tax purposes, but rather will be treated as either an
association taxable as a corporation or a partnership. JCC currently intends to
file a protective election with the IRS electing to be treated as an association
taxable as a corporation for federal income tax purposes in the event that any
of the debt instruments are recharacterized as equity. Because the IRS has not
yet issued any regulations regarding such an election, the form and
effectiveness of this election is not certain. JCC will file a protective
election if, prior to the Effective Date, it can determine, to the satisfaction
of the Bondholders Committee, that the IRS will respect such a protective
election. If JCC cannot so determine, JCC has agreed to either (a) file an
election that will cause it to be treated as a corporation for federal income
tax purposes, or (b) with the consent of the Bondholders Committee, take other
appropriate action to prevent it from being treated as a partnership for federal
income tax purposes.
If JCC were to be a corporation for federal income tax purposes, the
New Bonds and the New Contingent Bonds constituting debt for federal income tax
purposes would be an obligation of JCC (rather than JCC Holding). In addition,
a portion of the HJC assets that are being deemed exchanged with JCC Holding for
the New Bonds and New Contingent Bonds would instead be exchanged with JCC
directly. Such alternative characterizations should not adversely affect the
tax consequences to the Bondholders in a material manner. EACH BONDHOLDER IS
URGED TO CONSULT ITS OWN TAX ADVISOR AS TO THE IMPACT OF SUCH ALTERNATIVE
CHARACTERIZATIONS.
4. TAX TREATMENT OF NEW BONDS AND NEW CONTINGENT BONDS
a. STATED INTEREST, ORIGINAL ISSUE DISCOUNT AND CONTINGENT PAYMENTS.
Because the New Bonds permit JCC to make stated interest payments for the first
several years in additional New Bonds ("PIK BONDS"), and because both the New
Bonds and the New Contingent Bonds provide for contingent payments, both types
of Bonds will be subject to special rules governing the accrual of interest and
original issue discount for federal income tax purposes contained in the Debt
Regulations. The proper application of these rules to both types of Bonds is,
however, unclear absent additional guidance regarding the application of the
Debt Regulations to these specific contingent payment obligations. As a result,
there can be no assurance that the IRS will accept JCC Holding's application of
the Debt Regulations as contemplated herein. Moreover, as set forth above, the
discussion herein assumes that none of the Old Bonds, the New Bonds or the New
Contingent Bonds will be "publicly traded" for purposes of the Debt Regulations,
although the application of the Debt Regulations in this regard is ambiguous.
Accordingly, while the discussion herein is based on the Debt Regulations and
assumes no "public trading" for purposes of the Debt Regulations, the ultimate
federal income tax treatment of the New Bonds and New Contingent Bonds may
differ from that described herein. EACH HOLDER OF THE NEW BONDS AND NEW
CONTINGENT BONDS IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT TO THE
APPLICATION OF THE DEBT REGULATIONS TO THE NEW BONDS AND NEW CONTINGENT BONDS.
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b. APPLICATION OF THE DEBT REGULATIONS TO THE NEW BONDS. Under the
Debt Regulations, debt instruments that provide for both contingent and
non-contingent payments (such as the New Bonds) are separated into two distinct
components, and each is treated as a separate debt instrument for purposes of
applying the original issue discount rules. The non-contingent component will
initially have a stated interest rate of 5.867% that will increase over each of
the next five semi-annual periods by a pre-determined amount. In the fourth and
fifth years the stated interest rate will be 6.214% and will be 8% thereafter.
Based on current market rates, the non-contingent component should have an issue
price equal to the face amount ($187.5 million) of the New Bonds. All interest
with respect to the non-contingent component of the New Bonds will be treated as
original issue discount. Each holder of a New Bond will be required to include,
using a constant yield method, such original issue discount in ordinary income
as interest for federal income tax purposes before receiving cash to which a
portion of such interest income is attributable. The amount of such discount
accruing in any full accrual period for the first five years will be somewhat
greater than, and for the remaining years will be somewhat less than, the then
stated interest rate on the New Bonds.
The contingent component of the New Bonds (comprised solely of all
contingent payments thereon) would not be subject to the original issue discount
rules. Rather, all payments with respect to such contingent component would be
recharacterized under the Debt Regulations as, in part, a payment of principal
and, in part, a payment of stated interest. The terms of the New Bonds treat
all contingent payments as being comprised of principal and interest thereon at
a 12% annual rate from the date of issue (with semi-annual compounding). As an
illustration, and assuming that (1) the New Bonds are issued on February 28,
1998, (2) PIK Bonds are issued for the first six interest payment dates, (3) all
contingent payments on the New Bonds are made and each semi-annual payment is
equal to one-half of the annual maximum payment,**** and (4) the IRS accepts JCC
Holding's application of the Debt Regulations to the
- ---------------
**** Under the New Bonds, the maximum aggregate contingent payment for the
first semi-annual period of each year is approximately $8.077 million,
and the maximum aggregate contingent payment for the second
semi-annual period of each year is the difference between (a) $15
million and (b) the amount of aggregate contingent payment made for
the first semi-annual period of such year (approximately $6.923
million if the maximum payment is made for the first semi-annual
period). The actual contingent payment to be made under the New Bonds
for each semi-annual period of each year can be expected to vary from
the illustration above. In addition, under certain circumstances JCC
may issue PIK Bonds for one or more additional interest payment dates
as well, which would result in higher semi-annual non-contingent OID
for subsequent periods and a higher principal repayment at maturity.
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New Bonds, payments on the aggregate $187,500,000 original principal amount of
the New Bonds would be allocated between principal and interest as follows
(amounts in 000s):
<TABLE>
<CAPTION>
Payment Semi-Annual Semi-Annual Semi-Annual
Date Non-Contingent OID Contingent Interest Contingent Principal
---- ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
8/31/98 6,548.61 424.53 7,075.47
2/28/99 6,777.33 825.03 6,674.97
8/31/99 7,014.03 1,202.86 6,297.14
2/28/00 7,259.01 1,559.30 5,940.70
8/31/00 7,512.53 1,895.56 5,604.44
2/28/01 7,774.92 2,212.80 5,287.20
8/31/01 8,046.46 2,512.07 4,987.93
2/28/02 8,084.43 2,794.41 4,705.59
8/31/02 8,123.73 3,060.76 4,439.24
2/28/03 8,164.40 3,312.04 4,187.96
8/31/03 8,206.49 3,549.09 3,950.91
2/28/04 8,180.20 3,772.73 3,727.27
8/31/04 8,152.99 3,983.71 3,516.29
2/28/05 8,124.83 4,182.74 3,317.26
8/31/05 8,095.69 4,370.51 3,129.49
2/28/06 8,065.53 4,547.65 2,952.35
8/31/06 8,034.32 4,714.77 2,785.23
2/28/07 8,002.01 4,872.42 2,627.58
8/31/07 7,968.58 5,021.15 2,478.85
2/28/08 7,933.98 5,161.46 2,338.54
8/31/08 7,898.17 5,293.83 2,206.17
2/28/09 7,861.11 5,418.71 2,081.29
-------- --------- --------
171,829.35 74,688.13 90,311.87
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
Under the Debt Regulations, a contingent interest payment is taxable
to the holder in the year it is paid. Contingent principal payments are treated
as a return of capital, thereby reducing the holder's basis in the contingent
component and, to the extent they exceed such basis, are treated as gain on sale
or exchange of the contingent component. Because a Bondholder's basis in the
contingent component of a New Bond acquired upon issuance should be zero, all
contingent principal payments received should be treated as gain on sale or
exchange of such contingent component. Under general
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federal income tax principles, any gain recognized on such a principal payment
would normally be a capital gain to the holder.
If, and to the extent that, JCC's EBITDA results for any year are less
than the amount required to cause the maximum contingent payments for such year
to become due, scheduled contingent payments for such year will never be made.
The failure of any contingent payment to become payable should have no federal
income tax consequences for either the holders of New Bonds or to JCC Holding.
c. APPLICATION OF THE DEBT REGULATIONS TO THE NEW CONTINGENT BONDS.
Because the New Contingent Bonds provide solely for contingent payments, such
Bonds will be treated as having an issue price of zero and generally in the same
manner as the contingent component of the New Bonds described above. Hence, all
payments thereunder would be recharacterized as part principal and part
interest. The terms of such Bonds treat the contingent payments as being
comprised of principal and interest thereon at a 16% annual rate from the date
of issue (with semi-annual compounding). As an illustration, and assuming that
(1) the New Contingent Bonds are issued on February 28, 1998, (2) all contingent
payments on the New Contingent Bonds are made and each semi-annual payment is
equal to one-half of the annual maximum payment**** and (3) the IRS accepts JCC
Holding's application of the Debt Regulations to the New Contingent Bonds, the
maximum total payments made with respect to the New Contingent Bonds would be
allocated between principal and interest as follows (amounts in 000s):
Payment Semi-Annual Semi-Annual
Date Contingent Interest Contingent Principal
---- ------------------- --------------------
8/31/98 678.49 8,481.03
2/28/99 1,306.71 7,852.81
8/31/99 1,888.40 7,271.12
2/28/00 2,427.00 6,732.52
8/31/00 2,925.71 6,233.81
2/28/01 3,387.47 5,772.05
8/31/01 3,815.03 5,344.49
2/28/02 4,210.92 4,948.60
8/31/02 4,577.48 4,582.04
2/28/03 4,916.89 4,242.63
8/31/03 5,231.16 3,928.36
2/28/04 5,522.15 3,637.37
- ---------------
**** Under the New Contingent Bonds, the maximum aggregate contingent
payment for the first semi-annual period of each year will be
approximately $9.864 million, and the maximum aggregate contingent
payment for the second semi-annual period of each year will be the
difference between (a) $18.319 million and (b) the amount of aggregate
contingent payment made for the first semi-annual period of such year
(approximately $8.455 million if the maximum payment is made for the
first semi-annual period). The actual contingent payment to be made
under the New Contingent Bonds for each semi-annual period of each
year can be expected to vary from the illustration above.
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Payment Semi-Annual Semi-Annual
Date Contingent Interest Contingent Principal
---- ------------------- --------------------
8/31/04 5,791.58 3,367.94
2/28/05 6,041.06 3,118.46
8/31/05 6,272.06 2,887.46
2/28/06 6,485.94 2,673.58
8/31/06 6,683.99 2,475.53
2/28/07 6,867.36 2,292.16
8/31/07 7,037.15 2,122.37
2/28/08 7,194.36 1,965.16
8/31/08 7,339.93 1,819.59
2/28/09 7,474.71 1,684.81
-------- --------
108,075.55 93,433.89
---------- ---------
---------- ---------
Under the Debt Regulations, a contingent interest payment is taxable
to the holder in the year it is paid. Contingent principal payments are treated
as a return of capital, thereby reducing the holder's basis in a New Contingent
Bond and, to the extent they exceed such basis, are treated as gain on sale or
exchange of a New Contingent Bond. Because a Bondholder's basis in a New
Contingent Bond acquired upon issuance should be zero, all contingent principal
payments received should be treated as gain on sale or exchange of such Bond.
Under general federal income tax principles, any gain recognized on such a
principal payment would normally be a capital gain to the holder.
If, and to the extent that, JCC's EBITDA results for any year are less
than the amount required to cause the maximum contingent payments for such year
to become due, scheduled contingent payments for such year will never be made.
The failure of any contingent payment to become payable should have no federal
income tax consequences for either the holders of New Contingent Bonds or to JCC
Holding.
d. APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS. Generally, under
Section 163(e)(5) of the Code, original issue discount is not deductible until
paid with respect to any corporate debt instrument that (i) has a maturity date
that is more than five years from the date of issue, (ii) has a yield to
maturity that equals or exceeds five percentage points over the applicable
federal rate for the calendar month in which the obligation is issued and (iii)
has "significant original issue discount" (generally if, as of the close of any
accrual period ending more than five years after the date of issue, payment of
more than one year's accrued interest has been deferred). Moreover, if the debt
instrument's yield to maturity exceeds the applicable federal rate plus six
percentage points, a ratable portion of the issuing corporation's deduction for
original issue discount is denied (the "DISQUALIFIED OID"). For purposes of the
dividends-received deduction under Section 243 of the Code, the Disqualified OID
will be treated as a dividend to the extent it would have been so treated if it
had been distributed by the issuing corporation with respect to its stock.
The amount of interest or original issue discount that is deductible
each year on contingent payment debt instruments is determined under the Debt
Regulations. Because all interest under the New Contingent Bonds is taxable
when paid, it does not appear that the New Contingent Bonds will have
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"significant original issue discount" for purposes of the Code Section 163(e)(5)
rules and thus will not be subject to any of the original issue discount
deduction limitations therein. Based on current market interest rates, it is
possible that the yield to maturity on the New Bonds (if viewed as a single
instrument, rather than as separate non-contingent and contingent instruments as
under the Debt Regulations) may exceed the applicable federal rate by five or
more percentage points. However, the application of the Code Section 163(e)(5)
rules to the New Bonds is uncertain.
e. SUBSEQUENT PURCHASERS. The Debt Regulations require a holder of
a contingent payment debt instrument whose tax basis in the instrument is
different from its adjusted issue price (such as a subsequent purchaser) to
allocate such basis first, to the noncontingent component of the instrument in
an amount up to the adjusted issue price of such component and then, the balance
of such basis to the contingent component. The Debt Regulations provide that
any difference between the holder's basis in the noncontingent component and the
adjusted issue price of the noncontingent component is taken into account under
the market discount, amortizable bond premium and acquisition premium rules
discussed below (although it would not appear that any premium would exist with
respect to the New Bonds or the New Contingent Bonds upon issuance). Contingent
payments treated as principal payments reduce the holder's basis in the
contingent component and, to the extent that they exceed such basis, are treated
as capital gain. When there are no further contingent payments due on the
instrument, any remaining basis in the contingent component would be deductible
as a capital loss.
f. AMORTIZABLE BOND PREMIUM AND ACQUISITION PREMIUM. Generally, if
the tax basis of an obligation (usually, its purchase price) held as a capital
asset exceeds the sum of all amounts payable on the obligation after the
acquisition date (other than amounts treated as interest) such excess may
constitute amortizable bond premium that the holder may elect to amortize under
the constant interest rate method over the period from his acquisition date to
the obligation's maturity date. The amortizable bond premium is treated as an
offset to interest income on the related security for federal income tax
purposes. A holder who elects to amortize bond premium must reduce his tax
basis in the related obligation by the amount of bond premium used to offset
interest income. Proposed Treasury regulations provide that special rules (not
yet promulgated) may apply to debt instruments that provide for contingent
payments. ACCORDINGLY, A HOLDER ACQUIRING A NEW BOND OR NEW CONTINGENT BOND AT
A PREMIUM IS URGED TO CONSULT ITS OWN TAX ADVISER AS TO THE APPLICATION OF THE
AMORTIZABLE BOND PREMIUM RULES TO SUCH BONDS.
A debt instrument will be purchased at an acquisition premium if its
tax basis is less than or equal to the sum of all amounts payable on the
obligation after the acquisition date (other than amounts treated as interest),
but greater than the instrument's adjusted issue price (such excess constituting
the acquisition premium). The amount of original issue discount that the holder
must include in income over the term of the debt instrument will be reduced
ratably by the amount of acquisition premium. To the extent that any
acquisition premium reduces the amount of original issue discount includable in
a holder's income with respect to the debt instruments, such premium will not
also be deductible as "amortizable bond premium" under the Code.
Because the New Contingent Bonds provide solely for contingent
payments, it does not appear that the amortizable bond premium and acquisition
premium rules described above should apply to them.
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g. MARKET DISCOUNT. Holders should be aware that the resale of any
New Bonds may be affected by the market discount provisions of the Code, which
would generally require the holder to treat all or a portion of any gain
recognized on the disposition of a New Bond acquired at a market discount as
ordinary interest income at the time of the disposition. A purchase at a market
discount includes (subject to a statutory DE MINIMIS exception) a purchase or
exchange after the original issuance at a price or value below the stated
redemption price at maturity, or, in the case of a debt instrument issued with
original issue discount, at a price below (a) its "issue price," plus (b) the
amount of original issue discount includable in income by all prior holders of
the debt instrument (without regard to the rule discussed above with respect to
subsequent purchasers), less (c) all cash payments (other than payments
constituting qualified stated interest) received by such previous holders. The
market discount rules also provide that a holder who acquires a debt instrument
at a market discount (and who does not elect to (a) treat all interest thereon
as original issue discount or (b) include such market discount in income on a
current basis) may be required to defer a portion of any interest expense that
may otherwise be deductible on any indebtedness incurred or maintained to
purchase or carry such debt instrument until the holder disposes of the debt
instrument in a taxable transaction.
A holder of a debt instrument acquired at a market discount may elect
to include the market discount in income as the discount thereon accrues, either
on a straight line basis or, if elected, on a constant interest rate basis. The
current inclusion election, once made, applies to all market discount
obligations acquired by such holder on or after the first day of the first
taxable year to which the election applies, and may not be revoked without the
consent of the IRS. If a holder of a New Bond elects to include market discount
in income on a current basis, the foregoing rules with respect to the
recognition of ordinary income on a sale or other disposition of such New Bond
and the deferral of interest deductions on indebtedness related to such New Bond
would not apply.
Because the New Contingent Bonds provide solely for contingent
payments, it does not appear that the market discount rules described above
should apply to them.
h. DISPOSITION OF NEW BONDS AND NEW CONTINGENT BONDS. Under the
Debt Regulations, a holder of a New Bond or a New Contingent Bond must allocate
the amount of cash and fair market value of property received (other than
amounts attributable to, and taxable as, accrued stated interest) upon the sale,
exchange, redemption or other taxable disposition of a New Bond or a New
Contingent Bond first, to the noncontingent component in an amount up to the
total of the adjusted issue price of such component and then, the balance to the
contingent component. The holder will recognize gain or loss measured by the
difference between (i) the amount allocated to the noncontingent component and
(ii) the holder's tax basis in such component (as increased by any original
issue discount and market discount previously included in income by the holder).
Amounts allocated to the contingent component are treated as contingent payments
made on the date of sale, exchange or retirement and are characterized as
principal and interest under the rules discussed above. Subject to the original
issue discount and market discount rules and the Debt Regulations discussed
above, any such gain or loss will generally be long-term capital gain or loss,
provided the instrument was a capital asset in the hands of the holder and had
been held for more than one year.
159
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5. TAX TREATMENT OF RECEIPT OF COMMON STOCK FOR CERTAIN RELEASES
While not free from doubt, it appears that additional Class A New
Common Stock received by a Bondholder in exchange for entering into certain
releases may be viewed as additional consideration for such Bondholder's Old
Bonds, which generally would increase any capital gain, or decrease any capital
loss, recognized thereon. Each Bondholder is urged to consult its own tax
advisor as to the consequences to it of such receipt for federal income tax
purposes.
6. TAX TREATMENT OF PENALTIES FOR FAILURE TO REGISTER CLASS A NEW COMMON
STOCK, NEW BONDS AND NEW CONTINGENT BONDS
While not entirely free from doubt, it appears that any holder of
Class A New Common Stock, New Bonds or New Contingent Bonds that receives a cash
payment as a result of the failure to obtain proper registration of such
securities under applicable securities laws will recognize ordinary taxable
income in an amount equal to such amount received. Each holder is urged to
consult its own tax advisor as to the consequences to it of such receipt for
federal income tax purposes.
7. BACKUP WITHHOLDING AND REPORTING REQUIREMENTS
Backup withholding at the rate of 31% may apply with respect to
interest, original issue discount and other amounts paid on the New Bonds and
the New Contingent Bonds and dividends and other amounts paid with respect to
the Class A New Common Stock unless the holder (i) is a corporation, a
qualifying financial institution or comes within certain other exempt categories
and, when required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A holder who does not provide the issuer with his correct
taxpayer identification number may be subject to penalties imposed by the IRS.
Any amount withheld under these rules will be creditable against the holder's
federal income tax liability, and will be refundable to the extent that it
results in an overpayment of tax.
JCC Holding will report to holders and to the IRS the amount of
"reportable payments" (including any interest or other amounts paid and any
original issue discount accrued) and any amount withheld during each calendar
year.
C. TAX CONSEQUENCES TO JCC HOLDING
JCC Holding should not recognize gain or loss on the issuance of the
Class A New Common Stock, the New Bonds and the New Contingent Bonds in exchange
for the HJC assets. JCC Holding should generally take a basis in such assets
received equal to the Bondholder's basis in such assets (plus any gain
recognized by the Bondholders on their transfer of HJC assets to JCC Holding).
The Convertible Junior Subordinated Debentures have legal and economic
terms typically associated with indebtedness and are intended to create a
debtor-creditor relationship between JCC and the holders thereof. Consequently,
JCC and JCC Holding intend to treat such debentures as debt for federal income
tax purposes. Nevertheless, the IRS may assert that such debentures should be
classified as equity for federal income tax purposes. There can be no assurance
that the IRS would not so challenge the characterization of such debentures or
that a court would not sustain such a challenge. If such
160
<PAGE>
debentures were to be recharacterized as equity, then interest payments thereon
would not be deductible for tax purposes by JCC Holding.
In addition, even if the Convertible Junior Subordinated Debentures
are treated as debt for federal income tax purposes, recent Code amendments may
prohibit JCC Holding from deducting interest payments made thereon due to the
debentures' conversion and redemption features. It is unclear whether the
debentures will qualify for a transition rule or "grandfather" exception to
these amendments.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS
FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
CLAIMHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES OF THE PLAN DESCRIBED HEREIN AND THE CONTINUING OWNERSHIP AND
DISPOSITION OF THE CLASS A NEW COMMON STOCK, NEW BONDS AND NEW CONTINGENT BONDS,
INCLUDING THE POSSIBLE RECHARACTERIZATION OF THE BONDS AS EQUITY AND THE
APPLICATION OF THE DEBT REGULATIONS AND STATE, LOCAL AND FOREIGN TAX LAWS.
NEITHER THE PROPONENTS NOR THEIR PROFESSIONALS SHALL HAVE ANY LIABILITY TO ANY
PERSON OR CLAIMHOLDER ARISING FROM OR RELATED TO THE FEDERAL, STATE OR LOCAL TAX
CONSEQUENCES OF THE PLAN ON THE FOREGOING DISCUSSION.
XI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed and consummated, the Debtors'
alternatives include (i) liquidation of the Debtors under chapter 7 of the
Bankruptcy Code and (ii) the preparation and presentation of an alternative plan
or plans of reorganization.
A. LIQUIDATION UNDER CHAPTER 7
If no chapter 11 plan can be confirmed, the Chapter 11 Cases may be
converted to cases under chapter 7 of the Bankruptcy Code in which a trustee
would be elected or appointed to liquidate the assets of the Debtors. A
discussion of the effect that a chapter 7 liquidation would have on the recovery
of holders of Claims and Equity Interests is set forth in Section VI.C.4.,
"Confirmation and Consummation Procedure--Confirmation--Best Interests Test."
The Debtors believe that liquidation under chapter 7 would result in (i) smaller
distributions being made to creditors than those provided for in the Plan
because of the additional administrative expenses involved in the appointment of
a trustee and attorneys and other professionals to assist such trustee, (ii)
additional expenses and claims, some of which would be entitled to priority,
which would be generated during the liquidation and from the rejection of leases
and other executory contracts in connection with a cessation of the Debtors'
operations and (iii) the failure to realize the greater, going concern value of
the Debtors' assets.
B. ALTERNATIVE PLAN OR PLANS OF REORGANIZATION
If the Plan is not confirmed, the Debtors or any other party in
interest could attempt to formulate a different plan or plans of reorganization.
Such a plan might involve either a reorganization and continuation of the
Debtors' business or an orderly liquidation of their assets. With respect to an
alternative plan, various other alternatives in connection with the extensive
negotiation process involved in the formulation and development of the Plan have
been considered by the Debtors, the Committees and the State.
161
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ITT Corporation ("ITT") and Hilton Hotels Corporation ("HILTON") have
previously expressed an interest in proposing a plan for one or more of the
Debtors. ITT indicated in March 1996, in its response to HJC's first request
for an extension of the time within which HJC had the exclusive right to file a
plan of reorganization, that ITT was working toward submitting a plan of
reorganization under which the State, the City, the Bondholders, and unsecured
creditors would receive at least as much, if not more, than would be available
under any competing plan. ITT has not come forward with any plan, and has not
opposed any of the Debtors' subsequent requests for extensions of time within
which they have the exclusive right to file and solicit acceptances of a plan of
reorganization. Hilton has stated publicly that it is no longer interested in
pursuing a transaction involving the Debtors, and no other party has approached
the Debtors with any proposal to fund a plan of reorganization. In addition, no
one opposed the Debtors' requests for extensions of the time within which they
would have the exclusive right to solicit acceptances of a plan of
reorganization through April 30, 1997. Furthermore, no one has proposed a
competing plan of reorganization since exclusivity terminated. Based upon the
lack of interest by third parties in proposing a plan of reorganization for the
Debtors, among other things, the Debtors believe that the value being received
by their estates under the Plan is the highest value possible.
In a liquidation under chapter 11 of the Bankruptcy Code, the assets
of the Debtors would be sold in an orderly fashion over a more extended period
of time than in a liquidation under chapter 7, and a trustee need not be
appointed. Accordingly, creditors would receive greater recoveries than in a
chapter 7 liquidation. Although a chapter 11 liquidation is preferable to a
chapter 7 liquidation, the Debtors believe that a liquidation under chapter 11
is a much less attractive alternative to creditors because a greater return to
creditors is provided for in the Plan. Consequently, the Debtors believe that
the Plan, as opposed to any of the alternatives, enables the Debtors to emerge
successfully and expeditiously from chapter 11, preserves their business and
allows creditors to realize the highest recoveries under the circumstances.
XII. CONCLUSION AND RECOMMENDATION
The Proponents believe that confirmation and implementation of the
Plan is preferable to any of the alternatives described above because it will
provide the greatest recoveries to holders of Claims. In addition, other
alternatives would involve significant delay, uncertainty and substantial
additional administrative costs. The Proponents urge holders of impaired Claims
entitled to vote on the Plan to vote to accept the Plan and to evidence their
acceptance by returning their ballots so that they will be received not later
than the date and time set forth in the accompanying notice.
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Dated: __________ ___, 1997
Respectfully submitted:
-----------------------------
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
-----------------------------
WILLIAM HARDY PATRICK, III,
A PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
-----------------------------
BRONFIN & HELLER, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
-----------------------------
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's Entertainment, Inc.
<PAGE>
Exhibit B
FORECASTED CONDENSED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECASTED ASSUMPTIONS
<PAGE>
Exhibit B
FORECASTED CONDENSED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT FORECASTED ASSUMPTIONS
A. INTRODUCTION
This projected financial information (the "Financial Forecast") was
prepared by HET, on behalf of the Proponents, to show the estimated
consolidated financial position, results of operations, cash flows and
capitalization of JCC Holding Company ("JCC Holding") and its subsidiaries
(collectively, the "Company") following February 28, 1998, which is assumed
to be the Effective Date of the Plan of Reorganization for this Financial
Forecast.
This Financial Forecast contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements are subject to a number of risks and uncertainties.
The forecasted construction budget represents HET's estimate of the costs to
complete construction of the Casino and to open the Casino. Accordingly, the
forecast reflects HET's judgment, as of the date of this Disclosure
Statement, of the expected conditions and its expected course of action.
Some assumptions inevitably will not materialize, and unanticipated events
and circumstances may occur subsequent to November 14, 1997, the date of this
Financial Forecast. Many of these events and circumstances are out of the
control of the Proponents. Therefore, the actual results achieved during the
forecast period will vary from those set forth in the Financial Forecast, and
the variations may be material. As discussed elsewhere in the Disclosure
Statement, there are a number of legal proceedings pending which may affect
HJC or the Company. If adversely decided, such proceedings could have a
material adverse effect on the Financial Forecast. In addition, the Financial
Forecast does not include any adjustments that might result should HJC or the
Company be unable to continue as a going concern. The Company and the
Proponents undertake no obligation to publicly release the result of any
revisions to this Financial Forecast that may be made to reflect any future
events or circumstances. The Financial Forecast is based on the assumptions
discussed below and should be read in conjunction with the Disclosure
Statement, including "Section IX -- CERTAIN RISK FACTORS TO BE CONSIDERED."
All capitalized terms not defined in this Exhibit B have the same
meanings ascribed to them in the Disclosure Statement to which this exhibit
is attached.
B-1
<PAGE>
THE FINANCIAL FORECAST WAS NOT PREPARED WITH A VIEW TOWARD
COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS ("AICPA") OR THE FINANCIAL ACCOUNTING STANDARDS
BOARD ("FASB"). FURTHERMORE, THE FINANCIAL FORECAST HAS NOT BEEN AUDITED OR
REVIEWED BY THE PROPONENTS' INDEPENDENT ACCOUNTANTS. WHILE PRESENTED WITH
NUMERICAL SPECIFICITY, THE FINANCIAL FORECAST IS BASED UPON A VARIETY OF
ESTIMATES AND ASSUMPTIONS, WHICH MAY NOT BE REALIZED AND ARE SUBJECT TO
SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE PROPONENTS.
CONSEQUENTLY, THE FINANCIAL FORECAST SHOULD NOT BE REGARDED AS A
REPRESENTATION OR WARRANTY BY THE PROPONENTS OR ANY OTHER PERSON, AS TO THE
ACCURACY OF THE FINANCIAL FORECAST OR THAT THE FINANCIAL FORECAST WILL BE
REALIZED. ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE PRESENTED IN THESE
FINANCIAL FORECASTS.
The financial information herein includes:
Pro Forma Condensed Consolidated Balance Sheet of the Company
as of February 28, 1998, based on the historical consolidated balance sheet
as of June 30, 1997, updated to reflect the effect of projected activity up
to the Effective Date, and reflecting the anticipated accounting effects of
the Plan's consummation and of "fresh start" accounting as promulgated by
AICPA Statement of Position 90-7 entitled "Financial Reporting By Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7").
Forecasted Condensed Consolidated Income Statements of the
Company for the twelve months ending February 28, 1999, February 29, 2000,
February 28, 2001, and February 28, 2002.
Forecasted Condensed Consolidated Capitalization Tables of the
Company as of February 28, 1999, February 29, 2000, February 28, 2001, and
February 28, 2002.
Forecasted Condensed Consolidated Statements of Cash Flows of
the Company for the twelve months ending February 28, 1999, February 29,
2000, February 28, 2001, and February 28, 2002.
The Financial Forecast has been prepared on the basis of
generally accepted accounting principles consistent with those currently
utilized by HJC in the preparation of its historical consolidated financial
statements except as noted in the accompanying assumptions. The Financial
Forecast should be read in conjunction with the significant assumptions,
qualifications and notes set forth below.
B-2
<PAGE>
HJC does not, as a matter of course, publish its business plans
and strategies or projections of its anticipated financial position, results of
operations or cash flows. Accordingly, the Proponents and the Company do not
intend, and disclaim any obligation, to (a) furnish updated business plans or
projections to holders of Claims or Equity Interests, or (b) include such
updated information in any documents which may be required to be filed with the
Securities and Exchange Commission. The Proponents and the Company do not
intend to revise the Financial Forecast solely to reflect circumstances arising
after the date of this Disclosure Statement or to reflect the occurrence of
unanticipated events. The Proponents and the Company assume no responsibility
to advise recipients of the Financial Forecast about any subsequent changes.
NO ASSURANCE CAN BE GIVEN THAT THE FINANCIAL FORECAST WILL BE
REALIZED. THE PROPONENTS URGE THAT THE UNDERLYING ASSUMPTIONS BE CONSIDERED
CAREFULLY BY HOLDERS OF CLAIMS IN REACHING THEIR DETERMINATION OF WHETHER TO
ACCEPT OR REJECT THE PLAN.
B. REORGANIZATION ASSUMPTIONS
The Financial Forecast assumes Confirmation of the Plan in
accordance with its terms and that all transactions contemplated by the Plan
to be consummated by the Effective Date will be so consummated on February
28, 1998.
The application of fresh start reporting as set forth in SOP 90-7
requires the valuation of the assets and liabilities of the Company at their
fair values. In accordance with SOP 90-7, for purposes of the February 28,
1998, Pro Forma Condensed Consolidated Balance Sheet and the Financial
Forecast, the fair values of the Company's assets and liabilities have been
derived from a reorganization value for JCC Holding determined as of the
Effective Date.
The Financial Forecast also assumes that, as part of the Plan of
Reorganization, the Bondholders will exchange the Old Bonds for, among other
things, $187.5 million in aggregate principal amount of Senior Subordinated
Notes due 2009 with Contingent Payments (the "New Bonds"), and Senior
Subordinated Contingent Notes (the "New Contingent Bonds"). The New Bonds
will pay (i) Fixed Interest semi-annually at a rate of 5.867% per annum
increasing over the first three years to a rate of 6.214% per annum in the
third through fifth years (as set forth in the Bondholder Term Sheet), and
increasing to 8% per annum after the first five years, and (ii) contingent
interest equal to 75% of EBITDA over $65 million and under $85 million.
Fixed Interest begins accruing on the New Bonds on the Effective Date. The
Company will have the option of making the first six semi-annual payments of
Fixed Interest on the New Bonds in kind rather than in cash; provided,
however, that the Company must pay the first four semi-annual payments of
Fixed Interest in kind if Tranche A-1 and/or Tranche A-2 is outstanding when
such payments are due. The Company will have the option to pay the fifth and
sixth semi-annual payments of Fixed Interest in kind. If the Company pays
Fixed Interest in kind on any of the first six semi-annual interest payment
dates, HNOMC will defer its Base Management Fees and HET
B-3
<PAGE>
and HOCI will defer their fees under the HET/JCC Agreement to the extent that
the cash savings from paying Fixed Interest in kind is needed for cash flow
deficiencies other than for repayment of Tranche A-1 and Tranche A-2. If the
Company is required to pay Fixed Interest in kind with respect to the third,
fourth, fifth or sixth semi-annual interest payment because of the terms of
the Term Loans, or if the Company elects to pay Fixed Interest in kind during
such periods, the Incentive Management Fee payable to HNOMC will be deferred
during such corresponding period.
Payments of Fixed Interest in kind or deferrals of fees and other
obligations are possible if the Company does not meet certain EBITDA targets
starting with the fourth year after the Effective Date. If EBITDA for the
Company is not in excess of $28.5 million for the twelve months ending one
month prior to each semi-annual interest payment date, Fixed Interest on the
New Bonds will be paid in kind, the Base and Incentive Management Fees will
be deferred, amortization under the Term Loans will be deferred and the fees
due under the HET/JCC Agreement will be deferred. The Financial Forecast
assumes that the first four semi-annual payments of Fixed Interest will be
made in kind. For accounting purposes, the New Bonds will be discounted at
issuance to adjust the carrying amount to approximate their fair value at the
date of issuance.
All payments in respect of the New Contingent Bonds will be
contingent and will be limited to 75% of EBITDA, as defined, over $85 million
and under $109.425 million. Due to the contingent nature of all payments due
under the terms of the New Contingent Bonds, no liability is recognized for
these bonds in the February 28, 1998 Pro Forma Condensed Consolidated Balance
Sheet of the Company. Payments made pursuant to the terms of the New
Contingent Bonds are reported by JCC Holding in the Financial Forecast as
interest expense.
The Financial Forecast includes interest expense on the New Bonds
at the fixed rate and amortization of the assumed discount, which combine for
an effective annual interest rate for the eleven years that the New Bonds
will be outstanding of 15.4%. The Financial Forecast also includes
contingent interest on both the New Bonds and the New Contingent Bonds when
payable in accordance with the terms of the respective agreements.
The Financial Forecast assumes that the Company will enter into the
A Term Loan and that such loan will provide the Company with $60 million to
construct the Casino. The A Term Loan will consist of three tranches: (i)
Tranche A-1 totaling $10 million, (ii) Tranche A-2 totaling $20 million, and
(iii) Tranche A-3 totaling 30 million. The Financial Forecast also assumes
that the Company will enter into the B Term Loan and that such loan will
provide the Company with $135 million to construct the Casino. The B Term
Loan will consist of two tranches: (i) Tranche B-1 totaling $30 million, and
(ii) Tranche B-2 totaling $105 million. The Financial Forecast assumes that
pursuant to the HET Loan Guarantee, HET and HOCI will provide a payment
guarantee or a "put" agreement with respect to Tranche A-2 and Tranche B-2.
The Financial Forecast assumes that Tranche A-1, Tranche A-3 and Tranche B-1
will be funded on the Effective Date, and that borrowings under Tranche A-2
and Tranche B-2 will be funded as required for the construction of the
Casino. The Financial Forecast also assumes that the
B-4
<PAGE>
Company will enter into the Working Capital Facility, that such facility will
provide the Company with up to $25 million of availability, that such
facility will be fully available to meet the Company's short-term working
capital requirements and to fund any minimum balance required by the Amended
Management Agreement, and that pursuant to the HET Loan Guarantee, HET and
HOCI will provide a payment guarantee or a "put" agreement with respect to
the Working Capital Facility. The scheduled quarterly amortization payments
will be deferred for any of the first six semi-annual interest payment
periods if (i) the Company has elected to pay Fixed Interest in kind during
the interest period ending prior to the current quarter, (ii) HNOMC has
deferred both Base Management Fees and Incentive Management Fees for the
corresponding interest period and (iii) HET and HOCI have deferred their fees
under the HET/JCC Agreement. The Financial Forecast assumes that the Company
will not defer any scheduled quarterly amortization payments.
In exchange for providing the HET Loan Guarantee, BTCo will pay to
HET an annual credit support fee equal to 2%, and the Company will pay to HET
an annual credit support fee equal to 0.75%, of the average aggregate
principal amount of loans and/or stated amount of letters of credit
outstanding from time to time under the Working Capital Facility (but the
Financial Forecast assumes that there will be no amount of loans or letters
of credit outstanding under the Working Capital Facility), Tranche A-2 and
Tranche B-2 (in the case of Tranche B-2, only to the extent the aggregate
outstanding principal amount thereof from time to time is in excess of $10
million); provided, however, that (1) the BTCo Credit Support Fee and the JCC
Credit Support Fee shall be subject to adjustment as provided in the
Indicative Term Sheet attached as Exhibit J to the Plan; (2) HET shall not
receive credit support fees based on amounts outstanding, or stated amounts
of letters of credit relating to project costs of the Casino, under the
Working Capital Facility until the Carry Obligations of HET and HOCI under
the New Completion Guarantees have terminated; and (3) the BTCo Credit
Support Fee will be payable only to the extent such fee is actually received
by BTCo from the Company as interest under Tranche A-2, Tranche B-2 and the
Working Capital Facility, and so long as HET and HOCI are not in default
under the HET Loan Guarantee.
The Financial Forecast also assumes that on the Effective Date,
BTCo will purchase approximately $11 million aggregate principal amount, and
that Salomon, BT Securities Corporation and DLJ will purchase approximately
$15 million aggregate principal amount, of the Convertible Junior
Subordinated Debentures. The Financial Forecast assumes that the Convertible
Junior Subordinated Debentures will be due on the 15th anniversary of the
Effective Date and will bear interest at a rate of 8% per annum.
The Financial Forecast assumes that the Company will enter into the
Junior Subordinated Credit Facility, that such facility will provide $10
million of availability, and that the Company will incur the entire $10
million of indebtedness available under the Junior Subordinated Credit
Facility.
HJC is in the process of negotiating with the State of Louisiana and
City of New Orleans with regard to certain modifications to the Casino Operating
Contract and the Canal Street Casino Lease. Payments to the State are assumed
to be substantially as set forth in the summary
B-5
<PAGE>
of the Amended Casino Operating Contract in the Disclosure Statement. See
Section V.C.3., "The Plan of Reorganization -- Executory Contracts and
Unexpired Leases -- Casino Operating Contract." City rent payments are
assumed to be substantially as set forth in the summary of the Amended Canal
Street Casino Lease in the Disclosure Statement. See Section V.C.2. "The
Plan of Reorganization -- Executory Contracts and Unexpired Leases -- Canal
Street Casino Lease."
The Financial Forecast assumes that the Harrah's New Equity
Investment made on the Effective Date will be in the amount of $36.0 million
(the difference between $75.0 million and the $39.0 million of
debtor-in-possession financing assumed to have been provided by the DIP
Lender as of the Effective Date). The Harrah's Investor's obligation to make
the Harrah's New Equity Investment is subject to various conditions. See
Section V.F.3.s. "The Plan of Reorganization -- Conditions Precedent to
Confirmation and Effective Date --Conditions Precedent to Effective Date."
C. CERTAIN OPERATING ASSUMPTIONS
The Financial Forecast assumes that the Company will enter into an
exclusive contract to operate the sole land-based casino in Orleans Parish,
Louisiana, and will enter into a long-term lease for the site in the City
designated by law for the Casino's development.
The Financial Forecast assumes that the Casino, upon the completion
of Casino-Phase I, will contain approximately 100,000 square feet of net
gaming space.
The Financial Forecast includes the first four years of operations
for the Company. HET has based this Financial Forecast on the assumptions
identified herein including but not limited to the following:
(i) the Company will own and operate the sole land-based casino
in Orleans Parish, Louisiana, the number of riverboats in
Louisiana remains limited, and riverboat casinos operating
within the market area comply with the cruising requirements
of existing Louisiana riverboat gaming statutes, thereby
limiting the competitive environment in Louisiana;
(ii) the Company will not be involved with any legal proceedings
which could affect its revenues and expenses;
(iii) Casino--Phase I will open, and Second Floor Shell
Construction--Phase II will be completed, on February 28,
1999;
(iv) there will be no material changes made to the Gaming Act or
the regulations thereunder or any other applicable legal
requirements that would restrict or prevent the operations of
the Casino;
B-6
<PAGE>
(v) the Company will not incur any labor disputes or other
disturbances that would have a material effect on the
construction or operations of the Casino;
(vi) the underlying demographics and tourist visits to the New
Orleans market remain substantially the same as the trends
experienced over the past five years;
(vii) gaming is not legalized in any new jurisdiction from which
the Casino is expected to draw its customers;
(viii) there is no material downturn in general economic conditions;
(ix) the Company is able to identify and attract adequate
competent personnel; and
(x) there will be no change in generally accepted accounting
principles that may have a material effect on the financial
results of the Company.
D. ESTIMATED PROJECT COSTS
The total additional construction and other costs required to complete
and open the Casino are estimated as follows (in millions):
CONSTRUCTION COSTS
Total Construction Costs.............................................. $129.4
------
NON-CONSTRUCTION COSTS
Gaming Equipment & Supplies........................................... 19.1
Cash Loads, Preopening Expenses and Initial Working Capital........... 37.3
Organization Costs/Financing Fees and Other(1)........................ 36.2
------
Total Non-Construction Costs..................................... 92.6
Reorganization Expenses............................................... 59.9
Unsecured Creditors(2)................................................ 16.5
Cure Payments in connection with Contract Assumptions................. 40.4
Cash/Receivable Collections........................................... (32.8)
------
Total Costs....................................................... $306.0
------
------
- -------------------
(1)/ Other includes State payments, City payments, interest payments and
contingency.2/
(2)/ Excludes related parties.
B-7
<PAGE>
Major construction projects, such as the Casino, entail significant
risks, including, but not limited to, possible unanticipated shortages of
materials or skilled labor, unforeseen engineering or environmental problems,
remediation necessitated by the shutdown of the project, work stoppages,
weather interference, unanticipated cost increases, and regulatory problems.
Adverse developments in any of these areas could delay the project or
increase its costs.
E. CASINO REVENUES
The gaming demand forecast for the market was derived by analyzing
anticipated demand of residents living within a 50-mile radius of New
Orleans, as well as visitors coming from beyond the 50-mile range. The
market was sub-divided to forecast annual demand generated in four market
segments around New Orleans:
Local residents (0 to 50 miles around New Orleans)
Regional tourists (50 to 200 miles)
Tourists (> 200 miles)
Incremental tourists
The demand for the Casino was estimated using a three step
analysis: (i) determine population in the market based on distance from the
Casino; (ii) assess that population's propensity to wager through comparable
market research and local polling; and (iii) estimate the Company's market
share of those wagers through local market research. Steps (i) and (ii) were
duplicated for both residents and tourists. After estimating the number of
casino visits the Casino is expected to attract, HET estimated the win per
casino visit. HET then multiplied these two numbers to estimate gaming
revenues.
HET expects that the Company will compete with other gaming
facilities and other forms of gaming in the market, including dockside
casinos, riverboats, video poker and pari-mutual betting.
F. OPERATING EXPENSES
The operating expense forecast was prepared, in general, based upon
HJC's experience operating the Basin Street Casino and on the operations of
casinos of similar size and with similar equipment in other markets.
G. INTEREST EXPENSE
See "Summary of Significant Forecasted Assumptions --
Reorganization Assumptions."
B-8
<PAGE>
H. INCOME TAXES
The Financial Forecast assumes that JCC Holding is a corporation, that
JCC Intermediary and JCC are limited liability companies, and that the JCC
Entities will be treated as a single taxable entity subject to a 38.5% combined
federal and state income tax rate on its estimated taxable income throughout the
forecast period. See "Material Federal Income Tax Considerations" in the
Disclosure Statement.
I. CAPITAL EXPENDITURES
The Financial Forecast assumes that annual maintenance capital
expenditures will be approximately 1% of Gross Revenues during the forecast
period.
B-9
<PAGE>
JCC HOLDING COMPANY
PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AS OF FEBRUARY 28, 1998
(IN MILLIONS)
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 74.1
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
------
Total current assets . . . . . . . . . . . . . . . . . . . . 75.9
------
Land, buildings and equipment
Property held for development . . . . . . . . . . . . . . . . . . 13.2
Construction in progress. . . . . . . . . . . . . . . . . . . . . 153.3
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . 26.1
------
Total land, buildings and equipment. . . . . . . . . . . . . 192.6
------
Deferred operating contract costs . . . . . . . . . . . . . . . . . . 57.5
Lease prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0
------
Total other assets . . . . . . . . . . . . . . . . . . . . . 75.7
------
Total assets. . . . . . . . . . . . . . . . . . . . . . $344.2
------
------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $ --
------
Long-term debt
Senior Subordinated Notes due 2009 with
Contingent Payments. . . . . . . . . . . . . . . . . . . . . 187.5
Discount . . . . . . . . . . . . . . . . . . . . . . . . . . (73.6)
Senior Subordinated Contingent Notes. . . . . . . . . . . . . . . --
A Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.0
B Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.0
Junior Subordinated Credit Facility . . . . . . . . . . . . . . . --
Convertible Junior Subordinated Debentures. . . . . . . . . . . . 26.0
------
Total long-term debt . . . . . . . . . . . . . . . . . . . . 209.9
------
Commitments and contingencies
Stockholders' equity
Common stock
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . 75.3
Class B. . . . . . . . . . . . . . . . . . . . . . . . . . . 75.0
Capital Surplus/(Deficit). . . . . . . . . . . . . . . . . . (16.0)
------
Total stockholders' equity. . . . . . . . . . . . . . . 134.3
------
Total liabilities and stockholders' equity . . . . $344.2
------
------
See accompanying Summary of Significant Forecasted Assumptions.
B-10
<PAGE>
JCC HOLDING COMPANY
FORECASTED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
Twelve Months Ending
-----------------------------------------------------------------------------
February 28, 1999 February 29, 2000 February 28, 2001 February 28, 2002
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues
Casino . . . . . . . . . . . . . . . . . . . $ -- $348.0 $387.0 $422.0
Food and beverage. . . . . . . . . . . . . . -- 20.9 23.2 25.3
Parking, retail and other. . . . . . . . . . -- 15.4 17.1 18.6
Less: casino promotional allowances . . . . -- (16.5) (18.4) (20.0)
------ ------ ------ ------
Net revenues . . . . . . . . . . . -- 367.8 408.9 445.9
------ ------ ------ ------
Operating Expenses
Direct
Casino
LGCB Payments. . . . . . . . . . . -- 100.0 100.0 100.0
Other casino . . . . . . . . . . . -- 114.5 121.7 130.1
Food and beverage . . . . . . . . . . . -- 15.4 16.8 18.1
Parking, retail and other . . . . . . . -- 5.6 6.2 6.7
Undistributed expenses . . . . . . . . . . . -- 55.2 57.5 59.9
Management fees. . . . . . . . . . . . . . . -- 11.5 12.8 15.0
Ground lease rentals . . . . . . . . . . . . -- 15.8 17.8 19.6
Other. . . . . . . . . . . . . . . . . . . . -- 1.3 1.3 1.3
Franchise tax. . . . . . . . . . . . . . . . -- 1.6 1.5 1.5
Guaranty Fee . . . . . . . . . . . . . . . . -- 6.0 6.0 5.0
Depreciation and amortization. . . . . . . . -- 27.8 25.8 26.5
Preopening . . . . . . . . . . . . . . . . . 46.8 -- -- --
------ ------ ------ ------
Total operating expenses. . . 46.8 354.7 367.4 383.7
------ ------ ------ ------
Operating income (loss). . . . . . . . . . . . . (46.8) 13.1 41.5 62.2
Credit Support Fee . . . . . . . . . . . . . . . 0.9 0.9 0.8 0.8
Interest expense, net. . . . . . . . . . . . . . 10.2 35.5 36.3 54.2
------ ------ ------ ------
Income (loss) before income taxes. . . . . . . . (57.9) (23.3) 4.4 7.2
Provision for income taxes . . . . . . . . . . . 22.3 6.0 (4.9) (6.2)
------ ------ ------ ------
Net income (loss). . . . . . . . . . . . . . . . $(35.6) $(17.3) $ (0.5) $ 1.0
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
See accompanying Summary of Significant Forecasted Assumptions.
B-11
<PAGE>
JCC HOLDING COMPANY
FORECASTED CONDENSED CONSOLIDATED CAPITALIZATION TABLES
(IN MILLIONS)
<TABLE>
<CAPTION>
Twelve Months Ending
-----------------------------------------------------------------------------
February 28, 1999 February 29, 2000 February 28, 2001 February 28, 2002
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Long-term debt
A Term Loan. . . . . . . . . . . . . . . . . $ 60.0 $ 48.7 $ 28.3 $ 16.2
B Term Loan. . . . . . . . . . . . . . . . . 135.0 132.0 124.0 110.3
Senior Subordinated Notes due
2009 with Contingent payments . . . . . 122.8 138.7 150.2 156.8
Senior Subordinated Contingent Notes . . . . -- -- -- --
Junior Subordinated Credit Facility. . . . . 10.0 10.0 10.0 10.0
Convertible Junior Subordinated
Debentures. . . . . . . . . . . . . . . 26.0 26.0 26.0 26.0
------ ------ ------ ------
Total long-term debt . . . . . . . 353.8 355.4 338.5 319.3
Total stockholders' equity . . . . . . . . . . . 98.7 81.4 80.9 81.9
------ ------ ------ ------
Total capitalization . . . . . . . $452.5 $436.8 $419.4 $401.2
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
See accompanying Summary of Significant Forecasted Assumptions.
B-12
<PAGE>
JCC HOLDING COMPANY
FORECASTED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
Twelve Months Ending
-----------------------------------------------------------------------------
February 28, 1999 February 29, 2000 February 28, 2001 February 28, 2002
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss). . . . . . . . . . . . . . $(35.6) $(17.3) $(0.5) $1.0
Adjustments to reconcile net income (loss) to
net cash flows from operating activities
Changes in deferred taxes. . . . . (22.3) (6.0) 4.9 6.2
Depreciation and amortization. . . -- 27.8 25.8 26.5
Amortization of debt discount. . . 3.4 4.2 5.3 6.6
Expensed PIK interest. . . . . . . -- 11.7 6.2 --
Changes in working capital accounts -- -- -- --
------ ------ ------ ------
Cash flows provided by operating
activities. . . . . . . . . . (54.5) 20.4 41.7 40.3
------ ------ ------ ------
Cash flows used in investing activities
Land, buildings and equipment additions. . . (147.5) (3.0) (4.0) (5.0)
------ ------ ------ ------
Cash flows used in financing activities
Proceeds from Bank Loans, Convertible
Junior Subordinated Debentures and
Junior Subordinated Credit Facility . . 135.0 -- -- --
Debt retirements . . . . . . . . . . . . . . -- (14.2) (28.5) (25.7)
------ ------ ------ ------
Cash Flows provided by (used in)
financing activities . . . . . . . . . . . . 135.0 (14.2) (28.5) (25.7)
------ ------ ------ ------
Increase (Decrease) in cash and cash equivalents (67.0) 3.2 9.2 9.6
Cash and cash equivalents, beginning of period . 74.1 7.1 10.3 19.5
------ ------ ------ ------
Cash and cash equivalents, end of period . . . . $ 7.1 $ 10.3 $ 19.5 $ 29.1
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
See accompanying Summary of Significant Forecasted Assumptions.
B-13
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- ----------------------------------:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH DECEMBER 10, 1997
December 10, 1997
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- ----------------------------------:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
- ----------------------------------:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH DECEMBER 10, 1997
Dated: December 10, 1997
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
<PAGE>
BRONFIN & HELLER, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for
Harrah's Entertainment, Inc.
<PAGE>
TABLE OF CONTENTS
ARTICLE I......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. OTHER TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
C. CONSTRUCTION OF CERTAIN TERMS . . . . . . . . . . . . . . . . . . . 24
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS . . . . . . . . . . . . . . . . . 24
2.1. ADMINISTRATIVE EXPENSE CLAIMS . . . . . . . . . . . . . . . 24
2.2. PRIORITY TAX CLAIMS . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS. . . . . . . . . . . . . . 26
A. HJC CLASSIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 26
B. FINANCE CORP. CLASSIFICATION. . . . . . . . . . . . . . . . . . . . 26
C. HNOIC CLASSIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS . . . . . . . . . . . . . . . . 28
A. HJC TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1. CLASS A1 -- OTHER PRIORITY CLAIMS . . . . . . . . . . . . . 28
4.2. CLASS A2 -- NON-BONDHOLDER SECURED CLAIMS . . . . . . . . . 28
4.3. CLASS A3 -- BANK CLAIMS . . . . . . . . . . . . . . . . . . 28
4.4. CLASS A4 -- BONDHOLDER CLAIMS . . . . . . . . . . . . . . . 30
4.5. CLASS A5 -- OLD INDENTURE PREDECESSOR TRUSTEE AND OLD
INDENTURE PREDECESSOR COLLATERAL AGENT CLAIMS . . . . . . . 31
4.6. CLASS A6 -- WARN ACT CLAIMS . . . . . . . . . . . . . . . . 31
4.7. CLASS A7 -- GENERAL UNSECURED CLAIMS. . . . . . . . . . . . 32
4.8. CLASS A8 -- PENALTY CLAIMS. . . . . . . . . . . . . . . . . 32
4.9. CLASS A9 -- EQUITY INTERESTS. . . . . . . . . . . . . . . . 32
B. FINANCE CORP. TREATMENT . . . . . . . . . . . . . . . . . . . . . . 32
4.10. CLASS B1 -- OTHER PRIORITY CLAIMS . . . . . . . . . . . . . 32
4.11. CLASS B2 -- BANK CLAIMS . . . . . . . . . . . . . . . . . . 32
4.12. CLASS B3 -- BONDHOLDER CLAIMS . . . . . . . . . . . . . . . 33
4.13. CLASS B4 -- WARN ACT CLAIMS . . . . . . . . . . . . . . . . 33
4.14. CLASS B5 -- GENERAL UNSECURED CLAIMS. . . . . . . . . . . . 33
4.15. CLASS B6 -- PENALTY CLAIMS . . . . . . . . . . . . . . . . . 33
4.16. CLASS B7 -- EQUITY INTERESTS. . . . . . . . . . . . . . . . 34
C. HNOIC CLASSIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 34
4.17. CLASS C1 -- OTHER PRIORITY CLAIMS . . . . . . . . . . . . . 34
4.18. CLASS C2 -- SECURED CLAIMS. . . . . . . . . . . . . . . . . 34
4.19. CLASS C3 -- WARN ACT CLAIMS . . . . . . . . . . . . . . . . 34
4.20. CLASS C4 -- UNSECURED CLAIMS (FOR WHICH HJC IS LIABLE). . . 34
4.21. CLASS C5 -- GENERAL UNSECURED CLAIMS. . . . . . . . . . . . 35
i
<PAGE>
4.22. CLASS C6 -- SHOWBOAT CLAIM. . . . . . . . . . . . . . . . . 36
4.23. CLASS C7 -- PENALTY CLAIMS. . . . . . . . . . . . . . . . . 36
4.24. CLASS C8 -- EQUITY INTERESTS. . . . . . . . . . . . . . . . 36
ARTICLE V.
SETTLEMENT OF CERTAIN CLAIMS AND
PROSECUTION AND ASSIGNMENT OF CERTAIN CLAIMS . . . . . . . . . . . . . . 36
5.1. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST THE HET
GROUP, DEBTORS GROUP, BONDHOLDERS COMMITTEE GROUP,
NOLDC GROUP AND GRAND PALAIS GROUP. . . . . . . . . . . . . 36
5.2. RELEASE BY BONDHOLDERS OF CAUSES OF ACTION AGAINST HET
GROUP, DEBTORS GROUP, BONDHOLDERS COMMITTEE GROUP, CITY
GROUP, STATE GROUP, NOLDC GROUP, GRAND PALAIS GROUP AND THE
BANK/UNDERWRITER GROUP. . . . . . . . . . . . . . . . . . . 37
5.3. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST STATE
GROUP.. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.4. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST CITY
AND RDC . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.5. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST . . . . . .
BANK/UNDERWRITER GROUP. . . . . . . . . . . . . . . . . . . 38
5.7. INJUNCTION AGAINST COMMENCEMENT OF INDIVIDUAL ACTIONS
AGAINST HET GROUP, DEBTORS GROUP, BONDHOLDERS COMMITTEE
GROUP, CITY GROUP, STATE GROUP, NOLDC GROUP, GRAND PALAIS .
GROUP AND THE BANK/UNDERWRITER GROUP. . . . . . . . . . . . 40
5.8. EXTINGUISHMENT OF CERTAIN CAUSES OF ACTION UNDER THE
AVOIDING POWER PROVISIONS . . . . . . . . . . . . . . . . . 40
5.9. ASSIGNMENT AND PROSECUTION OF ASSIGNED LITIGATION CLAIMS,
JUDGMENT REDUCTION PROTECTION AND DISTRIBUTION OF
RECOVERIES FROM ASSIGNED LITIGATION CLAIMS. . . . . . . . . 41
5.10. APPROVAL OF OTHER SETTLEMENT AGREEMENTS . . . . . . . . . . 44
ARTICLE VI.
MEANS FOR IMPLEMENTATION
AND EXECUTION OF THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . 45
A. GENERAL IMPLEMENTATION MATTERS . . . . . . . . . . . . . . . . . . 45
6.1. GENERAL CORPORATE MATTERS . . . . . . . . . . . . . . . . . 45
6.2. EFFECTIVE DATE TRANSACTIONS . . . . . . . . . . . . . . . . 45
B. JCC ENTITIES AND THEIR GOVERNANCE . . . . . . . . . . . . . . . . . 51
6.3. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.4. BOARD OF DIRECTORS AND MANAGING MEMBERS OF JCC ENTITIES . . 51
6.5. OFFICERS OF JCC ENTITIES. . . . . . . . . . . . . . . . . . 52
6.6. SUITABILITY DETERMINATIONS. . . . . . . . . . . . . . . . . 52
6.7. ENTITY ACTION . . . . . . . . . . . . . . . . . . . . . . . 52
C. DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.8. GENERALLY . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.9. SERVICES OF OLD INDENTURE TRUSTEE . . . . . . . . . . . . . 52
6.10. DISTRIBUTIONS TO BE MADE TO BONDHOLDERS AS OF
DISTRIBUTION RECORD DATE. . . . . . . . . . . . . . . . . . 53
6.11. CANCELLATION AND SURRENDER OF EXISTING SECURITIES AND . . .
AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 53
6.12. DISTRIBUTIONS OF CASH . . . . . . . . . . . . . . . . . . . 54
6.13. TIMING OF DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 54
6.14. HART-SCOTT-RODINO COMPLIANCE. . . . . . . . . . . . . . . . 54
6.15. MINIMUM DISTRIBUTIONS; NO DUPLICATIVE DISTRIBUTIONS; NO
INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . 54
ii
<PAGE>
6.16. FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . 54
6.17. DELIVERY OF DISTRIBUTIONS . . . . . . . . . . . . . . . . . 55
6.18. FEES AND EXPENSES OF DISBURSING AGENTS. . . . . . . . . . . 55
6.19. TIME BAR TO CASH PAYMENTS . . . . . . . . . . . . . . . . . 55
6.20. TRANSFER OF RELEASE POOL DISTRIBUTIONS. . . . . . . . . . . 56
D. PROCEDURE FOR RESOLVING DISPUTED CLAIMS . . . . . . . . . . . . . . 56
6.21. OBJECTION DEADLINE. . . . . . . . . . . . . . . . . . . . . 56
6.22. AUTHORITY TO OPPOSE CLAIMS. . . . . . . . . . . . . . . . . 56
6.23. NO DISTRIBUTIONS PENDING ALLOWANCE. . . . . . . . . . . . . 56
6.24. DETERMINATION BY BANKRUPTCY COURT . . . . . . . . . . . . . 56
6.25. TREATMENT OF DISPUTED CLAIMS. . . . . . . . . . . . . . . . 56
ARTICLE VII.
ACCEPTANCE OR REJECTION OF THE PLAN. . . . . . . . . . . . . . . . . . . 57
7.1. CLASSES ENTITLED TO VOTE. . . . . . . . . . . . . . . . . . 57
7.2. CLASS ACCEPTANCE REQUIREMENT. . . . . . . . . . . . . . . . 57
7.3. CRAMDOWN. . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES . . . . . . . . . . . . . . . . 57
8.1. ASSUMPTION OR REJECTION OF EXECUTORY CONTRACTS AND
UNEXPIRED LEASES. . . . . . . . . . . . . . . . . . . . . . 57
8.2. RETIREE BENEFITS. . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE IX.
EFFECT OF CONFIRMATION OF PLAN . . . . . . . . . . . . . . . . . . . . . 60
9.1. REVESTING OF ASSETS . . . . . . . . . . . . . . . . . . . . 60
9.2. DISCHARGE OF DEBTOR . . . . . . . . . . . . . . . . . . . . 60
9.3. DISSOLUTION OF DEBTORS. . . . . . . . . . . . . . . . . . . 61
9.4. EXCULPATIONS. . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE X.
CONDITIONS PRECEDENT TO
CONFIRMATION AND EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . 61
10.1. CONDITION PRECEDENT TO CONFIRMATION OF THE PLAN . . . . . . 61
10.2. CONDITIONS PRECEDENT TO EFFECTIVE DATE. . . . . . . . . . . 61
10.3. WAIVER OF CONDITIONS. . . . . . . . . . . . . . . . . . . . 63
10.4. EFFECT OF FAILURE OF CONDITIONS . . . . . . . . . . . . . . 64
ARTICLE XI.
RETENTION OF JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XII.
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 65
12.1. EXEMPTION FROM TRANSFER TAXES . . . . . . . . . . . . . . . 65
iii
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12.2. POST-CONFIRMATION DATE FEES AND EXPENSES OF PROFESSIONAL
PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.3. COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . 66
12.4. AMENDMENT OR MODIFICATION OF THE PLAN; SEVERABILITY . . . . 66
12.5. REVOCATION OR WITHDRAWAL OF THE PLAN. . . . . . . . . . . . 66
12.6. BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . . 67
12.7. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.8. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 68
12.9. WITHHOLDING AND REPORTING REQUIREMENTS. . . . . . . . . . . 68
12.10. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.11. EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.12. JCC INTERMEDIARY. . . . . . . . . . . . . . . . . . . . . . 68
12.13. FILING OF ADDITIONAL DOCUMENTS. . . . . . . . . . . . . . . 69
12.14. CONTROLLING EFFECT OF AGREEMENTS WITH STATE/LGCB. . . . . . 69
12.15. RIGHTS OF STATE AND LGCB. . . . . . . . . . . . . . . . . . 69
iv
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
:
- ----------------------------------
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
- ----------------------------------
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
:
- ----------------------------------
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH DECEMBER 10, 1997
The Bankruptcy Court (as defined below) has previously entered a Final
Order (as defined below) dated April 28, 1997 confirming the Third Amended Joint
Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, As Modified (the
"Existing Plan"), which was filed by Harrah's Jazz Company, as debtor and
debtor-in-possession ("HJC"), Harrah's Jazz Finance Corp., as debtor and
debtor-in-possession ("Finance Corp."), Harrah's New Orleans Investment Company,
as debtor and debtor-in-possession ("HNOIC" and, together with HJC and Finance
Corp., collectively, the "Debtors") and Harrah's Entertainment, Inc. ("HET" and,
together with the Debtors, collectively, the "Proponents"), a Delaware
corporation. The Proponents propose the following modifications of the Existing
Plan pursuant to Section 1127(b) of title 11 of the United States Code. This
Plan (as defined below), if confirmed as to each of the Debtors, provides for
the transfer of all property of the Debtors (except for property distributed
pursuant to the Plan) to a single entity, JCC (as defined below) as successor to
each of the Debtors. If the Plan is not confirmed as to each of the Debtors, it
may not be confirmed as to any of the Debtors.
<PAGE>
ARTICLE I.
DEFINITION AND CONSTRUCTION OF TERMS
A. DEFINITIONS
As used herein, the following terms have the respective meanings specified
below, unless the context otherwise requires:
1.1. A TERM LOAN means the senior secured term loan in the principal
amount of $60 million to be obtained by JCC on the Effective Date pursuant to
Section 6.2(h) of the Plan, which loan shall consist of Tranche A-1, Tranche A-2
and Tranche A-3 and have the terms and conditions set forth in the Bank Term
Sheet and such other terms and conditions as shall be set forth in the A Term
Loan Documents.
1.2. A TERM LOAN DOCUMENTS means, collectively, the loan agreement and
all other loan and security documents governing the terms and conditions of the
A Term Loan, which documents shall be satisfactory in form and substance to the
Bondholders Committee (in its sole discretion) and HET (in its sole discretion)
on behalf of the Proponents and if a party thereto, HJC (which approval shall
not be unreasonably withheld or delayed). The forms of the A Term Loan
Documents shall be filed with the Bankruptcy Court as Plan Documents pursuant to
Section 6.2(t) of the Plan.
1.3. ADMINISTRATIVE AGENT shall have the meaning assigned such term in
the Old Bank Credit Agreement.
1.4. ADMINISTRATIVE EXPENSE CLAIM means with respect to any Debtor, any
claim against such Debtor under Sections 503(b), 507(a)(1) or 507(b) of the
Bankruptcy Code, including, without limitation, any actual and necessary
expenses of preserving the estate of the Debtor, any actual and necessary
expenses of operating the business of the Debtor, all compensation or
reimbursement of expenses allowed by the Bankruptcy Court under Section 330 or
503 of the Bankruptcy Code (including, without limitation, any attorneys' fees
or other expenses of Fidelity which are allowed by the Bankruptcy Court under
Section 503(b) of the Bankruptcy Code), the reasonable travel and other expenses
of members of the Committees in connection with their duties as Committee
members which are allowed by the Bankruptcy Court, and any fees or charges
assessed against the estate of the Debtor under Section 1930 of chapter 123 of
Title 28 of the United States Code.
1.5. AFFILIATE shall have the meaning assigned to such term in Section
101(2) of the Bankruptcy Code. For purposes of this Plan, NOLDC, HNOIC and
Grand Palais shall be deemed to be Affiliates of HJC.
1.6. ALLOWED, when used with respect to any Claim (except for a Claim
that is an Administrative Expense Claim) or any Equity Interest, means a Claim
or Equity Interest to the extent that (a)(i) a proof of claim or interest is
timely and properly filed prior to the Bar Date or (ii) if no proof of claim or
interest was filed, such Claim or Equity Interest is listed on the Schedules of
the applicable Debtor as liquidated in amount and non-disputed or noncontingent,
and (b)(i) no Debtor or other party in interest entitled to do so has made an
objection to the allowance thereof on or before the applicable period of
limitation fixed by the Bankruptcy Code, the Bankruptcy Rules, the Bankruptcy
Court or the Plan or (ii) such Claim or Equity Interest has been allowed by a
Final Order. Unless otherwise specified
2
<PAGE>
herein, Allowed Claims shall not include interest on such Claims for the period
from and after the Commencement Date, nor shall they include any Claim which may
be disallowed under Section 502(d) of the Bankruptcy Code. ALLOWED, when used
with respect to any Administrative Expense Claim, means an Administrative Claim
that has become "Allowed" pursuant to the procedures set forth in Article II of
the Plan.
1.7. ALLOWED GENERAL UNSECURED CLAIM shall have the meaning assigned to
such term in Section 4.7(a) of the Plan.
1.8. ALLOWED GENERAL UNSECURED CREDITOR shall have the meaning assigned
to such term in Section 4.7(b) of the Plan.
1.9. AMENDED AND RESTATED CANAL STREET CASINO LEASE means that certain
Amended and Restated Canal Street Casino Lease to be executed on or before and
as of the Effective Date by JCC and the RDC, with the City as Intervenor, and
incorporating amendments to the Canal Street Casino Lease that are described in
the City Agreement.
1.10. AMENDED AND RESTATED CASINO OPERATING CONTRACT means that certain
amended proposed new Casino Operating Contract recommended by the LGCB on
December 9, 1997, and to be executed on or before and as of the Effective Date
by JCC and the LGCB, as described in the term sheet attached hereto as Exhibit
B.
1.11. AMENDED AND RESTATED COMPLETION LOAN DOCUMENTS means that certain
Amended and Restated Completion Loan Agreement to be executed by JCC, HET and
HOCI on or before and as of the Effective Date, as described in the term sheet
attached to the Existing Plan as Exhibit C and incorporated by reference herein,
and all other loan or security agreements, instruments or documents executed in
connection therewith. The Amended and Restated Completion Loan Agreement and
all such other loan or security agreements, instruments and documents shall be
satisfactory in form and substance to the Bondholders Committee (in its sole
discretion), HET (in its sole discretion) on behalf of the Proponents, and if a
party thereto, HJC (which approval shall not be unreasonably withheld or
delayed). The forms of the New Completion Loan Documents shall be filed with
the Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of the Plan.
JCC's repayment obligations under the Amended and Restated Completion Loan
Documents shall be unsecured obligations of JCC and shall be junior in right of
payment to the New Bonds and the New Contingent Bonds.
1.12. AMENDED AND RESTATED CONSTRUCTION LIEN INDEMNITY OBLIGATION
AGREEMENT means that certain Amended and Restated Construction Lien Indemnity
Obligation Agreement to be entered into by JCC and HOCI on or before and as of
the Effective Date, as described in the term sheet attached to the Existing Plan
as Exhibit D and incorporated by reference herein. The form of the Amended and
Restated Construction Lien Indemnity Obligation Agreement shall be filed with
the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of the Plan.
1.13. AMENDED AND RESTATED GENERAL DEVELOPMENT AGREEMENT means that
certain Amended and Restated General Development Agreement to be executed on or
before and as of the Effective Date by JCC and the RDC, with the City as
Intervenor, and incorporating the amendments to the General Development
Agreement that are described in the City Agreement.
1.14. AMENDED AND RESTATED MANAGEMENT AGREEMENT means that certain
Second Amended and Restated Management Agreement to be executed on or before and
as of the Effective Date by JCC and HNOMC, as described in the term sheet
attached hereto as Exhibit E.
3
<PAGE>
1.15. ARCHITECT means Perez Ernst Farnet/Modus, Inc. Architects and
Planners and its successors and assigns.
1.16. ARCHITECT CONTRACT means the Design Agreement dated January 16,
1995 (and effective November 15, 1994), between HJC, as prepetition debtor, and
Architect, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.17. ASSIGNED BONDHOLDER LITIGATION CLAIMS means any and all claims and
causes of action, including, without limitation, Avoidance Claims, of any
Releasing Bondholder (in its capacity as a Bondholder) which, as of the
Effective Date, exists or may exist against any or all of (i) the
Non-Participating Banks, and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release to the extent such Releasing Bondholder, through an
appropriate indication on the ballot provided to such holder or in such other
manner as may be prescribed by an applicable order of the Bankruptcy Court, has
affirmatively evidenced its intent to be a Releasing Bondholder and as a
consequence to assign all such claims and causes of action to JCC.
1.18. ASSIGNED DEBTOR LITIGATION CLAIMS means any and all claims and
causes of action, including, without limitation, Avoidance Claims, of any Debtor
which, as of the Effective Date, exists or may exist against any or all of (i)
the Non-Participating Banks and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release.
1.19. ASSIGNED LITIGATION CLAIMS means all Assigned Debtor Litigation
Claims and all Assigned Bondholder Litigation Claims.
1.20. AVOIDANCE CLAIMS means all rights, claims, causes of action,
avoiding powers, suits and proceedings of or brought by or on behalf of any
Debtor or any Person and arising under any or all of Sections 510 and 544
through 554 of the Bankruptcy Code.
1.21. B TERM LOAN means the secured term loan in the principal amount of
$135 million to be obtained by JCC on the Effective Date pursuant to Section
6.2(h) of the Plan, which loan shall consist of Tranche B-1 and Tranche B-2 and
shall have the terms and conditions set forth in the Bank Term Sheet and such
other terms and conditions as shall be set forth in the B Term Loan Documents.
1.22. B TERM LOAN DOCUMENTS means, collectively, the loan agreement and
all other loan and security documents governing the terms and conditions of the
B Term Loan, which documents shall be satisfactory in form and substance to the
Bondholders Committee (in its sole discretion) and HET (in its sole discretion)
on behalf of the Proponents and if a party thereto, HJC (which approval shall
not be unreasonably withheld or delayed). The forms of the B Term Loan
Documents shall be filed with the Bankruptcy Court as Plan Documents pursuant to
Section 6.2(t) of the Plan.
1.23. BANK RESERVE FUND shall have the meaning assigned to such term in
Section 4.3(b) of the Plan.
1.24. BANK TERM SHEET means the term sheet attached hereto as Exhibit J.
1.25. BANK/UNDERWRITER GROUP means each Participating Bank and
Underwriter which executes the Bank/Underwriter Release and FNBC in any capacity
and their respective Affiliates, predecessors, successors and assigns and the
officers, directors, employees, attorneys, financial advisors, accountants,
agents or other representatives of each of the foregoing.
4
<PAGE>
1.26. BANK/UNDERWRITER RELEASE means, collectively, the mutual releases
described in the Bank Term Sheet, the Underwriter Term Sheet and the FNBC
Settlement Agreement, including, without limitation, mutual releases between the
Participating Banks, the Underwriters, the Old Bank Collateral Agent, the Old
Indenture Predecessor Trustee, the Old Indenture Predecessor Collateral Agent,
on the one hand, and the other Released Parties, on the other hand. The
Bank/Underwriter Release shall be in form and substance satisfactory to the
non-Debtor parties thereto (in their sole discretion), HJC (which shall not
unreasonably withhold or delay its approval), HET (in its sole discretion) on
behalf of the other Proponents and the Bondholders Committee (in its sole
discretion).
1.27. BANKRUPTCY CODE means Title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Cases.
1.28. BANKRUPTCY COURT means the United States District Court for the
Eastern District of Louisiana having jurisdiction over the Chapter 11 Cases and,
to the extent of any reference made pursuant to section 157 of Title 28 of the
United States Code, the unit of such District Court pursuant to section 157 of
Title 28 of the United States Code.
1.29. BANKRUPTCY RULES means the Federal Rules of Bankruptcy Procedure,
as amended from time to time, as applicable to the Chapter 11 Cases, including
the Local Rules of the Bankruptcy Court.
1.30. BANKS means, collectively, Bankers Trust Company, as Bank and
Administrative Agent, The Boatmen's National Bank of St. Louis, Prime Income
Trust, Van Kampen Merritt Prime Rate Income Trust, Senior High Income Portfolio,
Inc., Senior High Income Portfolio II, Inc., Senior Strategic Income Fund, Inc.,
as Banks, and First National Bank of Commerce, as Bank (but not as Collateral
Agent), and their successors and assigns, as the foregoing terms are defined in
the Old Bank Credit Agreement.
1.31. BAR DATE shall mean the applicable dates fixed by the Bankruptcy
Court or this Plan for filing proofs of claim or interests in the Chapter 11
Cases: (i) in the case of Rejection Claims, the date set forth in Section 8.1(f)
of the Plan, (ii) April 1, 1997 (subject to revocation under certain
circumstances), with respect to Claims of the Bondholders and the Old Indenture
Trustee other than contractual Claims based on the principal of or interest on
the Old Bonds, and certain Claims against HNOIC held by NOLDC, HJC, Finance
Corp., Grand Palais and/or their shareholders, and (iii) May 15, 1996, with
respect to all other pre-petition Unsecured Claims other than Claims which were
included in any Schedule and not listed therein as "disputed," "unliquidated" or
"contingent" and to which such scheduled amounts the holders of such Claims
agree.
1.32. BASIN STREET CASINO LEASE means that certain Temporary Casino
Lease dated March 14, 1994, between the RDC and HJC, as prepetition debtor, with
the City as Intervenor, together with any amendments thereto executed prior to
the Commencement Date of the Chapter 11 Case of HJC.
1.33. BASIN STREET CASINO LEASE TERMINATION AGREEMENT means that certain
Basin Street Casino Lease Termination Agreement entered into by JCC and the RDC,
with the City as Intervenor, dated as of January 15, 1997.
1.34. BONDHOLDER CLAIMS means all of the respective Claims of holders
and beneficial owners of the Old Bonds against any or all of the Debtors.
1.35. BONDHOLDER DEFICIENCY AMOUNT shall have the meaning assigned to
such term in Section 5.9(f)(vi) of the Plan.
5
<PAGE>
1.36. BONDHOLDER TERM SHEET means the term sheet attached hereto as
Exhibit F.
1.37. BONDHOLDERS means the holders and beneficial owners of the Old
Bonds.
1.38. BONDHOLDERS COMMITTEE means the statutory committee of Bondholders
appointed by the United States Trustee in the Chapter 11 Case of HJC pursuant to
Section 1102 of the Bankruptcy Code.
1.39. BONDHOLDERS COMMITTEE GROUP means the Bondholders Committee, and
each of the current and former members thereof in its capacities as a member of
the Bondholders Committee and as a Bondholder, and each Professional Person
retained by the Bondholders Committee.
1.40. BONDHOLDERS DIRECTOR NOMINEES shall have the meaning assigned to
such term in Section 6.4 of the Plan.
1.41. BROADMOOR means Broadmoor, a Louisiana general partnership, and
its successors and assigns.
1.42. BROADMOOR CONSTRUCTION AGREEMENT means that certain Construction
Agreement dated October 10, 1994, between HJC, as prepetition debtor, and
Broadmoor, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.43. BROADMOOR RELEASE means the Release, in a form mutually acceptable
to the parties thereto, to be executed on or before and as of the Effective Date
by Broadmoor, and providing for releases in favor of the Debtors, the Debtors
Group, the HET Group, the NOLDC Group (but only if the applicable Persons in the
NOLDC Group execute and deliver on or before the Effective Date the NOLDC
Shareholders/HET Settlement Agreement) and the Grand Palais Group (but only if
the applicable Persons in the Grand Palais Group execute and deliver on or
before the Effective Date the Grand Palais/HET Settlement Agreement). Neither
the Broadmoor Settlement Agreement nor the Broadmoor Release shall provide for
any release of claims by or against either of Honore/Broadmoor, a joint venture,
or Honore Construction Company, Inc.
1.44. BROADMOOR SETTLEMENT AGREEMENT means the Settlement Agreement
dated October 15, 1996, between HJC and Broadmoor and attached to the Existing
Plan as Exhibit H and incorporated by reference herein.
1.45. BUSINESS DAY means any day other than a Saturday, Sunday or any
other day on which commercial banks in New York, New York are required or
authorized to close.
1.46. CANAL STREET CASINO LEASE means that certain Amended Lease
Agreement dated March 15, 1994, between the RDC and HJC, as prepetition debtor,
with the City as Intervenor, together with any amendments thereto executed prior
to the Commencement Date of the Chapter 11 Case of HJC.
1.47. CASINO means that certain casino to be constructed on the real
property leased by HJC on Canal Street in New Orleans, Louisiana, together with
the parking lot adjacent thereto.
1.48. CASINO OPERATING CONTRACT means that certain Casino Operating
Contract dated as of July 15, 1994, between the LEDGC, and HJC, as prepetition
debtor, together with any amendments thereto executed prior to the Commencement
Date of the Chapter 11 Case of HJC.
1.49. CENTEX-LANDIS means Centex Landis Construction Co., Inc., and its
successors and assigns.
6
<PAGE>
1.50. CENTEX-LANDIS CONSTRUCTION AGREEMENT means that certain
Construction Agreement dated October 10, 1994, between HJC, as prepetition
debtor, and Centex-Landis, together with any amendments thereto executed prior
to the Commencement Date of the Chapter 11 Case of HJC.
1.51. CENTEX-LANDIS RELEASE means the Release, substantially in the form
attached to the Centex-Landis Settlement Agreement, to be executed on or before
and as of the Effective Date by Centex-Landis, providing for releases in favor
of the Debtors, the Debtors Group, the HET Group, the NOLDC Group (but only if
the applicable Persons in the NOLDC Group execute and deliver on or before the
Effective Date the NOLDC Shareholders/HET Settlement Agreement) and the Grand
Palais Group (but only if the applicable Persons in the Grand Palais Group
execute and deliver on or before the Effective Date the Grand Palais/HET
Settlement Agreement).
1.52. CENTEX-LANDIS SETTLEMENT AGREEMENT means the Settlement Agreement
dated November 25, 1996, between HJC and Centex-Landis and attached to the
Existing Plan as Exhibit L and incorporated by reference herein.
1.53. CERTIFIED WARN ACT CLASS means the class of holders of WARN Act
Claims certified for settlement purposes by the Bankruptcy Court pursuant to
Bankruptcy Rule 7023 by order dated December 10, 1996.
1.54. CHAPTER 11 CASES means the above-captioned cases under Chapter 11
of the Bankruptcy Code commenced by each Debtor and currently pending in the
Bankruptcy Court.
1.55. CITY means the City of New Orleans, Louisiana.
1.56. CITY AGREEMENT means that certain Agreement Regarding
Modifications And Related Agreements In Respect Of Amended And Restated Canal
Street Casino Lease, Termination Of Basin Street Casino Lease, Amended And
Restated General Development Agreement, The Conditional Use Ordinances And Other
Regulatory Matters dated as August 15, 1996, by and among the City, RDC and HJC,
a copy of which is attached to the Existing Plan as Exhibit A and incorporated
by reference herein, as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time, including, without
limitation, any modifications included in the forms of the Lease Documentation
(as defined in the City Agreement) submitted to the Council for the City on
September 12, 1996, and any forbearance agreement related thereto.
1.57. CITY GROUP means the City, the Mayor of the City, the City Council
of the City, the members of the City Council, the RDC, all boards, commissions,
agencies and other instrumentalities of the City and the officers, directors,
employees, staff members, attorneys, financial advisors, accountants, agents and
other representatives of each of the foregoing.
1.58. CITY/RDC RELEASE means the City Release Agreement, in the form
attached hereto as Exhibit G (or as modified on terms satisfactory to HET and
with the consent of HJC (which consent may not be unreasonably withheld or
delayed)) to be executed on or before and as of the Effective Date by the City,
the RDC, the Debtors, NOLDC, Grand Palais, HET, HOCI, HNOMC, JCC and/or certain
of their respective Affiliates, and providing for, among other things, mutual
releases in favor of the City, the RDC and their respective Affiliates, on the
one hand, and the Debtors, the Debtors Group, the JCC Entities, the HET Group,
the Bank/Underwriter Group, the Bondholders Committee Group, the NOLDC Group
(but only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement) and
the Grand Palais Group (but only if the
7
<PAGE>
applicable Persons in the Grand Palais Group execute and deliver on or before
the Effective Date the Grand Palais/HET Settlement Agreement), on the other
hand.
1.59. CLAIM shall have the meaning assigned to such term in Section
101(5) of the Bankruptcy Code.
1.60. CLASS A NEW COMMON STOCK means the Class A Common Stock of JCC
Holding authorized pursuant to Section 6.2(d) and (f) of the Plan. Class A New
Common Stock shall have a par value of $.01 per share and such rights with
respect to dividends, liquidation, voting and other matters as are provided for
by applicable nonbankruptcy law or in the JCC Holding Certificate of
Incorporation and JCC Holding Bylaws.
1.61. CLASS A 33 ACT REGISTRATION STATEMENT shall have the meaning
assigned to such term in Section 6.2(q) of the Plan.
1.62. CLASS A 34 ACT REGISTRATION STATEMENT shall have the meaning
assigned to such term in Section 6.2(q) of the Plan.
1.63. CLASS B NEW COMMON STOCK means the Class B Common Stock of JCC
Holding authorized pursuant to Sections 6.2(d), (e) and (f) of the Plan. Class
B New Common Stock shall have a par value of $.01 per share and such rights with
respect to dividends, liquidation, voting and other matters as are provided for
by applicable nonbankruptcy law or in the JCC Holding Certificate of
Incorporation and JCC Holding Bylaws.
1.64. CLASS B REGISTRATION RIGHTS AGREEMENT shall have the meaning
assigned to such term in Section 6.2(r) of the Plan.
1.65. CLASS B REGISTRATION STATEMENT shall have the meaning assigned to
such term in Section 6.2(r) of the Plan.
1.66. CLASS C5 CASH AMOUNT shall have the meaning assigned to such term
in Section 4.21 of the Plan.
1.67. CLASS C5 CLAIMS RESERVE shall have the meaning assigned to such
term in Section 4.21 of the Plan.
1.68. COMMENCEMENT DATE means the date on which the applicable Debtor
commenced its Chapter 11 Case: (i) November 22, 1995, with respect to the
Chapter 11 Cases of HJC and Finance Corp. and (ii) December 22, 1995, with
respect to HNOIC.
1.69. COMMITTEES mean the Bondholders Committee and the Unsecured
Creditors Committee.
1.70. COMPLETION LOAN DOCUMENTS means the Completion Loan Agreement
dated as of October 12, 1994, by and among HJC, as prepetition debtor, HET,
HOCI, NOLDC, Grand Palais and Grand Palais Management Companies, L.L.C., and the
Completion Loan Documents (as defined in the Completion Loan Agreement),
together with any amendments thereto executed prior to the Commencement Date of
the Chapter 11 Case of HJC.
1.71. COMPLETION NOTICE shall have the meaning assigned such term in
Section 5.9(f)(ii) of the Plan.
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1.72. CONFIRMATION DATE means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order with respect to this Plan on the
docket of the Bankruptcy Court.
1.73. CONFIRMATION HEARING means the hearing convened to consider
confirmation of the Plan.
1.74. CONFIRMATION ORDER means the order of the Bankruptcy Court entered
April 28, 1997 and confirming the Existing Plan, together with the order
pursuant to Sections 1127, 1128 and 1129 of the Bankruptcy Code approving
modifications of the Existing Plan set forth in this Plan.
1.75. CONSTRUCTION LIEN INDEMNITY OBLIGATION AGREEMENT means that
certain Construction Lien Indemnity Obligation Agreement dated October 12, 1994,
by and among HJC, as prepetition debtor, HOCI, NOLDC, Grand Palais, and Grand
Palais Management Company, L.L.C., together with any amendments thereto executed
prior to the Commencement Date of the Chapter 11 Case of HJC.
1.76. CONTINGENT CLAIM means a Claim that is contingent or unliquidated
on the Effective Date, including, without limitation, any Rejection Claim or
Deficiency Claim which has not been allowed on the Effective Date.
1.77. CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE DOCUMENTS means,
collectively, the Convertible Junior Subordinated Debentures, and, if
applicable, all other security agreements, mortgages, indentures and other
documents governing the terms and conditions of the obligations of HJC (and JCC
as HJC's successor) in respect of the Convertible Junior Subordinated
Debentures. The Convertible Junior Subordinated Debenture Documents shall be
satisfactory in form and substance to the non-Debtor parties thereto (in their
sole discretion), the Bondholders Committee (in its sole discretion) and HET (in
its sole discretion) on behalf of the Proponents, and if HJC is a party thereto,
HJC (which approval shall not be unreasonably withheld or delayed). The forms
of the Convertible Junior Subordinated Debenture Documents shall be filed with
the Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of the Plan.
1.78. CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES means the convertible
junior subordinated debentures to be issued by JCC on the Effective Date
pursuant to Sections 4.3(a) and 6.2(h) hereof in the approximate principal
amount of $15 million to the Underwriters (or Affiliates thereof), in the
approximate principal amount of $11.637 million to Bankers Trust Company (or an
Affiliate thereof) and the Participating Banks (plus additional convertible
junior subordinated debentures purchased pursuant to clause (C) of the first
sentence of Section 4.3(a)(ii) of the Plan) and in the principal amount of
$400,000 to FNBC (which amount is in addition to the $357,150 in principal
amount of Convertible Junior Subordinated Debentures to be purchased by FNBC as
a Participating Bank). These convertible junior subordinated debentures shall
have the terms and conditions set forth in the Convertible Junior Subordinated
Debenture Documents.
1.79. CREDITOR means the holder of an Allowed Claim.
1.80. DEBTORS means HJC, Finance Corp. and HNOIC.
1.81. DEBTORS GROUP means each Debtor's officers, directors, employees,
attorneys, financial advisors, accountants and, in the case of HJC, the members
of its Executive Committee and its Reorganization Steering Committee.
1.82. DEFICIENCY CLAIM means a Claim equal to the amount, if any, by
which the total Allowed Claim of any Creditor exceeds the sum of (i) any Setoff
or Recoupment Claims of the Creditor against
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the applicable Debtor provided for by applicable law and preserved by Section
553 of the Bankruptcy Code plus (ii) the portion of such Claim that is a Secured
Claim; PROVIDED, HOWEVER, that if the Class of which such Claim is a part makes
the election provided for by Section 1111(b)(2) of the Bankruptcy Code, there
shall be no Deficiency Claim in respect of such Claim.
1.83. DERIVATIVE CLAIM means any claim, demand, suit, action or cause of
action in law, equity or otherwise which is the property of any of the Debtors
or their respective estates.
1.84. DEVELOPMENT SERVICES AGREEMENT means the Development Services
Agreement to be executed on or before the Effective Date by JCC and the Harrah's
Investor and containing the terms and conditions described in the term sheet
attached hereto as Exhibit N. The Development Services Agreement shall be in
form and substance satisfactory to the Harrah's Investor, HET (in its sole
discretion) on behalf of the Proponents and the Bondholders Committee (in its
sole discretion).
1.85. DIP INDEBTEDNESS means, as of the date of determination, the
balance of principal, accrued interest and other amounts then outstanding in
respect of the debtor-in-possession loans (exclusive of any loans made under the
Junior Subordinated Credit Facility) made by HOCI or any of its Affiliates at
any time on or before the Effective Date to HJC pursuant to orders of the
Bankruptcy Court entered at any time on or before the Effective Date.
1.86. DIP LENDER means HOCI and/or any Affiliate which advanced any
funds constituting DIP Indebtedness.
1.87. DIP LOAN CLAIM means, collectively, any and all Claims based on
the DIP Indebtedness.
1.88. DIRECTOR NOMINEES shall have the meaning assigned to such term in
Section 6.4 of the Plan.
1.89. DISBURSING AGENT means any Person designated by HET (in its sole
discretion) on behalf of the Proponents or designated in the Plan to make
distributions required under the Plan, which may include, without limitation,
any JCC Entity, the Old Indenture Successor Trustee or any financial institution
of recognized standing.
1.90. DISBURSING AGREEMENTS means those agreements referenced in Section
6.8 of the Plan. The form of the Disbursing Agreement(s) shall be filed with
the Bankruptcy Court as Plan Document(s) pursuant to Section 6.2(t) of the Plan.
1.91. DISCLOSURE STATEMENT means the disclosure statement relating to
this Plan, as approved by the Bankruptcy Court pursuant to Section 1125 of the
Bankruptcy Code.
1.92. DISPUTED means, with respect to a Claim or Equity Interest, (i)
any Claim (including any Administrative Expense Claim) or Equity Interest as to
which any Debtor or any other party in interest has interposed a timely
objection or request for estimation in accordance with the Bankruptcy Code and
the Bankruptcy Rules, which objection or request for estimation has not been
withdrawn or determined by a Final Order in favor of the holder thereof, (ii)
any Claim or Equity Interest as to which a proof of claim or interest was
required to be filed by order of the Court but as to which a proof of claim or
interest was not timely or properly filed, and (iii) any Contingent Claim until
such Claim becomes fixed and absolute by Final Order, settlement or otherwise.
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1.93. DISPUTED CLAIM AMOUNT means, as to a particular Class on the date
of determination, the aggregate amount of Disputed Claims in that Class that are
not Contingent Claims. For purposes of calculating the initial distributions to
be made to holders of Allowed Class C5 Claims pursuant to Section 4.21 of the
Plan, the Disputed Claim Amount for each Disputed Claim shall be based upon
either (i) the amount of such Creditor's Disputed Claim as set forth in its
filed proofs of claim or (ii) the amount at which the Bankruptcy Court may
estimate such Disputed Claim.
1.94. DISTRIBUTION RECORD DATE means the Effective Date, unless
otherwise ordered by the Bankruptcy Court, and shall be used to determine which
holders of the Old Bonds are entitled to receive distributions, other than
distributions from the Release Pool, provided under the Plan.
1.95. EFFECTIVE DATE means a Business Day selected by HET (in its sole
discretion) on behalf of the Proponents after the first Business Day (A) which
is on or after the date of the entry of the Confirmation Order and (B) on which
(i) the Confirmation Order is not stayed and (ii) all conditions to the
effectiveness of the Plan have been satisfied or waived as provided in Article X
of the Plan, but not later than April 30, 1998, which date may be extended by
HET (in its sole discretion) on behalf of the Proponents with the written
consent of the Bondholders Committee (in its sole discretion) and the City.
1.96. EXISTING CONFIRMATION DATE means April 28, 1997, the date the
Bankruptcy Court entered an order confirming the Existing Plan.
1.97. EXISTING PLAN shall have the meaning assigned to such term in the
preamble hereof.
1.98. 8/95 WARN ACT CLAIMANT means any holder of a WARN Act Claim who
was terminated from his or her casino position in August, 1995.
1.99. 11/95 WARN ACT CLAIMANT means any holder of a WARN Act Claim who
was terminated from his or her casino position on or about November 22, 1995.
1.100. ENCUMBRANCE means any Lien, imperfection of title, option or
restriction of any kind affecting any property.
1.101. EQUITY INTEREST shall have the meaning assigned to the term
"Equity Security" in Section 101(16) of the Bankruptcy Code.
1.102. ESTIMATION ORDER shall have the meaning assigned to such term in
Section 4.3(b)(ii) of the Plan.
1.103. EXISTING LENDER'S TITLE INSURANCE POLICY means that certain
lender's title insurance policy previously issued by First American Title
Insurance Company for the benefit of the Banks and the Bondholders and certain
other parties, together with all reinsurance agreements, endorsements and
supplements thereto.
1.104. EXISTING OWNERS' TITLE INSURANCE POLICY means that certain Policy
of Title Insurance issued by First American Title Insurance Company dated
March 14, 1994, Policy Number D 102631 to HJC, as superseded and replaced by a
policy of the same Policy Number with an effective date of November 16, 1994,
together with all reinsurance agreements, endorsements and supplements thereto.
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1.105. FEE APPLICATION means an application of a Professional Person
under Section 330, 503 or 506(b) of the Bankruptcy Code for allowance of
compensation and reimbursement of expenses in any Chapter 11 Case.
1.106. FEE CLAIM means a Claim under Section 330, 503 or 506(b) of the
Bankruptcy Code for allowance of compensation and reimbursement of expenses in
any Chapter 11 Case.
1.107. FIDELITY means, collectively, Fidelity Management and Research
Company and Fidelity Management Trust Company.
1.108. FINAL ORDER means an order of the Bankruptcy Court or any other
court of competent jurisdiction (a) which has become final for purposes of 28
U.S.C. Section 158 or 1291 or such analogous law or rule in the case of an
order of a state court and (b)(i) as to which the time to appeal, petition for
certiorari, or move for reargument or rehearing has expired and as to which no
appeal, petition for certiorari, or other proceedings for reargument or
rehearing shall then be pending or as to which any right to appeal, petition for
certiorari, reargue, or rehear shall have been waived in writing in form and
substance satisfactory to HET (in its sole discretion) on behalf of the
Proponents or JCC or (ii) in the event that an appeal, writ of certiorari, or
reargument or rehearing thereof has been sought which shall have been determined
by the highest court to which such order was appealed, or certiorari, reargument
or rehearing shall have been denied or resulted in no modification of such order
and the time to take any further appeal, petition for certiorari or move for
reargument or rehearing shall have expired; PROVIDED, HOWEVER, that the
possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure,
or Bankruptcy Rule 9024 or other analogous rules governing procedure in cases
before the court, if not the Bankruptcy Court, may be filed with respect to such
order shall not cause such order not to be a Final Order.
1.109. FINANCE CORP. means Harrah's Jazz Finance Corp., a Delaware
corporation, as debtor and debtor in-possession.
1.110. FIRST AMERICAN SETTLEMENT AGREEMENT means that certain settlement
agreement by and between HJC and First American Title Insurance Company, dated
as of December 18, 1996, providing for the issuance of new owner's and lender's
title insurance policies.
1.111. FNBC means First National Bank of Commerce and its successors and
assigns.
1.112. FNBC CASH COLLATERAL shall have the meaning assigned to such term
in Section 6.2(k)(ii) of the Plan.
1.113. FNBC SETTLEMENT AGREEMENT means the letter agreement dated April
24, 1997, among HJC, HET, FNBC, the Bondholders Committee and Bankers Trust
Company attached to the Existing Plan as Exhibit M and incorporated by reference
herein.
1.114. GENERAL DEVELOPMENT AGREEMENT means that certain Amended General
Development Agreement dated March 15, 1994, between HJC, as prepetition debtor,
and the RDC, with the City as Intervenor, together with any amendments thereto
executed prior to the Commencement Date of the Chapter 11 Case of HJC.
1.115. GRAND PALAIS means Grand Palais Casino, Inc., a Delaware
corporation, and its successors and assigns.
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1.116. GRAND PALAIS BONDHOLDERS means the holders and beneficial owners
of the Grand Palais Senior Secured Bonds.
1.117. GRAND PALAIS GROUP means Grand Palais, and its Affiliates (other
than the Debtors), predecessors, successors and assigns and the officers,
directors, employees, attorneys, financial advisors, accountants, agents and
other representatives of each of the foregoing.
1.118. GRAND PALAIS/HET SETTLEMENT AGREEMENT means, collectively, (i) one
or more settlement agreements to be executed on or before the Effective Date by
Grand Palais, Christopher B. Hemmeter ("Hemmeter") and Cezar M. Froelich
("Froelich") on the one hand, and HET, HOCI and HNOMC, on the other hand, (ii)
the mutual releases attached as exhibits to such Settlement Agreement, pursuant
to which Grand Palais, Hemmeter, Froelich and certain Affiliates of Grand
Palais, on the one hand, and the Debtors, the JCC Entities, HET and certain
Affiliates thereof, on the other hand, shall release certain claims and causes
of action against each other and against the Bondholders Committee Group, the
Debtors Group, the Bank/Underwriter Group, the State Group and the City Group,
and (iii) all other agreements, instruments and documents executed or to be
executed in connection with this Settlement Agreement. The Grand Palais/HET
Settlement Agreement shall be in the form and substance satisfactory to Grand
Palais and HET.
1.119. GRAND PALAIS INDENTURE means that certain Amended and Restated
Indenture, dated as of November 16, 1994, between Grand Palais and Fleet
National Bank of Connecticut (formerly known as Shawmut Bank Connecticut,
National Association), as trustee, governing the terms of the Grand Palais
Senior Secured Bonds, as the same may be amended from time to time.
1.120. GRAND PALAIS RELEASING BONDHOLDER shall have the meaning set forth
in Section 5.6 of the Plan.
1.121. GRAND PALAIS SENIOR SECURED BONDS means the 18.25% Senior Secured
Pay-In-Kind Notes, due November 1, 1997, issued by Grand Palais pursuant to the
Grand Palais Indenture.
1.122. GRAND PALAIS SETTLEMENT CONSIDERATION shall have the meaning
assigned such term in Section 6.2(f)(i) of the Plan.
1.123. HARRAH'S DIRECTOR NOMINEES shall have the meaning assigned to such
term in Section 6.4 of the Plan.
1.124. HARRAH'S INVESTOR means, collectively, Harrah's Crescent City
Investment Company, a Nevada corporation and wholly-owned subsidiary of HET, HET
and/or any Affiliates of HET as the holder(s) of the shares of New Common Stock
issued pursuant to Sections 6.2(e) and 6.2(f) of the Plan, and its (their)
successors and assigns.
1.125. HARRAH'S NEW EQUITY INVESTMENT shall have the meaning assigned to
such term in Section 6.2(e) of the Plan.
1.126. HET means Harrah's Entertainment, Inc., a Delaware corporation,
formerly known as The Promus Companies, Incorporated, and its successors and
assigns.
1.127. HET GROUP means HET, HOCI, HNOMC, the Harrah's Investor and their
respective Affiliates (other than the Debtors), predecessors, successors and
assigns and the officers, directors,
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employees, attorneys, financial advisors, accountants, agents and other
representatives of each of the foregoing.
1.128. HET/JCC AGREEMENT means that certain HET/JCC Agreement executed by
HET and HOCI in favor of the LGCB and attached as an exhibit to the Amended and
Restated Casino Operating Contract.
1.129. HET LOAN GUARANTEE means, collectively, the payment guarantees or
"put" agreements by HET and HOCI with respect to (i) Tranche A-2 of the A Term
Loan, (ii) Tranche B-2 of the B Term Loan, and (iii) the Working Capital
Facility on terms satisfactory to such lenders and HET. The forms of the HET
Loan Guarantee shall be filed with the Bankruptcy Court as Plan Documents
pursuant to Section 6.2(t) of the Plan.
1.130. HET WARRANT means warrants to purchase additional shares of New
Common Stock such that, upon exercise of the warrants in their entirety,
Harrah's Investor would own up to 50.0% of the New Common Stock, as described in
the Bondholder Term Sheet attached hereto as Exhibit F, and which shall be (i)
satisfactory in form and substance to HET (in its sole discretion) on behalf of
the Proponents and the Bondholders Committee (in its sole discretion), and (ii)
filed with the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of
the Plan.
1.131. HJC means Harrah's Jazz Company, a Louisiana general partnership,
as debtor and debtor in-possession.
1.132. HNOIC means Harrah's New Orleans Investment Company, a Nevada
corporation, as debtor and debtor in-possession.
1.133. HNOMC means Harrah's New Orleans Management Company, a Nevada
corporation, and its successors and assigns.
1.134. HOCI means Harrah's Operating Company, Inc., a Delaware
corporation, formerly known as Embassy Suites, Inc., and its successors and
assigns.
1.135. INDENTURE TRUSTEE CHARGING LIEN means any Lien or other priority
in payment available to the Old Indenture Trustee pursuant to the Old Indenture
or otherwise against distributions made to the Bondholders under the Plan for
payment of any fees, costs, disbursements or amounts incurred by the Old
Indenture Trustee.
1.136. INDENTURE TRUSTEE CLAIM means a contractual Claim held by the Old
Indenture Trustee for compensation, reimbursement of costs or disbursements
(including, without limitation, the costs and expenses of its attorneys,
accountants and financial advisors), or indemnity arising from the Old Indenture
or otherwise, regardless of whether such fees and expenses are incurred prior or
subsequent to the Commencement Date.
1.137. INITIAL CLASS C5 DISTRIBUTION DATE shall have the meaning assigned
to such term in Section 4.21 of the Plan.
1.138. INSIDER shall have the meaning assigned to such term in Section
101(31) of the Bankruptcy Code.
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1.139. JCC means Jazz Casino Company, L.L.C., a Louisiana limited
liability company, and its successors and assigns, to which all of the property
of the Debtors and their estates shall be transferred on the Effective Date
(except as otherwise provided in the Plan).
1.140. JCC ENTITIES means JCC, JCC Intermediary (to the extent JCC
Intermediary is formed) and JCC Holding, and their respective successors and
assigns.
1.141. JCC HOLDING means JCC Holding Company, a Delaware corporation, and
its successors and assigns, which shall be a holding company owning directly or
indirectly all of the capital stock of JCC Intermediary (to the extent JCC
Intermediary is formed) and JCC.
1.142. JCC HOLDING BYLAWS means the Bylaws of JCC Holding, containing,
among other things, the applicable corporate governance provisions in the
Bondholder Term Sheet, and in the form to be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan.
1.143. JCC HOLDING CERTIFICATE OF INCORPORATION means the Certificate of
Incorporation of JCC Holding, containing, among other things, the applicable
corporate governance provisions in the Bondholder Term Sheet, and in the form to
be filed with the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t)
of the Plan.
1.144. JCC INTERMEDIARY means JCC Intermediary Company, L.L.C., a
Louisiana limited liability company, and its successors and assigns, which shall
be a holding company owning all of the membership interest(s) in JCC. As set
forth in Section 12.12 hereof, the formation of JCC Intermediary shall be at the
election of HET (in its sole discretion) on behalf of the Proponents.
1.145. JCC INTERMEDIARY OPERATING AGREEMENT means, to the extent JCC
Intermediary is formed, the operating agreement of JCC Intermediary, containing,
among other things, the applicable governance provisions in the Bondholder Term
Sheet, and in the form to be filed with the Bankruptcy Court as a Plan Document
pursuant to Section 6.2(t) of the Plan.
1.146. JCC INTERMEDIARY ORGANIZATIONAL DOCUMENTS means, collectively, the
articles of organization and initial report of JCC Intermediary and any other
documents required under the law of the State of Louisiana to form JCC
Intermediary as a limited liability company, each in the form to be filed with
the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of the Plan.
1.147. JCC OPERATING AGREEMENT means the operating agreement of JCC,
containing, among other things, the applicable governance provisions in the
Bondholder Term Sheet, and in the form to be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan.
1.148. JCC ORGANIZATIONAL DOCUMENTS means, collectively, the articles of
organization and the initial report of JCC and any other documents required
under the law of the State of Louisiana to form JCC as a limited liability
company, each in the form to be filed with the Bankruptcy Court as a Plan
Document pursuant to Section 6.2(t) of the Plan.
1.149. JUNIOR SUBORDINATED CREDIT FACILITY means the junior subordinated
credit facility in the aggregate principal amount of $10 million to be provided
by HET (or an Affiliate of HET) to JCC on the Effective Date pursuant to Section
6.2(i) of the Plan, which junior subordinated credit facility shall have such
terms and conditions as may be agreed to by the Bondholders Committee (in its
sole discretion), the Participating Banks (in their sole discretion), such
Affiliate of HET, and HET (in its sole discretion) on
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behalf of the Proponents, and if HJC is a party to the Junior Subordinated Loan
Documents, with the consent of HJC, which consent shall not be unreasonably
withheld or delayed.
1.150. JUNIOR SUBORDINATED LOAN DOCUMENTS means, collectively, the loan
agreement and all other loan documents and, if applicable, security documents
governing the terms and conditions of the Junior Subordinated Credit Facility,
which documents shall be satisfactory in form and substance to the Bondholders
Committee, the Participating Banks (in their sole discretion) and HET (in its
sole discretion) on behalf of the Proponents and if HJC is a party thereto, HJC,
which approval shall not be unreasonably withheld or delayed. The form of the
Junior Subordinated Loan Documents shall be filed with the Bankruptcy Court as
Plan Documents pursuant to Section 6.2(t) of the Plan.
1.151. LEDGC means the Louisiana Economic Development and Gaming
Corporation.
1.152. LGCB means, collectively, the Louisiana Gaming Control Board, and
its successors and assigns, and the LEDGC.
1.153. LIEN shall have the meaning assigned to such term in Section
101(37) of the Bankruptcy Code.
1.154. LITIGATION COSTS means (i) all reasonable fees, costs and expenses
(including all attorneys' and other professionals' fees and expenses) of or
incurred by JCC in prosecuting, settling or otherwise in connection with any
Assigned Litigation Claim or any action in which any Assigned Litigation Claim
is asserted or otherwise in connection with its performance of tasks and duties
pursuant to Section 5.9 of the Plan, (ii) all reasonable fees, costs and
expenses of Selected Counsel payable by JCC pursuant to clause (i) of the second
sentence of Section 5.9(d) hereof, and (iii) all reasonable out-of-pocket costs
and expenses of any Released Party reimbursable by JCC pursuant to clause (ii)
of the second sentence of Section 5.9(d) hereof.
1.155. LITIGATION DEFENDANT means any Person against whom an Assigned
Litigation Claim is asserted at any time by JCC.
1.156. MAJOR BONDHOLDERS means each member of the Bondholders Committee
in its capacity as a Bondholder or a member of the Bondholders Committee as of
the Voting Record Date.
1.157. MANAGEMENT AGREEMENT means that certain Amended and Restated
Management Agreement for the Harrah's New Orleans Casino dated March 14, 1995,
between HJC, as prepetition debtor, and HNOMC, together with any amendments
thereto executed prior to the Commencement Date of the Chapter 11 Case of HJC.
1.158. MINIMUM PAYMENT GUARANTOR LIEN means the Lien securing certain
obligations of JCC under the HET/JCC Agreement.
1.159. MINIMUM PAYMENT GUARANTY means a guaranty in the maximum stated
amount of $100 million for the benefit of the LGCB to assure payment of certain
obligations under the Amended and Restated Casino Operating Contract. The form
of the Minimum Payment Guaranty shall be filed with the Bankruptcy Court as a
Plan Document pursuant to Section 6.2(t) of the Plan and is summarized in the
Amended and Restated Casino Operating Contract Term Sheet attached hereto as
Exhibit B.
1.160. MODIFIED CONTRACTS means (i) the Canal Street Casino Lease, (ii)
the General Development Agreement, (iii) the Casino Operating Contract, (iv) the
Broadmoor Construction Agreement, (v) the
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Management Agreement, (vi) the Architect Contract, (vii) the Completion Loan
Documents, (viii) the Construction Lien Indemnity Obligation Agreement, (ix) the
Ticket Purchase Agreement dated July 19, 1996, and (x) the Centex-Landis
Construction Agreement, in each case as modified (or in the case of the Basin
Street Casino Lease, as modified and terminated) on the Effective Date in the
manner provided in Section 8.1(a) of the Plan.
1.161. NEW BOND DOCUMENTS means the New Indenture, the New Bonds, the New
Contingent Bonds, and all other security agreements, mortgages, indentures and
other documents of any kind and nature evidencing a Lien or other Encumbrance or
other obligation of JCC in respect of the New Bonds or New Contingent Bonds.
The forms of the New Bond Documents shall be filed with the Bankruptcy Court as
Plan Documents pursuant to Section 6.2(t) of the Plan.
1.162. NEW BONDS means the Senior Subordinated Notes due 2009 with
Contingent Payments of JCC to be issued under the Plan in the aggregate
noncontingent principal amount of $187.5 million, as more particularly described
in the Bondholder Term Sheet attached as Exhibit F hereto.
1.163. NEW BONDS 33 ACT REGISTRATION STATEMENT shall have the meaning set
forth in Section 6.2(s) of the Plan.
1.164. NEW COMMON STOCK means the Class A New Common Stock and Class B
New Common Stock of JCC Holding.
1.165. NEW COMPLETION GUARANTEES means the completion guarantees to be
executed and delivered on or before and as of the Effective Date by HET and HOCI
in favor of (i) the holders of the New Bonds as described in the Bondholder Term
Sheet, (ii) the LGCB and the City and RDC, on terms substantially similar to the
terms of the completion guarantee in favor of the holders of the New Bonds, and
(iii) the lenders under the A Term Loan, the B Term Loan and the Working Capital
Facility on terms satisfactory to such lenders and HET and HOCI. The forms of
these completion guarantees shall be filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan.
1.166. NEW CONTINGENT BONDS means the Senior Subordinated Contingent
Notes due 2009 to be issued under the Plan, as more particularly described in
the Bondholder Term Sheet attached as Exhibit F hereto.
1.167. NEW INDENTURE means, collectively, the indentures, as described in
the Bondholder Term Sheet, to be entered into by JCC and the trustees thereunder
and effective on or before and as of the Effective Date governing the terms and
conditions under which the New Bonds and New Contingent Bonds, respectively,
will be issued, subject to such modification as hereinafter may be made by HET
(in its sole discretion) on behalf of the Proponents with the consent of the
Bondholders Committee (which consent may be withheld in its sole discretion)
that do not adversely affect the rights of the holders of the New Bonds and New
Contingent Bonds and filed with the Bankruptcy Court as Plan Documents pursuant
to Section 6.2(t) of the Plan or as shall thereafter be required by the
Securities and Exchange Commission in connection with its qualification under
the Trust Indenture Act.
1.168. NEW INDENTURE TRUSTEE means the Person selected on or before the
Effective Date by HET (in its sole discretion) on behalf of the Proponents and
with the consent of the Bondholders Committee (which consent may be withheld in
its sole discretion) to serve as the trustee under the New Indenture if such
Person is eligible under the Trust Indenture Act and the New Indenture to serve
as the trustee under the New Indenture.
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1.169. NOLDC means New Orleans/Louisiana Development Corporation, a
Louisiana corporation, as debtor and debtor-in-possession.
1.170. NOLDC/GRAND PALAIS SETTLEMENT AGREEMENT means, collectively, (i)
the Settlement Agreement to be executed on or before and as of the Effective
Date by the NOLDC Shareholders and Grand Palais, (ii) mutual releases, in the
forms attached as exhibits to such Settlement Agreement, pursuant to which
NOLDC, the NOLDC Shareholders and certain Affiliates thereof, on the one hand,
and Grand Palais and certain Affiliates, on the other hand, release certain
claims and causes of action against each other, and (iii) all other agreements,
instruments or documents executed or to be executed in connection with the
Settlement Agreement. The NOLDC/Grand Palais Settlement Agreement shall be in
form and substance satisfactory to the NOLDC Shareholders and Grand Palais.
1.171. NOLDC GROUP means NOLDC, the NOLDC Shareholders, and their
respective Affiliates (other than the Debtors), predecessors, successors and
assigns and the officers, directors, employees, attorneys, financial advisors,
accountants, agents and other representatives of each of the foregoing.
1.172. NOLDC PLAN means the plan of reorganization to be confirmed
pursuant to a Final Order in the bankruptcy case of NOLDC, which plan of
reorganization and Final Order shall be in form and substance satisfactory to
the NOLDC Shareholders and HET in its sole discretion on behalf of the
Proponents.
1.173. NOLDC SHAREHOLDERS means T. George Solomon, Jr., Calvin Fayard,
Carl J. Eberts, Ronald M. Lamarque, Duplain W. Rhodes, III, Louie Roussel, III,
Michael X. St. Martin, John J. Cummings, III and Wendell H. Gauthier, and their
respective heirs, assigns and personal representatives.
1.174. NOLDC SHAREHOLDERS/HET SETTLEMENT AGREEMENT means, collectively,
(i) the Settlement Agreement to be executed on or before the Effective Date by
the NOLDC Shareholders, HET, HOCI, HNOMC, (ii) the mutual releases, in the forms
attached as exhibits to such Settlement Agreement, pursuant to which NOLDC, the
NOLDC Shareholders and certain Affiliates thereof, on the one hand, and the
Debtors, the JCC Entities, HET and certain Affiliates thereof, on the other
hand, release certain claims and causes of action against each other and provide
a mechanism by which mutual releases will be executed by NOLDC and the NOLDC
Shareholders with the Bondholders Committee Group, the Debtors Group, the
Bank/Underwriter Group, the State Group and the City Group, and (iii) all other
agreements, instruments or documents executed or to be executed in connection
with the Settlement Agreement. The NOLDC Shareholders/HET Settlement Agreement
shall be in form and substance satisfactory to the NOLDC Shareholders and HET
and shall be approved by the bankruptcy court in the Chapter 11 case of NOLDC
either pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code as part of the
NOLDC Plan or pursuant to Bankruptcy Rule 9019 by separate Final Order (in form
and substance satisfactory to the NOLDC Shareholders and HET).
1.175. NON-PARTICIPATING BANKS means each Bank which is not a
Participating Bank.
1.176. OBJECTION DEADLINE means the date by which objections to Claims
shall be filed with the Bankruptcy Court and served upon the respective holders
of each of the Claims as provided in Section 6.21 of the Plan.
1.177. OLD BANK COLLATERAL AGENT means First National Bank of Commerce
and its successors and assigns, as collateral agent for the Banks under the Old
Bank Credit Documents.
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1.178. OLD BANK CREDIT AGREEMENT means that certain Credit Agreement
dated as of November 8, 1994, among Bankers Trust Company, as Administrative
Agent and Bank, the other Banks listed therein and HJC and Finance Corp., as
prepetition debtors, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.179. OLD BANK CREDIT DOCUMENTS means the Old Bank Credit Agreement,
all Credit Documents (as defined in the Old Bank Credit Agreement), and all
other security agreements, mortgages, indentures and documents of every kind and
nature evidencing any Claims of any or all Banks, together with any amendments
thereto executed prior to the Commencement Date of the Chapter 11 Case of HJC.
1.180. OLD BOND DOCUMENTS means the Old Indenture, the Old Bonds, the
Collateral Documents (as defined in the Old Indenture), and all other security
agreements, mortgages, indentures and other documents of every kind and nature
evidencing a Lien or other Encumbrance or other obligation of any Debtor
relating to any Claim in respect of the Old Indenture or any of the Old Bonds,
together with any amendments thereto executed prior to the Commencement Date of
the Chapter 11 Case of HJC.
1.181. OLD BONDS means the 14-1/4% First Mortgage Notes due 2001 in the
aggregate principal amount of $435 million issued by HJC and Finance Corp., as
prepetition debtors, pursuant to the Old Indenture.
1.182. OLD COMPLETION GUARANTEES means (i) the Notes Completion Guaranty
dated as of November 16, 1994, by HET and HOCI in favor of the Old Indenture
Trustee and the City and the RDC, (ii) the LEDGC Completion Guaranty dated as of
November 16, 1994 by HET and HOCI in favor of LEDGC and (iii) the Bank
Completion Guaranty dated as of November 16, 1996, by HET and HOCI in favor of
the Administrative Agent (as defined in the Old Bank Credit Agreement).
1.183. OLD INDENTURE means that certain Indenture dated as of
November 15, 1994, between HJC and Finance Corp., as prepetition debtors, and
First National Bank of Commerce, as trustee, governing the terms of the Old
Bonds, together with any amendments thereto executed prior to the Commencement
Date of the Chapter 11 Cases of HJC and Finance Corp.
1.184. OLD INDENTURE PREDECESSOR COLLATERAL AGENT means First National
Bank of Commerce and its successors and assigns, as the predecessor collateral
agent for the Old Indenture Trustee and the Bondholders under the Old Bond
Documents.
1.185. OLD INDENTURE PREDECESSOR TRUSTEE means First National Bank of
Commerce as predecessor trustee under the Old Indenture and its successors and
assigns.
1.186. OLD INDENTURE SUCCESSOR TRUSTEE means Norwest Bank Minnesota,
N.A., as successor indenture trustee under the Old Indenture, and its successors
and assigns.
1.187. OLD INDENTURE TRUSTEE means, collectively, Norwest Bank
Minnesota, N.A., a successor indenture trustee, and First National Bank of
Commerce, as predecessor indenture trustee, under the Old Indenture, and their
respective successors and assigns.
1.188. OTHER PRIORITY CLAIM means, with respect to any Debtor, any
Claim, against such Debtor entitled to priority in right of payment under any or
all of Sections 507(a)(3) through (a)(7) of the Bankruptcy Code.
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1.189. PARTICIPATING BANKS means Bankers Trust Company, as Bank and
Administrative Agent, and any other Bank which elects through an appropriate
indication on the ballot provided to such Bank or otherwise in writing on or
before the Effective Date to be treated as a "Participating Bank" pursuant to
Section 4.3(a) of the Plan and for all other purposes under the Plan. No Bank
shall be treated as a Participating Bank for voting purposes unless it makes
such election prior to the deadline for submitting completed ballots. The term
"Participating Banks" shall include FNBC, provided that FNBC shall not have any
obligations under the Bank Term Sheet but shall instead be subject to the
provisions of the FNBC Settlement Agreement.
1.190. PENALTY CLAIMS means (a) Claims for fines, penalties or
forfeiture or for multiple, exemplary or punitive damages, to the extent that
such fine, penalty, forfeiture or damages are not compensation for actual
pecuniary loss suffered by the holder of such Claim, (b) Claims filed after the
Bar Date, (c) Claims increased through amendment after the Bar Date which the
Bankruptcy Court determines do not relate back to the applicable original timely
filed Claim, but only to the extent of the amount of such increase, (d) Claims
subject to subordination under Section 510 of the Bankruptcy Code, including,
without limitation, Securities Laws Claims, and (e) Claims for post-petition
attorneys' fees except to the extent allowed under Section 506(b) of the
Bankruptcy Code.
1.191. PERSON means a person, a corporation, a partnership, an
association, a joint stock company, a joint venture, a limited liability
company, an estate, a trust, an unincorporated organization, a government or any
subdivision thereof or any other entity.
1.192. PLAN means this Third Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code, as Modified Through December 10, 1997
(including all exhibits and schedules annexed hereto), either in its present
form or as it may be altered, amended, or modified from time to time.
1.193. PLAN DOCUMENTS means all of the agreements, instruments and
documents referenced in Section 6.2 of the Plan and all other agreements,
instruments and documents as HET, in its sole discretion, on behalf of the
Proponents deems necessary or appropriate to effectuate the terms and conditions
of or transactions contemplated by the Plan.
1.194. PRIORITY TAX CLAIM means a Claim of a governmental unit of the
kind specified in Sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.195. PROFESSIONAL PERSON means a Person retained or to be compensated
pursuant to Section 327, 328, 330, 503(b), 506(b) or 1103 of the Bankruptcy
Code.
1.196. PRO RATA SHARE or PRO RATA INTEREST means a proportionate share,
so that the ratio of the consideration distributed on account of an Allowed
Claim in a class to the amount of such Allowed Claim is the same as the ratio of
the amount of the consideration distributed on account of all Allowed Claims in
such class to the amount of all Allowed Claims in such class, or if the context
so requires, to the amount of all Allowed Claims in a designated portion of such
class.
1.197. PROPONENTS means the Debtors and HET as proponents of the Plan.
1.198. RDC means Rivergate Development Corporation, a Louisiana public
benefit corporation, and its successors and assigns.
1.199. REGISTRAR means the registrar under the Old Indenture of
transfers and exchanges of Old Bonds.
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1.200. REJECTION CLAIM means any Claim of any party to an executory
contract or unexpired lease with any Debtor arising from the rejection by such
Debtor of such executory contract or unexpired lease.
1.201. RELEASE CLAIMS means any actions, causes of action, in law or in
equity, suits, debts, Liens, liabilities, claims, demands, damages, punitive
damages, losses, costs or expenses and reasonable attorneys' fees of any kind or
nature whatsoever, whether fixed or contingent, known or unknown, and whenever
arising (including, without limitation, claims based on legal fault,
misrepresentations or omissions, negligence, offense, quasi-offense, contract,
quasi-contract or any other theory), which in any way relate to any Debtor, the
business affairs or operations of any Debtor, the issuance by any Debtor of any
securities or the Casino or the Temporary Casino (as defined in the Basin Street
Casino Lease), including, but not limited to, the licensing, leasing, financing,
arranging, development, construction, promotion, management or operation
thereof, or other matters relating to any Debtor or any successor to any of them
in connection with the Casino or the Temporary Casino, except to the extent any
of the foregoing arises under any of the Plan Documents on or after the
Effective Date.
1.202. RELEASE POOL shall have the meaning assigned to such term in
Section 6.2(f) of the Plan.
1.203. RELEASE POOL DISTRIBUTION RECORD DATE means May 5, 1997, the date
set by the Bankruptcy Court for determining which holders of the Old Bonds are
entitled to receive distributions from the Release Pool provided under the Plan.
1.204. RELEASE POOL TRANSFEREE shall have the meaning assigned to such
term in Section 6.20 of the Plan.
1.205. RELEASE POOL TRANSFER FORM shall have the meaning assigned to
such term in Section 6.20 of the Plan.
1.206. RELEASED AVOIDANCE CLAIMS means any and all Avoidance Claims
which are released pursuant to Section 5.8 of the Plan.
1.207. RELEASED PARTIES means the Debtors and the JCC Entities and each
Person in any or all of the HET Group, the Debtors Group, the Bondholders
Committee Group, the City Group, the State Group, the Bank/Underwriter Group,
the NOLDC Group (if the applicable Persons in the NOLDC Group execute and
deliver on or before the Effective Date the NOLDC Shareholders/HET Settlement
Agreement) and the Grand Palais Group (if the applicable Persons in the Grand
Palais Group execute on or before the Effective Date the Grand Palais/HET
Settlement Agreement).
1.208. RELEASES means the City/RDC Release, the State/LGCB Release, the
Centex-Landis Release, the Broadmoor Release, the NOLDC Shareholders/HET
Settlement Agreement, the Grand Palais/HET Settlement Agreement, the NOLDC
Shareholders/Grand Palais Settlement Agreement and the Bank/Underwriter Release.
1.209. RELEASING BONDHOLDERS shall have the meaning assigned to such
term in Section 5.2 of the Plan, and shall include, without limitation, each
Major Bondholder.
1.210. SCHEDULES means the schedules of assets and liabilities and the
statement of financial affairs filed by each Debtor as required by Section 521
of the Bankruptcy Code and Bankruptcy Rule 1007, and all amendments thereto
through the Confirmation Date.
1.211. SEC means the Securities and Exchange Commission or its
successors and assigns.
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1.212. SECURED CLAIM means an Allowed Claim held by any Person to the
extent of the value, as set forth in the Plan or as determined by a Final Order
of the Bankruptcy Court pursuant to Section 506(a) of the Bankruptcy Code, of
any interest in property of the applicable Debtor's estate securing such Allowed
Claim.
1.213. SECURITIES LAWS CLAIM means an Allowed Claim held by any Person
for rescission, damages or reimbursement, indemnification or contribution
arising out of a purchase or sale of any security (including, without
limitation, any Old Bonds) of either Debtor or any Affiliate thereof.
1.214. SELECTED COUNSEL shall have the meaning assigned to such term in
Section 6.2(t)(iv) hereof.
1.215. SETOFF OR RECOUPMENT CLAIM or SETOFF means a Claim which is
secured by setoff or recoupment rights of a Creditor of a Debtor, provided for
by applicable law and preserved by Section 553 of the Bankruptcy Code.
1.216. SHOWBOAT means Showboat, Inc., and its successors and assigns.
1.217. STATE means the State of Louisiana.
1.218. STATE GROUP means the State, the Governor of the State, the
LEDGC, the LGCB, the Riverboat Gaming Commission, the Attorney General of the
State, all boards, commissions, agencies, and other instrumentalities of the
State, and all of their respective predecessors, successors, and assigns, and
the officers, directors, employees, staff, members, attorneys, financial
advisors, accountants, agents, and other representatives of each of the
foregoing.
1.219. STATE/LGCB RELEASE means the Release, in a form substantially
similar to the City/RDC Release and satisfactory to HJC (which may not
unreasonably withhold or delay its approval) and HET, to be executed on or
before and as of the Effective Date by the Attorney General of the State of
Louisiana on behalf of the State Group, the Debtors, NOLDC, Grand Palais, HET,
HOCI, HNOMC, JCC and/or certain of their respective Affiliates, and providing
for mutual releases in favor of the State Group, on the one hand, and the
Debtors, the JCC Entities, the HET Group, the Debtors Group, the
Bank/Underwriter Group, the Bondholders Committee Group, the NOLDC Group (but
only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement), and
the Grand Palais Group (but only if the applicable Persons in the Grand Palais
Group execute and deliver on or before the Effective Date the Grand Palais/HET
Settlement Agreement), on the other hand.
1.220. SUBSEQUENT BANK DISTRIBUTION DATE shall have the meaning set
forth in Section 4.3(b) of the Plan.
1.221. SURETY BOND shall have the meaning set forth in Section 6.2(g) of
the Plan.
1.222. THIRD PARTY CLAIM means any claim or action (whether legal or
equitable, by subrogation or otherwise) by a Litigation Defendant against any
Released Party that seeks to hold such Person liable, in whole or in part, for
(i) any Assigned Litigation Claim, in whole or in part, brought at any time by
JCC against such Litigation Defendant or (ii) any claim or action, in whole or
in part, arising from any of the same transactions, occurrences, or facts upon
which such Assigned Litigation Claim brought at any time by JCC against such
Litigation Defendant is based in whole or in part.
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1.223. TOTAL CLAIMS AMOUNT means, as to a particular class, the sum of
(i) the aggregate amount of Allowed Claims in that class and (ii) the Disputed
Claim Amounts in that class.
1.224. TRANCHE A-1 means the $10 million A-1 tranche of the A Term Loan.
1.225. TRANCHE A-2 means the $20 million A-2 tranche of the A Term Loan.
1.226. TRANCHE A-3 means the $30 million A-3 tranche of the A Term Loan.
1.227. TRANCHE B-1 means the $30 million B-1 tranche of the B Term Loan.
1.228. TRANCHE B-2 means the $105 million B-2 tranche of the B Term
Loan.
1.229. TRUST INDENTURE ACT means the Trust Indenture Act of 1939, 15
U.S.C. Sections 77aaa-77bbbb, as now in effect or hereinafter amended.
1.230. TRUSTEE ACCOUNT shall have the meaning assigned to such term in
Section 4.5(b) of the Plan.
1.231. UNDERWRITER TERM SHEET means the term sheet attached hereto as
Exhibit K.
1.232. UNDERWRITERS means Salomon Brothers Inc, Donaldson, Lufkin &
Jenrette and BT Securities Corporation as underwriters of the Old Bonds.
1.233. UNKNOWN CLAIM means any Claim which any party asserting such
Claim does not know or suspect to exist in his, her, or its favor at the time of
the giving of the applicable releases and waivers set forth in this Plan which,
if known by him, her or it, might have affected his, her or its decision
regarding such releases and waivers.
1.234. UNSECURED CLAIM means any Claim that is not a Secured Claim,
Administrative Expense Claim, Priority Tax Claim, Penalty Claim or Other
Priority Claim.
1.235. UNSECURED CREDITORS COMMITTEE means the statutory committee of
unsecured creditors appointed by the United States Trustee in the Chapter 11
Case of HJC pursuant to Section 1102 of the Bankruptcy Code.
1.236. UNSUBSCRIBED RELEASE POOL SHARES means the shares of New Common
Stock in the Release Pool equal to the product of (i) 1,500,000 times (ii) a
fraction, the numerator of which is the aggregate principal amount of Old Bonds
held by Bondholders on the Release Pool Distribution Record Date that are not
Releasing Bondholders, and the denominator of which is $435 million. All
Unsubscribed Release Pool Shares which are distributed to the Releasing
Bondholders in accordance with the provisions of this Plan shall be shares of
Class A New Common Stock, and all Unsubscribed Release Pool Shares which are
distributed to Harrah's Investor in accordance with the provisions of this Plan
shall be shares of Class B New Common Stock.
1.237. VALUATION ORDER means the order, if any, entered by the
Bankruptcy Court on or before the Effective Date determining that the value of
the Assigned Debtor Litigation Claims (net of all estimated Litigation Costs and
the estimated aggregate amount of all Third Party Claims) is greater than the
sum of (i) the Bondholder Deficiency Amount, plus (ii) the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims, plus (iii) the
aggregate amount of all Allowed Claims in
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Class A7, plus (iv) the aggregate amount of all cure payments made as provided
in Section 8.1(e) of the Plan.
1.238. VOTING RECORD DATE means November 25, 1996, the date set by the
Bankruptcy Court for determining which holders of Old Bonds were entitled to
vote to accept or reject the Plan and are entitled to change their acceptances
or rejections of the Existing Plan.
1.239. WACHTELL FEES AND EXPENSES shall have the meaning assigned to
such term in Section 4.3(a)(ii) of the Plan.
1.240. WARN ACT CLAIM means any Claim against any or all of the Debtors
arising under the Worker Adjustment and Retraining Notification Act of 1988, 29
U.S.C. Section 2101 ET SEQ. and/or the Employee Retirement Income Security Act
of 1974 as amended, 29 U.S.C. Section 1001 ET SEQ.
1.241. WARN ACT COUNSEL means the law firms of Robein, Urann & Lurye,
P.L.C., Lowe, Stein, Hoffman, Alweiss & Hauver, and Shields, Mott, Lund &
Burnside, as counsel to the class representatives of the holders of WARN Act
Claims.
1.242. WARN ACT SETTLEMENT means the settlement agreement approved by
the Bankruptcy Court by order dated February 20, 1997, providing for the
settlement of the respective WARN Act Claims of the members of the Certified
WARN Act Class against any or all of the Debtors, HNOMC and Affiliates of HNOMC.
1.243. WITHHELD FUNDS means the funds withdrawn by or on behalf of any
or all of the Banks from one or more accounts of HJC on November 21 or 22, 1995,
(less the amount of any such funds which were subsequently returned to HJC), to
the extent such funds were not, prior to the commencement of the Chapter 11 Case
of HJC, legally and properly setoff or otherwise legally and properly applied
against the outstanding balance of the prepetition indebtedness (exclusive of
contingent indebtedness or obligations) owing to the Banks under the Old Bank
Credit Documents as of the commencement of the Chapter 11 Case of HJC, plus
interest thereon either (i) in the amount of interest actually credited to the
account(s) at which the Withheld Funds have been deposited, if HET, on behalf of
the Plan Proponents, the Bondholders Committee and Bankers Trust Company so
agree in their respective sole discretion, or (ii) if there is no such
agreement, at a rate to be determined by the Bankruptcy Court.
1.244. WORKING CAPITAL FACILITY means the revolving credit facility in
the principal amount of $25,000,000 to be provided by Bankers Trust Company and
any other Participating Banks to JCC on the Effective Date pursuant to Section
6.2(i) of the Plan, which revolving credit facility shall have the terms and
conditions set forth in the Bank Term Sheet and such other terms and conditions
as shall be set forth in the Working Capital Loan Documents.
1.245. WORKING CAPITAL LOAN DOCUMENTS means, collectively, the loan
agreement and all other loan and security documents governing the terms and
conditions of the Working Capital Facility, which documents shall be
satisfactory in form and substance to the Bondholders Committee (in its sole
discretion) and HET (in its sole discretion) on behalf of the Proponents, and if
HJC is a party to the Working Capital Loan Documents, with the consent of HJC,
which consent shall not be unreasonably withheld or delayed. The forms of the
Working Capital Loan Documents shall be filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan.
1.246. 34 ACT shall have the meaning assigned to such term in Section
6.2(q) of the Plan.
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B. OTHER TERMS
A term used herein that is not defined herein shall have the meaning
ascribed to that term, if any, in the Bankruptcy Code.
C. CONSTRUCTION OF CERTAIN TERMS
(a) The words "herein," "hereof," "hereto," "hereunder," and others of
similar import refer to the Plan as a whole and not to any particular section,
subsection, or clause contained in the Plan.
(b) Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include the singular and the plural
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, the feminine and the neuter.
(c) The rules of construction used in Section 102 of the Bankruptcy Code
shall apply to the construction of this Plan.
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
2.1. ADMINISTRATIVE EXPENSE CLAIMS. All Administrative Expense Claims
against any of the Debtors shall be treated as follows:
(a) TIME FOR FILING ADMINISTRATIVE EXPENSE CLAIMS. The holder of an
Administrative Expense Claim, other than (i) a Fee Claim, (ii) a liability
incurred and payable in the ordinary course of business by any Debtor in
accordance with any budget which is then in effect and has been approved by the
DIP Lender and filed with the Bankruptcy Court (including, without limitation,
the fees payable to the U.S. Trustee under 28 U.S.C. Section 1930), (iii) the
DIP Loan Claim or (iv) an Administrative Expense Claim which is allowed prior to
the Existing Confirmation Date, must file with the Bankruptcy Court and serve on
the Proponents and their counsel, a request for payment of such Administrative
Expense Claim within thirty days after the Existing Confirmation Date, or in the
case of any Administrative Expense Claim incurred after the Existing
Confirmation Date, within thirty days after the latter of (i) the date of
incurrence of such Administrative Expense Claim, and (ii) the Confirmation Date.
Such request must set forth at a minimum (i) the Debtor that is liable for the
Claim, (ii) the name of the holder of the Claim, (iii) the amount of the Claim,
and (iv) the basis of the Claim. Failure to file this request timely and
properly shall result in the Administrative Expense Claim being forever barred
and discharged.
(b) TIME FOR FILING FEE CLAIMS. Each Professional Person, Old Indenture
Trustee or other Person that holds or asserts an Administrative Expense Claim
that is a Fee Claim incurred before the Effective Date shall be required to file
with the Bankruptcy Court, and serve on all parties required to receive notice,
a final Fee Application within sixty days after the Effective Date. The failure
to file any such final Fee Application timely shall result in the applicable Fee
Claim being forever barred and discharged.
(c) ALLOWANCE OF ADMINISTRATIVE EXPENSE CLAIMS. An Administrative
Expense Claim with respect to which a request for payment has been properly
filed pursuant to Section 2.1(a) of the Plan shall become an Allowed
Administrative Expense Claim if no objection is filed within thirty days after
the
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filing and service of such request for payment of such Administrative Expense
Claim. If an objection is filed within such thirty-day period, the
Administrative Expense Claim shall become an Allowed Administrative Expense
Claim only to the extent allowed by Final Order. An Administrative Expense
Claim that is a Fee Claim and with respect to which a Fee Application has been
properly filed pursuant to Section 2.1(b) of the Plan, shall become an Allowed
Administrative Expense Claim only to the extent allowed by Final Order.
(d) PAYMENT OF ALLOWED ADMINISTRATIVE EXPENSE CLAIMS. Each holder of an
Allowed Administrative Expense Claim against a Debtor shall receive (i) the
amount of such holder's Allowed Claim in one cash payment on, or as soon as
practicable thereafter, the later of the Effective Date and the day on which
such Claim becomes an Allowed Claim (but in no event after the tenth (10th)
Business Day after the later of those two dates), or (ii) such other treatment
as may be agreed upon in writing by the applicable Debtor (prior to the
Effective Date) or JCC (from and after the Effective Date) and such holder;
PROVIDED, HOWEVER, that an Administrative Expense Claim representing a liability
incurred in the ordinary course of business of a Debtor (including, without
limitation, the fees payable to the U.S. Trustee under 28 U.S.C. Section 1930)
may be paid in the ordinary course of business by such Debtor, and PROVIDED
FURTHER, that the payment of an Allowed Administrative Expense Claim
representing a right to payment under Sections 365(b)(l)(A), 365(b)(l)(B), or
Section 365(d)(3) of the Bankruptcy Code may be made in one or more cash
payments over a period of time as is determined to be appropriate by the
Bankruptcy Court.
(e) WAIVER OF CERTAIN ADMINISTRATIVE EXPENSE CLAIMS. Solely for
purposes of this Plan, and subject to the occurrence of the Effective Date, HET,
NOLDC and Grand Palais and their respective Affiliates and Insiders shall be
deemed to have waived any Administrative Expense Claim other than (i) any
Administrative Expense Claim covered by any insurance policy assumed pursuant to
Section 8.1(c) hereof (PROVIDED, HOWEVER, that any such Administrative Claim
shall be payable only from available coverage under such insurance policy (and
not be payable by any Debtor) and only to the extent permitted under the NOLDC
Shareholders/HET Settlement Agreement or Grand Palais/HET Settlement Agreement,
as applicable) and (ii) in the case of HET and its Affiliates and Insiders, the
DIP Loan Claim (a portion of which is waived pursuant to Section 2.1(f) hereof)
or any Administrative Expense Claim for unreimbursed premiums or other
unreimbursed amounts paid for insurance coverage provided to any Debtor under
any insurance policy assumed pursuant to Section 8.1(c) of the Plan. The
respective distributions to which the Bondholders and, if applicable, the Old
Indenture Trustee are entitled under Article IV hereto shall be deemed to be in
complete satisfaction, discharge and release of any Administrative Expense Claim
or any superpriority administrative expense claim or any lien securing any of
the foregoing of the Bondholders or the Old Indenture Trustee, as applicable,
other than the Administrative Expense Claims of Fidelity, the respective Fee
Claims of the members of the Bondholders Committee and the Professional Persons
retained by the Bondholders Committee, any Bondholder or the Old Indenture
Trustee, which Fee Claims shall be governed by the applicable provisions of the
Plan and the Bankruptcy Code.
(f) PAYMENT OF DIP LOAN CLAIM. In consideration of, among other things,
the execution and delivery of the Releases and the other releases provided
pursuant to or in connection with the Plan and the issuance of New Common Stock
in accordance with the provisions of Sections 6.2(e) and (f) of the Plan, the
outstanding principal amount of the DIP Loan Claim shall be waived in its
entirety on and as of the Effective Date. The portion of the DIP Loan Claim
consisting of accrued and unpaid interest shall be paid in full in cash on the
Effective Date.
2.2. PRIORITY TAX CLAIMS. Except to the extent that the holder of an
Allowed Priority Tax Claim agrees to a different treatment, JCC shall pay to
each holder of an Allowed Priority Tax Claim, at the sole option of JCC, (a)
cash in an amount equal to such Allowed Priority Tax Claim on the later of
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the Effective Date and the date such Priority Tax Claim becomes an Allowed
Priority Tax Claim, or as soon thereafter as is practicable (but in no event
after the tenth (10th) Business Day after the later of those two dates), or (b)
equal quarterly cash payments in an aggregate amount equal to such Allowed
Priority Tax Claim, together with interest at a fixed annual rate to be
determined by the Bankruptcy Court or otherwise agreed to by JCC and such
holder, over a period through the sixth anniversary of the date of assessment of
such Allowed Priority Tax Claim, or upon such other terms determined by the
Bankruptcy Court to provide the holder of such Allowed Priority Tax Claim
deferred cash payments having a value, as of the Effective Date, equal to such
Allowed Priority Tax Claim.
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
Claims, other than Administrative Expense Claims and Priority Tax Claims,
are classified for all purposes, including voting, confirmation, and
distribution pursuant to the Plan, as follows:
A. HJC CLASSIFICATION
Class A1 -- Other Priority Claims: Class A1 consists of all Allowed Other
Priority Claims against HJC.
Class A2 -- Non-Bondholder Secured Class A2 consists of all Allowed Secured
Claims against
Claims: HJC other than the Secured Claims
specified in Class A3 or A4 of the Plan.
Class A3 -- Bank and Old Bank Class A3 consists of two separate
subclasses. Class
Collateral Agent Claims: A3(a) consists of all Allowed Secured
Claims of the
Participating Banks and the Old Bank
Collateral Agent against HJC, and Class
A3(b) consists of all Allowed Secured
Claims of the Non-Participating Banks
against HJC.
Class A4 -- Bondholder Claims: Class A4 consists of all Allowed Secured
and Unsecured Claims of the Bondholders
against HJC.
Class A5 -- Old Indenture Predecessor Class A5 consists of all Allowed Secured
Claims of the
Trustee and Old Indenture Old Indenture Predecessor Trustee and
the Old Indenture
Collateral Agent Claims: Collateral Agent against HJC.
Class A6 -- WARN Act Claims: Class A6 consists of all Allowed WARN
Act Claims against HJC of holders who
are part of the Certified WARN Act Class
and are bound by the WARN Act
Settlement.
Class A7 -- General Unsecured Claims: Class A7 consists of all Allowed
Unsecured Claims against HJC other than
the Unsecured Claims of the Bondholders
and the Unsecured Claims in Class A6 or
A8.
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Class A8 -- Penalty Claims Class A8 consists of all Allowed Penalty
Claims against HJC.
Class A9 -- HJC Equity Interests: Class A9 consists of all Allowed Equity
Interests in HJC, and any option,
warrant or other agreement requiring the
issuance of any such Equity Interest.
B.FINANCE CORP. CLASSIFICATION
Class B1 -- Other Priority Claims: Class B1 consists of all Allowed Other
Priority Claims against Finance Corp.
Class B2 -- Bank Claims: Class B2 consists of all Allowed Secured
Claims of the Banks and the Old Bank
Collateral Agent against Finance Corp.
Class B3 -- Bondholder Claims: Class B3 consists of all Allowed Secured
and Unsecured Claims against Finance
Corp. of the Bondholders.
Class B4 -- WARN Act Claims: Class B4 consists of all Allowed WARN
Act Claims against Finance Corp. of
holders who are part of the Certified
WARN Act Class and are bound by the WARN
Act Settlement.
Class B5 -- General Unsecured Claims: Class B5 consists of all Allowed
Unsecured Claims against Finance Corp.
other than the Unsecured Claims of the
Bondholders.
Class B6 -- Penalty Claims Class B6 consists of all Allowed Penalty
Claims against Finance Corp.
Class B7 -- Equity Interests: Class B7 consists of all Allowed Equity
Interests in Finance Corp., and any
option, warrant or other agreement
requiring the issuance of any such
Equity Interest.
C.HNOIC CLASSIFICATION
Class C1 -- Other Priority Claims: Class C1 consists of all Allowed Other
Priority Claims against HNOIC.
Class C2 -- Secured Claims: Class C2 consists of all Allowed Secured
Claims against HNOIC.
Class C3 -- WARN Act Claims: Class C3 consists of all Allowed WARN
Act Claims against HNOIC of holders who
are part of the Certified WARN Act Class
and are bound by the WARN Act
Settlement.
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Class C4 -- Unsecured Claims (for Class C4 consists of all Allowed
which HJC is liable): Unsecured Claims against HNOIC for which
HJC is also liable.
Class C5 -- General Unsecured Claims: Class C5 consists of all Allowed
Unsecured Claims against HNOIC other
than Unsecured Claims in Class C3, C4,
C6 or C7.
Class C6 -- Showboat Claim: Class C6 consists of all Allowed Claims
of NOLDC against HNOIC for reimbursement
of a portion of the amount owing by
NOLDC to Showboat.
Class C7 -- Penalty Claims Class C7 consists of all Allowed Penalty
Claims against HNOIC.
Class C8 -- Equity Interests: Class C8 consists of all Allowed Equity
Interests in HNOIC, and any option,
warrant or other agreement requiring the
issuance of any such Equity Interest.
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS
A. HJC TREATMENT
4.1. CLASS A1 -- OTHER PRIORITY CLAIMS.
(a) IMPAIRMENT AND VOTING. Class A1 is impaired by the Plan. Each
holder of an Allowed Claim in Class A1 is entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS. JCC shall pay to each holder of an Allowed Claim in
Class A1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.2. CLASS A2 -- NON-BONDHOLDER SECURED CLAIMS.
(a) IMPAIRMENT AND VOTING. Class A2 is impaired by the Plan. Each
holder of an Allowed Claim in Class A2 is entitled to vote to accept or reject
the Plan.
(b) REINSTATEMENT OF CLAIMS OR SURRENDER OF COLLATERAL. Except as
provided in the immediately following two sentences, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Claim in Class A2 to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of a default, each Allowed
Claim in Class A2 will be reinstated and rendered unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign,
abandon or surrender any property securing any Secured Claim in Class A2 to the
holder of such Secured Claim. The Court will determine the value of any such
property so assigned, abandoned or surrendered, and any Deficiency Claim
resulting therefrom will be paid as a Class A7 or A8 Claim.
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4.3. CLASS A3 -- BANK CLAIMS.
(a) CLASS A3(a) -- CLAIMS OF PARTICIPATING BANKS AND OLD BANK COLLATERAL
AGENT.
(i) IMPAIRMENT AND VOTING. Class A3(a) is impaired by the Plan.
Each holder of an Allowed Secured Claim in Class A3(a) is entitled to vote to
accept or reject the Plan. Solely for voting purposes, each Participating Bank
shall be deemed to have an Allowed Class A3(a) Claim in the aggregate amount set
forth in clauses (A) through (D) of the first sentence of Section 4.3(a)(ii)
hereof.
(ii) ALLOWANCE AND DISTRIBUTIONS. The Claim of each holder in
Class A3(a) shall be allowed in an amount equal to: (A) with respect to any
holder that participated in the pre-petition standby letter of credit issued by
Bankers Trust Company in the amount of $5,000,000 and previously drawn in full
by Broadmoor as the beneficiary, such holder's Pro Rata Share of the sum of
$5,000,000 plus all unpaid interest thereon (at the nondefault rate specified in
the Old Bank Credit Documents) and unpaid fees in respect of such letter of
credit that accrue through the Effective Date: (B) with respect to any holder
that participated in the undrawn Standby Letter of Credit S-10269 issued by
Bankers Trust Company in the amount of $1,500,000 in favor of the City, such
holder's Pro Rata Share of the unpaid fees in respect of such letter of credit
that accrue through the Effective Date; (C) the amount paid by such holder in
respect of the fees and expenses of Wachtell, Lipton, Rosen & Katz, as the
restructuring counsel of the Administrative Agent that accrue through the
Effective Date (the "Wachtell Fees and Expenses") (which shall not include any
fees and expenses in connection with the Convertible Junior Subordinated
Debentures, the A Term Loan, the B Term Loan, and/or the Working Capital
Facility), provided that such holder purchases on the Effective Date additional
Convertible Junior Subordinated Debentures in an amount equal to its Pro Rata
Share of the Wachtell Fees and Expenses; and (D) in the case of the
Administrative Agent, all unpaid facing fees arising under the Old Bank Credit
Agreement through the Effective Date; PROVIDED, HOWEVER, that the Class A3(a)
Claims of FNBC as a Participating Bank and as Old Bank Collateral Agent shall be
allowed and otherwise treated in accordance with the provisions of the FNBC
Settlement Agreement. Each Allowed Class A3(a) Claim shall be paid from the
Withheld Funds on the Effective Date by the Administrative Agent and, to the
extent such Withheld Funds are insufficient to pay the Allowed Class A3(a)
Claims of FNBC, the unpaid portion of FNBC's Allowed Class A3(a) Claims shall be
paid by JCC. Any remaining Withheld Funds shall be remitted by the
Administrative Agent to the Old Bank Collateral Agent for distribution pursuant
to Section 4.3(b)(ii) hereof. The Participating Banks and FNBC as the Old Bank
Collateral Agent waive all of their other Class A3(a) Claims against the Debtor,
and shall not receive any distribution on account thereof. As a condition to
the allowance of their respective Class A3(a) Claims, the holders of Class A3(a)
Claims shall purchase on the Effective Date Convertible Junior Subordinated
Debentures in an aggregate principal amount equal to the sum of (x) $11,000,000
PLUS (y) in the case of any holders of Class A3(a) Claims electing to have the
portion of their Class A3(a) Claim described in clause (C) above allowed, the
aggregate amount of Class A3(a) Claims allowed pursuant to such clause (C). The
$11,000,000 portion of the Convertible Junior Subordinated Debentures to be
purchased by each holder of a Class A3(a) Claim pursuant to clause (x) in the
immediately preceding sentence shall be based on the ratio of the amount of fees
and expenses paid to such holder in connection with the credit facility under
the Old Bank Credit Documents to the aggregate amount of fees and expenses paid
to all holders of Class A3(a) Claims in connection with such credit facility.
Notwithstanding anything to the contrary herein, FNBC shall be obligated to
purchase the principal amount of Convertible Junior Subordinated Debentures
specified in the FNBC Settlement Agreement, and $357,150 of such principal
amount shall be deemed to have been purchased by FNBC as a holder of Class A3(a)
Claims and shall be credited against the $11 million in aggregate principal
amount of Convertible Junior Subordinated Debentures to be purchased by holders
of Class A3(a) Claims pursuant to clause (x) of the third-to-last sentence of
this Section 4.3(a)(ii).
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(b) CLASS A3(b) -- CLAIMS OF NON-PARTICIPATING BANKS.
(i) IMPAIRMENT AND VOTING. Class A3(b) is impaired by the Plan.
Each holder of an Allowed Secured Claim in Class A3(b) is entitled to vote to
accept or reject the Plan.
(ii) DISTRIBUTIONS. The amount of the Allowed Secured Claim of
each holder in Class A3(b) shall be estimated for distribution purposes on or
before the Effective Date. As soon as practicable after the later of the
Effective Date and the date on which all of the Allowed Secured Claims in Class
A3(b) have been estimated pursuant to an order of the Bankruptcy Court (the
"Estimation Order"), the Old Bank Collateral Agent (A) shall distribute to each
such holder from the Withheld Funds remitted to the Old Bank Collateral Agent
pursuant to Section 4.3(a)(ii) hereof an amount of cash equal to the lesser of
(I) the portion of such holder's estimated Allowed Secured Claim that has been
liquidated as of the date of such Estimation Order, and (II) the product of (x)
the amount of such Withheld Funds and (y) a fraction, the numerator of which is
the amount specified in the immediately preceding clause (I) above and the
denominator of which is the aggregate amount of each holder's estimated Allowed
Secured Claim that has been liquidated as of the date of the Estimation Order,
(B) shall retain a portion of such Withheld Funds (the "Bank Reserve Fund")
equal to the aggregate amount of each such holder's estimated Class A3(b) Claim
that remains Contingent as of such date, which Bank Reserve Fund shall secure
the unliquidated portion of each holder's unliquidated estimated Class A3(b)
Claims, and (C) shall remit promptly to JCC the balance of such Withheld Funds.
On the tenth (10th) Business Day ("Subsequent Bank Distribution Date") after
each six-month anniversary of the Effective Date, and upon receipt of the
appropriate documentation from the applicable holder, Old Bank Collateral Agent
shall distribute to each holder of an estimated or actual Allowed Class A3(b)
Claim an amount equal to the lesser of (A) the portion of such Claim, if any,
that has been liquidated during the six-month period ending on such sixth (6th)
month anniversary date, and (B) the product of (x) the remaining amount of funds
in the Bank Reserve Fund times (y) a fraction, the numerator of which is the
amount specified in the immediately preceding clause (A) and the denominator of
which is the aggregate amount of all such estimated or actual Allowed Secured
Claims that have been liquidated during such six month period. In the event the
Claims of the holders in Class A3(b) are allowed as Secured Claims in an
aggregate amount in excess of the amount of Withheld Funds distributed to the
Old Bank Collateral Agent pursuant to Section 4.3(a)(ii) hereof, then each such
holder shall receive the "indubitable equivalent" (within the meaning of Section
1129(b)(2)(A)(iii) of the Bankruptcy Code) as determined by Final Order of the
Bankruptcy Court with respect to that portion of such holder's Allowed Secured
Claim in excess of its Pro Rata Share of such Withheld Funds. In the event that
the Secured Claim of any holder in Class A3(b) is, pursuant to a Final Order,
disallowed or allowed in an amount less than the amount of distributions
previously made on account of such Claim, such holder shall promptly remit to
JCC the excess of any such distributions over the amount of its Allowed Secured
Claim, if any. Upon the liquidation and payment in full of all Allowed Class
A3(b) Claims, the Old Bank Collateral Agent shall remit promptly to JCC the
remaining balance in the Bank Reserve Fund.
4.4. CLASS A4 -- BONDHOLDER CLAIMS.
(a) IMPAIRMENT AND VOTING. Class A4 is impaired by the Plan. Each
holder of an Allowed Claim in Class A4 as of the Voting Record Date is entitled
to vote to accept or reject the Plan.
(b) ALLOWANCE AND DISTRIBUTIONS. The Claim of each record holder of Old
Bonds as of the Distribution Record Date or the Release Pool Distribution Record
Date, as applicable, to the extent such Claim is based on the principal of and
accrued interest on the Old Bonds owned as of the Distribution Record Date or
the Release Pool Distribution Record Date, as applicable, shall be allowed in
the aggregate amount of the principal of such Old Bonds plus accrued interest
(calculated in accordance with the
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provisions of the Old Indenture) through and including the Effective Date. On
the Effective Date or as soon as practicable thereafter but in no event after
the tenth (10th) Business Day after the Effective Date (or in the case of
clause (v), as provided in Section 5.2 hereof), each record holder of an Allowed
Claim in Class A4 shall receive (i) 8.529 shares of Class A New Common Stock for
each $1,000 of the principal amount of the Old Bonds held by such holder on the
Distribution Record Date, (ii) $431 in principal amount of New Bonds for each
$1,000 of the principal amount of the Old Bonds held by such holder on the
Distribution Record Date, (iii) its Pro Rata Share of the New Contingent Bonds,
(iv) its Pro Rata Share of the interests in proceeds of Assigned Litigation
Claims allocated to holders of Allowed Class A4 Claims (as of the Distribution
Record Date) and/or Releasing Bondholders (as of the Release Pool Distribution
Record Date), as applicable, under Section 5.9 of the Plan, and (v) in the case
of any holder which is a Releasing Bondholder, as consideration for its release
of claims against the Released Parties if such holder specifically elects to
release such claims as provided in Section 5.2 of the Plan, from the Release
Pool, 3.448 shares of Class A New Common Stock for each $1,000 in principal
amount of Old Bonds held by such holder on the Release Pool Distribution Record
Date plus its Pro Rata Share (based on the total principal amount of Old Bonds
held by all Releasing Bondholders) of Class A New Common Stock consisting of
86.67% of the Unsubscribed Release Pool Shares. The foregoing distributions
shall be deemed to include the distribution to which each holder of an Allowed
Claim in Class A4 is entitled as a holder of an Allowed Claim in Class B3.
4.5. CLASS A5 -- OLD INDENTURE PREDECESSOR TRUSTEE AND OLD INDENTURE
PREDECESSOR COLLATERAL AGENT CLAIMS.
(a) IMPAIRMENT AND VOTING. Class A5 is impaired by the Plan. FNBC, as
the sole holder of Claims in Class A5, is entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS. All of FNBC's Claims as Old Indenture Predecessor
Trustee and Old Indenture Predecessor Collateral Agent shall be allowed and
otherwise treated in accordance with the provisions of the FNBC Settlement
Agreement.
4.6. CLASS A6 -- WARN ACT CLAIMS.
(a) IMPAIRMENT AND VOTING. Class A6 is impaired by the Plan. Each
holder of an Allowed Claim in Class A6 is entitled to vote to accept or reject
the Plan. Solely for purposes of voting, each holder of a WARN Act Claim shall
be deemed to have an Allowed WARN Act Claim in the amount of $1.00.
(b) DISTRIBUTIONS AND OTHER TREATMENT. On or as soon as practicable
after the Effective Date, JCC shall pay the sum of $2.265 million MINUS the fees
and expenses of WARN Act Counsel incurred in connection with its representation
of the holders of WARN Act Claims, and a portion of certain taxes attributable
to the WARN Act settlement (all as more fully described in the February 20, 1997
Bankruptcy Court order approving the settlement of WARN Act Claims), to holders
of Allowed 11/95 WARN Act Claims based on their respective Pro Rata Interests in
the balance of the $2.265 million payment, subject to any tax or other
withholdings required by law. The Allowed amount of the WARN Act Claim of each
11/95 WARN Act Claimant for purposes of determining his or her Pro Rata Interest
shall be determined by WARN Act Counsel in its reasonable discretion pursuant to
a set of objective and nondiscriminatory criteria to be filed with the
Bankruptcy Court on or before the Effective Date. In addition, to the extent
such positions are or become available, JCC shall offer each 11/95 WARN Act
Claimant re-employment to his or her former position or, if his or her former
position no longer exists or is not then available, to a substantially
equivalent position, prior to offering employment to such position to any other
Person other than any 11/95 WARN Act Claimant. As for the 8/95 WARN Act
Claimants, JCC (A) shall place each
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8/95 WARN Act Claimant on a preferential re-hire list for one year following the
date on which the Casino opens for business, and (B) to the extent such
positions are or become available, shall offer re-employment to his or her
former position or, if his or her former position no longer exists or is not
then available, to a substantially equivalent position, prior to offering
employment to such position to any Person other than any 11/95 WARN Act
Claimant, any 8/95 WARN Act Claimant or any Person who was formerly employed and
laid off by the Flamingo Casino.
4.7. CLASS A7 -- GENERAL UNSECURED CLAIMS.
(a) IMPAIRMENT AND VOTING. Class A7 is impaired by the Plan. Each
holder of an Allowed Claim in Class A7 (an "Allowed General Unsecured Claim") is
entitled to vote to accept or reject the Plan.
(b) DISTRIBUTIONS. JCC shall pay to each holder of an Allowed General
Unsecured Claim (an "Allowed General Unsecured Creditor") cash in an amount
equal to such Allowed General Unsecured Claim on the later of the Effective Date
and the date on which such Claim becomes an Allowed Claim, or as soon as
practicable thereafter. Solely for purposes of this Plan, and subject to the
occurrence of the Effective Date, HNOIC, Finance Corp., HET, NOLDC, Grand Palais
and all of their respective Affiliates and Insiders shall be deemed to have
waived any Class A7 Claim except (i) any Allowed Class A7 claim covered by any
insurance policy assumed pursuant to Section 8.1(c) hereof (provided that any
such Allowed Class A7 Claim shall be payable only from available coverage under
such insurance policy (and not be payable by any Debtor) and only to the extent
permitted under the NOLDC Shareholders/HET Settlement Agreement or Grand
Palais/HET Settlement Agreement, as applicable), (ii) in the case of HET and its
Affiliates and Insiders, any Class A7 Claim for unreimbursed premiums or other
unreimbursed amounts paid for insurance coverage provided to any Debtor under
any insurance policy assumed pursuant to Section 8.1(c) of the Plan, and (iii)
the Allowed Class A7 Claim of Deborah Sulzer in the amount of $39,579.52 as
reflected in Claim No. 490.
4.8. CLASS A8 -- PENALTY CLAIMS. Class A8 is impaired by the Plan. The
holders of Class A8 Claims shall not receive any distributions on account of
such Claims, and on the Effective Date, all Class A8 Claims shall be
extinguished; PROVIDED, HOWEVER, that if a Valuation Order is entered on or
before the Effective Date, each holder of an Allowed Claim in Class A8 shall
receive its Pro Rata Share of the interests in the proceeds of Assigned Debtor
Litigation Claims as allocated to holders of Allowed Class A8 Claims under
Section 5.9 of the Plan. Each holder of a Class A8 Claim is conclusively
presumed to have rejected the Plan as a holder of a Class A8 Claim and is not
entitled to vote to accept or reject the Plan.
4.9. CLASS A9 -- EQUITY INTERESTS. Class A9 is impaired by the Plan.
The holders of Equity Interests in Class A9 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity
Interests in HJC shall be extinguished. Each holder of an Equity Interest in
Class A9 is conclusively presumed to have rejected the Plan as a holder of a
Class A9 Equity Interest and is not entitled to vote to accept or reject the
Plan.
B. FINANCE CORP. TREATMENT
4.10. CLASS B1 -- OTHER PRIORITY CLAIMS.
(a) IMPAIRMENT AND VOTING. Class B1 is impaired by the Plan. Each
holder of an Allowed Claim in Class B1 is entitled to vote to accept or reject
the Plan.
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(b) DISTRIBUTIONS. JCC shall pay to each holder of an Allowed Claim in
Class B1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.11. CLASS B2 -- BANK CLAIMS.
(a) IMPAIRMENT AND VOTING. Class B2 is impaired by the Plan. Each
holder of an Allowed Secured Claim in Class B2 is entitled to vote to accept or
reject the Plan.
(b) DISTRIBUTIONS. As soon as practicable after the later of the
Effective Date and the date on which all of the Allowed Secured Claims in Class
B2 have been allowed or disallowed by Final Order, each holder of an Allowed
Class B2 Claim is entitled to receive from JCC its pro rata share (based on the
ratio of its Allowed Class B2 Claim to the aggregate amount of all Allowed
Secured Claims in Class B2 and Class B3) of $1,000 in cash. The distribution to
which each holder of an Allowed Class B2 Claim which is also a holder of an
Allowed Class A3(a) Claim is entitled shall be deemed part of, and satisfied
upon receipt of, the distributions which such holder is entitled to receive as a
holder of an Allowed Class A3(a) Claim.
4.12. CLASS B3 -- BONDHOLDER CLAIMS.
(a) IMPAIRMENT AND VOTING. Class B3 is impaired by the Plan. Each
holder of an Allowed Secured Claim in Class B3 as of the Voting Record Date is
entitled to vote to accept or reject the Plan.
(b) DISTRIBUTIONS. Each holder of an Allowed Claim in Class B3 is
entitled to receive its Pro Rata Share of shares of Class A New Common Stock and
New Bonds which, in the aggregate, have a value equal to the product of (i)
$1,000 and (ii) a fraction, the numerator of which is the aggregate amount of
Allowed Secured Claims in Class B3, and the denominator of which is the
aggregate amount of Allowed Secured Claims in Class B2 and Class B3. The
distribution to which each holder of an Allowed Class B3 Claim is entitled shall
be deemed part of, and satisfied upon receipt of, the distributions which such
holder is entitled to receive as a holder of an Allowed Class A4 Claim.
4.13. CLASS B4 -- WARN ACT CLAIMS.
(a) IMPAIRMENT AND VOTING. Class B4 is impaired by the Plan. Each
holder of an Allowed Claim in Class B4 is entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS AND OTHER TREATMENT. Each holder of an Allowed Claim
in Class B4 shall be deemed to have received on account of his or her Class B4
Claims, and in full satisfaction thereof, the distribution and/or other
treatment he or she receives as a holder of a Class A6 Claim pursuant to Section
4.6 of the Plan. No other distribution shall be provided to such holder on
account of his or her Class B4 Claims.
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4.14. CLASS B5 -- GENERAL UNSECURED CLAIMS.
(a) IMPAIRMENT AND VOTING. Class B5 is impaired by the Plan. Each
holder of an Allowed Claim in Class B5 is entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS. JCC shall pay to each holder of an Allowed Claim in
Class B5 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date on which such Claim becomes an Allowed Claim, or as
soon as practicable thereafter. Solely for purposes of this Plan, and subject
to the occurrence of the Effective Date, HNOIC, HJC, HET, NOLDC, Grand Palais
and all of their respective Affiliates and Insiders shall be deemed to have
waived their right to receive any distribution as a holder of a Class B5 Claim.
4.15. CLASS B6 - PENALTY CLAIMS. The holders of Class B6 Claims shall not
receive any distributions on account of such Claims, and on the Effective Date,
all Class B6 Claims shall be extinguished; PROVIDED, HOWEVER, that if a
Valuation Order is entered on or before the Effective Date, each holder of an
Allowed Class B6 Claim shall be deemed to have received on account of its Class
B6 Claim, and in full satisfaction thereof, the distribution it receives as a
holder of a Class A8 Claim pursuant to Section 4.8 of the Plan. Each holder of
a Class B6 Claim is conclusively presumed to have rejected the Plan as a holder
of a Class B6 Claim and is not entitled to vote to accept or reject the Plan.
4.16. CLASS B7 -- EQUITY INTERESTS. Class B7 is impaired by the Plan.
The holders of Equity Interests in Class B7 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity
Interests in Finance Corp. shall be extinguished. Each holder of an Equity
Interest in Class B7 is conclusively presumed to have rejected the Plan as a
holder of a Class B7 Equity Interest and is not entitled to vote to accept or
reject the Plan.
C. HNOIC CLASSIFICATION
4.17. CLASS C1 -- OTHER PRIORITY CLAIMS.
(a) IMPAIRMENT AND VOTING. Class C1 is impaired by the Plan. Each
holder of an Allowed Claim in Class C1 is entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS. JCC shall pay to each holder of an Allowed Claim in
Class C1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.18. CLASS C2 -- SECURED CLAIMS.
(a) IMPAIRMENT AND VOTING. Class C2 is impaired by the Plan. Each
holder of an Allowed Claim in Class C2 is entitled to vote to accept or reject
the Plan.
(b) REINSTATEMENT OF CLAIMS OR SURRENDER OF COLLATERAL. Except as
provided in the immediately following two sentences, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Claim in Class C2 to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of default, each Allowed
Claim in Class C2 will be reinstated and rendered unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign,
abandon or surrender any property securing any Secured Claim in Class C2 to the
holder of such Secured Claim. The Court will determine the value of any such
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property so assigned, abandoned or surrendered, and any Deficiency Claim
resulting therefrom will be paid as a Class C5 or C7 Claim.
4.19. CLASS C3 -- WARN ACT CLAIMS.
(a) IMPAIRMENT AND VOTING. Class C3 is impaired by the Plan. Each
holder of an Allowed Claim in Class C3 is entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS AND OTHER TREATMENT. Each holder of an Allowed Claim
in Class C3 shall be deemed to have received on account of his or her Class C3
Claims, and in full satisfaction thereof, the distribution and/or other
treatment he or she receives as a holder of a Class A6 Claim pursuant to Section
4.6 of the Plan. No other distribution shall be provided to such holder on
account of his or her Class C3 Claims.
4.20. CLASS C4 -- UNSECURED CLAIMS (FOR WHICH HJC IS LIABLE).
(a) IMPAIRMENT AND VOTING. Class C4 is impaired by the Plan. Each
holder of an Allowed Claim in Class C4 is entitled to vote to accept or reject
the Plan.
(b) DISTRIBUTIONS. Each holder of an Allowed Claim in Class C4 shall be
deemed to have received on account of its Class C4 Claims, and in full
satisfaction thereof, the distribution it receives as an Allowed General
Unsecured Creditor pursuant to Section 4.7 of the Plan. No other distribution
shall be provided to such holder on account of its Class C4 Claims.
4.21. CLASS C5 -- GENERAL UNSECURED CLAIMS.
(a) IMPAIRMENT AND VOTING. Class C5 is impaired. Each holder of an
Allowed Claim in Class C5 is entitled to vote to accept or reject the Plan.
(b) DISTRIBUTIONS. To the extent there are any holders of Allowed
Claims in Class C5, each such holder shall receive the lesser of the amount of
its Allowed Class C5 Claim or its Pro Rata Share of $1,000 in cash (the "Class
C5 Cash Amount") to be provided by JCC and distributed as follows:
(i) On the ninetieth (90th) day after the Effective Date or
as soon as practicable thereafter (the "Initial Class C5 Distribution
Date"), each holder of an Allowed Claim in Class C5 on the Initial
Class C5 Distribution Date shall receive, as an initial distribution
of the Class C5 Cash Amount, an amount equal to the product of (A) the
amount of such holder's Allowed Class C5 Claim times (B) a fraction,
(x) the numerator of which is the aggregate amount of Allowed Class C5
Claims on the Initial Class C5 Distribution Date, and (y) the
denominator of which is the Total Claims Amount for Class C5 on the
Initial Class C5 Distribution Date.
(ii) As soon as reasonably practicable after making the
initial distribution of the Class C5 Cash Amount, JCC will deposit the
remaining portion of the Class C5 Cash Amount in an interest-bearing,
money market account (such deposit, together with any interest
thereon, the "Class C5 Claims Reserve").
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(iii) No payment or distribution of any portion of the Class
C5 Cash Amount shall be made with respect to any Disputed Claim unless
and until such Claim becomes an Allowed Claim, and no holder of a
Class C5 Claim shall receive more than one hundred percent (100%) of
its Allowed Class C5 Claim or be entitled to any post-petition
interest thereon.
(iv) As soon as practicable after any Disputed Claim becomes
an Allowed Class C5 Claim by Final Order, JCC shall make an initial
distribution to the holder of such Allowed Claim from the Class C5
Claims Reserve in an amount equal to the product of (A) the Class C5
Cash Amount times (B) a fraction, (x) the numerator of which is the
amount of such holder's Allowed Class C5 Claim and (y) the denominator
of which is the Total Claims Amount for Class C5 on the Initial Class
C5 Distribution Date.
(v) As soon as practicable after all Disputed Claims have
been allowed or disallowed by Final Order, and after all interim
distributions have been made pursuant to clause (iv) above, JCC shall
distribute to each holder of an Allowed Class C5 Claim its Pro Rata
Share of any remaining funds in the Class C5 Claims Reserve, but in no
event more than the amount of such holder's Class C5 Claim then
outstanding (exclusive of post-petition interest). Any funds
remaining in the Class C5 Claims Reserve after payment in full of all
Allowed Class C5 Claims shall become the exclusive property of JCC
free and clear of all Claims and shall be subject to its exclusive
control.
Solely for purposes of this Plan, and subject to the occurrence of the Effective
Date, HJC, Finance Corp., HET, NOLDC, Grand Palais and all of their Affiliates
and Insiders shall be deemed to have waived any right to receive any
distribution as a holder of a Class C5 Claim.
4.22. CLASS C6 -- SHOWBOAT CLAIM.
(a) IMPAIRMENT AND VOTING. Class C6 is impaired by the Plan. NOLDC, as
the only holder of a Class C6 Claim, is entitled to vote to accept or reject the
Plan.
(b) DISTRIBUTIONS. In accordance with the terms of the NOLDC Plan and
the NOLDC Shareholders/HET Settlement Agreement, consideration shall be
furnished directly to Showboat in exchange for a full release from Showboat to
NOLDC. This transaction will result in a release of NOLDC's Class C6 Claim. No
distributions shall be provided to NOLDC on account of its Class C6 Claim.
4.23. CLASS C7 -- PENALTY CLAIMS. The holders of Class C7 Claims shall
not receive any distributions on account of such Claims, and on the Effective
Date, all Class C7 Claims shall be extinguished; PROVIDED, HOWEVER, that if a
Valuation Order is entered on or before the Effective Date, each holder of an
Allowed Claim in Class C7 shall be deemed to have received on account of its
Class C7 Claim, and in full satisfaction thereof, the distribution it receives
as a holder of a Class A8 Claim pursuant to Section 4.8 of the Plan. Each
holder of a Class C7 Claim is conclusively presumed to have rejected the Plan as
a holder of Class C7 Claim and is not entitled to vote to accept or reject the
Plan.
4.24. CLASS C8 -- EQUITY INTERESTS. Class C8 is impaired by the Plan.
The holder of Equity Interests in Class C8 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity
Interests in HNOIC shall be extinguished. The holder of Equity Interests in
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Class C8 is conclusively presumed to have rejected the Plan as a holder of Class
C8 Equity Interests and is not entitled to vote to accept or reject the Plan.
ARTICLE V.
SETTLEMENT OF CERTAIN CLAIMS AND
PROSECUTION AND ASSIGNMENT OF CERTAIN CLAIMS
5.1. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST THE HET GROUP,
DEBTORS GROUP, BONDHOLDERS COMMITTEE GROUP, NOLDC GROUP AND GRAND PALAIS GROUP.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of,
among other things, (i) the execution and delivery of the HET Loan Guarantee by
HET and the New Completion Guarantees by HET and HOCI and the provision of the
Surety Bond, (ii) the provision by the DIP Lender of debtor-in-possession
financing and its willingness to waive the principal amount thereof, (iii) the
purchase of the Harrah's New Equity Investment by Harrah's Investor, (iv) the
waiver by Persons in the HET Group, the NOLDC Group and the Grand Palais Group
of any right to distributions as holders of certain Class A6 and/or Class C5
Claims, (v) certain pre-development and development services by HET and its
Affiliates performed prior to the Effective Date, and (vi) other good and
valuable consideration, without which this Plan could not be confirmed and
consummated, on the Effective Date, each Debtor shall be conclusively and
irrevocably deemed to have released any and all Release Claims of such Debtor or
its estate against, respectively, (i) each Person in the HET Group, (ii) each
Person in the Debtors Group, (iii) each Person in the Bondholders Committee
Group, (iv) each Person in the NOLDC Group but only if the applicable Persons in
the NOLDC Group execute and deliver on or before the Effective Date the NOLDC
Shareholders/HET Settlement Agreement, and (v) each Person in the Grand Palais
Group but only if the applicable Persons in the Grand Palais Group execute and
deliver on or before the Effective Date the Grand Palais/HET Settlement
Agreement. The Confirmation Order shall constitute an order approving as a
compromise and settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy
Code the foregoing releases and the respective releases of the Debtors contained
in the NOLDC Shareholders/HET Settlement Agreement and the Grand Palais/HET
Settlement Agreement and the Debtors' execution and delivery of the applicable
release agreements in the forms attached as exhibits to the NOLDC
Shareholders/HET Settlement Agreement and the Grand Palais/HET Settlement
Agreement.
5.2. RELEASE BY BONDHOLDERS OF CAUSES OF ACTION AGAINST HET GROUP,
DEBTORS GROUP, BONDHOLDERS COMMITTEE GROUP, CITY GROUP, STATE GROUP, NOLDC
GROUP, GRAND PALAIS GROUP AND THE BANK/UNDERWRITER GROUP. Pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code, in consideration of (i) Harrah's
Investor's contribution of 200,000 shares of New Common Stock to the Release
Pool, and (ii) JCC Holding's contribution of 1,300,000 shares of New Common
Stock to the Release Pool on the Effective Date, each Bondholder that, through
an appropriate indication on the ballot previously provided to such Bondholder
in connection with the voting on the Existing Plan or through an appropriate
indication on the Bondholder release form provided to it by the Proponents, has
affirmatively evidenced its intent to release the Persons in the HET Group, the
Debtors Group, the Bondholders Committee Group, the City Group, the State Group,
the NOLDC Group, the Grand Palais Group and the Bank/Underwriter Group,
respectively (each, a "Releasing Bondholder"), shall be conclusively and
irrevocably deemed to have (i) released each Person in the HET Group, the
Debtors Group, the Bondholders Committee Group, the City Group, the State Group,
the NOLDC Group, the Grand Palais Group and the Bank/Underwriter Group,
respectively, from any and all Release Claims that such Releasing Bondholder, or
any of its predecessors-in-interest, successors or assigns, has or may have as
of the Effective Date arising in whole or in part from any acts, omissions,
activities and/or events prior to the Effective Date, and (ii) released, waived
and agreed not to bring any Claims against HET or HOCI, whether a known Claim or
an
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Unknown Claim, that may arise in any way, in whole or in part, out of (a) the
decision of HET or HOCI either to renew or not renew the HET/JCC Agreement or
any Minimum Payment Guaranty, (b) HET's or HOCI's acting in their own best
interests in connection with the execution of, renewal of or failure to renew
the HET/JCC Agreement or any Minimum Payment Guaranty, and/or (c) any alleged
assurance or guarantee by HET or HOCI concerning the financial results of the
Casino, unless such Claim is based on a writing (but in any event cannot be
based on the HET/JCC Agreement or any Minimum Payment Guaranty) properly
executed by the party against whom such a Claim is being made, PROVIDED,
HOWEVER, that such release in this clause (ii) hereof shall not bar or release
any Claims against HET or HOCI for (x) any breach of the HET/JCC Agreement or
any Minimum Payment Guaranty to which HET or HOCI is a party, (y) mismanagement
of the Casino after the Effective Date or (z) any other conduct, act or omission
occuring after the Effective Date which is not directly related to the matters
set forth in this clause (ii)(a) through (c) above; FURTHER PROVIDED, HOWEVER,
that (A) the foregoing release by the Releasing Bondholders shall not be
effective or enforceable as to (i) any Person in the NOLDC Group unless the
applicable Persons in the NOLDC Group execute and deliver on or before the
Effective Date the NOLDC Shareholders/HET Settlement Agreement, and (ii) any
Person in the Grand Palais Group unless the applicable Persons in the Grand
Palais Group execute and deliver on or before the Effective Date the Grand
Palais/HET Settlement Agreement; (B) each Major Bondholder shall be conclusively
and automatically deemed to be a Releasing Bondholder without the necessity of
taking the action otherwise required of any Bondholder to become a Releasing
Bondholder and regardless of the manner in which such Major Bondholder fills out
its ballot with respect to this Plan or filled out its ballot with respect to
the Existing Plan; (C) the release provisions in any ballot or other writing
previously executed by any Bondholder to evidence its agreement to the foregoing
release, unless revoked pursuant to clause (D) below, shall be binding on such
Bondholder and any transferee of the Old Bonds held by such Bondholder; and (D)
any Bondholder who agreed to the foregoing release in connection with the
Existing Plan shall be entitled to revoke such agreement by evidencing in
writing its intent to do so in any manner and subject to such conditions and
within any time period set by the Bankruptcy Court. Nothing in the foregoing
release by the Releasing Bondholders constitutes a release of any claims or
causes of action of any Releasing Bondholders against any Persons other than the
Released Parties, including, without limitation, any claims or causes of action
against any or all of the Non-Participating Banks and any Underwriter which
fails to execute and deliver the Bank/Underwriter Release. On, or as soon as
practicable after the Effective Date, (i) each Releasing Bondholder shall
receive from the Release Pool 3.448 shares of Class A New Common Stock for each
$1,000 in principal amount of Old Bonds held by such Releasing Bondholder on the
Release Pool Distribution Record Date plus its Pro Rata Share (based on the
total principal amount of Old Bonds held by all Releasing Bondholders on the
Release Pool Distribution Record Date) of Class A New Common Stock consisting of
86.67% of the Unsubscribed Release Pool Shares, and (ii) Harrah's Investor shall
receive from the Release Pool Class B New Common Stock consisting of 13.33% of
the Unsubscribed Release Pool Shares. Notwithstanding the foregoing, and except
as otherwise provided for in Section 6.20 of this Plan, (i) no Releasing
Bondholder shall be entitled to any distribution from the Release Pool unless
such holder is a Bondholder of record on the Release Pool Distribution Record
Date (or, in the case of a beneficial owner of any Old Bonds, is the beneficial
owner of Old Bonds on the Release Pool Distribution Record Date that are held on
its behalf by a Person which is a holder of record on the Release Pool
Distribution Record Date) and has not assigned or otherwise transferred its
claims, if any, against any Person in the HET Group, the Debtors Group, the
Bondholders Committee Group, the City Group, the State Group, the NOLDC Group,
the Grand Palais Group or the Bank/Underwriter Group to be released pursuant to
this Section 5.2, except that any Releasing Bondholder may transfer its Old
Bonds on or after the Release Pool Distribution Record Date subject to clause
(ii) below, (ii) the foregoing release by each Releasing Bondholder shall be
binding on any subsequent transferee of the Old Bonds held by such Releasing
Bondholder on the Release Pool Distribution Record Date, and (iii) the foregoing
release by each Releasing Bondholder which is a beneficial owner of any Old
Bonds shall be binding on any record holder, participant or nominee with
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respect to such Old Bonds. The Confirmation Order shall constitute an order
approving the foregoing release as a compromise and settlement pursuant to
Section 1123(b)(3)(A) of the Bankruptcy Code.
5.3. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST STATE GROUP.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of
and subject to, the execution and delivery of the State/LGCB Release and the
Amended and Restated Casino Operating Contract by LGCB and/or the State, as
applicable, on the Effective Date, each Debtor shall be conclusively and
irrevocably deemed to have released each Person in the State Group from any and
all Release Claims of such Debtor or its estate only to the extent set forth in
the State/LGCB Release. The Confirmation Order shall constitute an order
approving the foregoing release as a compromise and settlement pursuant to
Section 1123(b)(3)(A) of the Bankruptcy Code.
5.4. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST CITY AND RDC.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of,
and subject to, the execution and delivery by the City and the RDC of the
City/RDC Release and the other documents set forth in Section 6.2(o) of the
Plan, on the Effective Date, each Debtor shall be conclusively and irrevocably
deemed to have released each of the City and the RDC from any and all Release
Claims of such Debtor or its estate only to the extent set forth in the City/RDC
Release. The Confirmation Order shall constitute an order approving the
foregoing release as a compromise and settlement pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code.
5.5. RELEASE BY DEBTORS OF CAUSES OF ACTION AGAINST BANK/UNDERWRITER
GROUP. Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in
consideration of, and subject to, the execution and delivery by each
Participating Bank, FNBC and each Underwriter of the Bank/Underwriter Release
and the provision by certain Persons in the Bank/Underwriter Group of the A Term
Loan, the B Term Loan and the Working Capital Facility and the purchase of the
Convertible Junior Subordinated Debentures by the Underwriters, FNBC, Bankers
Trust Company, and any other Participating Banks, all as more particularly
described in the Bank Term Sheet, the FNBC Settlement Agreement and the
Underwriter Term Sheet, on the Effective Date, each Debtor shall be conclusively
and irrevocably deemed to have released any and all Release Claims of such
Debtor or its estate against each Person in the Bank/Underwriter Group. The
Confirmation Order shall constitute an order approving as a compromise and
settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code the
foregoing releases and the Debtors' execution and delivery of the
Bank/Underwriter Release. Except as provided in Section 4.3 and 4.11 hereof,
each Person in the Bank/Underwriter Group shall be deemed to have waived any
Claim against any Debtor or NOLDC (except for FNBC with respect to NOLDC as set
forth in the NOLDC Plan and the NOLDC Shareholders/HET Settlement Agreement) and
any right to receive any distribution on account of any such Claim. Without
limiting the foregoing and except for its Lien on the FNBC Cash Collateral, FNBC
shall be deemed to have released all of its Liens (including, without
limitation, its Indenture Trustee Charging Lien) on any and all (i) assets of
each Debtor (including, without limitation, all cash collateral held by the Old
Indenture Trustee) and (ii) any distributions made or to be made under the Plan.
5.6. RELEASE BY GRAND PALAIS BONDHOLDERS OF CAUSES OF ACTION AGAINST HET
GROUP, DEBTORS GROUP, BONDHOLDERS COMMITTEE GROUP, CITY GROUP, STATE GROUP,
NOLDC GROUP, GRAND PALAIS GROUP AND THE BANK/UNDERWRITER GROUP. Pursuant to
Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of, among other
things, (i) the Grand Palais Settlement Consideration, (ii) the execution and
delivery of the HET Loan Guarantee and the New Completion Guarantees by HET and
HOCI and the provision of the Surety Bond, (iii) the provision by the DIP Lender
of debtor-in-possession financing and its willingness to waive the principal
amount thereof, (iv) the purchase of the Harrah's New Equity Investment by
Harrah's Investor, (v) the waiver by Persons in the HET Group, the NOLDC Group
and the Grand Palais Group of any right to distributions as holders of certain
Class A7 and/or Class C5
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Claims, (vi) certain pre-development and development services by HET and its
Affiliates performed prior to the Effective Date, (vii) the provision by certain
Persons in the Bank/Underwriter Group of certain financing to JCC, and (viii)
other good and valuable consideration, without which this Plan could not be
confirmed and consummated, on the Effective Date, each Grand Palais Bondholder
that, through an appropriate indication on the release solicitation statement
provided to such Grand Palais Bondholder by the Disbursing Agent or in such
other manner as may be prescribed by an applicable order of the Bankruptcy
Court, has affirmatively evidenced its intent to release the Persons in the HET
Group, the Debtors Group, the Bondholders Committee Group, the City Group, the
State Group, the NOLDC Group, the Grand Palais Group and the Bank/Underwriter
Group, respectively (each, a "Grand Palais Releasing Bondholder"), shall be
conclusively and irrevocably deemed to have (i) released each Person in the HET
Group, the Debtors Group, the Bondholders Committee Group, the City Group, the
State Group, the NOLDC Group, the Grand Palais Group and the Bank/Underwriter
Group, respectively, from any and all Release Claims that such Grand Palais
Releasing Bondholder, or any of its predecessors-in-interest, successors or
assigns, has or may have as of the Effective Date arising in whole or in part
from any acts, omissions, activities and/or events prior to the Effective Date,
and (ii) released, waived and agreed not to bring any Claims against HET or
HOCI, whether a known Claim or an Unknown Claim, that may arise in any way, in
whole or in part, out of (a) the decision of HET or HOCI either to renew or not
renew the HET/JCC Agreement or any Minimum Payment Guaranty, (b) HET's or HOCI's
acting in their own best interests in connection with the execution, renewal or
failure to renew the HET/JCC Agreement or any Minimum Payment Guaranty, and/or
(c) any alleged assurance or guarantee by HET or HOCI concerning the financial
results of the Casino, unless such Claim is based on a writing (but in any event
cannot be based on the HET/JCC Agreement or any Minimum Payment Guaranty)
properly executed by the party against whom such a Claim is being made;
PROVIDED, HOWEVER, that the foregoing release by the Grand Palais Releasing
Bondholders shall not be effective or enforceable as to (i) any Person in the
NOLDC Group unless the applicable Persons in the NOLDC Group execute and deliver
on or before the Effective Date the NOLDC Shareholders/HET Settlement Agreement;
and (ii) any Person in the Grand Palais Group unless the applicable Persons in
the Grand Palais Group execute and deliver on or before the Effective Date the
Grand Palais/HET Settlement Agreement. On, or as soon as practicable after the
Effective Date, each Grand Palais Releasing Bondholder shall receive its pro
rata share of the Grand Palais Settlement Consideration (with respect to each
Grand Palais Releasing Bondholder, such pro rata share for such Grand Palais
Releasing Bondholder shall be determined by the ratio between the aggregate
principal amount of Grand Palais Senior Secured Bonds beneficially owned by such
Grand Palais Releasing Bondholder and the aggregate principal amount of Grand
Palais Senior Secured Bonds beneficially owned by all of the Grand Palais
Releasing Bondholders, each calculated as of the Distribution Record Date).
Notwithstanding the foregoing, (i) no Grand Palais Releasing Bondholder shall be
entitled to any distribution of the Grand Palais Settlement Consideration unless
such holder is a Grand Palais Bondholder of record on the Distribution Record
Date (or, in the case of a beneficial owner of any Grand Palais Senior Secured
Bonds, is the beneficial owner of Grand Palais Senior Secured Bonds on the
Distribution Record Date that are held on its behalf by a Person which is a
holder of record on the Distribution Record Date) and has not assigned or
otherwise transferred its claims, if any, against any Person in the HET Group,
the Debtors Group, the Bondholders Committee Group, the City Group, the State
Group, the NOLDC Group, the Grand Palais Group or the Bank/Underwriter Group to
be released pursuant to this Section 5.6, except that any Grand Palais Releasing
Bondholder may transfer its Grand Palais Senior Secured Bonds, subject to clause
(ii) below, (ii) the foregoing release by each Grand Palais Releasing Bondholder
shall be binding on any subsequent transferee of the Grand Palais Senior Secured
Bonds held by such Grand Palais Releasing Bondholder on the Distribution Record
Date, and (iii) the foregoing release by each Grand Palais Releasing Bondholder
which is a beneficial owner of any Grand Palais Senior Secured Bonds shall be
binding on any record holder, participant or nominee with respect to such Grand
Palais Senior Secured Bonds. The Confirmation Order shall constitute an order
approving the
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foregoing release as a compromise and settlement pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code.
5.7. INJUNCTION AGAINST COMMENCEMENT OF INDIVIDUAL ACTIONS AGAINST HET
GROUP, DEBTORS GROUP, BONDHOLDERS COMMITTEE GROUP, CITY GROUP, STATE GROUP,
NOLDC GROUP, GRAND PALAIS GROUP AND THE BANK/UNDERWRITER GROUP. To implement
the Releases and the release provisions of Sections 5.1, 5.2, 5.3, 5.4, 5.5 and
5.6 of the Plan, the Confirmation Order shall constitute and provide for an
injunction by the Bankruptcy Court as of the Effective Date against (a) any
Releasing Bondholder or any Grand Palais Releasing Bondholder from (i)
commencing or continuing in any manner any action or other proceeding of any
kind against any Released Party or any property of any Released Party, (ii)
enforcing, attaching, collecting and/or recovering by any manner or means any
judgment, award, decree or order against any Released Party or any property of
any Released Party, (iii) creating, perfecting or enforcing any Encumbrance of
any kind against any Released Party or any property of any Released Party, or
(iv) asserting any right of setoff, right of subrogation or recoupment against
any Released Party or any property of any Released Party, in each case to the
extent any of the foregoing is released, waived or otherwise prohibited by the
release provisions of Section 5.2 or 5.6 of the Plan, as applicable, (b) except
as provided in the FNBC Settlement Agreement or Section 6.1(k)(ii), 6.2(l)(i) or
6.2(l)(ii) hereof, any party to any of the Releases from (i) commencing or
continuing in any manner any action or other proceeding of any kind against any
Released Party or any property of any Released Party, (ii) enforcing, attaching,
collecting and/or recovering by any manner or means any judgment, award, decree
or order against any Released Party or any property of any Released Party, (iii)
creating, perfecting or enforcing any Encumbrance of any kind against any
Released Party or any property of any Released Party, or (iv) asserting any
right of setoff, right of subrogation or recoupment against any Released Party
or any property of any Released Party, in each case to the extent any of the
foregoing is released, waived or otherwise prohibited by the applicable
Release(s), and (c) any Creditor, any holder of an Equity Interest or any other
party in interest in any of the Chapter 11 Cases from commencing or continuing
any Derivative Claim against any Released Party; PROVIDED, HOWEVER, that the
foregoing injunction against the Releasing Bondholders and the Grand Palais
Releasing Bondholders shall not be effective or enforceable as to (i) any Person
in the NOLDC Group unless the applicable Persons in the NOLDC Group execute and
deliver on or before the Effective Date the NOLDC Shareholders/HET Settlement
Agreement, (ii) any Person in the Grand Palais Group unless the applicable
Persons in the Grand Palais Group execute and deliver on or before the Effective
Date the Grand Palais/HET Settlement Agreement, and (iii) any claim or cause of
action other than a Release Claim that is released pursuant to Section 5.2 or
5.6 of the Plan or a Derivative Claim.
5.8. EXTINGUISHMENT OF CERTAIN CAUSES OF ACTION UNDER THE AVOIDING POWER
PROVISIONS. On the Effective Date, Avoidance Claims against any Released Party,
any Bondholder or any other Person other than the Non-Participating Banks and
any Underwriter which fails to execute and deliver the Bank/Underwriter Release
shall be released, discharged and extinguished, whether or not then pending.
5.9. ASSIGNMENT AND PROSECUTION OF ASSIGNED LITIGATION CLAIMS, JUDGMENT
REDUCTION PROTECTION AND DISTRIBUTION OF RECOVERIES FROM ASSIGNED LITIGATION
CLAIMS.
(a) On the Effective Date, the Debtors and the Releasing Bondholders (to
the extent provided in the definition of Assigned Litigation Claims and without
any representations or warranties (except as to ownership)) shall be deemed to
have assigned their respective Assigned Litigation Claims to JCC. At the
direction of (x) a majority of the Bondholders Director Nominees in the case of
any and all Assigned Bondholder Litigation Claims and (y) both a majority of all
directors of JCC and a majority of the Bondholders Director Nominees in the case
of any and all Assigned Debtor Litigation Claims, JCC, in its sole discretion,
and either in its own name or in the name, place and stead of the Debtors and
their estates
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and/or the Releasing Bondholders, as the case may be, shall have the exclusive
right to prosecute or otherwise enforce or, subject to the provisions of Section
5.9(c) hereof, to waive or release any or all Assigned Litigation Claims;
PROVIDED, HOWEVER, that JCC shall be prohibited from asserting or maintaining
any Assigned Litigation Claims after its delivery of a Completion Notice.
Without limiting the generality of the foregoing, JCC shall have the authority
(in its sole discretion), on behalf of the Releasing Bondholders, to opt out of
any class actions affecting any Assigned Litigation Claims.
(b) JCC shall pay all Litigation Costs.
(c) Subject to the remaining provisions of this Section 5.9(c), JCC
shall be entitled to settle any Assigned Litigation Claim. JCC shall not settle
any Assigned Litigation Claim against any Litigation Defendant without either
(A) obtaining from the Litigation Defendant a written release in favor of each
Released Party of all Third Party Claims, or (B) to the extent written releases
are not provided in favor of any Released Party as contemplated in clause (A),
obtaining the written consent of such Released Party, as applicable, to the
settlement. Each Released Party may withhold its written consent to any such
settlement in its sole discretion, and shall not have any duties to any Person
in making its discretionary determination as to whether to provide such written
consent.
(d) In the event any Third Party Claim is brought against any Released
Party, or such Released Party is required to participate by way of discovery or
otherwise in connection with any Assigned Litigation Claim brought by JCC
against a Litigation Defendant, the Released Party shall select counsel (the
"Selected Counsel") in its sole discretion from a pre-approved list of law
firms, to be mutually agreed upon after good faith negotiations between the
Bondholders Committee and HET (in its sole discretion) on behalf of the
Proponents, to represent such Released Party, including to defend against,
negotiate, settle or otherwise deal with such Third Party Claim; PROVIDED,
HOWEVER, that if two or more Released Parties (other than any Person in the HET
Group) require counsel pursuant to this sentence in connection with the same
action, the same Selected Counsel shall represent all such Released Parties
unless a conflict of interest precludes such joint representation; and PROVIDED,
FURTHER, that if two or more Persons in the HET Group require counsel pursuant
to this sentence in connection with the same action, the same Selected Counsel
selected by HET (in its sole discretion) shall represent all such Persons unless
a conflict of interest precludes such joint representation. Subject to the
provisions of Sections 5.9(e) and (f) hereof and the immediately following
sentence, JCC shall, promptly upon request by the applicable Released Party, (i)
pay for all reasonable fees, costs and expenses incurred by the Selected Counsel
on behalf of the Released Party (except to the extent any such fees, costs and
expenses are incurred in connection with a Third Party Claim which is based on
any claim asserted by any non-releasing parties against the applicable
Litigation Defendant), (ii) reimburse the Released Party for its reasonable
out-of-pocket costs and expenses (I.E., litigation costs) in defense of such
Third Party Claim (except to the extent such Third Party Claim is based on any
claim asserted by any non-releasing parties against the applicable Litigation
Defendant) or in connection with its participation by way of discovery or
otherwise with any Assigned Litigation Claim brought by JCC against a Litigation
Defendant, and (iii) indemnify the Released Party for any liability incurred in
respect of any judgment or settlement of a Third Party Claim that is not
satisfied pursuant to Section 5.9(e) hereof (except to the extent such Third
Party Claim is based on a settlement or judgment obtained by any non-releasing
parties against the applicable Litigation Defendant). Any and all
indemnification liability of JCC to each Released Party pursuant to clause (iii)
of the immediately preceding sentence shall be limited to the aggregate proceeds
of Assigned Litigation Claims that are available to pay such liability pursuant
to Section 5.9(f). The Released Party shall cooperate fully with JCC and
Selected Counsel in connection with the prosecution of any Assigned Litigation
Claim and the defense of any Third Party Claim. In the event a Third Party
Claim is brought against a Released Party, such Released Party shall assert all
available defenses and/or claims or actions arising from the same transactions,
occurrences, or facts on which such Third Party Claim is based, in whole or in
part, held by
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such Released Party against such Litigation Defendant in order to reduce,
setoff, or recoup against any recovery sought by such Litigation Defendant
against such Released Party. The Released Party shall not settle any Third
Party Claim without the prior written consent of JCC (in its sole discretion) to
any such settlement. The Released Party shall promptly notify JCC in writing of
the assertion of any Third Party Claim against such Released Party or a request
to participate by way of discovery or otherwise in connection with any Assigned
Litigation Claim brought by JCC against a Litigation Defendant.
(e) In the event JCC is entitled to any recovery by judgment or
settlement against any Litigation Defendant in connection with any Assigned
Litigation Claim, and such Litigation Defendant is entitled to any recovery by
way of judgment or settlement against any Released Party based upon any Third
Party Claim, then (i) the recovery to which JCC would otherwise be entitled
against such Litigation Defendant shall be reduced (through a reduction or
credit against any judgment or settlement obtained against such Litigation
Defendant or through some other appropriate action achieving the same result) by
an amount equal to the aggregate recovery to which such Litigation Defendant is
entitled against such Released Party based upon any Third Party Claim, and (ii)
such reduction in JCC's recovery against such Litigation Defendant shall
discharge and satisfy in full any recovery to which such Litigation Defendant is
entitled against such Released Party based upon any Third Party Claim; PROVIDED,
HOWEVER, that any recovery in favor of JCC shall be reduced only to the extent
necessary to satisfy that portion of any judgment or settlement obtained against
a Released Party by a Litigation Defendant on account of a Third Party Claim,
(and not to the extent such Third Party Claim is based on a judgment or
settlement obtained by non-releasing parties against such Litigation Defendant).
To facilitate the orderly and expeditious resolution of all Assigned Litigation
Claims and related Third Party Claims and the orderly and expeditious
distribution of the proceeds of Assigned Litigation Claims in accordance with
the provisions of Section 5.9(f) hereof, the Confirmation Order shall require
each Litigation Defendant against which JCC has asserted an Assigned Litigation
Claim to assert, on or before the earlier of (x) the 170th day after the
commencement of such action by JCC, and (y) the entry of a Final Order
adjudicating all claims asserted in such action, and maintain exclusively in
such action all Third Party Claims arising in whole or in part from the same
transactions, occurrences, or facts on which any such Assigned Litigation Claim
is based in whole or in part, and each Litigation Defendant shall be forever
barred from asserting in any other forum or action any Third Party Claim not
asserted in accordance with the provisions of this sentence.
(f) Any proceeds recovered by JCC on account of any and all Assigned
Litigation Claims shall be held in escrow in an interest-bearing account shall
be applied and/or distributed only in the manner and pursuant to the terms set
forth below:
(i) First, to the payment of all accrued and unpaid
Litigation Costs and to the extent JCC has paid, without
reimbursement, any Litigation Costs, to JCC in the amount of such
unreimbursed Litigation Costs.
(ii) Second, as a reserve for payment of future Litigation
Costs in an aggregate amount no less than $2 million or such lesser
amount, if any, as jointly determined by (i) JCC and (ii) HET in its
sole discretion; PROVIDED, HOWEVER, that if (x) JCC has, by written
notice to HET (the "Completion Notice"), irrevocably determined that
it will not assert or maintain any further Assigned Litigation Claims,
and (y) as of the thirtieth (30th) day after HET's receipt of the
Completion Notice, all previously asserted Assigned Litigation Claims
and Third Party Claims have been conclusively resolved by Final Order
or settlement pursuant to Section 5.9(c) hereof, or in the case of any
Assigned Litigation Claims, have been dismissed, then on or as soon as
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practicable after the thirtieth (30th) day after HET's receipt of the
Completion Notice, any remaining funds in the reserve established
pursuant to this Clause (ii) shall be distributed in accordance with
the provisions of Clauses (iii) through (ix) of this Section 5.9(f).
(iii) Third, to the extent any Released Party has incurred
any liability based on any Third Party Claim asserted by any
Litigation Defendant that has not been satisfied by a corresponding
reduction in any recovery obtained by JCC against such Litigation
Defendant as provided in Section 5.9(e) hereof, then any remaining
distributable proceeds of any Assigned Litigation Claims shall be
distributed pro rata to each such Released Party for application to
such liability.
(iv) Fourth, in the event (A) there are any pending Third
Party Claims that have not been conclusively resolved by Final Order
or settlement pursuant to Section 5.9(c) hereof, or (B) any Assigned
Litigation Claim has been pending for less than six months, then any
remaining distributable proceeds of any Assigned Litigation Claims
shall be held in escrow as a reserve for satisfying any liability
incurred by any Released Party in respect of any Third Party Claim.
After all amounts in Clauses (i) through (iv) have been paid or fully reserved
for, and if (A) there are no pending Third Party Claims that have not been
conclusively resolved by Final Order or settlement pursuant to Section 5.9(c)
hereof, and (B) no Assigned Litigation Claim has been pending for less than six
months, then any remaining proceeds of any Assigned Bondholder Litigation Claims
shall be distributed in their entirety to:
(v) The Releasing Bondholders pro rata (based on the ratio
of the aggregate principal amount of Old Bonds beneficially owned by
such Releasing Bondholder to the aggregate principal amount of Old
Bonds beneficially owned by all of the Releasing Bondholders).
After all amounts in Clauses (i) through (iv) have been paid or fully reserved
for, and if (A) there are no pending Third Party Claims that have not been
conclusively resolved by Final Order or settlement pursuant to Section 5.9(c)
hereof, and (B) no Assigned Litigation Claim has been pending for less than six
months, then any remaining distributable proceeds of Assigned Debtor Litigation
Claims shall be distributed pursuant to Clauses (vi) through (ix) below;
PROVIDED, HOWEVER, that if the Bankruptcy Court does not enter a Valuation Order
on or before the Effective Date, all such remaining proceeds of Assigned Debtor
Litigation Claims shall be retained in their entirety by JCC free and clear of
all Claims and subject to JCC's exclusive control.
(vi) First, to the holders of Allowed Class A4 Claims, their
respective Pro Rata Interests in any remaining distributable proceeds
of Assigned Debtor Litigation Claims up to an amount equal to the
difference (the "Bondholder Deficiency Amount") between (A) the
aggregate amount of Allowed Class A4 Claims (which shall be deemed to
be $435 million plus accrued interest thereon, unless the Bankruptcy
Court otherwise orders) and (B) the sum of (I) $187.5 million, and
(II) the estimated value of the Class A New Common Stock to be
distributed to the holders of Allowed Class A4 Claims.
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(vii) Second, to Harrah's Investor, any remaining
distributable funds up to the sum of (A) the aggregate amount of the
Allowed Claims in Class A7, plus (B) the aggregate amount of all cure
payments made as provided in Section 8.1(e) of the Plan, plus (C) the
$2,265,000 to be distributed to the applicable holders of Allowed
Class A6 Claims pursuant to Section 4.6 of the Plan.
(viii) Third, to the holders of Allowed Class A8 Claims, their
respective Pro Rata Interests in any remaining distributable proceeds
of Assigned Debtor Litigation Claims up to the aggregate amount
necessary to pay all such Allowed Claims in full (without any
post-petition interest thereon unless the Bankruptcy Court otherwise
orders); PROVIDED, HOWEVER, that the Bankruptcy Court may allocate the
funds distributable under this Clause (viii) to the holders of Allowed
Class A8 Claims in any other manner which the Bankruptcy Court
determines is required under the Bankruptcy Code.
(ix) Fourth, to the holders of Allowed Claims in Classes A4
and A8, and Harrah's Investor, their respective pro rata interests in
any remaining distributable proceeds of Assigned Debtor Litigation
Claims (based on the ratio of their respective Allowed Claims (or in
the case of Harrah's Investor, the aggregate amount of Allowed Claims
in Class A7 plus the aggregate amount of cure payments made as
provided in Section 8.1(e) of the Plan, plus the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims
pursuant to Section 4.6 of the Plan) to the aggregate amount of the
Allowed Claims in Classes A4, A7 and A8 plus the aggregate amount of
cure payments made as provided in Section 8.1(e) of the Plan, plus the
$2,265,000 to be distributed to the applicable holders of Allowed
Class A6 Claims pursuant to Section 4.6 of the Plan).
(g) The interests in the proceeds of Assigned Litigation Claims granted
pursuant to the Plan shall not be transferable except in accordance with the
laws of descent and distribution or by operation of law.
5.10. APPROVAL OF OTHER SETTLEMENT AGREEMENTS. Subject to the provisions
of Section 12.15 hereof, and except to the extent the Bankruptcy Court has
entered a separate order providing for such approval, the Confirmation Order
shall constitute an order (a) approving as a compromise and settlement pursuant
to Section 1123(b)(3)(A) of the Bankruptcy Code, the Broadmoor Settlement
Agreement, the Broadmoor Release, the Centex-Landis Settlement Agreement, the
Centex-Landis Release, the First American Settlement Agreement, the NOLDC
Shareholders/HET Settlement Agreement, the NOLDC/Grand Palais Settlement
Agreement, the Grand Palais/HET Settlement Agreement, the FNBC Settlement
Agreement and all other settlement agreements entered into or to be entered into
by any Debtor and any other Person as contemplated by the Plan and all other
agreements, instruments or documents relating to any of the foregoing to which
any Debtor is a party and (b) authorizing the Debtors' execution and delivery of
the Broadmoor Settlement Agreement, the Broadmoor Release, the Centex-Landis
Settlement Agreement, the Centex-Landis Release, the First American Settlement
Agreement, the NOLDC Shareholders/HET Settlement Agreement, the NOLDC/Grand
Palais Settlement Agreement, the Grand Palais/HET Settlement Agreement, the FNBC
Settlement Agreement and all other settlement agreements entered into or to be
entered into by any Debtor or any other Person as contemplated by the Plan and
all related agreements, instruments or documents to which any Debtor is a party.
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ARTICLE VI.
MEANS FOR IMPLEMENTATION
AND EXECUTION OF THE PLAN
A. GENERAL IMPLEMENTATION MATTERS
6.1. GENERAL CORPORATE MATTERS. Except as provided in Section 12.12
hereof, on or before the Effective Date, each JCC Entity shall take such action
as is necessary under the laws of the State of Delaware, or in the cases of JCC
and JCC Intermediary (if formed), under the laws of the State of Louisiana,
Federal law and other applicable law to effect the terms and provisions of the
Plan. Among other actions, on or before the Effective Date, each JCC Entity
shall (i) file the JCC Organizational Documents, the JCC Intermediary
Organizational Documents or the JCC Holding Certificate of Incorporation, as
applicable, with the Secretary of State of Delaware (in the case of JCC Holding)
or the State of Louisiana (in the cases of JCC and JCC Intermediary) in
accordance with the laws of the State of Delaware or Louisiana, as applicable,
and (ii) in the cases of JCC and JCC Intermediary, enter into the JCC Operating
Agreement or the JCC Intermediary Operating Agreement, as applicable. The JCC
Holding Certificate of Incorporation shall comply with the requirements of
Section 1123(a)(6) of the Bankruptcy Code.
6.2. EFFECTIVE DATE TRANSACTIONS.
(a) JCC MEMBERSHIP INTEREST(S). On or before the Effective Date, (i) if
JCC Intermediary is formed, JCC Intermediary shall form JCC and receive 100% of
the membership interest(s) in JCC, or (ii) if JCC Intermediary is not formed,
JCC Holding shall form JCC and receive 100% of the membership interest(s) in
JCC. Such membership interest(s) shall have rights with respect to
distributions, liquidation, voting and other matters as are provided for by
applicable nonbankruptcy law or in the JCC Organizational Documents and the JCC
Operating Agreement.
(b) JCC INTERMEDIARY MEMBERSHIP INTEREST(S). If JCC Intermediary is
formed, on or before the Effective Date, JCC Holding shall form JCC Intermediary
and receive 100% of the membership interest(s) in JCC Intermediary. Such
membership interest(s) shall have rights with respect to distributions,
liquidation, voting and other matters as are provided for by applicable
nonbankruptcy law or in the JCC Intermediary Organizational Documents and the
JCC Intermediary Operating Agreement.
(c) NEW BOND DOCUMENTS. On the Effective Date, (i) JCC and the New
Indenture Trustee shall enter into the New Indenture and shall execute and
deliver all instruments, agreements, legal opinions and other operative
documents contemplated by the New Indenture, and (ii) JCC shall execute and
deliver all other New Bond Documents.
(d) DISTRIBUTION TO CREDITORS. On, or as soon as practicable after, the
Effective Date but in no event after the tenth (10th) Business Day after the
Effective Date (or in the case of holders of Allowed Class C5 Claims, on the
Initial Class C5 Distribution Date), or as otherwise provided in the Plan, JCC
and, in the case of the New Common Stock, JCC Holding will issue and deliver to
the Disbursing Agents for distribution to the applicable holders of Allowed
Claims in accordance with the Plan (i) the New Bonds, New Contingent Bonds and
Convertible Junior Subordinated Debentures, (ii) cash in the amount determined
pursuant to the provisions of Article IV, and (iii) shares of Class A and Class
B New Common Stock in the respective amounts determined pursuant to the
provisions of Article IV.
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(e) PURCHASE OF NEW COMMON STOCK BY HARRAH'S INVESTOR. On the Effective
Date, Harrah's Investor shall pay to JCC Holding, as an equity contribution, an
amount equal to the difference between $75 million and the principal amount of
DIP Indebtedness then outstanding (the "Harrah's New Equity Investment"). In
consideration of the Harrah's New Equity Investment, and the waiver of the
principal amount of the DIP Indebtedness then outstanding, on the Effective
Date, JCC Holding shall sell to Harrah's Investor 4,990,000 shares of New Common
Stock, a portion of which shall be issued by JCC Holding to certain other
Persons in accordance with the provisions of Section 6.2(f) hereof. All shares
of New Common Stock purchased by Harrah's Investor and issued by JCC Holding to
Harrah's Investor pursuant to this Section or to the Disbursing Agent for the
benefit of Harrah's Investor pursuant to Section 6.2(f) hereof shall be shares
of Class B New Common Stock, and all shares purchased by Harrah's Investor and
issued by JCC Holding directly to the Disbursing Agent for the benefit of the
Releasing Bondholders or the Grand Palais Releasing Bondholders pursuant to
Section 6.2(f) shall be shares of Class A New Common Stock. On the Effective
Date, all proceeds from the Harrah's New Equity Investment shall be contributed
as an equity contribution by JCC Holding (i) if JCC Intermediary has been
formed, to JCC Intermediary, which, in turn, shall contribute such amounts as an
equity contribution to JCC, or (ii) if JCC Intermediary has not been formed, to
JCC.
(f) TRANSFER OF NEW COMMON STOCK TO CERTAIN PERSONS IN SETTLEMENT OF
CLAIMS.
(i) NOLDC SHAREHOLDERS AND GRAND PALAIS. On the later of
the Effective Date and the date on which the NOLDC Shareholders/HET
Settlement Agreement is executed and delivered by all of the parties
thereto and is approved by the bankruptcy court in the Chapter 11 case
of NOLDC either pursuant to Section 1123(b)(3)(A) of the Bankruptcy
Code as part of the NOLDC Plan or pursuant to Bankruptcy Rule 9019 by
separate Final Order, the nine NOLDC Shareholders or their designee
shall have an option to purchase, on the terms set forth in the NOLDC
Shareholders/HET Settlement Agreement, an aggregate number of shares
of Class B New Common Stock to be specified in the NOLDC
Shareholders/HET Settlement Agreement (with each NOLDC Shareholder or
his designee receiving one-ninth thereof), which shares are to be
initially distributed to Harrah's Investor pursuant to Section 6.2(e)
hereof. On the later of the Effective Date and the date on which the
Grand Palais/HET Settlement Agreement is executed and delivered by all
of the parties thereto, JCC Holding shall, in accordance with the
provisions of the Grand Palais/HET Settlement Agreement, issue
directly to the Disbursing Agent on behalf of the Grand Palais
Releasing Bondholders a number of shares of Class A New Common Stock
to be specified in the Grand Palais/HET Settlement Agreement (the
"Grand Palais Settlement Consideration"), which shares would otherwise
be distributed to Harrah's Investor pursuant to Section 6.2(e) hereof.
In no event shall the aggregate number of shares of New Common Stock
distributed to the NOLDC Shareholders and Grand Palais Releasing
Bondholders pursuant to this Section exceed 800,000 shares.
(ii) RELEASING BONDHOLDERS. On the Effective Date, JCC
Holding shall issue directly to the Disbursing Agent on behalf of the
Releasing Bondholders and, if applicable, Harrah's Investor, 1,500,000
shares of Class A New Common Stock (or Class B New Common Stock with
respect to any shares distributed to Harrah's Investor) (such shares,
collectively, the "Release Pool"). The Release Pool shall include
200,000 shares of New
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Common Stock to which Harrah's Investor would otherwise be entitled
pursuant to the second sentence of Section 6.2(e). The remaining
1,300,000 shares of New Common Stock in the Release Pool shall be
issued by JCC Holding in consideration of, among other things, (i) the
execution and delivery of the HET Loan Guarantee and the New
Completion Guarantees by HET and HOCI and the provision of the Surety
Bond, (ii) the provision by the DIP Lender of debtor-in-possession
financing and its willingness to waive the principal amount thereof,
(iii) the purchase of the Harrah's New Equity Investment by Harrah's
Investor, (iv) the waiver by Persons in the HET Group, the NOLDC Group
and the Grand Palais Group of any right to distributions as holders of
certain Class A7 and/or Class C5 Claims, (v) certain pre-development
and development services by HET and its Affiliates performed prior to
the Effective Date, (vi) the execution and delivery by the City and
the RDC of the agreements referenced in Section 6.2(o) hereof and the
City/RDC Release, (vii) the execution and delivery by the LGCB and/or
the State of the agreements referenced in Section 6.2(n) hereof and
the State/LGCB Release and (viii) other good and valuable
consideration from the various beneficiaries of the releases provided
by the Releasing Bondholders pursuant to Section 5.2 hereof, without
which this Plan could not be confirmed and consummated. The 1,500,000
shares of New Common Stock in the Release Pool shall be distributed in
accordance with the provisions of Sections 4.4(b) and 5.2 hereof.
(g) NEW COMPLETION GUARANTEES; AMENDED AND RESTATED CONSTRUCTION LIEN
INDEMNITY OBLIGATION AGREEMENT; MINIMUM PAYMENT GUARANTY. On the Effective
Date, HET, HOCI (in the case of clauses (i) through (v)) and JCC (in the case of
clauses (iii) through (v)) shall execute and deliver (i) the HET Loan Guarantee,
(ii) the New Completion Guarantees, (iii) the Amended and Restated Construction
Lien Indemnity Obligation Agreement, (iv) the Amended and Restated Completion
Loan Documents, and (v) a Minimum Payment Guaranty for fiscal years ending March
31, 1999 and March 31, 2000. On the Effective Date, the Old Completion
Guarantees shall be terminated and cancelled to the extent any of such
guarantees has not been previously terminated and cancelled. On the Effective
Date, a surety bond (the "Surety Bond") shall be obtained to assure completion
of the construction of the Casino. As consideration for the HET Loan Guarantee,
HET will be paid an annual credit support fee based on the average aggregate
principal amount of outstanding indebtedness guaranteed by HET pursuant thereto
as set forth in Exhibit J hereto, and JCC Holding shall issue to HET or its
designee the HET Warrant. Pursuant to the HET/JCC Agreement, and subject to the
non-renewal and termination provisions thereof, as consideration for providing a
Minimum Payment Guaranty, HET and HOCI, among other things, will be paid an
annual guarantee fee of $6 million for the fiscal years ending March 31, 2000
and 2001 and $5 million for the fiscal years ending March 31, 2002, 2003 and
2004, all payable quarterly; PROVIDED, HOWEVER, that HET and HOCI will be paid a
pro rata fee based on an annual fee of $6 million for any partial fiscal year
ending March 31, 1999 or for the fiscal year ending March 31, 2000, if it is a
partial fiscal year.
(h) BANK/UNDERWRITER FINANCING. On or before the Effective Date, JCC
and the applicable Persons in the Bank/Underwriter Group shall execute and
deliver the A Term Loan Documents, the B Term Loan Documents, the Working
Capital Loan Documents and the Convertible Junior Subordinated Debenture
Documents, pursuant to which JCC will obtain the A Term Loan, the B Term Loan
and the Working Capital Credit Facility and issue the Convertible Junior
Subordinated Debentures.
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(i) HET AFFILIATE FINANCING AND DEVELOPMENT SERVICES AGREEMENT. On or
before the Effective Date, JCC and HET (or an Affiliate of HET) shall execute
and deliver the Junior Subordinated Loan Documents pursuant to which JCC shall
obtain the Junior Subordinated Credit Facility. On or before the Effective
Date, the Harrah's Investor and JCC shall execute and deliver the Development
Services Agreement.
(j) RELEASES. On the Effective Date, each of the City, RDC, Centex-
Landis, Broadmoor, the Debtors, JCC and the applicable Persons in the HET Group,
the NOLDC Group and the Grand Palais Group shall execute and deliver the
City/RDC Release, the Centex-Landis Release or the Broadmoor Release, as the
case may be. On or before the Effective Date, (i) the NOLDC Shareholders, HET,
the Debtors, JCC and the other parties thereto shall execute and deliver the
NOLDC Shareholder/HET Settlement Agreement, (ii) Grand Palais, HET, the Debtors,
JCC and the other parties thereto shall execute and deliver the Grand Palais/HET
Settlement Agreement, and (iii) Grand Palais, NOLDC, the NOLDC Shareholders and
the other parties thereto shall execute and deliver the NOLDC/Grand Palais
Settlement Agreement. On or before the Effective Date, the Debtors, the
Underwriters, the Participating Banks, FNBC (in all capacities) and the other
parties thereto, as the case may be, shall execute and deliver the
Bank/Underwriter Release.
(k) CANCELLATION OF OLD INDENTURE, OLD BOND DOCUMENTS AND EXISTING
LENDERS' TITLE INSURANCE POLICY.
(i) On the Effective Date, except as otherwise provided in this
Section or in Sections 6.9 and 6.10 of the Plan, (A) the Old Indenture
shall be terminated and cancelled, (B) the other Old Bond Documents,
and all Liens granted under the Old Bond Documents, shall be
terminated and cancelled, and (C) all collateral pledged or otherwise
granted as security pursuant to the Old Bond Documents shall be
released by the Old Indenture Trustee or the Old Indenture Predecessor
Collateral Agent, as applicable, and shall be repledged to secure the
obligations secured by the Minimum Payment Guarantor Lien and the A
Term Loan, B Term Loan, the Working Capital Facility, the New Bonds
and the New Contingent Bonds pursuant to the Construction Loan
Documents, the Working Capital Loan Documents and the New Bond
Documents, as applicable; PROVIDED, HOWEVER, that, except for the
termination of the Indenture Trustee Charging Lien, nothing in this
Plan shall terminate or impair the rights, if any, of FNBC under the
Old Bond Documents against any Persons other than the Debtors or the
JCC Entities. The Old Indenture Predecessor Trustee, the Old
Indenture Trustee Collateral Agent, and any other holder of any Liens
under the Old Bond Documents and/or the Old Bank Credit Documents
shall execute and deliver all termination statements, mortgage
releases and other instruments or documents reasonably requested by
JCC to effectuate or evidence the release of any such Liens.
(ii) On the Effective Date, all of FNBC's claims or other rights
to indemnity and/or reimbursement under the Old Indenture and the
other Old Bond Documents and all Liens securing same (including the
Indenture Trustee Charging Lien) shall be cancelled and extinguished
except as follows: On the Effective Date, JCC (A) shall assume on an
unsecured basis any obligation of HJC under the Old Bond Documents to
indemnify FNBC for attorneys' fees or other costs of defense incurred
in connection with any
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claim asserted by any Person against FNBC and (B) shall assume as an IN REM
obligation limited in recourse solely to the FNBC Cash Collateral any other
indemnification obligations of HJC under the Old Bond Documents. As
security for the assumed indemnification obligations of JCC set forth in
the immediately preceding sentence and in Section 6.2(l)(ii) hereof, FNBC
shall be authorized to retain $100,000 plus any interest accruing thereon
from and after the Effective Date (such amount and accrued interest,
collectively, the "FNBC Cash Collateral") until the later of (x) the first
anniversary of the Effective Date or (y) the date of resolution by final
unappealable judgment of any litigation filed against FNBC within one year
of the Effective Date to which FNBC is entitled to indemnity under the Old
Bank Credit Documents and/or Old Bond Documents, at which time the then
remaining balance of the FNBC Cash Collateral shall be released to JCC.
(iii) If, pursuant to the First American Settlement Agreement,
First American Title Insurance Company issues one or more new lender's
title insurance policies satisfactory to the Persons in the
Bank/Underwriter Group which are parties to the A Term Loan Documents,
B Term Loan Documents and/or Working Capital Loan Documents, then the
Existing Lender's Title Insurance Policy shall be deemed terminated as
of the Effective Date, and First American Title Insurance Company shall
not have any further liability thereunder.
(l) CANCELLATION OF OLD BANK CREDIT DOCUMENTS.
(i) On the Effective Date, except as otherwise provided in this
Section, the Old Bank Credit Documents, and all Liens granted
thereunder, shall be terminated and cancelled to the extent the
foregoing have not been previously terminated and cancelled, and all
collateral pledged or otherwise granted as security pursuant to the
Old Bond Documents or the Old Bank Credit Documents shall be released
by the Banks and, in the case of any collateral held by any Bank or
the Old Bank Collateral Agent, promptly returned to JCC; PROVIDED,
HOWEVER, that to the extent provided in Section 4.3 of the Plan, the
Administrative Agent and the Old Bank Collateral Agent may retain, for
application to any Allowed Secured Claim of any Bank or Old Bank
Collateral Agent or as security for any Disputed Secured Claims of any
Bank or Old Bank Collateral Agent, a portion of the Withheld Funds as
specified in Section 4.3 hereof; PROVIDED, FURTHER, that nothing in
the Plan shall terminate or impair the rights, if any, of FNBC under
the Old Bank Credit Documents against any Persons other than the
Debtors or the JCC Entities.
(ii) On the Effective Date, all of FNBC's claims or other rights
to indemnity and/or reimbursement under the Old Bank Credit Documents
and all Liens securing same shall be cancelled and extinguished except
as follows: On the Effective Date, JCC (A) shall assume on an
unsecured basis any obligation of HJC under the Old Bank Credit
Documents to indemnify FNBC for any attorneys' fees or other costs of
defense incurred in connection with any claim asserted by any Person
against FNBC, and (B) shall assume as an IN REM obligation limited in
recourse solely to the FNBC
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Cash Collateral any other indemnification obligations of HJC under the Old
Bank Credit Documents. As set forth in Section 6.2(k)(ii) hereof, the FNBC
Cash Collateral shall secure, among other things, the assumed
indemnification obligations of JCC set forth in this Section 6.2(l)(ii).
(m) CANCELLATION OF EQUITY INTERESTS. On the Effective Date, all Equity
Interests in each Debtor shall be cancelled.
(n) AGREEMENTS WITH LGCB AND STATE. Subject to the provisions of Section
12.15 hereof, on the Effective Date, JCC shall enter into the Amended and
Restated Casino Operating Contract, the State/LGCB Release and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein.
(o) AGREEMENTS WITH CITY AND RDC. Provided that the City Council shall
have enacted the ordinance(s) approving the Lease Documentation (as defined in
the City Agreement), on the Effective Date, JCC, the City and RDC shall enter
into the Amended and Restated Canal Street Casino Lease Agreement, Amended and
Restated General Development Agreement and all other agreements, instruments and
documents necessary or appropriate to evidence or consummate the transactions
contemplated therein. On or before the Effective Date, the Basin Street Casino
Lease shall have been terminated in accordance with the provisions of the City
Agreement and the Basin Street Casino Lease Termination Agreement. Unless
earlier terminated in accordance with the provisions thereof, the City Agreement
shall remain in full force and effect through the occurrence of the Effective
Date.
(p) AGREEMENTS WITH HNOMC. On the Effective Date, JCC and HNOMC shall
enter into the Amended and Restated Management Agreement and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein.
(q) REGISTRATION AND LISTING OF CLASS A NEW COMMON STOCK. The JCC
Entities shall use their best efforts to cause the Class A New Common Stock to
be listed on a national securities exchange or quoted on NASDAQ-NMS upon the
Effective Date. JCC Holding shall also use its best efforts to be, on or prior
to the Effective Date, a reporting company under the Securities Exchange Act of
1934, as amended (the "34 Act"), with respect to the Class A New Common Stock.
JCC Holding shall file a registration statement under the 34 Act (the "Class A
34 Act Registration Statement") no later than promptly after the date of entry
of the Final Order approving the Disclosure Statement. If the Class A 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of such registration statement with the SEC (PROVIDED, HOWEVER, that this
clause (i) is not applicable if JCC Holding did not file such registration
statement prior to the date which is five days after the date of entry of the
Final Order approving the Disclosure Statement), (ii) 60 days after the date of
entry of the Final Order approving the Disclosure Statement, (iii) 30 days after
receipt of any SEC comments on such registration statement, and (iv) the
Effective Date, then the JCC Entities shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of Class A New Common Stock (based on the
greater of (x) the market value of such Class A New Common Stock at such time
and (y) $15.00 per share) to be registered, which amount shall increase by $.05
every 45 days to a maximum of $.30 per week.
In addition, to the extent that it is reasonably determined that the
registration of public resales by any Bondholder of any Class A Common Stock
received by such Bondholder under the Plan is required by law, JCC Holding will
file a registration statement (the "Class A 33 Act Registration Statement") with
respect to such resales promptly after the Effective Date. If such Class A 33
Act Registration Statement is not effective within 120 days after it is filed,
then the JCC Entities shall pay to the Bondholders an amount equal to $.05 per
week for each $1,000 of Class A New Common Stock (based on the greater of
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(x) the market value of such Class A New Common Stock at such time and (y)
$15.00 per share) to be registered, which amount shall increase by $.05 every 45
days to a maximum of $.30 per week.
(r) REGISTRATION OF CLASS B NEW COMMON STOCK. On the Effective Date, the
JCC Entities and Harrah's Investor shall enter into a Registration Rights
Agreement (the "Class B Registration Rights Agreement") containing such terms
and conditions as are customary under the circumstances, including the
following:
(i) upon the request of Harrah's Investor, which request may not
be made prior to the second anniversary of the opening of the Casino,
the JCC Entities shall promptly file with the Securities and Exchange
Commission and cause to become effective as soon as reasonably
practicable thereafter a registration statement on the appropriate
form (the "Class B Registration Statement") relating to all shares of
Class B New Common Stock held by Harrah's Investor, including any
shares of Class B New Common Stock obtained by Harrah's Investor
pursuant to the exercise of the HET Warrant; and
(ii) the JCC Entities shall cause such Class B Registration
Statement to be continually effective, subject to customary
exceptions, through the third anniversary of the date on which the
Class B Registration Statement first becomes effective.
(s) REGISTRATION OF NEW BONDS. To the extent that it is reasonably
determined that the registration of public resales by any Bondholder of any New
Bonds or New Contingent Bonds received by such Bondholder under the Plan is
required by law, the JCC Entities will file a registration statement (the "New
Bonds 33 Act Registration Statement") with respect to such resales promptly
after the Effective Date. If such New Bonds 33 Act Registration Statement is
not effective within 120 days after it is filed, then the JCC Entities shall pay
to the Bondholders an amount equal to $.05 per week for each $1,000 of
securities which amount shall increase by $.05 every 45 days to a maximum of
$.30 per week.
(t) FILING OF PLAN DOCUMENTS. The forms of the respective Bylaws and
Certificates of Incorporation of the JCC Entities and any shareholders'
agreements relating to any JCC Entity shall be filed with, and approved by, the
Bankruptcy Court on or before the Effective Date. The Proponents shall file
with the Bankruptcy Court the forms of all of the other Plan Documents on or
before the Effective Date. All Plan Documents shall be in form and substance
satisfactory to the Bondholders Committee in its sole discretion and to HET (in
its sole discretion) on behalf of the Proponents, and if a party thereto, HJC
(which consent shall not be unreasonably withheld or delayed).
(u) CONTINUED DIP FINANCING. During the period from the Confirmation Date
through the Effective Date, and subject to any necessary additional approval by
the Bankruptcy Court, HJC shall request, and the DIP Lender shall provide to
HJC, additional debtor-in-possession financing in an aggregate principal amount,
together with all other outstanding DIP Indebtedness, up to $39 million (plus
any additional amounts which the DIP Lender elects to advance in its sole
discretion) and on terms and conditions similar to those set forth in the Final
Order (1) Authorizing Debtor-in-Possession To Incur Post-Petition Secured
Indebtedness, (2) Granting Security Interests And Priority Pursuant To 11 U.S.C.
Section 364, And (3) Modifying The Automatic Stay entered by the Bankruptcy
Court on December 4, 1997. Such additional debtor-in-possession financing shall
be used to fund expenditures necessary to recommence construction of the Casino
and any other amounts necessary for the completion of the Chapter 11 Case of HJC
and the consummation of the Plan.
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B. JCC ENTITIES AND THEIR GOVERNANCE
6.3. GENERAL. From and after the Effective Date, the management,
control and operation of each of JCC Entities shall become the general
responsibility of its Board of Directors or managing member, as applicable,
pursuant to the JCC Organizational Documents and JCC Operating Agreement, the
JCC Intermediary Organizational Documents and JCC Intermediary Operating
Agreement, or the JCC Holding Certificate of Incorporation and JCC Holding
Bylaws, as applicable.
6.4. BOARD OF DIRECTORS AND MANAGING MEMBERS OF JCC ENTITIES. Subject
to the provisions of Section 6.6 hereof, the initial Board of Directors of JCC
Holding shall consist of six members, three of whom shall be elected by the
Bondholders Committee (the "Bondholders Director Nominees") and the remaining
three of whom shall be elected by the holders of a majority of the outstanding
shares of Class B New Common Stock (the "Harrah's Director Nominees" and
together with the Bondholders Director Nominees, collectively the "Director
Nominees"), and their names shall be disclosed at or prior to the Confirmation
Hearing; PROVIDED, HOWEVER, that if any Director Nominee has not been found
suitable by LGCB (or deemed exempt or waived from such suitability requirements)
on or before the Effective Date, the number of Director Nominees which each of
the Bondholders Committee and such majority holders of Class B New Common Stock
is entitled to elect shall be so reduced (until all six Director Nominees have
been found suitable by LGCB or deemed exempt or waived from such suitability
requirements) so that each of the Bondholders Committee and such majority
holders of Class B New Common Stock has the equivalent number of Director
Nominees appointed to the Board of Directors of JCC Holding. Subject to the
provisions of Section 6.6 hereof, (a) the initial managing member of JCC shall
be (i) JCC Intermediary, if JCC Intermediary is formed, or (ii) JCC Holding, if
JCC Intermediary is not formed, and (b) the initial managing member of JCC
Intermediary (if formed) shall be JCC Holding.
6.5. OFFICERS OF JCC ENTITIES. The initial officers of each JCC Entity
shall be selected by their respective Board of Directors or managing members, as
applicable, and to the extent such officers have been selected, their names
shall be disclosed at or prior to the Confirmation Hearing. The selection of
officers of each JCC Entity after the Effective Date shall be as provided in the
applicable certificate of incorporation, bylaws, organizational documents and/or
operating agreement of such entity.
6.6. SUITABILITY DETERMINATIONS. Notwithstanding anything to the
contrary hereunder, any Person required by the Louisiana Economic Development
and Gaming Control Act, the rules and regulations of the LGCB (as said rules and
regulations may be amended from time to time), and the Amended and Restated
Casino Operating Contract, to be found suitable by the LGCB must meet the
suitability requirements of the Louisiana Economic Development and Gaming
Control Act, the rules and regulations of the LGCB (as said rules and
regulations may be amended from time to time), and the Amended and Restated
Casino Operating Contract.
6.7. ENTITY ACTION. As of the Effective Date, each JCC Entity shall be
deemed to have adopted the JCC Organizational Documents and JCC Operating
Agreement, the JCC Intermediary Organizational Documents and JCC Intermediary
Operating Agreement or the JCC Holding Certificate of Incorporation and JCC
Holding Bylaws, as applicable. Except as specifically provided in the Plan, the
adoption of the JCC Organizational Documents and JCC Operating Agreement, the
JCC Intermediary Organizational Documents and JCC Intermediary Operating
Agreement or the JCC Holding Certificate of Incorporation and JCC Holding
Bylaws, as applicable, or similar constituent documents, the selection of the
directors and/or officers, as the case may be, of each JCC Entity, the
distribution of cash, the issuance and distribution of New Bonds, New Contingent
Bonds, and Class A and Class B New Common Stock and the adoption, execution and
delivery of all contracts, instruments, indentures, modifications and other
agreements relating to any of the foregoing, and other matters provided for
under the Plan involving
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corporate or other action to be taken or required of the applicable JCC Entity
or Debtor shall be deemed to have occurred and be effective as provided herein,
and shall be authorized and approved in all respects without any requirement of
further action by the respective stockholders, managing members, officers or
directors of the JCC Entities and Debtors. To the extent required by law, the
Board of Directors or managing member, as the case may be, of each JCC Entity
shall take such action as may be necessary from time to time to approve the
issuance of any New Bonds, New Contingent Bonds or Class A and Class B New
Common Stock and such other action, if any, as may be required to meet the
requirements of the Plan or any of the New Bonds, New Contingent Bonds or Class
A and Class B New Common Stock issued pursuant thereto. Any officer of any JCC
Entity is authorized to execute and deliver on behalf of such JCC Entity or any
Debtor from and after its dissolution any Plan Document or any other
certificates, instruments or documents relating thereto.
C. DISTRIBUTIONS
6.8. GENERALLY. All distributions required hereunder to holders of
Allowed Claims shall be made by a Disbursing Agent pursuant to a Disbursing
Agreement, provided that no Disbursing Agreement shall be required if any JCC
Entity makes such distributions or if the Old Indenture Successor Trustee makes
such distributions pursuant to Section 6.9 hereof. The Disbursing Agent may
designate, employ or contract with other Persons to assist in or perform the
distribution of the property to be distributed. The Disbursing Agent and such
other Persons shall serve without bond.
6.9. SERVICES OF OLD INDENTURE TRUSTEE. The Old Indenture Successor
Trustee (or its nominee, designee or affiliate) is designated a Disbursing Agent
for purposes of effecting distributions to the Bondholders pursuant to the Plan.
Any reference in this Plan to "Disbursing Agent" in respect of distributions to
be made to the Bondholders shall be deemed to refer to the Old Indenture
Successor Trustee or its nominee, designee or affiliate. All distributions to
be made to the Bondholders under the Plan will be made to the Old Indenture
Successor Trustee in accordance with the Old Indenture, applicable law and the
Plan, and the Old Indenture Successor Trustee shall, as soon as reasonably
practicable, in accordance with the Old Indenture, applicable law and the Plan,
deliver the distributions, free and clear of any Indenture Trustee Charging
Lien, which Lien shall be cancelled and extinguished on the Effective Date.
6.10. DISTRIBUTIONS TO BE MADE TO BONDHOLDERS AS OF DISTRIBUTION RECORD
DATE. Only Bondholders of record as of the Distribution Record Date, or the
Release Pool Distribution Record Date as to distributions from the Release Pool,
shall be entitled to receive the distributions provided for in Article IV of the
Plan; PROVIDED, HOWEVER, that any Bondholder which is a record holder but not
the beneficial owner of any Old Bond shall not be entitled to retain any
distributions made hereunder on account of such Old Bond, but instead shall
receive and hold in trust such distributions on behalf of such beneficial owner
and shall promptly cause such distributions to be remitted to the beneficial
owner. As of the close of business on the Distribution Record Date or the
Release Pool Distribution Record Date, as applicable, the transfer ledgers in
respect of the Old Bonds shall be closed for purposes of making the
distributions required to be made to the Bondholders pursuant to Article IV of
the Plan. Except as otherwise provided herein, the JCC Entities, the Old
Indenture Successor Trustee and their respective agents shall have no obligation
to recognize any transfer of the Old Bonds occurring after the close of business
on the Distribution Record Date or the Release Pool Distribution Record Date, as
applicable, for purposes of such distributions. Except as otherwise provided
herein, the JCC Entities, the Old Indenture Successor Trustee and their
respective agents shall recognize and, for purposes of making such distributions
under the Plan, will only deal with those Bondholders of record reflected on the
transfer ledgers maintained by the Registrar for the Old Bonds as of the close
of business on the Distribution Record Date or the Release Pool Distribution
Date, as applicable; provided that nothing contained herein
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shall be deemed to prohibit or otherwise restrict the right of any such
Bondholder to transfer the Old Bonds at any time. As of the Effective Date, the
Debtors and the JCC Entities shall have no further obligations under the Old
Indenture. The Old Indenture shall continue in effect for the sole purpose of
allowing the Old Indenture Successor Trustee to make distributions on account of
the Allowed Claims of the Bondholders under the Plan, and upon completion of
such distributions, the Old Indenture shall terminate and have no further force
or effect; PROVIDED, HOWEVER, that except for the termination of the Indenture
Trustee Charging Lien, such termination of the Old Indenture shall not terminate
or impair the rights, if any, of FNBC under the Old Indenture (i) against any
Persons other than the Debtors or the JCC Entities or (ii) against any of the
Debtors and the JCC Entities, but solely to the extent provided in Section
6.2(k) hereof and/or the FNBC Settlement Agreement. Any actions taken by the
Old Indenture Trustee that are not for the purpose authorized in the Plan shall
be null and void.
6.11. CANCELLATION AND SURRENDER OF EXISTING SECURITIES AND AGREEMENTS.
(a) On the Effective Date, the promissory notes, share certificates and
other instruments evidencing any Claim or Equity Interest shall be deemed
cancelled without further act or action under any applicable agreement, law,
regulation, order, or rule, and the obligations of any Debtor under the
agreements, indentures and certificates of designations governing such Claims
and Equity Interests, as the case may be, shall be discharged.
(b) Each holder of a promissory note, share certificate or other
instrument evidencing a Claim or Equity Interest shall surrender such promissory
note, share certificate or instrument to JCC. No distribution of property
hereunder shall be made to or on behalf of any such holders unless and until
such promissory note or instrument is received by JCC or the unavailability of
such note or instrument is established to the reasonable satisfaction of JCC.
JCC may require any entity delivering an affidavit of loss and indemnity to
furnish a bond in form and substance (including, without limitation, with
respect to amount) reasonably satisfactory to JCC. Any holder that fails within
one year after the date of entry of the Confirmation Order (i) to surrender or
cause to be surrendered such promissory note or instrument, (ii) to execute and
deliver an affidavit of loss and indemnity reasonably satisfactory to JCC, and
(iii) if requested, to furnish a bond reasonably satisfactory to JCC upon
request shall be deemed to have forfeited all rights, Claims, and interests and
shall not participate in any distribution hereunder.
6.12. DISTRIBUTIONS OF CASH. Any payment of cash made by JCC pursuant to
the Plan shall be made by check drawn on a domestic bank, or at the option of
JCC, by wire transfer from a domestic bank; except that payment to foreign
holders of Allowed Claims may be in such funds and by such means (as determined
by JCC) as are customary or necessary in a particular foreign jurisdiction.
6.13. TIMING OF DISTRIBUTIONS. Any payment or distribution required to
be made under the Plan on a day other than a Business Day shall be due on the
next succeeding Business Day.
6.14. HART-SCOTT-RODINO COMPLIANCE. Any shares of Class A or Class B New
Common Stock to be distributed under the Plan to any Person required to file a
Pre-merger Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, shall not be distributed until the
notification and waiting periods applicable under such Act to such Person shall
have expired or been terminated.
6.15. MINIMUM DISTRIBUTIONS; NO DUPLICATIVE DISTRIBUTIONS; NO INTEREST.
No payment of cash less than ten dollars is required to be made by JCC to any
holder of a Claim unless a request therefor is made in writing to JCC.
Notwithstanding anything to the contrary in this Plan, to the extent more than
one Debtor is liable for any Allowed Claim (including, without limitation, any
Allowed WARN Act
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Claim), any distribution to which a holder of such Allowed Claim is entitled
from any Debtor under the Plan shall be reduced PRO TANTO by any distribution
received from any other Debtor on account of such Allowed Claim, and the portion
of the Allowed Claim to which the received distribution relates shall be deemed
satisfied and discharged. Except as otherwise expressly provided herein, no
holder of any Allowed Claim shall be entitled to any post-petition interest on
such Claim.
6.16. FRACTIONAL SHARES. Except as otherwise provided in this Section,
no fractional shares of New Common Stock or cash in lieu thereof shall be
distributed.
(a) SECTION 4.4(b)(i) DISTRIBUTIONS OF NEW COMMON STOCK. The
fractional portion of any distribution of New Common Stock to any recordholder
of Old Bonds pursuant to Section 4.4(b)(i) hereof shall be determined based upon
such recordholder's aggregate holding of Old Bonds on the Distribution Record
Date, without regard to the number or amount of participants, respondents or
beneficial owners for which such recordholder acts as nominee; PROVIDED,
HOWEVER, that the distribution of New Common Stock to Cede & Co. and/or The
Depository Trust Company as nominee for their participants pursuant to Section
4.4(b)(i) hereof shall be determined by excluding the aggregate amount of
fractional shares of New Common Stock which, but for this Section 6.16, would be
distributable to each such participant. The fractional portion of the
distribution made to each recordholder of Old Bonds under Section 4.4(b)(i)
shall be aggregated, and one additional share of New Common Stock shall be
distributed as part of the distribution under Section 4.4(b)(i) hereof in
descending order to each of the recordholders whose respective distributions
under Section 4.4(b)(i) hereof have the highest fractional amounts until the
aggregate amount of all fractional shares of New Common Stock distributable
under Section 4.4(b)(i) hereof (exclusive of the fractional portion of such
aggregate amount) has been distributed to the applicable recordholders of Old
Bonds. For purposes of this section only, the term "recordholder" shall be
deemed to include (i) those Persons listed as holders of the Old Bonds on the
books and records of the Registrar for the Old Bonds as of the close of business
on the Distribution Record Date, except for Cede & Co. and/or The Depository
Trust Company and (ii) each participant in Cede & Co. and/or The Depository
Trust Company listed as holders of the Old Bonds on the books and records of
Cede & Co. and/or The Depository Trust Company as of the close of business on
the Distribution Record Date.
(b) SECTION 4.4(b)(v) DISTRIBUTIONS OF NEW COMMON STOCK. Distributions
of New Common Stock to Releasing Bondholders pursuant to Section 4.4(b)(v)
hereof shall be made directly to or for the benefit of Releasing Bondholders
constituting beneficial owners of Old Bonds on the Release Pool Distribution
Record Date. In connection with the distribution of New Common Stock under
Section 4.4(b)(v) hereof, the fractional portion of the distribution of New
Common Stock to each Releasing Bondholder under Section 4.4(b)(v) hereof shall
be cumulated, and one share of additional New Common Stock shall be distributed
as part of such distribution in descending order to each of the Releasing
Bondholders whose respective distributions under Section 4.4(b)(v) hereof have
the highest fractional amounts until the aggregate amount of fractional shares
of New Common Stock distributable under Section 4.4(b)(v) hereof (exclusive of
the fractional portion of such aggregate amount) has been distributed to the
applicable Releasing Bondholders.
6.17. DELIVERY OF DISTRIBUTIONS. Subject to Bankruptcy Rule 9010,
distributions to holders of Allowed Claims shall be made at the address of each
such holder as set forth on the Schedules filed by the applicable Debtor with
the Bankruptcy Court, unless superseded by the address as set forth on proofs of
claim filed by such holders or other writing notifying the applicable Debtor of
a change of address (or at the last known address of such a holder if no proof
of claim is filed or if the applicable Debtor has not been notified in writing
of a change of address), or in the case of the Bondholders, may be made at the
addresses of the registered Bondholders contained in the records of the
Registrar as of the Distribution Record Date or the Release Pool Distribution
Record Date, as applicable. If any distribution to a holder
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of an Allowed Claim is returned as undeliverable, no further distributions to
such holder shall be made, unless and until JCC or the Disbursing Agent is
notified of such holder's then current address, at which time all missed
distributions shall be made to such holder together with any interest or
dividends earned thereon. Amounts in respect of the undeliverable distributions
made through the Disbursing Agent shall be returned to the Disbursing Agent
making such distribution until such distributions are claimed. All Claims for
undeliverable distributions shall be made on or before the later of the first
anniversary of the Effective Date and the date ninety (90) days after such Claim
is Allowed. After such date, all unclaimed property held for distribution to
any holder of an Allowed Claim shall be revested in, and returned to, JCC, and
the Claim of any holder with respect to such property shall be discharged and
forever barred.
6.18. FEES AND EXPENSES OF DISBURSING AGENTS. Except as otherwise
ordered by the Bankruptcy Court, the amount of any reasonable fees and expenses
incurred by a Disbursing Agent, including, but not limited to, the Old Indenture
Successor Trustee, on or after the Confirmation Date, and any compensation and
expense reimbursement claims (including reasonable fees and expenses of its
attorneys and other agents) made by such Disbursing Agent shall be repaid by JCC
in accordance with the applicable Disbursing Agreement or the Old Indenture, as
the case may be, without further order of the Bankruptcy Court; PROVIDED,
HOWEVER, that the Bankruptcy Court will hear and determine any disputes in
respect of such fees and expenses. In addition, the amount of any reasonable
fees and expenses incurred by FNBC as Old Bank Collateral Agent, Old Indenture
Predecessor Trustee and/or Old Indenture Predecessor Collateral Agent on or
after the Confirmation Date to consummate the transactions contemplated by the
Plan shall be paid by JCC, without further order of the Bankruptcy Court;
PROVIDED, HOWEVER, that the Bankruptcy Court will determine and hear any
disputes in respect of such fees and expenses.
6.19. TIME BAR TO CASH PAYMENTS. Checks issued by JCC in respect of
Allowed Claims shall be null and void if not negotiated within ninety (90) days
after the date of issuance thereof. Any amounts paid to the Disbursing Agent in
respect of such a check shall be promptly returned to JCC by the Disbursing
Agent. Requests for reissuance of any check shall be made directly to JCC by
the holder of the Allowed Claim with respect to which such check originally was
issued. Any claim in respect of such a voided check shall be made on or before
the later of the first anniversary of the Effective Date and the date ninety
(90) days after such Claim is Allowed, and the failure timely to make any such
claim shall result in such claim being forever barred and discharged.
6.20. TRANSFER OF RELEASE POOL DISTRIBUTIONS. Upon request of the
Debtors or the Bondholders Committee, the Bankruptcy Court may enter an order
with or without notice or hearing establishing a form (the "Release Pool
Transfer Form") and procedure whereby Releasing Bondholders who, on or after the
Release Pool Distribution Record Date but prior to the Distribution Record Date,
sold, assigned or otherwise transferred their rights under the Plan to receive
distributions in accordance with Section 4.4(b)(v) hereof to a third party (each
such third party, a "Release Pool Transferee") may designate a Release Pool
Transferee to receive directly such Releasing Bondholder's distribution of New
Common Stock from the Release Pool pursuant to Section 4.4(b)(v) hereof;
PROVIDED, HOWEVER, that no person (including a Disbursing Agent, any of the
Proponents or any of the JCC Entities) shall have any liability to a Release
Pool Transferee in the event that a distribution of New Common Stock from the
Release Pool is for any reason whatsoever made to the Releasing Bondholder
instead of the Release Pool Transferee designated in such Release Pool Transfer
Form; PROVIDED, FURTHER, that any Release Pool Transfer Form shall contain an
acknowledgement by the Release Pool Transferee that it is the beneficial owner
of the Old Bonds to which such Release Pool Transfer Form relates as of the
Distribution Record Date.
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D. PROCEDURE FOR RESOLVING DISPUTED CLAIMS
6.21. OBJECTION DEADLINE. As soon as practicable, but in no event later
than ninety (90) days after the Effective Date, unless otherwise ordered by the
Bankruptcy Court, objections to Claims shall be filed with the Bankruptcy Court
and served upon the holders of each of the Claims to which objections are made.
6.22. AUTHORITY TO OPPOSE CLAIMS. On and after the Effective Date,
except for the Assigned Litigation Claims, the objecting to, disputing,
defending against, and otherwise opposing, and the making, asserting, filing,
litigation, settlement or withdrawal of all objections to, Claims shall be the
exclusive responsibility of JCC. The managing member of JCC shall have the
power, without notice to or approval of the Bankruptcy Court, in the exercise of
its business judgment to preserve, fail to preserve, settle, compromise or
litigate any claim or cause of action (except for any claims or causes of action
released or to be released pursuant to or in connection with this Plan and any
Assigned Litigation Claims) before any applicable or appropriate court, panel,
agency or tribunal (including, where appropriate, the Bankruptcy Court) that JCC
may have against any Person based on acts, omissions or events prior to the
Effective Date.
6.23. NO DISTRIBUTIONS PENDING ALLOWANCE. Notwithstanding any other
provision in the Plan, no payment or distribution shall be made with respect to
any Claim to the extent it is a Disputed Claim unless and until such Claim
becomes an Allowed Claim.
6.24. DETERMINATION BY BANKRUPTCY COURT. The amount of any Disputed
Claim, and the rights of the holder of such Claim, if any, to payment in respect
thereof shall be determined by the Bankruptcy Court, unless it shall have sooner
become an Allowed Claim.
6.25. TREATMENT OF DISPUTED CLAIMS. Cash, shares of New Common Stock,
New Bonds and/or New Contingent Bonds, as applicable, shall be distributed by
JCC or JCC Holding (in the case of the New Common Stock) to a holder of a
Disputed Administrative Expense Claim or Disputed Claim when, and to the extent
that, such Disputed Administrative Expense Claim or Disputed Claim becomes an
Allowed Administrative Expense Claim or Allowed Claim pursuant to a Final Order.
Such distribution shall be made in accordance with the Plan to the holder of
such Claim based upon the amount in which such Disputed Administrative Expense
Claim or Disputed Claim becomes an Allowed Administrative Expense Claim or
Allowed Claim, as the case may be.
ARTICLE VII.
ACCEPTANCE OR REJECTION OF THE PLAN
7.1. CLASSES ENTITLED TO VOTE. Each holder of an Allowed Claim in a
Class of Claims against any Debtor which may be impaired under the Plan,
including any holder of an Allowed Claim in Classes A1, A2, A3(a), A3(b), A4,
A5, A6, A7, B1, B2, B3, B4, B5, C1, C2, C3, C4, C5 or C6 shall be entitled to
vote separately to accept or reject the Plan. Each holder of a Claim in a Class
of Claims which is unimpaired under the Plan shall be deemed to have accepted
the Plan pursuant to Section 1126(f) of the Bankruptcy Code. Each holder of a
Claim in a Class of Claims or an Equity Interest in a Class of Equity Interests
which are not receiving any distributions under the Plan shall be deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
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7.2. CLASS ACCEPTANCE REQUIREMENT. An impaired Class of Claims shall
have accepted the Plan if (i) the holders (other than any holder designated
under Section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount
of the Allowed Claims actually voting in such Class have voted to accept the
Plan and (ii) the holders (other than any holder designated under Section
1126(e) of the Bankruptcy Code) of more than one-half in number of the Allowed
Claims actually voting in such Class have voted to accept the Plan. An impaired
Class of Equity Interests shall have accepted the Plan if the holders (other
than any holder designated under Section 1126(e) of the Bankruptcy Code) of at
least two-thirds in amount of the Allowed Equity Interests actually voting in
such Class have voted to accept the Plan. For purposes of calculating the
number of Allowed Claims in a class of Claims held by holders of Allowed Claims
in such class that have voted to accept or reject the Plan under Section 1126(c)
of the Bankruptcy Code, all Allowed Claims in such class held by one entity or
any Affiliate shall be aggregated and treated as one Allowed Claim in such
class.
7.3. CRAMDOWN. In the event that any impaired class or classes of
Claims shall not accept the Plan, the Proponents reserve the right to (a)
request that the Bankruptcy Court confirm the Plan in accordance with Section
1129(b) of the Bankruptcy Code and/or (b) modify the Plan pursuant to the
provisions of Section 12.4 of the Plan to provide treatment sufficient to assure
that the Plan does not discriminate unfairly, and is fair and equitable, with
respect to the class or classes not accepting the Plan, and, in particular, the
treatment necessary to meet the requirements of Sections 1129(a) and (b) of the
Bankruptcy Code with respect to the rejecting classes and any other classes
affected by such modifications. The Proponents acknowledge that the Plan, in
the form of the "Third Amended Joint Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code, as Modified Through December 10, 1997" cannot be confirmed
under the cramdown requirements of Section 1129(b) of the Bankruptcy Code if
Class A4 does not accept the Plan.
ARTICLE VIII.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1. ASSUMPTION OR REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES.
(a) ASSUMPTION OF MODIFIED CONTRACTS. On the Effective Date, JCC, as
HJC's successor, shall assume (i) the Canal Street Casino Lease as amended and
restated pursuant to, and enter into, the Amended and Restated Canal Street
Casino Lease Agreement, (ii) the General Development Agreement as amended and
restated pursuant to, and enter into, the Amended and Restated General
Development Agreement, (iii) the Amended and Restated Casino Operating Contract,
(iv) the Broadmoor Construction Agreement as modified in accordance with the
Broadmoor Settlement Agreement, (v) the Management Agreement as amended and
restated pursuant to, and enter into, the Amended and Restated Management
Agreement, (vi) the Architect Contract as modified, if necessary, on terms
acceptable to the parties thereto, (vii) the Completion Loan Documents as
amended and restated pursuant to, and enter into, the Amended and Restated
Completion Loan Documents, (viii) the Construction Lien Indemnity Obligation
Agreement as amended and restated pursuant to, and enter into, the Amended and
Restated Construction Lien Indemnity Obligation Agreement, (ix) the Ticket
Purchase Agreement dated July 19, 1995, as amended pursuant to the Agreement to
Amend and Assume Executory Contract between HJC and The Audubon Institute and
attached as Exhibit I to the Existing Plan and incorporated by reference herein,
and (x) the Centex-Landis Construction Agreement as modified in accordance with
the Centex-Landis Settlement Agreement.
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(b) OTHER EXECUTORY CONTRACTS. All executory contracts and unexpired
leases that exist between any Debtor and any Person are hereby rejected, except
for any executory contract or unexpired lease (i) which is to be assumed (in
certain instances, as modified) by JCC pursuant to Section 8.1(a) or 8.1(c) of
the Plan, (ii) which has been assumed (in certain instances, as modified)
pursuant to an order of the Bankruptcy Court entered prior to the Confirmation
Date, (iii) which has been entered into by HJC after the Commencement Date in
the ordinary course of business or pursuant to an order of the Bankruptcy Court,
(iv) as to which a motion for approval of the assumption of such contract (in
certain instances, as modified) has been filed prior to and is pending on the
Confirmation Date or (v) which (in certain instances, as modified) is set forth
in a schedule (acceptable to the Bondholders Committee (in its sole discretion)
and HET (in its sole discretion) on behalf of the Proponents) filed prior to the
conclusion of the Confirmation Hearing. Subject to the occurrence of the
Effective Date, the rejection of any executory contract or unexpired lease
pursuant to this Article VIII shall be effective upon the earliest of (i) the
Confirmation Date, (ii) the date on which the applicable Debtor or JCC notifies
the non-debtor party to such contract or lease of the effectiveness of such
rejection, and (iii) the date specified as the effective date of rejection in
any order of the Bankruptcy Court. Any executory contract or unexpired lease
which is assumed under this Plan shall be assumed by JCC.
(c) INSURANCE POLICIES.
(i) EXISTING OWNER'S TITLE INSURANCE POLICY. If the First
American Settlement Agreement becomes effective on or before the Effective Date
(including, without limitation, the issuance of new owner's and lender's title
insurance policies on or before the Effective Date), the Existing Owner's Title
Insurance Policy shall be deemed rejected and terminated as of the Effective
Date in accordance with the terms of the First American Settlement Agreement.
If the First American Settlement Agreement either has not become effective on or
before April 30, 1998 (or such later date as agreed to by the parties) for any
reason or has become ineffective for any reason, then HJC or JCC (as HJC's
successor), with the consent of HET (in its sole discretion) on behalf of the
Proponents, shall be entitled, upon ten days' prior notice, to seek to assume
the Existing Owner's Title Insurance Policy pursuant to Section 365(a) of the
Bankruptcy Code. If the First American Settlement Agreement has not become
effective by the time at which all other conditions to the Effective Date have
been satisfied or waived, then HJC or JCC (as HJC's successor), with the consent
of HET (in its sole discretion) on behalf of the Proponents, shall be entitled,
upon ten days' prior notice, to seek to assume the Existing Owner's Title
Insurance Policy pursuant to Section 365(a) of the Bankruptcy Code. To the
extent HJC or JCC, as applicable, seeks to assume the Existing Owner's Title
Insurance Policy in accordance with the provisions of this Section, First
American Title Insurance Company shall be entitled to oppose such assumption on
any grounds other than on the grounds that the Confirmation Date has already
occurred.
(ii) OTHER INSURANCE POLICIES. The directors and officers
liability insurance policy of HJC and all other insurance policies and any
agreements, documents or instruments relating thereto, (including, without
limitation, any retrospective premium rating plans relating to such policies),
except for the Existing Owner's Title Insurance Policy and those policies (and
any agreements, documents or instruments relating thereto) set forth in a
schedule to be filed prior to the commencement of the Confirmation Hearing, are
treated as executory contracts under the Plan and shall be assumed by JCC on the
Effective Date pursuant to Section 365(a) of the Bankruptcy Code.
Notwithstanding the foregoing, distributions under the Plan to any holder of a
Claim covered by any of the insurance policies to be assumed pursuant to this
Section shall be in accordance with the treatment provided under Article IV of
the Plan.
(d) APPROVAL OF ASSUMPTION OR REJECTION OF LEASES AND CONTRACTS. Entry
of the Confirmation Order shall constitute (i) the approval, pursuant to
Sections 365(a) and 1123(b)(2) of the Bankruptcy Code,
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of the assumption of the executory contracts and unexpired leases assumed
pursuant to Sections 8.1(a), (b) and (c) hereof, (ii) the extension of time
pursuant to Section 365(d)(4) of the Bankruptcy Code within which HJC may assume
or reject the unexpired leases specified in Sections 8.1(a), (b) and (c) hereof
through the Confirmation Date, and (iii) the approval, pursuant to Sections
365(a) and 1123(b)(2) of the Bankruptcy Code, of the rejection of the executory
contracts and unexpired leases rejected pursuant to Section 8.1 hereof.
(e) CURE OF DEFAULTS. All cure payments which may be required by
Section 365(b)(1) of the Bankruptcy Code under any executory contract or
unexpired lease which is assumed under this Plan shall be made by JCC on the
Effective Date or as soon as practicable thereafter. All requests for cure
payments by a party to such assumed contract or lease must be filed pursuant to
Section 2.1(a), unless such cure payments are agreed to by such non-debtor
party, HJC (on or before the Effective Date), JCC (after the Effective Date),
HET (in its sole discretion) on behalf of the other Proponents and the
Bondholders Committee (in its sole discretion) or are otherwise determined by
the Bankruptcy Court upon appropriate notice and hearing. In the event of a
dispute regarding the amount of any cure payment, the ability of JCC to provide
adequate assurance of future performance or any other matter pertaining to
assumption, JCC shall make such cure payments required by Section 365(b)(1) of
the Bankruptcy Code following the later of the Effective Date (or as soon as
practicable thereafter) and the date of the entry of a Final Order resolving
such dispute. Without limiting the foregoing, in connection with JCC's
assumption of the Amended and Restated Canal Street Casino Lease Agreement, JCC
will cure any and all defaults in the annual payment of $200,000.00 to the
Audubon Park Commission pursuant to Section 4.7 of the Canal Street Casino
Lease. Notwithstanding anything to the contrary herein, any payments to be made
by JCC to the State or the LGCB shall be paid in accordance with the provisions
of the Amended and Restated Casino Operating Contract.
(f) BAR DATE FOR FILING PROOFS OF CLAIM RELATING TO EXECUTORY CONTRACTS
AND UNEXPIRED LEASES REJECTED PURSUANT TO THE PLAN. Claims arising out of the
rejection of an executory contract or unexpired lease pursuant to Section 8.1
must be filed with the Bankruptcy Court no later than thirty days after entry of
the Confirmation Order. Any Claims not filed within such time will be forever
barred from assertion against the Debtors, their estates, and their property.
Unless otherwise ordered by the Bankruptcy Court, all Claims arising from the
rejection of executory contracts and unexpired leases shall be treated as Claims
in Class A7, A8, B5, B6, C4, C5, C6, or C7 as applicable, under the Plan. To
the extent necessary, entry of the Confirmation Order shall amend and supersede
any previously entered order of the Bankruptcy Court regarding procedures for
payment of such Claims.
8.2. RETIREE BENEFITS. Payments, if any, due to any person for the
purpose of providing or reimbursing payments for retired employees and their
spouses and dependents for medical, surgical or hospital care benefits, or
benefits in the event of sickness, accident, disability or death under any plan,
fund or program (through the purchase of insurance or otherwise) maintained or
established in whole or in part by any Debtor prior to the Commencement Date
shall be continued by JCC for the duration of the period such Debtor has
obligated itself to provide such benefits.
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ARTICLE IX.
EFFECT OF CONFIRMATION OF PLAN
9.1. REVESTING OF ASSETS.
(a) The property of the estates (including, without limitation, all
present and future claims and causes of action) of the Debtors shall vest in JCC
on the Effective Date, and JCC shall be deemed to be the successor to each of
the Debtors; provided that none of the JCC Entities or any of their respective
property shall be subject to any of the Claims or Equity Interests against or in
any Debtor except as expressly provided in this Plan. For Federal income tax
purposes, the vesting of the property of the estates of the Debtors shall be
solely in JCC Holding and shall be deemed to have occurred as follows: (i) a
deemed exchange by the Bondholders of the Old Bonds for all of the assets of HJC
(including any Assigned Litigation Claims assigned by HJC to JCC), and (ii) a
deemed exchange by the Bondholders of such HJC assets (not including any
Assigned Litigation Claims assigned by HJC to JCC) with JCC Holding for shares
of Class A New Common Stock (which shares, along with Class A New Common Stock
received in exchange for certain releases, will represent 50.1% of the value of
JCC Holding's outstanding New Common Stock), the New Bonds and the New
Contingent Bonds (each of which shall be considered obligations of JCC Holding).
For Federal income tax purposes, JCC Holding, JCC Intermediary (if formed) and
JCC shall be treated as a single taxable entity.
(b) From and after the Effective Date, the JCC Entities may operate
their business, and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code.
(c) As of the Effective Date, all property of the Debtors shall be free
and clear of all Claims and Equity Interests of holders thereof, except as
provided in the Plan.
(d) Pursuant to Section 1123(b)(3) of the Bankruptcy Code, except for
those rights, causes of action and claims released or to be released pursuant to
or in connection with the Plan, and except as otherwise provided in Section 5.9
hereof with respect to Assigned Litigation Claims, JCC, in its sole discretion,
and either in its own name or in the name, place and stead of the Debtors and
their estates, shall have the exclusive right to enforce or waive or release any
and all present or future rights or causes of action against any Person and
rights of the Debtors that arose before or after the Commencement Date, and
shall be entitled to retain all proceeds thereof.
9.2. DISCHARGE OF DEBTOR. The rights afforded herein and the treatment
of all Claims and Equity Interests herein shall be in exchange for and in
complete satisfaction, discharge, and release of Claims and Equity Interests of
any nature whatsoever, including any interest accrued on such Claims from and
after the Commencement Date, against any or all Debtors, or any of their assets
or properties. Except as otherwise provided herein, on the Effective Date (a)
all such Claims against, and Equity Interests in, the Debtors shall be
satisfied, discharged, and released in full and (b) all Persons shall be
precluded from asserting against any Debtor or JCC Entity, or its successors, or
their respective assets or properties any other or further Claims or Equity
Interests based upon any act or omission, transaction, or other activity of any
kind or nature, whether known or unknown, that occurred prior to the Effective
Date, whether or not (i) a proof of claim or interest based upon such Claim or
Equity Interest is filed or deemed filed under Section 501 of the Bankruptcy
Code, (ii) such Claim or Equity Interest is allowed under Section 502 of the
Bankruptcy Code, or (iii) the holder of such Claim or Equity Interest has
accepted the Plan. Except as provided herein, the Confirmation Order shall be a
judicial determination of discharge of all liabilities of the Debtors. As
provided in Section 524 of the Bankruptcy Code, such discharge shall void any
judgment against any Debtor or any JCC Entity at any time obtained to the extent
it relates to a Claim
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or Equity Interest discharged, and shall operate as an injunction against the
prosecution of any action against any Debtor or any JCC Entity, or the property
of any of them, to the extent it relates to a Claim or Equity Interest
discharged.
9.3. DISSOLUTION OF DEBTORS. On or as of the Effective Date, each
Debtor shall be dissolved, liquidated or otherwise terminated under applicable
law.
9.4. EXCULPATIONS. Subject to the occurrence of the Effective Date,
neither the Debtors, the JCC Entities, the Committees, nor any of their
respective members (including, in the case of HJC, its executive committee
members and reorganization steering committee members), officers, directors,
employees, agents or professionals shall have or incur any liability to any
holder of a Claim or Equity Interest for any act, event or omission in
connection with, or arising out of, the Chapter 11 Cases (including the
activities and deliberations of the Committees), the confirmation of the Plan,
the consummation of the Plan, or the administration of the Plan or the property
to be distributed under the Plan, except for willful misconduct or gross
negligence. Such exculpation shall not extend to any prepetition act, event or
omission of any party nor shall it extend to any post-petition act of any party
other than in connection with that party's official capacity in the Chapter 11
Cases.
ARTICLE X.
CONDITIONS PRECEDENT TO
CONFIRMATION AND EFFECTIVE DATE
10.1. CONDITION PRECEDENT TO CONFIRMATION OF THE PLAN. Confirmation of
the Plan will not occur unless all of the following conditions precedent have
been satisfied or have been waived by HET (in its sole discretion) on behalf of
the Proponents subject to the provisions of Section 10.3 hereof:
(a) The Confirmation Order and the Plan as confirmed pursuant to the
Confirmation Order shall be in form and substance satisfactory to HJC (which may
not unreasonably withhold or delay its approval) and HET (in its sole
discretion) on behalf of the other Proponents, and shall confirm the Plan as to
each of the Debtors. Without limiting the foregoing, the Confirmation Order
shall expressly provide that pursuant to Sections 364(f) and 1145 of the
Bankruptcy Code, all New Common Stock, New Bonds, New Contingent Bonds,
Convertible Junior Subordinated Debentures, the HET Warrant and all other
securities issued in connection with the Plan (including, without limitation,
all shares of New Common Stock in the Release Pool which are distributed to the
Releasing Bondholders or Harrah's Investor pursuant to Section 5.2 hereof or to
the NOLDC Shareholders and Grand Palais Releasing Bondholders pursuant to
Section 6.2(f) hereof) shall be (i) exempt from Section 5 of the Securities Act
of 1933, as amended, and any state or local law requiring registration for offer
or sale of a security or registration for offer or sale of a security or
registration or licensing of an issuer of, underwriter of, or broker or dealer
in, a security, and (ii) otherwise entitled to all of the benefits and
protections afforded by Section 1145 of the Bankruptcy Code.
10.2. CONDITIONS PRECEDENT TO EFFECTIVE DATE. The Effective Date of the
Plan will not occur unless all of the following conditions precedent have been
satisfied or waived by HET (in its sole discretion) on behalf of the Proponents,
but only as permitted by Section 10.3 hereof:
(a) Each of the conditions precedent set forth in Section 10.1 hereof
shall have been satisfied or waived by HET (in its sole discretion) on behalf of
the Proponents subject to the provisions of Section 10.3 hereof.
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(b) The Confirmation Order shall have been entered and shall not be
stayed.
(c) The Effective Date shall occur no later than April 30, 1998, unless
extended pursuant to Section 10.4 of the Plan.
(d) All those transactions described in Section 6.2 hereof shall have
been effected, and all of the agreements and instruments described in Section
6.2 hereof shall have been executed and delivered, and all other agreements and
instruments to be delivered under or necessary to effectuate the Plan shall have
been executed and delivered, and all executory contracts and unexpired leases to
be assumed by JCC as provided in Section 8.1 hereof shall have been assumed by
JCC. The Amended and Restated Casino Operating Contract, the State/LGCB
Release, and all other agreements, instruments and documents necessary to
evidence or consummate the transactions contemplated therein shall have been
executed and delivered by the parties thereto. All other cure or other payments
required to be paid in connection with the assumption of any executory contract
or unexpired lease shall be acceptable to HET (in its sole discretion) on behalf
of the Proponents and the Bondholders Committee (in its sole discretion).
(e) The New Indenture shall have been qualified under the Trust
Indenture Act.
(f) Tranches A-1 and A-3 of the A Term Loan, Tranche B-1 of the B Term
Loan and the Convertible Junior Subordinated Debentures shall be fully funded
concurrently with the occurrence of the Effective Date, and the A Term Loan
Documents, the B Term Loan Documents, the Working Capital Loan Documents and the
Convertible Junior Subordinated Debenture Documents shall have been executed and
delivered.
(g) The Junior Subordinated Loan Documents shall have been executed and
delivered.
(h) The Bankruptcy Court shall have entered an (i) order (which may be
the Confirmation Order) estimating, for purposes of distribution, the maximum
amount of the Allowed Secured Claims of the Non-Participating Banks in an
aggregate amount no greater than the amount of the Withheld Funds which the
Administrative Agent is obligated to remit to the Old Bank Collateral Agent
pursuant to Section 4.3(a)(ii) hereof, or (ii) to the extent such Allowed
Secured Claims of the Non-Participating Banks are estimated by the Bankruptcy
Court to exceed the amount of such portion of the Withheld Funds, an order
(which may be the Confirmation Order) granting the Banks the indubitable
equivalent of that portion of the Allowed Secured Claims in excess of the amount
of such portion of the Withheld Funds, which indubitable equivalent shall be
acceptable to HET (in its sole discretion) on behalf of all Proponents.
(i) The LGCB, the State and the City and their respective agencies and
instrumentalities shall have given or issued all necessary approvals, consents,
waivers, and permits and licenses or modifications thereof (including any
modifications to any conditional use ordinances), if any, and, in the case of
LGCB, shall have made all suitability determinations required by the Louisiana
Economic Development and Gaming Control Act, the rules and regulations of the
LGCB and the Amended and Restated Casino Operating Contract, in each case to the
extent necessary to enter into the agreements contemplated by this Plan. The
City Council shall have enacted the ordinance(s) approving the Lease
Documentation (as defined in the City Agreement).
(j) HET shall have received all approvals, consents and waivers from
its board of directors or its lenders or any other third parties which HET
determines in its sole discretion to be necessary or appropriate in order for it
or any of its Affiliates to take any of the actions, execute and deliver any of
the agreements, instruments or documents, or consummate any of the transactions
contemplated by the Plan.
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(k) The NOLDC Plan shall have been confirmed by a Final Order (in form
and substance satisfactory to the NOLDC Shareholders and HET), and the NOLDC
Shareholders/HET Settlement Agreement and the Grand Palais/HET Settlement
Agreement shall have been executed and delivered by all of the parties thereto,
and the NOLDC Shareholders/HET Settlement Agreement shall have been approved by
the bankruptcy court in the Chapter 11 case of NOLDC either pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code as part of the NOLDC Plan, or pursuant to
Bankruptcy Rule 9019 by separate Final Order (in form and substance satisfactory
to the NOLDC Shareholders and HET).
(l) The Bankruptcy Court shall have entered an order (which may be the
Confirmation Order) approving the A Term Loan, the B Term Loan, the Working
Capital Credit Facility, the Convertible Junior Subordinated Debentures and the
Junior Subordinated Credit Facility, respectively, which order shall be in form
and substance satisfactory to HET (in its sole discretion) on behalf of the
Proponents, and the non-Debtor parties providing such financing (in their sole
discretion).
(m) The Bondholders Committee shall have approved in its sole
discretion all of the Plan Documents.
(n) Except as provided in the FNBC Settlement Agreement or Section
6.2(k)(ii), 6.2(l)(i) or 6.2(l)(ii) hereof, the assets of JCC shall not be
subject to any Liens other than the Minimum Payment Guarantor Lien and the Liens
securing the A Term Loan, the B Term Loan, the Working Capital Facility, the New
Bonds, and the New Contingent Bonds, and if applicable, the Convertible Junior
Subordinated Debentures and the Junior Subordinated Credit Facility, or any
Liens expressly permitted under the HET/JCC Agreement, the A Term Loan
Documents, the B Term Loan Documents, the Working Capital Loan Documents, the
Junior Subordinated Loan Documents, the Convertible Junior Subordinated
Debenture Documents or the New Indenture or any other Liens as may be approved
by the Bondholders Committee (in its sole discretion) and HET (in its sole
discretion) on behalf of the Proponents.
(o) The Debtors and the Bondholders Committee shall have requested a
determination by the Bankruptcy Court that the value of the Assigned Debtor
Litigation Claims (net of all estimated Litigation Costs and the estimated
aggregate amount of all Third Party Claims) is no greater than the sum of (i)
the Bondholder Deficiency Amount, plus (ii) the aggregate amount of the Allowed
Class A7 Claims, plus (iii) the aggregate amount of the cure payments made as
provided in Section 8.1(e) of the Plan, plus (iv) the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims pursuant to
Section 4.6 of the Plan, and the Bankruptcy Court shall have entered an order
(which may be the Confirmation Order) adjudicating this issue.
(p) (i) The First American Settlement Agreement shall have become
effective or (ii) JCC shall have assumed the Existing Owner's Title Insurance
Policy.
(q) The LGCB shall have found suitable (or deemed exempt or waived from
such suitability requirements) in accordance with its rules and regulations at
least one proposed officer of JCC Holding and at least two of the proposed
directors of JCC Holding (including at least one Bondholders Director Nominee
and one Harrah's Director Nominee).
10.3. WAIVER OF CONDITIONS. HET (in its sole discretion) on behalf of
the Proponents may waive any condition or any portion of any condition set forth
in this Article X, without notice and without leave or order of the Bankruptcy
Court but only with the written consent of both the Bondholders Committee (which
consent may be withheld in its sole discretion), and HJC (which consent may not
be unreasonably withheld or delayed) and to the extent such waiver is
inconsistent with the City Agreement, the written consent of the City; PROVIDED,
HOWEVER, that HET on behalf of the Proponents may not waive, (i) without
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the consent of the City, any condition to the Effective Date set forth in
Sections 10.2(b), (c) or (i) hereof or Section 10.2(d) hereof (but only to the
extent Section 10.2(d) requires the execution and delivery of the City/RDC
Release, the Amended and Restated Canal Street Casino Lease Agreement, and the
other agreements, instruments and documents referenced in Section 6.2(o)
hereof), and (ii) without the consent of LGCB, any condition to the Effective
Date set forth in Sections 10.2(b), (c) or (i) hereof or Section 10.2(d) hereof
(but only to the extent Section 10.2(d) relates to execution and delivery of the
Amended and Restated Casino Operating Contract, the State/LGCB Release and the
other agreements, instruments and documents referenced in Section 6.2(n)
hereof).
10.4. EFFECT OF FAILURE OF CONDITIONS. In the event that all of the
conditions specified in Section 10.1 or 10.2 have not been satisfied or waived
in accordance with the provisions of this Article X on or before April 30, 1998
(which date may be extended by HET (in its sole discretion) on behalf of the
Proponents with the written consent of the Bondholders Committee (which consent
may be withheld in its sole discretion) and the City (which consent may be
withheld in its sole discretion)), and upon notification submitted by HET to the
Bankruptcy Court and counsel for the Committees, (a) the Confirmation Order
shall be vacated, (b) no distributions under the Plan shall be made, (c) the
Debtors and all holders of Claims and Equity Interests shall be restored to the
STATUS QUO ANTE as of the day immediately preceding the Confirmation Date as
though the Confirmation Date never occurred, and (d) all the Debtors' respective
obligations with respect to the Claims and Equity Interests shall remain
unchanged and nothing contained herein or in the Disclosure Statement shall be
deemed an admission or statement against interest or to constitute a waiver or
release of any claims by or against any Debtor or any other Person or to
prejudice in any manner the rights of any Debtor or any Person in any further
proceedings involving any Debtor or Person.
ARTICLE XI.
RETENTION OF JURISDICTION
11.1. To the maximum extent permitted by the Bankruptcy Code or other
applicable law, the Bankruptcy Court shall have jurisdiction of all matters
arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to,
and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following nonexclusive purposes:
(a) To construe and to take any action to enforce this Plan and to
issue such orders as may be necessary for the implementation, execution and
confirmation of this Plan;
(b) To determine the allowance or classification of Claims or Equity
Interests and to determine any objections thereto;
(c) To determine rights to distribution pursuant to this Plan;
(d) To hear and determine applications for the assumption or rejection
of executory contracts or unexpired leases and the allowance of Claims resulting
therefrom;
(e) To determine any and all applications, motions, adversary
proceedings, contested matters and other litigated matters that may be pending
in the Bankruptcy Court on or initiated after the Effective Date;
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(f) To hear and determine any objection to Administrative Expense
Claims or to Claims or to Equity Interests;
(g) To hear and determine any causes of action brought or continued by
any Debtor or JCC as assignee of the Debtors (with respect to the Assigned
Debtor Litigation Claims or otherwise) or the Releasing Bondholders (with
respect to the Assigned Bondholder Litigation Claims), to the maximum extent
permitted under applicable law;
(h) To enter and implement such orders as may be appropriate in the
event the Confirmation Order is for any reason stayed, revoked, modified, or
vacated;
(i) To determine such other matters and for such other purposes as may
be provided in the Confirmation Order;
(j) To hear and determine matters concerning any Release and to enforce
the injunctions set forth in the Plan, including those set forth in Sections
2.2, 5.7, and 9.2 hereof;
(k) To consider any modifications of the Plan, to cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(l) To hear and determine all Fee Applications;
(m) To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Plan or any transactions
contemplated by the Plan;
(n) To hear and determine all questions and disputes regarding title
to, and any action to recover any of, the assets or property of any Debtor or
its estate, wherever located;
(o) To hear and determine any disputes relating to the Liens,
Encumbrances or other claims filed by any immediate or remote subcontractors,
laborers, suppliers or vendors against any of the property of any Debtor;
(p) To hear and determine matters concerning state, local, and Federal
taxes in accordance with Sections 346, 505, and 1146 of the Bankruptcy Code;
(q) To consider and act on the compromise and settlement of any claim
against any Debtor or its estate;
(r) To hear any other matter not inconsistent with the Bankruptcy Code;
(s) To enter a final decree closing the Chapter 11 Cases;
(t) To effectuate the provisions of Section 10.4 of the Plan; and
(u) To enter such orders as may be appropriate to evidence, for
recordation purposes, the transfer to and vesting in JCC of the Debtors'
immovable property and other instruments creating rights in and to immovable
property;
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PROVIDED, that nothing in the Plan is intended or shall be construed to alter
the jurisdiction, if any, of the Bankruptcy Court to determine issues regarding
the contractual or other relationships between the Debtors and JCC and the State
Group, nor shall the Plan be construed as to the State Group as consenting to
any jurisdiction by the Bankruptcy Court.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1. EXEMPTION FROM TRANSFER TAXES. Pursuant to Section 1146(c) of the
Bankruptcy Code, the issuance, transfer or exchange of notes or equity
securities under the Plan, the creation of any mortgage, deed of trust or other
security interest, the making or assignment of any lease or sublease, or the
making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including any merger agreements
or agreements of consolidation, deeds, bills of sale or assignments executed in
connection with any of the transactions contemplated under the Plan shall not be
subject to any stamp, real estate transfer, mortgage recording or other similar
tax.
12.2. POST-CONFIRMATION DATE FEES AND EXPENSES OF PROFESSIONAL PERSONS.
After the Confirmation Date, each Debtor (before the Effective Date) and JCC
(from and after the Effective Date) shall, in the ordinary course of business
and with such approval of the Bankruptcy Court as it may require, pay the
reasonable fees and expenses incurred after the Confirmation Date by the
Professional Persons employed by such Debtor or in the case of HJC, either
Committee, to the extent such fees and expenses are related to implementation
and consummation of the Plan. No such fees and expenses shall be paid, however,
except upon receipt by such Debtor or JCC, as applicable, of a written invoice
from the Professional Person seeking fee and expense reimbursement.
12.3. COMMITTEES. The appointment of the Committees shall terminate on
the Effective Date except that the professionals of the Committees shall be
entitled to prosecute their respective applications for final allowances of
compensation and reimbursement of expenses.
12.4. AMENDMENT OR MODIFICATION OF THE PLAN; SEVERABILITY.
(a) This Plan may not be altered, amended or modified without the
written consent of HET (in its sole discretion) on behalf of the Proponents and
the written consent of the Bondholders Committee (which consent may be withheld
in its sole discretion) and the consent of HJC (which consent may not be
unreasonably withheld or delayed by HJC). Subject to the first sentence of this
Section 12.4(a), the treatment of any Claim provided for under the Plan may be
modified with the consent of the holder of such Claim or the approval of the
Bankruptcy Court.
(b) In the event that the Bankruptcy Court determines, prior to the
Confirmation Date, that any provision in the Plan is invalid, void or
unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.
69
<PAGE>
12.5. REVOCATION OR WITHDRAWAL OF THE PLAN.
(a) HET (in its sole discretion) on behalf of the Proponents and with
the written consent of HJC (which consent may not be unreasonably withheld or
delayed) reserves the right to revoke or withdraw the Plan prior to the
Confirmation Date.
(b) If the Plan is revoked or withdrawn prior to the Confirmation Date
in accordance with Section 12.5(a) hereof, then the Plan shall be deemed null
and void. In such event, (i) the Debtors and all holders of Claims and Equity
Interests shall be restored to the STATUS QUO ANTE as of the day immediately
preceding the Confirmation Date as though the Confirmation Date never occurred,
and (ii) all the Debtors' respective obligations with respect to the Claims and
Equity Interests shall remain unchanged and nothing contained herein or in the
Disclosure Statement shall be deemed an admission or statement against interest
or to constitute a waiver or release of any claims by or against any Debtor or
any other Person or to prejudice in any manner the rights of any Debtor or any
Person in any further proceedings involving any Debtor or Person.
(c) Notwithstanding anything to the contrary in this Plan, (i) none of
HET, HOCI, HNOMC, HNOIC, Harrah's Investor, DIP Lender and their respective
Affiliates shall have any obligations or liabilities (including, without
limitation, any obligation to provide the Harrah's New Equity Investment) under
the Plan or any Plan Documents at any time prior to the Effective Date, and (ii)
HET and HNOIC expressly reserve their respective rights in their sole discretion
to withdraw as Proponents of this Plan or to otherwise terminate their support
for this Plan.
12.6. BINDING EFFECT. The Plan shall be binding upon and inure to the
benefit of the Debtors, the holders of Claims and Equity Interests, Harrah's
Investor, the Persons in the HET Group, the Bondholders Committee Group, the
NOLDC Group, the Grand Palais Group, the other Released Parties and their
respective successors and assigns.
12.7. NOTICES. Any notice required or permitted to be provided under the
Plan shall be in writing and served by either (a) certified mail, return receipt
requested, postage prepaid, (b) hand delivery, or (c) reputable overnight
delivery service, freight prepaid, to be addressed as follows:
HARRAH'S ENTERTAINMENT, INC.
1023 Cherry Road
Memphis, Tennessee 38117
Attn: General Counsel
with a copy to:
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Attn: Robert J. Rosenberg, Esq.
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HARRAH'S JAZZ COMPANY and
HARRAH'S JAZZ FINANCE CORP.
to its counsel:
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Attn: Daniel R. Murray, Esq.
and
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Attn: William H. Patrick, Esq.
HARRAH'S NEW ORLEANS INVESTMENT COMPANY
1023 Cherry Road
Memphis, Tennessee 38117
Attn: General Counsel
with a copy to:
BRONFIN & HELLER, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
Attn: Edward M. Heller, Esq.
BONDHOLDERS COMMITTEE
MERRILL LYNCH ASSET MANAGEMENT
800 Scudders Mill Road
Plainsboro, NJ 08536
HARRIS ASSOCIATES L.P.
2 North LaSalle Street, Suite 500
Chicago, IL 60602-3790
STANDARD MORTGAGE COMPANY
300 Plaza, One Shell Square
New Orleans, LA 70139
with a copy to:
WEIL GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153-0001
Attn: Bruce R. Zirinsky
71
<PAGE>
MCGLINCHEY STAFFORD
643 Magazine Street
New Orleans, LA 70130
Attn: Rudy J. Cerone
12.8. GOVERNING LAW. Except to the extent the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights and obligations arising under this
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the State of Louisiana, without giving effect to the principles of
conflicts of law thereof.
12.9. WITHHOLDING AND REPORTING REQUIREMENTS. In connection with the
Plan and all instruments issued in connection therewith and distributions
thereon, the Debtors or the JCC Entities, as the case may be, shall comply with
all withholding and reporting requirements imposed by any Federal, state, local,
or foreign taxing authority and all distributions hereunder shall be subject to
any such withholding and reporting requirements.
12.10. HEADINGS. Headings are used in the Plan for convenience and
reference only, and shall not constitute a part of the Plan for any other
purpose.
12.11. EXHIBITS. All exhibits and schedules to the Plan are incorporated
into and are a part of the Plan as if set forth in full herein.
12.12. JCC INTERMEDIARY. Notwithstanding anything to the contrary in the
Plan or any Plan Document, any provisions herein or therein relating to JCC
Intermediary shall be applicable only if JCC Intermediary is formed at the
election of HET (in its sole discretion) on behalf of the Proponents.
12.13. FILING OF ADDITIONAL DOCUMENTS. On or before substantial
consummation of the Plan, HET (in its sole discretion) on behalf of the
Proponents and before the Effective Date, with the consent of HJC (which consent
shall not be unreasonably withheld or delayed), shall file with the Bankruptcy
Court such agreements and other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the Plan, which
agreements and other documents shall be in form and substance satisfactory to
the Bondholders Committee in its sole discretion, and to the extent required
under applicable laws, rules and regulations or the Amended and Restated Casino
Operating Contract, shall be approved by LGCB.
12.14. CONTROLLING EFFECT OF AGREEMENTS WITH STATE/LGCB. In the event of
any conflict between any provision of this Plan and the provisions of any of the
contracts or agreements entered into between the State and/or the LGCB on the
one hand and JCC or any other Person on the other hand (including particularly,
but not limited to, the Amended and Restated Casino Operating Contract, the
State/LGCB Release and any security agreements), the provisions of any of said
contracts and agreements shall control the rights of the parties to the
particular contracts and agreements.
12.15. RIGHTS OF STATE AND LGCB. Notwithstanding any other provisions of
this Plan or the Confirmation Order to the contrary, if any, nothing contained
in this Plan or the Confirmation Order is intended to require, or shall be
construed as requiring, that the LGCB and/or the State enter into the Amended
and Restated Casino Operating Contract, the State/LGCB Release, or any other
agreements or contracts contemplated by the Plan, whether or not the provisions
of this Section 12.15 are referred to in the other provisions of this Plan or
the Confirmation Order.
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<PAGE>
Respectfully submitted:
----------------------------
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 527-0484
----------------------------
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
----------------------------
BRONFIN & HELLER, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
----------------------------
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's Entertainment, Inc.
73
<PAGE>
INDEX OF EXHIBITS
Exhibit A City Agreement
Exhibit B Amended and Restated Casino Operating Contract Term Sheet
Exhibit C Amended and Restated Completion Loan Agreement Term Sheet
Exhibit D Amended and Restated Construction Lien Indemnity Obligation
Agreement Term Sheet
Exhibit E Amended and Restated Management Agreement Term Sheet
Exhibit F Bondholder Term Sheet
Exhibit G Form of City Release Agreement
Exhibit H Broadmoor Settlement Agreement
Exhibit I Ticket Purchase Agreement as amended
Exhibit J Term Sheet for Settlement Agreement among Debtors and Participating
Banks
Exhibit K Term Sheet for Settlement Agreement among Debtors and Underwriters
Exhibit L Centex-Landis Settlement Agreement
Exhibit M FNBC Settlement Agreement
Exhibit N Term Sheet for Development Services Agreement
<PAGE>
EXHIBIT A
The City Agreement attached as Exhibit A to the Plan of
Reorganization filed on February 26, 1997 is hereby incorporated by reference.
<PAGE>
EXHIBIT B
DECEMBER 10, 1997
TERM SHEET
MODIFICATIONS TO CASINO OPERATING CONTRACT
This term sheet outlines the principal terms of a new Casino Operating Contract
(the "COC") to be entered into by Jazz Casino Company, L.L.C. (the "Casino
Operator") and the Louisiana Gaming Control Board ("LGCB"), which will be part
of the plan of reorganization of Harrah's Jazz Company ("HJC") (the "Plan"). As
set forth more fully in the Plan, if the Plan is not consummated within the
period specified therein, the parties shall have no further obligations to
pursue the matters described herein and all parties shall retain their rights
under the Casino Operating Contract by and among HJC and the Louisiana Economic
Development and Gaming Corporation ("LEDGC") dated as of July 15, 1994.
I. PAYMENT OF STATE FEES
(a) NO CONCESSIONS -- There shall be no concessions by the State regarding
State minimum compensation provisions as required by the Gaming Act, and the
COC shall provide annual payments to the LGCB for the Casino of the greater
of $100 million or the sum of 18 1/2% of revenues up to and including
$600,000,000 and between 20% and 25% of revenues in excess of $600,000,000.
(b) ADMINISTRATION -- The $100 million minimum payment shall vest at the
beginning of each year of Casino operations. Section 6.3 of the COC shall
provide for daily estimated payments (the "Daily Estimated Payments") in the
amount of $273,973 (1/365 of the $100 million minimum annual payment).
(c) ADVANCE PAYMENTS -- The COC will provide for payments to the LGCB for
costs of suitability investigations, up to $3.5 million, with unused portions
of suitability payments to be treated as credits against future compensation
due to the LGCB. The Casino Operator shall be responsible for any of such
costs in excess of $3.5 million.
B-1
<PAGE>
(d) MINIMUM PAYMENT GUARANTY -- For each fiscal year during the term of
the COC, the Casino Operator will be required to cause to be provided to the
LGCB a letter of credit, surety arrangement or guaranty of any unpaid portion
of the $100 million minimum obligation to the LGCB for a fiscal year
following certain defaults by the Casino Operator (the "Minimum Payment
Guaranty"). The Minimum Payment Guaranty shall be subject to the approval of
the LGCB, and the failure to cause to be provided a Minimum Payment Guaranty
for any fiscal year shall be an event of default under the COC and will cause
a termination of the COC. For any partial fiscal year of casino operations
ending March 31, 1999 and for each of the next five full fiscal years
thereafter, ending March 31, 2004, Harrah's Entertainment, Inc. ("HET") and
Harrah's Operating Company, Inc. ("HOCI") will provide a Minimum Payment
Guaranty if the terms and conditions of that certain HET/JCC Agreement by
and among JCC, HET and HOCI have been fully satisfied. Upon the expiration of
the HET/JCC Agreement on March 31, 2004, JCC will be obligated to obtain a
substitute or successor guarantor to provide a Minimum Payment Guaranty, and
such Minimum Payment Guaranty may or may not be provided by HET and HOCI.
The State of Louisiana and the LGCB have acknowledged and agreed that HET and
HOCI have no obligation to provide or to renew the HET/JCC Agreement or to
provide any Minimum Payment Guaranty other than pursuant to the terms of the
HET/JCC Agreement.
(e) CESSATION OF BUSINESS DAMAGES. -- If the COC is terminated in any
fiscal year due to a failure by JCC to cause to be provided a Minimum Payment
Guaranty or certain causes for the cessation of casino operations, the LGCB's
remedy against JCC shall be limited to the $100 million minimum obligation for
such fiscal year LESS the portion of the $100 million minimum payment for such
fiscal year which has already been paid to the LGCB, provided that the LGCB
received the $100 million minimum obligation for such fiscal year within 10 days
following the end of such fiscal year and the COC has been terminated. In such
event, the LGCB will not seek or assert an affirmative claim for any daily
payments against JCC for the balance of the term of the COC. Notwithstanding
the foregoing, the LGCB shall not be limited in its ability to assert any claims
for (i) indemnity and/or contribution, (ii) payments, costs, fines and penalties
(other than remittance of Louisiana Gross Revenue Share Payments and Daily
Payments) that are required to be paid under the terms of the COC or the Rules
and Regulations of the LGCB; (iii) Gross Gaming Revenue Share Payments due and
owing but not paid for a prior fiscal year (other than the immediately preceding
fiscal year); and (iv) a defense, offset and/or recoupment. If JCC, or any of
certain
B-2
<PAGE>
of its affiliates institutes legal action against the LGCB or the State
asserting any claims related to the COC or a right to continue casino
operations, the remedy limitation described in this subparagraph shall not
apply.
II. CONSTRUCTION OF THE CASINO
(a) PHASING -- Upon consummation of the Plan, the Casino Operator shall
diligently proceed with the construction of the Casino Facility. Under the
Plan, the Casino Facility will be developed in two phases.
The first phase of the Casino is anticipated to open, subject to
receipt of the appropriate regulatory approvals, twelve months from
the Effective Date of the Plan, and will include approximately 100,000
square feet of net gaming space, a 250-seat buffet and approximately
15,000 square feet of multi-function, special event, food service and
meeting-room space on the first floor of the premises.
The second phase of the development of the premises will consist of
approximately 150,000 square feet of multipurpose non-gaming
entertainment space on the second floor of the premises constructed to
the point at which the shell of the structure is complete and the
space is suitable for tenant build-out. The build-out of tenant
improvements on the second floor will begin following completion of
the second phase. The second phase of second floor shell construction
is anticipated to be completed concurrently with completion of the
first phase.
(b) CASINO REDESIGN -- The COC reflects the LGCB's approval of the
redesign of the Casino Facility and Support Facilities as described above in
lieu of the previous design under the Casino Operating Contract dated July
15, 1994.
(c) COMPLETION GUARANTEE -- The sections of the COC regarding the
Completion Guaranty shall reflect a Harrah's Entertainment, Inc. and Harrah's
Operating Company, Inc. completion guarantee given in connection with the Plan,
which completion guarantee will replace the 1994 completion guarantee to the
LEDGC and not be subject to financing conditions. The completion guarantee
shall be on substantially the same terms and conditions as that provided to the
bondholders, or such other terms and conditions as shall be satisfactory to the
LGCB and the completion guarantors. The Casino Operator will provide a surety
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<PAGE>
bond to assure the completion of construction of the Casino for the benefit of
the beneficiary of the completion guarantee.
III. RESTAURANT AND LODGING
(a) RESTAURANTS -- Section 10.2 of the COC shall be consistent with La.
R.S. 27:243(C) to reflect: (i) the limitations imposed upon the Casino Operator
in directly offering restaurant facilities to patrons as well as seating and
subsidy limitations; (ii) the Casino Operator's ability (x) to contract with
local restaurants and food preparers to offer food prepared by them for sale at
the Casino, and (y) to purchase and serve food prepared by local restaurants and
food preparers to casino patrons; and (iii) the Casino Operator's ability to
lease non-casino space on the second floor of the Rivergate to any business or
entertainment facility, that may offer food to the general public, provided
that the Casino Operator will liaison with, among others, the Louisiana
Restaurant Association concerning the scope and nature of the project.
(b) LODGING -- The restrictions in the Casino Act on lodging are contained
in the COC.
IV. OTHER NON-ECONOMIC CHANGES
(a) ENTITY STRUCTURE -- The COC shall reflect acceptance by LGCB of the
new entity and financial structure upon Plan consummation (and related
suitability rulings on debt holders receiving equity interests under the
Plan).
(b) CONSISTENCY OF COC WITH CHANGES IN RIVERGATE LEASE -- Certain sections
in the COC shall conform with changes in the Rivergate Lease to avoid
inconsistent obligations.
(c) BANKING CHANGES -- To facilitate immediate payment to the LGCB of the
compensation fee, Section 6.5 of the COC shall require funds to be wire
transferred.
V. SETTLEMENT OF CLAIMS
(a) SETTLEMENT AGREEMENT -- The parties (including affiliates) will agree
on mutual Releases for all events and claims arising prior to consummation of
the Plan other than overpayments made by HJC to the LEDGC.
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<PAGE>
(b) RIVERBOAT ISSUES - The dockside issue shall be resolved in the COC.
(c) PAYMENT TO COURT APPROVED UNSECURED CREDITORS - The COC shall provide
that Allowed General Unsecured Creditors of HJC (as defined in the Plan) will be
paid cash by the Casino Operator equal to the amounts of their Allowed General
Unsecured claims (as defined in the Plan) on the Plan Effective Date, with such
payments to be guaranteed by the completion guarantee.
END
B-5
<PAGE>
EXHIBIT C
The Completion Loan Agreement Term Sheet attached as Exhibit C to the
Plan of Reorganization filed on February 26, 1997 is hereby incorporated by
reference.
<PAGE>
EXHIBIT D
The Construction Lien Indemnity Obligation Agreement Term Sheet
attached as Exhibit D to the Plan of Reorganization filed on February 26, 1997
is hereby incorporated by reference.
<PAGE>
EXHIBIT E
December 10, 1997
TERM SHEET
MODIFICATIONS IN RESPECT OF
CASINO MANAGEMENT AGREEMENT
This term sheet outlines the principal terms of proposed modifications
of and agreements related to that certain Amended and Restated Management
Agreement, dated as of March 15, 1994 (the "Management Agreement"), by and among
Harrah's New Orleans Management Company, a Nevada corporation ("Manager"), and
Harrah's Jazz Company, a Louisiana general partnership ("HJC"). This term sheet
is attached to and incorporated into that certain plan of reorganization in the
bankruptcy case of Owner (the "Plan").
1. DOCUMENTATION. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
modifications of and agreements related to the Management Agreement in
connection with the Plan. As set forth more fully in the Plan, if the Plan is
not consummated within the time period specified therein, the parties shall have
no further obligations to pursue the matters described herein.
2. MANAGER APPROVALS
(a) NEW OWNER. The Management Agreement shall be amended and restated
(the "Second Amended Management Agreement") to reflect the substitution of Jazz
Casino Company, L.L.C., a Louisiana limited liability company as "Owner" under
the Second Amended Management Agreement as successor to all of HJC's right,
title and interest in the Second Amended Management Agreement.
(b) MODIFIED PROJECT. The Second Amended Management Agreement, including
without limitation Section 2.03 - "Development" and the approved Program Plans
attached as Exhibit "G" to the Second Amended Management Agreement, shall
reflect Manager's approval of the
<PAGE>
build out of the casino to be located at the Rivergate site (the "Casino") as
described in the Plan.
3. DEVELOPMENT AND CONSTRUCTION. The Second Amended Management Agreement,
including without limitation the definitions of "Completion Deadline" and
"Opening Date," shall tie any development, construction and related deadlines to
the development, construction and opening of the Casino - Phase I.
4. RESERVE FUND FOR CAPITAL REPLACEMENTS AND CAPITAL IMPROVEMENTS; PERIODIC
CONTRIBUTIONS TO RESERVE FUND. The capital reserve provisions will be revised
to conform to the proposed changes in the City Lease whereby Manager on behalf
of Owner shall deposit into the reserve fund one-twelfth of Three Million
Dollars ($3,000,000) for each month of the first twelve (12) month period
following the completion of the Casino - Phase I, one-twelfth of Four Million
Dollars ($4,000,000) for each month of the second twelve (12) month period
following the completion of the Casino - Phase I, one-twelfth of Five Million
Dollars ($5,000,000) for each month of the third twelve (12) month period
following the Completion of Casino, and two percent (2%) of gross revenues of
the Casino for each fiscal month thereafter.
5. MANAGEMENT FEES
(a) BASE AND INCENTIVE FEE. Section 9.01 of the Second Amended Management
Agreement will reflect that Owner agrees to pay to Manager a management fee (the
"Management Fee") having two components. The first component (the "Base Fee")
shall equal three percent (3.0%) of gross revenues of the Casino. The second
component (the "Incentive Fee") shall equal seven percent (7.0%) of consolidated
EBITDA (the EBITDA definition in the Second Amended Management Agreement will be
the same as the EBITDA definition in the Indenture) in excess of (i) $40 million
for the six month period ending on the date which is six months after the
opening of Casino - Phase I and each anniversary of such date, and (ii) $75
million for the twelve month period ending on the date which is twelve months
after the opening of Casino - Phase I and each anniversary of such date, less
the Incentive Fee paid to the Manager for the prior six (6) months; provided
however, that the Manager shall refund to JCC all fees paid by JCC under
subsection (i) hereof if EBITDA does not exceed $75 million for the twelve month
period ending on the date which is twelve months after the opening of Casino -
Phase I and each anniversary of such date, with
E-2
<PAGE>
appropriate proration of such threshold for any partial year following the
opening date of Casino - Phase I and preceding the termination of the Second
Amended Management Agreement, as the case may be. The Base Fee shall be payable
to Manager monthly subject to the priorities set forth in the Second Amended
Management Agreement. The Incentive Fee, if any, shall be payable to Manager at
six (6) month intervals on the next business day following actual cash payment
of all accrued fixed interest and contingent interest, if any, on the New Bonds
and the New Contingent Bonds (both of which are as defined in the Plan) pursuant
to the Plan and subject to the priorities set forth in the Second Amended
Management Agreement.
(b) DEFAULTS. No Base Fee shall be paid, and no Incentive Fee shall be
accrued or paid, during or with respect to any period in which Owner is in
default with respect to interest or principal payments under the New Bonds, the
New Contingent Bonds or the Bank Loans. In the case of any such default, any
unpaid Base Fees shall be deferred and payable at such time as any such default
is cured.
(c) DEFERRAL OF MANAGEMENT FEES
(i) The New Bonds provide for 6 elections by Owner to pay semi-annual
interest in kind rather than in cash for the first 3 year period of the term of
the New Bonds and for further elections by Owner to pay semi-annual interest in
kind thereafter if the Consolidated EBITDA for the prior twelve (12) months have
not exceeded $28,500,000 (collectively the "PIK Elections"). If Owner is
required by the Indenture or by the Credit Agreement to defer Base Fees, Manager
hereby consents and agrees to such deferrals of Base Fees. Any such election or
elections shall be by written notice from Owner to Manager specifying the amount
required to be deferred under the Indenture and/or the Credit Agreement (the
"Deferral Amount"). Such Deferral Amount shall first be applied to any Base
Management Fees then unpaid and thereafter accruing during the applicable six
(6) month period. To the extent any such Deferral Amount shall exceed the
projected amount of any unpaid and thereafter accruing Base Management Fees for
the applicable six (6) month period or if such six (6) month deferral period
shall have already elapsed, Manager shall refund to Owner the remaining amount
of such Deferral Amount not to exceed the amount of any Base Management Fees
previously paid to Manager with respect to any portion of the applicable six (6)
month period accruing prior to Owner's PIK election. To the extent Manager is
E-3
<PAGE>
required to refund to Owner any Incentive Fee or any deferred Base Management
Fees pursuant to this Section 5, HET shall guarantee such repayment. Owner and
Manager acknowledge that the Indenture and the Credit Agreement require that the
Incentive Management Fee be deferred during any corresponding PIK Election.
Manager hereby consents to such deferrals of Incentive Fees as may be required
by the Indenture and Credit Agreement.
(ii) Any Management Fees deferred pursuant to Section 5(c)(i) above
shall bear interest at eight percent (8.0%), which shall accrue until such
deferred Management Fees are repaid. Interest on Base Fees shall accrue (A)
from the date the Base Fees would otherwise have been payable, if the Base Fees
were not paid pursuant to Section 5(c)(i) hereof, or (B) from the date the Base
Fees were refunded by Manager, if the Base Fees were refunded pursuant to
Section 5(c)(i) hereof. Following such time as Owner has achieved Consolidated
EBITDA of not less than Sixty Five Million Dollars ($65,000,000) for the
preceding twelve (12) month period, any Base Management Fees deferred pursuant
to Section 5(c)(i) hereof together with interest thereon shall be payable to
Manager pro rata with any deferred guaranty fees out of excess cash flow
(remaining after application of the excess cash flow sweep required by the
Credit Agreement for the Bank Loans) to the extent Consolidated EBITDA exceeds
Sixty Five Million Dollars ($65,000,000). Following such time as Owner has
achieved Consolidated EBITDA of not less than Seventy Five Million and 00/100
Dollars ($75,000,000) for the preceding twelve (12) month period, any incentive
fees deferred pursuant to this Article 9.01(c) together with interest thereon
shall be payable to Manager, after repayment of any deferred Base Management
Fees and deferred guaranty fees out of excess cash flow (remaining after
application of the excess cash flow sweep required by the Credit Agreement for
the Bank Loans) to the extent Consolidated EBITDA exceeds Seventy Five Million
and 00/100 Dollars ($75,000,000).
6. TERMINATION RIGHTS AND TERMINATION FEES
(a) CHANGE OF CONTROL OF OWNER. Following the Transition Date (as defined
in the Certificate of Incorporation of JCC Holding), if any entity (including
any Controlled Affiliates, as defined in the Second Amended Management
Agreement, of such entity and any entity of which such entity is a Controlled
Affiliate) which (i) controls or operates, or, as of the date the Plan is
consummated, is licensed or qualified to control or operate in any of the states
of Illinois, Indiana, Louisiana, Mississippi, Missouri, Nevada or
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<PAGE>
New Jersey, a casino or casino hotel facility, or (ii) has been, within the five
(5) years prior to the date the Plan is consummated, involved in litigation with
Harrah's Entertainment, Inc. which Harrah's Entertainment, Inc. has disclosed in
an Annual Report on Form 10-K on or prior to the date the Plan is consummated,
or which Harrah's Entertainment, Inc. would be required to disclose in its next
Annual Report on Form 10-K following the date the Plan is consummated, acquires
twenty percent (20%) or more of the outstanding shares of JCC Holding and the
Board of Directors of JCC Holding shall not consist of a majority of Continuing
Directors, Manager shall be entitled to terminate this Agreement upon ninety
(90) days' written notice to Owner, but shall not be entitled to receive a
Termination Fee as defined in Article 17.02 of the Second Amended Management
Agreement.
(b) SALE OF CASINO. Following the Transition Date, if Owner shall sell,
assign or transfer any of its direct or indirect legal or beneficial interest in
the Casino, to any person other than a Qualified Purchaser (as defined in
Article 21.02(c) of the Second Amended Management Agreement) approved by Manager
pursuant to Article 21.02(d) of the Second Amended Management Agreement and
which assumes and agrees to perform all obligations of Owner under the Second
Amended Management Agreement, Manager shall be entitled to terminate the Second
Amended Management Agreement upon the closing of such sale, assignment or
transfer, but shall not be entitled to receive a Termination Fee.
(c) FAILURE TO OPEN. The Second Amended Management Agreement shall
terminate without any further action of JCC or the Manager immediately upon the
termination of the Amended Ground Lease by the RDC as a result of JCC's failure
timely to complete construction of the Casino, and the Manager shall not be
entitled to any Termination Fee.
(d) CONDEMNATION. If the Casino is condemned, the Manager shall be
entitled to seek its share of any condemnation proceeds but shall not be
entitled to any Termination Fee.
(e) Default by Owner. Upon a default by Owner or failure of Owner to
complete any obligatory reconstruction or restoration of the Casino after an
insured casualty or partial condemnation, the Manager shall be entitled to
receive a Termination Fee.
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7. ASSIGNMENT OR TRANSFER OF TITLE BY OWNER. The Second Amended Management
Agreement will provide no restriction on transfers of ownership interests in the
ultimate parent of Owner; provided, however, if a Non-Qualified Person shall
have a legal or beneficial interest in the equity or debt of the Company, and
such situation is not cured within forty five (45) days, or such shorter period
as may be required by any governmental entity with authority over the Casino,
Manager shall have the right to terminate the Second Amended Management
Agreement and collect the Termination Fee. The Second Amended Management
Agreement shall provide that a "Non-Qualified Person" shall be any person or
entity that
(a) controls or operates, or, as of the date the Plan is consummated, is
licensed or qualified to control or operate in any of the states of Illinois,
Indiana, Louisiana, Mississippi, Missouri, Nevada or New Jersey, a casino or
casino hotel facility; and
(b) has been, within the five (5) years prior to the date the Plan is
consummated, involved in litigation with Harrah's Entertainment, Inc. which
Harrah's Entertainment, Inc. has disclosed in an Annual Report on Form 10-K on
or prior to the date the Plan is consummated, or which Harrah's Entertainment,
Inc. would be required to disclose in its next Annual Report on Form 10-K
following the date the Plan is consummated; and
(c) would, if associated with Owner or Owner's affiliates or with Manager,
in the reasonable judgment of Manager or any licensing authority, impair or
cause the denial, suspension or revocation of any gaming registration, permit,
license, right or entitlement or alcoholic beverage registration, permit,
license, right or entitlement held or applied for by Owner, Manager or any
affiliate of Manager or Owner.
8. COMPETITION. The covenant not to compete will be revised to apply to Owner
and Manager and their respective affiliates.
9. MISCELLANEOUS
(a) CASINO OPERATIONAL STANDARDS. The definition of Casino Operational
Standards in the Second Amended Management Agreement shall provide that the
standard of the physical plant of the Casino may be measured against the
Harrah's Atlantic City Casino and that the operational
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practices of the Casino shall be gauged against the operational practices of the
Harrah's Atlantic City Casino.
(b) PAYMENTS. A general catch-all provision will be added to the Second
Amended Management Agreement as Article 6.05 allowing Manager to make payments
in accordance with the Second Amended Management Agreement.
(c) CHOICE OF LAW. The choice of law will be Nevada, except as mandatory
provisions of the Gaming Act as to which the external laws of the State of
Louisiana shall apply without regard to principles of conflicts of law.
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EXHIBIT F
BONDHOLDER TERM SHEET
Summary of Restructuring
December 10, 1997
A. NEW CAPITAL
1. CAPITAL STRUCTURE. Jazz Casino Company, L.L.C., a Louisiana limited
liability company ("JCC") will fund the completion of construction of the casino
at the Rivergate site in New Orleans (the "Casino") through (i) a $60 million
term loan (the "A Term Loan") from a syndicate of lenders led by Bankers Trust
Company ("BTCo"), (ii) a $135 million term loan from BTCo (the "B Term Loan"
and, together with the A Term Loan, the "Term Loans"), (iii) the sale of
approximately $26 million aggregate principal amount of Convertible Junior
Subordinated Debentures of JCC (the "Convertible Junior Subordinated
Debentures"), (iv) a credit facility pursuant to which Harrah's Entertainment
Inc. ("HET") and Harrah's Operating Company, Inc. ("HOCI"), a wholly-owned
subsidiary of HET, will make available up to $10 million of subordinated
indebtedness (the "Junior Subordinated Credit Facility") to fund project costs,
and (v) an equity investment by Harrah's Crescent City Investment Company (the
"Harrah's Investor") in an amount equal to the difference between $75 million
and the then outstanding principal amount of debtor-in-possession financing
provided at any time on or before the Effective Date (the "New Equity
Investment"). JCC will also have up to $25 million available for working
capital purposes under a working capital line of credit (the "Working Capital
Facility" and, together with the Term Loans, the "Bank Loans").
2. THE BANK LOANS. The Bank Loans will be on the terms and conditions
set forth in Exhibit J to the Third Amended Plan of Reorganization as
Modified through November 14, 1997 (the "Plan") and will have such other
terms and conditions as are acceptable to HET and the committee (the
"Bondholders' Committee") made up of holders (the "Bondholders") of the 14
1/4% First Mortgage Notes due 2001 (the "Old Bonds") of Harrah's Jazz Company
("HJC").
B. JCC ENTITIES
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1. ASSETS AND OWNERSHIP OF THE JCC ENTITIES. The assets and business of
HJC will be transferred to JCC on the Effective Date as set forth in the Plan,
subject to any gaming regulatory approvals and state law and, to the extent
practicable, taking into account economic efficiencies and simplicity of
execution. JCC will be wholly-owned by JCC Intermediary Company, L.L.C., a
Louisiana limited liability company ("JCC Intermediary"), which, in turn, will
be wholly-owned by JCC Holding Company, a Delaware corporation ("JCC Holding"
and, together with JCC and JCC Intermediary, the "JCC Entities"). Pending the
resolution of certain structural considerations, JCC Intermediary may be
eliminated prior to the Effective Date. In such case, JCC will be a wholly-
owned subsidiary of JCC Holding. HET, the bondholders of Grand Palais, and the
shareholders of NOLDC will receive a 49.9% stock ownership in JCC Holding (of
which 2.0% will be allocated to Releasing Bondholders, as provided in the Plan),
PROVIDED that HET will hold not less than 51% of such 49.9% stock ownership and
will, for as long as the corporate governance provisions described below are in
effect, maintain a majority interest thereof. Of the remaining 50.1%, 37.1% of
the stock of JCC Holding will be issued to the Bondholders, and the remaining
13.0% of the stock of JCC Holding will be allocated to Releasing Bondholders, as
provided in the Plan of Reorganization. Accordingly, under the Plan, Releasing
Bondholders will receive an aggregate of 15% of the stock of JCC Holding.
2. FLIP EVENTS. Generally, the directors designated by the Class B
Stockholders (the "Class B Directors") will supervise the day-to-day activities
with respect to the JCC Entities unless one of the following events ("Flip
Events") occurs: (i) (a) JCC is in default in any material respect under the
Bonds (as hereinafter defined) or the JCC Entities are in default in any
material respect under any material agreements with the City of New Orleans (the
"City") or the State of Louisiana (the "State"), any other financing agreements,
any other material contracts or any of their organizational documents, and (b)
such default by the JCC Entities is caused by HET, HOCI or Harrah's New Orleans
Management Company (the "Casino Manager") related events, (ii) the Casino
Manager is in default in any material respect under its management agreement,
HET or HOCI is in default in any material respect under the completion
guaranties or HET or its affiliates are in default in any material respect under
any other material agreements relating to the Casino between HET or its
affiliates and the City or the State or any agency or instrumentality of the
City or State, (iii) a filing for
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bankruptcy by or against HET, HOCI, the Casino Manager, any direct or indirect
parent thereof, or any affiliate of HET which is controlled by HET (an "HET
Controlled Affiliate") if the filing by or against such HET Controlled Affiliate
has or is reasonably likely to have an adverse effect on JCC, the Casino or the
suitability of any person required to be found suitable under Louisiana gaming
laws, or (iv) the Louisiana Gaming Control Board (the "LGCB") makes the
determination that HET or its affiliate is unsuitable to own an equity interest
in JCC Holding.
3. EFFECT OF FLIP EVENT. Upon the occurrence of a Flip Event, the
directors of JCC Holding selected by the former Bondholders (the "Independent
Directors") will supervise the day-to-day activities with respect to JCC
Holding; provided, however, that if all defaults causing a Flip Event to have
occurred are cured, the Class B Directors will resume supervising the day-to-day
activities of JCC Holding.
4. SIGNIFICANT TRANSACTIONS. Notwithstanding the foregoing, approval by
the Independent Directors of JCC Holding will be required if JCC Holding
proposes to engage in a Significant Transaction. "Significant Transactions"
shall include, without limitation, (i) amendments of the organizational
documents of any JCC Entity, (ii) any merger, consolidation or sale of a
material portion of its business or assets, (iii) any material transaction or
transactions, except for certain excluded transactions, during a single fiscal
year with HET or an HET Controlled Affiliate (including any decisions regarding
the exercise, waiver or modification of rights or obligations under the
management agreement) which in the aggregate involve consideration in excess of
a threshold to be determined by the board of directors of JCC Holding, (iv)
declarations of dividends, (v) amendment of any material agreements with the
City or the State, (vi) bankruptcy events, (vii) incurrence of, or assumption of
liability for, indebtedness for borrowed money, other than indebtedness incurred
pursuant to the Plan, the amendment of the terms of any indebtedness for
borrowed money or any modification, consent or waiver thereunder, (viii) any
issuance of securities, (ix) any repurchase of securities of a JCC Entity, (x)
any change in the independent auditors and (xi) approval of JCC's annual
operating plan and annual capital budget.
5. AFTER A FLIP EVENT. If a Flip Event has not occurred, or has occurred
other than as the result of a willful action or failure to act by the Class
B Directors,
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HET, the Casino Manager, or an HET Controlled Affiliate, as determined by Speedy
Arbitration, the approval by the Class B Directors will be required if any of
the JCC Entities proposes to engage in Significant Transactions. Speedy
Arbitration shall mean an arbitration in which a single arbitrator is selected
by HET and the Bondholders Committee, the arbitration is binding, and the
arbitration occurs on an expeditious schedule as determined by the arbitrator.
If a Flip Event has occurred and the approval of the Class B Directors is not
required for a Significant Transaction, any action or inaction by the
Independent Directors during the period after the Flip Event and prior to the
cure of all defaults giving rise thereto shall not disproportionately affect any
group of holders of equity of the JCC Entities. Such approval by the
Independent Directors and the Class B Directors, respectively, will, in certain
cases, require a majority thereof and in other cases will require unanimity.
6. EXTRAORDINARY FLIP EVENT. JCC Holding's board of directors will
consist of an equal number of Independent Directors and Class B Directors, but
(i) the Independent Directors will constitute a majority of the audit committee,
(ii) one Independent Director will be added to the board if a Flip Event
(including a Flip Event resulting from Casino Manager bankruptcy events, but
excluding a Flip Event resulting from HET bankruptcy events) occurs as the
result of a willful action or failure to act by the Class B Directors, HET, the
Casino Manager, or an HET Controlled Affiliate as determined in a Speedy
Arbitration process (an "Extraordinary Flip Event"); provided, however, that
such additional Independent Director will be removed if such Extraordinary Flip
Event is cured, and (iii) unless an Extraordinary Flip Event has occurred and
has not been cured, one Class B Director will be added to the board in the event
that at least 20% of the outstanding shares of Class A Stock of JCC Holding are
acquired (a "Change of Control") by any entity (including any parent and any
controlled affiliates) (a "Conflicted Entity") (a) which controls or operates,
or is licensed in any of Illinois, Indiana, Louisiana, Mississippi, Missouri,
Nevada or New Jersey to control or operate, as of the Effective Date, a casino
or casino hotel facility, or (b) which has been involved in material litigation
with HET within the five years prior to the Effective Date; provided, however,
that such additional Class B Director will be removed if (x) the percentage of
Class A Stock of JCC Holding owned by such Conflicted Entity falls below 20%, or
(y) an Extraordinary Flip
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Event occurs after such Change of Control.
7. CLASSES OF DIRECTORS. JCC Holding's board will be divided into three
classes of directors with staggered terms of office.
8. CLASS A AND CLASS B DIRECTORS. Until the Transition Date (as
hereinafter defined) there shall be an equal number of Independent Directors and
Class B Directors in each of the three classes of directors. When an
Independent Director's term of office expires, the remaining Independent
Directors will constitute the committee authorized to nominate the candidate for
such Independent Director's position, and when a Class B Director's term of
office expires, the remaining Class B Directors will constitute the committee
authorized to nominate the candidate for such Class B Director's position.
9. JCC AND JCC INTERMEDIARY GOVERNANCE. JCC shall be a member managed
Louisiana limited liability company with JCC Holding as its sole member manager.
If JCC Intermediary is utilized, the sole member manager of JCC Intermediary
will be JCC Holding, and JCC Intermediary will be the sole member manager of
JCC.
10. DIRECTOR COMPENSATION. The JCC Entities will pay reasonable
directors' fees and long term compensation to all of the Independent Directors
(and, until the Transisiton Date, to Class B Directors who are not employees of
HET), will pay the reasonable out-of-pocket expenses of all of their directors,
and will carry adequate D&O insurance for the benefit of all of their directors.
11. CLASSES OF STOCK AND CONVERSION OF STOCK. Until the Transition Date
there will be two classes of common stock of JCC Holding, one class to be
received by the Bondholders ("Class A Stock") and one class to be received by
HET, the bondholders of Grand Palais and the shareholders of NOLDC ("Class
B Stock"), which will be identical in all respects except (i) holders of Class A
Stock will elect the Independent Directors and holders of Class B Stock will
elect the Class B Directors, (ii) shares of Class B Stock will automatically
convert to shares of Class A Stock upon transfer to any entity except HET, the
bondholders of Grand Palais, NOLDC, any shareholder of NOLDC, and any of such
entities' affiliates (collectively, "Class B Entities"), and (iii) subject to
certain exceptions upon a Change of Control, shares of Class A Stock upon
transfer to a Class B
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Entity will automatically convert to shares of Class B Stock.
12. CAPITAL BUDGET. All changes to JCC's capital budget prior to
termination of the Completion Guaranty (as defined herein), except for changes
which reduce the scope or character of the Casino, as reflected in the approved
Plans and Specifications, or which exceed $5 million or such other threshold as
may be determined by the board of directors of JCC Holding, will be approved by
the Gaming Committee of JCC Holding's board of directors; thereafter all changes
to JCC's capital budget up to $250,000 will be approved by the Gaming Committee
and all changes to JCC's capital budget between $250,000 and $2 million will be
approved by the Capital Committee of JCC Holding's board of directors
(consisting of a single Independent Director and a single Class B Director until
the Transition Date). The capital budget itself will be approved by the board
of directors of JCC Holding.
13. TRANSITION DATE. The governance provisions set forth in Sections B.2,
3, 4, 5, 6, 8 and 11 shall terminate upon the Transition Date. The "Transition
Date" shall occur on the earliest of (i) the third anniversary of the date which
the Casino is open to customers, (ii) the end of two consecutive 12-month
periods in each of which the Contingent Payments under the New Bonds and the New
Contingent Bonds equals or exceeds $15 million, and (iii) the end of a period
consisting of 30 consecutive trading days during which the average daily closing
Minimum Market Value (as defined below) equals or exceeds $435 million (as
adjusted by the board of directors in good faith to account for purchases of
common stock or issuances of additional common stock). The "Minimum Market
Value" is, for each trading day, the sum of (i) the closing bid price of a share
of Class A Stock multiplied by the aggregate number of such shares issued and
outstanding plus (ii) the closing bid price per $1,000 of New Bonds and New
Contingent Bonds, divided by $1,000, and multiplied by the aggregate principal
amount of such Bonds outstanding.
C. FIDUCIARY CONSIDERATIONS
All definitive documentation implementing the transactions contemplated by
this term sheet will provide the Bondholders' Committee with a "fiduciary out"
in the event that there is a superior offer with respect to the Old Notes. The
Bondholders' Committee has agreed not to solicit any other sponsors after August
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23, 1996 (the "No Shop Date"). After the No Shop Date, if the Bondholders'
Committee supports a plan of reorganization not supported by HET, or withdraws
its support for a plan of reorganization supported by HET, then at such time,
HET shall be entitled to receive the immediate repayment of its DIP loans
(including all amounts advanced thereunder and accrued interest on such
advances). In addition, if after the date on which HET, the City, the State and
the Bondholders' Committee are definitively committed to support a plan of
reorganization supported by HET (the "Definitive Commitment Date"), the
Bondholders' Committee supports a plan of reorganization not supported by HET,
or withdraws its support for a plan of reorganization supported by HET, then HET
shall be entitled to receive from HJC a "break-up" fee of $2.5 million at such
time and the Bondholders' Committee shall not support any plan that does not
provide that HET shall be entitled to receive from HJC $5 million at the time of
the confirmation of such other plan and $5 million at the time of consummation
of such other plan. The Definitive Commitment Date shall be the date on which
the HET, the Bondholders Committee, the City and the State have negotiated and
agreed to definitive documentation. All such definitive documentation shall be
in form and substance acceptable to the Bondholders Committee.
D. OLD NOTES
The holders of $435 million of the existing Old Bonds will receive: (i)
$187.5 million of Senior Subordinated Notes with Contingent Payments of JCC (the
"New Bonds") having the terms described on the attached term sheet; (ii) the
Senior Subordinated Contingent Notes (the "New Contingent Bonds" and, together
with the New Bonds, the "Bonds") having the terms defined in the attached term
sheet; and (iii) 37.1% of the stock of JCC Holding, and 13.0% of the stock of
JCC Holding to be allocated to the Releasing Bondholders, as described herein.
E. MANAGEMENT FEES
1. MANAGEMENT FEES. The Casino Manager will receive 3.0% of gross
revenues ("Base Management Fee") and 7.0% of EBITDA above (i) $40 million for
the six-month period ending on the date which is six months after the opening
of Casino - Phase I and each anniversary of such date, and (ii) $75 million for
the twelve month period ending on the date which is twelve months after the
opening
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of Casino - Phase I and each anniversary of such date, less the Incentive Fee
paid to the Casino Manager for the prior six months ("Incentive Management
Fee") for managing the Casino, provided however that the Casino Manager shall
refund to JCC all fees paid by JCC under subsection (i) hereof if EBITDA does
not exceed $75 million for the twelve month period ending on the date which
is twelve months after the opening of Casino - Phase I and each anniversary
of such date. "EBITDA" means earnings before interest, taxes, depreciation
and amortization but after payment of the Base Management Fee. The
definition of EBITDA for purposes of the Incentive Management Fee shall be
the same as for purposes of the New Contingent Bonds.
2. PAYMENT OF BASE MANAGEMENT FEES. The Base Management Fee will be paid
monthly; provided, however, that HET will unconditionally guarantee the
repayment to JCC of the Casino Manager's obligation to repay any Base Management
Fees required as a result of a PIK election.
3. PAYMENT OF INCENTIVE MANAGEMENT FEES. The Incentive Management Fee,
if any, will be paid at six month intervals on the next business day following
actual cash payment of all accrued fixed interest and contingent interest, if
any, on the Bonds. No Base Management Fee will be paid, and no Incentive
Management Fee will be accrued or paid, during or with respect to any period in
which JCC is in default with respect to interest or principal payments under the
Bonds.
4. DEFERRALS. JCC shall have the option of making the first six semi-
annual interest payments in kind rather than in cash (the "PIK Periods");
provided however, that the first four semi-annual interest payments must be paid
in kind if Tranches A-1 and/or A-2 are outstanding at the end of the
corresponding PIK Periods.
a. The Casino Manager will defer Base Management Fees for the
corresponding first, second, third or fourth PIK Period to the extent the cash
savings resulting from the PIK election is needed for cash flow deficiencies
other than repayment of Tranche A-1 and Tranche A-2, and such deferred Base
Management Fee shall be due and payable to the Casino Manager, pro rata with any
deferred guaranty fees, out of excess cash flow (remaining after application of
the excess cash flow sweep required by the Credit Agreement for the Bank Loans)
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at such time and to the extent that EBITDA exceeds $65 million.
b. Any Incentive Management Fee payable to the Casino Manager will
be deferred during the corresponding third, fourth, fifth or sixth PIK Periods
if the respective third, fourth, fifth or sixth PIK election, as the case may
be, is required under the bank credit agreement or elected by JCC, and such
deferred Incentive Management Fees shall be due and payable to the Casino
Manager, after repayment of any deferred Base Management Fees and deferred
guaranty fees, out of excess cash flow (remaining after application of the
excess cash flow sweep required by the Credit Agreement for the Bank Loans) at
such times as and to the extent that EBITDA exceeds $75 million.
c. If EBITDA is less than $28.5 million for the twelve-month period
ending one month prior to each semi-annual New Bond interest payment date
beginning with the fourth year after the Effective Date, the Base Management
Fee, Bank Loan principal, and HET guaranty fees will be deferred, and the
Bondholders will receive PIK interest.
5. SUBORDINATION OF MANAGEMENT FEES AND OTHER AMOUNTS. In the event of
any payment default on the Bonds, any other default that results in acceleration
of the Bonds, the bankruptcy of JCC, or similar matters, any accrued but unpaid
Base Management Fees or Incentive Management Fees shall be subordinated to
payments on the Bonds in the following order:
a. Fixed interest on New Bonds
b. Principal amount of New Bonds
c. Base Management Fee
d. Contingent Payments on New Bonds and New Contingent Bonds
e. Amounts advanced under Completion Guaranty
f. Incentive Management Fee
F. DIP FINANCING
1. PRIOR DIP LOANS. HET, or an affiliate of HET, has previously advanced
$30 million to recommence construction of the Casino and fund other amounts
necessary for the continuation of the HJC bankruptcy case and the
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consummation of the Plan in the form of debtor-in-possession ("DIP") loans.
2. ADDITIONAL DIP LOANS. The JCC Entities will need additional funds
prior to the Effective Date. HET, or an affiliate of HET, will provide
additional DIP financing in accordance with the HET DIP order entered by the
Bankruptcy Court.
3. REPAYMENT. The DIP loans will be (i) repaid in full in cash upon
consummation of a plan of reorganization, or (ii) converted into the New Equity
Investment (and count toward the $75 million equity investment) on a dollar-for-
dollar basis. The DIP loans shall be entitled to an administrative priority
superior to the priority of all other creditors in the bankruptcy.
4. COLLATERAL. The DIP loans will receive a primary lien on all assets
of the estate, including the Fulton Street and CP3 properties, all gaming
equipment (subject to regulatory approval), all cash collateral (including the
cash collateral held by FNBC), and all causes of action of the Estate other than
insider claims.
5. FUNDING. Prior to the termination of the DIP loans (by acceleration,
maturity or otherwise), HET will fund sufficient amounts under the DIP loans to
provide for the payment of administrative expense claims for fees, expenses and
costs of professionals properly retained pursuant to court order, including
professionals properly retained pursuant to court order by the debtors and the
creditors' committees (including, without limitation, the Bondholders Committee)
to the extent such fees, expenses and costs (i) are payable pursuant to a court
order entered prior to such termination of the DIP loans, or (ii) are provided
for in a budget approved by HET.
6. TERMINATION. Upon the termination of the DIP loans (by acceleration,
maturity or otherwise), HET's administrative priority claims and the liens and
security interests granted under the terms of the DIP loans shall not have
priority over, and shall be subordinate and junior to, up to an aggregate of
$1.5 million of unpaid administrative expense claims for fees, expenses and
costs of professionals properly retained pursuant to court order, including
professionals properly retained pursuant to court order by the debtors and the
creditors' committees (including, without limitation, the Bondholders'
Committee).
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7. CALL. The DIP loans may be called at par plus accrued interest at any
time at the discretion of the Bondholders' Committee.
G. AGREEMENTS WITH CITY AND STATE
1. CITY AND LGCB. Any plan of reorganization of HJC is subject to the
approval of the LGCB (LEDGC's successor) and the City of New Orleans, except to
the extent such approvals are not required under bankruptcy law.
2. AGREEMENT. As part of its Plan, HJC will seek certain agreements with
the City and State. Any agreements between HJC, on the one hand, and the City
or the State, on the other hand, shall be satisfactory to the Bondholders'
Committee, in its sole discretion.
H. COMPLETION GUARANTY
1. FORM OF COMPLETION GUARANTY. For the benefit of holders of the Bonds,
HET and HOCI will unconditionally and irrevocably guarantee completion of the
project (the "Completion Guaranty") as discussed below, in accordance with the
City and State requirements, subject only to force majeure, on terms
substantially identical to the terms to be contained in HET's and HOCI's
completion guaranty in favor of the State and the City delivered in connection
with the Plan (including without limitation, collateral, guaranties or third
party financial support). In any event, such Completion Guaranty shall not
contain any financing condition precedent to the obligations of HET or HOCI.
2. REIMBURSEMENT OF COMPLETION GUARANTORS. The obligation of JCC to
repay amounts advanced by HET or HOCI will be an unsecured obligation and junior
in right of payment to the full $187.5 million of New Bonds and all amounts
owing under the New Contingent Bonds. Such repayment obligation will have an
interest rate of 8% per annum and will mature 6 months after the maturity of the
Bonds; provided, however, that early repayment of such obligation will be
permitted if allowed pursuant to a "Restricted Payments" test to be negotiated
in the indenture for the Bonds.
3. SCOPE OF COMPLETION GUARANTY. The Completion Guaranty will cover the
costs of construction, equipment, opening (pre-opening expenses and cashloads)
and opening working capital for Casino-Phase I and Second Floor
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Shell Construction-Phase II in accordance with an agreed-upon list of Casino-
Phase I and Second Floor Shell Construction-Phase II completion specifications.
Casino-Phase I shall consist of approximately 100,000 square feet of net gaming
space on the first floor, a 250-seat buffet, two parking garages, an underground
tunnel between the Casino and the parking garages and approximately 15,000
square feet of multi-function, special event, food service and meeting-room
space on the first floor. Second Floor Shell Construction-Phase II shall
consist of an additional approximately 150,000 square feet of multipurpose non-
gaming entertainment space on the second floor of the premises constructed to
the point at which the shell of the structure is complete and the space is
suitable for tenant build-out.
4. WORKING CAPITAL. The $25 million Working Capital Facility will be
obtained from a third party lender prior to the initial opening of Casino-Phase
I. Upon the completion of Casino-Phase I and Second Floor Shell Construction-
Phase II, pursuant to the Completion Guaranty, JCC will have available for
working capital (i) $5 million of cash, (ii) $10 million on deposit with the
Casino Manager to fund the Minimum Balance (as defined in the Management
Agreement), and (iii) the Working Capital Facility Maximum Amount of
availability for drawdown(s) under the Working Capital Facility. The "Working
Capital Facility Maximum Amount" equals $25 million reduced by the amount of
funds, if any, not to exceed $2 million, available under any letter of credit
sub-facility under the Working Capital Facility for purposes other than those
relating to project costs of the Casino and further reduced by a drawing of $10
million to be deposited in the Bank Account (as defined in the Management
Agreement) to fund the Minimum Balance. The Completion Guaranty shall not cover
any operating losses following the completion of Casino-Phase I and Second Floor
Shell Construction-Phase II.
I. HET/JCC AGREEMENT
1. GUARANTY. HET and HOCI will enter into an agreement with JCC (the
"HET/JCC Agreement") to provide a Minimum Payment Guaranty (as defined in the
Casino Operating Contract) to the LGCB, subject to renewal or early termination
in accordance with the terms of the HET/JCC Agreement.
2. INTEREST. Any drawing on a Minimum Payment Guaranty shall bear
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interest at the bank facility Tranche A-3 interest rate. For purposes of
computing the minimum annual payments to the LGCB, the Casino's fiscal year (a
"COC Fiscal Year") will begin on April 1.
3. RENEWAL. HET and HOCI will commit to provide a Minimum Payment
Guaranty through the Fiscal Year ending March 31, 2004; provided that the
obligation of HET and HOCI to provide a Minimum Payment Guaranty pursuant to the
HET/JCC Agreement shall not renew for any of the COC Fiscal Years beginning
April 1, 2000, 2001, 2002 or 2003 if prior to such date: (i) there has been a
JCC bankruptcy or a cessation of Casino operations; (ii) there are any unpaid
guaranty fees (other than fees deferred as agreed in the HET/JCC Agreement);
(iii) there are any unreimbursed drawings on a Minimum Payment Guaranty; (iv) in
the case of the COC Fiscal Year ending March 31, 2000, the project has failed to
generate positive EBITDA for the period of operations commencing with the
opening of the Casino and ending January 31, 2000, however, there shall be no
EBITDA test for the period of operations ending January 31, 2000 if such period
of operations commenced after August 1, 1999; (v) in the case of the COC Fiscal
Years ending March 31, 2001, 2002, and 2003, the project has failed to generate
EBITDA as of the twelve month period ending November 30 of the prior calendar
year in an amount equal to $15 million as of the twelve month period ending
November 30, 2000, $20 million as of the twelve month period ending November 30,
2001, and $25 million as of the twelve month period ending November 30, 2002;
(vi) HET, HOCI or the Casino Manager or any of HET's affiliates has been
determined to be unsuitable or the Casino Manager has been removed as manager of
the Casino; (vii) JCC has breached any of the covenants under Section 5 of the
HET/JCC Agreement; (viii) an Excusable Temporary Cessation of Operations has
occurred and is continuing and has not been cured in accordance with the terms
of the Casino Operating Contract; or (ix) the Casino Operating Contract has
been terminated. The HET/JCC Agreement will contain provisions to adjust the
EBITDA test if an Excusable Temporary Cessation of Operations has occurred.
4. DEFINITION OF EBITDA. For purposes of clauses I.3(d) and I.3.(e)
above, EBITDA shall mean operating income determined according to generally
accepted accounting principles plus depreciation and amortization determined
according to generally accepted accounting principles, but will not include any
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extraordinary non-cash items, such as the write down of assets, or pre-opening
expenses.
5. NOTICE. HET and HOCI shall give JCC at least ninety days prior
written notice of any such non-renewal pursuant to clauses I.3(b) and I.3(e)
above. HET shall give JCC at least thirty days prior written notice of any such
non-renewal pursuant to clause I.3.(d). above.
6. CANCELLATION. Commencing with the COC Fiscal Year ending March 31,
2002, upon ninety days written notice prior to the first day of the respective
COC Fiscal Year, JCC may cancel the commitment of HET and HOCI to provide a
Minimum Payment Guaranty for the COC Fiscal Year ending March 31, 2002 upon
payment of a termination fee of $1 million in cash and may cancel the commitment
of HET and HOCI to provide a Minimum Payment Guaranty for the COC Fiscal Years
ending March 31, 2003 and 2004 without any fee.
7. RESTRICTION ON TERMINATION. Notwithstanding any other provision
hereof, JCC will be restricted from terminating the HET/JCC Agreement unless JCC
has obtained a replacement guaranty or letter of credit which meets the
requirements of the Casino Operating Contract and which does not result in
increased cost to JCC (after giving effect to payment to HET and HOCI of the
termination fee, if applicable), the Casino Operating Contract no longer
requires JCC to provide a guaranty or letter of credit, or the LGCB waives the
requirement that JCC provide a guaranty or letter of credit.
8. FEE. HET and HOCI, collectively, will receive a $6 million per annum
guaranty fee for the COC Fiscal Years ending March 31, 2000 and 2001 and $5
million per annum guaranty fee for the COC Fiscal Years ending March 31, 2002,
2003 and 2004, all payable quarterly. HET and HOCI, collectively, shall receive
a PRO RATA fee based on an annual fee of $6 million for any partial COC Fiscal
Year ending March 31, 1999 or for the COC Fiscal Year ending March 31, 2000 if
it is a partial COC Fiscal Year. HET and HOCI shall not receive a guaranty fee
for any COC Fiscal Year in which a Minimum Payment Guaranty is not provided and
shall repay to JCC any guaranty fee previously advanced to it in respect of such
COC Fiscal Year.
9. DEFERRED FEES. If EBITDA is less than $28.5 million for the twelve
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month period ending one month prior to each semi-annual New Bond interest
payment date beginning with the fourth year after the Effective Date, the
guaranty fee to HET and HOCI will be deferred. JCC's obligation under the
HET/JCC Agreement to pay the per annum guaranty fee and any termination fee to
HET and HOCI and to reimburse HET and HOCI for any drawings (including interest
thereon) by the LGCB under a Minimum Payment Guaranty will be secured by a first
lien on the Casino assets.
10. COLLATERAL. The lien documents and the collateral to be provided to
HET and HOCI pursuant to the HET/JCC Agreement are to be substantially as
provided to the LGCB pursuant to the State Mortgage and Security Documents
attached as exhibits to the LGCB April, 1997 approved Casino Operating Contract.
The HET/JCC Agreement shall contain covenants in favor of HET and HOCI (i)
requiring JCC to maintain insurance, pay taxes and impositions, repair and
maintain the Casino, and keep the lease in effect, as was the case for the LGCB
pursuant to Section 20.4(d) of the Casino Operating Contract, and (ii) on terms
and conditions to be agreed by the parties, restricting indebtedness and liens
by JCC and restricting dividends, merger and asset disposition. The parties
agree that any successor guarantor may be secured by the first lien position of
HET and HOCI, subject to payment of any unpaid fees or obligations to HET and
HOCI in respect of the HET/JCC Agreement.
J. RESALE ISSUES
1. LISTING. The JCC Entities will use their best efforts to cause the
Class A Common Stock of JCC Holding to be listed on a national securities
exchange or quoted on NASDAQ upon the Effective Date.
2. REPORTING COMPANY. JCC Holding shall use its best efforts to be, on
or prior to the Effective Date, a reporting company under the Securities
Exchange Act of 1934, as amended (the "34 Act"), with respect to its Class A
Common Stock. JCC Holding will file a registration statement under the 34 Act
(the "34 Act Registration Statement") no later than promptly after the court
approves the disclosure statement for the Plan.
3. EFFECT OF 34 ACT REGISTRATION NOT BECOMING EFFECTIVE. If the 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of
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such registration statement with the SEC (provided, however, that this clause
(i) is not applicable if JCC Holding did not file such registration statement
prior to the date which is five days after final court approval of the
disclosure statement for the plan of reorganization), (ii) 60 days after final
court approval of the disclosure statement for the plan of reorganization, (iii)
30 days after receipt of any SEC comments on such registration statement, and
(iv) the Effective Date, then JCC shall pay to the Bondholders an amount equal
to $.05 per week for each $1,000 of securities to be registered, which amount
shall increase by $.05 every 45 days to a maximum of $.30 per week.
4. REGISTRATION FOR PUBLIC RESALES. In addition, to the extent that it
is reasonably determined that the registration of public resales by any
Bondholder of any securities received by such Bondholder under the Plan is
required by law, JCC will file a registration statement (the "33 Act
Registration Statement") with respect to such resales promptly after the
Effective Date. If such 33 Act Registration Statement is not effective within
120 days after it is filed, then JCC shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of securities to be registered, which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
5. REGISTRATION RIGHTS AGREEMENT. On the Effective Date, JCC Holding and
HET, or an affiliate of HET, will enter into a registration rights agreement
containing such terms and conditions as are customary under the circumstances,
including the following: (i) upon the request of HET, or an affiliate of HET,
which request may not be made prior to the second anniversary of the opening of
the Casino, JCC Holding must promptly file with the SEC and cause to become
effective as soon as reasonably practicable thereafter a registration statement
on the appropriate form relating to all shares of Class B Common Stock of JCC
Holding held by HET, or an affiliate of HET, including any shares obtained
pursuant to the exercise of warrants by HET, or an affiliate of HET; and (ii)
JCC Holding will cause such registration statement to be continually effective,
subject to customary exceptions, through the third anniversary of the day on
which such registration statement first becomes effective.
K. HET WARRANT
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In lieu of the warrants set forth in the Third Amended Plan of
Reorganization as confirmed in April, 1997 of HJC, HET, or its affiliate, will
receive warrants to purchase an amount of common stock of JCC Holding so that
upon the exercise of all such warrants HET, or its affiliate, will own 50.0% of
JCC Holding's common stock. The number of shares issuable upon exercise of such
warrants shall be adjusted as necessary to reflect the transfer of shares upon
exercise of the options held by NOLDC shareholders or their designee to purchase
from HET up to 4.5% of the common stock of JCC Holding. The warrants will be
exercisable at any time after the Transition Date until the sixth anniversary of
the opening of the Casino in whole or in part at a price of $15.00 per share.
If at any time after the Transition Date the market trading price of the JCC
Holding common stock has exceeded $20.00 for sixty consecutive days, the board
of directors of JCC Holding may elect to give written notice to HET of an
election to redeem 75% of the warrants at $.05 per warrant unless HET, or its
affiliate, exercises the warrants within forty-five days after the date of such
notice.
L. LITIGATION AND CLAIMS
1. RELEASES. As provided in the Third Amended Plan of Reorganization as
confirmed in April, 1997, the Bondholders will release HET, the bondholders of
Grand Palais, and the shareholders of NOLDC and their affiliates.
2. ASSIGNED CLAIMS. As provided in the Third Amended Plan of
Reorganization as confirmed in April, 1997, on the Effective Date, HJC, Harrah's
Jazz Finance Corp. and Harrah's New Orleans Investment Company and the releasing
Bondholders will assign their respective Assigned Litigation Claims (as defined
in the Third Amended Plan of Reorganization as confirmed in April, 1997) to JCC,
without any representations or warranties. The prosecution of the Assigned
Litigation Claims, judgment reduction protection and distribution of recoveries
from Assigned Litigation Claims will occur as provided in the Third Amended Plan
as confirmed in April, 1997.
3. OTHER CLAIMS. Treatment of chapter 11 administrative expenses and all
other claims in the HJC chapter 11 case shall be on terms and conditions
satisfactory to the Bondholders' Committee. It is understood that provision for
satisfaction of such expense claims has been included in the HJC reorganization
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budget.
M. MISCELLANEOUS
1. SUPPORT OF PLAN. The Bondholders Committee will support a revised
plan of reorganization consistent with this Term Sheet in a vote resolicitation
for Bondholder approval of such revised plan of reorganization, and each of the
Committee members agrees to exercise the election to release HET.
2. COUNSEL FEES. The fees and expenses of Weil, Gotshal & Manges and
McGlinchey Stafford shall not be capped and shall be paid in accordance with the
existing HJC monthly budget process.
3. INVESTMENT ADVISOR FEES. Ladenberg shall seek an order approving the
amendment of their retention agreement to provide for a monthly fee of $75,000
plus expenses from September 1, 1997. HET agrees that Ladenberg's $75,000 fees
and expenses from the month of October 1997 shall be paid currently. All rights
of Ladenberg with respect to fees and expenses incurred prior to September 1,
1997 are reserved, and no fees payable pursuant to the amendment shall be
credited against any such prior fees and expenses.
4. NO OTHER OBLIGATIONS. HET will not be required to provide equity,
guaranties, loans or other financial commitment beyond those described in the
Third Amended Plan of Reorganization as confirmed in April, 1997, in the Term
Sheet attached as Exhibit J to the Plan, and in this Bondholder Term Sheet. The
Bondholders will not be required to provide any concessions beyond those
described in the Third Amended Plan of Reorganization as confirmed in April,
1997, in the Term Sheet attached as Exhibit J to the Plan, and in this
Bondholder Term Sheet.
5. WAIVERS AND RELEASE. The New Bonds Indenture and the New Contingent
Bonds Indenture shall contain waiver and release provisions regarding any
non-renewal of a Minimum Payment Guaranty in accordance with the terms of the
HET/JCC Agreement or non-renewal of the HET/JCC Agreement after March 31, 2004.
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SUMMARY OF TERM SHEET
SENIOR SUBORDINATED NOTES WITH CONTINGENT PAYMENTS
Issuer: Jazz Casino Company, L.L.C. ("JCC"), a
Louisiana limited liability company
Issue: Senior Subordinated Notes With Contingent
Payments (the "New Bonds").
Principal Amount: $187,500,000.
Maturity: 2009 (11 years).
Fixed Interest: The interest will be as follows for the first
10 semi-annual periods:
1 - 5.867%
2 - 5.927%
3 - 5.987%
4 - 6.046%
5 - 6.103%
6 - 6.159%
7 - 6.214%
8 - 6.214%
9 - 6.214%
10 - 6.214%
and then 8% thereafter, payable in kind from
the Effective Date for six semi-annual
periods (the "PIK Periods"), and payable
semi-annually in cash, in arrears,
thereafter.
JCC shall have the option of making the first
six semi-annual interest payments in kind
rather than in cash; provided, however, that
the first four semi-annual interest payments
must be paid in kind if Tranches A-1 and/or
A-2 are outstanding at the end of the
corresponding PIK Periods. If
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EBITDA is less than $28.5 million for the
twelve-month period ending one month prior to
each semi-annual interest payment date
beginning with the fourth year after the
Effective Date, the semi-annual interest
payment may be paid in kind.
Contingent Payments: Payable semi-annually and limited to 75% of
EBITDA over $65 million and under $85 million
calculated on a fiscal-year basis.
Procedures to address seasonality and tax
considerations in connection with semi-annual
payments will be developed. "EBITDA" means
earnings before interest, taxes, depreciation
and amortization but after payment of the
Base Management Fee; provided, however, that
the fee to HET under the HET/JCC Agreement
will be treated as an operating expense for
purposes of calculating EBITDA. For federal
income tax purposes, all contingent payments
will be recharacterized as principal and
interest using a 12% discount factor.
Collateral: The New Bonds will be secured by a lien on
all assets of JCC, junior to the liens
securing certain obligations of JCC under the
HET/JCC Agreement, the A Term Loan, the
Working Capital Facility and any refinancings
of the A Term Loan and the Working Capital
Facility which do not increase the principal
amount of indebtedness outstanding and
available thereunder or decrease the
weighted-average maturity thereof
(collectively, the "Senior Permitted
Refinancings"), and PARI PASSU with the
liens securing the New Contingent Bonds
(described below), the B Term Loan and any
refinancings of the B Term Loan which do
not increase the
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principal amount of indebtedness outstanding
and available thereunder or decrease the
weighted-average maturity thereof
(collectively, the "Senior Subordinated
Permitted Refinancings").
Optional Redemption: The New Bonds will not be redeemable prior to
maturity.
Mandatory Redemption: The New Bonds will not be subject to
mandatory prepayment prior to maturity.
Change of Control Put to be triggered by
changes in the manager or other similar
events.
Ranking: The New Bonds will be secured obligations of
JCC, subordinated in right of payment to
certain obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working
Capital Facility and the Senior Permitted
Refinancings, and PARI PASSU with the New
Contingent Bonds, the B Term Loan and the
Senior Subordinated Permitted Refinancings.
With the exception of the certain obligations
of JCC under the HET/JCC Agreement, the A
Term Loan, the Working Capital Facility, the
Senior Permitted Refinancings, the New
Contingent Bonds, the B Term Loan, the Senior
Subordinated Permitted Refinancings and
certain special purpose indebtedness, any
other indebtedness for borrowed money of JCC
must be subordinated to the New Bonds.
Summary of Certain Covenants: Including, BUT NOT LIMITED TO: Limitation on
Restricted Payments; Limitation on Dividends
Affecting Subsidiaries; Limitation on
Indebtedness; Limitation on Payment of
Management Fees; Limitation on Asset Sales;
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Limitation on Transactions with Affiliates
(except for affiliate transactions approved
by the board of directors of JCC Holding
within limitations to be established by the
board of directors of JCC Holding);
Limitation on Mergers and Consolidations;
Limitation on Liens; and Change of Control.
Make Whole Provisions: The provisions in the Indenture regarding the
Make-Whole Amount shall be revised as
follows:
- The Make-Whole Amount with respect to
the Notes shall consist of a Primary
Make-Whole Amount and a Secondary
Make-Whole Amount.
- The Primary Make-Whole Amount shall
mean, as of any date, the greater of (a)
zero and (b) the remainder of the
present value (using a discount rate
equal to the Formula Rate at such time)
of any unpaid scheduled payments of
principal and interest with respect to
any remaining periods (excluding Maximum
Contingent Payments) payable in respect
of the Notes minus the principal amount
of the Notes outstanding on such date.
- Formula Rate and Maximum Contingent
Payments are as defined in the
previously circulated draft of the
Indenture.
- The Secondary Make-Whole Amount shall
mean, as of any date, the present value
(determined using a discount rate equal
to the Formula Rate at such time) of any
unpaid Maximum Contingent Payments with
respect to any remaining periods less
any negative amount determined according
to clause (b) of the definition of the
Primary Make-Whole Amount.
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- Upon acceleration of the Notes (i) all
principal and then accrued and unpaid
interest (including then accrued and
unpaid Contingent Payments) shall be
immediately due, (ii) the Primary
Make-Whole Amount and the Secondary
Make-Whole Amount shall be immediately
due, (iii) the Secondary Make-Whole
Amount shall be subordinate to all of
the bank debt including any bank debt to
which HET succeeds as guarantor, and
(iv) the Primary Make-Whole Amount shall
be pari passu with Tranche B of the bank
debt including any bank debt to which
HET succeeds as guarantor.
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SUMMARY OF TERM SHEET
SENIOR SUBORDINATED CONTINGENT NOTES
Issuer: Jazz Casino Company, L.L.C. ("JCC"), a
Louisiana limited liability company.
Issue: Senior Subordinated Contingent Notes (the
"New Contingent Bonds").
Final Contingent Payment: 2009 (11 years).
Stated Interest: None.
Semi-Annual Payments: Subject to contingency described below, the
New Contingent Bonds will be self-amortizing
with semi-annual payments as described below.
Contingent Payments: All payments will be contingent and will be
limited to 75% of EBITDA over $85 million and
under $109,425,380 calculated on a fiscal
year basis. Procedures to address
seasonality and tax considerations in
connection with semi-annual payments will be
developed. "EBITDA" means earnings before
interest, taxes, depreciation and
amortization but after payment of the Base
Management Fee; provided, however, that the
fee to HET under the HET/JCC Agreement will
be treated as an operating expense for
purposes of calculating EBITDA. For federal
income tax purposes, the contingent interest
will be recharacterized as principal and
interest using a 16% discount factor.
Collateral: The New Contingent Bonds will be secured by a
lien on all assets of JCC, junior to the
liens
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securing certain obligations of JCC under the
HET/JCC Agreement, the A Term Loan, the
Working Capital Facility and any refinancings
of the A Term Loan and the Working Capital
Facility which do not increase the principal
amount of indebtedness outstanding and
available thereunder or decrease the
weighted-average maturity thereof
(collectively, the "Senior Permitted
Refinancings"), and PARI PASSU with the liens
securing the New Bonds, the B Term Loan and
any refinancings of the B Term Loan which do
not increase the principal amount of
indebtedness outstanding and available
thereunder or decrease the weighted-average
maturity thereof (collectively, the "Senior
Subordinated Permitted Refinancings").
Optional Redemption: The New Contingent Bonds will not be
redeemable prior to maturity.
Mandatory Redemption: The New Contingent Bonds will not be subject
to mandatory prepayment prior to maturity.
Ranking: The New Contingent Bonds will be secured
obligations of JCC, subordinated in right of
payment to certain obligations of JCC under
the HET/JCC Agreement, the A Term Loan, the
Working Capital Facility and the Senior
Permitted Refinancings, and PARI PASSU with
the New Bonds, the B Term Loan and the Senior
Subordinated Permitted Refinancings. With
the exception of the certain obligations of
JCC under the HET/JCC Agreement, the A Term
Loan, the Working Capital Facility, the
Senior Permitted Refinancings, the New Bonds,
the B Term Loan, the Senior Subordinated
Permitted Refinancings
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and certain special purpose indebtedness, any
other indebtedness for borrowed money of JCC
must be subordinated to the New Contingent
Bonds.
Summary of Certain Covenants: Including, BUT NOT LIMITED TO: Limitation on
Restricted Payments; Limitation on Dividends
Affecting Subsidiaries; Limitation on
Indebtedness; Limitation on Payment of
Management Fees; Limitation on Asset Sales;
Limitation on Transactions with Affiliates
(except for affiliate transactions approved
by the board of directors of JCC Holding
within limitations to be established by the
board of directors of JCC Holding);
Limitation on Mergers and Consolidations;
Limitation on Liens.
Make Whole Provisions; The New Contingent Bonds will contain
Liquidated Damages: appropriate provisions so that in the event
of a payment default or bankruptcy, the New
Contingent Bondholders will be made whole for
any accelerated maturity (which shall consist
solely of Contingent Payments that are due
but have not yet been paid), reduction in
anticipated yield or any other expenses or
costs; provided that the amount of future
Contingent Payments shall be subordinated to
the bank claims including bank claims to
which HET as guarantor succeeds.
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EXHIBIT G
CITY RELEASE AGREEMENT
THIS CITY RELEASE AGREEMENT (the "Agreement") is entered into this
____ day of __________, 1998 by and among RIVERGATE DEVELOPMENT CORPORATION, a
Louisiana public benefit corporation ("RDC"), CITY OF NEW ORLEANS, LOUISIANA
("City"), HARRAH'S ENTERTAINMENT, INC., a Delaware corporation ("HET"), HARRAH'S
OPERATING COMPANY, INC., a Delaware corporation ("HOCI"), HARRAH'S NEW ORLEANS
MANAGEMENT COMPANY, a Nevada corporation ("HNOMC"), HARRAH'S NEW ORLEANS
INVESTMENT COMPANY, a Nevada corporation ("HNOIC"), HARRAH'S JAZZ COMPANY, a
Louisiana general partnership ("HJC"), NEW ORLEANS/LOUISIANA DEVELOPMENT
CORPORATION, a Louisiana corporation ("NOLDC"), GRAND PALAIS CASINO, INC., a
Delaware corporation ("Grand Palais"), JAZZ CASINO COMPANY, L.L.C. a Louisiana
limited liability company ("JCC"), and HARRAH'S JAZZ FINANCE CORPORATION, a
Delaware corporation ("HJFC").
RECITALS
A. HJC and HJFC filed voluntary petitions for relief under Chapter
11 of the United States Bankruptcy Code on November 22, 1995. HNOIC filed a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code on December 22, 1995. The cases are now pending in the United States
Bankruptcy Court for the Eastern District of Louisiana (the "Bankruptcy Court"),
Case Nos. 95-14544, 95-14545 and 95-14871. The cases are being jointly
administered.
B. HJC, RDC and City entered into that certain Amended Lease
Agreement effective as of March 15, 1994 (the "Original Lease Agreement")
C. HJC and certain other parties (collectively, the "Proponents")
have submitted, and the Bankruptcy Court has entered an order confirming, a plan
of reorganization in the bankruptcy proceedings of HJC, HJFC and HNOIC (the
"Plan").
<PAGE>
D. As provided by the Plan, JCC has succeeded to certain rights and
obligations of HJC under the Original Lease Agreement and the Original Lease
Agreement has been superseded by that certain Amended and Restated Lease
Agreement by and among RDC, City and JCC of even date herewith and exhibits
thereto (including, without limitation, the Casino Management Agreement and
Second Floor Sublease) (collectively, the "Amended and Restated Lease"). In
addition, JCC has assumed certain rights and obligations pursuant to that
certain Amended and Restated General Development Agreement by and among RDC,
City and JCC of even date herewith and exhibits thereto (including, without
limitation, the Completion Guarantee and Performance Bond) (the "Amended and
Restated GDA"), and that certain Amended and Restated Open Access Program
attached to the Amended and Restated Lease as Exhibit G (the "Amended and
Restated OAP").
E. RDC, City and JCC have previously entered into that certain Basin
Street Casino Lease Termination Agreement and the exhibits thereto and an
Agreement dated January 15, 1997, in connection therewith (collectively, the
"Termination Agreement").
F. RDC, City, HET, HOCI, HNOMC, HNOIC, HJC, NOLDC, Grand Palais, JCC
and HJFC desire to enter into certain settlements and releases on the terms and
conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, RDC, City, HET, HOCI, HNOMC, HNOIC, HJC, NOLDC, Grand Palais, JCC
and HJFC agree as follows:
1. EFFECTIVENESS
(a) This Agreement shall be effective upon its execution by all
parties hereto and the occurrence of the Effective Date of the Plan. The
"Effective Date" shall have the meaning set forth in the Plan.
(b) The release by the City Releasors (as hereinafter defined) set
forth in Section 2(a) hereof shall not be effective or enforceable as to (i) the
NOLDC Releasees (as hereinafter defined) unless NOLDC and the other NOLDC
Releasees which are parties thereto execute and deliver (A) the NOLDC
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Shareholders/HET Settlement Agreement (as defined in the Plan), executed by all
parties thereto, on or before the Effective Date and (B) this Agreement; (ii)
the Grand Palais Releasees (as hereinafter defined) unless Grand Palais and the
other Grand Palais Releasees which are parties thereto execute and deliver (A)
the Grand Palais/HET Settlement Agreement (as defined in the Plan), executed by
all parties thereto, on or before the Effective Date and (B) this Agreement;
(iii) the HET Releasees (as hereinafter defined) unless each of HET, HOCI, HNOIC
and HNOMC executes and delivers this Agreement; (iv) the HJC Releasees (as
hereinafter defined) unless each of JCC, HJC and HJFC executes and delivers this
Agreement; (v) each Participating Bank (as defined in the Plan) and each
Underwriter (as defined in the Plan) unless each such Participating Bank or
Underwriter enters into, executes and delivers its respective Bank/Underwriter
Release (as defined in the Plan), executed by all parties thereto, on or before
the Effective Date; or (vi) the FNBC Releasees, unless FNBC makes the FNBC
Settlement Election (as defined in the Plan) and executes and delivers the
Bank/Underwriter Release on or before the Effective Date.
(c) This Agreement and the releases set forth in this Agreement shall
be valid and enforceable as among the HET Releasees, the HJC Releasees and the
City Releasors, notwithstanding (i) the failure of NOLDC to execute and deliver
the NOLDC Shareholders/HET Settlement Agreement or this Agreement, (ii) Grand
Palais to execute and deliver the Grand Palais/HET Settlement Agreement or this
Agreement, (iii) the failure of each Participating Bank and Underwriter to
execute and deliver its respective Bank/Underwriter Release, or (iv) the failure
of FNBC to execute and deliver its Bank/Underwriter Release.
(d) The releases set forth in this Agreement shall not affect the
validity and enforceability of the Amended and Restated Lease, the Amended and
Restated GDA, the Amended and Restated OAP, the Termination Agreement or any
other document executed and delivered pursuant to the Plan.
2. RELEASE. Notwithstanding the foregoing, nothing contained in this
Agreement shall release or waive any rights or obligations of the parties
pursuant to the Amended and Restated Lease, the Amended and Restated GDA, the
Amended and Restated OAP and the Termination Agreement or any allowed claims of
the City or the RDC in HJC's bankruptcy.
(a) CITY RELEASE. Subject to the provisions of Sections 1(b) and
2(f)(iii) hereof, the City Releasors, and each of them, hereby release and
forever
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discharge the HJC Releasees, the HET Releasees, the NOLDC Releasees, the Grand
Palais Releasees, the Bank/Underwriter Releasees, the FNBC Releasees, and each
of them, of and from any and all manner of Claims (as hereinafter defined) which
the City Releasors, or any of them, now have or may hereafter have against the
HJC Releasees, the HET Releasees, the NOLDC Releasees, the Grand Palais
Releasees, the Bank/Underwriter Releasees, the FNBC Releasees, or any of them,
by reason of any matter, cause or thing whatsoever to the extent such Claims
arose prior to the Effective Date, including, but not limited to, any breaches,
defaults, or events of default under the Original Amended Lease, the Original
Amended GDA, and the OAP occurring at any time on or before the Effective Date.
The foregoing release shall not apply to any Claims to the extent such Claims
arise from or are based on any acts, omissions, events, circumstances or other
matters occurring on or after the Effective Date.
(b) HJC RELEASE. Subject to the provisions of Section 2(f)(iii)
hereof, the HJC Releasors (as hereinafter defined), and each of them, hereby
release and forever discharge the City Releasees (as hereinafter defined), and
each of them, of and from any and all manner of Claims which the HJC Releasors,
or any of them, now have or may hereafter have against the City Releasees or any
of them, by reason of any matter, cause or thing whatsoever to the extent such
Claims arose prior to the Effective Date, including, but not limited to, any
breaches, defaults, or events of default under the Original Amended Lease, the
Original Amended GDA, and the OAP occurring at any time on or before the
Effective Date; provided, however, that the foregoing release shall not apply to
any Claims to the extent such Claims arise from or are based on any acts,
omissions, events, circumstances or other matters occurring on or after the
Effective Date.
(c) HET RELEASE. Subject to the provisions of Section 2(f)(iii)
hereof, the HET Releasors, and each of them, hereby release and forever
discharge the City Releasees, and each of them, of and from any and all manner
of Claims which the HET Releasors, or any of them, now have or may hereafter
have against the City Releasees or any of them, by reason of any matter, cause
or thing whatsoever to the extent such Claims arose prior to the Effective Date,
including, but not limited to, any breaches, defaults, or events of default
under the Original Amended Lease, the Original Amended GDA, and the OAP
occurring at any time on or before the Effective Date. The foregoing release
shall not apply to any
4
<PAGE>
Claims to the extent such Claims arise from or are based on any acts, omissions,
events, circumstances or other matters occurring on or after the Effective Date.
(d) NOLDC RELEASE. Subject to the provisions of Section 2(f)(iii)
hereof, the NOLDC Releasors (as hereinafter defined), and each of them, hereby
release and forever discharge the City Releasees, and each of them, of and from
any and all manner of Claims which the NOLDC Releasors, or any of them, now have
or may hereafter have against the City Releasees or any of them, by reason of
any matter, cause or thing whatsoever to the extent such Claims arose prior to
the Effective Date, including, but not limited to, any breaches, defaults, or
events of default under the Original Amended Lease, the Original Amended GDA,
and the OAP occurring at any time on or before the Effective Date. The
foregoing release shall not apply to any Claims to the extent such Claims arise
from or are based on any acts, omissions, events, circumstances or other matters
occurring on or after the Effective Date.
(e) GRAND PALAIS RELEASE. Subject to the provisions of Section
2(f)(iii) hereof, the Grand Palais Releasors (as hereinafter defined), and each
of them, hereby release and forever discharge the City Releasees, and each of
them, of and from any and all manner of Claims which the Grand Palais Releasors,
or any of them, now have or may hereafter have against the City Releasees or any
of them, by reason of any matter, cause or thing whatsoever to the extent such
Claims arose prior to the Effective Date, including, but not limited to, any
breaches, defaults, or events of default under the Original Amended Lease, the
Original Amended GDA, and the OAP occurring at any time on or before the
Effective Date. The foregoing release shall not apply to any Claims to the
extent such Claims arise from or are based on any acts, omissions, events,
circumstances or other matters occurring on or after the Effective Date.
(f) SCOPE OF RELEASES
(i) The releases effectuated by this Agreement are intended by
the parties hereto to be as broad as the law allows with respect to the released
Claims and, subject to the provisions of Section 1(b) hereof, are intended
specifically to be a compromise and release generally of all released Claims of
the City Releasors against the HJC Releasees, the HET Releasees, the NOLDC
Releasees, the Grand Palais Releasees, the Bank/Underwriter Releasees, and the
FNBC Releasees and all released Claims of the HJC Releasors, the HET
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<PAGE>
Releasors, the NOLDC Releasors and the Grand Palais Releasors against the City
Releasees.
(ii) The releases effectuated by this Agreement are intended by
the parties hereto include the release of Claims as set forth in Sections 9.2
and 9.4 of the Plan. To the extent there are inconsistencies among the releases
provided for herein and those set forth in the Plan, the provisions of this
Agreement shall control.
(iii) The releases effectuated by this Agreement shall not effect
the release of any Excluded Claims.
3. DEFINITIONS
(a) BANK/UNDERWRITER RELEASEES. The "Bank/Underwriter Releasees"
shall mean any or all of the Participating Banks (as defined in the Plan), which
on or before the Effective Date execute and deliver their respective
Bank/Underwriter Releases (as defined in the Plan), and, in their capacity as
Participating Banks, any or all of their Affiliates, successors and assigns and
Salomon Brothers, Inc., Donaldson, Lufkin & Jenrette and BT Securities
Corporation in their capacity as underwriters of the Old Bonds (as defined in
the Plan), and any or all of their Affiliates, successors and assigns in their
capacity as underwriters of the Old Bonds, and the shareholders, parents,
subsidiaries, of each of the foregoing, and the officers, directors, employees,
attorneys, financial advisors, lenders, accountants, agents and other
representatives of each of the foregoing when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns, but in any event shall not include the FNBC
Releasees, the Excluded Grand Palais Parties, the Excluded HNOIC Parties or the
Excluded NOLDC Parties.
(b) CITY RELEASEES. The "City Releasees" shall mean RDC and the City
and any or all of their Affiliates (as defined in the Plan), successors and
assigns, and the shareholders, parents, subsidiaries, officers, directors,
council members, mayor, employees, attorneys, financial advisors, investment
bankers, lenders, accountants, agents (pursuant to a written agency agreement)
and other representatives of each of the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any and all of their successors and assigns, but in any event shall not include
the FNBC
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Releasees, the Excluded Grand Palais Parties, the Excluded HNOIC Parties, the
Excluded NOLDC Parties or the Bank/Underwriter Releasees.
(c) CITY RELEASORS. The "City Releasors" shall mean RDC and City and
any or all of their Affiliates, successors and assigns, and each of the
shareholders, parents, subsidiaries, officers, directors, council members,
mayor, employees and agents (pursuant to a written agency agreement) of each of
RDC and City, and any and all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing.
(d) CLAIMS. "Claims" shall mean any action or actions, cause or
causes of action, in law or in equity, suits, debts, liens, liabilities, claims,
demands, damages, punitive damages, losses, costs or expenses, and reasonable
attorneys' fees of any nature whatsoever (including, without limitation, claims
based upon legal fault, negligence, offense, quasi-offense, contract,
quasi-contract, or any other theory) whether fixed or contingent and including
known or suspected claims and Unknown Claims (as hereinafter defined), which in
any way relate to HJC, HJFC and HNOIC, the business affairs or operations of
HJC, HJFC and HNOIC, the issuance by HJC and HJFC of any securities, the
Permanent Casino (as defined in the Original Lease Agreement), the Casino (as
defined in the Amended and Restated Lease) or the Temporary Casino (as defined
in the Original Lease Agreement), including, but not limited to, the licensing,
leasing, financing, arranging, development, construction, promotion, management,
or operation thereof, or any matters related to HJC, HJFC, HNOIC or any
successor to any of them in connection with the Permanent Casino, the Casino or
the Temporary Casino, except to the extent that any of the foregoing arises
under any of the Plan Documents (as defined in the Plan) on or after the
Effective Date.
(e) EXCLUDED CLAIMS. "Excluded Claims" shall mean any Claims related
to or arising from (i) any obligations which have not been performed as of the
Effective Date pursuant to the Termination Agreement; [(ii) any obligations
pursuant to Sections __and __ of that certain Forbearance Agreement dated as of
____________ by and among counsel for the City, counsel for the RDC and counsel
for HJC.] Notwithstanding the foregoing, Excluded Claims shall not include (i)
any claim to revoke the Amended and Restated Lease, the Amended and Restated GDA
or the Amended and Restated OAP based on any action, event or circumstance
occurring prior to the Effective Date; (ii) any claim affecting the rights of
JCC under the Amended and Restated Lease, the Amended and Restated
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GDA or the Amended and Restated OAP; or (iii) any claim which is discharged,
enjoined or otherwise released pursuant to Sections 5.7, 9.2 or 9.4 of the Plan.
(f) EXCLUDED GRAND PALAIS PARTIES. The "Excluded Grand Palais
Parties" shall mean any or all of Grand Palais and its successors and assigns,
and the shareholders, parents, subsidiaries (except the JCC Entities, HJC or
HJFC), officers, directors, employees, attorneys, financial advisors, investment
bankers, lenders, accountants, agents (pursuant to a written agency agreement)
and other representatives of each the foregoing when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns.
(g) EXCLUDED HNOIC PARTIES. "Excluded HNOIC Parties" shall mean any
or all of HET, HOCI, HNOIC and HNOMC, and any or all of their successors and
assigns, and the shareholders, parents, subsidiaries (except the JCC Entities,
HJC or HJFC), officers, directors, employees, attorneys, financial advisors,
investment bankers, lenders, accountants, agents (pursuant to a written agency
agreement) and other representatives of each of the foregoing, when acting in
their respective representative capacities with respect to each of the
foregoing, and any or all of their successors and assigns.
(h) EXCLUDED NOLDC PARTIES. The "Excluded NOLDC Parties" shall mean
NOLDC and any or all of its successors and assigns, and the shareholders,
parents, subsidiaries (except the JCC Entities, HJC, or HJFC) officers,
directors, employees, attorneys, financial advisors, investment bankers,
lenders, accountants, agents (pursuant to a written agency agreement) and other
representatives of each the foregoing, when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns.
(i) FNBC. "FNBC" shall mean the First National Bank of Commerce and
any or all of its successors and assigns.
(j) FNBC RELEASEES. "FNBC Releasees" shall mean FNBC and any or all
of its Affiliates, successors and assigns, and the shareholders, parents,
subsidiaries, officers, directors, employees, attorneys, financial advisors,
investment bankers, lenders, accountants, agents (pursuant to a written agency
agreement) and other representatives of each the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any
8
<PAGE>
or all of their successors and assigns, but in any event shall not include any
Excluded Grand Palais Party, Excluded HNOIC Party, Excluded NOLDC Party, or the
Bank/Underwriter Releasees.
(k) GRAND PALAIS RELEASEES. The "Grand Palais Releasees" shall mean
Grand Palais and any or all of its Affiliates (except the JCC Entities, HJC or
HJFC), successors and assigns, and the shareholders, parents, subsidiaries
(except the JCC Entities, HJC or HJFC), officers, directors, employees,
attorneys, financial advisors, investment bankers, lenders, accountants, agents
(pursuant to a written agency agreement) and other representatives of each the
foregoing when acting in their respective representative capacities with respect
to each of the foregoing, and any or all of their successors and assigns, but in
any event shall not include any Excluded HNOIC Party, Excluded NOLDC Party, the
FNBC Releasees or the Bank/Underwriter Releasees.
(l) GRAND PALAIS RELEASORS. The "Grand Palais Releasors" shall mean
Grand Palais and any or all of its Affiliates (except JCC, JCC Holding, HJC or
HJFC), successors and assigns, and each of the shareholders, parents,
subsidiaries (except JCC, JCC Holding, HJC or HJFC), officers, directors,
employees and agents (pursuant to a written agency agreement) of each of the
foregoing and any or all of their successors and assigns and all persons acting
or claiming through or under any or all of the foregoing, but shall not include
any Excluded HNOIC Party, Excluded NOLDC Party, the FNBC Releasees or the
Bank/Underwriter Releasees.
(m) HET RELEASEES. The "HET Releasees" shall mean any or all of HET,
HOCI, HNOIC and HNOMC and any or all of their Affiliates (except the JCC
Entities, HJC or HJFC), successors and assigns, and the shareholders, parents,
subsidiaries (except the JCC Entities, HJC or HJFC), officers, directors,
employees, attorneys, financial advisors, investment bankers, lenders,
accountants, agents (pursuant to a written agency agreement) and other
representatives of each the foregoing when acting in their respective
representative capacities with respect to the foregoing, and any or all of their
successors and assigns, but in any event shall not include any Excluded NOLDC
Party, Excluded Grand Palais Party, the FNBC Releasees or the Bank/Underwriter
Releasees.
(n) HET RELEASORS. The "HET Releasors" shall mean any or all of HET,
HOCI, HNOIC and HNOMC and any or all of their Affiliates (except JCC, JCC
Holding, HJC or HJFC), successors and assigns, and each of the shareholders,
9
<PAGE>
parents, subsidiaries (except JCC, JCC Holding, HJC or HJFC), officers,
directors, employees and agents (pursuant to a written agency agreement) of each
of the foregoing and any or all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing, but shall not
include any Excluded NOLDC Party, Excluded Grand Palais Party, the FNBC
Releasees or the Bank/Underwriter Releasees.
(o) HJC RELEASEES. The "HJC Releasees" shall mean any or all of the
JCC Entities, HJC, HJFC and any or all of their Affiliates, successors and
assigns, and the shareholders, parents, subsidiaries, of each of the foregoing,
and the officers, directors, employees, attorneys, financial advisors,
investment bankers, lenders, accountants, agents (pursuant to a written agency
agreement) and other representatives of each the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any or all of their successors and assigns, but in any event shall not include
any Excluded HNOIC Party, Excluded NOLDC Party, Excluded Grand Palais Party, the
FNBC Releasees or the Bank/Underwriter Releasees.
(p) HJC RELEASORS. The "HJC Releasors" shall mean any or all of JCC,
JCC Holding, HJC, HJFC and any or all of their Affiliates, successors and
assigns, and each of the shareholders, parents, subsidiaries, officers,
directors, employees and agents (pursuant to a written agency agreement) of each
of the foregoing and any or all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing, but shall not
include any Excluded HNOIC Party, Excluded NOLDC Party, Excluded Grand Palais
Party, the FNBC Releasees or the Bank/Underwriter Releasees.
(q) JCC ENTITIES. The "JCC Entities" shall mean JCC, JCC Holding
Company, a Delaware corporation, and any of all of their Affiliates, successors
and assigns, and each of the shareholders, parents, subsidiaries.
(r) NOLDC RELEASEES. The "NOLDC Releasees" shall mean NOLDC and any
or all of its Affiliates (except the JCC Entities, HJC or HJFC), successors and
assigns, and the shareholders, parents, subsidiaries (except the JCC Entities,
HJC or HJFC), officers, directors, employees, attorneys, financial advisors,
investment bankers, lenders, accountants, agents (pursuant to a written agency
agreement) and other representatives of each the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any or all of their successors and assigns, but in any event shall not include
any
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<PAGE>
Excluded HNOIC Party, Excluded Grand Palais Party, the FNBC Releasees or the
Bank/Underwriter Releasees.
(s) NOLDC RELEASORS. The "NOLDC Releasors" shall mean NOLDC and any
or all of its Affiliates (except JCC, JCC Holding, HJC or HJFC), successors and
assigns, and each of the shareholders, parents, subsidiaries (except the JCC
Entities, HJC or HJFC), officers, directors, employees and agents (pursuant to a
written agency agreement) of each of the foregoing and any or all of their
successors and assigns and all persons acting or claiming through or under any
or all of the foregoing, but shall not include any Excluded HNOIC Party,
Excluded Grand Palais Party, the FNBC Releasees or the Bank/Underwriter
Releasees.
(t) UNKNOWN CLAIMS. "Unknown Claims" means any and all Claims
including, without limitation, any Claim which any of the parties hereto does
not know or even suspect to exist in his, her or its favor at the time of the
giving of the release which, if known by him, her or it might have affected his,
her or its decision regarding the releases. Each party hereto acknowledges that
he, she or it might hereafter discover facts in addition to or different from
those which he, she or it now knows or believes to be true with respect to the
subject matter of the matters released, but each such party shall be deemed to
have fully, finally and forever settled and released any and all Claims whether
known or unknown, suspected or unsuspected, contingent or non-contingent, which
now exist or heretofore have existed upon any theory of law or equity whether
such theory of law or equity now exists or comes into existence in the future.
Unknown Claims shall not include any Claim to the extent that such Claim arises
from or is based upon any act, omission, event, circumstance or other matter
occurring after the Effective Date.
4. REPRESENTATIONS AND WARRANTIES. In connection herewith, the parties
hereto each represent and warrant that the following are true and correct:
(a) Such party has due power and authority to enter into this
Agreement and perform its obligations hereunder.
(b) Such party has taken the requisite action, corporate or
otherwise, necessary to authorize the execution and delivery of this Agreement,
and this Agreement has been duly executed and delivered by such party and
11
<PAGE>
constitutes its valid and binding obligation, enforceable against such entity in
accordance with its terms.
(c) All consents, approvals and waivers from governmental authorities
and other parties necessary for such party to enter into this Agreement have
been obtained.
(d) To the best of such party's knowledge, no suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person or legal or administrative proceeding has been instituted or
threatened that questions the validity or legality of this Agreement.
(e) This Agreement does not conflict with any law or regulation
applicable to, or with any term or provision of any agreement binding upon, such
party.
(f) Such party has not currently assigned or transferred any interest
in any of the released Claims and such party will not in the future, assign or
transfer any interest in any such released Claim.
(g) Such party acknowledges that it (i) has been given the
opportunity to review all information and documents with respect to the Claims
released hereby prior to entering into this Agreement; (ii) has made an
independent investigation in making its decision to enter into this Agreement;
and (iii) is not relying on any statements or representations by any other party
hereto in entering into this Agreement other than as expressly set forth in the
Plan or the Amended and Restated Lease.
5. AMENDMENTS. Any amendment to this Agreement may only be made and
shall only be effective upon written approval of all parties hereto.
6. ENTIRE AGREEMENT. This Agreement, as written, contains all of the
terms and conditions agreed between the parties, relating to the transactions
covered by this Agreement, it being agreed that all understandings and
agreements heretofore and between the parties on the subject matter hereof are
merged in this Agreement which alone fully and completely expresses their
agreement and understanding with regard to the subject matter contained in this
Agreement.
7. VOLUNTARY AGREEMENT. The parties hereto have entered into this
Agreement freely and voluntarily, without coercion, duress, distress, or undue
12
<PAGE>
influence by any other persons or such person's respective shareholders,
directors, officers, partners, agents or employees.
8. ADVICE FROM COUNSEL. The parties hereto understand that this
Agreement may affect legal rights. The parties hereto represent that they have
received legal advice from counsel of their choice in connection with the
negotiation and execution of this Agreement and are satisfied with their legal
counsel and the advice received.
9. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the internal substantive laws of the State of Louisiana,
regardless of the laws which might otherwise govern under Louisiana's or other
applicable concepts of conflicts of law.
10. CAPTIONS. The headings on the sections in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
11. INTERPRETATION OF WORDS. A masculine pronoun wherever used in this
Agreement shall be construed to include the feminine or neuter where
appropriate. The singular form wherever used in this Agreement shall be
construed to include the plural where appropriate.
12. NO ADMISSION OF WRONGDOING. Nothing in this Agreement shall be
construed as an admission of liability or fault on the part of any HJC Releasee,
HET Releasee, NOLDC Releasee, Grand Palais Releasee, Bank/Underwriter Releasee,
the FNBC Releasees, or any City Releasee.
13. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 1(b)
hereof, this Agreement shall be binding upon the City Releasors, HJC Releasors,
HET Releasors, NOLDC Releasors, Grand Palais Releasors, and each of their
respective successors and assigns and inure to the benefit of the City
Releasees, HJC Releasees, HET Releasees, NOLDC Releasees, Grand Palais
Releasees, Bank/Underwriter Releasees, the FNBC Releasees, and each of their
respective successors and assigns.
14. SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person, entity or circumstance, shall be held invalid,
the remainder of this Agreement, or the application of such provision to
persons, entities or circumstances other than those to which it is held invalid,
shall not be
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affected thereby; provided that the parties shall attempt to reformulate such
invalid provision to give effect to such portions thereof as may be valid
without defeating the intent of such provision.
15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, notwithstanding that all of the parties
hereto are not signatories to the original or the same counterpart. In
addition, this Agreement may contain more than one counterpart of the signature
pages, and this Agreement may be executed by the affixing of the signatures of
each of the parties hereto to one of such counterpart signature pages; all of
such counterpart signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a single
signature page.
16. PENDING LITIGATION. On the Effective Date, the parties hereto hereby
agree to cause the dismissal with prejudice of the action styled CITY OF NEW
ORLEANS AND RIVERGATE DEVELOPMENT CORPORATION v. HARRAH'S ENTERTAINMENT, INC.
(f/k/a THE PROMUS COMPANIES, INC.), GRAND PALAIS CASINO, INC., EMBASSY SUITES,
INC., FIRST NATIONAL BANK OF COMMERCE AND RONALD A. LENCZYCKI, Adversary No.
96-1031, now pending in the Bankruptcy Court pursuant to a Motion and Order to
Dismiss with Prejudice in the form of Exhibit A attached hereto and by this
reference incorporated herein. With respect to the action styled HARRAH'S JAZZ
COMPANY v. A&D MAINTENANCE SERVICE, ET AL., Adversary Proceeding No. 97-1174,
pending in the United Sates Bankruptcy Court for the Eastern District of
Louisiana, the parties hereto hereby agree to cause the dismissal with prejudice
as to all defendants (including, without limitation, the City and the RDC)
except (i) the Non-Participating Banks, and (ii) any Underwriter which fails to
execute and deliver the Bank/Underwriter Release (as such terms are defined in
the Plan) (the defendants identified in clauses "(i)" and "(ii)," together, the
"Remaining Defendants"), as to which Remaining Defendants there shall be an
appropriate reservation of rights by JCC, by signing and filing an appropriate
order to dismiss with prejudice as to all defendants (including, without
limitation, the City and the RDC) except the Remaining Defendants and by causing
the aforesaid order to be entered as soon as is reasonably practicable after the
Effective Date. Such dismissal shall encompass all claims, counterclaims,
cross-claims, third party claims, motions or other demands brought by the
parties hereto with respect to all defendants (including, without limitation,
the City and the RDC) except the Remaining Defendants. JCC shall defend,
indemnify and hold harmless the City
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and the RDC from any claims, counterclaims, cross-claims, third party claims,
motions or other demands brought by any of the Remaining Defendants in
accordance with section 5.9 of the Plan.
[SIGNATURE PAGE FOLLOWS]
15
<PAGE>
IN WITNESS WHEREOF, the undersigned hereto have duly executed this
Agreement as of the date first written above.
RIVERGATE DEVELOPMENT CORPORATION, a
Louisiana public benefit corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CITY OF NEW ORLEANS
By:
------------------------------------
Name: Marc H. Morial
Title: Mayor
HARRAH'S JAZZ COMPANY, a Louisiana
general partnership
By: HARRAH'S NEW ORLEANS INVESTMENT
COMPANY, a Nevada corporation,
General Partner
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
By: NEW ORLEANS/LOUISIANA DEVELOPMENT
CORPORATION, a Louisiana
corporation, General Partner
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
S-1
<PAGE>
By: GRAND PALAIS CASINO, INC., a
Delaware corporation, General
Partner
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
JAZZ CASINO COMPANY, L.L.C., a Louisiana
limited liability company
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
HARRAH'S OPERATING COMPANY, INC., a
Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
GRAND PALAIS CASINO, INC., a Delaware
corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
NEW ORLEANS/LOUISIANA DEVELOPMENT
CORPORATION, a Louisiana corporation
By:
------------------------------------
Name:
----------------------------------
S-2
<PAGE>
Title:
---------------------------------
HARRAH'S JAZZ FINANCE CORPORATION, a
Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
HARRAH'S NEW ORLEANS INVESTMENT COMPANY,
a Nevada corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
HARRAH'S NEW ORLEANS MANAGEMENT COMPANY,
a Nevada corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
HARRAH'S ENTERTAINMENT, INC., a Delaware
corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
S-3
<PAGE>
EXHIBIT A
FORM OF
MOTION AND ORDER TO DISMISS WITH PREJUDICE
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
- -------------------------------------------------------------------------------
CITY OF NEW ORLEANS AND CASE NO. 95-14545
RIVERGATE DEVELOPMENT
CORPORATION, J. BRAHNEY, III
PLAINTIFF, CHAPTER 11
v.
ADVERSARY NO.: 96-1031
HARRAH'S ENTERTAINMENT, INC.
(F/K/A THE PROMUS COMPANIES, REFERRED FROM: U.S.D.C. CIVIL
INC.); GRAND PALAIS CASINO, ACTION NO. 96-0274
INC.; EMBASSY SUITES, INC.;
FIRST NATIONAL BANK OF COMMERCE AND U.S.D.C. SECTION N
RONALD A. LENCZYCKI,
U.S.D.C. MAG. 4
DEFENDANTS.
- -------------------------------------------------------------------------------
MOTION AND ORDER TO DISMISS WITH PREJUDICE
NOW INTO COURT, THROUGH UNDERSIGNED COUNSEL, COMES CITY OF NEW ORLEANS
AND RIVERGATE DEVELOPMENT CORPORATION, AND ON REPRESENTING TO THE COURT THAT
THIS ACTION HAS BEEN FULLY SETTLED AND COMPROMISED, RESPECTFULLY MOVE THIS
HONORABLE COURT FOR AN ORDER DISMISSING THIS ACTION WITH PREJUDICE, EACH PARTY
TO BEAR ITS RESPECTIVE COSTS.
RESPECTFULLY SUBMITTED,
BY:
----------------------- ---------
ATTORNEY FOR CITY OF NEW
ORLEANS AND RIVERGATE
DEVELOPMENT CORPORATION
A-1
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
- -------------------------------------------------------------------------------
CITY OF NEW ORLEANS AND CASE NO. 95-14545
RIVERGATE DEVELOPMENT
CORPORATION, J. BRAHNEY, III
PLAINTIFF, CHAPTER 11
v.
ADVERSARY NO.: 96-1031
HARRAH'S ENTERTAINMENT, INC.
(F/K/A THE PROMUS COMPANIES, REFERRED FROM: U.S.D.C.
INC.); GRAND PALAIS CASINO, CIVIL ACTION NO. 96-0274
INC.; EMBASSY SUITES, INC.;
FIRST NATIONAL BANK OF COMMERCE U.S.D.C. SECTION N
AND RONALD A. LENCZYCKI,
DEFENDANTS. U.S.D.C. MAG. 4
- -------------------------------------------------------------------------------
ORDER
CONSIDER THE FOLLOWING MOTION:
IT IS HEREBY ORDERED THAT THIS ACTION IS HEREBY DISMISSED WITH
PREJUDICE, EACH PARTY TO BEAR ITS RESPECTIVE COSTS.
NEW ORLEANS, LOUISIANA _____ DAY OF __________, 1998.
------------------------------
UNITED STATES BANKRUPTCY JUDGE
<PAGE>
EXHIBIT H
The Broadmoor Settlement Agreement attached as Exhibit H to the Plan
of Reorganization filed on February 26, 1997 is hereby incorporated by
reference.
<PAGE>
EXHIBIT I
The Ticket Purchase Agreement attached as Exhibit I to the Plan of
Reorganization filed on February 26, 1997 is hereby incorporated by reference.
<PAGE>
Exhibit J
December 10, 1997
TERMS AND CONDITIONS OF
PRE-PETITION BANK PARTICIPATION IN REORGANIZATION FINANCING
<PAGE>
Exhibit J
HARRAH'S JAZZ COMPANY
JAZZ CASINO COMPANY, L.L.C.
TERMS AND CONDITIONS OF
PRE-PETITION BANK PARTICIPATION IN REORGANIZATION FINANCING
I. Terms of Bank Financing Facility As described in the attached Jazz
Casino Company, L.L.C. Bank Financing
Indicative Term Sheet (the "Bank
Financing").
II. Terms of Debtors Chapter 11 The following shall be effectuated
Plan (the "Plan") through pre-solicitation modifications
to the proposed Plan satisfactory to the
banks participating in the Bank
Financing ("Participating Banks"):
A. Allowance of Pre-Petition Claims of Participating Banks (the
Claims of Participating Banks "Allowed Bank Claims") will be granted
final allowance in the Plan in an amount
equal to:
(i) with respect to any
Participating Bank which participated in
the pre-petition standby letter of
credit issued by Bankers Trust Company
and previously drawn by the beneficiary
(Broadmoor), its respective share of the
amount drawn ($5,000,000) plus unpaid
interest and fees accrued through the
effective date of the Plan (the
"Effective Date");
(ii) with respect to any
Participating Bank which participated in
the Standby LC S-10269, which remains
undrawn by the beneficiary (City of New
Orleans), its respective share of
accrued unpaid fees through the
Effective Date;
J-1
<PAGE>
(iii) with respect to Bankers Trust
Company as Administrative Agent, all
unpaid facing fees arising under the Old
Bank Credit Agreement through the
Effective Date; and
(iv) with respect to any
Participating Bank which purchases on
the Effective Date additional
Convertible Junior Subordinated
Debentures equal to the amount allowed
under this clause (iv), its share of the
fees and expenses of Wachtel, Lipton,
Rosen & Katz as restructuring counsel of
the Administrative Agent (but excluding
any fees and expenses incurred in
connection with the Bank Financing). On
the Effective Date, the Administrative
Agent will pay the Allowed Bank Claims
from the Withheld Funds (as defined in
the Plan).
J-2
<PAGE>
B. Purchase of On the Effective Date, each
Junior Convertible Participating Bank will purchase
Subordinated Debentures Convertible Junior Subordinated
Debentures in a principal amount equal
to the sum of (x) its pro rata share of
$11,000,000 based on the ratio of the
fees and expenses paid to it in
connection with the existing credit
facility to the aggregate fees and
expenses paid to all Participating Banks
in connection with such credit facility,
plus (y) with respect to any
Participating Bank which elects to have
the portion of its claim described in
Paragraph II. A (iv) above allowed and
paid, the amount of such allowed claim.
Any remaining withheld Funds will be
paid over to First National Bank of
Commerce as Old Bank Collateral Agent to
be distributed according to the Plan.
C. Waiver of all Except as set forth in paragraph A,
Claims of Participating all Participating Banks and
Banks affiliated members of the
Bank/Underwriter Group shall waive any
Claims against any Debtor or partners of
Harrah's Jazz Company.
J-3
<PAGE>
D. Settlement and Releases Participating Banks shall exchange
releases with the estate of each Debtor,
the Debtors Group, the HET Group, the
Bondholder Committee Group, the City
Group, the State Group, the NOLDC Group
and the Grand Palais Group, FNBC and
other parties receiving releases from
the Debtor on terms no less favorable
than those being granted under the Plan
to Harrah's Entertainment, Inc. ("HET")
or such other parties. Injunctive and
other protections granted to Released
Parties (as defined in the Plan) shall
apply on the same terms to Participating
Banks. All of the foregoing shall be
effectuated to obtain the broadest
possible preclusive effect with respect
to all potential derivative or direct
claims.
Participating Banks shall be included in
the group of persons whose collective
release is being solicited from
bondholders through the separate
consensual release mechanism.
Consideration for release of
Participating Banks will be, among other
things, the Release Pool stock to be
contributed by HET.)
Any claims against non-participating
banks or other non-settling parties will
be retained by the reorganized debtor,
with a judgment reduction and indemnity
mechanism for settled parties in respect
of such claims.
III. Reimbursement of JCC shall reimburse the
Attorneys' Fees and Expenses Participating Banks up to $500,000 in
attorneys' fees plus out-of-pocket
expenses of White & Case incurred in
connection with the negotiation and
documentation of the Bank Financing.
J-4
<PAGE>
Exhibit A
(to Terms and Conditions of Pre-Petition Bank
Participation in Reorganization Financing)
J-A-1
<PAGE>
JAZZ CASINO COMPANY, L.L.C. - BANK FINANCING INDICATIVE TERM SHEET
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This Bank Financing Indicative Term Sheet does not constitute (and shall not be
construed as) a commitment on the part of, or an engagement of, Bankers Trust
Company ("BTCo") or any of its affiliates and creates no obligation or liability
on the part of BTCo or any of its affiliates in connection therewith. If the
Credit Facility contemplated by this Bank Financing Indicative Term Sheet is
entered into, all terms and conditions not expressly (or to the extent not
expressly) described herein will be subject to the agreement of BTCo and the
respective other parties thereto.
I. CREDIT FACILITIES
A. REVOLVING CREDIT FACILITY
AMOUNT: $25 million, with a $10 million letter
of credit sublimit.
MATURITY DATE: June 30, 2005
SCHEDULED AMORTIZATION: None.
CREDIT SUPPORT: Harrah's Entertainment, Inc. ("HET") and
Harrah's Operating Company, Inc. ("HOC")
shall provide a joint and several
unconditional payment guaranty and/or
"put" agreement. Such guaranty and/or
put agreement shall contain terms and
conditions satisfactory to Bankers Trust
Company ("BTCo") and HET, including
incorporating by reference the covenants
contained in HET's existing senior bank
credit facility.
J-A-2
<PAGE>
SECURITY: To include a deed of trust and security
interest in the following collateral
(the "Collateral"): the real property
comprising the Casino Project, including
improvements hereafter completed; all
personal property, FF&E, contract
rights, equipment leases, intangibles
and all other assets of the Borrower and
its subsidiaries now owned or hereafter
acquired, but excluding, in each case to
the extent not permitted to be assigned
pursuant to applicable law, the Casino
Operating Contract and gross revenue
share payments to the State of
Louisiana.
RANKING: The Revolving Credit Facility will be a
senior secured obligation of the
Borrower, ranking junior (except for the
right to receive and retain payments
pursuant to HET and/or HOC guarantees
and put agreements) to the $60 million A
Term Loans (as hereinafter defined),
having a senior lien priority to the
$135 million B Term Loans (as
hereinafter defined) and the $187.5
million of Bonds due 2009, which bonds
include contingent payments and the
related new contingent bonds
(collectively, the "Bonds"), and having
a senior lien priority to all other
existing and future indebtedness of the
Borrower. The Revolving Credit Facility
will also have a junior priority to the
lien in favor of HET and HOC as
guarantors of the Minimum Payment, as
described in Section II below in the
paragraph entitled "Prior Security."
INTEREST RATE: Loans under the Revolving Credit
Facility will bear interest at a rate
per annum which is (i) so long as the
"Carry Obligations" under
J-A-3
<PAGE>
the Completion Guarantee referenced
below remain guaranteed pursuant to the
terms of such Completion Guarantee and
in accordance with the terms thereof
(with the first date upon which such
Carry Obligations are no longer so
guaranteed being herein called the
"Carry Obligation Termination Date"), at
the applicable HET interest rate and
(ii) at all times from and after the
Carry Obligation Termination Date, at a
rate per annum equal to the sum of (a)
Libor + 2.50%, plus, if applicable, (b)
any increase, not to exceed 1.0%, in the
applicable interest rate charged under
HET's existing senior bank credit
facility ("HET interest rate") above the
HET interest rate in effect on the
Effective Date, except that default
interest rates will apply to past-due
amounts.
B. SENIOR SECURED TERM
LOANS (THE "A TERM LOANS")
AMOUNT: $60.0 million; with Tranche A-1
comprising $10 million (the "A-1 Term
Loans"), Tranche A-2 comprising $20
million (the "A-2 Term Loans"), and
Tranche A-3 comprising $30 million (the
"A-3 Term Loans").
MATURITY: September 30, 2004
SCHEDULED AMORTIZATION: As shown on Annex I attached hereto.
See the paragraph entitled
"Amortization" in Section II below.
CREDIT SUPPORT: HET and HOC shall jointly and severally
provide an unconditional payment
guaranty
J-A-4
<PAGE>
of, and/or "put" agreement with respect
to, all amounts owing under Tranche A-2
of the A Term Loan Facility. Such
guarantee and/or put agreement shall
contain terms and conditions
satisfactory to BTCo and HET, including
incorporating by reference the covenants
contained in HET's existing senior bank
credit facility.
SECURITY: To include a deed of trust and security
interest in the Collateral.
RANKING: The A Term Loans will be senior secured
obligations of the Borrower, ranking
senior to all existing and future
indebtedness of the Borrower (including
the Revolving Credit Facility, the B
Term Loans and the Bonds), but ranking
junior to the lien in favor of HET and
HOC as guarantors of the Minimum
Payment, as described in Section II
below in the paragraph entitled "Prior
Security."
INTEREST RATE: Loans under Tranche A-1 and Tranche A-3
will bear interest at Libor + 1.0%, and
loans under Tranche A-2 will bear
interest at a rate per annum equal to
the sum or (i) Libor + 2.50%, plus, if
applicable, (ii) any increase, not to
exceed 1.0%, in the applicable HET
interest rate above the HET interest
rate in effect on the Effective Date,
except that in all cases default
interest rates will apply to past due
amounts.
C. SECURED TERM LOANS
(THE "B TERM LOANS")
AMOUNT: $135.0 million; with Tranche B-1
comprising $30 million (the "B-1 Term
Loans") and
J-A-5
<PAGE>
Tranche B-2 comprising $105 million (the
"B-2 Term Loans").
MATURITY: June 30, 2005
SCHEDULED AMORTIZATION: As shown on Annex I. See the paragraph
entitled "Amortization" in Section II
below.
CREDIT SUPPORT: HET and HOC shall jointly and severally
provide an unconditional payment
guaranty of, and/or "put" agreement with
respect to, all of the amounts owing
under Tranche B-2 of the B Term Loan
Facility. Such guaranty and/or put
agreement shall contain terms and
conditions satisfactory to BTCo and HET,
including incorporating by reference the
covenants contained in HET's existing
senior bank credit facility.
SECURITY: To include a deed of trust and security
interest in the Collateral.
RANKING: The B Term Loan Facility will be
subordinated to the A Term Loan Facility
and, in lien priority, to the Revolving
Credit Facility, pari passu with the
Bonds, and senior in lien priority to
all other existing and future senior
indebtedness of the Borrower. The
B Term Loan Facility will also have a
junior priority to the lien in favor of
HET and HOC as guarantors of the Minimum
Payment, as described in Section II
below in the paragraph entitled "Prior
Security."
INTEREST RATE: Loans under Tranche B-1 will bear
interest at Libor + 2.50%. The loans
under Tranche B-2 will bear interest at
a rate per annum equal to (i) Libor +
2.50%, plus, if
J-A-6
<PAGE>
applicable, (ii) any increase, not to
exceed 1.0%, in the applicable HET
interest rate above the HET interest
rate in effect on the Effective Date on
the portion of the loans under Tranche
B-2 in excess of $10 million and in the
case of the first $10 million of such
loans at any time outstanding, the rate
will be the applicable HET interest
rate, except that in all cases default
interest rates will apply to past-due
amounts.
II. TERMS APPLICABLE TO ALL
CREDIT FACILITIES
PRIOR SECURITY: The security interests in favor of the
Revolving Credit Facility, A Term Loans
and B Term Loans will be subject to a
prior security interest in favor of HET
and HOC as guarantors of the Minimum
Payment, as described in Exhibit B to
the Plan of Reorganization.
Intercreditor arrangements involving
this prior security interest are to be
determined.
BORROWER A newly formed company, Jazz Casino
Company, L.L.C., to operate the former
Harrah's Jazz Casino project in New
Orleans (the "Company" or the
"Borrower")
AMORTIZATION The maturity date for each Tranche of
the Credit Facilities, as well as the
amortization schedule on Annex I
attached hereto, were based on a
projected Effective Date of February 28,
1998 and a projected casino opening date
of February 28, 1999. The Credit
Agreement will set forth an amortization
schedule based on the actual Effective
Date and the projected casino
J-A-7
<PAGE>
opening date as of the Effective Date.
The scheduled amortization payments
shown on Annex I attached hereto (x)
with respect to the A-1 and A-2 Term
Loans, shall be applied pro rata to the
outstanding A-1 and A-2 Term Loans
(based upon the relative outstanding
principal amounts thereof) and (y) with
respect to the B Term Loans, shall be
applied, first, to the repayment of all
then outstanding Tranche B-1 Term Loans
and, after all Tranche B-1 Term Loans
have been repaid in full, to outstanding
Tranche B-2 Term Loans.
Amortization payments with respect to
the B-2 Term Loans shall be applied
first to the portion of the B-2 Term
Loans as to which a credit support fee
is payable until such portion is fully
repaid and thereafter to the balance of
the B-2 Term Loans as to which no credit
support fee is payable.
For the first six PIK periods, the
scheduled quarterly amortizations listed
in Annex I attached hereto shall be
deferred for the corresponding PIK
period if (i) the payment-in-kind
feature applicable to the Bonds is
exercised such that payments in kind
have been made for the semi-annual
periods ending prior to such quarterly
amortization date, (ii) HNOMC has
deferred base management fees for the
corresponding PIK period, (iii) HNOMC
has deferred incentive management fees
for the corresponding PIK periods, and
(iv) HET has deferred its fees for
providing a guaranty to the LGCB for the
corresponding PIK period.
J-A-8
<PAGE>
If EBITDA is less than $28.5 million for
the twelve month period ending one month
prior to each semi-annual bond interest
payment date beginning with the fourth
year after the Effective Date, the bonds
will receive PIK interest, management
fees will be deferred, scheduled
amortization of bank principal will be
deferred (in no case beyond the
scheduled maturity date) and the HET
guarantee fee will be deferred.
At such time as EBITDA exceeds $65
million, any deferred base management
fees and deferred guaranty fees may be
repaid pro rata out of available cash
flow remaining after application of
Excess Cash Flow as set forth in the
paragraph entitiled "Priorities within
Credit Facilities and Application of
Excess Cash Flow" in Section II below,
and at such time as EBITDA exceeds $75
million, after payment of any deferred
base fees and deferred guaranty fees,
any deferred incentive management fees
may also be repaid pro rata out of
available cash flow remaining after
application of Excess Cash Flow as set
forth in the paragraph entitiled
"Priorities within Credit Facilities and
Application of Excess Cash Flow" in
Section II below.
USE OF PROCEEDS/FUNDING: To complete, in all material respects,
the Casino Project (the "Casino
Project") to be developed in accordance
with the Plans and Specifications,
Budget and Timetable (to be defined in
the Credit Agreement), provided that the
timing of the availability of the
Revolving Credit Facility and
limitations on
J-A-9
<PAGE>
the uses of the proceeds thereof, in
each case satisfactory to BTCo, shall be
provided.
The A-1, A-3 and the B-1 Term Loans must
be drawn at closing, without subsequent
funding or disbursement conditions, and
the proceeds may be used for the project
or held for future use by Borrower. Any
such proceeds being held for future use
will constitute Collateral.
After the funding of A-1, A-3 and B-1
Term Loans, drawings of the B-2 and A-2
Term Loans and extensions of credit
pursuant to the Revolving Credit
Facility will be subject to conditions
precedent that there exist no default
under Section 10.01 (payment) or Section
10.06 (bankruptcy) or under the Bank
Completion Guarantee or the HET/HOC
Guaranty and Loan Purchase Agreement and
that all representations in the Bank
Completion Guarantee and the HET/HOC
Guaranty and Loan Purchase Agreement
remain true and correct in all material
respects; provided that HET shall have
an irrevocable and unconditional
obligation to fund any undrawn amounts
under the Bank Completion Guarantee,
subject to its terms.
Tranche B-2 must be drawn prior to
Tranche A-2. If any of Tranche B-2
remains undrawn on completion of the
Casino Project, on such completion it
shall be drawn, to the extent Tranche A-
1 Loans are then outstanding, to pay
down Tranche A-1. If any of Tranche B-2
remains undrawn (or will remain undrawn)
after the actions required by the
immediately
J-A-10
<PAGE>
preceding sentence are taken,
outstanding Tranche B-1 Loans in an
aggregate amount equal to such undrawn
amount shall be converted into Tranche
B-2 Loans.
UPFRONT FEE: None.
COMPLETION GUARANTEE: HET and HOC will also guarantee
completion of the Casino Project in
conformity with the Plans and
Specifications, the Budget and the
Timetable. If the Company has
insufficient funds to complete the
Casino Project in accordance with the
Plans, HET and HOC will be jointly and
severally obligated to promptly
contribute at the time of such
insufficiency, in the form of junior
subordinated debt maturing in not less
than 11 years, all amounts, in cash,
necessary to permit completion of the
Casino Project. The Completion
Guarantee will terminate on the date on
which the Casino Project is completed in
all material respects. The Completion
Guarantee shall contain terms and
provisions which are substantially the
same as the provisions of the other
Completion Guarantees furnished by HET
or HOC, as the case may be, in respect
of the Casino Project and, in any event,
shall be required to be satisfactory to
BTCo and HET.
HET/JCC AGREEMENT: The Credit Agreement shall contain
waiver and release provisions regarding
any non-renewal of any Guaranty to the
LGCB by HET and HOCI in accordance with
the terms of the HET/JCC Agreement or
non-renewal by HET and HOCI of the
HET/JCC Agreement after March 31, 2004.
J-A-11
<PAGE>
PRIORITIES WITHIN CREDIT For purposes of allocating payments
FACILITIES AND APPLICATION among the holders of the Term Loans and
OF EXCESS CASH FLOW: the lenders pursuant to the Revolving
Credit Facility only, all Excess Cash
Flow (to be defined in the Credit
Agreement) will first be allocated to
repayment of Tranches A-1 and A-2 on a
pro rata basis until Tranches A-1 and A-
2 have been repaid in full.
Scheduled amortization and other
payments made in respect of the Term
Loan Facilities and Revolving Credit
Facility (excluding payments pursuant to
the payment guarantees and put
agreements referenced above) will first
be allocated to any unpaid amounts which
are then due and payable with respect to
Tranches A and B-1. Payments shall be
allocated to amounts then due and
payable pursuant to the Revolving Credit
Facility and Tranche B-2 only if all
amounts then due and payable with
respect to Tranches A and B-1 have been
paid in full.
After Tranches A-1 and A-2 are repaid,
mandatory prepayments resulting from
application of Excess Cash Flow and
other proceeds (excluding scheduled
amortization) shall be applied:
(i) if any principal amortization has
been deferred as set forth above, 75% of
Excess Cash Flow and such other proceeds
shall be applied to first to Tranche B-1
and second to Tranche A-3 to the extent
of the total of all of such deferred
principal amortization (i.e. the total
of deferred amortization on
J-A-12
<PAGE>
Tranches A-1, A-2, A-3, B-1, and B-2);
and
(ii) otherwise, and after the
application of clause (i) above, 50% of
Excess Cash Flow and such other proceeds
shall be applied pro rata to Tranches
A-3, B-1 and B-2 until an agreed
Threshold Amount (determined based on
projected cash flow) for the respective
fiscal year has been so applied to
Tranche B-2. At such time as an
aggregate amount equal to the agreed
Threshold Amount has been so applied in
any fiscal year, Excess Cash Flow shall
be applied first to Tranche B-1, second
to Tranche A-3 and third to Tranche B-2.
The B-1 Term Loans and the B-2 Term
Loans will be secured equally and
ratably with the Bonds, and if, as a
result of any distribution pursuant to
the security arrangements or pursuant to
a bankruptcy or other similar proceeding
with respect to the Borrower or in other
similar circumstances, amounts are
distributed in respect of Tranche B-2
(other than payments pursuant to the
payment guarantees and put agreements
referenced above), then the holders of
the B-2 Term Loans shall (and shall
agree to) turn such amounts over to the
holders of the B-1 Term Loans until all
amounts owing with respect to the B-1
Term Loans are repaid in full.
The Credit Agreement and the payment
guarantees and/or put agreements in
respect of the B-2 Term Loans shall
contain subrogation and other provisions
satisfactory to BTCo acknowledging and
agreeing to the
J-A-13
<PAGE>
foregoing.
ADMINISTRATIVE AGENT'S FEE: $100,000 payable annually in arrears.
CREDIT SUPPORT FEE: So long as the Revolving Credit
Facility, A-2 Term Loans or B-2 Term
Loans are entitled to the respective
payment guarantees and/or put agreements
provided by HET and/or HOC as described
above, the respective Banks shall agree
that, from interest payments actually
received by them in respect of the
Revolving Credit Facility, A-2 Term
Loans or B-2 Term Loans, as the case may
be, HET shall be paid a fee equal to 2%
per annum on the outstanding principal
amount of Loans and/or stated amount of
letters of credit outstanding from time
to time pursuant to the Revolving Credit
Facility and Tranche A-2 and B-2 Term
Loans (in the case of B-2 Term Loans,
only to the extent of the aggregate
outstanding principal amount thereof
from time to time is in excess of $10
million); provided, however, that (i)
the fee described above with respect to
the credit support provided for the
Revolving Credit Facility shall only
accrue from and after the occurrence of
the Carry Obligation Termination Date;
(ii) for any time period in which the
HET applicable margin increases by more
than 1.0% per annum above the HET
applicable margin in effect on the
Effective Date, the credit support fee
paid by the Banks shall decrease by .01%
for each such .01% increase in the
applicable HET applicable margin (in
excess of 1.0% over the HET interest
rate in effect on the Effective Date)
until such credit support fee is reduced
to zero; (iii) for any
J-A-14
<PAGE>
time period in which the applicable HET
interest rate decreases below the HET
interest rate in effect on the Effective
Date, the credit support fee paid by the
Banks shall increase by .01% for each
such .01% decrease in the applicable HET
interest rate (below the HET applicable
margin in effect on the Effective Date).
So long as the Revolving Credit
Facility, A-2 Term Loans or B-2 Term
Loans are entitled to the respective
payment guarantees and/or put agreements
provided by HET and/or HOC as described
above, JCC shall pay a credit support
fee equal to .75% per annum on the
outstanding principal amount of Loans
and/or stated amount of letters of
credit outstanding from time to time
pursuant to the Revolving Credit
Facility and Tranche A-2 and B-2 Term
Loans (in the case of B-2 Term Loans,
only to the extent of the aggregate
outstanding principal amount thereof
from time to time is in excess of $10
million); provided, however, that (i)
the fee described above with respect to
the credit support provided for the
Revolving Credit Facility shall only
accrue from and after the occurrence of
the Carry Obligation Termination Date;
(ii) for any time period in which the
HET applicable margin increases by more
than .25% per annum above the HET
applicable margin in effect on the
Effective Date, the credit support fee
paid by JCC shall decrease by .01% for
each such .01% increase in the HET
applicable margin (in excess of .25%
over the HET applicable margin in effect
on the Effective Date) until such credit
support fee is reduced to zero.
J-A-15
<PAGE>
COVENANTS: The Credit Facilities will contain
covenants (which will apply equally to
each of the Credit Facilities) usual and
customary for a financing of this
nature.
INTERCREDITOR AGREEMENT: The Administrative Agent (on behalf of
the lenders) and the trustee for the
Bonds shall enter into an intercreditor
agreement with a collateral agent
regarding the Collateral and the rights
and remedies of the various classes of
lenders with respect thereto (the
"Intercreditor Agreement"), which
Intercreditor Agreement shall be in form
and substance satisfactory to BTCo. The
Intercreditor Agreement will provide HET
certain limited secured creditor voting
rights if HET is called on its payment
guaranty.
MISCELLANEOUS: The Credit Facilities will be documented
pursuant to mutually acceptable
definitive loan and collateral
documents, including a Credit Agreement
and a satisfactory Intercreditor
Agreement. The Credit Agreement will
contain customary representations,
warranties, covenants, events of default
and other provisions. Conditions
Precedent will include as conditions
precedent to the closing date, among
other things:
(i) BTCo's satisfaction with Harrah's
Jazz Company's Plan of Reorganization,
including without limitation the
releases to be provided in connection
therewith.
(ii) All necessary governmental and
third party consents and approvals have
been
J-A-16
<PAGE>
obtained (including, without limitation,
all approvals of the Bankruptcy Court
having jurisdiction over Harrah's Jazz
Company's bankruptcy case, all approvals
by the LGCB or its successor agency and
all necessary approvals by the people of
Louisiana and Orleans Parish).
(iii) Lender's satisfaction with the
Plans and Specifications, Budget,
Timetable and other Casino Project
documents.
The Credit Agreement will include
provisions for:
(i) Payment of any Libor breakage
costs, capital adequacy charges and any
applicable taxes by the Borrower;
(ii) Regular reports as to the progress
of construction of the Casino Project;
(iii) Regular furnishing of unaudited
quarterly and audited annual financial
statements of the Borrower, monthly
detailed operating reports and other
reports;
(iv) Furnishing of the same reports with
respect to HET and its subsidiaries as
are required under the HET Bank
Facility;
(v) Indemnification of Lenders as to
all third-party claims relative to the
Credit Facilities (except as to matters
involving the gross negligence or
willful misconduct of Lenders) and
environmental law matters;
(vi) Application of New York law
(except
J-A-17
<PAGE>
certain security documentation that the
lenders determine should be governed by
Louisiana law) and waiver of jury trial;
and
(vii) Assignments to customary eligible
assignees permitted with consent of the
Borrower, the Administrative Agent and,
in the case of assignments of interests
in the Revolving Credit Facility and A-2
or B-2 Term Loans, HET (none of which
consents shall be unreasonably
withheld), subject to $5.0 million
minimum. No consents will be required
for assignment to existing Lenders or
after an event of default.
Participations permitted without consent
of the Borrower or Administrative Agent,
subject to customary limitations.
(viii) An event of default due to a
change of control of HET as a result of
the Board of HET not consisting of a
majority of Continuing Directors.
(ix) The change of control event of
default in the bank credit agreement
will also occur if HET does not retain
at least 51% of the Class B stock prior
to the Transition Date and 20% of the
JCC Holding stock after the Transition
Date.
(x) The Continuing Director event of
default or the change in ownership of
Class B Stock Event of Default will be
deemed cured in respect of the debt
acquired by HET as guarantor if the
guaranteed bank debt is acquired by HET
as guarantor; provided that such deemed
cure shall not affect the bank debt
guaranteed by HET unless and until
J-A-18
<PAGE>
HET as guarantor acquires such bank debt
and in any event shall not affect the
bank debt not guaranteed by HET.
(xi) The change of the Casino Manager or
loss of the Harrah's name shall be an
event of default in the Bank Credit
Agreement.
REQUISITE LENDERS: Lenders comprising more than 50% of
total commitments under the Credit
Facilities; provided that commitments
held by HET, HOC or any other affiliate
of the Borrower shall be excluded.
EXPENSE AND INDEMNITY PROVISIONS: JCC shall reimburse the Banks up to
$500,000 in attorneys' fees plus out-of-
pocket expenses of White & Case incurred
in connection with the negotiation and
documentation of the Revolving Credit
Facility, the A Term Loans and the
B Term Loans.
J-A-19
<PAGE>
ANNEX I TO JAZZ CASINO COMPANY, L.L.C. - BANK FINANCING
INDICATIVE TERM SHEET
<TABLE>
<CAPTION>
$30 MILLION $30 MILLION $135 MILLION
A-1 AND A-2 A-3 TERM B TERM LOANS TOTAL
TERM LOANS LOAN
<S> <C> <C> <C> <C>
December 31, 1999 $100,000 $1,000,000 $1,500,000 $ 2,600,000
March 31, 2000 $100,000 $1,000,000 $1,500,000 $ 2,600,000
June 30, 2000 $100,000 $1,000,000 $1,500,000 $ 2,600,000
September 31, 2000 $100,000 $1,000,000 $1,500,000 $ 2,600,000
December 31, 2000 $100,000 $1,500,000 $2,500,000 $ 4,100,000
March 31, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
June 30, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
September 31, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
December 31, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
March 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
June 30, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
September 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
December 31, 2002 $100,000 $1,750,000 $2,500,000 $ 4,350,000
March 31, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
June 30, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
September 31, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
December 31, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
March 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
June 30, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
September 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
December 31, 2004 $100,000 $0 $4,250,000 $ 4,350,000
March 31, 2005 $100,000 $0 $4,250,000 $ 4,350,000
June 30, 2005 $27,800,000 $0 $ 80,500,000 $108,300,000
Total $30,000,000 $30,000,000 $135,000,000 $195,000,000
</TABLE>
Note: See the paragraph entitled "Amortization" in Section II of the Bank
Financing Indicative Term Sheet to which this Annex I is attached.
J-A-20
<PAGE>
EXHIBIT K
December 10, 1997
TERMS AND CONDITIONS OF
UNDERWRITERS PARTICIPATION IN REORGANIZATION FINANCING
<PAGE>
Exhibit K
HARRAH'S JAZZ COMPANY
HARRAH'S JAZZ FINANCE CORP.
HARRAH'S NEW ORLEANS INVESTMENT CO.
TERMS AND CONDITIONS OF
UNDERWRITERS PARTICIPATION IN REORGANIZATION FINANCING
I. Terms of Underwriters' Financing: Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Salomon Brothers
Inc. ("Salomon") and BT Securities
Corporation ("BT Securities")
(collectively in their capacity as
underwriters for HJC and HNOIC, the
"Underwriters") subject to the
conditions set forth below agree to
purchase approximately $15 million face
value of subordinated notes (the
"Notes") on mutually acceptable terms
and conditions as set forth in the
attached term sheet. The aggregate
amount of the Notes to be purchased by
the Underwriters shall be equal to the
aggregate fees, and expenses paid or
reimbursed to the Underwriters.
II. Terms of the Debtors' The following shall be effectuated
Chapter 11 Plan (the "Plan"): through pre-solicitation modifications
to the proposed Plan satisfactory to
the Underwriters:
A. Waiver of Other Claims: The Underwriters agree to waive all of
their claims against any or all of the
Debtors and NOLDC.
B. Settlement and Releases: The Underwriters shall exchange mutual
releases with the estate of each Debtor,
the Debtors Group, the HET Group, the
Bondholder Committee Group, the City
Group, the State Group, the NOLDC Group
and the
K-1
<PAGE>
Grand Palais Group, FNBC and other
parties receiving releases from the
Debtors, on terms no less favorable than
those being granted under the Plan to
Harrah's Entertainment, Inc. ("HET") and
such other parties. Injunctive and
other protections granted to Released
Parties (as defined in the Plan) shall
apply on the same terms to the
Underwriters. All of the foregoing
shall be effectuated to obtain the
broadest possible preclusive effect with
respect to all potential derivative or
direct claims.
The Underwriters shall be included in
the group of persons whose collective
release is being solicited from
bondholders through the separate
consensual release mechanism. (Note:
consideration for release of the
Underwriters is, inter alia, the Release
Pool stock to be contributed by HET.)
Any claims against non-participating
banks or other non-settling parties will
be retained by the reorganized debtor,
with a judgment reduction and indemnity
mechanism for settled parties in respect
of such claims.
III. No Reimbursement of Each Underwriter shall bear all fees
Attorneys' Fees and and expenses of attorneys acting on
Expenses its behalf related to the original
financing, the Exit Financing (through
the closing) and these bankruptcy cases.
K-2
<PAGE>
FOR DISCUSSION PURPOSES ONLY
TERM SHEET FOR
CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES (THE "DEBENTURES")
TO BE ISSUED BY
JAZZ CASINO COMPANY, L.L.C.
Issuer Jazz Casino Company, L.L.C. ("Jazz")
Principal Amount Approximately $26.637 million
Approximately $15 million purchased by
the Underwriters or their affiliates and
approximately $11.0 million to be
purchased by Bankers Trust. The
aggregate amount of the Debentures to be
purchased by the Underwriters shall be
equal to the aggregate fees, and
expenses paid or reimbursed to the
Underwriters.
Purchase Price Par.
Maturity 6 months following the scheduled
maturity of the $187.5 million of new
contingent bonds (the "Contingent
Bonds") to be issued to existing
bondholders.
Interest 8.0% per annum payable semi-annually
either in cash, or at the option of
Jazz, in whole or in part, in additional
Debentures (i) at any time during the
first five full years following the
issuance of the Debentures, and (ii) at
any time thereafter if during the
immediately preceding full interest
period on the Contingent Bonds, no
contingent interest was paid on the
Contingent Bonds.
K-3
<PAGE>
Amortization None.
Rank Subordinated to the A Term Loan, the B
Term Loan, the Working Capital Facility,
the New Bonds and the New Contingent
Bonds, as well as all debt which would
constitute Senior Debt to the foregoing.
The Debentures will, however, be senior
to the repayment of Jazz's obligations
under the Completion Loan and any other
amounts advanced by Harrah's
Entertainment under its completion
obligations.
Collateral None.
Convertible At the Conversion Price in whole or in
part, at any time after October 1, 2002
at the option of the holder into Class A
Common Stock of Jazz.
Conversion Price $25.00 per share of Class A Common
Stock, subject to anti-dilution and
other appropriate adjustments (which has
been calculated using the 10,000,000
shares of Class A and Class B Common
Stock which are expected to be issued on
the Effective Date, and a target total
market value of such shares of Class A
and Class B common stock equal to $250.0
million).
K-4
<PAGE>
Redeemable At the option of Jazz, (i) at any time
at par plus accrued interest in cash, or
(ii) at any time during the 12 months
prior to the maturity of the Debentures,
at par in whole or in part in shares of
Class A Common Stock at the Conversion
Price per share if the Conversion Price
per share is greater than the Current
Market Price per share. The "Current
Market Price" of the Class A Common
Stock as of any date will be defined as
the volume-weighted average of the
closing trading or bid prices of the
Class A common stock for the 10
consecutive trading days preceding such
date, with customary modification if the
Class A common stock is not then traded.
Amortization None required prior to maturity.
Credit Support None.
Purpose Construction financing and other
corporate purposes.
Fees None, other than the payment of
interest.
Covenants None, other than payment of interest.
Conditions, Representations None other than basic legality and
and Warranties enforceability of the Debentures.
K-5
<PAGE>
Issuance The Debentures are to be purchased by
the Underwriters or their affiliates and
the banks on the Effective Date of the
HJC Bankruptcy. Jazz to provide demand
registration rights to permit one
underwritten secondary offering of these
Debentures if requested by the initial
holders of the restricted Debentures in
an amount no less than $5 million and no
sooner than October 1, 2002.
Jazz will file the reports required
under Section 13(a) or 15(d) of the 1934
Act and the rules and regulations
adopted by the SEC thereunder. Upon the
request of any holder of Debentures,
Jazz will (i) make publicly available
such information as is necessary to
permit sales pursuant to Rule 144 under
the 1933 Act, (ii) deliver such
information as is necessary to permit
sales pursuant to Rule 144A under the
1933 Act, and (iii) take such further
action as is reasonable under the
circumstances to enable such holder to
sell its Debentures without registration
under the 1933 Act. Upon the request of
any holder of Debentures, Jazz will
deliver to such holder a written
statement as to whether it has complied
with such requirements.
Acknowledgment The Indenture for the Convertible
Subordinated Debenture will contain
certain waiver and release provisions
regarding any non-renewal of the
Guaranty (as defined in the HET/JCC
Agreement between HET, HOCI and JCC in
favor of the LGCB) in accordance with
the terms of the HET/JCC Agreement or
non-renewal of the HET/JCC Agreement
after March 31, 2004
K-6
<PAGE>
K-7
<PAGE>
EXHIBIT L
The Centex-Landis Settlement Agreement attached as Exhibit L to the
Plan of Reorganization filed on February 26, 1997 is hereby incorporated by
reference.
<PAGE>
EXHIBIT M
The FNBC Settlement Agreement attached as Exhibit M to the Plan of
Reorganization filed on February 26, 1997 is hereby incorporated by reference.
<PAGE>
EXHIBIT N
December 10, 1997
TERM SHEET
DEVELOPMENT AGREEMENT
This term sheet outlines the principal terms proposed for inclusion in that
certain Development Agreement to be entered into by and between Jazz Casino
Company, L.L.C., a Louisiana limited liability company (the "Company"), and
Harrah's Crescent City Investment Company (the "Consultant") (the "Development
Agreement). This term sheet is attached to and incorporated into that certain
plan of reorganization in the bankruptcy proceedings of Harrah's Jazz Company, a
Louisiana general partnership (the "Plan").
1. DOCUMENTATION. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
agreements related to the Development Agreement in connection with the Plan. As
set forth more fully in the Plan, unless the Plan is consummated on terms
satisfactory to the Consultant and Harrah's Jazz Company in their respective
sole discretion, the parties shall have no further obligations to pursue the
matters described herein.
2. SERVICES GENERALLY. Under the Development Agreement, the Consultant will
arrange, supervise and coordinate certain planning and development services for
the Company with respect to the second floor of the Casino, the Fulton Street
property and the CP3 property (the "Development Properties").
3. DEVELOPMENT SERVICES. Under the Development Agreement, the planning and
development services to be arranged, supervised and coordinated by the
Consultant shall be:
(a) completion of a master plan for the second floor of the Casino;
N-1
<PAGE>
(b) solicitation of development proposals for the Fulton Street property
and the CP3 property;
(c) negotiation with prospective master developers, tenants and users of
the Development Properties;
(d) preparation of marketing, feasibility, architectural, engineering and
other studies and reports necessary for the development of the Development
Properties;
(e) preparation of a pre-development budget and a construction budget
estimating the costs of developing the Development Properties;
(f) selecting, contracting with, and supervising architects, engineers,
and any other consultants, professionals, or third parties on matters
relating to the planning and development of the Development Properties;
(g) obtaining any necessary approvals from the City, RDC, LGCB or any
other governmental bodies or agencies;
(h) Obtaining cost estimates for development of the Development
Properties;
(i) any other planning or development services in connection with the
Development Properties.
4. COSTS AND INDEMNITIES. Neither the Consultant nor any Affiliates of the
Consultant shall receive any fees in consideration for the performance of any
planning and development services pursuant to the Development Agreement.
However, the Company shall be responsible for all costs and expenses of any
third party consultants or contractors in connection with any planning or
development activities or services for the Development Properties. The Company
shall defend, indemnify and save the Consultant and the the Consultant
Affiliates completely harmless in respect to any action, suit, debt or claim
brought by any third party in connection with the performance by the Consultant
or the the Consultant Affiliates of any and all obligations under the
Development Agreement; provided that, in the
N-2
<PAGE>
case of any action, suit, debt or claim arising from the gross negligence or
willful misconduct of the Consultant or the the Consultant Affiliates in
connection with the Development Agreement, the Consultant shall defend,
indemnify and save the Company completely harmless.
N-3
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE MATERIALS ACCOMPANYING
AND CONTAINED WITHIN THIS BALLOT BEFORE COMPLETING
EACH SECTION AND MARKING YOUR CHOICES CLEARLY.
YOU SHOULD NOT RETURN THIS BALLOT IF YOU DO NOT WISH
TO CHANGE THE VOTE THAT YOU PREVIOUSLY CAST IN THESE CASES.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
In re: ) No. 95-14545
) Section A
HARRAH'S JAZZ COMPANY, )
) Chapter 11
Debtor. ) Reorganization
_____________________________)
)
In re: ) No. 95-14544
) Section A
HARRAH'S JAZZ FINANCE CORP., )
) Chapter 11
Debtor. ) Reorganization
_____________________________)
)
In re: )
) No. 95-14871
HARRAH'S NEW ORLEANS ) Section A
INVESTMENT COMPANY, )
) Chapter 11
Debtor. ) Reorganization
_____________________________)
BONDHOLDER'S BALLOT FOR CHANGING VOTE
Holders of claims based upon 14 1/4% first mortgage notes due 2001
("Bondholders") issued by Harrah's Jazz Company and Harrah's Jazz
Finance Corp. should use this ballot only if they wish to change the
votes that they previously cast in these cases. If you do not wish to
change your previous vote(s), please do not return this ballot.
Holders of all other claims against the above-captioned debtors should
not use this ballot. If you are not a Bondholder, please contact Mr.
Mark Fiddes, Price Waterhouse LLP, P.O. Box 81109, Chicago, IL 60681,
(312) 540-2748, and request an appropriate ballot for your class of
claim.
A PLAN OF REORGANIZATION CAN BE CONFIRMED BY THE COURT AND THEREBY MADE BINDING
ON YOU IF IT IS ACCEPTED BY THE HOLDERS OF AT LEAST TWO-THIRDS IN AMOUNT AND
MORE THAN ONE-HALF IN NUMBER OF CLAIMS IN EACH CLASS AND THE HOLDERS OF AT LEAST
TWO-THIRDS IN AMOUNT OF EQUITY SECURITY INTERESTS IN EACH CLASS VOTING ON THE
PLAN. THE "ORIGINAL PLAN" REFERRED TO IN THIS BALLOT RECEIVED THE REQUISITE
VOTES FOR CONFIRMATION BY THE COURT. VOTES CAST ON THE ORIGINAL PLAN WILL BE
DEEMED TO HAVE BEEN VOTED WITH RESPECT TO THE "MODIFIED PLAN" REFERRED TO IN
THIS BALLOT IN THE SAME MANNER IN WHICH THEY WERE CAST ON THE ORIGINAL PLAN,
UNLESS CREDITORS ELECT TO CHANGE THEIR VOTES. ACCORDINGLY, UNLESS A SUFFICIENT
AMOUNT AND NUMBER OF CREDITORS CHANGE THEIR VOTES WITH RESPECT TO THE MODIFIED
PLAN SUCH THAT ANY CLASS HAS NOT ACCEPTED THE MODIFIED PLAN BY THE REQUISITE
MAJORITIES REQUIRED UNDER THE BANKRUPTCY CODE, THE MODIFIED PLAN CAN BE
CONFIRMED BY THE COURT AND THEREBY MADE BINDING ON YOU. IN THE EVENT THAT
SUFFICIENT VOTES ARE CHANGED AND THUS THE REQUISITE ACCEPTANCES ARE NOT
OBTAINED, THE COURT NEVERTHELESS MAY CONFIRM THE MODIFIED PLAN IF THE COURT
FINDS THAT THE MODIFIED PLAN
<PAGE>
ACCORDS FAIR AND EQUITABLE TREATMENT TO THE CLASS OR CLASSES REJECTING
IT AND OTHERWISE SATISFIES THE REQUIREMENTS OF SECTION 1129(b) OF THE
BANKRUPTCY CODE.
The above-captioned debtors (the "Debtors"), together with Harrah's
Entertainment, Inc., proposed the Third Amended Joint Plan of Reorganization,
dated February 26, 1997 (the "Original Plan"). The Debtors distributed to
creditors the Debtors' Third Amended Joint Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code, dated February 26, 1997, along with copies
of the Original Plan, voting instructions and ballots. After a vote by the
Debtors' creditors and a hearing on confirmation of the Original Plan, the
United States Bankruptcy Court for the Eastern District of Louisiana confirmed
the Debtors' Original Plan on April 28, 1997. The Effective Date of the
Original Plan, however, has not occurred.
In July 1997, the Debtors solicited votes on a modified plan of reorganization
which contained changes that were objected to by the Louisiana Gaming Control
Board. The Bankruptcy Court has not conducted a hearing on confirmation of that
plan.
The Debtors are now proposing a different set of modifications to the Original
Plan, as set forth in the Third Amended Joint Plan of Reorganization, as
Modified Through December 10, 1997 (the "Modified Plan"). (Capitalized terms
not otherwise defined in this Ballot have the meanings assigned to them by the
Original Plan or the Modified Plan as the context requires.) Pursuant to
Section 1127(d) of the Bankruptcy Code, the Debtors are distributing this ballot
in order to give holders of claims an opportunity to change their previously
cast votes accepting or rejecting the Original Plan. You are receiving this
ballot because you returned a ballot with respect to the Original Plan and are,
therefore, entitled to change the vote(s) that you previously cast in these
cases. However, if your claim against the Debtors' estates is unliquidated,
disputed, or contingent or is subject to an objection filed with the Bankruptcy
Court, or you have sold or assigned your claim to a third party, your vote will
not be counted.
Below you will be asked to make a decision -- whether, as a Bondholder, you wish
to change your previous vote(s) to accept or reject the Original Plan. To
change the vote(s) that you previously cast to accept or reject the Original
Plan, please mark the appropriate boxes below.
UNDER SECTION 1127 OF THE BANKRUPTCY CODE, IF YOU DO NOT CHANGE YOUR VOTE, YOU
WILL BE DEEMED TO HAVE VOTED IN THE MANNER IN WHICH YOU VOTED ON THE ORIGINAL
PLAN. ACCORDINGLY IF YOU DO NOT WISH TO CHANGE YOUR VOTE(S), YOU NEED NOT AND
SHOULD NOT RETURN THIS BALLOT.
To change your previously cast vote(s), you must fully and accurately complete
this ballot and return it to the following address so as to be received no later
than 5:00 p.m., Central Standard Time, on January 16, 1998:
(for regular mail) Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
c/o Price Waterhouse LLP
P.O. Box 81109
Chicago, Illinois 60681
(for overnight or Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
other courier c/o Price Waterhouse LLP
deliveries) Attn: Mr. Mark Fiddes
200 East Randolph Drive
Chicago, Illinois 60601
ONLY BONDHOLDERS WHICH OWNED BONDS AS OF THE VOTING RECORD DATE ESTABLISHED BY
THE BANKRUPTCY COURT (NOVEMBER 25, 1996) ARE ENTITLED TO CHANGE THEIR VOTES ON
THE ORIGINAL PLAN. IF YOU ACQUIRED BONDS AFTER THE VOTING RECORD DATE OF
NOVEMBER 25, 1996 AND DESIRE TO CHANGE THE VOTE(S) OF THE BONDHOLDER(S) FROM
WHICH YOU ACQUIRED YOUR BONDS, YOU MUST FILE AND DELIVER A NOTICE OF TRANSFER
-2-
<PAGE>
OF CLAIM IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THE BONDHOLDER
PLAN NOTICE ACCOMPANYING THIS BALLOT, OR YOUR CHANGE OF VOTE WILL NOT BE
COUNTED.
THIS BALLOT CANNOT BE USED TO REVOKE, AND SHALL NOT CONSTITUTE A REVOCATION OF,
ANY RELEASE OF CLAIMS AGAINST CERTAIN THIRD PARTIES, ASSIGNMENT OF CLAIMS TO
JCC, AND ELECTION TO RECEIVE ADDITIONAL COMMON STOCK OF THE REORGANIZED COMPANY,
PREVIOUSLY PROVIDED BY A BONDHOLDER IN ACCORDANCE WITH THE TERMS OF THE ORIGINAL
PLAN AND THE BANKRUPTCY COURT'S ORDERS. IF YOU DESIRE TO REVOKE SUCH A RELEASE,
ASSIGNMENT OF CLAIMS AND ELECTION TO RECEIVE ADDITIONAL STOCK, YOU MUST FOLLOW
THE INSTRUCTIONS FOR REVOKING A RELEASE SET FORTH IN THE BONDHOLDER PLAN NOTICE
ACCOMPANYING THIS BALLOT, OR YOUR ORIGINAL RELEASE, ASSIGNMENT OF CLAIMS AND
ELECTION TO RECEIVE ADDITIONAL STOCK WILL BIND YOU AND REMAIN IN FULL FORCE AND
EFFECT.
I. CHANGE OF PREVIOUSLY CAST VOTE(S)
If you wish to change your vote(s), please mark your previous vote(s) on the
Original Plan, and then mark your new vote(s) on the Modified Plan in the
corresponding box. UNLESS YOU CHECK THE BOX AT THE END OF THIS BALLOT AND
PROVIDE THE REQUIRED INFORMATION, YOUR CHANGED VOTE WILL BE TABULATED IN SUCH
AMOUNT, AND IN SUCH CLASS(ES), AS IS INDICATED ON THE PRE-PRINTED LABEL AFFIXED
TO THIS BALLOT.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VOTE ON ORIGINAL PLAN VOTE ON MODIFIED PLAN
- -------------------------------------------------------------------------------
HARRAH'S JAZZ COMPANY
(CLASS A4) / / Accept / / Reject / / Accept / / Reject
- -------------------------------------------------------------------------------
HARRAH'S JAZZ FINANCE CORP.
(CLASS B3)
/ / Accept / / Reject / / Accept / / Reject
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
II. CERTIFICATIONS
By returning this Bondholder's Ballot For Changing Vote ("Bondholder Ballot"),
the undersigned Bondholder certifies that:
a. As of the date below, it owns $________ (face amount) in Bonds;
b. It has previously cast one or more votes on the Debtors' Original Plan
in the class(es) specified herein and it wishes to change such vote(s) as set
forth above;
c. It has not submitted any other Bondholder Ballots with respect to the
Modified Plan, or if it has submitted other Bondholder Ballots with respect to
the Modified Plan, such earlier Bondholder Ballots are hereby revoked;
d. It has been provided with a copy of the Debtors' Fifth Amended Joint
Disclosure Statement Pursuant to Sections 1125 and 1127 of the Bankruptcy Code,
dated as of December 10, 1997 (the "Disclosure Statement");
e. It has the full power and authority to change its previous vote(s) to
accept or reject the Original Plan; and
f. It acknowledges that this solicitation is subject to all the terms and
conditions set forth in the Disclosure Statement.
-3-
<PAGE>
[ PRE-PRINTED LABEL CONTAINING
BONDHOLDER IDENTITY AND ADDRESS]
Dated: ________________ Signature:_________________________________
By (if applicable):_________________________________
(print or type)
Title (if applicable):_________________________________
(print or type)
/ / Check this box if any of the information on the above pre-printed
label is incorrect, and provide the correct information below.
NAME: _________________________________________
ADDRESS: _________________________________________
_________________________________________
_________________________________________
CLAIM
CLASS(ES) _________________________________________
CLAIM
AMOUNT: _________________________________________
YOUR BALLOT WILL NOT BE COUNTED UNLESS RECEIVED BY PRICE WATERHOUSE LLP AT THE
ADDRESS LISTED ABOVE BY 5:00 P.M. (C.S.T.) ON JANUARY 16, 1998.
THIS BALLOT DOES NOT CONSTITUTE AND SHALL NOT BE DEEMED A PROOF OF CLAIM OR AN
ASSERTION OF A CLAIM AGAINST THE DEBTORS
-4-
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE MATERIALS ACCOMPANYING
AND CONTAINED WITHIN THIS BALLOT BEFORE COMPLETING
EACH SECTION AND MARKING YOUR CHOICES CLEARLY.
YOU SHOULD NOT RETURN THIS BALLOT IF YOU DO NOT WISH
TO CHANGE THE VOTE THAT YOU PREVIOUSLY CAST IN THESE CASES.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF LOUISIANA
In re: ) No. 95-14545
) Section A
HARRAH'S JAZZ COMPANY, )
) Chapter 11
Debtor. ) Reorganization
_____________________________)
)
In re: ) No. 95-14544
) Section A
HARRAH'S JAZZ FINANCE CORP., )
) Chapter 11
Debtor. ) Reorganization
_____________________________)
)
In re: )
) No. 95-14871
HARRAH'S NEW ORLEANS ) Section A
INVESTMENT COMPANY, )
) Chapter 11
Debtor. ) Reorganization
_____________________________)
BALLOT FOR CHANGING VOTE ON DEBTORS' ORIGINAL PLAN
Holders of claims against the above-captioned debtors (other than
bondholders) should use this ballot only if they wish to change the
votes that they previously cast in these cases. If you do not wish to
change your previous vote, please do not return this ballot.
Holders of claims based upon 14 1/4% first mortgage notes due 2001 issued
by Harrah's Jazz Company and Harrah's Jazz Finance Corp. and holders of
WARN Act or ERISA claims should not use this ballot. If you are a
bondholder or holder of a WARN Act or ERISA claim, please contact Mr.
Mark Fiddes, Price Waterhouse LLP, P.O. Box 81109, Chicago, IL 60681,
(312) 540-2748, and request an appropriate ballot for your class of
claim.
A PLAN OF REORGANIZATION CAN BE CONFIRMED BY THE COURT AND THEREBY MADE BINDING
ON YOU IF IT IS ACCEPTED BY THE HOLDERS OF AT LEAST TWO-THIRDS IN AMOUNT AND
MORE THAN ONE-HALF IN NUMBER OF CLAIMS IN EACH CLASS AND THE HOLDERS OF AT LEAST
TWO-THIRDS IN AMOUNT OF EQUITY SECURITY INTERESTS IN EACH CLASS VOTING ON THE
PLAN. THE "ORIGINAL PLAN" REFERRED TO IN THIS BALLOT RECEIVED THE REQUISITE
VOTES FOR CONFIRMATION BY THE COURT. VOTES CAST ON THE ORIGINAL PLAN WILL BE
DEEMED TO HAVE BEEN VOTED WITH RESPECT TO THE "MODIFIED PLAN"
<PAGE>
REFERRED TO IN THIS BALLOT IN THE SAME MANNER IN WHICH THEY WERE CAST ON
THE ORIGINAL PLAN, UNLESS CREDITORS ELECT TO CHANGE THEIR VOTES.
ACCORDINGLY, UNLESS A SUFFICIENT AMOUNT AND NUMBER OF CREDITORS CHANGE
THEIR VOTES WITH RESPECT TO THE MODIFIED PLAN SUCH THAT ANY CLASS HAS
NOT ACCEPTED THE MODIFIED PLAN BY THE REQUISITE MAJORITIES REQUIRED
UNDER THE BANKRUPTCY CODE, THE MODIFIED PLAN CAN BE CONFIRMED BY THE
COURT AND THEREBY MADE BINDING ON YOU. IN THE EVENT THAT SUFFICIENT
VOTES ARE CHANGED AND THUS THE REQUISITE ACCEPTANCES ARE NOT OBTAINED,
THE COURT NEVERTHELESS MAY CONFIRM THE MODIFIED PLAN IF THE COURT FINDS
THAT THE MODIFIED PLAN ACCORDS FAIR AND EQUITABLE TREATMENT TO THE CLASS
OR CLASSES REJECTING IT AND OTHERWISE SATISFIES THE REQUIREMENTS OF
SECTION 1129(b) OF THE BANKRUPTCY CODE.
The above-captioned debtors (the "Debtors"), together with Harrah's
Entertainment, Inc., proposed the Third Amended Joint Plan of Reorganization,
dated February 26, 1997 (the "Original Plan"). The Debtors distributed to
creditors the Debtors' Third Amended Joint Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code, dated February 26, 1997, along with copies
of the Original Plan, voting instructions and ballots. After a vote by the
Debtors' creditors and a hearing on confirmation of the Original Plan, the
United States Bankruptcy Court for the Eastern District of Louisiana confirmed
the Debtors' Original Plan on April 28, 1997. The Effective Date of the
Original Plan, however, has not occurred.
In July 1997, the Debtors solicited votes on a modified plan of reorganization
which contained changes that were objected to by the Louisiana Gaming Control
Board. The Bankruptcy Court has not conducted a hearing on confirmation of
that plan.
The Debtors are now proposing a different set of modifications to the Original
Plan, as set forth in the Third Amended Joint Plan of Reorganization, as
Modified Through December 10, 1997 (the "Modified Plan"). (Capitalized terms
not otherwise defined in this Ballot have the meanings assigned to them by the
Original Plan or the Modified Plan as the context requires.) Pursuant to
Section 1127(d) of the Bankruptcy Code, the Debtors are distributing this ballot
in order to give holders of claims an opportunity to change their previously
cast votes accepting or rejecting the Original Plan. You are receiving this
ballot because you returned a ballot with respect to the Original Plan and are,
therefore, entitled to change the vote(s) that you previously cast in these
cases. However, if your claim against the Debtors' estates is unliquidated,
disputed, or contingent or is subject to an objection filed with the Bankruptcy
Court, or you have sold or assigned your claim to a third party, your vote will
not be counted.
Below you will be asked to make a decision -- whether, as a creditor, you wish
to change your previous vote to accept or reject the Original Plan. To change
the vote that you previously cast to accept or reject the Original Plan, please
mark the appropriate boxes below.
UNDER SECTION 1127 OF THE BANKRUPTCY CODE, IF YOU DO NOT CHANGE YOUR VOTE, YOU
WILL BE DEEMED TO HAVE VOTED IN THE MANNER IN WHICH YOU VOTED ON THE ORIGINAL
PLAN. ACCORDINGLY IF YOU DO NOT WISH TO CHANGE YOUR VOTE, YOU NEED NOT AND
SHOULD NOT RETURN THIS BALLOT.
To change your previously cast vote, you must fully and accurately complete this
ballot and return it to the following address so as to be received no later than
5:00 p.m., Central Standard Time, on January 16, 1998:
Balloting Agent for IN RE HARRAH'S JAZZ COMPANY, ET AL.
c/o Price Waterhouse LLP
P.O. Box 81109
Chicago, Illinois 60681
-2-
<PAGE>
I. CHANGE OF PREVIOUSLY CAST VOTE
If you wish to change your vote, please mark your previous vote on the Original
Plan, and then mark your new vote on the Modified Plan in the corresponding box.
UNLESS YOU CHECK THE BOX AT THE END OF THIS BALLOT AND PROVIDE THE REQUIRED
INFORMATION, YOUR CHANGED VOTE WILL BE TABULATED IN SUCH AMOUNT (IF APPLICABLE)
AND IN SUCH CLASS AS IS INDICATED ON THE PRE-PRINTED LABEL AFFIXED TO THIS
BALLOT.
---------------------------------------------------
---------------------------------------------------
VOTE ON ORIGINAL PLAN VOTE ON MODIFIED PLAN
---------------------------------------------------
/ / Accept / / Reject / / Accept / / Reject
---------------------------------------------------
---------------------------------------------------
II. CERTIFICATIONS
By returning this Ballot For Changing Vote on Debtors' Original Plan ("Ballot"),
the undersigned creditor certifies that:
a. As of the date below, it holds a claim against one or more of the
Debtors which it has not sold, assigned or transferred to a third party;
b. It has previously cast a vote on the Debtors' Original Plan in the
class specified herein and it wishes to change such vote as set forth above;
c. It has not submitted any other Ballots with respect to the Modified
Plan, or if it has submitted other Ballots with respect to the Modified Plan,
such earlier Ballots are hereby revoked;
d. It has been provided with a copy of the Debtors' Fifth Amended Joint
Disclosure Statement Pursuant to Sections 1125 and 1127 of the Bankruptcy Code,
dated as of December 10, 1997 (the "Disclosure Statement");
e. It has the full power and authority to change its previous vote(s) to
accept or reject the Original Plan; and
f. It acknowledges that this solicitation is subject to all the terms and
conditions set forth in the Disclosure Statement.
-3-
<PAGE>
[PRE-PRINTED LABEL CONTAINING
CREDITOR IDENTITY AND ADDRESS]
Dated: ________________ Signature:_________________________________
By (if applicable):_________________________________
(print or type)
Title (if applicable):_________________________________
(print or type)
/ / Check this box if any of the information on the above pre-printed label is
incorrect, and provide the correct information below.
NAME: _________________________________________
ADDRESS: _________________________________________
_________________________________________
_________________________________________
CLAIM
CLASS(ES) _________________________________________
CLAIM
AMOUNT: _________________________________________
YOUR BALLOT WILL NOT BE COUNTED UNLESS RECEIVED BY PRICE WATERHOUSE LLP AT THE
ADDRESS LISTED ABOVE BY 5:00 P.M. (C.S.T.) ON JANUARY 16, 1998.
THIS BALLOT DOES NOT CONSTITUTE AND SHALL NOT BE DEEMED A PROOF OF CLAIM OR AN
ASSERTION OF A CLAIM AGAINST THE DEBTORS
-4-
<PAGE>
December 10, 1997
TO ALL CREDITORS OF HARRAH'S JAZZ COMPANY, HARRAH'S JAZZ
FINANCE CORP. AND HARRAH'S NEW ORLEANS INVESTMENT COMPANY:
The undersigned act as counsel to Harrah's Jazz Company, Harrah's Jazz Finance
Corp. and Harrah's New Orleans Investment Company (the "Debtors"). On April 28,
1997, the United States Bankruptcy Court for the Eastern District of Louisiana
confirmed the Debtors' Third Amended Joint Plan of Reorganization Under Chapter
11 of the Bankruptcy Code ("Original Plan"). As you likely know, the Original
Plan has not been consummated. Together with Harrah's Entertainment, Inc., the
Debtors have now proposed a modified plan of reorganization (the "Modified
Plan"), a copy of which is enclosed. This Modified Plan differs from the
revised plan proposed by the Debtors in July 1997 and the Original Plan.
In the FRONT POCKET of the envelope containing these materials you will find a
ballot for use in changing your vote with respect to the Debtors' Modified Plan,
if you so desire. If you timely voted on the Original Plan, then that vote will
count as your vote on the Modified Plan unless you change your vote in
accordance with the enclosed Modified Voting Procedures and Notice. In
addition, you also should find enclosed:
A. Notice;
B. Debtors' Third Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as Modified Through December 10, 1997 (i.e., the Modified
Plan);
C. Debtors' Fifth Amended Joint Disclosure Statement Pursuant to Sections 1125
and 1127 of the Bankruptcy Code, dated December 10, 1997 (the "Disclosure
Statement"); and
D. Modified Voting Procedures.
If you have not received all of these enclosures or require a replacement or
different ballot, please contact the balloting agent IN WRITING at the following
address: Mr. Mark Fiddes, Price Waterhouse LLP, P.O. Box 81109, Chicago, IL
60681. Please do NOT contact him with any questions about the Modified Plan or
Disclosure Statement, as the balloting agent is prohibited from discussing the
contents of the Modified Plan or Disclosure Statement with creditors.
Sincerely,
_____________________________ ________________________________
Daniel R. Murray, Esq. Edward M. Heller, Esq.
Jenner & Block Bronfin & Heller
One IBM Plaza 650 Poydras St., Suite 2500
Chicago, IL 60611 New Orleans, LA 70130
Counsel for Harrah's New
Orleans Investment Company
_____________________________
William H. Patrick, , Esq.
William H. Patrick, III, P.L.C.
10636 Linkwood Drive
Baton Rouge, LA 70810
Counsel for Harrah's Jazz Company
<PAGE>
and Harrah's Jazz Finance Corp.
-2-
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- ---------------------------------------:
:
In the Matter of: : No. 95-14544
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
:
- ---------------------------------------:
In the Matter of : : No. 95-14871
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, : Chapter 11
: Reorganization
Debtor. :
- ---------------------------------------:
NOTICE
The United States Bankruptcy Court for the Eastern District of Louisiana
("Court") has entered an Order approving the adequacy of the Debtors' Fifth
Amended Disclosure Statement Pursuant to Sections 1125 and 1127 of the
Bankruptcy Code dated as of December 10, 1997 (the "Disclosure Statement"),
referring to the Third Amended Joint Plan Of Reorganization Under Chapter 11 of
the Bankruptcy Code, as Modified Through December 10, 1997 (the "Modified Plan")
NOTICE IS HEREBY GIVEN THAT:
A. JANUARY 16, 1998 is fixed as the last date for filing written
acceptances or rejections of the Plan.
B. The hearing on confirmation of the Plan ("Confirmation Hearing") shall
commence on JANUARY 21, 1998 at 10:00 a.m. before the Hon. Thomas M. Brahney,
III, 7th Floor, Hale Boggs Federal Building, 501 Magazine Street, New Orleans,
Louisiana. At the Confirmation Hearing, the Debtors will request that the Court
approve the Modified Plan and consider all matters pertinent to confirmation and
consummation of the Modified Plan, including (but not limited to):
1. The approval of the transfer of all of the interests of Harrah's Jazz
Company ("HJC") in property to Jazz Casino Corporation ("JCC"), a new
entity formed in accordance with the Modified Plan, free and clear of all
liens, encumbrances and other interests to the extent provided for in the
Modified Plan;
<PAGE>
2. The approval of financing for the Debtors' plan of reorganization,
including a determination that all secured borrowings are authorized under
the Plan and that all entities receiving liens and encumbrances on the
property transferred by HJC to JCC under the Plan acted in good faith and
are entitled to the protections afforded by Section 364(e) of the
Bankruptcy Code;
3. A determination that all compromises provided for in the Modified Plan
are fair, reasonable and in the best interests of the Debtors and their
respective bankruptcy estates; and
4. A determination that the Modified Plan is feasible in all respects,
including but not limited to findings that all leases, contracts, zoning
ordinances, variances and other agreements, licenses, rights and privileges
involving HJC or JCC and the City of New Orleans, the State of Louisiana,
and all other governmental agencies, subdivisions and authorities are
constitutional, valid and binding obligations, in full force and effect and
legally enforceable as of the effective date of the Modified Plan, to the
extent that such obligations are necessary and integral to transactions and
undertakings contemplated under the Modified Plan.
C. JANUARY 16, 1998 is fixed as the last date for filing and serving
pursuant to Fed. R. Bankr. P. 3020(b)(1) written objections to confirmation of
the Plan. All objections to confirmation shall be served upon the following
parties so as to be received by 5:00 p.m. C.S.T. on such date:
<TABLE>
<S> <C> <C>
Daniel R. Murray William H. Patrick, III Edward M. Heller, Esq.
Jenner & Block A Professional Corporation Bronfin & Heller
One IBM Plaza 10636 Linkwood Court 650 Poydras Street, Suite 2500
Chicago, IL 60611 Baton Rouge, LA 70810 New Orleans, LA 70130
Fax: (312) 527-0484 Fax: (504) 769-0010 Fax: (504) 522-0949
Robert J. Rosenberg, Esq. Joseph E. Friend, Esq. Rudy J. Cerone, Esq.
Latham & Watkins Breazeale, Sachse & Wilson, L.L.P. McGlinchey Stafford Lang
885 Third Avenue LL & E Tower, Suite 2400 643 Magazine Street
New York, NY 10022 909 Poydras St. New Orleans, LA 70130
Fax: (212) 751-4864 New Orleans, LA 70112-0500 Fax: (504) 596-2847
Fax: (504) 582-1164
Bruce R. Zirinsky, Esq. Diana Rachal, Esq.
Weil Gotshal & Manges Office of the United States Trustee
767 Fifth Avenue 400 Poydras Street, Suite 2110
New York, NY 10153-0001 New Orleans, LA 70130
Fax: (213) 310-8007 Fax: (504) 589-4096
</TABLE>
D. Any beneficial owner of 14 1/4% first mortgage notes due 2001 as of December
10, 1997 issued by Harrah's Jazz Company and Harrah's Jazz Finance Corp.
("Notes") which holds a claim on account of Notes purchased after November 25,
1996 and prior to December 10, 1997 (an "Existing Noteholder"), and which wishes
to change the vote on the Third Amended Joint Plan of Reorganization under
Chapter 11 of the Bankruptcy Code dated as of February 26, 1997, as
-2-
<PAGE>
confirmed on April 28, 1997 (the "Existing Plan") previously cast by its
predecessor in ownership (the "Voting Former Noteowner"), must file with the
Clerk of the Court and cause to be delivered to (i) counsel for the
Proponents at the addresses set forth below, and (ii) the Balloting Agent for
the Debtors' cases, Price Waterhouse, LLP, attn: Mark Fiddes, P.O. Box 81109,
Chicago, IL 60681, no later than JANUARY 13, 1998, a verified written notice
containing, AT A MINIMUM: (a) the identity of the Voting Former Noteowner
from which such current beneficial owner purchased its Notes; (b) the face
amount of Notes originally voted by the Voting Former Noteowner, and whether
such Voting Former Noteowner voted in favor or against the Existing Plan; (c)
the name and mailing address of the Existing Noteowner; and (d) the face
amount of Notes owned by the Existing Noteowner (a "Notice of Transfer of
Claim"). Unless otherwise ordered by the Bankruptcy Court prior the
commencement of the Confirmation Hearing, any Notice of Transfer of Claim
which does not contain all of the foregoing information will not be effective
to transfer voting rights from the Former Voting Noteowner to the Existing
Noteowner.
E. Under the Modified Plan, beneficial owners of Notes which executed
releases of claims against certain third parties in accordance with the
provisions of Sections 4.4 and 5.2 of the Existing Plan will receive a minimum
of 3.448 shares of Class A New Common Stock of JCC Holding from the Release Pool
(each as defined and further described in the Modified Plan) for each $1,000 in
Notes owned as of May 5, 1997 ( "Release").
1. If, after reviewing the Modified Plan and Disclosure Statement, a
beneficial owner of Notes desires to revoke its Release (and its right to
receive a minimum of 3.448 shares of Class A New Common Stock of JCC
Holding), it may be entitled to do so by filing with the Clerk of the Court
and causing to be delivered to counsel for the Proponents at the addresses
set forth below, no later than JANUARY 13, 1998, a notice: (a) revoking its
Release, (b) certifying that it was (i) the owner of the Notes as of
November 25, 1996 and (ii) entitled to execute the Release; and (c)
certifying that its ownership of Notes has remained unchanged since its
execution of the Release. Unless otherwise ordered by the Bankruptcy Court
prior to the commencement of the Confirmation Hearing and except as
provided for below, any such notice which does not contain all of the
foregoing information will not be effective to revoke a Release.
2. In the event a beneficial owner has sold its Notes since its execution
of the Release and nonetheless desires to revoke its Release, such former
owner of Notes may be entitled to do so by filing with the Clerk of the
Court and causing to be delivered to: (i) counsel for the Proponents at the
addresses set forth below, and (ii) the purchaser of its Notes, no later
than JANUARY 13, 1998, a notice: (a) revoking its Release, (b) identifying
the purchaser(s) of its Notes (including a mailing address), and (c)
indicating whether it sold or transferred to such purchaser(s) of its Notes
its right to a distribution from the Release Pool. Unless otherwise
ordered by the Bankruptcy Court prior to the commencement of the
Confirmation Hearing, any such notice which does not contain all of the
foregoing information will not be effective to revoke a Release.
-3-
<PAGE>
F. Any owner of Notes which purchased Notes between May 5, 1997 and
December 10, 1997 with "release rights," and which desires to directly receive
the distribution from the Release Pool otherwise deliverable under the Modified
Plan to the beneficial owner of such Notes as of May 5, 1997, may request a
"Release Pool Transfer Form" IN WRITING from Debtor's counsel, Jenner & Block,
attn: Vincent E. Lazar, One IBM Plaza, Chicago, IL 60611. To be effective,
Release Pool Transfer Forms must be executed by both the beneficial owner of the
Notes as of May 5, 1997 and the owner of such Notes as of December 10, 1997, and
returned to the Balloting Agent in accordance with the instructions on the
Release Pool Transfer Form.
G. In accordance with Section 1127 of the Bankruptcy Code, the Modified
Plan may be further modified at or prior to the Confirmation Hearing to
accommodate objections thereto. At the Confirmation Hearing, the Court may
enter such orders as it deems appropriate under applicable law and as required
under the circumstances of the Debtors' Chapter 11 cases.
Dated: December 10, 1997
Daniel R. Murray, Esq. William H. Patrick, III, Esq.
Jenner & Block William H. Patrick, III, APLC
One IBM Plaza 10636 Linkwood Drive
Chicago, IL 60611 Baton Rouge, LA 70810
Counsel for Harrah's Jazz Company and Harrah's Jazz Finance Corp.
Edward M. Heller, Esq. Robert J. Rosenberg, Esq.
Bronfin & Heller Latham & Watkins
650 Poydras St., Suite 2500 885 Third Avenue
New Orleans, LA 70130 New York, NY 10022
Counsel for Harrah's New Counsel for Harrah's Entertainment, Inc.
Orleans Investment Company
-4-
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
- --------------------------------------------:
:
In the Matter of: : No. 95-14544
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
- --------------------------------------------:
:
In the Matter of : : No. 95-14871
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, : Chapter 11
: Reorganization
Debtor. :
- --------------------------------------------:
NOTICE
The United States Bankruptcy Court for the Eastern District of Louisiana
("Court") has entered an Order approving the adequacy of the Debtors' Fifth
Amended Disclosure Statement Pursuant to Sections 1125 and 1127 of the
Bankruptcy Code dated as of December 10, 1997 (the "Disclosure Statement"),
referring to the Third Amended Joint Plan Of Reorganization Under Chapter 11 of
the Bankruptcy Code, as Modified Through December 10, 1997 (the "Modified
Plan").
NOTICE IS HEREBY GIVEN THAT:
A. JANUARY 16, 1998 is fixed as the last date for filing written
acceptances or rejections of the Plan.
B. The hearing on confirmation of the Plan ("Confirmation Hearing") shall
commence on JANUARY 21, 1998 at 10:00 a.m. before the Hon. Thomas M. Brahney,
III, 7th Floor, Hale Boggs Federal Building, 501 Magazine Street, New Orleans,
Louisiana. At the Confirmation Hearing, the Debtors will request that the Court
approve the Modified Plan and consider all matters pertinent to confirmation and
consummation of the Modified Plan, including (but not limited to):
1. The approval of the transfer of all of the interests of Harrah's Jazz
Company ("HJC") in property to Jazz Casino Corporation ("JCC"), a new
entity formed in accordance with the Modified Plan, free and clear of all
liens, encumbrances and other interests to the extent provided for in the
Modified Plan;
2. The approval of financing for the Debtors' plan of reorganization,
including a determination that all secured borrowings are authorized under
the Plan and that all entities receiving liens and encumbrances on the
property transferred by HJC to JCC under the Plan acted in good faith and
are entitled to the protections afforded by Section 364(e) of the
Bankruptcy Code;
<PAGE>
3. A determination that all compromises provided for in the Modified Plan
are fair, reasonable and in the best interests of the Debtors and their
respective bankruptcy estates; and
4. A determination that the Modified Plan is feasible in all respects,
including but not limited to findings that all leases, contracts, zoning
ordinances, variances and other agreements, licenses, rights and privileges
involving HJC or JCC and the City of New Orleans, the State of Louisiana,
and all other governmental agencies, subdivisions and authorities are
constitutional, valid and binding obligations, in full force and effect and
legally enforceable as of the effective date of the Modified Plan, to the
extent that such obligations are necessary and integral to transactions and
undertakings contemplated under the Modified Plan.
C. JANUARY 16, 1998 is fixed as the last date for filing and serving
pursuant to Fed. R. Bankr. P. 3020(b)(1) written objections to confirmation of
the Plan. All objections to confirmation shall be served upon the following
parties so as to be received by 5:00 p.m. C.S.T. on such date:
<TABLE>
<CAPTION>
<S> <C> <C>
Daniel R. Murray William H. Patrick, III Edward M. Heller, Esq.
Jenner & Block A Professional Corporation Bronfin & Heller
One IBM Plaza 10636 Linkwood Court 650 Poydras Street, Suite 2500
Chicago, IL 60611 Baton Rouge, LA 70810 New Orleans, LA 70130
Fax: (312) 527-0484 Fax: (504) 769-0010 Fax: (504) 522-0949
Robert J. Rosenberg, Esq. Joseph E. Friend, Esq. Rudy J. Cerone, Esq.
Latham & Watkins Breazeale, Sachse & Wilson, L.L.P. McGlinchey Stafford Lang
885 Third Avenue LL & E Tower, Suite 2400 643 Magazine Street
New York, NY 10022 909 Poydras St. New Orleans, LA 70130
Fax: (212) 751-4864 New Orleans, LA 70112-0500 Fax: (504) 596-2847
Fax: (504) 582-1164
Bruce R. Zirinsky, Esq. Diana Rachal, Esq.
Weil Gotshal & Manges Office of the United States Trustee
767 Fifth Avenue 400 Poydras Street, Suite 2110
New York, NY 10153-0001 New Orleans, LA 70130
Fax: (213) 310-8007 Fax: (504) 589-4096
</TABLE>
D. In accordance with Section 1127 of the Bankruptcy Code. the Modified
Plan may be further modified at or prior to the Confirmation Hearing to
accommodate objections thereto. At the Confirmation Hearing, the Court may
enter such orders as it deems appropriate under applicable law and as
required under the circumstances of the Debtors' Chapter 11 cases.
Dated: December 10, 1997
Daniel R. Murray, Esq. William H. Patrick, III, Esq.
Jenner & Block William H. Patrick, III, APLC
One IBM Plaza 10636 Linkwood Drive
Chicago, IL 60611 Baton Rouge, LA 70810
Counsel for Harrah's Jazz Company and Harrah's Jazz Finance Corp.
Edward M. Heller, Esq. Robert J. Rosenberg, Esq.
Bronfin & Heller Latham & Watkins
650 Poydras St., Suite 2500 885 Third Avenue
New Orleans, LA 70130 New York, NY 10022
Counsel for Harrah's New Counsel for Harrah's Entertainment, Inc.
Orleans Investment Company
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545
: Section A
HARRAH'S JAZZ COMPANY, :
: JOINTLY ADMINISTERED
Debtor. : WITH
__________________________________:
:
In the Matter of: : No. 95-14544
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
__________________________________:
:
In the Matter of : No. 95-14871
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
MODIFIED VOTING PROCEDURES
I. UNMODIFIED VOTES. Except as otherwise ordered by the Court, unless the
Balloting Agent receives prior to the Voting Deadline a properly executed
and valid ballot changing a vote, all ballots cast for or against the
Debtors' Third Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, dated as of February 26, 1997 (the "Original Plan") shall
be counted for purposes of voting on the Modified Plan (as defined below),
and shall continue to be tabulated and counted in accordance with the
Voting Procedures approved by the Court on or about February 27, 1997.
II. MODIFIED VOTES.
A. RULES AND STANDARDS. The following rules and standards shall apply to
all ballots changing votes with respect to the Debtors' Third Amended
Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code,
as Modified Through December 10, 1997 (as it may be amended, modified,
or supplemented, the "MODIFIED PLAN"):
1. GENERALLY. To be counted, ballots changing votes must be: (a)
received by the Balloting Agent before 5:00 p.m. C.S.T. on
January 12, 1998 (the "VOTING DEADLINE"); and (b) properly signed
by the creditor or authorized agent.
<PAGE>
2. AMBIGUOUS BALLOTS. Signed ballots marked in any class as both
accepting and rejecting the Plan shall be counted as voting for
the Plan in that class. Unsigned and/or unmarked ballots shall
not be counted as voting for the Plan.
3. MULTIPLE BALLOTS. The Balloting Agent shall make a notation on
each ballot indicating the date on which the ballot is received.
Unless otherwise directed by the Court, whenever a creditor
submits more than one ballot voting the same claim before the
Voting Deadline, the Balloting Agent shall deem as reflecting the
voter's intent, and shall only count, the last such ballot
received by the Balloting Agent prior to the Voting Deadline.
There shall be a rebuttable presumption that any creditor
submitting such superseding ballot has sufficient cause to do so
within the meaning of Rule 3018(a) of the Federal Rules of
Bankruptcy Procedure (the "BANKRUPTCY RULES").
4. LATE BALLOTS ON ORIGINAL PLAN. Unless otherwise ordered by the
Bankruptcy Court, the ballot of any creditor whose vote on the
Original Plan was not counted because its ballot on the Original
Plan was not received prior to the voting deadline for the
Original Plan, shall not be counted.
5. DELIVERY OF BALLOTS TO BALLOTING AGENT. For voting purposes:
(a) the Balloting Agent shall be deemed in constructive receipt
of any ballot delivered prior to the Voting Deadline to any post
office box (or equivalent) the Balloting Agent establishes to
receive ballots for changing votes; (b) any ballots received by
the Balloting Agent by mail or hand delivery (but not facsimile)
prior to the Voting Deadline shall be deemed timely; and (c) any
ballot postmarked before but received after the Voting Deadline
shall be deemed late and shall not be counted.
6. SIGNATURE. The signature of the person executing each ballot
shall be presumed genuine and duly authorized.
B. CLASSIFICATION AND ALLOWANCE FOR VOTING PURPOSES.
1. CLASSIFICATION. Unless otherwise ordered by the Court, each
Claim shall be counted by the Balloting Agent in a class or
classes in accordance with the designation contained in the
ballot timely received by the Balloting Agent.
2. AMOUNT. Subject to all other subsections in this section B, and
except as otherwise ordered by the Court, the amount of each
Claim for voting purposes shall be equal to the amount set forth
in the ballot for changing votes submitted by such creditor.
Notwithstanding the foregoing, when a
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Each capitalized term used but not otherwise defined herein shall have the
meaning ascribed to such term in the Modified Plan.
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Court order has fixed the amount of a Claim, the Court order
shall control the amount of the Claim for voting purposes.
3. MULTIPLE CLAIMS.
(a) NON-BONDHOLDER CLAIMS. The ballot(s) of any Person (other
than a Bondholder) holding more than one Claim against the
Debtors within one class under the Plan will be counted for
the aggregate dollar amount of all Claims of such Person in
such class. Thus, all Claims held by the same Person or
affiliate thereof in one class, irrespective of whether and
when such Claim(s) were acquired or transferred to such
Person, will be aggregated and treated as one Claim in such
class.
(b) BONDHOLDER CLAIMS. The ballot(s) of any Bondholder holding
more than one Claim against the Debtors will be counted for
the aggregate dollar amount of all Bonds currently owned by
such Bondholder. Thus, all Bonds held by the same
Bondholder, irrespective of whether and when such Bonds(s)
were acquired and/or transferred to such Bondholder, will be
aggregated and treated as one Claim in Classes A4 and B3.
Notwithstanding the foregoing, in the case of any Bondholder
who acquired some or all of its Bonds after the Voting
Record Date (November 25, 1996), the Bondholder must file
and deliver, in accordance with the procedures set forth in
the Bondholder Plan Notice accompanying the Modified Plan, a
Notice of Transfer of Claim containing all of the
information required by such Bondholder Plan Notice. Any
Notice of Transfer of Claim which is incomplete or untimely
filed shall not be recognized by the Balloting Agent, in
which case only the aggregate dollar amount of all Bonds
owned by such Bondholder on the Voting Record Date (if any)
will be counted.
4. TRANSFERRED BONDHOLDER CLAIMS. With respect to any Bondholder
ballot changing the vote on a Claim that was transferred to such
Bondholder after the Voting Record Date, the Balloting Agent
shall not count the original ballot or ballots of the original
Bondholder(s) voting on the Original Plan only if a timely and
otherwise proper Notice of Transfer of Claim was filed and
delivered with respect to such transferred Claim. Subject to the
provisions of Section 3.b above, the Balloting Agent shall
aggregate the Claims of any Bondholder holding more than one
Claim against the Debtors and count the aggregate dollar amount
of all Bonds so owned by the Bondholder as one vote in Classes A4
and B3, irrespective of the number of Bondholders from which such
Bondholder acquired its Bonds. In the event multiple Bondholders
acquired Claims from a single Bondholder which voted on the
Original Plan, each Bondholder which acquired such Claims shall
be entitled to change the vote on that portion of the Claim which
it acquired, and
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the Balloting Agent shall count the aggregate dollar amount of
all Bonds owned by such Bondholder as one vote in Classes A4
and B3.
5. DISPUTED CLAIMS. A Claim that is the subject of an objection of
any of the Debtors filed and served at least ten days before the
Voting Deadline, shall be disallowed for voting purposes, except
to the extent and in the manner the Debtors state the Claim
should be allowed in such objection or as otherwise ordered by
the Bankruptcy Court after notice and hearing pursuant to
Bankruptcy Rule 3018(a).
6. UNLIQUIDATED AND/OR CONTINGENT CLAIMS. Subject to Sections B.2
and B.5 above, to the extent a proof of claim has been filed
asserting a wholly unliquidated, contingent and/or undetermined
Claim, the holder of such Claim shall be entitled to one vote
valued at $1.00 in the appropriate class, unless ordered
otherwise by the Bankruptcy Court. Any Claim asserted as
partially unliquidated, contingent and/or undetermined shall be
treated as a Claim for only the liquidated, non-contingent amount
asserted. Solely for purposes of changing votes on the Existing
Plan, all WARN Act Claims shall be deemed to be wholly
unliquidated, contingent and/or undetermined, and shall be valued
at $1.00 each.
7. DUPLICATE AND AMENDED CLAIMS. Creditors shall not be entitled to
vote Claims to the extent such Claims duplicate or have been
superseded by other Claims of such creditors.
8. LATE-FILED CLAIMS. A Claim that was untimely (I.E., filed after
May 15, 1996 or such other date as may have been set by the
Bankruptcy Court with respect to any particular Claim) according
to the records of the Clerk of the Bankruptcy Court shall be
disallowed for voting purposes unless such Claim has been deemed
timely filed by an order of the Bankruptcy Court; provided,
however, that any untimely-filed claim which purports to amend a
timely-filed claim shall be deemed, solely for purposes of
changing votes on the Existing Plan, to be a permissible and
proper amendment of such timely-filed claim.
9. ESTIMATED CLAIMS. The amount and classification of a Claim
estimated or otherwise allowed for voting purposes by order of
the Bankruptcy Court shall be as set by the Bankruptcy Court.
10. GENERAL. Nothing herein shall affect the rights of any party
under the Bankruptcy Code or Bankruptcy Rules to raise or defend
against objections to the validity of any vote changed in
connection with the Modified Plan.
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