<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
PRE-EFFECTIVE
Amendment No. 1 To
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES
UNDER THE TRUST INDENTURE ACT OF 1939
------------
JAZZ CASINO COMPANY, L.L.C.
(NAME OF APPLICANT)
512 SOUTH PETERS STREET, NEW ORLEANS, LOUISIANA 70130
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
------------
TITLE OF CLASS AMOUNT
-------------- ------
Senior Subordinated Notes Due 2009 $187,500,000
With Contingent Payments
Approximate date of proposed issuance: October 30, 1998
Jazz Casino Company, L.L.C.
512 South Peters Street
New Orleans, Louisiana 70130
(Name and address of agent for service)
With a copy to:
Michael R. McAlevey, Esq.
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
(404) 881-7000
------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 "February 1997 Plan of
Reorganization") and related Disclosure Statement (the "February 1997
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 February 1997 Disclosure Statement.
By order dated April 28, 1997 the Bankruptcy Court confirmed the February
1997 Plan of Reorganization.
The effective date of the February 1997 Plan of Reorganization was
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 had 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. On March 16, 1998, however, the Attorney General
for the State issued an opinion that the Louisiana Gaming Control Board (the
"LGCB") has independent authority (without the necessity of any legislative
approval) to renegotiate and execute a renegotiated casino operating
contract. Accordingly, on March 20, 1998, the LGCB approved an amended and
renegotiated casino operating contract among HJC, Jazz Casino Company,
L.L.C., a Louisiana limited liability company (the "Company" or "Applicant"),
and the State, by and through the LGCB, (the "Amended and Renegotiated Casino
Operating Contract"), subject to, among other conditions, the condition that
the Louisiana Supreme Court render a final, non-appealable judgment that the
LGCB, acting on its own, is the proper party and has the legal authority to
enter into the Amended and Renegotiated Casino Operating Contract with HJC or
the Company on behalf of the State and the LGCB, without the specific
approval of the Governor or the legislature of the State. On May 15, 1998,
the Louisiana Supreme Court issued a decision confirming that the LGCB has
the independent authority to renegotiate and execute the Amended and
Renegotiated Casino Operating Contract without seeking gubernatorial or
legislative approval. The LGCB's approval of the Amended and Renegotiated
Casino Operating Contract will not become final, and the contract cannot be
executed, until, among other things, the LGCB makes a determination that
certain of the owners and operators of the Casino and officers and directors
thereof are suitable under applicable rules and regulations, and until
certain regulatory rulings and approvals are received, all of which are
expected to be received on or prior to the Effective Date. On September 3,
1998 the Debtors submitted a Third Amended Joint Plan of Reorganization As
Modified Through September 3, 1998 (the "Plan of Reorganization") and related
Disclosure Statement (the "Disclosure Statement"). A hearing to consider the
adequacy of the Disclosure Statement was held on September 3, 1998, at which
the Bankruptcy Court approved the Disclosure Statement. A summary of the
Disclosure Statement was distributed to creditors of the Debtors on or about
September 3, 1998. A hearing to consider confirmation of the Modified Plan
of Reorganization was held on October 13, 1998 at which time the Bankruptcy
Court confirmed the Plan of Reorganization by order dated October 13, 1998.
Accordingly, if certain other conditions precedent are satisfied or waived as
set forth in the Plan of Reorganization, the Effective Date (as defined
below) may occur, and the Notes (as defined below) may be issued, on or about
October 30, 1998.
Under the Plan of Reorganization, the assets and business of HJC will
vest in the Company on the date that the 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 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
guarantees (the "Guarantees") of such Notes by JCC Holding Company, a
Delaware Corporation ("JCC Holding"), CP Development, L.L.C., a Louisiana
limited liability company ("CP Development"), FP Development, L.L.C., a
Louisiana limited liability company ("FP Development") and JCC Development
Company, L.L.C., a Louisiana limited liability company ("JCC Development")
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), and guarantees of such notes by JCC Holding, CP Development, FP
Development and JCC Development. The Company and each of CP Development, FP
Development and JCC Development are wholly-owned subsidiaries of JCC Holding.
<PAGE>
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 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 October 19, 1998:
100% of the membership interests in the Company are owned by JCC
Holding.
100% of the membership interests in JCC Development Company, L.L.C. are
owned by JCC Holding.
100% of the membership interests in FP Development, L.L.C. are owned by
JCC Holding.
100% of the membership interests in CP Development, L.L.C. are owned by
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 will be owned by JCC
Holding.
100% of the membership interests in FP Development will be owned by JCC
Holding.
100% of the membership interests in CP 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 ("HET"), may be deemed to be an affiliate of the Company
through its ownership of voting securities of, and affiliate status with, JCC
Holding, the sole member of the Company. The following table sets forth
certain information regarding the beneficial ownership by HET of JCC Holding's
Class B Common Stock, $0.01 par value per share (the "Class B Common Stock")
as of the Effective Date of the Plan of Reorganization. Unless noted
otherwise, the holder listed below has sole voting power and dispositive
power over the shares beneficially held by it. On the Effective Date of the
Plan of Reorganization, JCC Holding will issue 10 million shares of Common
Stock. JCC Holding expects that at the time of issuance approximately
5,560,000 of such shares will be shares of Class A Common Stock and
approximately 4,440,000 of such shares will be shares of Class B Common Stock.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
---------------------------------------- -------------------------------------
AMOUNT AND PERCENTAGE AMOUNT AND PERCENTAGE
NAME OF NATURE OF OF CLASS A NATURE OF OF CLASS B
BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK BENEFICIAL OWNERSHIP COMMON STOCK
- ---------------- -------------------- ------------ -------------------- ------------
<S> <C> <C> <C> <C>
Harrah's Entertainment, Inc. ......... -- -- 4,440,000(1) 100%(1)
</TABLE>
- ---------------------
(1) Upon the Effective Date of the Plan of Reorganization, HET, by and
through its wholly-owned subsidiary, Harrah's Crescent City Investment
Company, a Nevada Corporation ("HCCIC"), will own beneficially more than
5% of the outstanding shares of Class B Common Stock. The exact number
of shares owned by HET upon the Effective Date, however, will depend
upon whether certain entities exercise options with respect to an
aggregate of 450,000 shares of Class B Common Stock from HCCIC.
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 October 19, 1998:
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. The Company
has appointed the following officers:
<TABLE>
<CAPTION>
Name and Mailing
Address Title
---------------- -----------
<S> <C>
Frederick W. Burford President
512 South Peters Street
New Orleans, Louisiana 70130
L. Camille Fowler Vice President-Finance,
512 South Peters Street Treasurer and Secretary
New Orleans, Louisiana 70130
</TABLE>
3
<PAGE>
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 October 19, 1998:
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 October 19, 1998:
<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 2010 $ 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 interest 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 2010
issued (i) in lieu of cash interest payments in accordance with the terms
of the indenture for such securities or (ii) pursuant to the Plan
of Reorganization.
4
<PAGE>
(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 2010 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, CP
Development, FP Development and JCC Development as guarantors, 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 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) above, failure
of the Company or any Subsidiary of the Company to comply with
provisions in the Indenture regarding limitation on transactions with
affiliates, construction, limitation on use of certain funds,
restrictions on sale and issuance of Subsidiary Stock, limitation on
payment of management fees or limitation on merger, sale or
consolidation or right to require repurchase, which failure continues
for 30 days;
(4) 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;
(5) certain events of bankruptcy, insolvency or restructuring
in respect of either the Company or a Significant Subsidiary;
(6) 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 be cured, or such acceleration shall be rescinded, or
the Indebtedness shall be repaid in full, in each such case within 10
days;
(7) 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;
(8) 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;
(9) 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
5
<PAGE>
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;
(10) 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 Collateral Agent 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);
(11) 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;
(12) an "Event of Default" (as defined in the Ground Lease) has
occurred; and
(13) 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 with respect to the Company), 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 with respect to the Company, (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 be subordinated in right of payment to all Senior Debt and shall
rank PARI PASSU with all Senior Subordinated Debt including, without
limitation, all Senior Subordinated Debt to which HET has succeeded to the
rights of the lenders thereunder and (B) the Secondary Make-Whole Amount
shall be subordinated to all Senior Debt and all Senior Subordinated Debt
including, without limitation, all Senior Subordinated Debt to which HET has
succeeded to the rights of the lenders thereunder. The Primary Make-Whole
Amount shall be subordinated to Senior Debt in accordance with the terms of
the provision in the Indenture regarding subordination of Notes. The
Secondary Make-Whole Amount shall be subordinated to all Senior Debt and all
Senior Subordinated Debt on the terms provided in the provision in the
Indenture regarding subordination of Notes for this purpose, (treating all
Senior Subordinated Debt as if same were Senior Debt), except that no
payments whatsoever may be made with respect to the Secondary Make-Whole
Amount unless and until all Senior Debt and all Senior Subordinated Debt has
been repaid in full in cash. 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 by its President or
its Vice President, under the corporate seal of the Company, reproduced
thereon, and attested by its Secretary or Assistant Secretary. To evidence its
Guaranty, each Guarantor agrees that a notation of such Guaranty as described
in the Indenture shall be endorsed on each Note authenticated and delivered
by the Trustee and that the Indenture shall be executed on behalf of such
Guarantor by an Authorized Representative of such Guarantor under a facsimile
of that Guarantor's corporate seal reproduced thereon and attested to by an
Authorized Representative of such Guarantor other than the Authorized
Representative executing the Indenture. To evidence Parent Guaranty, the
Parent Guarantor agrees that a notation of such Parent Guaranty as described
in the Indenture shall be endorsed on each Note authenticated and delivered
by the Trustee and that the Indenture shall be executed on behalf of the
Parent Guarantor by an Authorized Representative of the Parent Guarantor,
under facsimile of such Parent Guarantor's corporate seal reproduced thereon
and attested to by an Authorized Representative of the Parent Guarantor other
than the Authorized Representative executing the Indenture. The signature of
any of these officers, or Authorized Representatives, as the case may be, on
the Notes 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 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.
6
<PAGE>
(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 Guarantors 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
7
<PAGE>
other material agreement or instrument (including, without limitation, the
Bank Credit Facilities) 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 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, the Collateral Documents and
the Bank Credit Facilities 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.
JCC Development Company L.L.C., 512 South Peters Street, New Orleans,
Louisiana, 70130 is a guarantor of the Notes.
FP Development L.L.C., 512 South Peters Street, New Orleans,
Louisiana, 70130 is a guarantor of the Notes.
CP Development, L.L.C., 512 South Peters Street, New Orleans,
Louisiana, 70130 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.1 Operating Agreement of the Company. (2)
Exhibit T3A.2 Articles of Organization 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.
8
<PAGE>
Exhibit T3E.1 Debtors' Third Amended Joint Disclosure
Statement dated February 26, 1997, and
exhibits thereto. (3)
Exhibit T3E.2 Debtors' Third Amended Joint Plan of
Reorganization dated February 26, 1997, and
exhibits thereto. (3)
Exhibit T3E.3 Letter to Creditors from Debtors' Counsel,
dated March 3, 1997. (2)
Exhibit T3E.4 Letter to Creditors from The Official
Committee of Bondholders of Harrah's Jazz
Company, dated February 28, 1997. (2)
Exhibit T3E.5 Notices of Entry of Order and Order Approving
Debtors' Third Amended Joint Disclosure
Statement and of Plan Confirmation Hearing. (2)
Exhibit T3E.6 Voting Procedures Notice. (2)
Exhibit T3E.7 Ballots. (2)
Exhibit T3E.8 Debtors' Fourth Amended Joint Disclosure
Statement, dated July 24, 1997, and
exhibits thereto. (4)
Exhibit T3E.9 Debtors' Third Amended Joint Plan of
Reorganization, dated July 24, 1997, and
exhibits thereto. (4)
Exhibit T3E.10 Notice of Entry of Order Approving Debtors'
Fourth Amended Joint Disclosure Statement. (2)
Exhibit T3E.11 Ballot. (2)
Exhibit T3E.12 Form of Debtors' Fifth Amended Joint
Disclosure Statement dated December 10, 1997,
and exhibit thereto. (2)
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. (2)
Exhibit T3E.14 Form of Ballots. (2)
Exhibit T3E.15 Form of letter to Creditors from Debtors'
Counsel, dated December 10, 1997. (2)
Exhibit T3E.16 Form of Notices of Entry of Order Approving
Debtors' Fifth Amended Joint Disclosure
Statement and of Plan Confirmation Hearing. (2)
Exhibit T3E.17 Form of Modified Voting Procedures. (2)
Exhibit T3E.18 Notice dated February 6, 1998 of Entry of
Order Approving Debtors' Third Amended Joint
Plan of Reorganization as Modified through
January 29, 1998.
Exhibit T3E.19 Notice Dated April 8, 1998 of Entry of Order
Approving Debtors' Third Amended Joint Plan
of Reorganization as Modified through April
6, 1998.
Exhibit T3E.20 Cover Letter dated September 3, 1998, to All
Creditors of Harrah's Jazz Company, Harrah's
Jazz Finance Corp. and Harrah's New Orleans
Investment Company from Debtors' Counsel.
Exhibit T3E.21 Notice dated September 3, 1998 of Entry of
Order Approving the Summary of Debtors'
Sixth Amended Disclosure Statement and the
Debtors' Sixth Amended Disclosure Statement
dated as of September 3, 1998.
Exhibit T3E.22 Debtors' Third Amended Joint Plan of
Reorganization as Modified through September
3, 1998, dated September 3, 1998, and
exhibits thereto.
Exhibit T3E.23 Summary of Debtors' Sixth Amended Joint
Disclosure Statement dated September 3, 1998.
Exhibit T3E.24 Modified Voting Procedures.
Exhibit T3E.25 Debtors' Sixth Amended Joint Disclosure
Statement dated September 3, 1998, and
exhibits thereto.
Exhibit T3E.26 Notice dated October 13, 1998 of Entry of
Confirmation Order Approving the Third
Amended Joint Plan of Reorganization as
Modified through October 13, 1998 and of
Hearing on Approval of the Plan Documents.
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) Previously filed.
(3) 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>
(4) 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 New Orleans
and State of Louisiana, on the 19th day of October, 1998.
JAZZ CASINO COMPANY, L.L.C.
By: JCC HOLDING COMPANY
Its: Sole Member
By: /s/ FREDERICK W. BURFORD
------------------------------
Name: Frederick W. Burford
------------------------------
Title: President
------------------------------
Attest: /s/ TRECCIA HANEY
---------------------------
Name: Treccia Haney
----------------------
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 Street
New Orleans, LA 70130
(Address of principal executive offices) (Zip code)
----------------------------------
Senior Subordinated Notes due 2009 with Contingent Payments
(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 Currency
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.*
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.*
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.*
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.*
<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.*
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."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued
January 2, 1934, by the Federal Reserve
Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
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.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-62999.
<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 14th day of October, 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Gavin S. Wilkinson
---------------------------
Gavin S. Wilkinson
Vice President
<PAGE>
EXHIBIT 6
October 14, 1998
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 S. Wilkinson
---------------------------
Gavin S. Wilkinson
Vice President
<PAGE>
STATE OF LOUISIANA EXHIBIT T3A.2
PARISH OF ORLEANS
ARTICLES OF ORGANIZATION
OF
JAZZ CASINO COMPANY, L.L.C.
The undersigned does hereby form and organize a limited liability
company, pursuant to the Limited Liability Company Law of Louisiana, La. R.S.
12:1301 ET SEQ., and in accordance therewith adopts the following Articles of
Organization, to-wit:
ARTICLE I
The name of this limited liability company is Jazz Casino Company, L.L.C.
ARTICLE II
This limited liability company shall have perpetual existence; provided,
however, that it shall be subject to dissolution in accordance with the
written operating agreement of the limited liability company.
ARTICLE III
The purpose of this limited liability company is to engage in any lawful
activity for which limited liability companies may be formed under the
Louisiana Limited Liability Company Law, La. R.S. 12:1301 ET SEQ.
ARTICLE IV
This limited liability company shall be managed by its member or members.
<PAGE>
ARTICLE V
Persons dealing with this limited liability company may rely upon a
certificate of JCC Holding Company, the sole initial member of this limited
liability company, to establish the membership of any member, the
authenticity of any records of this limited liability company, or the
authority of any person to act on behalf of this limited liability company,
including but not limited to the authority to take the actions referred to in
La. R.S. 12:1318(B).
ARTICLE VI
In addition to the general authority of the member or members of this
limited liability company to act on behalf of this limited liability company
in all matters in the ordinary course of its business, which is hereby
confirmed, the member or members of this limited liability company are hereby
specifically authorized to act on behalf of this limited liability company as
follows: (a) to enter into and carry out contracts and agreements of all
kinds including but not limited to opening accounts at a bank or other
financial institution; (b) to bring and defend actions at law or in equity;
(c) to buy, acquire, sell, lease, convey, exchange, agree to sell or buy,
dispose of, manage, lease or operate real or immovable property, personal or
movable property, whether tangible, intangible, corporeal or incorporeal,
including all property now owned or hereinafter acquired by this limited
liability company, whether now or in the future, for such consideration as
the member or members may deem appropriate, including for cash, credit, a
combination of both or exchange of property rights, with such acts to contain
such terms and conditions as the member or members may deem necessary, proper
and/or advisable; (d) to borrow monies for the business of this limited
liability company from any bank, financial institution, corporation, person
or entity and
- 2 -
<PAGE>
guaranty the debts and obligations of any person or entity and from time to
time make, execute and issue promissory notes and other negotiable or
non-negotiable instruments, continuing guaranties or evidences of
indebtedness, all to be on such terms and conditions and to contain such
rates of interest and repayment terms as the member or members may deem
necessary; (e) to assign, pledge, mortgage or grant security interests in or
otherwise incumber any real or immovable property, personal or movable
property, whether tangible, intangible, corporeal or incorporeal including
all property now owned or hereinafter acquired by this limited liability
company, whether now or in the future, and to execute and bind this limited
liability company on any mortgage, assignment, security agreement, financing
statement, pledges or any other document creating such encumbrances to secure
the obligations of this limited liability company or any other person or
entity with such documents to contain the usual and customary security
clauses, including without limitation a confession of judgment, waiver of
appraisal and PACT DE NON ALIENANDO, all upon such terms and conditions as
the member or members may deem proper; and (f) to do and perform all such
other things as may be in furtherance of this limited liability company's
purpose and necessary or appropriate to the conduct of its business.
THUS DONE AND EXECUTED by the organizer on the 8th day of December,
1997, before the undersigned competent witnesses.
WITNESSES:
/s/ Peggy Field /s/ John W. Colbert
- -------------------------------- --------------------------------
JOHN W. COLBERT, ORGANIZER
/s/ Deborah L. McShan
- --------------------------------
- 3 -
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned authority, personally came and appeared John
W. Colbert, who being duly sworn, acknowledged in my presence and in the
presence of the undersigned witnesses that he executed the foregoing Articles
of Organization of Jazz Casino Company, L.L.C. as his free act and deed.
IN WITNESS WHEREOF, the said Appearer has executed this acknowledgment
in my presence and in the presence of the undersigned competent witnesses on
this 8th day of December, 1997.
WITNESSES:
/s/ Peggy Field /s/ John W. Colbert
- -------------------------------- --------------------------------
JOHN W. COLBERT, ORGANIZER
/s/ Deborah L. McShan /s/ Illegible
- -------------------------------- --------------------------------
Notary Public
- 4 -
<PAGE>
INITIAL REPORT OF
JAZZ CASINO COMPANY, L.L.C.
1. The location and municipal address of the registered office of Jazz
Casino Company, L.L.C. is:
512 South Peters Street
New Orleans, Louisiana 70130
2. The name and municipal address of the registered agent of Jazz
Casino Company, L.L.C. is:
Stone, Pigman, Walther, Wittmann & Hutchinson, L.L.P.
Attention: David L. Stone
546 Carondelet Street
New Orleans, Louisiana 70130
3. The name and municipal address of the sole first member of Jazz
Casino Company, L.L.C. is:
JCC Holding Company
1023 Cherry Road
Memphis, Tennessee 38117
Dated at New Orleans, Louisiana, this 8th day of December, 1997.
/s/ John W. Colbert
--------------------------------
JOHN W. COLBERT, ORGANIZER
546 Carondelet Street
New Orleans, Louisiana 70130
REGISTERED AGENT'S AFFIDAVIT
AND ACKNOWLEDGMENT OF ACCEPTANCE
Stone, Pigman, Walther, Wittmann & Hutchinson, L.L.P. hereby
acknowledges and accepts the appointment as registered agent for and on
behalf of the above named limited liability company.
STONE, PIGMAN, WALTHER, WITTMANN
& HUTCHINSON, L.L.P.
By: /s/ Michael R. Schneider
-------------------------------
MICHAEL R. SCHNEIDER, AGENT
Sworn to and subscribed before me
this 8th day of December, 1997.
/s/ Illegible
- ------------------------------------
NOTARY PUBLIC
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
JAZZ CASINO COMPANY, L.L.C.
Issuer,
JCC HOLDING COMPANY,
CP DEVELOPMENT, L.L.C.,
FP DEVELOPMENT, L.L.C. and
JCC DEVELOPMENT COMPANY, L.L.C.,
Guarantors,
and
NORWEST BANK MINNESOTA,
National Association,
Trustee
----------------
INDENTURE
Dated as of ____________, 1998
----------------
$187,500,000
Senior Subordinated Notes due 2009
With Contingent Payments
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- -------- ---------
<S> <C>
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;
15.2
(c) ....................................... N.A.
311 (a) ....................................... 8.11
(b) ....................................... 8.11
(c) ....................................... N.A.
312 (a) ....................................... 2.5
(b) ....................................... 15.3.
(c) ....................................... 15.3.
313 (a) ....................................... 8.6
(b)(1) ....................................... N.A.
(b)(2) ....................................... 8.6
(c) ....................................... 8.6;
15.2.
(d) ....................................... 8.6
314 (a) ....................................... 5.7;
5.8;
15.2.
(b) ....................................... 4.2
(c)(1) ....................................... 2.2;
8.2;
15.4
(c)(2) ....................................... 8.2;
15.4.
(c)(3) ....................................... 4.1(c);
4.2
(d) ....................................... 4.1(c);
4.2
(e) ....................................... 15.5.
(f) ....................................... N.A.
315 (a) ....................................... 8.1(b)
(b) ....................................... 8.5;
8.6;
15.2.
(c) ....................................... 8.1(a)
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- -------- ---------
<S> <C>
(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) ....................................... 15.1.
</TABLE>
- ------------
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
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . .1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.2. Incorporation by Reference of TIA. . . . . . . . . . . . . . . . 33
SECTION 1.3. Rules of Construction. . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE II. THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.1. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . 35
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . 36
SECTION 2.4. Paying Agent to Hold Assets in Trust . . . . . . . . . . . . . . 37
SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.6. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.7. Replacement Securities . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.8. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.9. Treasury Securities. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE III. REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.1. Right of Redemption. . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.2. Redemption Pursuant to Applicable Laws . . . . . . . . . . . . . 41
SECTION 3.3. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.4. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.5. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . 42
SECTION 3.6. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . 42
SECTION 3.7. Securities Redeemed in Part. . . . . . . . . . . . . . . . . . . 42
ARTICLE IV. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.1. Security Interest. . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.2. Recording; Opinions of Counsel . . . . . . . . . . . . . . . . . 43
SECTION 4.3. Disposition of Certain Collateral. . . . . . . . . . . . . . . . 44
SECTION 4.4. Net Cash Proceeds Account. . . . . . . . . . . . . . . . . . . . 46
SECTION 4.5. Certain Releases of Collateral . . . . . . . . . . . . . . . . . 46
SECTION 4.6. Lien Subordination . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.7. Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.8. Suits to Protect the Collateral. . . . . . . . . . . . . . . . . 47
SECTION 4.9. Trustee's Duties . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.10. Collateral Documents . . . . . . . . . . . . . . . . . . . . . . 47
iii
<PAGE>
ARTICLE V. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.1. Payment of Securities. . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.2. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . 48
SECTION 5.3. Limitation on Restricted Payments. . . . . . . . . . . . . . . . 49
SECTION 5.4. Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.5. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . 51
SECTION 5.6. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.7. Compliance Certificate; Notice of Default. . . . . . . . . . . . 51
SECTION 5.8. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.9. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . . . 52
SECTION 5.10. Limitation on Transactions with Affiliates . . . . . . . . . . . 53
SECTION 5.11. Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock. . . . . . . . . . . 54
SECTION 5.12. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries. . . . . . . . . . . . . . . 56
SECTION 5.13. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . 57
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 . . . . . . . . . . . . . . . 62
SECTION 5.17. Limitation on Status as Investment Company . . . . . . . . . . . 62
SECTION 5.18. Restrictions on Sale and Issuance of Subsidiary Stock. . . . . . 62
SECTION 5.19. Limitation on Payment of Management Fees . . . . . . . . . . . . 62
SECTION 5.20. Listing of Securities. . . . . . . . . . . . . . . . . . . . . . 64
SECTION 5.21. Compliance with Environmental Laws . . . . . . . . . . . . . . . 64
SECTION 5.22. Limitation on Layering Debt. . . . . . . . . . . . . . . . . . . 65
SECTION 5.23. Certain Damages . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 5.24. Certain Deferrals. . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VI. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.1. Limitation on Merger, Sale or Consolidation. . . . . . . . . . . 66
SECTION 6.2. Successor Substituted. . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . 67
SECTION 7.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.2. Acceleration of Maturity Date; Rescission and
Annulment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.3. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.4. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . 72
SECTION 7.5. Trustee May Enforce Claims Without Possession
of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.6. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 7.7. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . 73
iv
<PAGE>
SECTION 7.8. Unconditional Right of Holders to Receive
Principal and Interest . . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.9. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . 74
SECTION 7.10. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . 74
SECTION 7.11. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.12. Waiver of Past Default . . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.13. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.14. Restoration of Rights and Remedies . . . . . . . . . . . . . . . 75
ARTICLE VIII. TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 8.1. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . 76
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
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. . . . . . . . . . . . . . . . . 88
v
<PAGE>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.1. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.2. Parent Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 12.3. Execution and Delivery of Guaranty. . . . . . . . . . . . . . . .94
SECTION 12.4. Future Subsidiary Guarantors . . . . . . . . . . . . . . . . . . 95
SECTION 12.5. Release of Guarantors. . . . . . . . . . . . . . . . . . . . . . 95
SECTION 12.6. When the Guarantor May Merge, etc. . . . . . . . . . . . . . . . 97
SECTION 12.7. Certain Bankruptcy Events. . . . . . . . . . . . . . . . . . . . 97
ARTICLE XIII. SUBORDINATION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . 98
SECTION 13.1. Securities Subordinated to Senior Debt . . . . . . . . . . . . . 98
SECTION 13.2. Securities Subordinated to Prior Payment
of All Senior Debt on Dissolution, Liquidation,
Reorganization, etc. of the Company. . . . . . . . . . . . . . . 98
SECTION 13.3. Holders of Securities to be Subrogated
to Right of Holders of Senior Debt . . . . . . . . . . . . . . . 99
SECTION 13.4. Obligations of the Company Unconditional . . . . . . . . . . . .100
SECTION 13.5. Company Not to Make Payments With Respect to
Securities in Certain Circumstances. . . . . . . . . . . . . . .100
SECTION 13.6. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice. . . . . . . . . . . . . . . . .102
SECTION 13.7. Application by Trustee of Monies Deposited With It . . . . . . .102
SECTION 13.8. Subordination Rights Not Impaired by
Acts or Omissions of Company or Holders of Senior Debt . . . . .103
SECTION 13.9. Holders of Securities Authorize Trustee
to Effectuate Subordination of Securities. . . . . . . . . . . .104
SECTION 13.10. Right of Trustee to Hold Senior Debt;
Preservation of Trustee's Rights . . . . . . . . . . . . . . . .104
SECTION 13.11. Article XIII Not to Prevent Events of Default. . . . . . . . . .104
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt . . . . . . . .105
SECTION 13.13. Trust Monies Not Subordinated. . . . . . . . . . . . . . . . . .105
ARTICLE XIV. SUBORDINATION OF GUARANTY. . . . . . . . . . . . . . . . . . . . . .105
SECTION 14.1. Guaranty Subordinated to Guarantor Senior Debt . . . . . . . . .105
SECTION 14.2. Guaranty 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. . . . . . . . . . . .107
SECTION 14.4. Obligations of the Guarantor Unconditional. . . . . . . . . . . 107
vi
<PAGE>
SECTION 14.5. Guarantors Not to Make Payments in
Respect of the Guaranties in Certain Circumstances. . . . . . . 108
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 . . . . . . . . . . . . . . . . . . . . . . . 109
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 Guaranties . . . . . . . . . . . 110
SECTION 14.10. Right of Trustee to Hold Guarantor
Senior Debt; Preservation of Trustee's Rights . . . . . . . . . 111
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 15.1. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . . . 112
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. . . . . . . . . .115
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
</TABLE>
vii
<PAGE>
INDENTURE, dated as of ________, 1998, between Jazz Casino Company,
L.L.C., a Louisiana limited liability company ("JCC" or the "Company"), as
issuer, JCC Holding Company, a Delaware corporation ("JCC Holding"), CP
Development, L.L.C., a Louisiana limited liability company ("CP Development"),
FP Development, L.L.C., a Louisiana limited liability company ("FP
Development"), and JCC Development Company, L.L.C., a Louisiana limited
liability company ("JCC Development"), as guarantors, 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 (or an affiliate
of 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"
<PAGE>
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 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.
"Authorized Representative" means, (i) with respect to (a) JCC
Holding, (b) any Guarantor that is a corporation, or (c) any Guarantor that
has two or more Officers, any Officer thereof, and (ii) with respect to any
Guarantor that is a limited liability company and that has fewer than two
Officers, an Officer of the manager of such liability company, and (iii) with
respect to any Guarantor that is a partnership and that has fewer than two
Officers, an Officer of a general partner of such partnership.
"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.
2
<PAGE>
"Bank Agent" means Bankers Trust Company or any successor or
replacement Administrative Agent (as defined in the Bank Credit Facilities)
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 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 Holding or 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.
"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 capital 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 casino 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 Amended and Renegotiated
Casino Operating Contract between Harrah's Jazz Company, the Company and the
State of Louisiana by and through 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.
"Change of Control Put Date" shall have the meaning specified in
Section 11.1.
4
<PAGE>
"City" means the City of New Orleans, Louisiana.
"Collateral" means the Property and assets of the Company and the
Guarantors which is now or hereafter subject to the Liens created by the
Collateral Documents.
"Collateral Agent" shall mean The Bank of New York as collateral
agent under the Collateral Documents.
"Collateral Documents" means the Security Agreement, the
Intellectual Property Security Documents, the Pledge Agreement , the
Mortgages and any other agreement purporting to convey to the Collateral
Agent for the benefit of the Secured Creditors a security interest in
Property pursuant to the requirements of this Indenture, 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 of 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 State of
Louisiana and 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 (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
5
<PAGE>
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 Management Fees, if any, the proceeds, if any, from the
exercise of the HET Warrant, and (B) to subtract therefrom (i) any
extraordinary gain reflected in the calculation of Consolidated Net Income,
(ii) any Restricted Payments from the Company to the Parent Guarantor made
pursuant to clause (E) of the second paragraph of Section 5.3 and (iii)
solely for the purpose of calculating Contingent Payments, if any, and
Incentive Management Fees, if any, all revenues received by the Company
pursuant to the Second Floor Sublease.
6
<PAGE>
"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 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,
7
<PAGE>
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, CP Development,
FP Development and JCC Development, as guarantors, and Norwest Bank
Minnesota, National Association, as trustee, in connection with the
Contingent Notes.
"Contingent Payment Accrual" means, at any time, the total amount
of Contingent Payments accrued and unpaid through and as of such time.
"Contingent Payment Measurement Amount" shall mean an amount equal
to (i) the Consolidated EBITDA of the Company, (ii) plus an amount equal to
the cash distributions, if any, from CP Development and FP Development to JCC
Holding, (iii) after the date on which the second floor of the Casino is open
to customers, (a) if the cash advances (whether in the form of one or more
loans or equity contributions or otherwise), if any, made by the Company to
JCC Development (collectively, the "Cash Advances") are in excess of the
lease payments received by the Company pursuant to the Second Floor Sublease,
less the amount of such excess, or (b) if the lease payments received by the
Company pursuant to the Second Floor Sublease are in excess of the Cash
Advances, plus the amount of such excess. If the Net Working Capital of
either of CP Development or FP Development is in excess of $1,000,000 on the
last day of the Semiannual Period for which the Contingent Payment
Measurement Amount is being calculated, then the amount of Net Working
Capital in excess of $1,000,000 shall be deemed to have been distributed by
CP Development and/or FP Development, as applicable, to JCC Holding for the
purposes of calculating the Contingent Payment Measurement Amount.
Notwithstanding the foregoing, in no event (including, without limitation,
with respect to clause (ii) or the previous sentence of this definition)
shall the proceeds from the sale of assets be included in the calculation of
"Contingent Payment Measurement Amount."
"Contingent Payment Period" means collectively a First Semiannual
Period together with the next succeeding Second Semiannual Period.
"Contingent Payments" means collectively the Initial First Period
Contingent Payments, First Period Contingent Payments and the Second Period
Contingent Payments.
8
<PAGE>
"Convertible Junior Subordinated Debentures" means the 8%
Convertible Junior Subordinated Debentures due 2009 issued by the Company in
connection with the Plan of Reorganization.
"Convertible Junior Subordinated Debentures Indenture" means the
Indenture, dated as of _____________, 1998, among the Company, as obligor,
and Norwest Bank Minnesota, National Association, as trustee, in connection
with the Convertible Junior Subordinated Debentures.
"CP Development" means CP Development, L.L.C., a Louisiana limited
liability company.
"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.
"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 (other than
Minimum Payment Guaranty Obligations) permitted under this Indenture the
principal amount of which is $15,000,000 or more.
"Development Agreement" means that certain Development Services
Agreement, dated as of _______, 1998, between the Company, CP Development, FP
Development, JCC Development and HOC.
"Development Companies" means collectively CP Development, FP
Development, JCC Development, all other wholly owned Subsidiaries of JCC
Holding (other than the Company and its Subsidiaries) and all other
Subsidiaries of JCC Holding (other than the Company and its Subsidiaries)
that guarantee the Bank Credit Facilities (for so long as such guarantees
remain in effect).
"Development Companies Guaranty" means the Guaranty of each of the
Development Companies.
"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
9
<PAGE>
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.
"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 a First Semiannual Period (except for the Initial First Period) in
an amount (which may not be less than zero) equal to the product of (i) 37.5%
of the aggregate Contingent Payment Measurement Amount for such First
Semiannual Period and the immediately preceding Second Semiannual Period in
excess of $65,000,000 and less than $85,000,000, 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.
"First Semiannual Period" shall mean each six month period ending
on March 31.
10
<PAGE>
"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 May 15, 1999 5.867%
May 15, 1999 through November 15, 1999 5.927%
November 15, 1999 through May 15, 2000 5.987%
May 15, 2000 through November 15, 2000 6.046%
November 15, 2000 through May 15, 2001 6.103%
May 15, 2001 through November 15, 2001 6.159%
November 15, 2001 through May 15, 2003 6.214%
May 15, 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 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.
"FP Development" means FP Development, L.L.C., a Louisiana limited
liability company.
"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
11
<PAGE>
with responsibility to interpret and enforce the laws and regulations
applicable to gaming in any Gaming Jurisdiction.
"Gaming Jurisdiction" shall mean any jurisdiction in which the
Company is licensed to conduct gaming activities.
"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, including, 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, as
intervenor, 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 Revenues" shall have the meaning specified in the Management
Agreement as in effect on the date hereof.
"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) to the extent the same does 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. To the extent (and only to
the extent) that any refinancing Indebtedness does not comply with the
requirements of the preceding clause (i), such non-complaint amounts shall
not constitute Guarantor Senior Debt. It is understood and agreed that if
any interest or outstanding Guarantor Senior Debt is deferred or capitalized,
any increased amounts resulting therefrom shall continue to constitute
Guarantor Senior Debt.
"Guarantors" means collectively the Parent Guarantor, the
Subsidiary Guarantors and the Development Companies.
12
<PAGE>
"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 HET/JCC Agreement, dated as of
______________, 1998, among HET, HOC and the Company (and any substitute or
successor agreement), and any other documents entered into in connection with
(and to the extent relating directly to) such agreement, as 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 Guaranty" means the guarantees of HET and HOC pursuant to
that certain HET/HOC Guaranty and Loan Purchase Agreement, dated as of
________ 1998, among HET, HOC and Bankers Trust Company, as administrative
agent.
"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.
"Incentive Management Fees" shall have the meaning specified in
Section 5.19.
13
<PAGE>
"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 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.
14
<PAGE>
"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.
"Initial 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 period ending on March 31, 1999 (the "Initial
First Period") in an amount (which may not be less than zero) equal to the
product of (i) 75% of the Contingent Payment Measurement Amount for such
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 interest payments as of such Record Date.
"Initial Minimum Payment Guarantors" means HET and HOC.
"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 HET and HOC, as initial Minimum Payment
Guarantors, the Bank
15
<PAGE>
Agent, the Trustee, the trustee under the Contingent Notes Indenture, 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, specified in the
Security, of an installment of interest on the Securities. The "First
Interest Payment Date" shall mean May 15, 1999. The "Second Interest Payment
Date" shall mean November 15, 1999. The "Third Interest Payment Date" shall
mean May 15, 2000. The "Fourth Interest Payment Date" shall mean November
15, 2000. The "Fifth Interest Payment Date" shall mean May 15, 2001. The
"Sixth Interest Payment Date" shall mean November 15, 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.
16
<PAGE>
"JCC Development" means JCC Development Company, L.L.C., a
Louisiana limited liability company.
"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.
"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 a person is a limited liability
company, the Manager of such limited liability company as set forth in its
Operating Agreement or, if such limited liability company's Operating
Agreement does not provide for a Manager, the member or members of such
limited liability company, and (ii) otherwise the Board of Directors of such
person.
"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.
"Minimum Accumulation Date" shall have the meaning specified in
Section 5.14.
17
<PAGE>
"Minimum Payment Guarantor" means the Initial Minimum Payment
Guarantors and any other successor or substitute entity or entities which
provides a Minimum Payment Guaranty.
"Minimum Payment Guaranty" means the Minimum Payment Guaranty (as
defined in the Casino Operating Contract) that the Casino Operating Contract
obligates the Company to cause to be provided to the State of Louisiana by
and through the Regulating Authority.
"Minimum Payment Guaranty Documents" means each Minimum Payment
Guaranty and all agreements or documents (including, without limitation, the
HET/JCC Agreement) executed and delivered in connection therewith.
"Minimum Payment Guaranty Obligations" shall have the meaning
specified in the Intercreditor Agreement.
"Mortgages" shall mean, collectively (i) the Act of Mortgage and
Collateral Assignment, dated as of the date hereof, by the Company, as
mortgagor, in favor of the Collateral Agent, as mortgagee for the benefit of
the Secured Creditors, (ii) the Act of Mortgage and Collateral Assignment,
dated as of the date hereof, by JCC Development, as mortgagor, in favor of
the Collateral Agent, as mortgagee for the benefit of the Secured Creditors,
(iii) the Act of Mortgage and Collateral Assignment, dated as of the date
hereof, by FP Development, as mortgagor, in favor of the Collateral Agent, as
mortgagee, for the benefit of the Secured Creditors, (iv) the Act of Mortgage
and Collateral Assignment, dated as of the date hereof, by CP Development, as
mortgagor, in favor of the Collateral Agent, as mortgagee for the benefit of
the Secured Creditors, and (v) any mortgage, deed of trust, assignment of
leases or rents or similar document executed and delivered at any time after
the date hereof by JCC Holding or any of its Subsidiaries to secure any
obligations to the Secured Creditors.
"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 Minimum Payment Guarantor, the Holders and the Bank
Lenders pursuant to Section 4.4 and the
18
<PAGE>
terms of the Security Agreement into which the Net Cash Proceeds from Asset
Sales and Insurance Proceeds are to be deposited.
"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.
"Net Working Capital" means, for any person as of any date, the
Current Assets of such person as of such date minus the Current Liabilities
of such person as of such date. Net Working Capital shall be determined in
accordance with GAAP. "Current Assets" means all cash, cash equivalents,
inventory and accounts receivable, calculated in accordance with GAAP.
"Current Liabilities" means all current liabilities calculated in accordance
with GAAP.
"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, Contingent Payments, Make-Whole Amounts, penalties fees,
indemnifications, reimbursements (including, without limitation,
reimbursement obligations with respect to letters of credit and bankers'
acceptances), damages and other liabilities payable under the documentation
governing, or otherwise relating to, any Indebtedness. Without limiting the
foregoing, the "Obligations" in respect of Senior Debt shall include all
interest accruing after the filing of any petition or proceeding of the type
referenced in Section 13.2 or 14.2 with respect to the Company or any
Guarantor at the relevant contract rate provided in the documentation
governing the respective issue of Senior Debt, regardless of whether such
interest is an allowed claim in the relevant proceeding.
"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.
19
<PAGE>
"Officers' Certificate" means, with respect to the Company or any
Guarantor, a certificate signed by any Officer of such entity (or, if such
entity does not have any Officers, by an Officer of the Manager of such
entity) 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 with respect to 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 (or any Guarantor, if applicable) 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.
"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.
"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") 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 Collateral Agent under the
Collateral Documents).
"Permitted Guaranty" shall mean any guarantee of Permitted Junior
Securities (which Permitted Junior Securities constitute debt securities
issued by the Company in accordance with the definition thereof contained
herein), which guarantee is issued by a Guarantor or any successor
corporation pursuant to a plan of reorganization or readjustment of such
Guarantor or any successor corporation pursuant to a plan of reorganization
or readjustment of such Guarantor that is subordinated to the payment of all
then outstanding Guarantor Senior Debt at least to the same extent that the
Guarantee of such Guarantor is subordinated to the payment of all Guarantor
Senior Debt on the date of the original effectiveness of this Indenture, so
long as (i) the effect of the use of this defined term in the subordination
provisions contained
20
<PAGE>
in Article XIV is not to cause the Securities (or any Guarantee thereof) to
be treated as part of (a) the same class of claims as any Senior Debt or
Guarantor Senior Debt or (b) any class of claims pari passu with, or senior
to, the Senior Debt or Guarantor Senior Debt for any payment or distribution
in any case or proceeding or similar event relating to the liquidation,
insolvency, bankruptcy, dissolution, winding up or reorganization of the
Company or any Guarantor and (ii) to the extent any Senior Debt or Guarantor
Senior Debt outstanding on the date of consummation of any such plan of
reorganization or readjustment is not paid in full in cash on such date,
either (a) the holders of such Senior Debt or Guarantor Senior Debt not so
paid in full in cash have consented to the terms of such plan of
reorganization or readjustment or (b) such holders receive securities which
constitute Senior Debt and Guarantor Senior Debt and which have been
determined by the relevant court to constitute satisfaction in full in money
or money's worth of any Senior Debt (and any related Guarantor Senior Debt)
not paid in full in cash.
"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);
(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 Junior Securities" shall mean debt or equity securities
of the Company or any successor corporation issued pursuant to a plan of
reorganization or readjustment of the Company that are subordinated to the
payment of all then outstanding Senior
21
<PAGE>
Debt at least to the same extent that the Securities are subordinated to the
payment of all Senior Debt on the date of the original effectiveness of this
Indenture so long as (i) the effect of the use of this defined term in the
subordination provisions contained in Article XIII is not to cause the
Securities to be treated as part of (a) the same class of claims as the
Senior Debt or (b) any class of claims pari passu with, or senior to, the
Senior Debt for any payment or distribution in any case or proceeding or
similar event relating to the liquidation, insolvency, bankruptcy,
dissolution, winding up or reorganization of the Company and (ii) to the
extent that any Senior Debt outstanding on the date of consummation of any
such plan of reorganization or readjustment is not paid in full in cash on
such date, either (a) the holders of any such Senior Debt not so paid in full
in cash have consented to the terms of such plan of reorganization or
readjustment or (b) such holders receive securities which constitute Senior
Debt (which are guaranteed pursuant to guarantees constituting Guarantor
Senior Debt of each Guarantor) and which have been determined by the relevant
court to constitute satisfaction in full in money or money's worth of any
Senior Debt (and any related Guarantor Senior Debt) not paid in full in cash.
"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;
22
<PAGE>
(f) Liens created by this Indenture, the Contingent Notes
Indenture and the Collateral Documents (which Liens may also secure
certain other indebtedness and certain refinancings thereof on the
terms provided in the Collateral Documents and the Intercreditor
Agreement);
(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 Distributions" means (i) 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; (ii) for so long as the Company is treated as a
corporation for federal income tax purposes 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 (A) 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 (B) 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; (iii) payment by the Company to the Parent Guarantor in an amount not
in excess of the separate return federal and state income tax liability (if
any) of the Parent Guarantor attributable to the aggregate items of income,
gain, loss, deduction or credit generated by the Development Companies; and
(iv) payment by the Company to the Parent Guarantor in an amount not in
excess of any state or local franchise tax (or any similar tax based on
assets or capital) liability of the Parent Guarantor (except to the extent
that such liability is attributable to the Parent Guarantor's investment in
an entity other than the Company (or any Subsidiaries
23
<PAGE>
thereof) or the Development Companies); provided, that for purposes of
clauses (i) through (iv), any such payment can be made by the Company no
earlier than the date on which the Parent Guarantor is required to make such
tax payment for such year to the appropriate taxing authority; and provided,
further, that for purposes of clause (ii)(B) 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 clause (ii) of the preceding sentence for
federal income taxes.
"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 Third Amended Joint 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 JCC Holding, the Company, CP Development, FP Development
and JCC Development in favor of, the Collateral Agent and the custodian named
therein for the benefit of the Secured Creditors, as the same 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 present value (using a discount rate equal to the
Formula Rate at such time) of the remaining scheduled payments of principal
and Fixed Interest (excluding the Maximum Contingent Payments for the then
current and all remaining Contingent Payment Periods) payable in respect of
the Notes minus the aggregate 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,
24
<PAGE>
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).
"Project Expansion" means any capital addition, improvement,
extension or repair, after the Casino Completion Date, to any of the
Company's properties.
"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.
"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
25
<PAGE>
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 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 Rivergate Development Corporation, a Louisiana public
benefit corporation.
"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 (including due and unpaid Contingent Payments) 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."
26
<PAGE>
"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 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 (or
any successor thereto).
"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. Without limiting the generality
of the foregoing, if the Company receives written notice from Harrah's
Management Company pursuant to Section 21.03 of the Management Agreement that
Securities have been transferred to a Non-Qualified Person (as defined in the
Management
27
<PAGE>
Agreement), the Company shall be entitled to redeem such Securities from such
Non-Qualified Person and such redemption shall be a Required Regulatory
Redemption.
"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 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, 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 Indemnity Agreement; (viii) Credit
Enhancement Fees, as defined in, and paid pursuant to, the Credit Enhancement
Fee Agreement; (ix) payments to the Minimum Payment Guarantor in respect of
Minimum Payment Guaranty Obligations; (x) payments in respect of a Slot
Machine Lease; and (xi) any payments under or pursuant to the Bank Credit
Facilities.
28
<PAGE>
"Revolving Loans" means collectively the Revolving Loans, the
Swingline Loans and the Letters of Credit under the Bank Credit Facilities.
"SEC" means the Securities and Exchange Commission.
"Second Floor Sublease" means the Second Floor Non-Gaming Sublease,
dated as of _____________, 1998, between the Company and JCC Development
relating to JCC Development's sublease of the second floor of the Casino.
"Second Period Contingent Payments" means the amounts payable in
the aggregate to the Holders of the Securities on the Interest Payment Date
next following a Second Semiannual Period in an amount (which may not be less
than zero) equal to (A) the product of (i) 75% of the aggregate Contingent
Payment Measurement Amount for such Second Semiannual Period and the
immediately preceding First 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 or Initital First Period Contingent Payments, as
applicable, whether paid or accrued, in respect of the immediately preceding
First Semiannual Period or Initial First Period, as the case may be.
"Second Semiannual Period" shall mean each six month period ending
on September 30.
"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 aggregate Maximum Contingent Payments (other than accrued
or paid Contingent Payments) with respect to the then current Contingent
Payment Period or any future Contingent Payment Period through Stated
Maturity, less the absolute value of 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.
"Secured Creditors" means, collectively, the Minimum Payment
Guarantor, the Bank Agent and the Bank Lenders, the Trustee, the trustee
under the Contingent Notes Indenture, and other Bank Lenders (or affiliates
thereof) entering into Interest Rate Agreements with, or guaranteed by, the
Company, so long as such Bank Lender (or affiliate thereof) participates in
the extension of such Interest Rate Agreements, and their subsequent assigns,
if any.
"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.
29
<PAGE>
"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, executed by JCC Holding, the Company, CP Development, FP
Development and JCC Development in favor of the Collateral Agent for the
benefit of the Secured Creditors, as the same may be amended from time to
time in accordance with the terms thereof.
"Security Agreement (House Bank)" means the Security Agreement
(House Bank), dated as of ____________, 1998, executed by the Company in
favor of HET and HOC, as it 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 Collateral Agent for the benefit of
the Secured Creditors.
"Semiannual Period" means either as First Semiannual Period or a
Second Semiannual Period, as applicable.
"Senior Debt" means (i) 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 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) to
the extent the same does 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, and (ii) the Minimum Payment Guaranty
Obligations. To the extent (and only to the extent) that any refinancing
Indebtedness does not comply with the requirements of preceding clause (i),
such non-compliant amounts shall not constitute Senior Debt. It is
understood and agreed that if any interest on outstanding Senior Debt is
deferred or capitalized, any increased amounts resulting therefrom shall
continue to constitute Senior Debt.
"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.
30
<PAGE>
"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.
"Slot Machine Lease" means an operating lease that the Company may
enter into after the date hereof with HET or a Subsidiary of HET pursuant to
which the Company may lease from HET or such Subsidiary no more than 1,100
slot machines for use in the Casino on terms that are fair and reasonable to
the Company and at least as favorable as the terms which could be obtained by
the Company in a comparable transaction made on an arm's length basis with a
person other than HET or such Subsidiary. A Slot Machine Lease shall be
deemed to be on terms which are fair and reasonable to the Company and on
terms which are at least as favorable as the terms which could be obtained on
an arm's length basis with persons other than HET or such Subsidiary if such
Slot Machine Lease (i) is approved by a majority of the members of the Parent
Guarantor'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 (ii) requires the Company to make lease payments based on a
value of such slot machines that is equal to or less than an appraisal of
such slot machines by an appraisal firm of national reputation.
"Stated Maturity" means _________, 2009.
"Subordinated Credit Facility" means the Subordinated Loan
Agreement, dated as of _________, 1998, among the Company, 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 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
31
<PAGE>
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.
"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.
"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.
"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 Loans 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 Loans under the
Bank Credit Facilities.
"Tranche B-2 Term Loan" means the Tranche B-2 Term Loans 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.
"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.
32
<PAGE>
"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). 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.
"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.
33
<PAGE>
"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;
(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,
34
<PAGE>
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.
-----------------------------
(a) The Securities shall be executed on
behalf of the Company by its Chairman of the Board, President or one of its
Vice Presidents, under the corporate seal of the Company, reproduced thereon,
and attested by its Secretary or Assistant Secretaries. The signature of any
of these officers on the Securities may be manual or facsimile.
(b) Securities or Guarantees bearing the manual or
facsimile signatures of individuals who were at any time the proper officers
of the Company or the Guarantors 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.
(c) 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.
(d) 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 Secondary 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
or a 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 such Guarantor.
(e) The Company shall pay Fixed Interest and Contingent
Payments from _________, 1998 or from the most recent Interest Payment Date
to which Fixed Interest or Contingent Payments, as applicable, 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
35
<PAGE>
and payable on such Interest Payment Date in Secondary Securities in lieu of
the payment of such Fixed Interest in cash; provided, further, however, that
on the Fifth Interest Payment Date and the Sixth Interest Payment Date the
Company shall not be entitled to pay 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 on the last Business Day of the corresponding
Semiannual Period (i) the Company has no outstanding borrowings under the
Tranche A-1 Term Loan and the Tranche A-2 Term Loan, (ii) no Revolving Loans
are outstanding, and (iii) the Company has at least $20,000,000 of cash and
Cash Equivalents. In addition, if the Company's Consolidated EBITDA is less
than $28,500,000 for the twelve month period ending on the last day of the
Semiannual Period immediately preceding any 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. Any such
Secondary Securities shall be governed by this Indenture and shall be subject
to the same terms (including Stated Maturity and rates of interest from time
to time payable thereon (but not including the issuance date)) on all other
Securities.
(f) 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 applicable 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. 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
deems it necessary to do so in order to comply with any law or other
applicable regulation or requirement, with appropriate distinguishing
designations.
(g) 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.
(h) Securities shall be issuable only in registered form
without coupons in denominations of $1.00 and 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 $1.00.
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
36
<PAGE>
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 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
37
<PAGE>
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,
3.7, 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 Guarantors shall issue and the Trustee shall authenticate
a replacement Security if the Trustee's requirements are met. If required by
the Trustee or the 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 canceled 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
38
<PAGE>
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 Guarantors 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 reasonably and in good faith considers appropriate for
temporary Securities. Without unreasonable delay, the Company and the
Guarantors 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 canceled 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
39
<PAGE>
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 (a "Special Record Date"), 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
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.
40
<PAGE>
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 no less than 20 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 aggregate principal amount of the Securities 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's
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 $1.00 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
41
<PAGE>
principal amount of such Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial
redemption;
(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
Guarantors and, as applicable, the Trustee, the other Secured Creditors and
the Collateral Agent for the benefit of the Secured Creditors 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 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.
42
<PAGE>
(b) The Collateral is to be held by the Collateral Agent
for the benefit of the Secured Creditors, subject to the terms of the
Intercreditor Agreement, the Collateral Documents and Section 4.6.
(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 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.
43
<PAGE>
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, 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;
(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, release or
otherwise dispose of, free from the security interests under the
Collateral Documents, the Intercreditor Agreement
44
<PAGE>
and hereunder, any Collateral as permitted by and pursuant to the express
terms of any of the Collateral Documents;
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
Mortgages 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 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.
45
<PAGE>
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 the Collateral Agent
for the benefit of the Secured Creditors. 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 Guarantors 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 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) The Trustee and each Holder acknowledge that, as
more fully set forth in the Collateral Documents and the Intercreditor
Agreement, 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 rights of holders of Senior Debt to receive proceeds from the disposition
of Collateral, and is pari passu with the rights of Holders of Contingent
Notes and the rights holders of Senior Subordinated Debt to receive proceeds
from the disposition of 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 any Secured Creditor under the applicable law.
(c) The priorities set forth in this Section 4.6 and in
the Intercreditor Agreement shall be as set forth herein notwithstanding any
defects in connection with the creation, perfection or priority of the
Security Interests. 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 Security Interests, and
provided further, that nothing herein shall be
46
<PAGE>
deemed or construed to prevent the Minimum Payment Guarantor or 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.
(d) To the extent the priorities set forth in this
Section 4.6 are inconsistent with the Intercreditor Agreement, the terms of
the Intercreditor Agreement shall control.
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.
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, or any other documents
contemplated hereunder to the contrary:
(a) This Indenture and the Collateral Documents shall
grant no Liens, or any other security or other interests or right in or to
(i) the Casino Operating Contract, (ii) the House Bank (as defined in the
Management Agreement), and (iii) the Louisiana Gaming Gross Revenue
47
<PAGE>
Share Payments (including the State's Interest in Daily Collections), as such
terms are defined in the Casino Operating Contract;
(b) The Casino Operating Contract and the Louisiana
Gaming Gross Revenue Share Payments (including the State's Interest in Daily
Collections), are not part of the Collateral and are not included within the
definition of Collateral;
(c) The Security Interests in favor of the Secured
Creditors other than the Minimum Payment Guarantor granted by the Collateral
Documents are subordinated to the Security Interests securing the Minimum
Payment Guaranty Obligations; and
(d) The Security Agreement (House Bank) (i) is not
included within the definition of Collateral Documents, and (ii) grants the
Minimum Payment Guarantor (but not the other Secured Creditors) a security
interest in the House Bank.
ARTICLE V.
COVENANTS
SECTION 5.1. Payment of Securities.
----------------------
(a) 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.
(b) If and to the extent that, the Contingent Payment
Measurement Amount 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 paid or accrued, if any, and the amount of such Maximum
Contingent Payments with respect to such period will never be accrued or paid.
(c) 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 due
and unpaid 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
48
<PAGE>
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 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 (1), (2), (3) and (4) of the
immediately preceding paragraph, however, will not prohibit (A) the payment
of any dividend on or redemption of
49
<PAGE>
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, (E) dividends and distributions (other than Permitted Tax
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 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,
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, its
Subsidiaries and the Development Companies), and (F) Restricted Investments
by the Company in any of the Development Companies, and Restricted Payments
by the Company to the Parent Guarantor to the extent the Parent Guarantor
uses such Restricted Payment to make an Investment in any of the Development
Companies. The full amount of any Restricted Payment made pursuant to either
of clauses (A), (B) and (F) (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), (E) and (F) 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
50
<PAGE>
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 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 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, the Collateral
Documents and the Bank Credit Facilities 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
51
<PAGE>
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
[or the Bank Credit Facilities], 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.
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,
if any, and the Company's Consolidated EBITDA and the Contingent Payment
Measurement Amount with respect to the most recently ended fiscal quarter,
and in the case of annual reports, the audited Contingent Payments made, the
audited Contingent Payment Accrual amount, if any, and audited Consolidated
EBITDA and the Contingent Payment Measurement Amount 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
52
<PAGE>
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.
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; provided, further, however, (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, by the
Company's Board of Directors) 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
53
<PAGE>
effected pursuant to, and in accordance with the terms of, the Management
Agreement, the Completion Guarantees, the Administrative Services Agreement,
the Development Agreement, the Completion Loan Agreement, the Indemnity
Agreement, the HET Loan Guaranty, the Credit Enhancement Fee Agreement, the
Minimum Payment Guaranty Documents, the HET/JCC Agreement, the HET Warrant,
the Second Floor Sublease, a Slot Machine Lease, and any payments under the
Bank Credit Facilities, as such terms in such agreements exist on the Issue
Date or, in the case of the Bank Credit Facilities, as they may be
subsequently amended, modified, supplemented or replaced, and (iv) Restricted
Payments to the extent permitted by Section 5.3.
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 its Subsidiaries 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, (the
"FF&E Basket") during the period from the Issue Date until the third
anniversary of the Casino Opening Date; on the third anniversary of the
Casino Opening Date, the FF&E Basket shall increase by $2,000,000; and the
FF&E Basket shall increase by an additional $2,000,000 on each subsequent
anniversary of the Casino Opening Date; provided, however, that in each case
the aggregate amount of Indebtedness incurred pursuant to this paragraph (c)
(including any Indebtedness issued to refinance, replace
54
<PAGE>
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 Subsidiary 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 Subsidiary 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 and any Guarantor may incur Indebtedness
pursuant to, or in respect of, (i) the Tranche A-1 Term Loans in an aggregate
principal amount outstanding at any time not to exceed $10,000,000, (ii) the
Tranche A-2 Term Loans in an aggregate principal amount outstanding at any
time not to exceed $20,000,000, (iii) the Tranche A-3 Term Loans in an
aggregate principal amount outstanding at any time not to exceed $30,000,000,
(iv) the Tranche B-1 Term Loans in an aggregate principal amount outstanding
at any time not to exceed $30,000,000, and (v) the Tranche B-2 Term Loans in
an aggregate principal amount outstanding at any time not to exceed
$121,500,000 (in each case, less the amount of any permanent reductions in
the principal amounts thereunder pursuant to Section 5.14);
(i) the Company and any of its Subsidiaries may incur
Indebtedness incurred pursuant to the Completion Guarantees (including
without limitation under the Completion Loan Agreement), the HET Loan
Guaranty and the 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;
(l) the Company and its Subsidiaries may incur
Indebtedness under Interest Rate Agreements in the ordinary course of
business;
55
<PAGE>
(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 $22,500,000;
(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 Convertible Junior
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 Subsidiary may incur
Indebtedness pursuant to, or in connection with, any Minimum Payment Guaranty
Documents or Minimum Payment Guaranty Obligations; and
(p) the Company and any Subsidiary may incur
Indebtedness which constitutes Protective Advances (as defined in the
Intercreditor Agreement) in accordance with the terms of the Intercreditor
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 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 HET Loan Guaranty or the Minimum
Payment Guaranty Documents, (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 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
56
<PAGE>
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, and the Parent Guarantor and the
Development Companies will not, 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
in favor of the Collateral Agent for the benefit of the Secured Creditors
created by the Collateral Documents and the Intercreditor Agreement and any
other future Liens in favor of the Collateral Agent for the benefit of the
Secured Creditors affecting other Property of the Parent Guarantor, the
Company, its Subsidiaries or the Development Companies securing the
Indedtedness described in the Indenture Agreement or the Collateral
Documents, (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 in
favor of the Collateral Agent for the benefit of the Secured Creditors to
secure Indebtedness described in the Intercreditor Agreement or the
Collateral Documents in Property used as a substitute Property in
consideration of release of Property in which a Lien is granted pursuant to
the Collateral Documents or the Intercreditor Agreement, (e) Liens securing
Subordinated Debt; provided, that the instrument creating such Lien contains
provisions expressly subordinating such Subordinated Debt to the Notes and
the Contingent Notes and subordinating such Liens to the Liens securing the
Notes and the Contingent Notes and (f) a Lien on the House Bank (as defined
in the Management Agreement) in favor of the Minimum Payment Guarantor.
Notwithstanding the foregoing, Liens granted pursuant to clauses (b) and (d)
above shall only be released in accordance with the Intercreditor Agreement
or the Collateral Documents.
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, the Tranche A Term Loans with a permanent reduction of the
amounts available under, or in respect of, Tranche A Term Loans, and to
57
<PAGE>
amounts outstanding (and/or permanent reductions in commitments) under, or in
respect of, the Tranche B Term Loans and/or the Revolving Loans, with a
permanent reduction of the amounts available under, or in respect of, the
Tranche B Term Loans and/or the Revolving Loans; provided, however, that the
amount of Net Cash Proceeds applied to amounts outstanding (and/or permanent
reductions in commitments) under, or in respect of, the Tranche B Term Loans
and/or the Revolving Loans pursuant to this clause (A) shall in no event
exceed [$25,000,000]; and (B) second, to the extent not applied (or required
to be applied) pursuant to clause (A), (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, Revolving Loans and Senior
Subordinated Debt with a permanent reduction of the amounts available under,
or in respect of, Revolving Loans and 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 (i)(A) above and clause (ii) below) multiplied by a
fraction, the numerator of which is the aggregate 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 aggregate
principal amount 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,
Revolving Loans and 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 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, (4) the Manager of the Company determines in good
faith that the Company or such Subsidiary, as applicable, receives fair
market value for such Asset Sale and (5) no Minimum Payment Guaranty
Obligations are due and unpaid. 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.
58
<PAGE>
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;
(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; and
(v) the Company may enter into, and comply with its
obligations under, the Second Floor Sublease.
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 Secured Creditors),
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,
Indebtedness described in clause (1)(i)(A) of Section 5.14(a) with a
permanent reduction of the amounts available under or in respect of, such
Indebtedness. To the extent that there are no amounts outstanding, and there
are no amounts available under, or in respect of, Indebtedness described in
clause (1)(i)(A) of Section 5.14(a), 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
Offer Amount, at a purchase price (the "Asset Sale Offer Price") equal to
100% of principal amount,
59
<PAGE>
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
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;
60
<PAGE>
(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;
(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.
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).
61
<PAGE>
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 Minimum Payment Guaranty
Obligations, (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
and the 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 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 5.18. 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 5.19. 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
62
<PAGE>
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 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:
(i) if (A) 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, the Fourth Interest Payment Date, the Fifth
Interest and the Sixth Interest Payment Date, and (B) the Company has
achieved negative cash flow (other than cash flow deficiencies resulting
from payments of principal or interest in respect of the Tranche A-1 Term
Loans or the Tranche A-2 Term Loans) for the Semiannual Period
corresponding to such Interest Payment Date (excluding capital
expenditures as a use of cash and excluding financings as a source of
cash), Base Management Fees shall be deferred for such Semiannual Period
to the extent of such negative cash flow; to the extent Harrah's
Management Company received Base Management Fees for such Semiannual
Period that are required to be deferred pursuant to this Section
5.19(b)(i), the Company shall cause Harrah's Management Company to return
such Base Management Fees to the Company and such Base Management Fees
shall upon such return be deemed to be deferred for such Semiannual
Period;
(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 Semiannual Period corresponding
to such Interest Payment Date; to the extent Harrah's Management Company
received Incentive Management Fees for such Semiannual Period, the
63
<PAGE>
Company shall cause Harrah's Management Company to return such Incentive
Management Fees to the Company and such Incentive Management Fees shall
upon such return be deemed to be deferred for such Semiannual Period;
(iii) if the Company's Consolidated EBITDA is less than $28,500,000
for the twelve month period ending on the last day of the Semiannual
Period immediately preceding any Interest Payment Date occurring after
the Sixth Interest Payment Date, Base Management Fees shall be deferred
for the Semiannual Period corresponding to such Interest Payment Date;
to the extent Harrah's Management Company received Base Management Fees
for such Semiannual Period, the Company shall cause Harrah's Management
Company to return such Base Management Fees to the Company and such Base
Management Fees upon such return shall be deemed to be deferred for such
Semiannual Period; and
(iv) at such time as, and to the extent that, Consolidated EBITDA
exceeds $65,000,000 for any First Semiannual Period and the immediately
following Second Semiannual Period, the Company may, after the payment
of any amounts owing under the Bank Credit Facilities for such period,
pay all deferred Base Management Fees (pro rata with any due and unpaid
fees owing by the Company under the Minimum Payment Guaranty Documents);
and at such time as, and to the extent that, Consolidated EBITDA exceeds
$75,000,000 for any First Semiannual Period and the immediately
following Second Semiannual Period, the Company may, after the payment
of any amounts owing under the Bank Credit Facilities for such period,
and after the payment of all deferred Base Management Fees and all
accrued and unpaid fees owing by the Company under the Minimum Payment
Guaranty Documents, pay all deferred Incentive Management Fees.
SECTION 5.20. 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 5.21. 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,
64
<PAGE>
treat, store, release or dispose of, or permit the 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 5.22. Limitation on Layering Debt. Neither the Company, the
---------------------------
Parent Guarantor, nor any Subsidiary 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 such 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 (i) in the case of the Company, the Securities, (ii) in
the case of the Subsidiary Guarantors, the Guaranty, and (iii) in the case of
the Parent Guarantor, the Parent Guaranties.
SECTION 5.23. Certain Damages. To the extent any Holder who received
---------------
Securities pursuant to the Plan of Reorganization reasonably determines that
the registration of public resales by such Holder of any Securities received
by such Holder pursuant to the Plan of Reorganization is required by law and
provides the Company with written notice of such determination within 15 days
of the Issue Date, the Company will file (or cause JCC Holding to file) a
registration statement (the "Registration Statement") under the Securities
Act of 1933, as amended, with respect to such resales promptly after the
receipt of such notice. If the Registration Statement is not declared
effective by the SEC within 120 days after it is filed with the SEC, the
Company shall pay liquidated damages to any such Holder in an amount equal to
$.05 per week (the "Liquidated Damages Amount") for each $1,000 of Securities
covered by the
65
<PAGE>
Registration Statement for the period beginning on the 121st day after the
Registration Statement is filed with the SEC and ending on the day the
Registration Statement is declared effective by the SEC (the "Liquidated
Damages Period"). The Liquidated Damages Amount shall increase by $.05 for
every 45 days of the Liquidated Damages Period to a maximum of $.30 per week
for each $1,000 of Securities covered by the Registration Statement. The
Registration Statement may cover all Securities held by all Holders, if any,
who provide notice to the Company pursuant to this Section 5.23.
SECTION 5.24. Certain Deferrals. The Company shall, if required by the
-----------------
terms of the Completion Loan Agreement, defer its payment obligations
thereunder in accordance with the Completion Loan Agreement. The Company
shall, if required under the terms of the Credit Enhancement Fee Agreement,
defer the payment of its fees owing thereunder in accordance with the terms
of the Credit Enhancement Fee Agreement. The Company shall, if required by
the terms of the Subordinated Credit Facility, defer payments of interest
thereunder in accordance with the terms of the Subordinated Credit Facility.
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 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
66
<PAGE>
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 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):
67
<PAGE>
(1) the failure by the Company to pay any installment of interest
on the 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 Subsidiary of the Company to comply with
any provision of Section 5.10, 5.15, 5.16, 5.18, 5.19 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 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 Parent Guarantor, the Company or any
Significant Subsidiary of the Company (in each 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
68
<PAGE>
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 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) a failure to comply with the provisions of the Collateral
Documents and the continuance of such or failure to comply 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
failure to comply need only continue after the applicable cure period
specified in the applicable Collateral Document;
(12) [Intentionally deleted]
(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
Collateral Agent, with respect to any material amount of Collateral, a
valid and perfected Lien on the Collateral (except to the extent a valid
and perfected Lien on the Collateral is not required) to be covered
thereby (unless a prior or exclusive Lien is specifically permitted by
this Indenture);
69
<PAGE>
(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 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 an Event of Default (other than an Event of Default specified in Section
7.1(5), (6) or (7) with respect to the Company), 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 with respect
to the Company, (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 be subordinated in
right of payment to all Senior Debt and shall rank pari passu with all Senior
Subordinated Debt including, without limitation, all 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 all Senior Debt
and all Senior Subordinated Debt including, without limitation, all Senior
Subordinated Debt to which HET has succeeded to the rights of the lenders
thereunder. The Primary Make-Whole Amount shall be subordinated to Senior
Debt in accordance with the terms of Article XIII.
The Secondary Make-Whole Amount shall be subordinated to all Senior Debt
and all Senior Subordinated Debt on the terms provided in Article XIII (for
this purpose, treating all Senior Subordinated Debt as if same were Senior
Debt), except that no payments whatsoever may be made with respect to the
Secondary Make-Whole Amount unless and until all Senior Debt and all Senior
Subordinated Debt has been repaid in full in cash.
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:
70
<PAGE>
(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,
(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
71
<PAGE>
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.
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.
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
72
<PAGE>
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;
(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;
73
<PAGE>
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
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.
74
<PAGE>
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
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.
75
<PAGE>
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 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 his
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.
76
<PAGE>
(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.
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.
77
<PAGE>
(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.
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;
provided, however, that the Trustee shall use reasonable good faith efforts
so that it at no time becomes a Bank Lender; provided, further, that the
foregoing proviso shall in no event operate to prevent the Trustee from
acquiring all or any portion of the equity interests in any other person
which itself is a Bank Lender (and as a result of which the Trustee could
become a Bank Lender). 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
78
<PAGE>
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.
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
79
<PAGE>
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.
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.
80
<PAGE>
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.
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 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
81
<PAGE>
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, 5.18, 5.19,
5.20, 5.21 and 5.22 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
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
82
<PAGE>
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 (including, without limitation, the
Bank Credit Facilities) 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) 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
83
<PAGE>
(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 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.
84
<PAGE>
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;
(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.
85
<PAGE>
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 (including Contingent
Payments) 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);
(6) reduce any Purchase Price;
(7) alter the redemption provisions of Article III or the ecurities
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
86
<PAGE>
(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 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.
87
<PAGE>
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 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 Ground
Lease, and any and all other leases now or hereafter subject to the
Mortgages, 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 Mortgages, assuring (i) that such amendment does not
impair or invalidate the lien of the Mortgages
88
<PAGE>
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) 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 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)
89
<PAGE>
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 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);
(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
90
<PAGE>
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
(viii) 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.
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,
Article XIV 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.
91
<PAGE>
(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 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.
Each Guarantor further agrees that, as between such Guarantor, on the one
hand, and the Holders and the 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.
92
<PAGE>
(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. Parent Guaranty.
----------------
(a) In consideration of good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to Article III,
Article XIV and subsection (d) below, the Parent Guarantor hereby irrevocably
and unconditionally guarantees (the "Parent Guaranty" and, together with the
Guaranty of the Parent Guarantor, the "Parent Guaranties") to each holder of
a Development Companies Guaranty and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of the Development
Companies Guaranty or the obligations of any of the Development Companies
under the Development Companies Guaranty, that all obligations of each of the
Development Companies to the Holders or the Trustee under the Guaranty will
be promptly paid in full or performed, all in accordance with the terms of
the Development Companies Guaranty.
(b) The Parent Guarantor hereby agrees that its obligations with regard
to this Parent Guaranty shall be unconditional, irrespective of the validity,
regularity or enforceability of the Development Companies Guaranty 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 any Development Company, any action to
enforce the same or any other circumstances that might otherwise constitute a
legal or equitable discharge or defense of any Development Company under the
Development Companies Guaranty. The Parent Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of any Development Company, any right
to require a proceeding first against any Development Company or right to
require the prior disposition of the assets of any Development Company to
meet its obligations, protest, notice and all demands whatsoever and
covenants that this Parent Guaranty will not be discharged except by complete
performance of the obligations of the Development Companies under the
Development Companies Guaranty.
(c) If any Holder or the Trustee is required by any court or otherwise
to return to any Development Company, or any Custodian, Trustee, or similar
official acting in relation to such Development Company, any amount paid by
such Development Company to the Trustee or such Holder, this Parent Guaranty,
to the extent theretofore discharged, shall be reinstated in full force and
effect. The Parent 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 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. The Parent
Guarantor further agrees that, as between such Development Company, on the
one hand, and the
93
<PAGE>
Holders and the 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 Parent Guaranty, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to any
Development 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 the Parent Guarantor for the purpose of
this Parent Guaranty.
(d) It is the intention of the Parent Guarantor and the Development
Companies that the obligations of the Parent Guarantor hereunder shall be,
but not in excess of, the maximum amount permitted by applicable law.
Accordingly, if the obligations in respect of the Parent Guaranty would be
annulled, avoided or subordinated to the creditors of the Parent Guarantor by
a court of competent jurisdiction in a proceeding actually pending before
such court as a result of a determination both that the Parent Guaranty was
made without fair consideration and, immediately after giving effect thereto,
or at the time that any demand is made thereupon, the Parent Guarantor was
insolvent or unable to pay its debts as they mature or left with an
unreasonably small capital, then the obligations of the Parent Guarantor
under the Parent 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) The Parent Guarantor shall be subrogated to all rights of the
Holders against the Development Companies under the Development Companies
Guaranty in respect of any amounts paid by the Parent Guarantor pursuant to
the provisions of the Parent Guaranty; provided, however, that the Parent
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 12.3. Execution and Delivery of Guaranty.
-----------------------------------
(a) 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 an Authorized Representative, by manual or facsimile
signature, under a facsimile of its seal reproduced thereon and attested to
by an Authorized Representative, other than the Authorized Representative
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.
94
<PAGE>
If an Authorized Representative, 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.
(b) To evidence the Parent Guaranty set forth in Section 12.2, the
Parent Guarantor agrees that a notation of such Parent Guaranty substantially
in the form annexed hereto as Exhibit C shall be endorsed on each Security
---------
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of the Parent Guarantor by an Authorized Representative,
by manual or facsimile signature, under a facsimile of its seal reproduced
thereon and attested to by another Authorized Representative other than the
Authorized Representative executing the Indenture.
The Parent Guarantor agrees that the Parent Guaranty set forth in
Section 12.2 shall remain in full force and effect and apply to each
Development Companies Guaranty notwithstanding any failure to endorse on each
Development Company Guaranty a notation of such Parent Guaranty.
If an Authorized Representative whose signature is on a Development
Company Guaranty no longer holds that office at the time the Parent Guaranty
is endorsed, the Parent Guaranty shall be valid nevertheless.
The delivery of any Development Company Guaranty shall constitute due
delivery of the Parent Guaranty set forth in this Indenture on behalf of the
Parent Guarantor.
SECTION 12.4. 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 12.5. Release of Guarantors.
----------------------
(a) The Parent Guarantor shall be released from all of its obligations
under the Parent Guaranties and under this Indenture if:
(i) (A) 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;
(B) 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
95
<PAGE>
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
Parent Guaranties and this Indenture;
(C) 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
(D) 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 12.4 and that all conditions
precedent herein provided for relating to such transaction have been
complied with; or
(ii) the Company ceases for any reason to be a "wholly owned
promulgated by the Commission) of the Parent Guarantor.
(b) In the event (a) of a sale or other disposition of all of the assets
of any Subsidiary Guarantor or Development Company, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
capital stock (or membership interests) of any Subsidiary Guarantor or
Development Company, or (b) that the Company designates a Subsidiary
Guarantor to be an Unrestricted Subsidiary, or such Guarantor ceases to be a
Subsidiary of the Company, then such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of
all of the capital stock of such Guarantor or any such designation) or the
entity acquiring the property (in the event of a sale or other disposition of
all of the assets of such Guarantor) shall be released and relieved of any
obligations under its Guaranty. In the case of a sale, assignment, lease,
transfer, conveyance or other disposition of all or substantially all of the
assets of Subsidiary Guarantor or Development Company, upon the assumption
provided in Section 12.6, such Subsidiary Guarantor or Development Company
shall be discharged from all further liability and obligation under this
Indenture. Upon delivery by the Company to the Trustee of an Officers'
Certificate to the effect of the foregoing, the Trustee shall execute any
documents reasonably required in order to evidence the release of any
Subsidiary Guarantor or Development Company from its obligations under the
Guaranty.
(c) Upon any assumption of the Guaranty or Parent Guaranty by any Person
pursuant to this Section, such Person may exercise every right and power of a
Guarantor under this Indenture with the same effect as if such successor
corporation had been named as a Guarantor herein, and all the obligations of
the released Guarantor under the Guaranty and/or Parent Guaranty, as
applicable, and the Indenture shall terminate.
(d) In the event that a Development Company is released by the Bank
Agent of such Development Company's obligations in respect of its guarantee of
the Bank Credit
96
<PAGE>
Facilities, such Development Company shall be released and relieved of its
obligations under its Guaranty and shall be discharged of all further
liability and obligation under this Indenture.
SECTION 12.6. When the Guarantor May Merge, etc. A 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 Company or a Guarantor shall be the continuing person, or
the Person (if other than the Company or a Guarantor) formed by such
consolidation or into which the Guarantor is merged or to which the
assets of the 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, in
form satisfactory to the Trustee, all the obligations of such Guarantor
under the Guaranty and/or Parent Guaranty, as applicable, 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 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 a Guarantor, in accordance with
this Section, the successor corporation formed by such consolidation or into
which the 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
Guarantor under this Indenture with the same effect as if such successor
corporation had been named as a Guarantor herein, and all the obligations of
the predecessor Guarantor hereunder and under the Guaranty and/or Parent
Guaranty, as applicable, and the Indenture shall terminate.
SECTION 12.7. Certain Bankruptcy Events. Each Guarantor hereby
--------------------------
covenants and agrees that in the event of the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company, such 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 or the Parent 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.
97
<PAGE>
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 and any Make-Whole Amount) thereon
and any interest payable on such interest (including Contingent Payments and
any Make-Whole Amount), 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,
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 and any Make-Whole
Amount), in respect of the Securities or in respect of any Offer to
Purchase 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, Permitted Junior
Securities), 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
98
<PAGE>
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, Permitted Junior
Securities), shall be received by the Trustee or the Holders before all
Obligations in respect of Senior Debt are paid in full, in cash or Cash
Equivalents, 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 in cash or Cash
Equivalents, 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 Indebtedness 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
99
<PAGE>
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 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, 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 and any Make-Whole
Amount), 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
100
<PAGE>
in respect of Senior Debt, 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 made by or on behalf of the
Company with respect to Obligations (except in the form of Secondary
Securities in accordance with the provisions of this Indenture), including,
without limitation, the principal of, premium, if any, or interest (including
Contingent Payments and any Make-Whole Amount), 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, 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 the (i) holders of Designated Senior
Debt representing a majority of the principal amount thereof or their
representative, or (ii) the Minimum Payment Guarantor, 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 on behalf of the Company with
respect to Obligations, including, without limitation, the principal of,
premium, if any, or interest (including Contingent Payments and any
Make-Whole Amount), 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 or Minimum
Payment Guaranty Obligations 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; provided, however, that (a) a default or event of
default that resulted in the commencement of a 180-day period may be the
basis for the commencement of another 180-day period if such default or event
of default was cured or waived for at least 90 days, (b) for the purpose of
this clause (iii), separate breaches of the same covenant shall be deemed to
give rise to separate defaults or events of default, and (c) for purposes of
this clause (iii), any breach of a financial covenant for a subsequent period
shall be deemed to give rise to a separate default or event of default.
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, shall be received by the Trustee or the
Holders at a time when such payment or distribution
101
<PAGE>
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 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 and any Make-Whole Amount)
on, any Securities or Offer to Purchase 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 and any Make-Whole Amount) on, or Offer to
Purchase 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
102
<PAGE>
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 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.
Subject to the definition of Senior Debt and 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;
103
<PAGE>
(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 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
104
<PAGE>
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 GUARANTY
SECTION 14.1. Guaranty 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
and/or the Parent Guaranty, as applicable (the "Guaranties"), 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 Guaranties" means any payment made by or on behalf of a
Guarantor in respect of the Guaranties, including, but not limited to, any
payment on account of the principal of, premium, if any, or interest (including
Contingent Payments and any Make-Whole Amount) on the Securities in cash or
property or to acquire or repurchase any of the Securities.
SECTION 14.2. Guaranty 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
105
<PAGE>
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 Guaranties 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 connection with an issuance of Permitted Junior
Securities, such Permitted Junior Securities may be guaranteed, on a
subordinated basis, by one or more Permitted Guaranties), 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 connection with an issuance
of Permitted Junior Securities, such Permitted Junior Securities maybe
guaranteed, on a subordinated basis, by one or more Permitted Guaranties),
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, in cash or Cash
Equivalents, after giving effect to any concurrent payment or distribution
to the holders of such Guarantor Senior Debt.
106
<PAGE>
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 Indebtedness of the Guarantor that, by its terms, ranks pari
passu with the Guaranties) 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 Offer to
Purchase 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 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 Guaranties, 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
107
<PAGE>
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
Guaranties.
SECTION 14.5. Guarantors Not to Make Payments in Respect of the
-------------------------------------------------
Guaranties in Certain Circumstances.
- ------------------------------------
(a) Upon the maturity of any Guarantor Senior Debt by lapse of time,
acceleration or otherwise, 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 Guaranties 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, 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 Guaranties shall be made.
(c) No payment in respect of the Guaranties may be made during any
Payment Blockage Period. Notwithstanding the foregoing, unless the Designated
Senior Debt 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
108
<PAGE>
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 Guaranties 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 and any
Make-Whole Amount) on, or the Offer to Purchase 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,
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
Guaranties 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.
109
<PAGE>
Subject to the definition of Guarantor Senior Debt and 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 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 Guaranties or any liability or liabilities which rank
pari passu or junior in right of payment to the Guaranties) 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 Guaranties. 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
110
<PAGE>
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 Guaranties 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.
SECTION 14.11. Article XIV Not to Prevent Events of Default. The
---------------------------------------------
failure to make a payment in respect of the Guaranties, 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
Guaranties 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 Guaranties in
accordance with the provisions (other than this Section 14.13) of this Article
XIV.
111
<PAGE>
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.
SECTION 15.2. Notices. Any notices or other communications to the
--------
Company, any 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 or any Subsidiary Guarantor:
512 South Peters
New Orleans, Louisiana 70130
Attention: Corporate Secretary
if to the Parent Guarantor or any Development Company:
512 South Peters
New Orleans, Louisiana 70130
Attention: Corporate Secretary
if to the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center
6th and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
The Company, the Guarantors 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, any
Guarantor 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.
112
<PAGE>
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.
In addition to any other notices required or permitted to be given
pursuant to this Indenture, the Trustee shall, promptly after its delivery of
any written notice to the Company pursuant to the first paragraph of Section 7.2
(or promptly after its receipt of any such notice delivered to it by the
Holders), send to the Regulating Authority (at the address set forth below) a
copy of such written notice; provided, however, that any failure or delay in
giving any such notice shall not affect or impair the validity of any action
taken pursuant to Section 7.2 (or otherwise pursuant to this Indenture, any
Collateral Document or the Intercreditor Agreement) and shall give rise to no
liability on the part of the Trustee or any Secured Creditor. All notices to
the Regulating Authority pursuant to this paragraph shall be mailed (or sent by
reputable courier) to the Regulating Authority at the following address (or such
other address as the Regulatory Authority provides to the Trustee from time to
time for its receipt of notices pursuant to this paragraph):
Louisiana Gaming Control Board
9100 Bluebonnet Centre Blvd.
Suite 500
Baton Rouge, LA 70809
Attention: Chairman
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:
113
<PAGE>
(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.
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
114
<PAGE>
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.
SECTION 15.10. No Recourse Against Others. A direct or indirect
---------------------------
stockholder, incorporator, 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
115
<PAGE>
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.
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 are and shall remain
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 as the same may be amended from time to time (collectively, the
"Gaming Regulations"), and in particular, without limitation, the exercise of
remedies under the Collateral Documents with respect to the Collateral will be
subject to the Gaming Regulations. The Company represents and warrants that all
requisite approvals under the Gaming Regulations have been obtained for the
execution and issuance of this Indenture, the Collateral Documents, the
Securities and the security interests thereunder.
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
Section 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
Sections 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, the Initial Minimum Payment Guarantors have entered
into the HET/JCC Agreement in favor of the Regulating Authority. The HET/JCC
Agreement provides that the Initial Minimum Payment 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 into the HET/JCC Agreement, the Initial
Minimum Payment Guarantors have no obligation to provide a
116
<PAGE>
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 Minimum Payment
Guarantors have expressly informed the Trustee on behalf of the Holders that the
Initial Minimum Payment Guarantors have not agreed to renew the HET/JCC
Agreement beyond March 31, 2004, or in any prior year where the Initial Minimum
Payment 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
Minimum Payment Guarantors have informed the Trustee on behalf of the Holders
that any decision the Initial Minimum Payment Guarantors make concerning whether
to renew any Minimum Payment Guaranty or the HET/JCC Agreement will be made in
the Initial Minimum Payment Guarantors' sole discretion, acting only in their
best interests. The Trustee on behalf of the Holders hereby acknowledges that
(A) the Initial Minimum Payment Guarantors are not obligated to, and have not
given any assurances to the Trustee that the Initial Minimum Payment Guarantors
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 Minimum
Payment Guarantors' obligation to furnish a Minimum Payment Guaranty does not
renew under the express terms of Section 1(b) thereof, (B) the Initial Minimum
Payment Guarantors have the right to make any such renewal decision by
considering only their best interests, and (C) the Initial Minimum Payment
Guarantors need not consider the interests of any other parties in making any
such renewal decision, notwithstanding that the Initial Minimum Payment
Guarantors are involved in a number of capacities in respect of the Company.
(ii) The Trustee and the Holders hereby agree that the Initial
Minimum Payment 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 Minimum Payment 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 Minimum Payment 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 Minimum Payment 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 Minimum Payment Guarantors' decision either
to renew or not renew any Minimum
117
<PAGE>
Payment Guaranty or the HET/JCC Agreement, (B) the Initial Minimum Payment
Guarantors acting in their own best interests in connection with the execution,
renewal or failure to renew any Minimum Payment Guaranty or the HET/JCC
Agreement, and/or (C) any alleged assurance or guarantee by the Initial Minimum
Payment 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 Minimum Payment 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 Minimum Payment Guarantors have informed it (i)
not to infer or assume that the Initial Minimum Payment Guarantors will renew
any Minimum Payment Guaranty or the HET/JCC Agreement; (ii) that the Initial
Minimum Payment 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 Minimum Payment 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 Minimum Payment Guarantors without the prior written agreement of
the Initial Minimum Payment Guarantors, and any such amendment or modification
shall have no force or effect in respect of the Initial Minimum Payment
Guarantors or any Minimum Payment Guaranty provided thereby.
(Signature Page Follows)
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:
CP DEVELOPMENT, L.L.C.,
a Louisiana limited liability company
By:
--------------------------------
Name:
Title:
FP DEVELOPMENT, L.L.C.,
a Louisiana limited liability company
By:
--------------------------------
Name:
Title:
S-1
<PAGE>
JCC DEVELOPMENT COMPANY, L.L.C.,
a Louisiana limited liability company
By:
--------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:
--------------------------------
Name:
Title:
S-2
<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: May 15 and November 15. The first Interest
Payment Date is May 15, 1999.
Record Dates: May 1 and November 1. The first Record Date is
May 1, 1999.
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, from _________________ or from the most
recent Interest Payment Date to which Fixed Interest or Contingent Payments, as
applicable, 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:
<TABLE>
<S> <C> <C>
__________, 1998 through May 15, 1999......... 5.867%
May 15, 1999 through November 15, 1999.... 5.927%
November 15, 1999 through May 15, 2000......... 5.987%
May 15, 2000 through November 15, 2000.... 6.046%
November 15, 2000 through May 15, 2001......... 6.103%
May 15, 2001 through November 15, 2001.... 6.159%
November 15, 2001 through May 15, 2003......... 6.214%
May 15, 2003 through __________, 2009..... 8.000%
</TABLE>
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
A-4
<PAGE>
Interest Payment Date in Secondary Securities in lieu of the payment of such
Fixed Interest in cash; provided, further, however, that on the Fifth Interest
Payment Date and the Sixth Interest Payment Date the Company shall not be
entitled to pay 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 on
the last Business Date of the corresponding Semiannual Period (i) the Company
has no outstanding borrowings under the Tranche A-1 Term Loan and the Tranche
A-2 Term Loan, (ii) no Revolving Loans are outstanding, and (iii) the Company
has at least $20,000,000 of cash and Cash Equivalents. In addition, if the
Company's Consolidated EBITDA is less than $28,500,000 for the twelve month
period ending on the last day of the Semiannual Period immediately preceding any
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 applicable
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 May 15 and
November 15, commencing May 15, 1999, to the person in whose name this Security
is registered at the close of business on May 1 or November 1, 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, if any are due and payable in accordance
with the terms of this Security and the Indenture, with respect to the First
Semiannual Period or the Second Semiannual Period, as applicable, last ended
prior to such Interest Payment Date.
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 $1.00 principal
amount of Notes with respect to a Semiannual Period prior to the completion of
such period, such Contingent Payments due and payable per $1.00 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 (including any due and unpaid Contingent Payments) on
such principal amount at a rate of 8% per annum compounded semi-annually.
A-5
<PAGE>
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 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"), among the Company, JCC Holding, CP
Development, FP Development, JCC Development 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 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
A-6
<PAGE>
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 Redemption Date (or such lesser amount as may be required by applicable law
or by order of any Gaming Authority).
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 20
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 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 $1.00 and integral multiples of $1.00. 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 irrevocably deposits with the Trustee, in
trust, for the benefit of the Holders, U.S. Legal Tender, U.S. Government
Obligations or a combination
A-7
<PAGE>
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 and interest (including Maximum Contingent
Payments) on the Securities to the applicable redemption date 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 $1.00) 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.
A-8
<PAGE>
14. Security.
---------
In order to secure the obligations under the Indenture, the Company,
the Guarantors and the Trustee or the Collateral Agent have entered into a
security 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 indebtedness and, to the extent that no amounts
of such 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 Section
1.1275-4(a)(1) and (5); (iii) use a discount rate with respect to the
non-contingent
A-10
<PAGE>
component of a Security for purposes of Treasury Regulation Sections 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 SUBORDINATED GUARANTY
For value received, each of the undersigned entities 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,
a Delaware corporation
Attest: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
CP DEVELOPMENT, L.L.C.,
a Louisiana limited liability company
Attest: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
FP DEVELOPMENT, L.L.C.,
a Louisiana limited liability company
Attest: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
JCC DEVELOPMENT COMPANY, L.L.C.,
a Louisiana limited liability company
Attest: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
B-1
<PAGE>
Exhibit C
FORM OF SUBORDINATED PARENT 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 Guaranty upon which this
Parent Guaranty is endorsed that all obligations of each of CP Development,
L.L.C., FP Development, L.L.C. and JCC Development Company, L.L.C. to the
Holders or the Trustee under the Guaranty, dated as of the date hereof, executed
by, among others each of them (the "Guaranty") will be promptly paid in full or
performed, all in accordance with the terms of the Guaranty. This Parent
Guaranty of the Guaranty upon which this Parent Guaranty is endorsed will not
become effective until the Trustee signs the certificate of authentication on
the Security upon which the Guaranty is endorsed.
JCC HOLDING COMPANY,
a Delaware corporation
Attest: By:
----------------------------- ------------------------------
Name: Name:
Title: Title:
C-1
<PAGE>
Exhibit T3E.18
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 OF ENTRY OF CONFIRMATION ORDER
-------------------------------------
NOTICE IS HEREBY GIVEN that on February 2, 1998, the United States
Bankruptcy Court for the Eastern District of Louisiana entered an ORDER
CONFIRMING THIRD AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE
BANKRUPTCY CODE, AS MODIFIED THROUGH JANUARY 29, 1998, confirming the Third
Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code,
as Modified Through January 29, 1998, filed by the debtors and
debtors-in-possession Harrah's Jazz Company, Harrah's Jazz Finance Corp. and
Harrah's New Orleans Investment Company, together with the plan proponent
Harrah's Entertainment, Inc., and such other and further modifications as are
hereafter approved by the Court as immaterial.
Dated: February 6, 1998
JENNER & BLOCK BRONFIN & HELLER, LLC
One IBM Plaza 650 Poydras Street, Suite 2500
Chicago, Illinois 60611 New Orleans, Louisiana 70130
Telephone: (312) 222-9350 Telephone: (504) 568-1888
WILLIAM HARDY PATRICK, III, Attorneys for Harrah's New Orleans
A Professional Corporation Investment Company
10636 Linkwood Court
Baton Rouge, Louisiana 70180 LATHAM & WATKINS
Telephone: (504) 767-1460 885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp. Attorneys for Harrah's 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 OF ENTRY OF CONFIRMATION ORDER
NOTICE IS HEREBY GIVEN that on April 6, 1998, on the motion of the
above-captioned Debtors to modify the Third Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, as Modified Through
January 29, 1998 ("Existing Plan"), the United States Bankruptcy Court for
the Eastern District of Louisiana found that the Debtors' proposed
modifications to the Existing Plan were immaterial and did not warrant
additional disclosure to creditors or re-solicitation of votes on the
Existing Plan, and entered an ORDER confirming the Third Amended Joint Plan
of Reorganization Under Chapter 11 of the Bankruptcy Code, as Modified
Through April 6, 1998, filed by the debtors and debtors-in-possession
Harrah's Jazz Company, Harrah's Jazz Finance Corp. and Harrah's New Orleans
Investment Company, together with the plan proponent Harrah's Entertainment,
Inc.
Dated: April 8, 1998
<TABLE>
<S> <C>
JENNER & BLOCK BRONFIN & HELLER, LLC
One IBM Plaza 650 Poydras Street, Suite 2500
Chicago, Illinois 60611 New Orleans, Louisiana 70130
Telephone: (312) 222-9350 Telephone: (504) 568-1888
WILLIAM HARDY PATRICK, III, Attorneys for Harrah's New Orleans Investment Company
A Professional Corporation
10636 Linkwood Court LATHAM & WATKINS
Baton Rouge, Louisiana 70180 885 Third Avenue
Telephone: (504) 767-1460 New York, New York 10022
Telephone: (212) 906-1200
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp. Attorneys for Harrah's Entertainment, Inc.
</TABLE>
<PAGE>
September 3, 1998
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"). Thereafter, the Debtors proposed
modifications to the Original Plan, and on April 6, 1998, the Bankruptcy
confirmed a modified plan. Together with Harrah's Entertainment, Inc., the
Debtors have now proposed further modifications to the Original Plan (the
"Modified Plan"), a copy of which is enclosed.
Based upon the best information available at this time, the Debtors believe that
the Modified Plan, if approved by the Bankruptcy Court, likely will be
consummated in late October, 1998, and that the distributions to creditors
contemplated under the Modified Plan will be made immediately thereafter.
Accordingly, it appears that the Bankruptcy Court's consideration of the
Modified Plan will not delay consummation of the Debtors' plan of
reorganization.
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 (or later changed
that vote as a result of the subsequent modifications proposed by the Debtors),
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 September 3, 1998 (i.e.,
the Modified Plan);
C. Summary of Debtors' Sixth Amended Joint Disclosure Statement
Pursuant to Sections 1125 and 1127 of the Bankruptcy Code, dated
September 3, 1998 (the "Summary 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, PricewaterhouseCoopers LLP, P.O. Box 81109, Chicago,
IL 60681. Please do not contact him with
<PAGE>
any questions about the Modified Plan or Summary Disclosure Statement, as the
balloting agent is prohibited from discussing the contents of the Modified Plan
or Summary Disclosure Statement with creditors.
If you desire a copy of the full Disclosure Statement, please submit a written
request for the full Disclosure Statement in accordance with the instructions
set forth in the Summary Disclosure Statement.
Sincerely,
- -------------------------------- -------------------------------------
Daniel R. Murray, Esq. Jan M. Hayden, Esq.
Jenner & Block Heller, Draper, Hayden & Horn, L.L.C.
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, III, Esq.
William H. Patrick, III, A P.L.C.
10636 Linkwood Drive
Baton Rouge, LA 70810
Counsel for Harrah's Jazz Company
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 Summary of
Debtors' Sixth Amended Disclosure Statement Pursuant to Sections 1125 and
1127 of the Bankruptcy Code dated as of September 3, 1998 (the "Summary
Disclosure Statement") and the Debtors' Sixth Amended Disclosure Statement
Pursuant to Sections 1125 and 1127 of the Bankruptcy Code dated as of
September 3, 1998 (the "Summary Disclosure Statement"), referring to the
Third Amended Joint Plan Of Reorganization Under Chapter 11 of the Bankruptcy
Code, as Modified Through September 3, 1998 (the "Modified Plan").
NOTICE IS HEREBY GIVEN THAT:
A. OCTOBER 7, 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 OCTOBER 13, 1998 at 10:30 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):
<PAGE>
1. The approval of the transfers of the interests of Harrah's Jazz
Company ("HJC") in property to Jazz Casino Company, L.L.C. ("JCC"), CP
Development, L.L.C. and FP Development, L.L.C., new entities 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 the Debtors 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. OCTOBER 7, 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.D.T. on such date:
<TABLE>
<S> <C> <C>
Daniel R. Murray, Esq. William H. Patrick, III, Esq. Edward M. Heller, Esq.
Jenner & Block A Professional Corporation Heller, Draper, Hayden & Horn, L.L.C.
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) 582-1164
John K. Cunningham, 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>
2
<PAGE>
D. Any beneficial owner of 14 1/4% first mortgage notes due 2001 as
of December 10, 1997 issued by HJC and Harrah's Jazz Finance Corp. ("Notes")
which holds a claim on account of Notes purchased after November 25, 1996 and
prior to September 3, 1998 (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 modified
and confirmed on April 28, 1997 (the "Original Plan") and/or the Third
Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code
dated as of December 10, 1997, as modified and confirmed on April 6, 1998
(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,
PricewaterhouseCoopers LLP, attn: Mark Fiddes, P.O. Box 81109, Chicago, IL
60681, no later than OCTOBER 5, 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 Original 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 OCTOBER 5, 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.
3
<PAGE>
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 OCTOBER 5, 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.
F. 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: September 3, 1998
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.
Heller, Draper, Hayden & Horn, L.L.C. 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 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: jointly administered
Debtor. : with
:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH SEPTEMBER 3, 1998
-------------------------------------
September 3, 1998
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: jointly administered
Debtor. : with
:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH SEPTEMBER 3, 1998
-------------------------------------
Dated: September 3, 1998 JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
<PAGE>
HELLER, DRAPER, HAYDEN &
HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130-6103
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for
Harrah's Entertainment, Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ARTICLE I.
DEFINITION AND CONSTRUCTION OF TERMS.....................................................................2
A. Definitions.....................................................................................2
B. Other Terms....................................................................................25
C. Construction of Certain Terms..................................................................25
ARTICLE II. TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX
CLAIMS..................................................................................................25
2.1. Administrative Expense Claims.........................................................25
2.2. Priority Tax Claims...................................................................27
ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.......................................................27
A. HJC Classification.............................................................................27
B. Finance Corp. Classification...................................................................28
C. HNOIC Classification...........................................................................28
ARTICLE IV. TREATMENT OF CLAIMS AND EQUITY INTERESTS.............................................................29
A. HJC Treatment..................................................................................29
4.1. Class A1 -- Other Priority Claims.....................................................29
4.2. Class A2 -- Non-Bondholder Secured Claims.............................................29
4.3. Class A3 -- Bank Claims...............................................................30
4.4. Class A4 -- Bondholder Claims.........................................................31
4.5. Class A5 -- Old Indenture Predecessor Trustee and Old Indenture Predecessor
Collateral Agent Claims...............................................................32
4.6. Class A6 -- WARN Act Claims...........................................................32
4.7. Class A7 -- General Unsecured Claims..................................................33
4.8. Class A8 -- Penalty Claims............................................................33
4.9. Class A9 -- Equity Interests..........................................................33
B. Finance Corp. Treatment........................................................................34
4.10. Class B1 -- Other Priority Claims.....................................................34
4.11. Class B2 -- Bank Claims...............................................................34
4.12. Class B3 -- Bondholder Claims.........................................................34
4.13. Class B4 -- WARN Act Claims...........................................................34
4.14. Class B5 -- General Unsecured Claims..................................................35
4.15. Class B6 - Penalty Claims.............................................................35
4.16. Class B7 -- Equity Interests..........................................................35
C. HNOIC Classification...........................................................................35
4.17. Class C1 -- Other Priority Claims.....................................................35
4.18. Class C2 -- Secured Claims............................................................35
4.19. Class C3 -- WARN Act Claims...........................................................36
4.20. Class C4 -- Unsecured Claims (for which HJC is liable)................................36
4.21. Class C5 -- General Unsecured Claims..................................................36
4.22. Class C6 -- Showboat Claim............................................................37
4.23. Class C7 -- Penalty Claims............................................................37
4.24. Class C8 -- Equity Interests..........................................................37
i
<PAGE>
ARTICLE V. SETTLEMENT OF CERTAIN CLAIMS AND PROSECUTION AND ASSIGNMENT OF
CERTAIN CLAIMS............................................................................................38
5.1. Release by Debtors of Causes of Action Against the HET Group, Debtors Group,
Bondholders Committee Group, NOLDC Group and Grand Palais Group.......................38
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..............................38
5.3. Release by Debtors of Causes of Action Against State Group............................39
5.4. Release by Debtors of Causes of Action Against City and RDC...........................40
5.5. Release by Debtors of Causes of Action Against Bank/Underwriter Group.................40
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........................40
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........................41
5.8. Extinguishment of Certain Causes of Action Under the Avoiding Power
Provisions............................................................................42
5.9. Assignment and Prosecution of Assigned Litigation Claims, Judgment Reduction
Protection and Distribution of Recoveries from Assigned Litigation Claims.............42
5.10. Approval of Other Settlement Agreements...............................................46
ARTICLE VI. MEANS FOR IMPLEMENTATION AND EXECUTION OF THE PLAN...................................................46
A. General Implementation Matters.................................................................46
6.1. General Corporate Matters.............................................................46
6.2. Effective Date Transactions...........................................................47
B. New Entities and Their Governance..............................................................53
6.3. General...............................................................................53
6.4. Board of Directors and Initial Members of New Entities................................53
6.5. Officers of New Entities..............................................................54
6.6. Suitability Determinations............................................................54
6.7. Entity Action.........................................................................54
C. Distributions..................................................................................54
6.8. Generally.............................................................................54
6.9. Services of Old Indenture Trustee.....................................................55
6.10. Distributions to be Made to Bondholders as of Distribution Record Date................55
6.11. Cancellation and Surrender of Existing Securities and Agreements......................55
6.12. Distributions of Cash.................................................................56
6.13. Timing of Distributions...............................................................56
6.14. Hart-Scott-Rodino Compliance..........................................................56
6.15. Minimum Distributions; No Duplicative Distributions; No Interest......................56
6.16. Fractional Distributions..............................................................56
6.17. Delivery of Distributions.............................................................57
6.18. Fees and Expenses of Disbursing Agents................................................58
6.19. Time Bar to Cash Payments.............................................................58
6.20. Transfer of Release Pool Distributions................................................58
D. Procedure for Resolving Disputed Claims........................................................58
6.21. Objection Deadline....................................................................58
6.22. Authority to Oppose Claims............................................................59
6.23. No Distributions Pending Allowance....................................................59
6.24. Determination by Bankruptcy Court.....................................................59
ii
<PAGE>
6.25. Treatment of Disputed Claims..........................................................59
ARTICLE VII. ACCEPTANCE OR REJECTION OF THE PLAN.................................................................59
7.1. Classes Entitled to Vote..............................................................59
7.2. Class Acceptance Requirement..........................................................59
7.3. Cramdown..............................................................................60
ARTICLE VIII. EXECUTORY CONTRACTS AND UNEXPIRED LEASES...........................................................60
8.1. Assumption or Rejection of Executory Contracts and Unexpired Leases...................60
8.2. Retiree Benefits......................................................................62
ARTICLE IX. EFFECT OF CONFIRMATION OF PLAN.......................................................................63
9.1. Revesting of Assets...................................................................63
9.2. Discharge of Debtors..................................................................64
9.3. Dissolution of Debtors................................................................64
9.4. Exculpations..........................................................................64
ARTICLE X. CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVE DATE...............................................64
10.1. Condition Precedent to Confirmation of the Plan.......................................64
10.2. Conditions Precedent to Effective Date................................................65
10.3. Waiver of Conditions..................................................................67
10.4. Effect of Failure of Conditions.......................................................67
ARTICLE XI. RETENTION OF JURISDICTION............................................................................68
ARTICLE XII. MISCELLANEOUS PROVISIONS............................................................................69
12.1. Exemption from Transfer Taxes.........................................................69
12.2. Post-Confirmation Date Fees and Expenses of Professional Persons......................69
12.3. Committees............................................................................70
12.4. Amendment or Modification of the Plan; Severability...................................70
12.5. Revocation or Withdrawal of the Plan..................................................70
12.6. Existing Agreements...................................................................70
12.7. Notices...............................................................................71
12.8. Governing Law.........................................................................72
12.9. Withholding and Reporting Requirements................................................72
12.10. Headings..............................................................................72
12.11. Exhibits..............................................................................72
12.12. JCC Intermediary......................................................................72
12.13. Filing of Additional Documents........................................................72
12.14. Controlling Effect of Agreements with State/LGCB......................................73
12.15. Rights of State and LGCB..............................................................73
</TABLE>
iii
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
In the Matter of: : No. 95-14545 TMB
: Section A
HARRAH'S JAZZ COMPANY, :
: jointly administered
Debtor. : with
:
:
In the Matter of: : No. 95-14544 TMB
: Section A
HARRAH'S JAZZ FINANCE CORP., :
: Chapter 11
Debtor. : Reorganization
:
:
In the Matter of: : No. 95-14871 TMB
: Section A
HARRAH'S NEW ORLEANS :
INVESTMENT COMPANY, :
: Chapter 11
Debtor. : Reorganization
:
THIRD AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE,
AS MODIFIED THROUGH SEPTEMBER 3, 1998
-------------------------------------
The Bankruptcy Court (as defined below) has previously entered an order
dated April 28, 1997 confirming the Third Amended Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code, As Modified (the "Original Plan"),
which was filed by Harrah's Jazz Company, as debtor and debtor-in-possession
("HJC"), Harrah's Jazz Finance Corp., as debtor and debtor-in-possession
("Finance Corp."), Harrah's New Orleans Investment Company, as debtor and
debtor-in-possession ("HNOIC" and, together with HJC and Finance Corp.,
collectively, the "Debtors") and Harrah's Entertainment, Inc. ("HET" and,
together with the Debtors, collectively, the "Proponents"), a Delaware
corporation. The Bankruptcy Court subsequently entered an order dated January
29, 1998 confirming the Third Amended Joint Plan of Reorganization Under Chapter
11 of the Bankruptcy Code, as Modified Through January 29, 1998 (the "January
29, 1998 Plan"), and an order dated April 6, 1998 confirming the Third Amended
Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as
Modified Through April 6, 1998 (the "April 6, 1998 Plan"). The Proponents
propose the following further modifications of the Original Plan pursuant to
Section 1127(b) of title 11 of the United States Code. This Plan (as defined
below), if confirmed as to each of the Debtors, provides for the transfer of all
property of the Debtors (except for property distributed pursuant to the Plan)
to JCC, CP Development and FP Development (each as defined below) as successor
to each of the Debtors. If the Plan is not confirmed as to each of the Debtors,
it may not be confirmed as to any of the Debtors.
1
<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 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
2
<PAGE>
Administrative Expense Claim, means an Administrative Claim that has become
"Allowed" pursuant to the procedures set forth in Article II of the Plan.
1.7. Allowed General Unsecured Claim shall have the meaning assigned to
such term in Section 4.7(a) of the Plan.
1.8. Allowed General Unsecured Creditor shall have the meaning assigned
to such term in Section 4.7(b) of the Plan.
1.9. Amended and Restated Canal Street Casino Lease means that certain
Amended and Restated Canal Street Casino Lease to be executed on or before and
as of the Effective Date by JCC and the RDC, with the City as Intervenor, and
incorporating amendments to the Canal Street Casino Lease that are described in
the City Agreement.
1.10. Amended and Renegotiated Casino Operating Contract means the
Casino Operating Contract, as renegotiated between HJC and the LGCB and amended,
substantially in the form attached to the April 6, 1998 Plan as Exhibit B and
incorporated herein by reference, subject to such further modifications as might
be approved by the LGCB, the Bondholders Committee and the Proponents, which is
to be executed on or before the Effective Date by HJC and the LGCB and assigned
to JCC as of the Effective Date in accordance with the provisions of Section
8.1(g) of this Plan.
1.11. Amended and Restated Completion Loan Documents means that certain
Amended and Restated Completion Loan Agreement to be executed by JCC, HET and
HOCI on or before and as of the Effective Date, as described in the term sheet
attached hereto as Exhibit A, and all other loan or security agreements,
instruments or documents executed in connection therewith. The Amended and
Restated Completion Loan Agreement and all such other loan or security
agreements, instruments and documents shall be satisfactory in form and
substance to the Bondholders Committee (in its sole discretion), HET (in its
sole discretion) on behalf of the Proponents, and if a party thereto, HJC (which
approval shall not be unreasonably withheld or delayed). The forms of the New
Completion Loan Documents shall be filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan. JCC's repayment obligations
under the Amended and Restated Completion Loan Documents shall be unsecured
obligations of JCC and shall be junior in right of payment to the New Bonds and
the New Contingent Bonds.
1.12. Amended and Restated Construction Lien Indemnity Obligation
Agreement means that certain Amended and Restated Construction Lien Indemnity
Obligation Agreement to be entered into by JCC and HOCI on or before and as of
the Effective Date, as described in the term sheet attached hereto as Exhibit B.
The form of the Amended and Restated Construction Lien Indemnity Obligation
Agreement shall be filed with the Bankruptcy Court as a Plan Document pursuant
to Section 6.2(t) of the Plan.
1.13. Amended and Restated General Development Agreement means that
certain Amended and Restated General Development Agreement to be executed on or
before and as of the Effective Date by JCC and the RDC, with the City as
Intervenor, and incorporating the amendments to the General Development
Agreement that are described in the City Agreement.
1.14. Amended and Restated Management Agreement means that certain
Second Amended and Restated Management Agreement to be executed on or before and
as of the Effective Date by JCC and HNOMC, as described in the term sheet
attached hereto as Exhibit C.
1.15. April 6, 1998 Plan shall have the meaning assigned to such
term in the preamble hereof.
3
<PAGE>
1.16. Architect means Perez Ernst Farnet/Modus, Inc. Architects and
Planners and its successors and assigns.
1.17. Architect Contract means the Design Agreement dated January 16,
1995 (and effective November 15, 1994), between HJC, as prepetition debtor, and
Architect, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.18. Assigned Bondholder Litigation Claims means any and all claims
and causes of action, including, without limitation, Avoidance Claims, of any
Releasing Bondholder (in its capacity as a Bondholder) which, as of the
Effective Date, exists or may exist against any or all of (i) the
Non-Participating Banks, and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release to the extent such Releasing Bondholder, through an
appropriate indication on the ballot provided to such holder or in such other
manner as may be prescribed by an applicable order of the Bankruptcy Court, has
affirmatively evidenced its intent to be a Releasing Bondholder and as a
consequence to assign all such claims and causes of action to JCC.
1.19. Assigned Debtor Litigation Claims means any and all claims and
causes of action, including, without limitation, Avoidance Claims, of any Debtor
which, as of the Effective Date, exists or may exist against any or all of (i)
the Non-Participating Banks and (ii) any Underwriter which fails to execute the
Bank/Underwriter Release.
1.20. Assigned Litigation Claims means all Assigned Debtor
Litigation Claims and all Assigned Bondholder Litigation Claims.
1.21. Avoidance Claims means all rights, claims, causes of action,
avoiding powers, suits and proceedings of or brought by or on behalf of any
Debtor or any Person and arising under any or all of Sections 510 and 544
through 554 of the Bankruptcy Code.
1.22. B Term Loan means the secured term loan in the principal amount
of $151.5 million to be obtained by JCC on the Effective Date pursuant to
Section 6.2(h) of the Plan, which loan shall consist of Tranche B-1 and Tranche
B-2 and shall have the terms and conditions set forth in the Bank Term Sheet and
such other terms and conditions as shall be set forth in the B Term Loan
Documents.
1.23. B Term Loan Documents means, collectively, the loan agreement and
all other loan and security documents governing the terms and conditions of the
B Term Loan, which documents shall be satisfactory in form and substance to the
Bondholders Committee (in its sole discretion) and HET (in its sole discretion)
on behalf of the Proponents and if a party thereto, HJC (which approval shall
not be unreasonably withheld or delayed). The forms of the B Term Loan Documents
shall be filed with the Bankruptcy Court as Plan Documents pursuant to Section
6.2(t) of the Plan.
1.24. Bank Reserve Fund shall have the meaning assigned to such term
in Section 4.3(b) of the Plan.
1.25. Bank Term Sheet means the term sheet attached hereto as Exhibit
F.
1.26. Bank/Underwriter Group means each Participating Bank and
Underwriter which executes the Bank/Underwriter Release and FNBC in any capacity
and their respective Affiliates, predecessors, successors and assigns and the
officers, directors, employees, attorneys, financial advisors, accountants,
agents or other representatives of each of the foregoing.
4
<PAGE>
1.27. Bank/Underwriter Release means, collectively, the mutual releases
described in the Bank Term Sheet, the Underwriter Term Sheet and the FNBC
Settlement Agreement, including, without limitation, mutual releases between the
Participating Banks, the Underwriters, the Old Bank Collateral Agent, the Old
Indenture Predecessor Trustee, the Old Indenture Predecessor Collateral Agent,
on the one hand, and the other Released Parties, on the other hand. The
Bank/Underwriter Release shall be in form and substance satisfactory to the
non-Debtor parties thereto (in their sole discretion), HJC (which shall not
unreasonably withhold or delay its approval), HET (in its sole discretion) on
behalf of the other Proponents and the Bondholders Committee (in its sole
discretion).
1.28. Bankruptcy Code means Title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Cases.
1.29. Bankruptcy Court means the United States District Court for the
Eastern District of Louisiana having jurisdiction over the Chapter 11 Cases and,
to the extent of any reference made pursuant to section 157 of Title 28 of the
United States Code, the unit of such District Court pursuant to section 157 of
Title 28 of the United States Code.
1.30. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure,
as amended from time to time, as applicable to the Chapter 11 Cases, including
the Local Rules of the Bankruptcy Court.
1.31. Banks means, collectively, Bankers Trust Company, as Bank and
Administrative Agent, The Boatmen's National Bank of St. Louis, Prime Income
Trust, Van Kampen Merritt Prime Rate Income Trust, Senior High Income Portfolio,
Inc., Senior High Income Portfolio II, Inc., Senior Strategic Income Fund, Inc.,
as Banks, and First National Bank of Commerce, as Bank (but not as Collateral
Agent), and their successors and assigns, as the foregoing terms are defined in
the Old Bank Credit Agreement.
1.32. Bar Date shall mean the applicable dates fixed by the Bankruptcy
Court or this Plan for filing proofs of claim or interests in the Chapter 11
Cases: (i) in the case of Rejection Claims, the date set forth in Section 8.1(f)
of the Plan, (ii) April 1, 1997 (subject to revocation under certain
circumstances), with respect to Claims of the Bondholders and the Old Indenture
Trustee other than contractual Claims based on the principal of or interest on
the Old Bonds, and certain Claims against HNOIC held by NOLDC, HJC, Finance
Corp., Grand Palais and/or their shareholders, and (iii) May 15, 1996, with
respect to all other pre-petition Unsecured Claims other than Claims which were
included in any Schedule and not listed therein as "disputed," "unliquidated" or
"contingent" and to which such scheduled amounts the holders of such Claims
agree.
1.33. Basin Street Casino Lease means that certain Temporary Casino
Lease dated March 14, 1994, between the RDC and HJC, as prepetition debtor, with
the City as Intervenor, together with any amendments thereto executed prior to
the Commencement Date of the Chapter 11 Case of HJC.
1.34. Basin Street Casino Lease Termination Agreement means that
certain Basin Street Casino Lease Termination Agreement entered into by JCC and
the RDC, with the City as Intervenor, dated as of January 15, 1997.
1.35. Bondholder Claims means all of the respective Claims of holders
and beneficial owners of the Old Bonds against any or all of the Debtors.
1.36. Bondholder Deficiency Amount shall have the meaning assigned to
such term in Section 5.9(f)(vi) of the Plan.
1.37. Bondholder Term Sheet means the term sheet attached hereto as
Exhibit D.
5
<PAGE>
1.38. Bondholders means the holders and beneficial owners of the Old
Bonds.
1.39. Bondholders Committee means the statutory committee of
Bondholders appointed by the United States Trustee in the Chapter 11 Case of HJC
pursuant to Section 1102 of the Bankruptcy Code.
1.40. Bondholders Committee Group means the Bondholders Committee, and
each of the current and former members thereof in its capacities as a member of
the Bondholders Committee and as a Bondholder, and each Professional Person
retained by the Bondholders Committee.
1.41. Bondholders Director Nominees shall have the meaning assigned
to such term in Section 6.4 of the Plan.
1.42. Broadmoor means Broadmoor, a Louisiana general partnership, and
its successors and assigns.
1.43. Broadmoor Construction Agreement means that certain Construction
Agreement dated October 10, 1994, between HJC, as prepetition debtor, and
Broadmoor, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.44. Broadmoor Release means the Release, in a form mutually
acceptable to the parties thereto, to be executed on or before and as of the
Effective Date by Broadmoor, and providing for releases in favor of the Debtors,
the Debtors Group, the HET Group, the NOLDC Group (but only if the applicable
Persons in the NOLDC Group execute and deliver on or before the Effective Date
the NOLDC Shareholders/HET Settlement Agreement) and the Grand Palais Group (but
only if the applicable Persons in the Grand Palais Group execute and deliver on
or before the Effective Date the applicable GP Representative/HET Settlement
Agreements). Neither the Broadmoor Settlement Agreement nor the Broadmoor
Release shall provide for any release of claims by or against either of
Honore/Broadmoor, a joint venture, or Honore Construction Company, Inc.
1.45. Broadmoor Settlement Agreement means the Settlement Agreement
dated October 15, 1996, between HJC and Broadmoor and attached to the Original
Plan as Exhibit H and incorporated by reference herein, as the same may be
amended.
1.46. Business Day means any day other than a Saturday, Sunday or any
other day on which commercial banks in New York, New York are required or
authorized to close.
1.47. Canal Street Casino Lease means that certain Amended Lease
Agreement dated March 15, 1994, between the RDC and HJC, as prepetition debtor,
with the City as Intervenor, together with any amendments thereto executed prior
to the Commencement Date of the Chapter 11 Case of HJC.
1.48. Casino means that certain casino to be constructed on the real
property leased by HJC on Canal Street in New Orleans, Louisiana, together with
the parking lot adjacent thereto.
1.49. Casino Operating Contract means that certain Casino Operating
Contract dated as of July 15, 1994, between the LEDGC, and HJC, as prepetition
debtor, together with any amendments thereto executed prior to the Commencement
Date of the Chapter 11 Case of HJC.
1.50. Centex-Landis means Centex Landis Construction Co., Inc., and its
successors and assigns.
1.51. Centex-Landis Construction Agreement means that certain
Construction Agreement dated October 10, 1994, between HJC, as prepetition
debtor, and Centex-Landis, together with any amendments thereto executed prior
to the Commencement Date of the Chapter 11 Case of HJC.
6
<PAGE>
1.52. Centex-Landis Release means the Release, substantially in the
form attached to the Centex- Landis Settlement Agreement, to be executed on or
before and as of the Effective Date by Centex-Landis, providing for releases in
favor of the Debtors, the Debtors Group, the HET Group, the NOLDC Group (but
only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement) and
the Grand Palais Group (but only if the applicable Persons in the Grand Palais
Group execute and deliver on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements).
1.53. Centex-Landis Settlement Agreement means the Settlement Agreement
dated November 25, 1996, between HJC and Centex-Landis and attached to the
Original Plan as Exhibit L and incorporated by reference herein, as the same may
be amended.
1.54. Certified WARN Act Class means the class of holders of WARN Act
Claims certified for settlement purposes by the Bankruptcy Court pursuant to
Bankruptcy Rule 7023 by order dated December 10, 1996.
1.55. Chapter 11 Cases means the above-captioned cases under Chapter 11
of the Bankruptcy Code commenced by each Debtor and currently pending in the
Bankruptcy Court.
1.56. City means the City of New Orleans, Louisiana.
1.57. City Agreement means that certain Agreement Regarding
Modifications And Related Agreements In Respect Of Amended And Restated Canal
Street Casino Lease, Termination Of Basin Street Casino Lease, Amended And
Restated General Development Agreement, The Conditional Use Ordinances And Other
Regulatory Matters dated as August 15, 1996, by and among the City, RDC and HJC,
a copy of which is attached to the Original Plan as Exhibit A and incorporated
by reference herein, as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time, 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.
1.58. City Group means the City, the Mayor of the City, the City
Council of the City, the members of the City Council, the RDC, all boards,
commissions, agencies and other instrumentalities of the City and the officers,
directors, employees, staff members, attorneys, financial advisors, accountants,
agents and other representatives of each of the foregoing.
1.59. City/RDC Release means the City Release Agreement, in the form
attached hereto as Exhibit E (or as modified on terms satisfactory to HET and
with the consent of HJC (which consent may not be unreasonably withheld or
delayed)) to be executed on or before and as of the Effective Date by the City,
the RDC, the Debtors, NOLDC, Grand Palais, HET, HOCI, HNOMC, JCC and/or certain
of their respective Affiliates, and providing for, among other things, mutual
releases in favor of the City, the RDC and their respective Affiliates, on the
one hand, and the Debtors, the Debtors Group, the New Entities, the HET Group,
the Bank/Underwriter Group, the Bondholders Committee Group, the NOLDC Group
(but only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement) and
the Grand Palais Group (but only if the applicable Persons in the Grand Palais
Group execute and deliver on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements), on the other hand.
1.60. Claim shall have the meaning assigned to such term in Section
101(5) of the Bankruptcy Code.
7
<PAGE>
1.61. Class A New Common Stock means the Class A Common Stock of JCC
Holding authorized pursuant to Section 6.2(d) and (f) of the Plan. Class A New
Common Stock shall have a par value of $.01 per share and such rights with
respect to dividends, liquidation, voting and other matters as are provided for
by applicable nonbankruptcy law or in the JCC Holding Certificate of
Incorporation and JCC Holding Bylaws.
1.62. Class A 33 Act Registration Statement shall have the meaning
assigned to such term in Section 6.2(q) of the Plan.
1.63. Class A 34 Act Registration Statement shall have the meaning
assigned to such term in Section 6.2(q) of the Plan.
1.64. Class B New Common Stock means the Class B Common Stock of JCC
Holding authorized pursuant to Sections 6.2(d), (e) and (f) of the Plan. Class B
New Common Stock shall have a par value of $.01 per share and such rights with
respect to dividends, liquidation, voting and other matters as are provided for
by applicable nonbankruptcy law or in the JCC Holding Certificate of
Incorporation and JCC Holding Bylaws.
1.65. Class B Registration Rights Agreement shall have the meaning
assigned to such term in Section 6.2(r) of the Plan.
1.66. Class B Registration Statement shall have the meaning assigned
to such term in Section 6.2(r) of the Plan.
1.67. Class C5 Cash Amount shall have the meaning assigned to such
term in Section 4.21 of the Plan.
1.68. Class C5 Claims Reserve shall have the meaning assigned to
such term in Section 4.21 of the Plan.
1.69. COC Fiscal Year means the 12-month period ending March 31 for
purposes of the Amended and Renegotiated Casino Operating Contract.
1.70. Commencement Date means the date on which the applicable Debtor
commenced its Chapter 11 Case: (i) November 22, 1995, with respect to the
Chapter 11 Cases of HJC and Finance Corp. and (ii) December 22, 1995, with
respect to HNOIC.
1.71. Committees mean the Bondholders Committee and the Unsecured
Creditors Committee.
1.72. Completion Loan Documents means the Completion Loan Agreement
dated as of October 12, 1994, by and among HJC, as prepetition debtor, HET,
HOCI, NOLDC, Grand Palais and Grand Palais Management Companies, L.L.C., and the
Completion Loan Documents (as defined in the Completion Loan Agreement),
together with any amendments thereto executed prior to the Commencement Date of
the Chapter 11 Case of HJC.
1.73. Completion Notice shall have the meaning assigned such term in
Section 5.9(f)(ii) of the Plan.
1.74. Confirmation Date means the date on which the Clerk of the
Bankruptcy Court enters an order confirming this Plan.
1.75. Confirmation Hearing means the hearing convened to consider
confirmation of the Plan.
8
<PAGE>
1.76. Confirmation Order means the order of the Bankruptcy Court
entered April 28, 1997 and confirming the Original Plan, together with any
subsequent orders pursuant to Sections 1127, 1128 and 1129 of the Bankruptcy
Code approving modifications to the Original Plan.
1.77. Construction Lien Indemnity Obligation Agreement means that
certain Construction Lien Indemnity Obligation Agreement dated October 12, 1994,
by and among HJC, as prepetition debtor, HOCI, NOLDC, Grand Palais, and Grand
Palais Management Company, L.L.C., together with any amendments thereto executed
prior to the Commencement Date of the Chapter 11 Case of HJC.
1.78. Contingent Claim means a Claim that is contingent or unliquidated
on the Effective Date, including, without limitation, any Rejection Claim or
Deficiency Claim which has not been allowed on the Effective Date.
1.79. Convertible Junior Subordinated Debenture Documents means,
collectively, the Convertible Junior Subordinated Debentures, and, if
applicable, all other security agreements, mortgages, indentures and other
documents governing the terms and conditions of the obligations of HJC (and JCC
as HJC's successor) in respect of the Convertible Junior Subordinated
Debentures. The Convertible Junior Subordinated Debenture Documents shall be
satisfactory in form and substance to the non-Debtor parties thereto (in their
sole discretion), the Bondholders Committee (in its sole discretion) and HET (in
its sole discretion) on behalf of the Proponents, and if HJC is a party thereto,
HJC (which approval shall not be unreasonably withheld or delayed). The forms of
the Convertible Junior Subordinated Debenture Documents shall be filed with the
Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of the Plan.
1.80. Convertible Junior Subordinated Debentures means the convertible
junior subordinated debentures to be issued by JCC on the Effective Date
pursuant to Sections 4.3(a) and 6.2(h) hereof in the approximate principal
amount of $15 million to the Underwriters (or Affiliates thereof), in the
approximate principal amount of $11.637 million to Bankers Trust Company (or an
Affiliate thereof) and the Participating Banks (plus additional convertible
junior subordinated debentures purchased pursuant to clause (C) of the first
sentence of Section 4.3(a)(ii) of the Plan) and in the principal amount of
$400,000 to FNBC (which amount is in addition to the $357,150 in principal
amount of Convertible Junior Subordinated Debentures to be purchased by FNBC as
a Participating Bank). These convertible junior subordinated debentures shall
have the terms and conditions set forth in the Convertible Junior Subordinated
Debenture Documents.
1.81. CP Development means CP Development, L.L.C., a Louisiana limited
liability company, and its successors and assigns, to which all right, title and
interest of the Debtors in the 3CP Property shall be transferred on the
Effective Date.
1.82. Creditor means the holder of an Allowed Claim.
1.83. Debtors means HJC, Finance Corp. and HNOIC.
1.84. Debtors Group means each Debtor's officers, directors, employees,
attorneys, financial advisors, accountants and, in the case of HJC, the members
of its Executive Committee and its Reorganization Steering Committee.
1.85. Deficiency Claim means a Claim equal to the amount, if any, by
which the total Allowed Claim of any Creditor exceeds the sum of (i) any Setoff
or Recoupment Claims of the Creditor against the applicable Debtor provided for
by applicable law and preserved by Section 553 of the Bankruptcy Code plus (ii)
the portion of such Claim that is a Secured Claim; provided, however, that if
the Class of which such Claim is a part makes the election provided for by
Section 1111(b)(2) of the Bankruptcy Code, there shall be no Deficiency Claim in
respect of such Claim.
9
<PAGE>
1.86. Derivative Claim means any claim, demand, suit, action or cause
of action in law, equity or otherwise which is the property of any of the
Debtors or their respective estates.
1.87. Development Services Agreement means the Development Services
Agreement to be executed on or before the Effective Date by JCC and the Harrah's
Investor and containing the terms and conditions described in the term sheet
attached hereto as Exhibit I. The Development Services Agreement shall be in
form and substance satisfactory to the Harrah's Investor, HET (in its sole
discretion) on behalf of the Proponents and the Bondholders Committee (in its
sole discretion).
1.88. DIP Indebtedness means, as of the date of determination, the
balance of principal, accrued interest and other amounts then outstanding in
respect of the debtor-in-possession loans (exclusive of any loans made under the
Junior Subordinated Credit Facility) made by HOCI or any of its Affiliates at
any time on or before the Effective Date to HJC pursuant to orders of the
Bankruptcy Court entered at any time on or before the Effective Date.
1.89. DIP Lender means HOCI and/or any Affiliate which advanced any
funds constituting DIP Indebtedness.
1.90. DIP Loan Claim means, collectively, any and all Claims based on
the DIP Indebtedness.
1.91. Director Nominees shall have the meaning assigned to such term
in Section 6.4 of the Plan.
1.92. Disbursing Agent means any Person designated by HET (in its sole
discretion) on behalf of the Proponents or designated in the Plan to make
distributions required under the Plan, which may include, without limitation,
any JCC Entity, the Old Indenture Successor Trustee or any financial institution
of recognized standing.
1.93. Disbursing Agreements means those agreements referenced in
Section 6.8 of the Plan. The form of the Disbursing Agreement(s) shall be filed
with the Bankruptcy Court as Plan Document(s) pursuant to Section 6.2(t) of the
Plan.
1.94. Disclosure Statement means the disclosure statement relating to
this Plan, as approved by the Bankruptcy Court pursuant to Section 1125 of the
Bankruptcy Code.
1.95. Disputed means, with respect to a Claim or Equity Interest, (i)
any Claim (including any Administrative Expense Claim) or Equity Interest as to
which any Debtor or any other party in interest has interposed a timely
objection or request for estimation in accordance with the Bankruptcy Code and
the Bankruptcy Rules, which objection or request for estimation has not been
withdrawn or determined by a Final Order in favor of the holder thereof, (ii)
any Claim or Equity Interest as to which a proof of claim or interest was
required to be filed by order of the Court but as to which a proof of claim or
interest was not timely or properly filed, and (iii) any Contingent Claim until
such Claim becomes fixed and absolute by Final Order, settlement or otherwise.
1.96. Disputed Claim Amount means, as to a particular Class on the date
of determination, the aggregate amount of Disputed Claims in that Class that are
not Contingent Claims. For purposes of calculating the initial distributions to
be made to holders of Allowed Class C5 Claims pursuant to Section 4.21 of the
Plan, the Disputed Claim Amount for each Disputed Claim shall be based upon
either (i) the amount of such Creditor's Disputed Claim as set forth in its
filed proofs of claim or (ii) the amount at which the Bankruptcy Court may
estimate such Disputed Claim.
10
<PAGE>
1.97. Distribution Record Date means the Effective Date, unless
otherwise ordered by the Bankruptcy Court, and shall be used to determine which
holders of the Old Bonds are entitled to receive distributions, other than
distributions from the Release Pool, provided under the Plan.
1.98. Effective Date means a Business Day selected by HET (in its sole
discretion) on behalf of the Proponents after the first Business Day (A) which
is on or after the date of the entry of the Confirmation Order and (B) on which
(i) the Confirmation Order is not stayed and (ii) all conditions to the
effectiveness of the Plan have been satisfied or waived as provided in Article X
of the Plan, but not later than October 31, 1998, which date may be extended by
HET (in its sole discretion) on behalf of the Proponents with the written
consent of the Bondholders Committee, the LGCB and the City (each of whose
consent may be withheld in its sole discretion).
1.99. 8/95 WARN Act Claimant means any holder of a WARN Act Claim who
was terminated from his or her casino position in August, 1995.
1.100. 11/95 WARN Act Claimant means any holder of a WARN Act Claim who
was terminated from his or her casino position on or about November 22, 1995.
1.101. Encumbrance means any Lien, imperfection of title, option or
restriction of any kind affecting any property.
1.102. Equity Interest shall have the meaning assigned to the term
"Equity Security" in Section 101(16) of the Bankruptcy Code.
1.103. Estimation Order shall have the meaning assigned to such term
in Section 4.3(b)(ii) of the Plan.
1.104. Existing Lender's Title Insurance Policy means that certain
lender's title insurance policy previously issued by First American Title
Insurance Company for the benefit of the Banks and the Bondholders and certain
other parties, together with all reinsurance agreements, endorsements and
supplements thereto.
1.105. Existing Owners' Title Insurance Policy means that certain
Policy of Title Insurance issued by First American Title Insurance Company with
an original effective date of March 16, 1994, Policy Number D 102631 to HJC, as
superseded and replaced by a policy of the same policy number with an effective
date of November 16, 1994, together with all reinsurance agreements,
endorsements and supplements thereto.
1.106. Fee Application means an application of a Professional Person
under Section 330, 503 or 506(b) of the Bankruptcy Code for allowance of
compensation and reimbursement of expenses in any Chapter 11 Case.
1.107. Fee Claim means a Claim under Section 330, 503 or 506(b) of the
Bankruptcy Code for allowance of compensation and reimbursement of expenses in
any Chapter 11 Case.
1.108. Fidelity means, collectively, Fidelity Management and Research
Company and Fidelity Management Trust Company.
1.109. Final Order means an order of the Bankruptcy Court or any other
court of competent jurisdiction (a) which has become final for purposes of 28
U.S.C. S-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,
11
<PAGE>
reargue, or rehear shall have been waived in writing in form and substance
satisfactory to HET (in its sole discretion) on behalf of the Proponents or JCC
or (ii) in the event that an appeal, writ of certiorari, or reargument or
rehearing thereof has been sought which shall have been determined by the
highest court to which such order was appealed, or certiorari, reargument or
rehearing shall have been denied or resulted in no modification of such order
and the time to take any further appeal, petition for certiorari or move for
reargument or rehearing shall have expired; provided, however, that the
possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure,
or Bankruptcy Rule 9024 or other analogous rules governing procedure in cases
before the court, if not the Bankruptcy Court, may be filed with respect to such
order shall not cause such order not to be a Final Order.
1.110. Finance Corp. means Harrah's Jazz Finance Corp., a Delaware
corporation, as debtor and debtor in-possession.
1.111. First American Settlement Agreement means that certain
settlement agreement by and between HJC and First American Title Insurance
Company, dated as of December 18, 1996, providing for, among other things, the
issuance of new owner's and lender's title insurance policies.
1.112. FNBC means First National Bank of Commerce and its successors
and assigns.
1.113. FNBC Cash Collateral shall have the meaning assigned to such
term in Section 6.2(k)(ii) of the Plan.
1.114. FNBC Settlement Agreement means the letter agreement dated April
24, 1997, among HJC, HET, FNBC, the Bondholders Committee and Bankers Trust
Company attached to the Original Plan as Exhibit M and incorporated by reference
herein.
1.115. FP Development means FP Development, L.L.C., a Louisiana limited
liability company, and its successors and assigns, to which all right, title and
interest of the Debtors in the Fulton Property shall be transferred on the
Effective Date.
1.116. Fulton Property means real property owned by HJC located in New
Orleans, Louisiana bounded by Fulton Street, Lafayette Street, Poydras Street
and South Peters Street, commonly known as 224 Poydras Street, 228 Poydras
Street, 237 Lafayette Street/550 South Peters Street, 508-510 South Peters
Street, 512-526 South Peters Street, 528 South Peters Street/529 Fulton Street
and 530 South Peters Street, together with any easements, rights of servitude
and other rights appurtenant thereto and any improvements thereupon, which shall
be transferred to FP Development on the Effective Date.
1.117. General Development Agreement means that certain Amended General
Development Agreement dated March 15, 1994, between HJC, as prepetition debtor,
and the RDC, with the City as Intervenor, together with any amendments thereto
executed prior to the Commencement Date of the Chapter 11 Case of HJC.
1.118. Grand Palais means Grand Palais Casino, Inc., a Delaware
corporation, and its successors and assigns.
1.119. Grand Palais Bondholders means the holders and beneficial owners
of the Grand Palais Senior Secured Bonds.
1.120. Grand Palais Group means Grand Palais, and its Affiliates (other
than the Debtors), predecessors, successors and assigns and the officers,
directors, employees, attorneys, financial advisors, accountants, agents and
other representatives of each of the foregoing.
12
<PAGE>
1.121. GP Representative/HET Settlement Agreements means, collectively,
(i) the settlement agreements to be executed on or before the Effective Date by
the person(s) authorized under applicable law to act on behalf of Grand Palais,
Christopher B. Hemmeter ("Hemmeter"), Hemmeter's Chapter 7 bankruptcy trustee,
Cezar M. Froelich ("Froelich"), Eddie L. Sapir ("Sapir"), William Broadhurst
("Broadhurst") and certain of their Affiliates on the one hand, and HET, HOCI
and HNOMC, on the other hand, (ii) the releases attached as exhibits to such
settlement agreements, pursuant to which the authorized representative(s) of
Grand Palais, Hemmeter, Hemmeter's Chapter 7 bankruptcy trustee, Froelich,
Sapir, Broadhurst and certain of their Affiliates on the one hand, and HET,
HOCI, HNOIC, HNOMC and certain Affiliates thereof, on the other hand, shall
release certain claims and causes of action against each other, (iii) the
further releases provided for in such settlement agreements in favor of the
Bondholders Committee Group, the Debtors Group, the Bank/Underwriter Group, the
State Group and the City Group, and (iv) all other agreements, instruments and
documents executed or to be executed in connection with these settlement
agreements. The GP Representative/HET Settlement Agreements shall be in the form
and substance satisfactory to the parties thereto.
1.122. Grand Palais Indenture means that certain Amended and Restated
Indenture, dated as of November 16, 1994, between Grand Palais and Fleet
National Bank of Connecticut (formerly known as Shawmut Bank Connecticut,
National Association), as trustee, governing the terms of the Grand Palais
Senior Secured Bonds, as the same may be amended from time to time.
1.123. Grand Palais Releasing Bondholder shall have the meaning set
forth in Section 5.6 of the Plan.
1.124. Grand Palais Senior Secured Bonds means the 18.25% Senior
Secured Pay-In-Kind Notes, due November 1, 1997, issued by Grand Palais pursuant
to the Grand Palais Indenture.
1.125. Grand Palais Settlement Consideration shall have the meaning
assigned such term in Section 6.2(f)(i) of the Plan.
1.126. Harrah's Director Nominees shall have the meaning assigned to
such term in Section 6.4 of the Plan.
1.127. Harrah's Investor means, collectively, Harrah's Crescent City
Investment Company, a Nevada corporation and wholly-owned subsidiary of HET, HET
and/or any Affiliates of HET as the holder(s) of the shares of New Common Stock
issued pursuant to Sections 6.2(e) and 6.2(f) of the Plan, and its (their)
successors and assigns.
1.128. Harrah's New Equity Investment shall have the meaning assigned
to such term in Section 6.2(e) of the Plan.
1.129. HET means Harrah's Entertainment, Inc., a Delaware corporation,
formerly known as The Promus Companies, Incorporated, and its successors and
assigns.
1.130. HET Group means HET, HOCI, HNOMC, the Harrah's Investor and
their respective Affiliates (other than the Debtors), predecessors, successors
and assigns and the officers, directors, employees, attorneys, financial
advisors, accountants, agents and other representatives of each of the
foregoing.
1.131. HET/JCC Agreement means that certain HET/JCC Agreement executed
by HET and HOCI in favor of the LGCB and attached as an exhibit to the Amended
and Restated Casino Operating Contract.
13
<PAGE>
1.132. HET Loan Guarantee means, collectively, the payment guarantees
or "put" agreements by HET and HOCI with respect to (i) Tranche A-2 of the A
Term Loan, (ii) Tranche B-2 of the B Term Loan, and (iii) the Working Capital
Facility on terms satisfactory to such lenders and HET. The forms of the HET
Loan Guarantee shall be filed with the Bankruptcy Court as Plan Documents
pursuant to Section 6.2(t) of the Plan.
1.133. HET Warrant means warrants to purchase additional shares of New
Common Stock such that, upon exercise of the warrants in their entirety, HET and
its subsidiaries (including Harrah's Investor) would own in the aggregate 50.0%
of the New Common Stock issued on the Effective Date, as described in the
Bondholder Term Sheet attached hereto as Exhibit E, and which shall be (i)
satisfactory in form and substance to HET (in its sole discretion) on behalf of
the Proponents and the Bondholders Committee (in its sole discretion) and (ii)
filed with the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of
the Plan.
1.134. HJC means Harrah's Jazz Company, a Louisiana general
partnership, as debtor and debtor in-possession.
1.135. HNOIC means Harrah's New Orleans Investment Company, a Nevada
corporation, as debtor and debtor in-possession.
1.136. HNOMC means Harrah's New Orleans Management Company, a Nevada
corporation, and its successors and assigns.
1.137. HOCI means Harrah's Operating Company, Inc., a Delaware
corporation, formerly known as Embassy Suites, Inc., and its successors and
assigns.
1.138. Indenture Trustee Charging Lien means any Lien or other priority
in payment available to the Old Indenture Trustee pursuant to the Old Indenture
or otherwise against distributions made to the Bondholders under the Plan for
payment of any fees, costs, disbursements or amounts incurred by the Old
Indenture Trustee.
1.139. Indenture Trustee Claim means a contractual Claim held by the
Old Indenture Trustee for compensation, reimbursement of costs or disbursements
(including, without limitation, the costs and expenses of its attorneys,
accountants and financial advisors), or indemnity arising from the Old Indenture
or otherwise, regardless of whether such fees and expenses are incurred prior or
subsequent to the Commencement Date.
1.140. Initial Class C5 Distribution Date shall have the meaning
assigned to such term in Section 4.21 of the Plan.
1.141. Insider shall have the meaning assigned to such term in
Section 101(31) of the Bankruptcy Code.
1.142. January 29, 1998 Plan shall have the meaning assigned to such
term in the preamble hereof.
1.143. JCC means Jazz Casino Company, L.L.C., a Louisiana limited
liability company, and its successors and assigns, to which all of the property
of the Debtors and their estates shall be transferred on the Effective Date
(except as otherwise provided in the Plan).
1.144. JCC Development means JCC Development Company, L.L.C., a
Louisiana limited liability company, and its successors and assigns, which shall
lease the second floor of the Casino building from JCC and develop it for
non-gaming uses.
14
<PAGE>
1.145. JCC Entities means JCC, JCC Intermediary (to the extent JCC
Intermediary is formed) and JCC Holding, and their respective successors and
assigns.
1.146. JCC Holding means JCC Holding Company, a Delaware corporation,
and its successors and assigns, which shall be a holding company owning directly
or indirectly all of the membership interests of JCC Intermediary (to the extent
JCC Intermediary is formed), JCC, JCC Development, CP Development and FP
Development.
1.147. JCC Holding Bylaws means the Bylaws of JCC Holding, containing,
among other things, the applicable corporate governance provisions in the
Bondholder Term Sheet, and in the form to be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan.
1.148. JCC Holding Certificate of Incorporation means the Restated
Certificate of Incorporation of JCC Holding, containing, among other things, the
applicable corporate governance provisions in the Bondholder Term Sheet, and in
the form to be filed with the Bankruptcy Court as a Plan Document pursuant to
Section 6.2(t) of the Plan.
1.149. JCC Intermediary means JCC Intermediary Company, L.L.C., a
Louisiana limited liability company, and its successors and assigns, which shall
be a holding company owning all of the membership interest(s) in JCC. As set
forth in Section 12.12 hereof, the formation of JCC Intermediary shall be at the
election of HET (in its sole discretion) on behalf of the Proponents.
1.150. JCC Intermediary Operating Agreement means, to the extent JCC
Intermediary is formed, the operating agreement of JCC Intermediary, containing,
among other things, the applicable governance provisions in the Bondholder Term
Sheet, and in the form to be filed with the Bankruptcy Court as a Plan Document
pursuant to Section 6.2(t) of the Plan.
1.151. JCC Intermediary Organizational Documents means, collectively,
the articles of organization and initial report of JCC Intermediary and any
other documents required under the law of the State of Louisiana to form JCC
Intermediary as a limited liability company, each in the form to be filed with
the Bankruptcy Court as a Plan Document pursuant to Section 6.2(t) of the Plan.
1.152. JCC Operating Agreement means the operating agreement of JCC,
containing, among other things, the applicable governance provisions in the
Bondholder Term Sheet, and in the form to be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan.
1.153. JCC Organizational Documents means, collectively, the articles
of organization and the initial report of JCC and any other documents required
under the law of the State of Louisiana to form JCC as a limited liability
company, each in the form to be filed with the Bankruptcy Court as a Plan
Document pursuant to Section 6.2(t) of the Plan.
1.154. Junior Subordinated Credit Facility means the junior
subordinated credit facility in the aggregate principal amount of $22.5 million
to be provided by HET (or an Affiliate of HET) to JCC on the Effective Date
pursuant to Section 6.2(i) of the Plan, which junior subordinated credit
facility shall have such terms and conditions as may be agreed to by the
Bondholders Committee (in its sole discretion), the Participating Banks (in
their sole discretion), such Affiliate of HET, and HET (in its sole discretion)
on behalf of the Proponents, and if HJC is a party to the Junior Subordinated
Loan Documents, with the consent of HJC, which consent shall not be unreasonably
withheld or delayed.
1.155. Junior Subordinated Loan Documents means, collectively, the loan
agreement and all other loan documents and, if applicable, security documents
governing the terms and conditions of the Junior Subordinated Credit Facility,
which documents shall be satisfactory in form and substance to the Bondholders
15
<PAGE>
Committee, the Participating Banks (in their sole discretion) and HET (in its
sole discretion) on behalf of the Proponents and if HJC is a party thereto, HJC,
which approval shall not be unreasonably withheld or delayed.
The form of the Junior Subordinated Loan Documents shall be filed with the
Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of the Plan.
1.156. LEDGC means the Louisiana Economic Development and Gaming
Corporation.
1.157. LGCB means the Louisiana Gaming Control Board and its successors
and assigns.
1.158. Lien shall have the meaning assigned to such term in Section
101(37) of the Bankruptcy Code.
1.159. Litigation Costs means (i) all reasonable fees, costs and
expenses (including all attorneys' and other professionals' fees and expenses)
of or incurred by JCC in prosecuting, settling or otherwise in connection with
any Assigned Litigation Claim or any action in which any Assigned Litigation
Claim is asserted or otherwise in connection with its performance of tasks and
duties pursuant to Section 5.9 of the Plan, (ii) all reasonable fees, costs and
expenses of Selected Counsel payable by JCC pursuant to clause (i) of the second
sentence of Section 5.9(d) hereof, and (iii) all reasonable out-of-pocket costs
and expenses of any Released Party reimbursable by JCC pursuant to clause (ii)
of the second sentence of Section 5.9(d) hereof.
1.160. Litigation Defendant means any Person against whom an Assigned
Litigation Claim is asserted at any time by JCC.
1.161. Major Bondholders means each member of the Bondholders Committee
in its capacity as a Bondholder or a member of the Bondholders Committee as of
the Voting Record Date.
1.162. Management Agreement means that certain Amended and Restated
Management Agreement for the Harrah's New Orleans Casino dated March 14, 1995,
between HJC, as prepetition debtor, and HNOMC, together with any amendments
thereto executed prior to the Commencement Date of the Chapter 11 Case of HJC.
1.163. Minimum Payment Guarantor Lien means the Lien securing certain
obligations of JCC under the HET/JCC Agreement, as well as the obligations of
JCC to any successor or substitute guarantor providing the Minimum Payment
Guaranty.
1.164. Minimum Payment Guaranty means a guaranty in the maximum stated
amount of $100 million for the benefit of the LGCB to assure payment of certain
obligations under the Amended and Renegotiated Casino Operating Contract. The
form of the Minimum Payment Guaranty shall be filed with the Bankruptcy Court as
a Plan Document pursuant to Section 6.2(t) of the Plan and is attached to the
Amended and Renegotiated Casino Operating Contract.
1.165. Modified Contracts means (i) the Canal Street Casino Lease, (ii)
the General Development Agreement, (iii) the Broadmoor Construction Agreement,
(iv) the Management Agreement, (v) the Architect Contract, (vi) the Completion
Loan Documents, (vii) the Construction Lien Indemnity Obligation Agreement,
(viii) the Ticket Purchase Agreement dated July 19, 1996, and (ix) the
Centex-Landis Construction Agreement, in each case as modified (or in the case
of the Basin Street Casino Lease, as modified and terminated) on the Effective
Date in the manner provided in Section 8.1(a) of the Plan.
1.166. New Bond Documents means the New Indenture, the New Bonds, the
New Contingent Bonds, and all other security agreements, mortgages, indentures
and other documents of any kind and nature evidencing a Lien or other
Encumbrance or other obligation of JCC in respect of the New Bonds or New
16
<PAGE>
Contingent Bonds. The forms of the New Bond Documents shall be filed with the
Bankruptcy Court as Plan Documents pursuant to Section 6.2(t) of the Plan.
1.167. New Bonds means the Senior Subordinated Notes due 2009 with
Contingent Payments of JCC to be issued under the Plan in the aggregate
noncontingent principal amount of $187.5 million, as more particularly described
in the Bondholder Term Sheet attached as Exhibit D hereto.
1.168. New Bonds 33 Act Registration Statement shall have the meaning
set forth in Section 6.2(s) of the Plan.
1.169. New Common Stock means the Class A New Common Stock and Class B
New Common Stock of JCC Holding.
1.170. New Completion Guarantees means the completion guarantees to be
executed and delivered on or before and as of the Effective Date by HET and HOCI
in favor of (i) the holders of the New Bonds as described in the Bondholder Term
Sheet, (ii) the LGCB and the City and RDC, on terms substantially similar to the
terms of the completion guarantee in favor of the holders of the New Bonds, and
(iii) the lenders under the A Term Loan, the B Term Loan and the Working Capital
Facility on terms satisfactory to such lenders and HET and HOCI. The forms of
these completion guarantees shall be filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan.
1.171. New Contingent Bonds means the Senior Subordinated Contingent
Notes due 2009 to be issued under the Plan, as more particularly described in
the Bondholder Term Sheet attached as Exhibit D hereto.
1.172. New Entities means, collectively, JCC Holding, JCC Intermediary
(if formed), JCC, JCC Development, CP Development and FP Development.
1.173. New Indenture means, collectively, the indentures, as described
in the Bondholder Term Sheet, to be entered into by JCC and the trustees
thereunder and effective on or before and as of the Effective Date governing the
terms and conditions under which the New Bonds and New Contingent Bonds,
respectively, will be issued, subject to such modification as hereinafter may be
made by HET (in its sole discretion) on behalf of the Proponents with the
consent of the Bondholders Committee (which consent may be withheld in its sole
discretion) that do not adversely affect the rights of the holders of the New
Bonds and New Contingent Bonds and filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan or as shall thereafter be
required by the Securities and Exchange Commission in connection with its
qualification under the Trust Indenture Act.
1.174. New Indenture Trustee means the Person selected on or before the
Effective Date by HET (in its sole discretion) on behalf of the Proponents and
with the consent of the Bondholders Committee (which consent may be withheld in
its sole discretion) to serve as the trustee under the New Indenture if such
Person is eligible under the Trust Indenture Act and the New Indenture to serve
as the trustee under the New Indenture.
1.175. NOLDC means New Orleans/Louisiana Development Corporation, a
Louisiana corporation, as debtor and debtor-in-possession.
1.176. NOLDC/Grand Palais Settlement Agreement means, collectively, (i)
the Settlement Agreement to be executed on or before and as of the Effective
Date by the NOLDC Shareholders and Grand Palais, (ii) mutual releases, in the
forms attached as exhibits to such Settlement Agreement, pursuant to which
NOLDC, the NOLDC Shareholders and certain Affiliates thereof, on the one hand,
and Grand Palais and
17
<PAGE>
certain Affiliates, on the other hand, release certain claims and causes of
action against each other, and (iii) all other agreements, instruments or
documents executed or to be executed in connection with the Settlement
Agreement. The NOLDC/Grand Palais Settlement Agreement shall be in form and
substance satisfactory to the NOLDC Shareholders and Grand Palais.
1.177. NOLDC Group means NOLDC, the NOLDC Shareholders, and their
respective Affiliates (other than the Debtors), predecessors, successors and
assigns and the officers, directors, employees, attorneys, financial advisors,
accountants, agents and other representatives of each of the foregoing.
1.178. NOLDC Plan means the plan of reorganization to be confirmed
pursuant to a Final Order in the bankruptcy case of NOLDC, which plan of
reorganization and Final Order shall be in form and substance satisfactory to
the NOLDC Shareholders and HET in its sole discretion on behalf of the
Proponents.
1.179. NOLDC Shareholders means T. George Solomon, Jr., Calvin
Fayard, Carl J. Eberts, Ronald M. Lamarque, Duplain W. Rhodes, III, Louie
Roussel, III, Michael X. St. Martin, John J. Cummings, III and Wendell H.
Gauthier, and their respective heirs, assigns and personal representatives.
1.180. NOLDC Shareholders/HET Settlement Agreement means, collectively,
(i) the Settlement Agreement to be executed on or before the Effective Date by
the NOLDC Shareholders, HET, HOCI and HNOMC, (ii) the mutual releases, in the
forms attached as exhibits to such Settlement Agreement, pursuant to which
NOLDC, the NOLDC Shareholders and certain Affiliates thereof, on the one hand,
and HET HOCI, HNOIC, HNOMC and certain Affiliates thereof, on the other hand,
release certain claims and causes of action against each other, (iii) the
further releases provided for in such settlement agreement in favor of the
Bondholders Committee Group, the Debtors Group, the Bank/Underwriter Group, the
State Group and the City Group, and (iv) all other agreements, instruments or
documents executed or to be executed in connection with the Settlement
Agreement. The NOLDC Shareholders/HET Settlement Agreement shall be in form and
substance satisfactory to the NOLDC Shareholders and HET and shall be approved
by the bankruptcy court in the Chapter 11 case of NOLDC either pursuant to
Section 1123(b)(3)(A) of the Bankruptcy Code as part of the NOLDC Plan or
pursuant to Bankruptcy Rule 9019 by separate Final Order (in form and substance
satisfactory to the NOLDC Shareholders and HET).
1.181. Non-Participating Banks means each Bank which is not a
Participating Bank.
1.182. Objection Deadline means the date by which objections to Claims
shall be filed with the Bankruptcy Court and served upon the respective holders
of each of the Claims as provided in Section 6.21 of the Plan.
1.183. Old Bank Collateral Agent means First National Bank of Commerce
and its successors and assigns, as collateral agent for the Banks under the Old
Bank Credit Documents.
1.184. Old Bank Credit Agreement means that certain Credit Agreement
dated as of November 8, 1994, among Bankers Trust Company, as Administrative
Agent and Bank, the other Banks listed therein and HJC and Finance Corp., as
prepetition debtors, together with any amendments thereto executed prior to the
Commencement Date of the Chapter 11 Case of HJC.
1.185. Old Bank Credit Documents means the Old Bank Credit Agreement,
all Credit Documents (as defined in the Old Bank Credit Agreement), and all
other security agreements, mortgages, indentures and documents of every kind and
nature evidencing any Claims of any or all Banks, together with any amendments
thereto executed prior to the Commencement Date of the Chapter 11 Case of HJC.
18
<PAGE>
1.186. Old Bond Documents means the Old Indenture, the Old Bonds, the
Collateral Documents (as defined in the Old Indenture), and all other security
agreements, mortgages, indentures and other documents of every kind and nature
evidencing a Lien or other Encumbrance or other obligation of any Debtor
relating to any Claim in respect of the Old Indenture or any of the Old Bonds,
together with any amendments thereto executed prior to the Commencement Date of
the Chapter 11 Case of HJC.
1.187. Old Bonds means the 14-1/4% First Mortgage Notes due 2001 in the
aggregate principal amount of $435 million issued by HJC and Finance Corp., as
prepetition debtors, pursuant to the Old Indenture.
1.188. Old Completion Guarantees means (i) the Notes Completion
Guaranty dated as of November 16, 1994, by HET and HOCI in favor of the Old
Indenture Trustee and the City and the RDC, (ii) the LEDGC Completion Guaranty
dated as of November 16, 1994 by HET and HOCI in favor of LEDGC and (iii) the
Bank Completion Guaranty dated as of November 16, 1996, by HET and HOCI in favor
of the Administrative Agent (as defined in the Old Bank Credit Agreement).
1.189. Old Indenture means that certain Indenture dated as of November
15, 1994, between HJC and Finance Corp., as prepetition debtors, and First
National Bank of Commerce, as trustee, governing the terms of the Old Bonds,
together with any amendments thereto executed prior to the Commencement Date of
the Chapter 11 Cases of HJC and Finance Corp.
1.190. Old Indenture Predecessor Collateral Agent means First National
Bank of Commerce and its successors and assigns, as the predecessor collateral
agent for the Old Indenture Trustee and the Bondholders under the Old Bond
Documents.
1.191. Old Indenture Predecessor Trustee means First National Bank of
Commerce as predecessor trustee under the Old Indenture and its successors and
assigns.
1.192. Old Indenture Successor Trustee means Norwest Bank Minnesota,
N.A., as successor indenture trustee under the Old Indenture, and its successors
and assigns.
1.193. Old Indenture Trustee means, collectively, Norwest Bank
Minnesota, N.A., a successor indenture trustee, and First National Bank of
Commerce, as predecessor indenture trustee, under the Old Indenture, and their
respective successors and assigns.
1.194. Operating Agreements means the JCC Operating Agreement, the JCC
Intermediary Operating Agreement (if JCC Intermediary is formed), the operating
agreement for CP Development, the operating agreement for FP Development, and
the operating agreement for JCC Development.
1.195. Organizational Documents means the JCC Holding Bylaws, the JCC
Holding Certificate of Incorporation, the JCC Intermediary Organizational
Documents (if JCC Intermediary is formed), the JCC Organizational Documents, and
the articles of organization, initial reports and other documents required under
the laws of the State of Louisiana to form CP Development, FP Development and
JCC Development as limited liability companies.
1.196. Original Confirmation Date means April 28, 1997, the date the
Bankruptcy Court entered an order confirming the Original Plan.
1.197. Original Plan shall have the meaning assigned to such term in
the preamble hereof.
19
<PAGE>
1.198. Other Priority Claim means, with respect to any Debtor, any
Claim, against such Debtor entitled to priority in right of payment under any or
all of Sections 507(a)(3) through (a)(7) of the Bankruptcy Code.
1.199. Participating Banks means Bankers Trust Company, as Bank and
Administrative Agent, and any other Bank which elects through an appropriate
indication on the ballot provided to such Bank or otherwise in writing on or
before the Effective Date to be treated as a "Participating Bank" pursuant to
Section 4.3(a) of the Plan and for all other purposes under the Plan. No Bank
shall be treated as a Participating Bank for voting purposes unless it makes
such election prior to the deadline for submitting completed ballots. The term
"Participating Banks" shall include FNBC, provided that FNBC shall not have any
obligations under the Bank Term Sheet but shall instead be subject to the
provisions of the FNBC Settlement Agreement.
1.200. Penalty Claims means (a) Claims for fines, penalties or
forfeiture or for multiple, exemplary or punitive damages, to the extent that
such fine, penalty, forfeiture or damages are not compensation for actual
pecuniary loss suffered by the holder of such Claim, (b) Claims filed after the
Bar Date, (c) Claims increased through amendment after the Bar Date which the
Bankruptcy Court determines do not relate back to the applicable original timely
filed Claim, but only to the extent of the amount of such increase, (d) Claims
subject to subordination under Section 510 of the Bankruptcy Code, including,
without limitation, Securities Laws Claims, and (e) Claims for post-petition
attorneys' fees except to the extent allowed under Section 506(b) of the
Bankruptcy Code.
1.201. Person means a person, a corporation, a partnership, an
association, a joint stock company, a joint venture, a limited liability
company, an estate, a trust, an unincorporated organization, a government or any
subdivision thereof or any other entity.
1.202. Plan means this Third Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code, as Modified Through September 3, 1998
(including all exhibits and schedules annexed hereto), either in its present
form or as it may be altered, amended, or modified from time to time.
1.203. Plan Documents means all of the agreements, instruments and
documents referenced in Section 6.2 of the Plan and all other agreements,
instruments and documents as HET, in its sole discretion, on behalf of the
Proponents deems necessary or appropriate to effectuate the terms and conditions
of or transactions contemplated by the Plan.
1.204. Priority Tax Claim means a Claim of a governmental unit of the
kind specified in Sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.205. Professional Person means a Person retained or to be compensated
pursuant to Section 327, 328, 330, 503(b), 506(b) or 1103 of the Bankruptcy
Code.
1.206. Pro Rata Share or Pro Rata Interest means a proportionate share,
so that the ratio of the consideration distributed on account of an Allowed
Claim in a class to the amount of such Allowed Claim is the same as the ratio of
the amount of the consideration distributed on account of all Allowed Claims in
such class to the amount of all Allowed Claims in such class, or if the context
so requires, to the amount of all Allowed Claims in a designated portion of such
class.
1.207. Proponents means the Debtors and HET as proponents of the Plan.
1.208. RDC means Rivergate Development Corporation, a Louisiana public
benefit corporation, and its successors and assigns.
20
<PAGE>
1.209. Registrar means the registrar under the Old Indenture of
transfers and exchanges of Old Bonds.
1.210. Rejection Claim means any Claim of any party to an executory
contract or unexpired lease with any Debtor arising from the rejection by such
Debtor of such executory contract or unexpired lease.
1.211. Release Claims means any actions, causes of action, in law or in
equity, suits, debts, Liens, liabilities, claims, demands, damages, punitive
damages, losses, costs or expenses and reasonable attorneys' fees of any kind or
nature whatsoever, whether fixed or contingent, known or unknown, and whenever
arising (including, without limitation, claims based on legal fault,
misrepresentations or omissions, negligence, offense, quasi-offense, contract,
quasi-contract or any other theory), which in any way relate to any Debtor, the
business affairs or operations of any Debtor, the issuance by any Debtor of any
securities or the Casino or the Temporary Casino (as defined in the Basin Street
Casino Lease), including, but not limited to, the licensing, leasing, financing,
arranging, development, construction, promotion, management or operation
thereof, or other matters relating to any Debtor or any successor to any of them
in connection with the Casino or the Temporary Casino, except to the extent any
of the foregoing arises under any of the Plan Documents on or after the
Effective Date.
1.212. Release Pool shall have the meaning assigned to such term in
Section 6.2(f) of the Plan.
1.213. Release Pool Distribution Record Date means May 5, 1997, the
date set by the Bankruptcy Court for determining which holders of the Old Bonds
are entitled to receive distributions from the Release Pool provided under the
Plan.
1.214. Release Pool Transferee shall have the meaning assigned to
such term in Section 6.20 of the Plan.
1.215. Release Pool Transfer Form shall have the meaning assigned to
such term in Section 6.20 of the Plan.
1.216. Released Avoidance Claims means any and all Avoidance Claims
which are released pursuant to Section 5.8 of the Plan.
1.217. Released Parties means the Debtors and the New Entities and each
Person in any or all of the HET Group, the Debtors Group, the Bondholders
Committee Group, the City Group, the State Group, the Bank/Underwriter Group,
the NOLDC Group (if the applicable Persons in the NOLDC Group execute and
deliver on or before the Effective Date the NOLDC Shareholders/HET Settlement
Agreement) and the Grand Palais Group (if the applicable Persons in the Grand
Palais Group execute on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements).
1.218. Releases means the City/RDC Release, the State/LGCB Release, the
Centex-Landis Release, the Broadmoor Release, the NOLDC Shareholders/HET
Settlement Agreement, the GP Representative/HET Settlement Agreements, the NOLDC
Shareholders/Grand Palais Settlement Agreement and the Bank/Underwriter Release.
1.219. Releasing Bondholders shall have the meaning assigned to such
term in Section 5.2 of the Plan, and shall include, without limitation, each
Major Bondholder.
1.220. Schedules means the schedules of assets and liabilities and the
statement of financial affairs filed by each Debtor as required by Section 521
of the Bankruptcy Code and Bankruptcy Rule 1007, and all amendments thereto
through the Confirmation Date.
21
<PAGE>
1.221. SEC means the Securities and Exchange Commission or its
successors and assigns.
1.222. Secured Claim means an Allowed Claim held by any Person to the
extent of the value, as set forth in the Plan or as determined by a Final Order
of the Bankruptcy Court pursuant to Section 506(a) of the Bankruptcy Code, of
any interest in property of the applicable Debtor's estate securing such Allowed
Claim.
1.223. Securities Laws Claim means an Allowed Claim held by any Person
for rescission, damages or reimbursement, indemnification or contribution
arising out of a purchase or sale of any security (including, without
limitation, any Old Bonds) of either Debtor or any Affiliate thereof.
1.224. Selected Counsel shall have the meaning assigned to such term in
Section 6.2(t)(iv) hereof.
1.225. Setoff or Recoupment Claim or Setoff means a Claim which is
secured by setoff or recoupment rights of a Creditor of a Debtor, provided for
by applicable law and preserved by Section 553 of the Bankruptcy Code.
1.226. Showboat means Showboat, Inc., and its successors and assigns.
1.227. State means the State of Louisiana.
1.228. State Group means the State, the Governor of the State, the
LEDGC, the LGCB, the Riverboat Gaming Commission, the Attorney General of the
State, all boards, commissions, agencies, and other instrumentalities of the
State, and all of their respective predecessors, successors, and assigns, and
the officers, directors, employees, staff, members, attorneys, financial
advisors, accountants, agents, and other representatives of each of the
foregoing.
1.229. State/LGCB Release means the Release, in a form substantially
similar to the City/RDC Release and satisfactory to HJC (which may not
unreasonably withhold or delay its approval) and HET, to be executed on or
before and as of the Effective Date by the Attorney General of the State of
Louisiana on behalf of the State Group, the Debtors, NOLDC, Grand Palais, HET,
HOCI, HNOMC, JCC and/or certain of their respective Affiliates, and providing
for mutual releases in favor of the State Group, on the one hand, and the
Debtors, the New Entities, the HET Group, the Debtors Group, the
Bank/Underwriter Group, the Bondholders Committee Group, the NOLDC Group (but
only if the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement), and
the Grand Palais Group (but only if the applicable Persons in the Grand Palais
Group execute and deliver on or before the Effective Date the applicable GP
Representative/HET Settlement Agreements), on the other hand.
1.230. Subsequent Bank Distribution Date shall have the meaning set
forth in Section 4.3(b) of the Plan.
1.231. Surety Bond shall have the meaning set forth in Section 6.2(g)
of the Plan.
1.232. Third Party Claim means any claim or action (whether legal or
equitable, by subrogation or otherwise) by a Litigation Defendant against any
Released Party that seeks to hold such Person liable, in whole or in part, for
(i) any Assigned Litigation Claim, in whole or in part, brought at any time by
JCC against such Litigation Defendant or (ii) any claim or action, in whole or
in part, arising from any of the same transactions, occurrences, or facts upon
which such Assigned Litigation Claim brought at any time by JCC against such
Litigation Defendant is based in whole or in part.
22
<PAGE>
1.233. 3CP Property means the parcel of real property owned by HJC
located at 3 Canal Place in New Orleans, Louisiana, bounded by the Canal
Place shopping center, Canal Street and that parcel of land adjacent to the
Entergy Delta substation which acts as a continuation of Iberville Street
known as Lot S-1, together with any easements, rights of servitude and other
rights appurtenant thereto and any improvements thereupon, which shall be
transferred to CP Development on the Effective Date.
1.234. Total Claims Amount means, as to a particular class, the sum of
(i) the aggregate amount of Allowed Claims in that class and (ii) the Disputed
Claim Amounts in that class.
1.235. Tranche A-1 means the $10 million A-1 tranche of the A Term
Loan.
1.236. Tranche A-2 means the $20 million A-2 tranche of the A Term
Loan.
1.237. Tranche A-3 means the $30 million A-3 tranche of the A Term
Loan.
1.238. Tranche B-1 means the $30 million B-1 tranche of the B Term
Loan.
1.239. Tranche B-2 means the $121.5 million B-2 tranche of the B Term
Loan.
1.240. Trust Indenture Act means the Trust Indenture Act of 1939, 15
U.S.C. SS-77aaa-77bbbb, as now in effect or hereinafter amended.
1.241. Trustee Account shall have the meaning assigned to such term
in Section 4.5(b) of the Plan.
1.242. Underwriter Term Sheet means the term sheet attached hereto as
Exhibit G.
1.243. Underwriters means Salomon Smith Barney, Donaldson, Lufkin &
Jenrette and BT Alex. Brown Incorporated as underwriters of the Old Bonds.
1.244. Unknown Claim means any Claim which any party asserting such
Claim does not know or suspect to exist in his, her, or its favor at the time of
the giving of the applicable releases and waivers set forth in this Plan which,
if known by him, her or it, might have affected his, her or its decision
regarding such releases and waivers.
1.245. Unsecured Claim means any Claim that is not a Secured Claim,
Administrative Expense Claim, Priority Tax Claim, Penalty Claim or Other
Priority Claim.
1.246. Unsecured Creditors Committee means the statutory committee of
unsecured creditors appointed by the United States Trustee in the Chapter 11
Case of HJC pursuant to Section 1102 of the Bankruptcy Code.
1.247. Unsubscribed Release Pool Shares means the shares of New Common
Stock in the Release Pool equal to the product of (i) 1,500,000 times (ii) a
fraction, the numerator of which is the aggregate principal amount of Old Bonds
held by Bondholders on the Release Pool Distribution Record Date that are not
Releasing Bondholders, and the denominator of which is $435 million. All
Unsubscribed Release Pool Shares which are distributed to the Releasing
Bondholders in accordance with the provisions of this Plan shall be shares of
Class A New Common Stock, and all Unsubscribed Release Pool Shares which are
distributed to Harrah's Investor in accordance with the provisions of this Plan
shall be shares of Class B New Common Stock.
23
<PAGE>
1.248. Valuation Order means the order, if any, entered by the
Bankruptcy Court on or before the Effective Date determining that the value
of the Assigned Debtor Litigation Claims (net of all estimated Litigation
Costs and the estimated aggregate amount of all Third Party Claims) is
greater than the sum of (i) the Bondholder Deficiency Amount, plus (ii) the
$2,265,000 to be distributed to the applicable holders of Allowed Class A6
Claims, plus (iii) the aggregate amount of all Allowed Claims in Class A7,
plus (iv) the aggregate amount of all cure payments made as provided in
Section 8.1(e) of the Plan.
1.249. Voting Record Date means November 25, 1996, the date set by the
Bankruptcy Court for determining which holders of Old Bonds were entitled to
vote to accept or reject the Original Plan and are entitled to change their
acceptances or rejections of the Original Plan.
1.250. Wachtell Fees and Expenses shall have the meaning assigned to
such term in Section 4.3(a)(ii) of the Plan.
1.251. WARN Act Claim means any Claim against any or all of the Debtors
arising under the Worker Adjustment and Retraining Notification Act of 1988, 29
U.S.C. S-2101 et seq. and/or the Employee Retirement Income Security Act of 1974
as amended, 29 U.S.C. S-1001 et seq.
1.252. WARN Act Counsel means the law firms of Robein, Urann & Lurye,
P.L.C., Lowe, Stein, Hoffman, Alweiss & Hauver, and Shields, Mott, Lund &
Burnside, as counsel to the class representatives of the holders of WARN Act
Claims.
1.253. WARN Act Settlement means the settlement agreement approved by
the Bankruptcy Court by order dated February 20, 1997, providing for the
settlement of the respective WARN Act Claims of the members of the Certified
WARN Act Class against any or all of the Debtors, HNOMC and Affiliates of HNOMC.
1.254. Withheld Funds means the funds withdrawn by or on behalf of any
or all of the Banks from one or more accounts of HJC on November-21 or 22, 1995,
(less the amount of any such funds which were subsequently returned to HJC), to
the extent such funds were not, prior to the commencement of the Chapter 11 Case
of HJC, legally and properly setoff or otherwise legally and properly applied
against the outstanding balance of the prepetition indebtedness (exclusive of
contingent indebtedness or obligations) owing to the Banks under the Old Bank
Credit Documents as of the commencement of the Chapter 11 Case of HJC, plus
interest thereon either (i) in the amount of interest actually credited to the
account(s) at which the Withheld Funds have been deposited, if HET, on behalf of
the Plan Proponents, the Bondholders Committee and Bankers Trust Company so
agree in their respective sole discretion, or (ii) if there is no such
agreement, at a rate to be determined by the Bankruptcy Court.
1.255. Working Capital Facility means the revolving credit facility in
the principal amount of $25,000,000 to be provided by Bankers Trust Company and
any other Participating Banks to JCC on the Effective Date pursuant to Section
6.2(i) of the Plan, which revolving credit facility shall have the terms and
conditions set forth in the Bank Term Sheet and such other terms and conditions
as shall be set forth in the Working Capital Loan Documents.
1.256. Working Capital Loan Documents means, collectively, the loan
agreement and all other loan and security documents governing the terms and
conditions of the Working Capital Facility, which documents shall be
satisfactory in form and substance to the Bondholders Committee (in its sole
discretion) and HET (in its sole discretion) on behalf of the Proponents, and if
HJC is a party to the Working Capital Loan Documents, with the consent of HJC,
which consent shall not be unreasonably withheld or delayed. The forms of the
Working Capital Loan Documents shall be filed with the Bankruptcy Court as Plan
Documents pursuant to Section 6.2(t) of the Plan.
24
<PAGE>
1.257. 34 Act shall have the meaning assigned to such term in Section
6.2(q) of the Plan.
B. Other Terms
A term used herein that is not defined herein shall have the meaning
ascribed to that term, if any, in the Bankruptcy Code.
C. Construction of Certain Terms
(a) The words "herein," "hereof," "hereto," "hereunder," and others of
similar import refer to the Plan as a whole and not to any particular section,
subsection, or clause contained in the Plan.
(b) Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include the singular and the plural
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, the feminine and the neuter.
(c) The rules of construction used in Section 102 of the Bankruptcy
Code shall apply to the construction of this Plan.
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. S-1930), (iii) the DIP Loan
Claim or (iv) an Administrative Expense Claim which was allowed prior to the
Original Confirmation Date, must file with the Bankruptcy Court and serve on the
Proponents and their counsel, a request for payment of such Administrative
Expense Claim within thirty days after the Original Confirmation Date, or in the
case of any Administrative Expense Claim incurred after the Original
Confirmation Date, within thirty days after the latter of (i) the date of
incurrence of such Administrative Expense Claim, and (ii) the Confirmation Date.
Such request must set forth at a minimum (i) the Debtor that is liable for the
Claim, (ii) the name of the holder of the Claim, (iii) the amount of the Claim,
and (iv) the basis of the Claim. Failure to file this request timely and
properly shall result in the Administrative Expense Claim being forever barred
and discharged.
(b) Time for Filing Fee Claims. Each Professional Person, Old Indenture
Trustee or other Person that holds or asserts an Administrative Expense Claim
that is a Fee Claim incurred before the Effective Date shall be required to file
with the Bankruptcy Court, and serve on all parties required to receive notice,
a final Fee Application within sixty days after the Effective Date. The failure
to file any such final Fee Application timely shall result in the applicable Fee
Claim being forever barred and discharged.
(c) Allowance of Administrative Expense Claims. An Administrative
Expense Claim with respect to which a request for payment has been properly
filed pursuant to Section 2.1(a) of the Plan shall
25
<PAGE>
become an Allowed Administrative Expense Claim if no objection is filed within
thirty days after the filing and service of such request for payment of such
Administrative Expense Claim. If an objection is filed within such thirty-day
period, the Administrative Expense Claim shall become an Allowed Administrative
Expense Claim only to the extent allowed by Final Order. An Administrative
Expense Claim that is a Fee Claim and with respect to which a Fee Application
has been properly filed pursuant to Section 2.1(b) of the Plan, shall become an
Allowed Administrative Expense Claim only to the extent allowed by Final Order.
(d) Payment of Allowed Administrative Expense Claims. Each holder of an
Allowed Administrative Expense Claim against a Debtor shall receive (i) the
amount of such holder's Allowed Claim in one cash payment on, or as soon as
practicable thereafter, the later of the Effective Date and the day on which
such Claim becomes an Allowed Claim (but in no event after the tenth (10th)
Business Day after the later of those two dates), or (ii) such other treatment
as may be agreed upon in writing by the applicable Debtor (prior to the
Effective Date) or JCC (from and after the Effective Date) and such holder;
provided, however, that an Administrative Expense Claim representing a liability
incurred in the ordinary course of business of a Debtor (including, without
limitation, the fees payable to the U.S. Trustee under 28 U.S.C. S-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 or Cancellation of Certain Administrative Expense Claims.
Solely for purposes of this Plan, and subject to the occurrence of the Effective
Date, HET, NOLDC and Grand Palais and their respective Affiliates and Insiders
shall be deemed to have waived or agreed to cancel any Administrative Expense
Claim other than (i) any Administrative Expense Claim covered by any insurance
policy assumed pursuant to Section 8.1(c) hereof (provided, however, that any
such Administrative Claim shall be payable only from available coverage under
such insurance policy (and not be payable by any Debtor) and only to the extent
permitted under the NOLDC Shareholders/HET Settlement Agreement or GP
Representative/HET Settlement Agreements, as applicable) and (ii) in the case of
HET and its Affiliates and Insiders, the principal amount of the DIP
Indebtedness outstanding on the Effective Date, which shall be converted to
equity and contributed by the Harrah's Investor as part of the Harrah's New
Equity or any Administrative Expense Claim for unreimbursed premiums or other
unreimbursed amounts paid for insurance coverage provided to any Debtor under
any insurance policy assumed pursuant to Section 8.1(c) of the Plan. The
respective distributions to which the Bondholders and, if applicable, the Old
Indenture Trustee are entitled under Article IV hereto shall be deemed to be in
complete satisfaction, discharge and release of any Administrative Expense Claim
or any superpriority administrative expense claim or any lien securing any of
the foregoing of the Bondholders or the Old Indenture Trustee, as applicable,
other than the Administrative Expense Claims of Fidelity, the respective Fee
Claims of the members of the Bondholders Committee and the Professional Persons
retained by the Bondholders Committee, any Bondholder or the Old Indenture
Trustee, which Fee Claims shall be governed by the applicable provisions of the
Plan and the Bankruptcy Code.
(f) DIP Loan Claim. In consideration of, among other things, the
execution and delivery of the Releases and the other releases provided pursuant
to or in connection with the Plan and the issuance of New Common Stock in
accordance with the provisions of Sections 6.2(e) and (f) of the Plan, the
principal amount of the DIP Indebtedness outstanding on the Effective Date shall
be converted to equity and contributed by the Harrah's Investor to JCC Holding
as part of the Harrah's New Equity Investment on the Effective Date. All accrued
interest on the DIP Indebtedness outstanding as of the Effective Date shall be
cancelled.
2.2. Priority Tax Claims. Except to the extent that the holder of an
Allowed Priority Tax Claim agrees to a different treatment, JCC shall pay to
each holder of an Allowed Priority Tax Claim, at the sole option of JCC, (a)
cash in an amount equal to such Allowed Priority Tax Claim on the later of the
Effective Date and the date such Priority Tax Claim becomes an Allowed Priority
Tax Claim, or as soon thereafter as
26
<PAGE>
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:
<TABLE>
<CAPTION>
A. HJC Classification
<S> <C>
Class A1 -- Other Priority Claims: Class A1 consists of all Allowed Other Priority Claims
against HJC.
Class A2 -- Non-Bondholder Secured Class A2 consists of all Allowed Secured Claims against
Claims: HJC other than the Secured Claims specified in Class A3 or
A4 of the Plan.
Class A3 -- Bank and Old Bank Class A3 consists of two separate subclasses. Class
Collateral Agent Claims: A3(a) consists of all Allowed Secured Claims of the
Participating Banks and the Old Bank Collateral Agent
against HJC, and Class A3(b) consists of all Allowed
Secured Claims of the Non-Participating Banks against
HJC.
Class A4 -- Bondholder Claims: Class A4 consists of all Allowed Secured and Unsecured
Claims of the Bondholders against HJC.
Class A5 -- Old Indenture Predecessor Class A5 consists of all Allowed Secured Claims of the
Trustee and Old Indenture Old Indenture Predecessor Trustee and the Old Indenture
Collateral Agent Claims: Collateral Agent against HJC.
Class A6 -- WARN Act Claims: Class A6 consists of all Allowed WARN Act Claims against
HJC of holders who are part of the Certified WARN Act
Class and are bound by the WARN Act Settlement.
Class A7 -- General Unsecured Claims: Class A7 consists of all Allowed Unsecured Claims against
HJC other than the Unsecured Claims of the Bondholders
and the Unsecured Claims in Class A6 or A8.
Class A8 -- Penalty Claims Class A8 consists of all Allowed Penalty Claims against
HJC.
27
<PAGE>
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.
Class C4 -- Unsecured Claims (for Class C4 consists of all Allowed Unsecured Claims
which HJC is liable): against HNOIC for which HJC is also liable.
Class C5 -- General Unsecured Claims: Class C5 consists of all Allowed Unsecured Claims against
HNOIC other than Unsecured Claims in Class C3, C4, C6
or C7.
28
<PAGE>
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.
</TABLE>
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS
A. HJC Treatment
4.1. Class A1 -- Other Priority Claims.
(a) Impairment and Voting. Class A1 is impaired by the Plan. Each
holder of an Allowed Claim in Class A1 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class A1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.2. Class A2 -- Non-Bondholder Secured Claims.
(a) Impairment and Voting. Class A2 is impaired by the Plan. Each
holder of an Allowed Claim in Class A2 is entitled to vote to accept or reject
the Plan.
(b) Reinstatement of Claims or Surrender of Collateral. Except as
provided in the immediately following two sentences, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Claim in Class A2 to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of a default, each Allowed
Claim in Class A2 will be reinstated and rendered unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign,
abandon or surrender any property securing any Secured Claim in Class A2 to the
holder of such Secured Claim. The Court will determine the value of any such
property so assigned, abandoned or surrendered, and any Deficiency Claim
resulting therefrom will be paid as a Class A7 or A8 Claim.
4.3. Class A3 -- Bank Claims.
(a) Class A3(a) -- Claims of Participating Banks and Old Bank
Collateral Agent.
(i) Impairment and Voting. Class A3(a) is impaired by the
Plan. Each holder of an Allowed Secured Claim in Class A3(a) is entitled to vote
to accept or reject the Plan. Solely for 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.
29
<PAGE>
(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).
(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,
30
<PAGE>
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 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
31
<PAGE>
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, the terms of which are summarized on the FNBC Term Sheet attached
hereto as Exhibit H.
4.6. Class A6 -- WARN Act Claims.
(a) Impairment and Voting. Class A6 is impaired by the Plan. Each
holder of an Allowed Claim in Class A6 is entitled to vote to accept or reject
the Plan. Solely for purposes of voting, each holder of a WARN Act Claim shall
be deemed to have an Allowed WARN Act Claim in the amount of $1.00.
(b) Distributions and Other Treatment. On or as soon as practicable
after the Effective Date, JCC shall pay the sum of $2.265 million minus the
fees and expenses of WARN Act Counsel incurred in connection with its
representation of the holders of WARN Act Claims, and a portion of certain
taxes attributable to the WARN Act settlement (all as more fully described in
the February 20, 1997 Bankruptcy Court order approving the settlement of WARN
Act Claims), to holders of Allowed 11/95 WARN Act Claims based on their
respective Pro Rata Interests in the balance of the $2.265 million payment,
subject to any tax or other withholdings required by law. The Allowed amount
of the WARN Act Claim of each 11/95 WARN Act Claimant for purposes of
determining his or her Pro Rata Interest shall be determined by WARN Act
Counsel in its reasonable discretion pursuant to a set of objective and
nondiscriminatory criteria to be filed with the Bankruptcy Court on or before
the Effective Date. In addition, to the extent such positions are or become
available, JCC shall offer each 11/95 WARN Act Claimant re-employment to his
or her former position or, if his or her former position no longer exists or
is not then available, to a substantially equivalent position, prior to
offering employment to such position to any other Person other than any 11/95
WARN Act Claimant. As for the 8/95 WARN Act Claimants, JCC (A) shall place
each 8/95 WARN Act Claimant on a preferential rehire list for one year
following the date on which the Casino opens for business, and (B) to the
extent such positions are or become available, shall offer re-employment to
his or her former position or, if his or her former position no longer exists
or is not then available, to a substantially equivalent position, prior to
offering employment to such position to any Person other than any 11/95 WARN
Act Claimant, any 8/95 WARN Act Claimant or any Person who was formerly
employed and laid off by the Flamingo Casino.
4.7. Class A7 -- General Unsecured Claims.
(a) Impairment and Voting. Class A7 is impaired by the Plan. Each
holder of an Allowed Claim in Class A7 (an "Allowed General Unsecured Claim") is
entitled to vote to accept or reject the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed General
Unsecured Claim (an "Allowed General Unsecured Creditor") cash in an amount
equal to such Allowed General Unsecured Claim on the later of the Effective Date
and the date on which such Claim becomes an 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
32
<PAGE>
insurance policy assumed pursuant to Section 8.1(c) hereof (provided that any
such Allowed Class A7 Claim shall be payable only from available coverage under
such insurance policy (and not be payable by any Debtor) and only to the extent
permitted under the NOLDC Shareholders/HET Settlement Agreement or GP
Representative/HET Settlement Agreements, as applicable), (ii) in the case of
HET and its Affiliates and Insiders, any Class A7 Claim for unreimbursed
premiums or other unreimbursed amounts paid for insurance coverage provided to
any Debtor under any insurance policy assumed pursuant to Section 8.1(c) of the
Plan, and (iii) the Allowed Class A7 Claim of Deborah Sulzer in the amount of
$39,579.52 as reflected in Claim No. 490.
4.8. Class A8 -- Penalty Claims. Class A8 is impaired by the Plan. The
holders of Class A8 Claims shall not receive any distributions on account of
such Claims, and on the Effective Date, all Class A8 Claims shall be
extinguished; provided, however, that if a Valuation Order is entered on or
before the Effective Date, each holder of an Allowed Claim in Class A8 shall
receive its Pro Rata Share of the interests in the proceeds of Assigned Debtor
Litigation Claims as allocated to holders of Allowed Class A8 Claims under
Section 5.9 of the Plan. Each holder of a Class A8 Claim is conclusively
presumed to have rejected the Plan as a holder of a Class A8 Claim and is not
entitled to vote to accept or reject the Plan.
4.9. Class A9 -- Equity Interests. Class A9 is impaired by the Plan.
The holders of Equity Interests in Class A9 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity Interests
in HJC shall be extinguished. Each holder of an Equity Interest in Class A9 is
conclusively presumed to have rejected the Plan as a holder of a Class A9 Equity
Interest and is not entitled to vote to accept or reject the Plan.
B. Finance Corp. Treatment
4.10. Class B1 -- Other Priority Claims.
(a) Impairment and Voting. Class B1 is impaired by the Plan. Each
holder of an Allowed Claim in Class B1 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class B1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.11. Class B2 -- Bank Claims.
(a) Impairment and Voting. Class B2 is impaired by the Plan. Each
holder of an Allowed Secured Claim in Class B2 is entitled to vote to accept or
reject the Plan.
(b) Distributions. As soon as practicable after the later of the
Effective Date and the date on which all of the Allowed Secured Claims in Class
B2 have been allowed or disallowed by Final Order, each holder of an Allowed
Class B2 Claim is entitled to receive from JCC its pro rata share (based on the
ratio of its Allowed Class B2 Claim to the aggregate amount of all Allowed
Secured 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.
33
<PAGE>
4.12. Class B3 -- Bondholder Claims.
(a) Impairment and Voting. Class B3 is impaired by the Plan. Each
holder of an Allowed Secured Claim in Class B3 as of the Voting Record Date is
entitled to vote to accept or reject the Plan.
(b) Distributions. Each holder of an Allowed Claim in Class B3 is
entitled to receive its Pro Rata Share of shares of Class A New Common Stock and
New Bonds which, in the aggregate, have a value equal
to the product of (i) $1,000 and (ii) a fraction, the numerator of which is the
aggregate amount of Allowed Secured Claims in Class B3, and the denominator of
which is the aggregate amount of Allowed Secured Claims in Class B2 and Class
B3. The distribution to which each holder of an Allowed Class B3 Claim is
entitled shall be deemed part of, and satisfied upon receipt of, the
distributions which such holder is entitled to receive as a holder of an Allowed
Class A4 Claim.
4.13. Class B4 -- WARN Act Claims.
(a) Impairment and Voting. Class B4 is impaired by the Plan. Each
holder of an Allowed Claim in Class B4 is entitled to vote to accept or reject
the Plan.
(b) Distributions and Other Treatment. Each holder of an Allowed Claim
in Class B4 shall be deemed to have received on account of his or her Class B4
Claims, and in full satisfaction thereof, the distribution and/or other
treatment he or she receives as a holder of a Class A6 Claim pursuant to Section
4.6 of the Plan. No other distribution shall be provided to such holder on
account of his or her Class B4 Claims.
4.14. Class B5 -- General Unsecured Claims.
(a) Impairment and Voting. Class B5 is impaired by the Plan. Each
holder of an Allowed Claim in Class B5 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class B5 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date on which such Claim becomes an Allowed Claim, or as
soon as practicable thereafter. Solely for purposes of this Plan, and subject to
the occurrence of the Effective Date, HNOIC, HJC, HET, NOLDC, Grand Palais and
all of their respective Affiliates and Insiders shall be deemed to have waived
their right to receive any distribution as a holder of a Class B5 Claim.
4.15. Class B6 - Penalty Claims. The holders of Class B6 Claims shall
not receive any distributions on account of such Claims, and on the Effective
Date, all Class B6 Claims shall be extinguished; provided, however, that if a
Valuation Order is entered on or before the Effective Date, each holder of an
Allowed Class B6 Claim shall be deemed to have received on account of its Class
B6 Claim, and in full satisfaction thereof, the distribution it receives as a
holder of a Class A8 Claim 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.
34
<PAGE>
C. HNOIC Classification
4.17. Class C1 -- Other Priority Claims.
(a) Impairment and Voting. Class C1 is impaired by the Plan. Each
holder of an Allowed Claim in Class C1 is entitled to vote to accept or reject
the Plan.
(b) Distributions. JCC shall pay to each holder of an Allowed Claim in
Class C1 cash in an amount equal to such Allowed Claim on the later of the
Effective Date and the date such Claim becomes an Allowed Claim, or as soon as
practicable thereafter.
4.18. Class C2 -- Secured Claims.
(a) Impairment and Voting. Class C2 is impaired by the Plan. Each
holder of an Allowed Claim in Class C2 is entitled to vote to accept or reject
the Plan.
(b) Reinstatement of Claims or Surrender of Collateral. Except as
provided in the immediately following two sentences, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Claim in Class C2 to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of default, each Allowed
Claim in Class C2 will be reinstated and rendered unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code. JCC may, in its discretion, assign,
abandon or surrender any property securing any Secured Claim in Class C2 to the
holder of such Secured Claim. The Court will determine the value of any such
property so assigned, abandoned or surrendered, and any Deficiency Claim
resulting therefrom will be paid as a Class C5 or C7 Claim.
4.19. Class C3 -- WARN Act Claims.
(a) Impairment and Voting. Class C3 is impaired by the Plan. Each
holder of an Allowed Claim in Class C3 is entitled to vote to accept or reject
the Plan.
(b) Distributions and Other Treatment. Each holder of an Allowed Claim
in Class C3 shall be deemed to have received on account of his or her Class C3
Claims, and in full satisfaction thereof, the distribution and/or other
treatment he or she receives as a holder of a Class A6 Claim pursuant to Section
4.6 of the Plan. No other distribution shall be provided to such holder on
account of his or her Class C3 Claims.
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.
35
<PAGE>
(b) Distributions. To the extent there are any holders of Allowed
Claims in Class C5, each such holder shall receive the lesser of the amount of
its Allowed Class C5 Claim or its Pro Rata Share of $1,000 in cash (the "Class
C5 Cash Amount") to be provided by JCC and distributed as follows:
(i) On the ninetieth (90th) day after the Effective Date or as
soon as practicable thereafter (the "Initial Class C5 Distribution
Date"), each holder of an Allowed Claim in Class C5 on the Initial
Class C5 Distribution Date shall receive, as an initial distribution of
the Class C5 Cash Amount, an amount equal to the product of (A) the
amount of such holder's Allowed Class C5 Claim times (B) a fraction,
(x) the numerator of which is the aggregate amount of Allowed Class C5
Claims on the Initial Class C5 Distribution Date, and (y) the
denominator of which is the Total Claims Amount for Class C5 on the
Initial Class C5 Distribution Date.
(ii) As soon as reasonably practicable after making the
initial distribution of the Class C5 Cash Amount, JCC will deposit the
remaining portion of the Class C5 Cash Amount in an interest-bearing,
money market account (such deposit, together with any interest thereon,
the "Class C5 Claims Reserve").
(iii) No payment or distribution of any portion of the Class
C5 Cash Amount shall be made with respect to any Disputed Claim unless
and until such Claim becomes an Allowed Claim, and no holder of a Class
C5 Claim shall receive more than one hundred percent (100%) of its
Allowed Class C5 Claim or be entitled to any post-petition interest
thereon.
(iv) As soon as practicable after any Disputed Claim becomes
an Allowed Class C5 Claim by Final Order, JCC shall make an initial
distribution to the holder of such Allowed Claim from the Class C5
Claims Reserve in an amount equal to the product of (A) the Class C5
Cash Amount times (B) a fraction, (x) the numerator of which is the
amount of such holder's Allowed Class C5 Claim and (y) the denominator
of which is the Total Claims Amount for Class C5 on the Initial Class
C5 Distribution Date.
(v) As soon as practicable after all Disputed Claims have been
allowed or disallowed by Final Order, and after all interim
distributions have been made pursuant 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.
<PAGE>
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
36
<PAGE>
for a full release from Showboat to NOLDC. This transaction will result in a
release of NOLDC's Class C6 Claim. No distributions shall be provided to NOLDC
on account of its Class C6 Claim.
4.23. Class C7 -- Penalty Claims. The holders of Class C7 Claims shall
not receive any distributions on account of such Claims, and on the Effective
Date, all Class C7 Claims shall be extinguished; provided, however, that if a
Valuation Order is entered on or before the Effective Date, each holder of an
Allowed Claim in Class C7 shall be deemed to have received on account of its
Class C7 Claim, and in full satisfaction thereof, the distribution it receives
as a holder of a Class A8 Claim pursuant to Section 4.8 of the Plan. Each holder
of a Class C7 Claim is conclusively presumed to have rejected the Plan as a
holder of Class C7 Claim and is not entitled to vote to accept or reject the
Plan.
4.24. Class C8 -- Equity Interests. Class C8 is impaired by the Plan.
The holder of Equity Interests in Class C8 shall not receive any distributions
on account of such Equity Interests. On the Effective Date, all Equity Interests
in HNOIC shall be extinguished. The holder of Equity Interests in Class C8 is
conclusively presumed to have rejected the Plan as a holder of Class C8 Equity
Interests and is not entitled to vote to accept or reject the Plan.
ARTICLE V.
SETTLEMENT OF CERTAIN CLAIMS AND
PROSECUTION AND ASSIGNMENT OF CERTAIN CLAIMS
5.1. Release by Debtors of Causes of Action Against the HET Group,
Debtors Group, Bondholders Committee Group, NOLDC Group and Grand Palais Group.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of,
among other things, (i) the execution and delivery of the HET Loan Guarantee by
HET and the New Completion Guarantees by HET and HOCI and the provision of the
Surety Bond, (ii) the DIP Lender's consent to the conversion to equity and
contribution of the principal amount of the DIP Indebtedness outstanding on the
Effective Date as part of the Harrah's New Equity Investment, (iii) the Harrah's
New Equity Investment, (iv) the waiver by Persons in the HET Group, the NOLDC
Group and the Grand Palais Group of any right to distributions as holders of
certain Class A6 and/or Class C5 Claims, (v) certain pre-development and
development services by HET and its Affiliates performed prior to the Effective
Date, and (vi) other good and valuable consideration, without which this Plan
could not be confirmed and consummated, on the Effective Date, each Debtor shall
be conclusively and irrevocably deemed to have released any and all Release
Claims of such Debtor or its estate against, respectively, (i) each Person in
the HET Group, (ii) each Person in the Debtors Group, (iii) each Person in the
Bondholders Committee Group, (iv) each Person in the NOLDC Group but only if the
applicable Persons in the NOLDC Group execute and deliver on or before the
Effective Date the NOLDC Shareholders/HET Settlement Agreement, and (v) each
Person in the Grand Palais Group but only if the applicable Persons in the Grand
Palais Group execute and deliver on or before the Effective Date the applicable
GP Representative/HET Settlement Agreements. The Confirmation Order shall
constitute an order approving as a compromise and settlement pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code the foregoing releases and the respective
releases of the Debtors contained in the NOLDC Shareholders/HET Settlement
Agreement and the GP Representative/HET Settlement Agreements and the Debtors'
execution and delivery of the applicable release agreements in the forms
attached as exhibits to the NOLDC Shareholders/HET Settlement Agreement and the
GP Representative/HET Settlement Agreements.
5.2. Release by Bondholders of Causes of Action Against HET Group,
Debtors Group, Bondholders Committee Group, City Group, State Group, NOLDC
Group, Grand Palais Group and the Bank/Underwriter Group. Pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code, in consideration of (i)
37
<PAGE>
Harrah's Investor's contribution of 200,000 shares of New Common Stock to the
Release Pool, and (ii) JCC Holding's contribution of 1,300,000 shares of New
Common Stock to the Release Pool on the Effective Date, each Bondholder that,
through an appropriate indication on the ballot previously provided to such
Bondholder in connection with the voting on the Original Plan or through an
appropriate indication on the Bondholder release form provided to it by the
Proponents, has affirmatively evidenced its intent to release the Persons in the
HET Group, the Debtors Group, the Bondholders Committee Group, the City Group,
the State Group, the NOLDC Group, the Grand Palais Group and the
Bank/Underwriter Group, respectively (each, a "Releasing Bondholder"), shall be
conclusively and irrevocably deemed to have (i) released each Person in the HET
Group, the Debtors Group, the Bondholders Committee Group, the City Group, the
State Group, the NOLDC Group, the Grand Palais Group and the Bank/Underwriter
Group, respectively, from any and all Release Claims that such Releasing
Bondholder, or any of its predecessors-in-interest, successors or assigns, has
or may have as of the Effective Date arising in whole or in part from any acts,
omissions, activities and/or events prior to the Effective Date, and (ii)
released, waived and agreed not to bring any Claims against HET or HOCI, whether
a known Claim or an Unknown Claim, that may arise in any way, in whole or in
part, out of (a) the decision of HET or HOCI either to renew or not renew the
HET/JCC Agreement or any Minimum Payment Guaranty, (b) HET's or HOCI's acting in
their own best interests in connection with the execution of, renewal of or
failure to renew the HET/JCC Agreement or any Minimum Payment Guaranty, and/or
(c) any alleged assurance or guarantee by HET or HOCI concerning the financial
results of the Casino, unless such Claim is based on a writing (but in any event
cannot be based on the HET/JCC Agreement or any Minimum Payment Guaranty)
properly executed by the party against whom such a Claim is being made,
provided, however, that such release in this clause (ii) hereof shall not bar or
release any Claims against HET or HOCI for (x) any breach of the HET/JCC
Agreement or any Minimum Payment Guaranty to which HET or HOCI is a party, (y)
mismanagement of the Casino after the Effective Date or (z) any other conduct,
act or omission occurring after the Effective Date which is not directly related
to the matters set forth in this clause (ii)(a) through (c) above; further
provided, however, that (A) the foregoing release by the Releasing Bondholders
shall not be effective or enforceable as to (i) any Person in the NOLDC Group
unless the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement, and
(ii) any Person in the Grand Palais Group unless the applicable Persons in the
Grand Palais Group execute and deliver on or before the Effective Date the
applicable GP Representative/HET Settlement Agreements; (B) each Major
Bondholder shall be conclusively and automatically deemed to be a Releasing
Bondholder without the necessity of taking the action otherwise required of any
Bondholder to become a Releasing Bondholder and regardless of the manner in
which such Major Bondholder fills out its ballot with respect to this Plan or
filled out its ballot with respect to the Original Plan or the January 29, 1998
Plan; (C) the release provisions in any ballot or other writing previously
executed by any Bondholder to evidence its agreement to the foregoing release,
unless revoked pursuant to clause (D) below, shall be binding on such Bondholder
and any transferee of the Old Bonds held by such Bondholder; and (D) any
Bondholder who agreed to the foregoing release in connection with the Original
Plan shall be entitled to revoke such agreement by evidencing in writing its
intent to do so in any manner and subject to such conditions and within any time
period set by the Bankruptcy Court. Nothing in the foregoing release by the
Releasing Bondholders constitutes a release of any claims or causes of action of
any Releasing Bondholders against any Persons other than the Released Parties,
including, without limitation, any claims or causes of action against any or all
of the Non-Participating Banks and any Underwriter which fails to execute and
deliver the Bank/Underwriter Release. On, or as soon as practicable after the
Effective Date, (i) each Releasing Bondholder shall receive from the Release
Pool 3.448 shares of Class A New Common Stock for each $1,000 in principal
amount of Old Bonds held by such Releasing Bondholder on the Release Pool
Distribution Record Date plus its Pro Rata Share (based on the total principal
amount of Old Bonds held by all Releasing Bondholders on the Release Pool
Distribution Record Date) of Class A New Common Stock consisting of 86.67% of
the Unsubscribed Release Pool Shares, and (ii) Harrah's Investor shall receive
from the Release Pool Class B New Common Stock consisting of 13.33% of the
Unsubscribed Release Pool Shares. Notwithstanding the foregoing, and except as
otherwise provided for in Section 6.20 of this Plan, (i) no Releasing Bondholder
shall be entitled to any distribution from the Release Pool unless such holder
is a Bondholder of record on the Release Pool Distribution Record Date (or, in
the case
38
<PAGE>
of a beneficial owner of any Old Bonds, is the beneficial owner of Old Bonds on
the Release Pool Distribution Record Date that are held on its behalf by a
Person which is a holder of record on the Release Pool Distribution Record Date)
and has not assigned or otherwise transferred its claims, if any, against any
Person in the HET Group, the Debtors Group, the Bondholders Committee Group, the
City Group, the State Group, the NOLDC Group, the Grand Palais Group or the
Bank/Underwriter Group to be released pursuant to this Section 5.2, except that
any Releasing Bondholder may transfer its Old Bonds on or after the Release Pool
Distribution Record Date subject to clause (ii) below, (ii) the foregoing
release by each Releasing Bondholder shall be binding on any subsequent
transferee of the Old Bonds held by such Releasing Bondholder on the Release
Pool Distribution Record Date, and (iii) the foregoing release by each Releasing
Bondholder which is a beneficial owner of any Old Bonds shall be binding on any
record holder, participant or nominee with respect to such Old Bonds. The
Confirmation Order shall constitute an order approving the foregoing release as
a compromise and settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy
Code.
5.3. Release by Debtors of Causes of Action Against State Group.
Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of
and subject to, the execution and delivery of the State/LGCB Release and the
Amended and Renegotiated Casino Operating Contract by LGCB 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 Term Sheet 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.
39
<PAGE>
5.6. Release by Grand Palais Bondholders of Causes of Action Against
HET Group, Debtors Group, Bondholders Committee Group, City Group, State Group,
NOLDC Group, Grand Palais Group and the Bank/Underwriter Group. Pursuant to
Section 1123(b)(3)(A) of the Bankruptcy Code, in consideration of, among other
things, (i) the Grand Palais Settlement Consideration, (ii) the execution and
delivery of the HET Loan Guarantee and the New Completion Guarantees by HET and
HOCI and the provision of the Surety Bond, (iii) the DIP Lender's consent to the
conversion to equity and contribution of the principal amount of the DIP
Indebtedness outstanding on the Effective Date as part of the Harrah's New
Equity Investment, (iv) the Harrah's New Equity Investment, (v) the waiver by
Persons in the HET Group, the NOLDC Group and the Grand Palais Group of any
right to distributions as holders of certain Class A7 and/or Class C5 Claims,
(vi) certain pre-development and development services by HET and its Affiliates
performed prior to the Effective Date, (vii) the provision by certain Persons in
the Bank/Underwriter Group of certain financing to JCC, and (viii) other good
and valuable consideration, without which this Plan could not be confirmed and
consummated, on the Effective Date, each Grand Palais Bondholder that, through
an appropriate indication on the release solicitation statement provided to such
Grand Palais Bondholder by the Disbursing Agent or in such other manner as may
be prescribed by an applicable order of the Bankruptcy Court, has affirmatively
evidenced its intent to release the Persons in the HET Group, the Debtors Group,
the Bondholders Committee Group, the City Group, the State Group, the NOLDC
Group, the Grand Palais Group and the Bank/Underwriter Group, respectively
(each, a "Grand Palais Releasing Bondholder"), shall be conclusively and
irrevocably deemed to have (i) released each Person in the HET Group, the
Debtors Group, the Bondholders Committee Group, the City Group, the State Group,
the NOLDC Group, the Grand Palais Group and the Bank/Underwriter Group,
respectively, from any and all Release Claims that such Grand Palais Releasing
Bondholder, or any of its predecessors-in-interest, successors or assigns, has
or may have as of the Effective Date arising in whole or in part from any acts,
omissions, activities and/or events prior to the Effective Date, and (ii)
released, waived and agreed not to bring any Claims against HET or HOCI, whether
a known Claim or an Unknown Claim, that may arise in any way, in whole or in
part, out of (a) the decision of HET or HOCI either to renew or not renew the
HET/JCC Agreement or any Minimum Payment Guaranty, (b) HET's or HOCI's acting in
their own best interests in connection with the execution, renewal or failure to
renew the HET/JCC Agreement or any Minimum Payment Guaranty, and/or (c) any
alleged assurance or guarantee by HET or HOCI concerning the financial results
of the Casino, unless such Claim is based on a writing (but in any event cannot
be based on the HET/JCC Agreement or any Minimum Payment Guaranty) properly
executed by the party against whom such a Claim is being made; provided,
however, that the foregoing release by the Grand Palais Releasing Bondholders
shall not be effective or enforceable as to (i) any Person in the NOLDC Group
unless the applicable Persons in the NOLDC Group execute and deliver on or
before the Effective Date the NOLDC Shareholders/HET Settlement Agreement; and
(ii) any Person in the Grand Palais Group unless the applicable Persons in the
Grand Palais Group execute and deliver on or before the Effective Date the
applicable GP Representative/HET Settlement Agreements. On, or as soon as
practicable after the Effective Date, each Grand Palais Releasing Bondholder
shall receive its pro rata share of the Grand Palais Settlement Consideration
(with respect to each Grand Palais Releasing Bondholder, such pro rata share for
such Grand Palais Releasing Bondholder shall be determined by the ratio between
the aggregate principal amount of Grand Palais Senior Secured Bonds beneficially
owned by such Grand Palais Releasing Bondholder and the aggregate principal
amount of Grand Palais Senior Secured Bonds beneficially owned by all of the
Grand Palais Releasing Bondholders, each calculated as of the Distribution
Record Date). Notwithstanding the foregoing, (i) no Grand Palais Releasing
Bondholder shall be entitled to any distribution of the Grand Palais Settlement
Consideration unless such holder is a Grand Palais Bondholder of record on the
Distribution Record Date (or, in the case of a beneficial owner of any Grand
Palais Senior Secured Bonds, is the beneficial owner of Grand Palais Senior
Secured Bonds on the Distribution Record Date that are held on its behalf by a
Person which is a holder of record on the Distribution Record Date) and has not
assigned or otherwise transferred its claims, if any, against any Person in the
HET Group, the Debtors Group, the Bondholders Committee Group, the City Group,
the State Group, the NOLDC Group, the Grand Palais Group or the Bank/Underwriter
Group to be released pursuant to this Section 5.6, except that any Grand Palais
Releasing Bondholder may transfer its Grand Palais Senior Secured Bonds, subject
to clause (ii) below, (ii)
40
<PAGE>
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 foregoing release as a compromise and settlement pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code.
5.7. Injunction Against Commencement of Individual Actions Against HET
Group, Debtors Group, Bondholders Committee Group, City Group, State Group,
NOLDC Group, Grand Palais Group and the Bank/Underwriter Group. To implement the
Releases and the release provisions of Sections 5.1, 5.2, 5.3, 5.4, 5.5 and 5.6
of the Plan, the Confirmation Order shall constitute and provide for an
injunction by the Bankruptcy Court as of the Effective Date against (a) any
Releasing Bondholder or any Grand Palais Releasing Bondholder from (i)
commencing or continuing in any manner any action or other proceeding of any
kind against any Released Party or any property of any Released Party, (ii)
enforcing, attaching, collecting and/or recovering by any manner or means any
judgment, award, decree or order against any Released Party or any property of
any Released Party, (iii) creating, perfecting or enforcing any Encumbrance of
any kind against any Released Party or any property of any Released Party, or
(iv) asserting any right of setoff, right of subrogation or recoupment against
any Released Party or any property of any Released Party, in each case to the
extent any of the foregoing is released, waived or otherwise prohibited by the
release provisions of Section 5.2 or 5.6 of the Plan, as applicable, (b) except
as provided in the FNBC Settlement Agreement or Section 6.1(k)(ii), 6.2(l)(i) or
6.2(l)(ii) hereof, any party to any of the Releases from (i) commencing or
continuing in any manner any action or other proceeding of any kind against any
Released Party or any property of any Released Party, (ii) enforcing, attaching,
collecting and/or recovering by any manner or means any judgment, award, decree
or order against any Released Party or any property of any Released Party, (iii)
creating, perfecting or enforcing any Encumbrance of any kind against any
Released Party or any property of any Released Party, or (iv) asserting any
right of setoff, right of subrogation or recoupment against any Released Party
or any property of any Released Party, in each case to the extent any of the
foregoing is released, waived or otherwise prohibited by the applicable
Release(s), and (c) any Creditor, any holder of an Equity Interest or any other
party in interest in any of the Chapter 11 Cases from commencing or continuing
any Derivative Claim against any Released Party; provided, however, that the
foregoing injunction against the Releasing Bondholders and the Grand Palais
Releasing Bondholders shall not be effective or enforceable as to (i) any Person
in the NOLDC Group unless the applicable Persons in the NOLDC Group execute and
deliver on or before the Effective Date the NOLDC Shareholders/HET Settlement
Agreement, (ii) any Person in the Grand Palais Group unless the applicable
Persons in the Grand Palais Group execute and deliver on or before the Effective
Date the applicable GP Representative/HET Settlement Agreements, and (iii) any
claim or cause of action other than a Release Claim that is released pursuant to
Section 5.2 or 5.6 of the Plan or a Derivative Claim.
5.8. Extinguishment of Certain Causes of Action Under the Avoiding
Power Provisions. On the Effective Date, Avoidance Claims against any Released
Party, any Bondholder or any other Person other than the Non-Participating Banks
and any Underwriter which fails to execute and deliver the Bank/Underwriter
Release shall be released, discharged and extinguished, whether or not then
pending.
5.9. Assignment and Prosecution of Assigned Litigation Claims,
Judgment Reduction Protection and Distribution of Recoveries from Assigned
Litigation Claims.
41
<PAGE>
(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 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
42
<PAGE>
liability pursuant to Section 5.9(f). The Released Party shall cooperate fully
with JCC and Selected Counsel in connection with the prosecution of any Assigned
Litigation Claim and the defense of any Third Party Claim. In the event a Third
Party Claim is brought against a Released Party, such Released Party shall
assert all available defenses and/or claims or actions arising from the same
transactions, occurrences, or facts on which such Third Party Claim is based, in
whole or in part, held by such Released Party against such Litigation Defendant
in order to reduce, setoff, or recoup against any recovery sought by such
Litigation Defendant against such Released Party. The Released Party shall not
settle any Third Party Claim without the prior written consent of JCC (in its
sole discretion) to any such settlement. The Released Party shall promptly
notify JCC in writing of the assertion of any Third Party Claim against such
Released Party or a request to participate by way of discovery or otherwise in
connection with any Assigned Litigation Claim brought by JCC against a
Litigation Defendant.
(e) In the event JCC is entitled to any recovery by judgment or
settlement against any Litigation Defendant in connection with any Assigned
Litigation Claim, and such Litigation Defendant is entitled to any recovery by
way of judgment or settlement against any Released Party based upon any Third
Party Claim, then (i) the recovery to which JCC would otherwise be entitled
against such Litigation Defendant shall be reduced (through a reduction or
credit against any judgment or settlement obtained against such Litigation
Defendant or through some other appropriate action achieving the same result) by
an amount equal to the aggregate recovery to which such Litigation Defendant is
entitled against such Released Party based upon any Third Party Claim, and (ii)
such reduction in JCC's recovery against such Litigation Defendant shall
discharge and satisfy in full any recovery to which such Litigation Defendant is
entitled against such Released Party based upon any Third Party Claim; provided,
however, that any recovery in favor of JCC shall be reduced only to the extent
necessary to satisfy that portion of any judgment or settlement obtained against
a Released Party by a Litigation Defendant on account of a Third Party Claim,
(and not to the extent such Third Party Claim is based on a judgment or
settlement obtained by non-releasing parties against such Litigation Defendant).
To facilitate the orderly and expeditious resolution of all Assigned Litigation
Claims and related Third Party Claims and the orderly and expeditious
distribution of the proceeds of Assigned Litigation Claims in accordance with
the provisions of Section 5.9(f) hereof, the Confirmation Order shall require
each Litigation Defendant against which JCC has asserted an Assigned Litigation
Claim to assert, on or before the earlier of (x) the 170th day after the
commencement of such action by JCC, and (y) the entry of a Final Order
adjudicating all claims asserted in such action, and maintain exclusively in
such action all Third Party Claims arising in whole or in part from the same
transactions, occurrences, or facts on which any such Assigned Litigation Claim
is based in whole or in part, and each Litigation Defendant shall be forever
barred from asserting in any other forum or action any Third Party Claim not
asserted in accordance with the provisions of this sentence.
(f) Any proceeds recovered by JCC on account of any and all Assigned
Litigation Claims shall be held in escrow in an interest-bearing account shall
be applied and/or distributed only in the manner and pursuant to the terms set
forth below:
(i) First, to the payment of all accrued and unpaid Litigation
Costs and to the extent JCC has paid, without reimbursement, any
Litigation Costs, to JCC in the amount of such unreimbursed Litigation
Costs.
(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
43
<PAGE>
Section 5.9(c) hereof, or in the case of any Assigned Litigation
Claims, have been dismissed, then on or as soon as practicable after
the thirtieth (30th) day after HET's receipt of the Completion Notice,
any remaining funds in the reserve established pursuant to this Clause
(ii) shall be distributed in accordance with the provisions of Clauses
(iii) through (ix) of this Section 5.9(f).
(iii) Third, to the extent any Released Party has incurred any
liability based on any Third Party Claim asserted by any Litigation
Defendant that has not been satisfied by a corresponding reduction in
any recovery obtained by JCC against such Litigation Defendant as
provided in Section 5.9(e) hereof, then any remaining distributable
proceeds of any Assigned Litigation Claims shall be distributed pro
rata to each such Released Party for application to such liability.
(iv) Fourth, in the event (A) there are any pending Third
Party Claims that have not been conclusively resolved by Final Order or
settlement pursuant to Section 5.9(c) hereof, or (B) any Assigned
Litigation Claim has been pending for less than six months, then any
remaining distributable proceeds of any Assigned Litigation Claims
shall be held in escrow as a reserve for satisfying any liability
incurred by any Released Party in respect of any Third Party Claim.
After all amounts in Clauses (i) through (iv) have been paid or fully reserved
for, and if (A) there are no pending Third Party Claims that have not been
conclusively resolved by Final Order or settlement pursuant to Section 5.9(c)
hereof, and (B) no Assigned Litigation Claim has been pending for less than six
months, then any remaining proceeds of any Assigned Bondholder Litigation Claims
shall be distributed in their entirety to:
(v) The Releasing Bondholders pro rata (based on the ratio of
the aggregate principal amount of Old Bonds beneficially owned by such
Releasing Bondholder to the aggregate principal amount of Old Bonds
beneficially owned by all of the Releasing Bondholders).
After all amounts in Clauses (i) through (iv) have been paid or fully reserved
for, and if (A) there are no pending Third Party Claims that have not been
conclusively resolved by Final Order or settlement pursuant to Section 5.9(c)
hereof, and (B) no Assigned Litigation Claim has been pending for less than six
months, then any remaining distributable proceeds of Assigned Debtor Litigation
Claims shall be distributed pursuant to Clauses (vi) through (ix) below;
provided, however, that if the Bankruptcy Court does not enter a Valuation Order
on or before the Effective Date, all such remaining proceeds of Assigned Debtor
Litigation Claims shall be retained in their entirety by JCC free and clear of
all Claims and subject to JCC's exclusive control.
(vi) First, to the holders of Allowed Class A4 Claims, their
respective Pro Rata Interests in any remaining distributable proceeds
of Assigned Debtor Litigation Claims up to an amount equal to the
difference (the "Bondholder Deficiency Amount") between (A) the
aggregate amount of Allowed Class A4 Claims (which shall be deemed to
be $435 million plus accrued interest thereon, unless the Bankruptcy
Court otherwise orders) and (B) the sum of (I) $187.5 million, and (II)
the estimated value of the Class A New Common Stock to be distributed
to the holders of Allowed Class A4 Claims.
(vii) Second, to Harrah's Investor, any remaining
distributable funds up to the sum of (A) the aggregate amount of the
Allowed Claims in Class A7, plus (B) the aggregate amount of all cure
payments made as provided in Section 8.1(e) of the Plan, plus (C) the
44
<PAGE>
$2,265,000 to be distributed to the applicable holders of Allowed Class
A6 Claims pursuant to Section 4.6 of the Plan.
(viii) Third, to the holders of Allowed Class A8 Claims, their
respective Pro Rata Interests in any remaining distributable proceeds
of Assigned Debtor Litigation Claims up to the aggregate amount
necessary to pay all such Allowed Claims in full (without any
post-petition interest thereon unless the Bankruptcy Court otherwise
orders); provided, however, that the Bankruptcy Court may allocate the
funds distributable under this Clause (viii) to the holders of Allowed
Class A8 Claims in any other manner which the Bankruptcy Court
determines is required under the Bankruptcy Code.
(ix) Fourth, to the holders of Allowed Claims in Classes A4
and A8, and Harrah's Investor, their respective pro rata interests in
any remaining distributable proceeds of Assigned Debtor Litigation
Claims (based on the ratio of their respective Allowed Claims (or in
the case of Harrah's Investor, the aggregate amount of Allowed Claims
in Class A7 plus the aggregate amount of cure payments made as provided
in Section 8.1(e) of the Plan, plus the $2,265,000 to be distributed to
the applicable holders of Allowed Class A6 Claims pursuant to Section
4.6 of the Plan) to the aggregate amount of the Allowed Claims in
Classes A4, A7 and A8 plus the aggregate amount of cure payments made
as provided in Section 8.1(e) of the Plan, plus the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims
pursuant to Section 4.6 of the Plan).
(g) The interests in the proceeds of Assigned Litigation Claims granted
pursuant to the Plan shall not be transferable except in accordance with the
laws of descent and distribution or by operation of law.
5.10. Approval of Other Settlement Agreements. Except to the extent the
Bankruptcy Court has entered a separate order providing for such approval, the
Confirmation Order shall constitute an order (a) approving as a compromise and
settlement pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, the
Broadmoor Settlement Agreement, the Broadmoor Release, the Centex-Landis
Settlement Agreement, the Centex-Landis Release, the First American Settlement
Agreement, the NOLDC Shareholders/HET Settlement Agreement, the NOLDC/Grand
Palais Settlement Agreement, the GP Representative/HET Settlement Agreements,
the FNBC Settlement Agreement and all other settlement agreements entered into
or to be entered into by any Debtor and any other Person as contemplated by the
Plan and all other agreements, instruments or documents relating to any of the
foregoing to which any Debtor is a party and (b) authorizing the Debtors'
execution and delivery of the Broadmoor Settlement Agreement, the Broadmoor
Release, the Centex-Landis Settlement Agreement, the Centex-Landis Release, the
First American Settlement Agreement, the NOLDC Shareholders/HET Settlement
Agreement, the NOLDC/Grand Palais Settlement Agreement, the GP
Representative/HET Settlement Agreements, the FNBC Settlement Agreement and all
other settlement agreements entered into or to be entered into by any Debtor or
any other Person as contemplated by the Plan and all related agreements,
instruments or documents to which any Debtor is a party.
ARTICLE VI.
MEANS FOR IMPLEMENTATION
AND EXECUTION OF THE PLAN
A. General Implementation Matters
45
<PAGE>
6.1. General Corporate Matters. Except as provided in Section 12.12
hereof, on or before the Effective Date, each New Entity shall take such action
as is necessary under the laws of the State of Delaware (in the case of JCC
Holding), the State of Louisiana (in the case of JCC, JCC Intermediary (if
formed), CP Development, FP Development and JCC Development) and any other
applicable law to effect the terms and provisions of the Plan. Among other
actions, on or before the Effective Date, each New Entity shall (i) file its
applicable Organizational Documents with the Secretary of State of Delaware (in
the case of JCC Holding) or the State of Louisiana (in the cases of the other
New Entities) in accordance with the applicable state law, and (ii) in the cases
of JCC, JCC Intermediary, CP Development, FP Development and JCC Development
enter into the applicable Operating Agreements. The JCC Holding Certificate of
Incorporation shall comply with the requirements of Section 1123(a)(6) of the
Bankruptcy Code.
6.2. Effective Date Transactions.
(a) Membership Interests. On or before the Effective Date, (i) if JCC
Intermediary is formed, JCC Intermediary shall receive 100% of the membership
interests in JCC, JCC Development, CP Development and FP Development, or (ii) if
JCC Intermediary is not formed, JCC Holding shall receive 100% of the membership
interests in JCC, JCC Development, CP Development and FP Development. Such
membership interests shall have rights with respect to distributions,
liquidation, voting and other matters as are provided for by applicable
nonbankruptcy law and in the applicable Organizational Documents and Operating
Agreements.
(b) JCC Intermediary Membership Interest(s). If JCC Intermediary is
formed, on or before the Effective Date, JCC Holding shall receive 100% of the
membership interest(s) in JCC Intermediary. Such membership interest(s) shall
have rights with respect to distributions, liquidation, voting and other matters
as are provided for by applicable nonbankruptcy law and in the JCC Intermediary
Organizational Documents and JCC Intermediary Operating Agreement.
(c) New Bond Documents. On the Effective Date, (i) JCC and the New
Indenture Trustee shall enter into the New Indenture and shall execute and
deliver all instruments, agreements, legal opinions and other operative
documents contemplated by the New Indenture, and (ii) JCC shall execute and
deliver all other New Bond Documents.
(d) Distribution to Creditors. On, or as soon as practicable after, the
Effective Date but in no event after the tenth (10th) Business Day after the
Effective Date (or in the case of holders of Allowed Class C5 Claims, on the
Initial Class C5 Distribution Date), or as otherwise provided in the Plan, JCC
and, in the case of the New Common Stock, JCC Holding will issue and deliver to
the Disbursing Agents for distribution to the applicable holders of Allowed
Claims in accordance with the Plan (i) the New Bonds, New Contingent Bonds and
Convertible Junior Subordinated Debentures, (ii) cash in the amount determined
pursuant to the provisions of Article IV, and (iii) shares of Class A and Class
B New Common Stock in the respective amounts determined pursuant to the
provisions of Article IV.
(e) Purchase of New Common Stock by Harrah's Investor. On the Effective
Date, Harrah's Investor shall pay to JCC Holding, as an equity contribution, an
amount equal to the difference between $75 million and the principal amount of
DIP Indebtedness then outstanding, which shall be converted to equity and
contributed to JCC Holding on the Effective Date (the "Harrah's New Equity
Investment"). In consideration of, among other things, the Harrah's New Equity
Investment and the DIP Lender's consent to the conversion to equity and
contribution of the principal amount of the DIP Indebtedness outstanding on the
Effective Date, on the Effective Date JCC Holding shall sell to Harrah's
Investor 4,990,000 shares of New Common Stock, a portion of which shall be
issued by JCC Holding to certain other Persons in accordance with the
provisions of Section 6.2(f) hereof. All shares of New Common Stock purchased
by Harrah's Investor and issued by JCC Holding to Harrah's Investor pursuant to
this Section or to the Disbursing Agent for the benefit of Harrah's
46
<PAGE>
Investor pursuant to Section 6.2(f) hereof shall be shares of Class B New Common
Stock, and all shares purchased by Harrah's Investor and issued by JCC Holding
directly to the Disbursing Agent for the benefit of the Releasing Bondholders or
the Grand Palais Releasing Bondholders pursuant to Section 6.2(f) shall be
shares of Class A New Common Stock. On the Effective Date, all proceeds from the
Harrah's New Equity Investment shall be contributed as an equity contribution by
JCC Holding (i) if JCC Intermediary has been formed, to JCC Intermediary, which,
in turn, shall contribute such amounts as an equity contribution to JCC, or (ii)
if JCC Intermediary has not been formed, to JCC.
(f) Transfer of New Common Stock to Certain Persons in Settlement
of Claims.
(i) NOLDC Shareholders and Grand Palais. On the later of the
Effective Date and the date on which the NOLDC Shareholders/HET
Settlement Agreement is executed and delivered by all of the parties
thereto and is approved by the bankruptcy court in the Chapter 11 case
of NOLDC either pursuant to Section 1123(b)(3)(A) of the Bankruptcy
Code as part of the NOLDC Plan or pursuant to Bankruptcy Rule 9019 by
separate Final Order, each of the nine NOLDC Shareholders shall have an
option, on the terms set forth in the NOLDC Shareholders/HET Settlement
Agreement, to purchase .33% of the shares of New Common Stock (for an
aggregate of up to 3% of the shares of New Common Stock), and FNBC
shall have the option to purchase 1.5% of the shares on New Common
Stock, which shares are to be initially distributed to Harrah's
Investor pursuant to Section 6.2(e) hereof. On the later of the
Effective Date and the date on which the GP Representative/HET
Settlement Agreements are executed and delivered by all of the parties
thereto, JCC Holding shall, in accordance with the provisions of the GP
Representative/HET Settlement Agreements, issue directly to the
Disbursing Agent on behalf of the Grand Palais Releasing Bondholders a
number of shares of Class A New Common Stock to be specified in the GP
Representative/HET Settlement Agreements (the "Grand Palais Settlement
Consideration"), which shares would otherwise be distributed to
Harrah's Investor pursuant to Section 6.2(e) hereof. In no event shall
the aggregate number of shares of New Common Stock distributed to the
NOLDC Shareholders, FNBC and Grand Palais Releasing Bondholders
pursuant to this Section exceed 800,000 shares.
(ii) Releasing Bondholders. On the Effective Date, JCC Holding
shall issue directly to the Disbursing Agent on behalf of the Releasing
Bondholders and, if applicable, Harrah's Investor, 1,500,000 shares of
Class A New Common Stock (or Class B New Common Stock with respect to
any shares distributed to Harrah's Investor) (such shares,
collectively, the "Release Pool"). The Release Pool shall include
200,000 shares of New Common Stock to which Harrah's Investor would
otherwise be entitled pursuant to the second sentence of Section
6.2(e). The remaining 1,300,000 shares of New Common Stock in the
Release Pool shall be issued by JCC Holding in consideration of, among
other things, (i) the execution and delivery of the HET Loan Guarantee
and the New Completion Guarantees by HET and HOCI and the provision of
the Surety Bond, (ii) DIP Lender's consent to the conversion to equity
and contribution of the principal amount of the DIP Indebtedness
outstanding on the Effective Date as part of the Harrah's New Equity
Investment, (iii) the Harrah's New Equity Investment, (iv) the waiver
by Persons in the HET Group, the NOLDC Group and the Grand Palais Group
of any right to distributions as holders of certain Class A7 and/or
Class C5 Claims, (v) certain pre-development and development services
by HET and its Affiliates performed prior to the Effective Date, (vi)
the execution and delivery by the City and the RDC of the agreements
referenced in Section 6.2(o) hereof and the City/RDC Release, (vii) the
execution and delivery by the LGCB and/or the State of the agreements
referenced in Section 6.2(n) hereof and the State/LGCB Release and
(viii) other good and valuable consideration from the various
beneficiaries of the releases provided
47
<PAGE>
by the Releasing Bondholders pursuant to Section 5.2 hereof, without
which this Plan could not be confirmed and consummated. The 1,500,000
shares of New Common Stock in the Release Pool shall be distributed in
accordance with the provisions of Sections 4.4(b) and 5.2 hereof.
(g) New Completion Guarantees; Amended and Restated Construction Lien
Indemnity Obligation Agreement; Minimum Payment Guaranty. On the Effective Date,
HET, HOCI (in the case of clauses (i) through (v)) and JCC (in the case of
clauses (iii) through (v)) shall execute and deliver (i) the HET Loan Guarantee,
(ii) the New Completion Guarantees, (iii) the Amended and Restated Construction
Lien Indemnity Obligation Agreement, (iv) the Amended and Restated Completion
Loan Documents, and (v) a Minimum Payment Guaranty for the COC Fiscal Year
ending March 31, 2000. On the Effective Date, the Old Completion Guarantees
shall be terminated and 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 A hereto, and JCC Holding shall issue to HET or its designee the HET
Warrant. Pursuant to the HET/JCC Agreement, and subject to the non-renewal and
termination provisions thereof, as consideration for providing a Minimum Payment
Guaranty, HET and HOCI, among other things, will be paid an annual guarantee fee
of $6 million for the COC Fiscal Years ending March 31, 2000 and 2001 and $5
million for the COC Fiscal Years ending March 31, 2002, 2003 and 2004, all
payable quarterly; provided, however, that HET and HOCI will be paid a pro rata
fee based on an annual fee of $6 million for the COC Fiscal Year ending March
31, 2000, if it is a partial COC Fiscal Year.
(h) Bank/Underwriter Financing. On or before the Effective Date, JCC
and the applicable Persons in the Bank/Underwriter Group shall execute and
deliver the A Term Loan Documents, the B Term Loan Documents, the Working
Capital Loan Documents and the Convertible Junior Subordinated Debenture
Documents, pursuant to which JCC will obtain the A Term Loan, the B Term Loan
and the Working Capital Credit Facility and issue the Convertible Junior
Subordinated Debentures.
(i) HET Affiliate Financing and Development Services Agreement. On or
before the Effective Date, JCC and HET (or an Affiliate of HET) shall execute
and deliver the Junior Subordinated Loan Documents pursuant to which JCC shall
obtain the Junior Subordinated Credit Facility. On or before the Effective Date,
the Harrah's Investor and JCC shall execute and deliver the Development Services
Agreement.
(j) Releases. On the Effective Date, each of the City, RDC,
Centex-Landis, Broadmoor, the Debtors, JCC and the applicable Persons in the HET
Group, the NOLDC Group and the Grand Palais Group shall execute and deliver the
City/RDC Release, the Centex-Landis Release or the Broadmoor Release, as the
case may be. On or before the Effective Date, (i) the NOLDC Shareholders, HET,
the Debtors, JCC and the other parties thereto shall execute and deliver the
NOLDC Shareholder/HET Settlement Agreement, (ii) Grand Palais, HET, the Debtors,
JCC and the other parties thereto shall execute and deliver the applicable GP
Representative/HET Settlement Agreements, and (iii) Grand Palais, NOLDC, the
NOLDC Shareholders and the other parties thereto shall execute and deliver the
NOLDC/Grand Palais Settlement Agreement. On or before the Effective Date, the
Debtors, the Underwriters, the Participating Banks, FNBC (in all capacities) and
the other parties thereto, as the case may be, shall execute and deliver the
Bank/Underwriter Release.
(k) Cancellation of Old Indenture, Old Bond Documents and Existing
Lenders' Title Insurance Policy.
(i) On the Effective Date, except as otherwise provided in
this Section or in Sections 6.9 and 6.10 of the Plan, (A) the Old
Indenture shall be terminated and cancelled,
48
<PAGE>
(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
New Entities. The Old Indenture Predecessor Trustee, the Old Indenture
Trustee Collateral Agent, and any other holder of any Liens under the
Old Bond Documents and/or the Old Bank Credit Documents shall execute
and deliver all termination statements, mortgage releases and other
instruments or documents reasonably requested by JCC to effectuate or
evidence the release of any such Liens.
(ii) On the Effective Date, all of FNBC's claims or other
rights to indemnity and/or reimbursement under the Old Indenture and
the other Old Bond Documents and all Liens securing same (including the
Indenture Trustee Charging Lien) shall be 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 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
49
<PAGE>
Claim of any Bank or Old Bank Collateral Agent or as security for any
Disputed Secured Claims of any Bank or Old Bank Collateral Agent, a
portion of the Withheld Funds as specified in Section 4.3 hereof;
provided, further, that nothing in the Plan shall terminate or impair
the rights, if any, of FNBC under the Old Bank Credit Documents against
any Persons other than the Debtors or the New Entities.
(ii) On the Effective Date, all of FNBC's claims or other
rights to indemnity and/or reimbursement under the Old Bank Credit
Documents and all Liens securing same shall be 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 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 the State Group. On the Effective Date, HJC shall
execute the Amended and Renegotiated Casino Operating Contract, and shall
thereupon assign the Amended and Renegotiated Casino Operating Contract to JCC,
which assignment shall take place pursuant to and in accordance with applicable
State law and the agreement of the parties thereto. On the Effective Date, upon
the assignment of the Amended and Renegotiated Casino Operating Contract from
HJC to JCC, JCC shall undertake the obligations of HJC thereunder, and shall
execute the State/LGCB Release and all other agreements, instruments and
documents necessary or appropriate to evidence or consummate the transactions
contemplated therein.
(o) Agreements with City and RDC. Provided that the City Council shall
have enacted the ordinance(s) approving the Lease Documentation (as defined in
the City Agreement), on the Effective Date, JCC, the City and RDC shall enter
into the Amended and Restated Canal Street Casino Lease Agreement, Amended and
Restated General Development Agreement and all other agreements, instruments and
documents necessary or appropriate to evidence or consummate the transactions
contemplated therein. Unless earlier terminated in accordance with the
provisions thereof, the City Agreement shall remain in full force and effect
through the occurrence of the Effective Date.
(p) Agreements with HNOMC. On the Effective Date, JCC and HNOMC shall
enter into the Amended and Restated Management Agreement and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein.
(q) Registration and Listing of Class A New Common Stock. The JCC
Entities shall use their best efforts to cause the Class A New Common Stock to
be listed on a national securities exchange or quoted on NASDAQ upon the
Effective Date. JCC Holding shall also use its best efforts to be, on or prior
to the Effective Date, a reporting company under the Securities Exchange Act of
1934, as amended (the "34 Act"), with respect to the Class A New Common Stock.
JCC Holding shall file a registration statement under the 34 Act (the "Class A
34 Act Registration Statement") no later than promptly after the date of entry
of the Final Order approving the Disclosure Statement. If the Class A 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of such registration statement with the SEC (provided, however, that this
clause (i) is not applicable if JCC Holding did not file such registration
statement prior to the date which is five days after the date of entry of the
Final Order approving the Disclosure Statement), (ii) 60 days after the date
50
<PAGE>
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 (x)
the market value of such Class A New Common Stock at such time and (y) $15.00
per share) to be registered, which amount shall increase by $.05 every 45 days
to a maximum of $.30 per week.
(r) Registration of Class B New Common Stock. On the Effective Date,
JCC Holding and Harrah's Investor shall enter into a Registration Rights
Agreement (the "Class B Registration Rights Agreement") containing such terms
and conditions as are customary under the circumstances, including the
following:
(i) upon the request of Harrah's Investor, which request may
not be made prior to the second anniversary of the opening of the
Casino, JCC Holding shall promptly file with the Securities and
Exchange Commission and cause to become effective as soon as reasonably
practicable thereafter a registration statement on the appropriate form
(the "Class B Registration Statement") relating to all shares of Class
B New Common Stock held by Harrah's Investor, including any shares of
Class B New Common Stock obtained by Harrah's Investor pursuant to the
exercise of the HET Warrant; and
(ii) JCC Holding shall cause such Class B Registration
Statement to be continually effective, subject to customary exceptions,
through the third anniversary of the date on which the Class B
Registration Statement first becomes effective.
(s) Registration of New Bonds. To the extent that it is reasonably
determined that the registration of public resales by any Bondholder of any New
Bonds or New Contingent Bonds received by such Bondholder under the Plan is
required by law, JCC will file a registration statement (the "New Bonds 33 Act
Registration Statement") with respect to such resales promptly after the
Effective Date. If such New Bonds 33 Act Registration Statement is not effective
within 120 days after it is filed, then the JCC Entities shall pay to the
Bondholders an amount equal to $.05 per week for each $1,000 of securities which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
(t) Plan Documents. All Plan Documents shall be in form and substance
satisfactory to the Bondholders Committee in its sole discretion and to HET (in
its sole discretion) on behalf of the Proponents, and if a party thereto, HJC
(which consent shall not be unreasonably withheld or delayed). The forms of the
respective Organizational Documents and any shareholders' agreements relating to
any New Entity shall be filed with, and approved by, the Bankruptcy Court on or
before the Effective Date. In addition, the operative Plan Documents specified
in Sections 1.2, 1.11 - 1.12, 1.23, 1.79, 1.93, 1.132 - 1.133, 1.147 - 1.148,
1.152 - 1.153, 1.155, 1.164, 1.166, 1.170, 1.173 and 1.256 hereof shall be filed
with the Bankruptcy Court on or before the Effective Date.
(u) Continued DIP Financing. Through the later of October 31, 1998 and
such later date to which the DIP Lender may consent, and subject to any
necessary additional approval by the Bankruptcy Court, HJC
51
<PAGE>
shall request, and the DIP Lender shall provide to HJC debtor-in-possession
financing in an aggregate principal amount, together with all other outstanding
DIP Indebtedness, of up to $60 million (plus any additional amounts which the
DIP Lender elects to advance in its sole discretion) on terms and conditions set
forth in the Final Order (1) Authorizing Debtor-in-Possession To Incur
Post-Petition Secured Indebtedness, (2) Granting Security Interests And Priority
Pursuant To 11 U.S.C. Section 364, And (3) Modifying The Automatic Stay entered
by the Bankruptcy Court on or about August 26, 1998. Such additional
debtor-in-possession financing shall be used to fund expenditures necessary to
recommence construction of the Casino and any other amounts necessary for the
completion of the Chapter 11 Case of HJC and the consummation of the Plan.
(v) Dismissal of Litigation. Upon the earlier of (i) the date provided
for in a release executed pursuant to this Plan, and (ii) 180 days following the
Confirmation Date, the Debtors shall voluntarily dismiss with prejudice all
litigation (including any adversary proceedings) as to, and to the extent of,
any Claims that are released pursuant to this Plan.
B. New Entities and Their Governance
6.3. General. From and after the Effective Date, the management,
control and operation of each New Entity shall become the general responsibility
of its Board of Directors or managing member, as applicable, pursuant to the
Organizational Documents and Operating Agreement, if any, applicable to such
entity.
6.4. Board of Directors and Initial Members of New Entities. Subject to
the provisions of Section 6.6 hereof, the initial Board of Directors of JCC
Holding shall consist of six members, three of whom shall be elected by the
Bondholders Committee (the "Bondholders Director Nominees") and the remaining
three of whom shall be elected by the holders of a majority of the outstanding
shares of Class B New Common Stock (the "Harrah's Director Nominees" and
together with the Bondholders Director Nominees, collectively the "Director
Nominees"), and their names shall be disclosed at or prior to the Confirmation
Hearing; provided, however, that if any Director Nominee has not been found
suitable by LGCB (or deemed exempt or waived from such suitability requirements)
on or before the Effective Date, the number of Director Nominees which each of
the Bondholders Committee and such majority holders of Class B New Common Stock
is entitled to elect shall be so reduced (until all six Director Nominees have
been found suitable by LGCB or deemed exempt or waived from such suitability
requirements) so that each of the Bondholders Committee and such majority
holders of Class B New Common Stock has the equivalent number of Director
Nominees appointed to the Board of Directors of JCC Holding. Subject to the
provisions of Section 6.6 hereof, (a) the initial member of JCC, CP Development,
FP Development and JCC Development shall be (i) JCC Intermediary, if JCC
Intermediary is formed, or (ii) JCC Holding, if JCC Intermediary is not formed,
and (b) the initial member of JCC Intermediary (if formed) shall be JCC Holding.
6.5. Officers of New Entities. The initial officers of each New Entity
shall be selected by their respective Board of Directors or initial member, as
applicable, and to the extent such officers have been selected, their names
shall be disclosed at or prior to the Confirmation Hearing. The selection of
officers of each New Entity after the Effective Date shall be as provided in the
Organizational Documents and Operating Agreement, if any, applicable to such
entity.
6.6. Suitability Determinations. Notwithstanding anything to the
contrary hereunder, any Person required by the Louisiana Economic Development
and Gaming Control Act, the rules and regulations of the LGCB (as said rules and
regulations may be amended from time to time), and the Amended and Renegotiated
Casino Operating Contract, to be found suitable by the LGCB must meet the
suitability requirements of the Louisiana Economic Development and Gaming
Control Act, the rules and regulations of the LGCB (as said rules and
regulations may be amended from time to time), and the Amended and Renegotiated
Casino Operating Contract.
52
<PAGE>
6.7. Entity Action. As of the Effective Date, each New Entity shall be
deemed to have adopted the Organizational Documents and Operating Agreement, if
any, applicable to such entity. Except as specifically provided in the Plan, the
adoption of the Organizational Documents and Operating Agreement, if any,
applicable to each New Entity, the selection of the directors and/or officers,
as the case may be, of each New Entity, the distribution of cash, the issuance
and distribution of New Bonds, New Contingent Bonds, and Class A and Class B New
Common Stock and the adoption, execution and delivery of all contracts,
instruments, indentures, modifications and other agreements relating to any of
the foregoing, and other matters provided for under the Plan involving corporate
or other action to be taken or required of the applicable New Entity or Debtor
shall be deemed to have occurred and be effective as provided herein, and shall
be authorized and approved in all respects without any requirement of further
action by the respective stockholders, initial members, officers or directors of
the New Entities and Debtors. To the extent required by law, the Board of
Directors or managing member, as the case may be, of each New Entity shall take
such action as may be necessary from time to time to approve the issuance of any
New Bonds, New Contingent Bonds or Class A and Class B New Common Stock and such
other action, if any, as may be required to meet the requirements of the Plan or
any of the New Bonds, New Contingent Bonds or Class A and Class B New Common
Stock issued pursuant thereto. Any officer of any New Entity is authorized to
execute and deliver on behalf of such New Entity or any Debtor from and after
its dissolution any Plan Document or any other certificates, instruments or
documents relating thereto.
C. Distributions
6.8. Generally. All distributions required hereunder to holders of
Allowed Claims shall be made by a Disbursing Agent pursuant to a Disbursing
Agreement, provided that no Disbursing Agreement shall be required if any JCC
Entity makes such distributions or if the Old Indenture Successor Trustee makes
such distributions pursuant to Section 6.9 hereof. The Disbursing Agent may
designate, employ or contract with other Persons to assist in or perform the
distribution of the property to be distributed. The Disbursing Agent and such
other Persons shall serve without bond.
6.9. Services of Old Indenture Trustee. The Old Indenture Successor
Trustee (or its nominee, designee or affiliate) is designated a Disbursing Agent
for purposes of effecting distributions to the Bondholders pursuant to the Plan.
Any reference in this Plan to "Disbursing Agent" in respect of distributions to
be made to the Bondholders shall be deemed to refer to the Old Indenture
Successor Trustee or its nominee, designee or affiliate. All distributions to be
made to the Bondholders under the Plan will be made to the Old Indenture
Successor Trustee in accordance with the Old Indenture, applicable law and the
Plan, and the Old Indenture Successor Trustee shall, as soon as reasonably
practicable, in accordance with the Old Indenture, applicable law and the Plan,
deliver the distributions, free and clear of any Indenture Trustee Charging
Lien, which Lien shall be 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
53
<PAGE>
Record Date, as applicable, for purposes of such distributions. Except as
otherwise provided herein, the JCC Entities, the Old Indenture Successor Trustee
and their respective agents shall recognize and, for purposes of making such
distributions under the Plan, will only deal with those Bondholders of record
reflected on the transfer ledgers maintained by the Registrar for the Old Bonds
as of the close of business on the Distribution Record Date or the Release Pool
Distribution Date, as applicable; provided that nothing contained herein shall
be deemed to prohibit or otherwise restrict the right of any such Bondholder to
transfer the Old Bonds at any time. As of the Effective Date, the Debtors and
the JCC Entities shall have no further obligations under the Old Indenture. The
Old Indenture shall continue in effect for the sole purpose of allowing the Old
Indenture Successor Trustee to make distributions on account of the Allowed
Claims of the Bondholders under the Plan, and upon completion of such
distributions, the Old Indenture shall terminate and have no further force or
effect; provided, however, that except for the termination of the Indenture
Trustee Charging Lien, such termination of the Old Indenture shall not terminate
or impair the rights, if any, of FNBC under the Old Indenture (i) against any
Persons other than the Debtors or the New Entities or (ii) against any of the
Debtors and the New Entities, but solely to the extent provided in Section
6.2(k) hereof and/or the FNBC Settlement Agreement. Any actions taken by the Old
Indenture Trustee that are not for the purpose authorized in the Plan shall be
null and void.
6.11. Cancellation and Surrender of Existing Securities and Agreements.
(a) On the Effective Date, the promissory notes, share certificates and
other instruments evidencing any Claim or Equity Interest shall be deemed
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 or, in the case of Old Notes, to
the Old Indenture Successor Trustee. No distribution of property hereunder shall
be made to or on behalf of any such holders unless and until such promissory
note or instrument is received by JCC or the Old Indenture Successor Trustee or
the unavailability of such note or instrument is established to the reasonable
satisfaction of JCC or the Old Indenture Successor Trustee. JCC or the Old
Indenture Successor Trustee may require any entity delivering an affidavit of
loss and indemnity to furnish a bond in form and substance (including, without
limitation, with respect to amount) reasonably satisfactory to JCC or the Old
Indenture Successor Trustee. Any holder that fails within one year after the
date of entry of the Confirmation Order (i) to surrender or cause to be
surrendered such promissory note or instrument, (ii) to execute and deliver an
affidavit of loss and indemnity reasonably satisfactory to JCC or the Old
Indenture Successor Trustee, and (iii) if requested, to furnish a bond
reasonably satisfactory to JCC or the Old Indenture Successor Trustee upon
request 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
54
<PAGE>
notification and waiting periods applicable under such Act to such Person shall
have expired or been terminated.
6.15. Minimum Distributions; No Duplicative Distributions; No Interest.
No payment of cash less than ten dollars is required to be made by JCC to any
holder of a Claim unless a request therefor is made in writing to JCC.
Notwithstanding anything to the contrary in this Plan, to the extent more than
one Debtor is liable for any Allowed Claim (including, without limitation, any
Allowed WARN Act Claim), any distribution to which a holder of such Allowed
Claim is entitled from any Debtor under the Plan shall be reduced pro tanto by
any distribution received from any other Debtor on account of such Allowed
Claim, and the portion of the Allowed Claim to which the received distribution
relates shall be deemed satisfied and discharged. Except as otherwise expressly
provided herein, no holder of any Allowed Claim shall be entitled to any
post-petition interest on such Claim.
6.16. Fractional Distributions. Except as otherwise provided in this
Section, (i) no fractional shares of New Common Stock or cash in lieu thereof
shall be distributed, and (ii) no New Contingent Bonds shall be issued in any
nominal (face) amount that contains a fraction of a dollar.
(a) Section 4.4(b)(i) Distributions of New Common Stock. The amount of
New Common Stock distributed to each recordholder shall be determined by
excluding the fractional shares of New Common Stock distributable to each such
recordholder. The fractional portion of any distribution of New Common Stock to
any recordholder of Old Bonds pursuant to Section 4.4(b)(i) hereof shall be
determined based upon such recordholder's aggregate holding of Old Bonds on the
Distribution Record Date, without regard to the number or amount of
participants, respondents or beneficial owners for which such recordholder acts
as nominee. The fractional shares which, but for this Section 6.16, would be
distributed to each recordholder of Old Bonds under Section 4.4(b)(i) hereof
shall be cumulated, and one additional share of New Common Stock shall be
distributed as part of such distribution in descending order to each of the
recordholders whose respective distributions under Section 4.4(b)(i) hereof have
the highest fractional amounts until the aggregate amount of all fractional
shares of New Common Stock distributable under Section 4.4(b)(i) hereof
(exclusive of the fractional portion of such aggregate amount) has been
distributed to the applicable recordholders of Old Bonds. For purposes of this
section, the term "recordholder" means those Persons listed as holders of the
Old Bonds on the books and records of the Registrar for the Old Bonds as of the
close of business on the Distribution Record Date.
(b) Section 4.4(b)(v) Distributions of New Common Stock. Distributions
of New Common Stock to Releasing Bondholders pursuant to Section 4.4(b)(v)
hereof shall be made directly to or for the benefit of Releasing Bondholders
constituting beneficial owners of Old Bonds on the Release Pool Distribution
Record Date. In connection with the distribution of New Common Stock under
Section 4.4(b)(v) hereof, the fractional shares which, but for this Section
6.16, would be distributed to Releasing Bondholders under Section 4.4(b)(v)
hereof shall be cumulated, and one share of additional New Common Stock shall be
distributed as part of such distribution in descending order to each of the
Releasing Bondholders whose respective distributions under Section 4.4(b)(v)
hereof have the highest fractional amounts until the aggregate amount of
fractional shares of New Common Stock distributable under Section 4.4(b)(v)
hereof (exclusive of the fractional portion of such aggregate amount) has been
distributed to the applicable Releasing Bondholders.
(c) Section 4.4(b)(iii) Distributions of New Contingent Bonds. Unless
otherwise ordered by the Bankruptcy Court, the New Contingent Bonds issued
pursuant to Section 4.4(b)(iii) hereof shall bear a nominal (face) amount equal
to, subject to the third sentence of this Section 6.16(c), the maximum
contingent payment to which a holder of such New Contingent Bonds may be
entitled during any one-year period following the Effective Date. The Old
Indenture Successor Trustee shall distribute the New Contingent Bonds pro rata
to all recordholders of Old Bonds pursuant to Section 4.4(b)(iii) hereof based
upon such recordholder's aggregate holding of Old Bonds on the Distribution
Record Date, without regard to the number or amount of participants, respondents
or beneficial owners for which such recordholder acts as nominee. Unless
otherwise ordered by the Bankruptcy Court, the Old Indenture Successor Trustee
shall round up or down (in its sole discretion) all New Contingent Bonds issued
pursuant to Section 4.4(b)(iii) hereof, such that no New Contingent Bonds are
issued in any face amount that contains a fraction of a dollar. Recordholders of
Old Bonds shall be determined based upon such recordholder's aggregate holding
of Old Bonds on the Distribution Record Date, without regard to the number or
amount of participants,
55
<PAGE>
respondents or beneficial owners for which such recordholder acts as nominee.
For purposes of this section, the term "recordholder" means those Persons listed
as holders of the Old Bonds on the books and records of the Registrar for the
Old Bonds as of the close of business on the Distribution Record Date.
6.17. Delivery of Distributions. Subject to Bankruptcy Rule 9010,
distributions to holders of Allowed Claims shall be made at the address of each
such holder as set forth on the Schedules filed by the applicable Debtor with
the Bankruptcy Court, unless superseded by the address as set forth on proofs of
claim filed by such holders or other writing notifying the applicable Debtor of
a change of address (or at the last known address of such a holder if no proof
of claim is filed or if the applicable Debtor has not been notified in writing
of a change of address). In the case of the Bondholders, distributions may be
made at the addresses of the registered Bondholders contained in the records of
the Registrar as of the Distribution Record Date or, with respect to the Release
Pool Distribution in the manner specified in the proof of ownership or other
document delivered by each Releasing Bondholder to the Balloting Agent. If any
distribution to a holder of an Allowed Claim is returned as undeliverable, no
further distributions to such holder shall be made, unless and until JCC or the
Disbursing Agent is notified of such holder's then current address, at which
time all missed distributions shall be made to such holder together with any
interest or dividends earned thereon. Amounts in respect of the undeliverable
distributions made through the Disbursing Agent shall be returned to the
Disbursing Agent making such distribution until such distributions are claimed.
All Claims for undeliverable distributions shall be made on or before the later
of the first anniversary of the Effective Date and the date ninety (90) days
after such Claim is Allowed. After such date, all unclaimed property held for
distribution to any holder of an Allowed Claim shall be revested in and returned
to JCC except for any unclaimed New Common Stock which shall be revested in and
returned to JCC Holding, and the Claim of any holder with respect to such
property shall be discharged and forever barred.
6.18. Fees and Expenses of Disbursing Agents. Except as otherwise
ordered by the Bankruptcy Court, the amount of any reasonable fees and expenses
incurred by a Disbursing Agent, including, but not limited to, the Old Indenture
Successor Trustee, on or after the Confirmation Date, and any compensation and
expense reimbursement claims (including reasonable fees and expenses of its
attorneys and other agents) made by such Disbursing Agent shall be repaid by JCC
in accordance with the applicable Disbursing Agreement or the Old Indenture, as
the case may be, without further order of the Bankruptcy Court; provided,
however, that the Bankruptcy Court will hear and determine any disputes in
respect of such fees and expenses. In addition, the amount of any reasonable
fees and expenses incurred by FNBC as Old Bank Collateral Agent, Old Indenture
Predecessor Trustee and/or Old Indenture Predecessor Collateral Agent on or
after the Confirmation Date to consummate the transactions contemplated by the
Plan shall be paid by JCC, without further order of the Bankruptcy Court;
provided, however, that the Bankruptcy Court will determine and hear any
disputes in respect of such fees and expenses.
6.19. Time Bar to Cash Payments. Checks issued by JCC in respect of
Allowed Claims shall be null and void if not negotiated within ninety (90) days
after the date of issuance thereof. Any amounts paid to the Disbursing Agent in
respect of such a check shall be promptly returned to JCC by the Disbursing
Agent. Requests for reissuance of any check shall be made directly to JCC by the
holder of the Allowed Claim with respect to which such check originally was
issued. Any claim in respect of such a voided check shall be made on or before
the later of the first anniversary of the Effective Date and the date ninety
(90) days after such Claim is Allowed, and the failure timely to make any such
claim shall result in such claim being forever barred and discharged.
56
<PAGE>
6.20. Transfer of Release Pool Distributions. Upon request of the
Debtors or the Bondholders Committee, the Bankruptcy Court may enter an order
with or without notice or hearing establishing a form (the "Release Pool
Transfer Form") and procedure whereby Releasing Bondholders who, on or after the
Release Pool Distribution Record Date but prior to the Distribution Record Date,
sold, assigned or otherwise transferred their rights under the Plan to receive
distributions in accordance with Section 4.4(b)(v) hereof to a third party (each
such third party, a "Release Pool Transferee") may designate a Release Pool
Transferee to receive directly such Releasing Bondholder's distribution of New
Common Stock from the Release Pool pursuant to Section 4.4(b)(v) hereof;
provided, however, that no person (including a Disbursing Agent, any of the
Proponents or any of the New Entities) shall have any liability to a Release
Pool Transferee in the event that a distribution of New Common Stock from the
Release Pool is for any reason whatsoever made to the Releasing Bondholder
instead of the Release Pool Transferee designated in such Release Pool Transfer
Form; provided, further, that any Release Pool Transfer Form shall contain an
acknowledgment by the Release Pool Transferee that it is the beneficial owner of
the Old Bonds to which such Release Pool Transfer Form relates as of the
Distribution Record Date.
D. Procedure for Resolving Disputed Claims
6.21. Objection Deadline. As soon as practicable, but in no event later
than ninety (90) days after the Effective Date, unless otherwise ordered by the
Bankruptcy Court, objections to Claims shall 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.
57
<PAGE>
ARTICLE VII.
ACCEPTANCE OR REJECTION OF THE PLAN
7.1. Classes Entitled to Vote. Each holder of an Allowed Claim in a
Class of Claims against any Debtor which may be impaired under the Plan,
including any holder of an Allowed Claim in Classes A1, A2, A3(a), A3(b), A4,
A5, A6, A7, B1, B2, B3, B4, B5, C1, C2, C3, C4, C5 or C6 shall be entitled to
vote separately to accept or reject the Plan. Each holder of a Claim in a Class
of Claims which is unimpaired under the Plan shall be deemed to have accepted
the Plan pursuant to Section 1126(f) of the Bankruptcy Code. Each holder of a
Claim in a Class of Claims or an Equity Interest in a Class of Equity Interests
which are not receiving any distributions under the Plan shall be deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
7.2. Class Acceptance Requirement. An impaired Class of Claims shall
have accepted the Plan if (i) the holders (other than any holder designated
under Section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount
of the Allowed Claims actually voting in such Class have voted to accept the
Plan and (ii) the holders (other than any holder designated under Section
1126(e) of the Bankruptcy Code) of more than one-half in number of the Allowed
Claims actually voting in such Class have voted to accept the Plan. An impaired
Class of Equity Interests shall have accepted the Plan if the holders (other
than any holder designated under Section 1126(e) of the Bankruptcy Code) of at
least two-thirds in amount of the Allowed Equity Interests actually voting in
such Class have voted to accept the Plan. For purposes of calculating the number
of Allowed Claims in a class of Claims held by holders of Allowed Claims in such
class that have voted to accept or reject the Plan under Section 1126(c) of the
Bankruptcy Code, all Allowed Claims in such class held by one entity or any
Affiliate shall be aggregated and treated as one Allowed Claim in such class.
7.3. Cramdown. In the event that any impaired class or classes of
Claims shall not accept the Plan, the Proponents reserve the right to (a)
request that the Bankruptcy Court confirm the Plan in accordance with Section
1129(b) of the Bankruptcy Code and/or (b) modify the Plan pursuant to the
provisions of Section 12.4 of the Plan to provide treatment sufficient to assure
that the Plan does not discriminate unfairly, and is fair and equitable, with
respect to the class or classes not accepting the Plan, and, in particular, the
treatment necessary to meet the requirements of Sections 1129(a) and (b) of the
Bankruptcy Code with respect to the rejecting classes and any other classes
affected by such modifications. The Proponents acknowledge that the Plan, in the
form of the "Third Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as Modified Through September 3, 1998" cannot be confirmed
under the cramdown requirements of Section 1129(b) of the Bankruptcy Code if
Class A4 does not accept the Plan.
58
<PAGE>
ARTICLE VIII.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1. Assumption or Rejection of Executory Contracts and Unexpired
Leases.
(a) Assumption of Modified Contracts. On the Effective Date, JCC (as
HJC's successor) shall assume, or at JCC's option HJC shall assume and assign to
JCC (i) the Canal Street Casino Lease as amended and restated pursuant to, and
enter into, the Amended and Restated Canal Street Casino Lease Agreement, (ii)
the General Development Agreement as amended and restated pursuant to, and enter
into, the Amended and Restated General Development Agreement, (iii) the
Broadmoor Construction Agreement as modified in accordance with the Broadmoor
Settlement Agreement, (iv) the Management Agreement as amended and restated
pursuant to, and enter into, the Amended and Restated Management Agreement, (v)
the Architect Contract as modified, if necessary, on terms acceptable to the
parties thereto, (vi) the Completion Loan Documents as amended and restated
pursuant to, and enter into, the Amended and Restated Completion Loan Documents,
(vii) the Construction Lien Indemnity Obligation Agreement as amended and
restated pursuant to, and enter into, the Amended and Restated Construction Lien
Indemnity Obligation Agreement, (viii) the Ticket Purchase Agreement dated July
19, 1995, as amended pursuant to the Agreement to Amend and Assume Executory
Contract between HJC and The Audubon Institute and attached as Exhibit I to the
Original Plan and incorporated by reference herein, and (ix) the Centex-Landis
Construction Agreement as modified in accordance with the Centex-Landis
Settlement Agreement.
(b) Other Executory Contracts. All executory contracts and unexpired
leases that exist between any Debtor and any Person are hereby rejected, except
for any executory contract or unexpired lease (in certain instances, as
modified) (i) which is to be assumed by JCC, assigned to JCC, or revested in HJC
pursuant to Section 8.1(a), 8.1(c), 8.1(g) or 9.1(a) of the Plan, (ii) which has
been assumed or assumed and assigned (in certain instances, as modified)
pursuant to an order of the Bankruptcy Court entered prior to the Confirmation
Date, (iii) which has been entered into by HJC after the Commencement Date in
the ordinary course of business or pursuant to an order of the Bankruptcy Court,
(iv) as to which a motion for approval of the assumption or assumption and
assignment of such contract (in certain instances, as modified) has been filed
prior to and is pending on the Confirmation Date or (v) which (in certain
instances, as modified) is set forth in a schedule (acceptable to the
Bondholders Committee (in its sole discretion) and HET (in its sole discretion)
on behalf of the Proponents) filed prior to the conclusion of the Confirmation
Hearing. Subject to the occurrence of the Effective Date, the rejection of any
executory contract or unexpired lease pursuant to this Article VIII shall be
effective upon the earliest of (i) the Confirmation Date, (ii) the date on which
the applicable Debtor or JCC notifies the non-debtor party to such contract or
lease of the effectiveness of such rejection, and (iii) the date specified as
the effective date of rejection in any order of the Bankruptcy Court.
(c) Insurance Policies.
(i) Existing Owner's Title Insurance Policy. If the First
American Settlement Agreement becomes effective on or before the Effective Date
(including, without limitation, the issuance of new owner's and lender's title
insurance policies on or before the Effective Date), the Existing Owner's Title
Insurance Policy shall be deemed rejected and terminated as of the Effective
Date in accordance with the terms of the First American Settlement Agreement. If
the First American Settlement Agreement either has not become effective by the
date agreed to by the parties or has become ineffective for any reason, then HJC
or JCC (as HJC's successor), with the consent of HET (in its sole discretion) on
behalf of the Proponents, shall be entitled, upon ten days' prior notice, to
seek to assume the Existing Owner's Title Insurance Policy pursuant to Section
365(a) of the Bankruptcy Code. If the First American Settlement Agreement has
not become effective by the time at which all other conditions to the Effective
Date have been satisfied or waived, then HJC or JCC (as HJC's successor), with
the consent of HET (in its sole discretion) on behalf of the Proponents, shall
be entitled,
59
<PAGE>
upon ten days' prior notice, to seek to assume the Existing Owner's Title
Insurance Policy pursuant to Section 365(a) of the Bankruptcy Code. To the
extent HJC or JCC, as applicable, seeks to assume the Existing Owner's Title
Insurance Policy in accordance with the provisions of this Section, First
American Title Insurance Company shall be entitled to oppose such assumption on
any grounds other than on the grounds that the Confirmation Date has already
occurred.
(ii) Other Insurance Policies. The directors and officers
liability insurance policy of HJC and all other insurance policies and any
agreements, documents or instruments relating thereto, (including, without
limitation, any retrospective premium rating plans relating to such policies),
except for the Existing Owner's Title Insurance Policy and those policies (and
any agreements, documents or instruments relating thereto) set forth in a
schedule to be filed prior to the commencement of the Confirmation Hearing, are
treated as executory contracts under the Plan and shall be assumed by JCC, or
assumed by HJC and assigned to JCC, on the Effective Date pursuant to Section
365(a) of the Bankruptcy Code. Notwithstanding the foregoing, distributions
under the Plan to any holder of a Claim covered by any of the insurance policies
to be assumed pursuant to this Section shall be in accordance with the treatment
provided under Article IV of the Plan.
(d) Approval of Assumption or Rejection of Leases and Contracts. Entry
of the Confirmation Order shall constitute (i) the approval, pursuant to
Sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the assumption or
assumption and assignment of the executory contracts and unexpired leases
assumed pursuant to Sections 8.1(a), (b) and (c) hereof, (ii) the extension of
time pursuant to Section 365(d)(4) of the Bankruptcy Code within which HJC may
assume or reject the unexpired leases specified in Sections 8.1(a), (b) and (c)
hereof through the Confirmation Date, and (iii) the approval, pursuant to
Sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the rejection of the
executory contracts and unexpired leases rejected pursuant to Section 8.1
hereof.
(e) Cure of Defaults. All cure payments which may be required by
Section 365(b)(1) of the Bankruptcy Code under any executory contract or
unexpired lease which is assumed under this Plan shall be made by JCC on the
Effective Date or as soon as practicable thereafter. All requests for cure
payments by a party to such assumed contract or lease must be filed pursuant to
Section 2.1(a), unless such cure payments are agreed to by such non-debtor
party, HJC (on or before the Effective Date), JCC (after the Effective Date),
HET (in its sole discretion) on behalf of the other Proponents and the
Bondholders Committee (in its sole discretion) or are otherwise determined by
the Bankruptcy Court upon appropriate notice and hearing. In the event of a
dispute regarding the amount of any cure payment, the ability of JCC to provide
adequate assurance of future performance or any other matter pertaining to
assumption, JCC shall make such cure payments required by Section 365(b)(1) of
the Bankruptcy Code following the later of the Effective Date (or as soon as
practicable thereafter) and the date of the entry of a Final Order resolving
such dispute. Without limiting the foregoing, in connection with JCC's
assumption of the Amended and Restated Canal Street Casino Lease Agreement, JCC
will cure any and all defaults in the annual payment of $200,000.00 to the
Audubon Park Commission pursuant to Section 4.7 of the Canal Street Casino
Lease. Notwithstanding anything to the contrary herein, any payments to be made
by JCC to the State or the LGCB shall be paid in accordance with the provisions
of the Amended and Renegotiated Casino Operating Contract without any
requirement of filing any type of request for payments.
(f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts
and Unexpired Leases Rejected Pursuant to the Plan. Claims arising out of the
rejection of an executory contract or unexpired lease pursuant to Section 8.1
must be filed with the Bankruptcy Court no later than thirty days after entry of
the Confirmation Order. Any Claims not filed within such time will be forever
barred from assertion against the Debtors, their estates, and their property.
Unless otherwise ordered by the Bankruptcy Court, all Claims arising from the
rejection of executory contracts and unexpired leases shall be treated as Claims
in Class A7, A8, B5, B6, C4, C5, C6, or C7 as applicable, under the Plan. To the
extent necessary, entry of the Confirmation Order
60
<PAGE>
shall amend and supersede any previously entered order of the Bankruptcy Court
regarding procedures for payment of such Claims.
(g) Assignment of Amended and Renegotiated Casino Operating Contract.
On the Effective Date, upon the revesting of the Casino Operating Contract in
HJC, HJC shall enter into the Amended and Renegotiated Casino Operating
Contract, and shall thereupon assign the Amended and Renegotiated Casino
Operating Contract to JCC, which assignment shall take place pursuant to and in
accordance with applicable State law and the agreement of the parties thereto.
On the Effective Date, upon the assignment of the Amended and Renegotiated
Casino Operating Contract from HJC to JCC, JCC shall undertake the obligations
of HJC thereunder, and shall execute the State/LGCB Release and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein.
8.2. Retiree Benefits. Payments, if any, due to any person for the
purpose of providing or reimbursing payments for retired employees and their
spouses and dependents for medical, surgical or hospital care benefits, or
benefits in the event of sickness, accident, disability or death under any plan,
fund or program (through the purchase of insurance or otherwise) maintained or
established in whole or in part by any Debtor prior to the Commencement Date
shall be continued by JCC for the duration of the period such Debtor has
obligated itself to provide such benefits.
ARTICLE IX.
EFFECT OF CONFIRMATION OF PLAN
9.1. Revesting of Assets.
(a) On the Effective Date, all of HJC's right, title and interest in
and to the Casino Operating Contract shall revest in HJC, which Casino Operating
Contract shall then be modified by the Amended and Renegotiated Casino Operating
Contract and assigned to JCC in accordance with applicable State law, the
agreement of the parties thereto and the provisions of Section 8.1(g) hereof. In
addition, on the Effective Date all right, title and interest of the Debtors in
the Fulton Property shall vest in FP Development, and all right, title and
interest of the Debtors in the 3CP Property shall vest in CP Development. All
other property of the estates (including, without limitation, all present and
future claims and causes of action) of the Debtors shall vest in JCC on the
Effective Date, and JCC shall be deemed to be the successor to each of the
Debtors; provided that none of the New Entities or any of their respective
property shall be subject to any of the Claims or Equity Interests against or in
any Debtor except as expressly provided in this Plan. For Federal income tax
purposes, the vesting of the property of the estates of the Debtors shall be
solely in JCC Holding and shall be deemed to have occurred as follows: (i) a
deemed exchange by the Bondholders of the Old Bonds for all of the assets of HJC
(including any Assigned Litigation Claims assigned by HJC to JCC), and (ii) a
deemed exchange by the Bondholders of such HJC assets (not including any
Assigned Litigation Claims assigned by HJC to JCC) with JCC Holding for shares
of Class A New Common Stock (which shares, along with Class A New Common Stock
received in exchange for certain releases, will represent 50.1% of the value of
JCC Holding's outstanding New Common Stock), the New Bonds and the New
Contingent Bonds (each of which shall be considered obligations of JCC Holding).
For Federal income tax purposes, JCC Holding, FP Development, CP Development,
JCC Intermediary (if formed) and JCC shall be treated as a single taxable
entity, and all assets of any such entities shall be deemed to be owned by JCC
Holding for federal income tax purposes. In the event that JCC files an election
to be treated as a corporation for federal income tax purposes, JCC shall be
treated as a separate taxable entity and the HJC assets that are deemed to be
exchanged with JCC Holding for the New Bonds and New Contingent Bonds shall
instead be deemed to be exchanged with JCC for such New Bonds and New Contingent
Bonds.
61
<PAGE>
(b) From and after the Effective Date, the New Entities may operate
their business, and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code.
(c) As of the Effective Date, all property of the Debtors shall be free
and clear of all Claims and Equity Interests of holders thereof, except as
provided in the Plan.
(d) Pursuant to Section 1123(b)(3) of the Bankruptcy Code, except (i)
those rights, causes of action and claims released or to be released pursuant to
or in connection with the Plan, (ii) HJC's right, title and interest in and to
the Casino Operating Contract, which shall revest in HJC on the Effective Date,
(iii) as otherwise provided in Section 5.9 hereof with respect to Assigned
Litigation Claims, and (iv) rights relating to the 3CP Property and Fulton
Property which shall be transferred to CP Development and FP Development,
respectively, JCC, in its sole discretion, and either in its own name or in the
name, place and stead of the Debtors and their estates, shall have the exclusive
right to enforce or waive or release any and all present or future rights or
causes of action against any Person and rights of the Debtors that arose before
or after the Commencement Date, and shall be entitled to retain all proceeds
thereof. CP Development, in its sole discretion, and either in its own name or
in the name, place and stead of the Debtors and their estates, shall have the
exclusive right to enforce or waive or release any and all present or future
rights or causes of action against any Person and rights of the Debtors that
arose before or after the Commencement Date relating to the 3CP Property, and
shall be entitled to retain all proceeds thereof. FP Development, in its sole
discretion, and either in its own name or in the name, place and stead of the
Debtors and their estates, shall have the exclusive right to enforce or waive or
release any and all present or future rights or causes of action against any
Person and rights of the Debtors that arose before or after the Commencement
Date relating to the Fulton Property, and shall be entitled to retain all
proceeds thereof.
9.2. Discharge of Debtors. The rights afforded herein and the treatment
of all Claims and Equity Interests herein shall be in exchange for and in
complete satisfaction, discharge, and release of Claims and Equity Interests of
any nature whatsoever, including any interest accrued on such Claims from and
after the Commencement Date, against any or all Debtors, or any of their assets
or properties. Except as otherwise provided herein, on the Effective Date (a)
all such Claims against, and Equity Interests in, the Debtors shall be
satisfied, discharged, and released in full and (b) all Persons shall be
precluded from asserting against any Debtor or New Entity, or its successors, or
their respective assets or properties any other or further Claims or Equity
Interests based upon any act or omission, transaction, or other activity of any
kind or nature, whether known or unknown, that occurred prior to the Effective
Date, whether or not (i) a proof of claim or interest based upon such Claim or
Equity Interest is filed or deemed filed under Section 501 of the Bankruptcy
Code, (ii) such Claim or Equity Interest is allowed under Section 502 of the
Bankruptcy Code, or (iii) the holder of such Claim or Equity Interest has
accepted the Plan. Except as provided herein, the Confirmation Order shall be a
judicial determination of discharge of all liabilities of the Debtors. As
provided in Section 524 of the Bankruptcy Code, such discharge shall void any
judgment against any Debtor or any New Entity at any time obtained to the extent
it relates to a Claim or Equity Interest discharged, and shall operate as an
injunction against the prosecution of any action against any Debtor or any New
Entity, or the property of any of them, to the extent it relates to a Claim or
Equity Interest discharged. Nothing in this Plan, including this Section 9.2,
shall be construed as or constitute a release of any Claim against HJC arising
under the Casino Operating Contract, which Casino Operating Contract shall
revest in HJC on the Effective Date, be modified by the Amended and Renegotiated
Casino Operating Contract, and be assigned to JCC in accordance with applicable
State law, the agreement of the parties, and the provisions of Section 8.1(g)
hereof.
9.3. Dissolution of Debtors. On or as of the Effective Date, each
Debtor shall be dissolved, liquidated or otherwise terminated under applicable
law.
9.4. Exculpations. Subject to the occurrence of the Effective Date,
neither the Debtors, the New Entities, the Committees, nor any of their
respective members (including, in the case of HJC, its executive
62
<PAGE>
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.
(b) The Confirmation Order shall have been entered and shall not be
stayed.
(c) The Effective Date shall occur no later than October 31, 1998,
unless extended pursuant to Section 10.4 of the Plan.
(d) All those transactions described in Section 6.2 hereof shall have
been effected, and all of the agreements and instruments described in Section
6.2 hereof shall have been executed and delivered, and all other agreements and
instruments to be delivered under or necessary to effectuate the Plan shall have
been executed and delivered, and all executory contracts and unexpired leases to
be assumed by or assigned to JCC as provided in Section 8.1 hereof shall have
been assumed by or assigned to JCC. The Amended and
63
<PAGE>
Renegotiated Casino Operating Contract, the State/LGCB Release, and all other
agreements, instruments and documents necessary to evidence or consummate the
transactions contemplated therein shall have been executed and delivered by the
parties thereto. All other cure or other payments required to be paid in
connection with the assumption of any executory contract or unexpired lease
shall be acceptable to HET (in its sole discretion) on behalf of the Proponents
and the Bondholders Committee (in its sole discretion).
(e) The New Indenture shall have been qualified under the Trust
Indenture Act.
(f) Tranches A-1 and A-3 of the A Term Loan, Tranche B-1 of the B Term
Loan and the Convertible Junior Subordinated Debentures shall be fully funded
concurrently with the occurrence of the Effective Date, and the A Term Loan
Documents, the B Term Loan Documents, the Working Capital Loan Documents and the
Convertible Junior Subordinated Debenture Documents shall have been executed and
delivered.
(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 (i) made all suitability determinations and given all approvals
required by the Louisiana Economic Development and Gaming Control Act, the rules
and regulations of the LGCB (as said rules and regulations are in effect at such
time as the issuance of the approvals and making of suitability determinations)
and the Amended and Renegotiated Casino Operating Contract, and (ii) consented
to the assignment of the Amended and Renegotiated Casino Operating Contract to
JCC, in each case to the extent necessary to enter into the agreements
contemplated by this Plan. The City Council shall have enacted the ordinance(s)
approving the Lease Documentation (as defined in the City Agreement).
(j) HET shall have received all approvals, consents and waivers from
its board of directors or its lenders or any other third parties which HET
determines in its sole discretion to be necessary or appropriate in order for it
or any of its Affiliates to take any of the actions, execute and deliver any of
the agreements, instruments or documents, or consummate any of the transactions
contemplated by the Plan.
(k) The NOLDC Plan shall have been confirmed by a Final Order (in form
and substance satisfactory to the NOLDC Shareholders and HET), and the NOLDC
Shareholders/HET Settlement Agreement and the GP Representative/HET Settlement
Agreements shall have been executed and delivered by all of the parties thereto,
and the NOLDC Shareholders/HET Settlement Agreement shall have been approved by
the bankruptcy court in the Chapter 11 case of NOLDC either pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code as part of the NOLDC Plan, or pursuant to
Bankruptcy Rule 9019 by separate Final Order (in form and substance satisfactory
to the NOLDC Shareholders and HET).
64
<PAGE>
(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 the New Entities shall
not be subject to any Liens other than the Minimum Payment Guarantor Lien and
the Liens securing the A Term Loan, the B Term Loan, the Working Capital
Facility, the New Bonds, and the New Contingent Bonds, and if applicable, the
Convertible Junior Subordinated Debentures and the Junior Subordinated Credit
Facility, or any Liens expressly permitted under the HET/JCC Agreement, the A
Term Loan Documents, the B Term Loan Documents, the Working Capital Loan
Documents, the Junior Subordinated Loan Documents, the Convertible Junior
Subordinated Debenture Documents or the New Indenture or any other Liens as may
be approved by the Bondholders Committee (in its sole discretion) and HET (in
its sole discretion) on behalf of the Proponents.
(o) The Debtors and the Bondholders Committee shall have requested a
determination by the Bankruptcy Court that the value of the Assigned Debtor
Litigation Claims (net of all estimated Litigation Costs and the estimated
aggregate amount of all Third Party Claims) is no greater than the sum of (i)
the Bondholder Deficiency Amount, plus (ii) the aggregate amount of the Allowed
Class A7 Claims, plus (iii) the aggregate amount of the cure payments made as
provided in Section 8.1(e) of the Plan, plus (iv) the $2,265,000 to be
distributed to the applicable holders of Allowed Class A6 Claims pursuant to
Section 4.6 of the Plan, and the Bankruptcy Court shall have entered an order
(which may be the Confirmation Order) adjudicating this issue.
(p) (i) The First American Settlement Agreement shall have become
effective or (ii) JCC shall have assumed the Existing Owner's Title Insurance
Policy.
(q) The LGCB shall have found suitable (or deemed exempt or waived from
such suitability requirements) in accordance with its rules and regulations (as
said rules and regulations are in effect at the time of the suitability
determinations) at least one proposed officer of JCC Holding and at least two of
the proposed directors of JCC Holding (including at least one Bondholders
Director Nominee and one Harrah's Director Nominee).
10.3. Waiver of Conditions. HET (in its sole discretion) on behalf
of the Proponents may waive any condition or any portion of any condition set
forth in this Article X, without notice and without leave or order of the
Bankruptcy Court but only with the written consent of both the Bondholders
Committee (which consent may be withheld in its sole discretion), and HJC (which
consent may not be unreasonably withheld or delayed) and to the extent such
waiver is inconsistent with the City Agreement, the written consent of the City;
provided, however, that HET on behalf of the Proponents may not waive, (i)
without the consent of the City, any condition to the Effective Date set forth
in Sections 10.2(b), (c) or (i) hereof or Section 10.2(d) hereof (but only to
the extent Section 10.2(d) requires the execution and delivery of the City/RDC
Release, the Amended and Restated Canal Street Casino Lease Agreement, and the
other agreements, instruments and documents referenced in Section 6.2(o)
hereof), and (ii) without the consent of LGCB, any condition to the Effective
Date set forth in Sections 10.2(b), (c), (i) or (q) hereof or Section 10.2(d)
hereof (but only to the extent Section 10.2(d) relates to execution and delivery
of the Amended and Renegotiated Casino Operating Contract, the State/LGCB
Release and the other agreements, instruments and documents referenced in
Section 6.2(n) hereof).
65
<PAGE>
10.4. Effect of Failure of Conditions. In the event that all of the
conditions specified in Section 10.1 or 10.2 have not been satisfied or waived
in accordance with the provisions of this Article X on or before October 31,
1998 (which date may be extended by HET (in its sole discretion) on behalf of
the Proponents only with the written consent of the Bondholders Committee, the
City and the LGCB (each of whose consent may be withheld in its sole
discretion)), and upon notification submitted by HET to the Bankruptcy Court and
counsel for the Committees, (a) the Confirmation Order shall be vacated, (b) no
distributions under the Plan shall be made, (c) the Debtors and all holders of
Claims and Equity Interests shall be restored to the status quo ante as of the
day immediately preceding the date the January 29, 1998 Plan was confirmed as
though such date never occurred, and (d) all the Debtors' respective obligations
with respect to the Claims and Equity Interests shall remain unchanged and
nothing contained herein or in the Disclosure Statement shall be deemed an
admission or statement against interest or to constitute a waiver or release of
any claims by or against any Debtor or any other Person or to prejudice in any
manner the rights of any Debtor or any Person in any further proceedings
involving any Debtor or Person.
ARTICLE XI.
RETENTION OF JURISDICTION
11.1. To the maximum extent permitted by the Bankruptcy Code or other
applicable law, the Bankruptcy Court shall have jurisdiction of all matters
arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to,
and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following nonexclusive purposes:
(a) To construe and to take any action to enforce this Plan and to
issue such orders as may be necessary for the implementation, execution and
confirmation of this Plan;
(b) To determine the allowance or classification of Claims or Equity
Interests and to determine any objections thereto;
(c) To determine rights to distribution pursuant to this Plan;
(d) To hear and determine applications for the assumption or rejection
of executory contracts or unexpired leases and the allowance of Claims resulting
therefrom;
(e) To determine any and all applications, motions, adversary
proceedings, contested matters and other litigated matters that may be pending
in the Bankruptcy Court on or initiated after the Effective Date;
(f) To hear and determine any objection to Administrative Expense
Claims or to Claims or to Equity Interests;
(g) To hear and determine any causes of action brought or continued by
any Debtor or New Entity as assignee of the Debtors (with respect to the
Assigned Debtor Litigation Claims or 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;
66
<PAGE>
(j) To hear and determine matters concerning any Release and to enforce
the injunctions set forth in the Plan, including those set forth in Sections
2.2, 5.7, and 9.2 hereof;
(k) To consider any modifications of the Plan, to cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(l) To hear and determine all Fee Applications;
(m) To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Plan or any transactions
contemplated by the Plan;
(n) To hear and determine all questions and disputes regarding title
to, and any action to recover any of, the assets or property of any Debtor or
its estate, wherever located;
(o) To hear and determine any disputes relating to the Liens,
Encumbrances or other claims filed by any immediate or remote subcontractors,
laborers, suppliers or vendors against any of the property of any Debtor;
(p) To hear and determine matters concerning state, local, and Federal
taxes in accordance with Sections 346, 505, and 1146 of the Bankruptcy Code;
(q) To consider and act on the compromise and settlement of any claim
against any Debtor or its estate;
(r) To hear any other matter not inconsistent with the Bankruptcy
Code;
(s) To enter a final decree closing the Chapter 11 Cases;
(t) To effectuate the provisions of Section 10.4 of the Plan; and
(u) To enter such orders as may be appropriate to evidence, for
recordation purposes, the transfer to and vesting in JCC, CP Development and FP
Development of the Debtors' immovable property and other instruments creating
rights in and to immovable property, and the execution and delivery of the
sublease of the second floor of the Casino by JCC and JCC Development; provided,
that nothing in the Plan or the Confirmation Order is intended or shall be
construed to alter the jurisdiction, if any, of the Bankruptcy Court to
determine issues regarding the contractual or other relationships between the
Debtors and JCC and the State Group, nor shall the Plan or the Confirmation
Order be construed as to the State Group as consenting to any jurisdiction by
the Bankruptcy Court.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
67
<PAGE>
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.
12.5. Revocation or Withdrawal of the Plan.
(a) HET (in its sole discretion) on behalf of the Proponents and with
the written consent of HJC (which consent may not be unreasonably withheld or
delayed) reserves the right to revoke or withdraw the Plan prior to the
Confirmation Date.
(b) If the Plan is revoked or withdrawn prior to the Confirmation Date
in accordance with Section 12.5(a) hereof, then the Plan shall be deemed null
and void. In such event, (i) the Debtors and all holders of Claims and Equity
Interests shall be restored to the status quo ante as of the day immediately
preceding the date the January 29, 1998 Plan was confirmed as though such date
never occurred, and (ii) all the Debtors' respective obligations with respect to
the Claims and Equity Interests shall remain unchanged and nothing contained
herein or in the Disclosure Statement shall be deemed an admission or statement
against interest or to constitute a waiver or release of any claims by or
against any Debtor or any other Person or to prejudice in any manner the rights
of any Debtor or any Person in any further proceedings involving any Debtor or
Person.
68
<PAGE>
(c) Notwithstanding anything to the contrary in this Plan, (i) none of
HET, HOCI, HNOMC, HNOIC, Harrah's Investor, DIP Lender and their respective
Affiliates shall have any obligations or liabilities (including, without
limitation, any obligation to provide the Harrah's New Equity Investment) under
the Plan or any Plan Documents at any time prior to the Effective Date, and (ii)
HET and HNOIC expressly reserve their respective rights in their sole discretion
to withdraw as Proponents of this Plan or to otherwise terminate their support
for this Plan.
12.6. Existing Agreements. Unless otherwise ordered by the Bankruptcy
Court or the context clearly requires otherwise, all references in any
settlement agreement, agreement regarding the assumption or rejection of
executory contracts, plan exhibits or other writings to the confirmation,
consummation or Effective Date of the Original Plan, the January 29, 1998 Plan
and/or the April 6, 1998 Plan shall be deemed to refer to this Plan.
12.7. Notices. Any notice required or permitted to be provided under
the Plan shall be in writing and served by either (a) certified mail, return
receipt requested, postage prepaid, (b) hand delivery, or (c) reputable
overnight delivery service, freight prepaid, to be addressed as follows:
HARRAH'S ENTERTAINMENT, INC.
1023 Cherry Road
Memphis, Tennessee 38117
Attn: General Counsel
with a copy to:
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Attn: Robert J. Rosenberg, Esq.
HARRAH'S JAZZ COMPANY and
HARRAH'S JAZZ FINANCE CORP.
to its counsel:
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
69
<PAGE>
with a copy to:
HELLER, DRAPER, HAYDEN & HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130-6103
Attn: Edward M. Heller, Esq.
BONDHOLDERS COMMITTEE
---------------------
MERRILL LYNCH ASSET MANAGEMENT
800 Scudders Mill Road
Plainsboro, NJ 08536
Attn: Bradley J. Lucido, Esq.
HARRIS ASSOCIATES L.P.
2 North LaSalle Street, Suite 500
Chicago, IL 60602-3790
Attn: John Raitt
STANDARD MORTGAGE COMPANY
300 Plaza, One Shell Square
New Orleans, LA 70139
Attn: Edgar Bright, Jr.
with a copy to:
WEIL GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153-0001
Attn: John K. Cunningham, Esq.
MCGLINCHEY STAFFORD
643 Magazine Street
New Orleans, LA 70130
Attn: Rudy J. Cerone, Esq.
12.8. Governing Law. Except to the extent the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights and obligations arising under this
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the State of Louisiana, without giving effect to the principles of
conflicts of law thereof.
12.9. Withholding and Reporting Requirements. In connection with the
Plan and all instruments issued in connection therewith and distributions
thereon, the Debtors or the New Entities, 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.
70
<PAGE>
12.11. Exhibits. All exhibits and schedules to the Plan are
incorporated into and are a part of the Plan as if set forth in full herein.
12.12. JCC Intermediary. Notwithstanding anything to the contrary in
the Plan or any Plan Document, any provisions herein or therein relating to JCC
Intermediary shall be applicable only if JCC Intermediary is formed at the
election of HET (in its sole discretion) on behalf of the Proponents.
12.13. Filing of Additional Documents. On or before substantial
consummation of the Plan, HET (in its sole discretion) on behalf of the
Proponents and before the Effective Date, with the consent of HJC (which consent
shall not be unreasonably withheld or delayed), may file with the Bankruptcy
Court such agreements and other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the Plan, which
agreements and other documents shall be in form and substance satisfactory to
the Bondholders Committee in its sole discretion, and to the extent required
under applicable laws, rules and regulations or the Amended and Renegotiated
Casino Operating Contract, shall be approved by LGCB.
12.14. Controlling Effect of Agreements with State/LGCB. Except as
otherwise provided in this Section 12.14 of the Plan, in the event of any
conflict between any provision of this Plan and the provisions of any of the
contracts or agreements entered into between the State and/or the LGCB on the
one hand and HJC, JCC or any other Person on the other hand (including
particularly, but not limited to, the Amended and Renegotiated Casino Operating
Contract, the State/LGCB Release and the Minimum Payment Guaranty), the
provisions of any of said contracts and agreements shall control the rights of
the parties to the particular contracts and agreements. Notwithstanding any
provision of this Plan, the Confirmation Order, the Casino Operating Contract,
the Amended and Renegotiated Casino Operating Contract, the State/LGCB Release
or any other document necessary to effectuate and implement this Plan to the
contrary, nothing contained in this Plan, the Confirmation Order, the Casino
Operating Contract, the Amended and Renegotiated Casino Operating Contract, the
State/LGCB Release or any such other document shall release any obligation of
HJC arising under the Casino Operating Contract or the Amended and Renegotiated
Casino Operating Contract, and the Casino Operating Contract, as modified by and
restated in the Amended and Renegotiated Casino Operating Contract, shall remain
in force and effect.
12.15. Rights of State and LGCB. Notwithstanding any other provisions
of this Plan (including, without limitation, Sections 5.3, 5.10, 6.2(n), 8.1(d),
8.1(g) or 9.1(a)) or the Confirmation Order to the contrary, if any, nothing
contained in this Plan or the Confirmation Order is intended to require, or
shall be construed as requiring, that the LGCB and/or the State (i) enter into
the Amended and Renegotiated Casino Operating Contract, the State/LGCB Release,
or any other agreements or contracts contemplated by the Plan, or (ii) be bound
by any such contract, release or agreement without their express written consent
as evidenced by their execution thereof, whether or not the provisions of this
Section 12.15 are referred to in the other provisions of this Plan or the
Confirmation Order.
71
<PAGE>
------------------------------------------
Respectfully submitted:
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312)222-9350
Fax: (312)527-0484
William H. Patrick, III (10359)
WILLIAM HARDY PATRICK III, A
PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
------------------------------------------
HELLER, DRAPER, HAYDEN & HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130-6103
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
------------------------------------------
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's Entertainment, Inc.
72
<PAGE>
INDEX OF EXHIBITS
Exhibit A Amended and Restated Completion Loan Agreement Term Sheet
Exhibit B Amended and Restated Construction Lien Indemnity Obligation
Agreement Term Sheet
Exhibit C Amended and Restated Management Agreement Term Sheet
Exhibit D Bondholder Term Sheet
Exhibit E Form of City Release Agreement
Exhibit F Term Sheet for Settlement Agreement among Debtors and Participating
Banks
Exhibit G Term Sheet for Settlement Agreement among Debtors and Underwriters
Exhibit H FNBC Term Sheet
Exhibit I Term Sheet for Development Services Agreement
73
[cad 255]
<PAGE>
Exhibit A
Term Sheet
September 3, 1998
Amended and Restated
Completion Loan Agreement
<PAGE>
Exhibit A
Term Sheet
September 3, 1998
Amended and Restated
Completion Loan Agreement
This term sheet outlines the principal terms of proposed modifications of and
agreements related to that certain Completion Loan Agreement, dated as of
October 12, 1994, as amended by that certain First Amendment to Completion Loan
Agreement dated as of November 8, 1994, by and among Harrah's Jazz Company, a
Louisiana general partnership ("HJC"), Embassy Suites, Inc. (now known as
Harrah's Operating Company, Inc.), a Delaware corporation ("HOCI"), The Promus
Companies Incorporated (now known as Harrah's Entertainment, Inc.), a Delaware
corporation ("HET"), Harrah's New Orleans Investment Company, a Nevada
corporation ("HNOIC"), Grand Palais Casino, Inc., a Delaware corporation, Grand
Palais Management Company, L.L.C., a Delaware limited liability company, and New
Orleans/Louisiana Development Corporation, a Louisiana corporation (the "Prior
Completion Loan Agreement"). This term sheet is attached to and incorporated
into that certain plan of reorganization in the bankruptcy proceedings of HJC
(the "Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
modifications of and agreements related to an amendment and restatement in its
entirety of the Prior Completion Loan Agreement in connection with the Plan. As
set forth more fully in the Plan, if the Plan is not consummated within the time
period specified therein, the parties shall have no further obligations to
pursue the matters described herein.
2. HET and HOCI Approvals
(a) The amended and restated Completion Loan Agreement (the "Amended Completion
Loan Agreement") shall reflect the substitution of Jazz Casino Company, L.L.C.
(the "Company") for HJC under the Amended Completion Loan Agreement as
contemplated by the Plan.
(b) The Amended Completion Loan Agreement shall reflect HET's and HOCI's
approval of the changes in the plans and specifications for the Casino and the
completion of the Casino in phases as contemplated by the Plan.
3. Reorganized Debt Structure. The Prior Completion Loan Agreement, including
without limitation the definitions of "Bank Loan Documents," "Bank Notes," First
Mortgage Notes," "Prior Debt," and "Public Debt," shall be amended to reflect
the ownership, equity, financing and capital structure of the Company as
contemplated by the Plan.
A-1
<PAGE>
4. Completion Loans. The Amended Completion Loan Agreement shall provide that
any amounts (i) expended by HET and/or HOCI pursuant to any of the completion
guarantees to be provided by HET and HOCI as contemplated by the Plan, (ii)
expended by the completion guarantors pursuant to the Performance Bond Indemnity
Agreement (as defined in the Amended Completion Loan Agreement), or (iii)
advanced pursuant to the HET/HOC Guaranty and Loan Purchase Agreement (as
defined in the A Term Loan Documents) shall be unsecured loans ("Completion
Loans") to the Company bearing interest at a rate of eight percent (8%) per
annum and having a maturity date that is six (6) months following the maturity
of the New Bonds and the New Contingent Bonds (each as defined in the Plan)
pursuant to the Plan. Subject to meeting certain "Restricted Payment" tests
contained in the indenture for the New Bonds and in the A Term Loan, B Term Loan
and Working Capital Facility Documents (each as defined in the Plan), early
repayment of the Completion Loans will be permitted. In addition, HET and/or
HOCI as the completion guarantors will be required to make Completion Loans to
the extent that the total cost to complete the Casino (to the point at which the
Casino contains 100,000 square feet of net gaming space) exceeds the budgeted
cost to complete the Casino.
5. Use of Available Funds. The Amended Completion Loan Agreement shall provide
that at such time that there is a demand, call, notice or requirement for
performance of any completion guarantee, without any further action by the
parties to the Amended Completion Loan Agreement the completion guarantors shall
be entitled to control the disbursement and use of certain available funds of
the Company and to apply such available funds of the Company to any and all
costs required to complete the Casino, including, without limitation, drawing or
using any portion of the A Term Loan and the B Term Loan up to the total amount
available thereunder, or taking any other action which the completion guarantors
reasonably determine to be necessary or helpful to obtain the available funds of
the Company to be applied to the cost to complete the Casino. The Amended
Completion Loan Agreement shall also provide that the Company shall use all of
its available funds other than available cash flow for the construction and
development of the Casino.
6. Completion Guarantee Fee and Financing Advisory Fee. Except for the guarantee
fees payable in connection with the HET Loan Guarantee, no further fee shall be
paid by the Company to HET or HOCI in respect of (i) issuing the completion
guarantees, and (ii) HOCI's services and advice in connection with arranging the
financing for completion of the Casino. HET and HOCI shall waive their right to
receive the fee of Eleven Million Eight Hundred Thousand Dollars ($11,800,00)
provided for in Section 7(b) of the Prior Completion Loan Agreement.
7. Elimination of Consulting Fees. The Amended Completion Loan Agreement shall
reflect the elimination of all consulting fees referenced in the definition of
"Consulting Fees" and "Consulting Agreements" in the Prior Completion Loan
Agreement.
8. Entry Agreement. The Company will use its best efforts to cause the City and
the RDC to execute an entry agreement in favor of the completion guarantors in
substantially the form of the entry agreement executed in connection with the
Prior Completion Loan Agreement.
A-2
<PAGE>
Exhibit B
Term Sheet
September 3, 1998
Amended and Restated
Construction Lien Indemnity Obligation Agreement
<PAGE>
Exhibit B
Term Sheet
September 3, 1998
Amended and Restated
Construction Lien Indemnity Obligation Agreement
This term sheet outlines the principal terms of proposed modifications of and
agreements related to that certain Construction Lien Indemnity Obligation
Agreement, dated as of October 12, 1994, by and among Harrah's Jazz Company, a
Louisiana general partnership ("HJC"), Embassy Suites, Inc. (now known as
Harrah's Operating Company, Inc.), a Delaware corporation ("HOCI"), Harrah's New
Orleans Investment Company, a Nevada corporation ("HNOIC"), Grand Palais Casino,
Inc., a Delaware corporation ("Grand Palais"), Grand Palais Management Company,
L.L.C., a Delaware limited liability company ("Grand Palais LLC"), and New
Orleans/Louisiana Development Corporation, a Louisiana corporation (the "Prior
CLIOA"). This term sheet is attached to and incorporated into that certain plan
of reorganization in the bankruptcy case of HJC (the "Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
modifications of and agreements related to an amendment and restatement in its
entirety of the Prior CLIOA in connection with the Plan. As set forth more fully
in the Plan, if the Plan is not consummated within the period specified therein,
the parties shall have no further obligations to pursue the matters described
herein.
2. Substitution and Elimination of Parties. The amended and restated
Construction Lien Indemnity Obligation Agreement (the "Amended CLIOA") shall
reflect (i) the substitution of Jazz Casino Company, L.L.C. (the "Company") for
HJC under the Amended CLIOA as successor to HJC's right, title and interest in
the Prior CLIOA, and (ii) the elimination of HNOIC, Grand Palais, Grand Palais
LLC and NOLDC as parties thereto.
3. Construction Lien Indemnity Obligations. It is anticipated that a new
Construction Lien Indemnity Agreement will be required to be delivered to the
title company providing a lender's policy of title insurance in connection with
the new construction financing contemplated by the Plan. Said new Construction
Lien Indemnity Agreement is anticipated to indemnify the Company's title
insurers regarding mechanic's liens claiming priority to Casino financing. The
Amended CLIOA shall provide that any amounts expended by HOCI pursuant to said
new Construction Lien Indemnity Agreement shall be obligations of the Company
payable on demand by HOCI if allowed pursuant to the restricted payments
covenants in the New Indenture and Working Capital Loan Documents (as defined in
the Plan). Such obligations shall bear interest at a rate of eight percent (8%)
per annum.
B-1
<PAGE>
4. No Additional Fees. The Amended Construction Lien Indemnity Obligation
Agreement shall provide that no additional fees shall be payable to HOCI in
respect of its agreement to enter into the Amended Construction Lien Indemnity
Obligation Agreement.
B-2
<PAGE>
Exhibit C
Term Sheet
September 3, 1998
Amended and Restated
Casino Management Agreement
<PAGE>
Exhibit C
Term Sheet
September 3, 1998
Amended and Restated
Casino Management Agreement
This term sheet outlines the principal terms of proposed modifications
of and agreements related to that certain Amended and Restated Management
Agreement, dated as of March 15, 1994 (the "Management Agreement"), by and among
Harrah's New Orleans Management Company, a Nevada corporation ("Manager"), and
Harrah's Jazz Company, a Louisiana general partnership ("HJC"). This term sheet
is attached to and incorporated into that certain plan of reorganization in the
bankruptcy case of Owner (the "Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
modifications of and agreements related to the Management Agreement in
connection with the Plan. As set forth more fully in the Plan, if the Plan is
not consummated within the time period specified therein, the parties shall have
no further obligations to pursue the matters described herein.
2. Manager Approvals
(a) New Owner. The Management Agreement shall be amended and restated
(the "Second Amended Management Agreement") to reflect the substitution of Jazz
Casino Company, L.L.C., a Louisiana limited liability company, as "Owner" under
the Second Amended Management Agreement as successor to all of HJC's right,
title and interest in the Second Amended Management Agreement.
(b) Modified Project. The Second Amended Management Agreement,
including without limitation Section 2.03 - "Development" and the approved
Program Plans attached as Exhibit "G" to the Second Amended Management
Agreement, shall reflect Manager's approval of the build out of the casino to be
located at the Rivergate site (the "Casino") as described in the Plan.
3. Development and Construction. The Second Amended Management Agreement,
including without limitation the definitions of "Completion Deadline" and
"Opening Date," shall tie any development, construction and related deadlines to
the development, construction and opening of the Casino.
4. Reserve Fund for Capital Replacements and Capital Improvements; Periodic
Contributions to Reserve Fund. The capital reserve provisions will be revised to
conform to the proposed changes in the City Lease whereby Manager on behalf of
Owner shall deposit into the reserve
<PAGE>
fund one-twelfth of Three Million Dollars ($3,000,000) for each month of the
first twelve (12) month period following the completion of the Casino,
one-twelfth of Four Million Dollars ($4,000,000) for each month of the second
twelve (12) month period following the completion of the Casino, one-twelfth of
Five Million Dollars ($5,000,000) for each month of the third twelve (12) month
period following the Completion of Casino, and two percent (2%) of gross
revenues of the Casino for each fiscal month thereafter.
5. Management Fees
(a) Base and Incentive Fee. Section 9.01 of the Second Amended
Management Agreement will reflect that Owner agrees to pay to Manager a
management fee (the "Management Fee") having two components. The first component
(the "Base Fee") shall equal three percent (3.0%) of gross revenues of the
Casino. The second component (the "Incentive Fee") shall equal seven percent
(7.0%) of consolidated EBITDA (the EBITDA definition in the Second Amended
Management Agreement will be the same as the EBITDA definition in the Indenture)
in excess of (i) $40 million for the six month period ending on the date which
is six months after the opening of the Casino and each anniversary of such date,
and (ii) $75 million for the twelve month period ending on the date which is
twelve months after the opening of the Casino and each anniversary of such date,
less the Incentive Fee paid to the Manager for the prior six (6) months;
provided however, that the Manager shall refund to JCC all fees paid by JCC
under subsection (i) hereof if EBITDA does not exceed $75 million for the twelve
month period ending on the date which is twelve months after the opening of the
Casino and each anniversary of such date, with appropriate proration of such
threshold for any partial year following the opening date of the Casino and
preceding the termination of the Second Amended Management Agreement, as the
case may be. The Base Fee shall be payable to Manager monthly subject to the
priorities set forth in the Second Amended Management Agreement. The Incentive
Fee, if any, shall be payable to Manager at six (6) month intervals on the next
business day following actual cash payment of all accrued fixed interest and
contingent interest, if any, on the New Bonds and the New Contingent Bonds (both
of which are as defined in the Plan) pursuant to the Plan and subject to the
priorities set forth in the Second Amended Management Agreement.
(b) Defaults. No Base Fee shall be paid, and no Incentive Fee shall be
accrued or paid, during or with respect to any period in which Owner is in
default with respect to interest or principal payments under the New Bonds, the
New Contingent Bonds or the Bank Loans. In the case of any such default, any
unpaid Base Fees shall be deferred and payable at such time as any such default
is cured.
(c) Deferral of Management Fees
(i) The New Bonds provide for 6 elections by Owner to pay
semi-annual interest in kind rather than in cash for the first 3 year period of
the term of the New Bonds and for further elections by Owner to pay semi-annual
interest in kind thereafter if the Consolidated EBITDA for the prior twelve (12)
months have not exceeded $28,500,000 (collectively the "PIK Elections"). If
Owner is required by the Indenture or by the Credit Agreement to defer Base
C-2
<PAGE>
Fees, Manager consents and agrees to such deferrals of Base Fees. Any such
election or elections shall be by written notice from Owner to Manager
specifying the amount required to be deferred under the Indenture and/or the
Credit Agreement (the "Deferral Amount"). Such Deferral Amount shall first be
applied to any Base Management Fees then unpaid and thereafter accruing during
the applicable six (6) month period. To the extent any such Deferral Amount
shall exceed the projected amount of any unpaid and thereafter accruing Base
Management Fees for the applicable six (6) month period or if such six (6) month
deferral period shall have already elapsed, Manager shall refund to Owner the
remaining amount of such Deferral Amount not to exceed the amount of any Base
Management Fees previously paid to Manager with respect to any portion of the
applicable six (6) month period accruing prior to Owner's PIK election. To the
extent Manager is required to refund to Owner any Incentive Fee or any deferred
Base Management Fees pursuant to this Section 5, HET shall guarantee such
repayment. Owner and Manager acknowledge that the Indenture and the Credit
Agreement require that the Incentive Management Fee be deferred during any
corresponding PIK Election. Manager consents to such deferrals of Incentive Fees
as may be required by the Indenture and Credit Agreement.
(ii) Any Management Fees deferred pursuant to Section 5(c)(i)
above shall bear interest at eight percent (8.0%), which shall accrue until such
deferred Management Fees are repaid. Interest on Base Fees shall accrue (A) from
the date the Base Fees would otherwise have been payable, if the Base Fees were
not paid pursuant to Section 5(c)(i) hereof, or (B) from the date the Base Fees
were refunded by Manager, if the Base Fees were refunded pursuant to Section
5(c)(i) hereof. Following such time as Owner has achieved Consolidated EBITDA of
not less than Sixty Five Million Dollars ($65,000,000) for the preceding twelve
(12) month period, any Base Management Fees deferred pursuant to Section 5(c)(i)
hereof together with interest thereon shall be payable to Manager pro rata with
any deferred guaranty fees out of excess cash flow (remaining after application
of the excess cash flow sweep required by the Credit Agreement for the Bank
Loans) to the extent Consolidated EBITDA exceeds Sixty Five Million Dollars
($65,000,000). Following such time as Owner has achieved Consolidated EBITDA of
not less than Seventy Five Million and 00/100 Dollars ($75,000,000) for the
preceding twelve (12) month period, any incentive fees deferred pursuant to this
Article 9.01(c) together with interest thereon shall be payable to Manager,
after repayment of any deferred Base Management Fees and deferred guaranty fees
out of excess cash flow (remaining after application of the excess cash flow
sweep required by the Credit Agreement for the Bank Loans) to the extent
Consolidated EBITDA exceeds Seventy Five Million and 00/100 Dollars
($75,000,000).
6. Termination Rights and Termination Fees
(a) Change of Control of Owner. Following the Transition Date (as
defined in the Certificate of Incorporation of JCC Holding), if any entity
(including any Controlled Affiliates, as defined in the Second Amended
Management Agreement, of such entity and any entity of which such entity is a
Controlled Affiliate) which (i) controls or operates, or, as of the date the
Plan is consummated, is licensed or qualified to control or operate in any of
the states of Illinois, Indiana, Louisiana, Mississippi, Missouri, Nevada or New
Jersey, a casino or casino hotel facility, or (ii) has been, within the five (5)
years prior to the date the Plan is consummated, involved in litigation
C-3
<PAGE>
with Harrah's Entertainment, Inc. which Harrah's Entertainment, Inc. has
disclosed in an Annual Report on Form 10-K on or prior to the date the Plan is
consummated, or which Harrah's Entertainment, Inc. would be required to disclose
in its next Annual Report on Form 10-K following the date the Plan is
consummated, acquires twenty percent (20%) or more of the outstanding shares of
JCC Holding and the Board of Directors of JCC Holding shall not consist of a
majority of Continuing Directors, Manager shall be entitled to terminate this
Agreement upon ninety (90) days' written notice to Owner, but shall not be
entitled to receive a Termination Fee as defined in Article 17.02 of the Second
Amended Management Agreement.
(b) Sale of Casino. Following the Transition Date, if Owner shall sell,
assign or transfer any of its direct or indirect legal or beneficial interest in
the Casino, to any person other than a Qualified Purchaser (as defined in
Article 21.02(c) of the Second Amended Management Agreement) approved by Manager
pursuant to Article 21.02(d) of the Second Amended Management Agreement and
which assumes and agrees to perform all obligations of Owner under the Second
Amended Management Agreement, Manager shall be entitled to terminate the Second
Amended Management Agreement upon the closing of such sale, assignment or
transfer, but shall not be entitled to receive a Termination Fee.
(c) Failure to Open. The Second Amended Management Agreement shall
terminate without any further action of JCC or the Manager immediately upon the
termination of the Amended Ground Lease by the RDC as a result of JCC's failure
timely to complete construction of the Casino, and the Manager shall not be
entitled to any Termination Fee.
(d) Condemnation. If the Casino is condemned, the Manager shall be
entitled to seek its share of any condemnation proceeds but shall not be
entitled to any Termination Fee.
(e) Default by Owner. Upon a default by Owner or failure of Owner to
complete any obligatory reconstruction or restoration of the Casino after an
insured casualty or partial condemnation, the Manager shall be entitled to
receive a Termination Fee.
7. Assignment or Transfer of Title by Owner. The Second Amended Management
Agreement will provide no restriction on transfers of ownership interests in the
ultimate parent of Owner; provided, however, if a Non-Qualified Person shall
have a legal or beneficial interest in the equity or debt of the Company, and
such situation is not cured within forty five (45) days, or such shorter period
as may be required by any governmental entity with authority over the Casino,
Manager shall have the right to terminate the Second Amended Management
Agreement and collect the Termination Fee. The Second Amended Management
Agreement shall provide that a "Non-Qualified Person" shall be any person or
entity that
(a) controls or operates, or, as of the date the Plan is consummated,
is licensed or qualified to control or operate in any of the states of Illinois,
Indiana, Louisiana, Mississippi, Missouri, Nevada or New Jersey, a casino or
casino hotel facility; and
C-4
<PAGE>
(b) has been, within the five (5) years prior to the date the Plan is
consummated, involved in litigation with Harrah's Entertainment, Inc. which
Harrah's Entertainment, Inc. has disclosed in an Annual Report on Form 10-K on
or prior to the date the Plan is consummated, or which Harrah's Entertainment,
Inc. would be required to disclose in its next Annual Report on Form 10-K
following the date the Plan is consummated; and
(c) would, if associated with Owner or Owner's affiliates or with
Manager, in the reasonable judgment of Manager or any licensing authority,
impair or cause the denial, suspension or revocation of any gaming registration,
permit, license, right or entitlement or alcoholic beverage registration,
permit, license, right or entitlement held or applied for by Owner, Manager or
any affiliate of Manager or Owner.
8. Competition. The covenant not to compete will be revised to apply to Owner
and Manager and their respective affiliates.
9. Miscellaneous
(a) Casino Operational Standards. The definition of Casino Operational
Standards in the Second Amended Management Agreement shall provide that the
standard of the physical plant of the Casino may be measured against the
Harrah's Atlantic City Casino and that the operational practices of the Casino
shall be gauged against the operational practices of the Harrah's Atlantic City
Casino.
(b) Payments. A general catch-all provision will be added to the Second
Amended Management Agreement as Article 6.05 allowing Manager to make payments
in accordance with the Second Amended Management Agreement.
(c) Choice of Law. The choice of law will be Nevada, except as
mandatory provisions of the Gaming Act as to which the external laws of the
State of Louisiana shall apply without regard to principles of conflicts of law.
C-5
<PAGE>
Exhibit D
September 3, 1998
Bondholder Term Sheet
Summary of Restructuring
<PAGE>
Exhibit D
September 3, 1998
Bondholder Term Sheet
Summary of Restructuring
A. New Capital
1. Capital Structure. Jazz Casino Company, L.L.C., a Louisiana limited
liability company ("JCC") will fund the completion of construction of the casino
at the Rivergate site in New Orleans (the "Casino") through (i) a $60 million
term loan (the "A Term Loan") from a syndicate of lenders led by Bankers Trust
Company ("BTCo"), (ii) a $151.5 million term loan from BTCo (the "B Term Loan"
and, together with the A Term Loan, the "Term Loans"), (iii) the sale of
approximately $27 million aggregate principal amount of Convertible Junior
Subordinated Debentures of JCC (the "Convertible Junior Subordinated
Debentures"), (iv) a credit facility pursuant to which Harrah's Entertainment
Inc. ("HET") and Harrah's Operating Company, Inc. ("HOCI"), a wholly-owned
subsidiary of HET, will make available up to $22.5 million of subordinated
indebtedness (the "Junior Subordinated Credit Facility") to fund project costs,
and (v) an equity investment by Harrah's Crescent City Investment Company (the
"Harrah's Investor") in an amount equal to the difference between $75 million
and the then outstanding principal amount of debtor-in-possession financing
provided at any time on or before the Effective Date (the "New Equity
Investment"). JCC will also have up to $25 million available for working capital
purposes under a working capital line of credit (the "Working Capital Facility"
and, together with the Term Loans, the "Bank Loans").
2. The Bank Loans. The Bank Loans will be on the terms and conditions
set forth in Exhibit F to the Third Amended Joint Plan of Reorganization, as
Modified through August 12, 1998 (the "Plan") and will have such other terms and
conditions as are acceptable to HET and the committee (the "Bondholders'
Committee") made up of holders (the "Bondholders") of the 14 1/4% First Mortgage
Notes due 2001 (the "Old Bonds") of Harrah's Jazz Company ("HJC").
B. New Entities
1. Assets and Ownership of the New Entities. The assets and business,
except certain excess real property, of HJC will be transferred to JCC on the
Effective Date as set forth in the Plan, subject to any gaming regulatory
approvals and state law and, to the extent practicable, taking into account
economic efficiencies and simplicity of execution. Title to certain excess real
property owned by HJC will vest in each of CP Development, L.L.C. ("CPD") and FP
Development, L.L.C. ("FPD"), both of which are newly formed Louisiana limited
liability companies. JCC will enter into a sublease of the second floor of the
Casino with JCC Development, L.L.C., a Louisiana limited liability company. CPD,
FPD and JCC Development will each provide mortgages (which may be released or
subordinated under terms and conditions acceptable to the Banks, the
Bondholder's Committee and the Proponents) and guarantees for the benefit of the
banks, bondholders and Minimum Payment Guarantors. JCC, JCC Development,
<PAGE>
CPD and FPD will be wholly-owned by JCC Intermediary Company, L.L.C., a
Louisiana limited liability company ("JCC Intermediary"), which, in turn, will
be wholly-owned by JCC Holding Company, a Delaware corporation ("JCC Holding"
and, together with JCC and JCC Intermediary, the "JCC Entities" and the JCC
Entities, together with CPD, FPD, and JCC Development, the "New Entities").
Pending the resolution of certain structural considerations, JCC Intermediary
may be eliminated prior to the Effective Date. In such case, JCC, JCC
Development, CPD and FPD will be wholly-owned subsidiaries of JCC Holding. HET,
the bondholders of Grand Palais, and the shareholders of NOLDC will receive a
49.9% stock ownership in JCC Holding (of which 2.0% will be allocated to
Releasing Bondholders, as provided in the Plan); provided that HET will hold not
less than 51% of such 49.9% stock ownership and will, for as long as the
corporate governance provisions described below are in effect, maintain a
majority interest thereof. Of the remaining 50.1%, 37.1% of the stock of JCC
Holding will be issued to the Bondholders, and the remaining 13.0% of the stock
of JCC Holding will be allocated to Releasing Bondholders, as provided in the
Plan of Reorganization. Accordingly, under the Plan, Releasing Bondholders will
receive an aggregate of 15% of the stock of JCC Holding.
2. Flip Events. Generally, the directors designated by the Class B
Stockholders (the "Class B Directors") will supervise the day-to-day activities
with respect to the New Entities unless one of the following events ("Flip
Events") occurs: (i) (a) JCC is in default in any material respect under the
Bonds (as hereinafter defined) or the JCC Entities are in default in any
material respect under any material agreements with the City of New Orleans (the
"City") or the State of Louisiana (the "State"), any other financing agreements,
any other material contracts or any of their organizational documents, and (b)
such default by the JCC Entities is caused by HET, HOCI or Harrah's New Orleans
Management Company (the "Casino Manager") related events, (ii) the Casino
Manager is in default in any material respect under its management agreement,
HET or HOCI is in default in any material respect under the completion
guaranties or HET or its affiliates are in default in any material respect under
any other material agreements relating to the Casino between HET or its
affiliates and the City or the State or any agency or instrumentality of the
City or State, (iii) a filing for bankruptcy by or against HET, HOCI, the Casino
Manager, any direct or indirect parent thereof, or any affiliate of HET which is
controlled by HET (an "HET Controlled Affiliate") if the filing by or against
such HET Controlled Affiliate has or is reasonably likely to have an adverse
effect on JCC, the Casino or the suitability of any person required to be found
suitable under Louisiana gaming laws, or (iv) the Louisiana Gaming Control Board
(the "LGCB") makes the determination that HET or its affiliate is unsuitable to
own an equity interest in JCC Holding.
3. Effect of Flip Event. Upon the occurrence of a Flip Event, the
directors of JCC Holding selected by the former Bondholders (the "Independent
Directors") will supervise the day-to-day activities with respect to the New
Entities; provided, however, that if all defaults causing a Flip Event to have
occurred are cured, the Class B Directors will resume supervising the day-to-day
activities of the New Entities.
D-2
<PAGE>
4. Significant Transactions. Notwithstanding the foregoing, approval by
the Independent Directors of JCC Holding will be required if a New Entity
proposes to engage in a Significant Transaction. "Significant Transactions"
shall include, without limitation, (i) amendments of the organizational
documents of any of the New Entities, (ii) any merger, consolidation, lease or
sale of a material portion of their respective businesses or assets, (iii) any
material transaction or transactions, except for certain excluded transactions,
during a single fiscal year with HET or an HET Controlled Affiliate (including
any decisions regarding the exercise, waiver or modification of rights or
obligations under the management agreement) which in the aggregate involve
consideration in excess of a threshold to be determined by the board of
directors of JCC Holding, (iv) declarations of dividends, (v) amendment of any
material agreements with the City or the State, (vi) bankruptcy events, (vii)
incurrence of, or assumption of liability for, indebtedness for borrowed money,
other than indebtedness incurred pursuant to the Plan, the amendment of the
terms of any indebtedness for borrowed money or any modification, consent or
waiver thereunder, (viii) any issuance of securities, (ix) any repurchase of
securities of a New Entity, (x) any change in the independent auditors, and (xi)
approval of JCC's annual operating plan and annual capital budget.
5. After a Flip Event. If a Flip Event has not occurred, or has
occurred other than as the result of a willful action or failure to act by the
Class B Directors, HET, the Casino Manager, or an HET Controlled Affiliate, as
determined by Speedy Arbitration, the approval by the Class B Directors will be
required if any of the JCC Entities proposes to engage in Significant
Transactions. Speedy Arbitration shall mean an arbitration in which a single
arbitrator is selected by HET or its subsidiary and the Bondholders Committee,
the arbitration is binding, and the arbitration occurs on an expeditious
schedule as determined by the arbitrator. An arbitrator or a mechanism for
arbitration shall be identified and set forth in the appropriate organizational
documents. If a Flip Event has occurred and the approval of the Class B
Directors is not required for a Significant Transaction, any action or inaction
by the Independent Directors during the period after the Flip Event and prior to
the cure of all defaults giving rise thereto shall not disproportionately affect
any group of holders of equity of the JCC Entities. Such approval by the
Independent Directors and the Class B Directors, respectively, will, in certain
cases, require a majority thereof and in other cases will require unanimity.
6. Independent Directors; Extraordinary Flip Event. JCC Holding's board
of directors will consist of an equal number of Independent Directors and Class
B Directors, but (i) the Independent Directors will constitute a majority of the
audit committee, (ii) one Independent Director will be added to the board if a
Flip Event (including a Flip Event resulting from Casino Manager bankruptcy
events, but excluding a Flip Event resulting from HET bankruptcy events) occurs
as the result of a willful action or failure to act by the Class B Directors,
HET, the Casino Manager, or an HET Controlled Affiliate as determined in a
Speedy Arbitration process (an "Extraordinary Flip Event"); provided, however,
that such additional Independent Director will be removed if such Extraordinary
Flip Event is cured, and (iii) unless an Extraordinary Flip Event has occurred
and has not been cured, one Class B Director will be added to the board in the
event that
D-3
<PAGE>
at least 20% of the outstanding shares of Class A Stock of JCC Holding are
acquired (a "Change of Control") by any entity (including any parent and any
controlled affiliates) (a "Conflicted Entity") (a) which controls or operates,
or is licensed in any of Illinois, Indiana, Louisiana, Mississippi, Missouri,
Nevada or New Jersey to control or operate, as of the Effective Date, a casino
or casino hotel facility, or (b) which has been involved in material litigation
with HET within the five years prior to the Effective Date; provided, however,
that such additional Class B Director will be removed if (x) the percentage of
Class A Stock of JCC Holding owned by such Conflicted Entity falls below 20%, or
(y) an Extraordinary Flip Event occurs after such Change of Control.
7. Classes of Directors. JCC Holding's board will be divided into three
classes of directors with staggered terms of office.
8. Class A and Class B Directors. Until the Transition Date (as
hereinafter defined) there shall be an equal number of Independent Directors and
Class B Directors in each of the three classes of directors. When an Independent
Director's term of office expires, the remaining Independent Directors will
constitute the committee authorized to nominate the candidate for such
Independent Director's position, and when a Class B Director's term of office
expires, the remaining Class B Directors will constitute the committee
authorized to nominate the candidate for such Class B Director's position.
9. JCC and JCC Intermediary Governance. JCC shall be a member managed
Louisiana limited liability company with JCC Holding as its sole member manager.
If JCC Intermediary is utilized, the sole member manager of JCC Intermediary
will be JCC Holding, and JCC Intermediary will be the sole member manager of
JCC.
10. Director Compensation. The JCC Entities will pay reasonable
directors' fees and long term compensation to all of the Independent Directors
(and, until the Transition Date, to Class B Directors who are not employees of
HET), will pay the reasonable out-of-pocket expenses of all of their directors,
and will carry adequate D&O insurance for the benefit of all of their directors.
11. Classes of Stock and Conversion of Stock. Until the Transition Date
there will be two outstanding classes of common stock of JCC Holding, one class
to be received by the Bondholders ("Class A Stock") and one class to be received
by HET, the bondholders of Grand Palais and the shareholders of NOLDC ("Class B
Stock"), which will be identical in all respects except (i) holders of Class A
Stock will elect the Independent Directors and holders of Class B Stock will
elect the Class B Directors, (ii) shares of Class B Stock will be converted into
shares of Class A Stock upon transfer to any entity except HET, the bondholders
of Grand Palais, NOLDC, any shareholder of NOLDC, and any of such entities'
affiliates (collectively, "Class B Entities"), and (iii) subject to certain
exceptions upon a Change of Control, shares of Class A Stock upon transfer to a
Class B Entity will be converted into shares of Class B Stock.
D-4
<PAGE>
12. Capital Budget. All changes to JCC's capital budget prior to
termination of the Completion Guarantee (as defined herein), except for changes
which reduce the scope or character of the Casino, as reflected in the approved
Plans and Specifications, or which exceed $5 million or such other threshold as
may be determined by the board of directors of JCC Holding, will be approved by
the Gaming Committee of JCC Holding's board of directors; thereafter all changes
to JCC's capital budget up to $250,000 will be approved by the Gaming Committee
and all changes to JCC's capital budget between $250,000 and $2 million will be
approved by the Capital Committee of JCC Holding's board of directors
(consisting of a single Independent Director and a single Class B Director until
the Transition Date). The capital budget itself will be approved by the board of
directors of JCC Holding.
13. Transition Date. The governance provisions set forth in Sections
B.2, 3, 4, 5, 6, 8 and 11 shall terminate upon the Transition Date. The
"Transition Date" shall occur on the earliest of (i) the third anniversary of
the date which the Casino is open to customers, (ii) the end of two consecutive
12-month periods in each of which the Contingent Payments under the New Bonds
and the New Contingent Bonds equals or exceeds $15 million, and (iii) the end of
a period consisting of 30 consecutive trading days during which the average
daily closing Minimum Market Value (as defined below) equals or exceeds $435
million (as adjusted by the board of directors in good faith to account for
purchases of common stock or issuances of additional common stock). The "Minimum
Market Value" is, for each trading day, the sum of (i) the closing bid price of
a share of Class A Stock multiplied by the aggregate number of such shares
issued and outstanding plus (ii) the closing bid price per $1,000 of New Bonds
and New Contingent Bonds, divided by $1,000, and multiplied by the aggregate
principal amount of such Bonds outstanding.
C. Fiduciary Considerations
All definitive documentation implementing the transactions contemplated
by this term sheet will provide the Bondholders' Committee with a "fiduciary
out" in the event that there is a superior offer with respect to the Old Notes.
The Bondholders' Committee has agreed not to solicit any other sponsors after
August 23, 1996 (the "No Shop Date"). After the No Shop Date, if the
Bondholders' Committee supports a plan of reorganization not supported by HET,
or withdraws its support for a plan of reorganization supported by HET, then at
such time, HET shall be entitled to receive the immediate repayment of its DIP
loans (including all amounts advanced thereunder and accrued interest on such
advances). In addition, if after the date on which HET, the City, the State and
the Bondholders' Committee are definitively committed to support a plan of
reorganization supported by HET (the "Definitive Commitment Date"), the
Bondholders' Committee supports a plan of reorganization not supported by HET,
or withdraws its support for a plan of reorganization supported by HET, then HET
shall be entitled to receive from HJC a "break-up" fee of $2.5 million at such
time and the Bondholders' Committee shall not support any plan that does not
provide that HET shall be entitled to receive from HJC $5 million at the time of
the confirmation of such other plan and $5 million at the time of consummation
of
D-5
<PAGE>
such other plan. The Definitive Commitment Date shall be the date on which the
HET, the Bondholders Committee, the City and the State have negotiated and
agreed to definitive documentation. All such definitive documentation shall be
in form and substance acceptable to the Bondholders Committee.
D. Old Notes
The holders of $435 million of the existing Old Bonds will receive: (i)
$187.5 million of Senior Subordinated Notes with Contingent Payments of JCC (the
"New Bonds") having the terms described on the attached term sheet; (ii) the
Senior Subordinated Contingent Notes (the "New Contingent Bonds" and, together
with the New Bonds, the "Bonds") having the terms defined in the attached term
sheet; and (iii) 37.1% of the stock of JCC Holding. The Releasing Bondholders
shall receive 13.0% of the stock of JCC Holding to be allocated among the
Releasing Bondholders, as described herein.
E. Management Agreement
1. Management Fees. The Casino Manager will receive 3.0% of gross
revenues ("Base Management Fee") and 7.0% of EBITDA above (i) $40 million for
the six-month period ending on the date which is six months after the opening of
the Casino and each anniversary of such date, and (ii) $75 million for the
twelve month period ending on the date which is twelve months after the opening
of the Casino and each anniversary of such date, less the Incentive Fee paid to
the Casino Manager for the prior six months ("Incentive Management Fee") for
managing the Casino; provided, however, that the Casino Manager shall refund to
JCC all fees paid by JCC under subsection (i) hereof if EBITDA does not exceed
$75 million for the twelve month period ending on the date which is twelve
months after the opening of the Casino and each anniversary of such date.
"EBITDA" means earnings before interest, taxes, depreciation and amortization
but after payment of the Base Management Fee. The definition of EBITDA for
purposes of the Incentive Management Fee shall be the same as for purposes of
the New Contingent Bonds.
2. Payment of Base Management Fees. The Base Management Fee will be
paid monthly; provided, however, that HET will unconditionally guarantee the
repayment to JCC of the Casino Manager's obligation to repay any Base Management
Fees required as a result of a PIK election.
3. Payment of Incentive Management Fees. The Incentive Management Fee,
if any, will be paid at six month intervals on the next business day following
actual cash payment of all accrued fixed interest and contingent interest, if
any, on the Bonds. No Base Management Fee will be paid, and no Incentive
Management Fee will be accrued or paid, during or with respect to any period in
which JCC is in default with respect to interest or principal payments under the
Bonds.
D-6
<PAGE>
4. Deferrals. JCC shall have the option of making the first six
semi-annual interest payments of fixed interest on the New Bonds in kind rather
than in cash (the "PIK Periods"); provided however, that the first four
semi-annual interest payments must be paid in kind if Tranches A-1 and/or A-2
are outstanding at the end of the corresponding PIK Periods.
a. The Casino Manager will defer Base Management Fees for the
corresponding first, second, third or fourth PIK Period to the extent the cash
savings resulting from the PIK election is needed for cash flow deficiencies
other than repayment of Tranche A-1 and Tranche A-2, and such deferred Base
Management Fee plus applicable interest shall be due and payable to the Casino
Manager, pro rata with any deferred guaranty fees, out of excess cash flow
(remaining after application of the excess cash flow sweep required by the
Credit Agreement for the Bank Loans) at such time and to the extent that EBITDA
exceeds $65 million.
b. Any Incentive Management Fee payable to the Casino Manager will
be deferred during the corresponding third, fourth, fifth or sixth PIK Periods
if the respective third, fourth, fifth or sixth PIK election, as the case may
be, is required under the bank credit agreement or elected by JCC, and such
deferred Incentive Management Fees shall be due and payable to the Casino
Manager, after repayment of any deferred Base Management Fees and deferred
guaranty fees, out of excess cash flow (remaining after application of the
excess cash flow sweep required by the Credit Agreement for the Bank Loans) at
such times as and to the extent that EBITDA exceeds $75 million.
c. If EBITDA is less than $28.5 million for the twelve-month
period ending one month prior to each semi-annual New Bond interest payment date
beginning with the fourth year after the Effective Date, the Base Management
Fee, Bank Loan principal, and HET guaranty fees will be deferred, and the
Bondholders will receive PIK interest.
d. JCC may not pay fixed interest in kind for the fifth and sixth
PIK-periods if (i) Tranches A-1 and A-2 have been fully repaid, (ii) there are
no outstanding drawings under the Revolving Credit Facility, and (iii) the
Casino has accumulated cash availability of at least $20 million.
5. Subordination of Management Fees and Other Amounts. In the event of
any payment default on the Bonds, any other default that results in acceleration
of the Bonds, the bankruptcy of JCC, or similar matters, any accrued but unpaid
Base Management Fees or Incentive Management Fees shall be subordinated to
payments on the Bonds in the following order:
a. Fixed interest on New Bonds
b. Principal amount of New Bonds
D-7
<PAGE>
c. Base Management Fee
d. Contingent Payments on New Bonds and New Contingent Bonds
e. Amounts advanced under Completion Guarantee
f. Incentive Management Fee
6. Year 2000 Compliance. The Management Agreement shall contain a
covenant from the Manager regarding Year 2000 compliance.
F. DIP Financing
1. Prior DIP Loans. HET, or an affiliate of HET, has advanced over $40
million to recommence construction of the Casino and fund other amounts
necessary for the continuation of the HJC bankruptcy case and the consummation
of the Plan in the form of debtor-in-possession ("DIP") loans.
2. Additional DIP Loans. The JCC Entities will need additional funds
prior to the Effective Date. HET, or an affiliate of HET, will provide
additional DIP financing in accordance with the HET DIP order entered by the
Bankruptcy Court.
3. Repayment. Principal on the DIP loans will be (i) repaid in full in
cash upon consummation of a plan of reorganization, or (ii) converted into the
New Equity Investment (and count toward the $75 million equity investment) on a
dollar-for-dollar basis. The Plan shall provide that any HET claim for interest
on the DIP Loans will be canceled upon consummation of the Plan. The DIP loans
shall be entitled to an administrative priority superior to the priority of all
other creditors in the bankruptcy.
4. Collateral. The DIP loans will receive a primary lien on all assets
of the estate, including the Fulton Street and 3CP properties, all gaming
equipment (subject to regulatory approval), all cash collateral (including the
cash collateral held by FNBC), and all causes of action of the Estate other than
insider claims.
5. Funding. Prior to the termination of the DIP loans (by acceleration,
maturity or otherwise), HET will fund sufficient amounts under the DIP loans to
provide for the payment of administrative expense claims for fees, expenses and
costs of professionals properly retained pursuant to court order, including
professionals properly retained pursuant to court order by the debtors and the
creditors' committees (including, without limitation, the Bondholders Committee)
to the extent such fees, expenses and costs (i) are payable pursuant to a court
order entered prior to such termination of the DIP loans, or (ii) are provided
for in a budget approved by HET.
D-8
<PAGE>
6. Termination. Upon the termination of the DIP loans (by acceleration,
maturity or otherwise), HET's administrative priority claims and the liens and
security interests granted under the terms of the DIP loans shall not have
priority over, and shall be subordinate and junior to, up to an aggregate of
$1.5 million of unpaid administrative expense claims for fees, expenses and
costs of professionals properly retained pursuant to court order, including
professionals properly retained pursuant to court order by the debtors and the
creditors' committees (including, without limitation, the Bondholders'
Committee).
7. Call. The DIP loans may be called at par plus accrued interest at
any time at the discretion of the Bondholders' Committee.
G. Agreements with City and State
1. City and LGCB. Any plan of reorganization of HJC is subject to the
approval of the LGCB (LEDGC's successor) and the City of New Orleans, except to
the extent such approvals are not required under bankruptcy law.
2. Agreement. As part of its Plan, HJC will seek certain agreements
with the City and State. Any agreements between HJC, on the one hand, and the
City or the State, on the other hand, shall be satisfactory to the Bondholders'
Committee, in its sole discretion.
H. Completion Guarantee
1. Form of Completion Guarantee. For the benefit of holders of the
Bonds, HET and HOCI will unconditionally and irrevocably guarantee completion of
the project (the "Completion Guarantee") as discussed below, in accordance with
the City and State requirements, subject only to force majeure, on terms
substantially identical to the terms to be contained in HET's and HOCI's
completion guarantee in favor of the State and the City delivered in connection
with the Plan (including without limitation, collateral, guaranties or third
party financial support). In any event, such Completion Guarantee shall not
contain any financing condition precedent to the obligations of HET or HOCI.
2. Reimbursement of Completion Guarantors. The obligation of JCC to
repay amounts advanced by HET or HOCI will be an unsecured obligation and junior
in right of payment to the full $187.5 million of New Bonds and all amounts
owing under the New Contingent Bonds. Such repayment obligation will have an
interest rate of 8% per annum and will mature 6 months after the maturity of the
Bonds; provided, however, that early repayment of such obligation will be
permitted if allowed pursuant to a "Restricted Payments" test to be negotiated
in the indenture for the Bonds.
3. Scope of Completion Guarantee. The Completion Guarantee will cover
the costs of construction, equipment, opening (pre-opening expenses and
cashloads) and opening working capital for the Casino and Second Floor Shell
Construction in accordance with an
D-9
<PAGE>
agreed-upon list of Casino and Second Floor Shell Construction completion
specifications. The Casino shall consist of approximately 100,000 square feet of
net gaming space on the first floor, a 250-seat buffet, two parking garages, an
underground tunnel between the Casino and the parking garages and approximately
15,000 square feet of multi-function, special event, food service and
meeting-room space on the first floor. The Second Floor Shell Construction shall
consist of an additional approximately 130,000 square feet of multipurpose
non-gaming entertainment space on the second floor of the premises constructed
to the point at which the shell of the structure is complete and the space is
suitable for tenant build-out.
4. Working Capital. The $25 million Working Capital Facility will be
obtained from a third party lender prior to the initial opening of the Casino.
Upon the completion of the Casino and Second Floor Shell Construction, pursuant
to the Completion Guarantee, JCC will have available for working capital (i) $5
million of cash, (ii) $10 million on deposit with the Casino Manager or
available under the Working Capital Facility to fund the Minimum Balance (as
defined in the Management Agreement), and (iii) the Working Capital Facility
Maximum Amount of availability for drawdown(s) under the Working Capital
Facility. The "Working Capital Facility Maximum Amount" equals $25 million
reduced by the amount of funds, if any, not to exceed $2 million, available
under any letter of credit sub-facility under the Working Capital Facility for
purposes other than those relating to project costs of the Casino and further
reduced by a drawing of up to $10 million to be deposited in the Bank Account
(as defined in the Management Agreement) to fund the Minimum Balance. The
Completion Guarantee shall not cover any operating losses following the
completion of the Casino and Second Floor Shell Construction.
I. HET/JCC Agreement
1. Guaranty. HET and HOCI will enter into an agreement with JCC (the
"HET/JCC Agreement") to provide a Minimum Payment Guaranty (as defined in the
Amended and Renegotiated Casino Operating Contract) to the LGCB, subject to
renewal or early termination in accordance with the terms of the HET/JCC
Agreement.
2. Interest. Any drawing on a Minimum Payment Guaranty shall bear
interest at the bank facility Tranche A-3 interest rate. For purposes of
computing the minimum annual payments to the LGCB, the Casino's fiscal year (a
"COC Fiscal Year") will begin on April 1.
3. Renewal. HET and HOCI will commit to provide a Minimum Payment
Guaranty through the COC Fiscal Year ending March 31, 2004; provided that the
obligation of HET and HOCI to provide a Minimum Payment Guaranty pursuant to the
HET/JCC Agreement shall not renew for any of the COC Fiscal Years beginning
April 1, 2000, 2001, 2002 or 2003 if prior to such date: (i) there has been a
JCC bankruptcy or a cessation of Casino operations; (ii) there are any unpaid
guaranty fees (other than fees deferred as agreed in the HET/JCC Agreement);
(iii) there are any unreimbursed drawings on a Minimum Payment Guaranty; (iv) in
D-10
<PAGE>
the case of a renewal for the COC Fiscal Year beginning April 1, 2000, the
project has failed to generate positive EBITDA for the period of operations
commencing with the opening of the Casino and ending January 31, 2000, however,
there shall be no EBITDA test for the period of operations ending January 31,
2000 if such period of operations commenced after August 1, 1999; (v) in the
case of the COC Fiscal Years beginning April 1, 2001, 2002, and 2003, the
project has failed to generate EBITDA as of the twelve month period ending
November 30 of the prior calendar year in an amount equal to $15 million as of
the twelve month period ending November 30, 2000, $20 million as of the twelve
month period ending November 30, 2001, and $25 million as of the twelve month
period ending November 30, 2002; (vi) HET, HOCI or the Casino Manager or any of
HET's affiliates has been determined to be unsuitable or the Casino Manager has
been removed as manager of the Casino; (vii) JCC has breached any of the
covenants under Section 5 of the HET/JCC Agreement; (viii) an Excusable
Temporary Cessation of Operations has occurred and is continuing and has not
been cured in accordance with the terms of the Amended and Renegotiated Casino
Operating Contract; or (ix) the Amended and Renegotiated Casino Operating
Contract has been terminated. The HET/JCC Agreement will contain provisions to
adjust the EBITDA test for purposes of clauses (iv) and (v) above if an
Excusable Temporary Cessation of Operations has occurred during a COC fiscal
year.
4. Definition of EBITDA. For purposes of clauses I.3(d) and I.3.(e)
above, EBITDA shall mean operating income determined according to generally
accepted accounting principles plus depreciation and amortization determined
according to generally accepted accounting principles, but will not include any
extraordinary non-cash items, such as the write down of assets, or pre-opening
expenses.
5. Notice. HET and HOCI shall give JCC at least ninety days prior
written notice of any such non-renewal pursuant to clauses I.3(b) and I.3(e)
above. HET shall give JCC at least thirty days prior written notice of any such
non-renewal pursuant to clause I.3.(d). above.
6. Cancellation. Commencing with the COC Fiscal Year ending March 31,
2002, upon ninety days written notice prior to the first day of the respective
COC Fiscal Year, JCC may cancel the commitment of HET and HOCI to provide a
Minimum Payment Guaranty for the COC Fiscal Year ending March 31, 2002 upon
payment of a termination fee of $1 million in cash and may cancel the commitment
of HET and HOCI to provide a Minimum Payment Guaranty for the COC Fiscal Years
ending March 31, 2003 and 2004 without any fee.
7. Restriction on Termination. Notwithstanding any other provision
hereof, JCC will be restricted from terminating the HET/JCC Agreement unless JCC
has obtained a replacement guaranty or letter of credit which meets the
requirements of the Amended and Renegotiated Casino Operating Contract and which
does not result in increased cost to JCC (after giving effect to payment to HET
and HOCI of the termination fee, if applicable), the Amended and Renegotiated
Casino Operating Contract no longer requires JCC to provide a guaranty or
D-11
<PAGE>
letter of credit, or the LGCB waives the requirement that JCC provide a guaranty
or letter of credit.
8. Fee. HET and HOCI, collectively, will receive a $6 million per annum
guaranty fee for the COC Fiscal Years ending March 31, 2000 and 2001 and $5
million per annum guaranty fee for the COC Fiscal Years ending March 31, 2002,
2003 and 2004, all payable quarterly. HET and HOCI, collectively, shall receive
a pro rata fee based on an annual fee of $6 million for any partial COC Fiscal
Year ending March 31, 2000. HET and HOCI shall not receive a guaranty fee for
any COC Fiscal Year in which a Minimum Payment Guaranty is not provided and
shall repay to JCC any guaranty fee previously advanced to it in respect of such
COC Fiscal Year.
9. Deferred Fees. If EBITDA is less than $28.5 million for the twelve
month period ending one month prior to each semi-annual New Bond interest
payment date beginning with the fourth year after the Effective Date, the
guaranty fee to HET and HOCI will be deferred. JCC's obligation under the
HET/JCC Agreement to pay the per annum guaranty fee and any termination fee to
HET and HOCI and to reimburse HET and HOCI for any drawings (including interest
thereon) by the LGCB under a Minimum Payment Guaranty will be secured by a first
lien on the Casino assets.
10. Collateral. The collateral to be provided to HET and HOCI pursuant
to the HET/JCC Agreement is to be substantially as provided to the LGCB pursuant
to the State Mortgage and Security Documents attached as exhibits to the LGCB
April, 1997 approved Casino Operating Contract. The mortgages, security
agreement and other lien documents will be joint documents in favor of the
Minimum Payment Guarantors and the Banks and Bondholders, subject to the terms
of a Minimum Payment Guarantor/Bank-Bondholder intercreditor agreement setting
forth their lien priorities and other intercreditor matters and all in a form
satisfactory to the Bondholders Committee. The HET/JCC Agreement shall contain
covenants in favor of HET and HOCI (i) requiring JCC to maintain insurance, pay
taxes and impositions, repair and maintain the Casino, and keep the lease in
effect, as was the case for the LGCB pursuant to Section 20.4(d) of the Amended
and Renegotiated Casino Operating Contract, and (ii) on terms and conditions to
be agreed by the parties, restricting indebtedness and liens by JCC and
restricting dividends, merger and asset disposition. The parties agree that any
successor guarantor may be secured by the first lien position of HET and HOCI,
subject to payment of any unpaid fees or obligations to HET and HOCI in respect
of the HET/JCC Agreement.
J. Resale Issues
1. Listing. The JCC Entities will use their best efforts to cause the
Class A Common Stock of JCC Holding to be listed on a national securities
exchange or quoted on NASDAQ upon the Effective Date.
D-12
<PAGE>
2. Reporting Company. JCC Holding shall use its best efforts to be, on
or prior to the Effective Date, a reporting company under the Securities
Exchange Act of 1934, as amended (the "34 Act"), with respect to its Class A
Common Stock. JCC Holding will file a registration statement under the 34 Act
(the "34 Act Registration Statement") no later than promptly after the court
approves the disclosure statement for the Plan.
3. Effect of 34 Act Registration Not Becoming Effective. If the 34 Act
Registration Statement is not effective by the later of (i) 60 days after the
filing of such registration statement with the SEC (provided, however, that this
clause (i) is not applicable if JCC Holding did not file such registration
statement prior to the date which is five days after final court approval of the
disclosure statement for the plan of reorganization), (ii) 60 days after final
court approval of the disclosure statement for the plan of reorganization, (iii)
30 days after receipt of any SEC comments on such registration statement, and
(iv) the Effective Date, then JCC Holding shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of securities to be registered, which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
4. Registration For Public Resales. In addition, to the extent that it
is reasonably determined that the registration of public resales by any
Bondholder of any securities received by such Bondholder under the Plan is
required by law, the JCC Entities will file a registration statement (the "33
Act Registration Statement") with respect to such resales promptly after the
Effective Date. If such 33 Act Registration Statement is not effective within
120 days after it is filed, then JCC shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of securities to be registered, which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
5. Registration Rights Agreement. On the Effective Date, JCC Holding
and HET, or an affiliate of HET, will enter into a registration rights agreement
containing such terms and conditions as are customary under the circumstances,
including the following: (i) upon the request of HET, or an affiliate of HET,
which request may not be made prior to the second anniversary of the opening of
the Casino, JCC Holding must promptly file with the SEC and cause to become
effective as soon as reasonably practicable thereafter a registration statement
on the appropriate form relating to all shares of Class B Common Stock of JCC
Holding held by HET, or an affiliate of HET, including any shares obtained
pursuant to the exercise of warrants by HET, or an affiliate of HET; and (ii)
JCC Holding will cause such registration statement to be continually effective,
subject to customary exceptions, through the third anniversary of the day on
which such registration statement first becomes effective.
K. HET Warrant
In lieu of the warrants set forth in the Third Amended Plan of
Reorganization as confirmed on April 6, 1998 of HJC, HET, or its affiliate, will
receive warrants to purchase an
D-13
<PAGE>
amount of common stock of JCC Holding so that upon the exercise of all such
warrants HET, or its affiliate, will own 50.0% of JCC Holding's common stock.
The number of shares issuable upon exercise of such warrants shall be adjusted
as necessary to reflect, among other things, the transfer of shares upon
exercise of the options held by FNBC and the NOLDC shareholders to purchase from
HET or one of its subsidiaries up to 4.5% of the common stock of JCC Holding and
the issuance of shares if all or a portion of the Convertible Junior
Subordinated Debentures are converted. The warrants will be exercisable at any
time, in whole or in part, after the Transition Date until the sixth anniversary
of the opening of the Casino in whole or in part at a price of $15.00 per share.
If at any time after the Transition Date the market trading price of the JCC
Holding common stock has exceeded $20.00 for sixty consecutive days, the board
of directors of JCC Holding may elect to give written notice to HET of an
election to redeem 75% of the warrants at $.05 per warrant unless HET, or its
affiliate, exercises the warrants within forty-five days after the date of such
notice. If (i) an election to redeem warrants is made by JCC Holding, and (ii)
HET or its affiliate exercises warrants with respect to that number of shares
which at the time of exercise would cause HET and its affiliates to own in the
aggregate 50% of JCC Holding's common stock, then none of the then unexercised
warrants which were called for redemption shall be redeemed. Prior to the
Transition Date, and except as provided in Section B.11.iii hereof, all JCC
Holding common stock directly or indirectly owned by HET and its affiliates
shall be Class B Common Stock, and all Class A Common Stock acquired by HET and
its affiliates prior to the Transition Date shall promptly be converted to Class
B Common Stock.
L. Litigation and Claims
1. Releases. As provided in the Third Amended Plan of Reorganization as
confirmed on April 6, 1998, the Bondholders will release HET, the bondholders of
Grand Palais, and the shareholders of NOLDC and their affiliates.
2. Assigned Claims. As provided in the Third Amended Plan of
Reorganization as confirmed on April 6, 1998, on the Effective Date, HJC,
Harrah's Jazz Finance Corp. and Harrah's New Orleans Investment Company and the
releasing Bondholders will assign their respective Assigned Litigation Claims
(as defined in the Third Amended Plan of Reorganization as confirmed in April,
1997) to JCC, without any representations or warranties. The prosecution of the
Assigned Litigation Claims, judgment reduction protection and distribution of
recoveries from Assigned Litigation Claims will occur as provided in the Third
Amended Plan as confirmed on April 6, 1998.
3. Other Claims. Treatment of chapter 11 administrative expenses and
all other claims in the HJC chapter 11 case shall be on terms and conditions
satisfactory to the Bondholders' Committee. It is understood that provision for
satisfaction of such expense claims has been included in the HJC reorganization
budget.
D-14
<PAGE>
M. Miscellaneous
1. Support of Plan. The Bondholders Committee will join the Proponents
of the Plan of Reorganization of HJC and HJFC in urging the Bondholders not to
change their earlier support of the Plan of Reorganization.
2. Counsel Fees. The fees and expenses of Weil, Gotshal & Manges and
McGlinchey Stafford shall not be capped and shall be paid in accordance with the
existing HJC monthly budget process.
3. Investment Advisor Fees. All rights of Ladenberg with respect to
fees and expenses are reserved.
4. No Other Obligations. HET will not be required to provide equity,
guaranties, loans or other financial commitment beyond those described in the
Third Amended Plan of Reorganization as confirmed on April 6, 1998, in the Term
Sheet attached as Exhibit F to the Plan, and in this Bondholder Term Sheet. The
Bondholders will not be required to provide any concessions beyond those
described in the Third Amended Plan of Reorganization as confirmed on April 6,
1998, in the Term Sheet attached as Exhibit F to the Plan, and in this
Bondholder Term Sheet.
5. Waivers and Release. The New Bonds Indenture and the New Contingent
Bonds Indenture shall contain waiver and release provisions regarding any
non-renewal of a Minimum Payment Guaranty in accordance with the terms of the
HET/JCC Agreement or non-renewal of the HET/JCC Agreement after March 31, 2004.
D-15
<PAGE>
SUMMARY OF TERM SHEET
SENIOR SUBORDINATED NOTES WITH CONTINGENT PAYMENTS
--------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Issuer: Jazz Casino Company, L.L.C. ("JCC"), a
Louisiana limited liability company
Issue: Senior Subordinated Notes With Contingent
Payments (the "New Bonds").
Principal Amount: $187,500,000.
Maturity: 2009 (11 years).
Fixed Interest: The interest will be as follows for the
first 10 semi-annual periods:
1 - 5.867%
2 - 5.927%
3 - 5.987%
4 - 6.046%
5 - 6.103%
6 - 6.159%
7 - 6.214%
8 - 6.214%
9 - 6.214%
10 - 6.214%
and then 8% thereafter, payable in kind from
the Effective Date for six semi-annual
periods (the "PIK Periods"), and payable
semi-annually in cash, in arrears,
thereafter.
JCC shall have the option of making the
first six semi-annual interest payments in
kind rather than in cash; provided, however,
that the first four semi-annual interest
payments must be paid in kind if Tranches
A-1 and/or A-2 are outstanding at the end of
the corresponding PIK Periods. If EBITDA is
less than $28.5 million for the twelve-month
period ending one month prior to each
semi-annual interest payment date beginning
with the fourth year after the Effective
Date, the semi-annual interest payment may
be paid in kind.
</TABLE>
D-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Contingent Payments: Payable semi-annually and limited to 75%
of EBITDA over $65 million and under $85
million calculated on a fiscal-year basis.
If, and to the extent that, JCC's EBITDA
results for any year are less than the
amount required to cause maximum contingent
payments for such year to become due, the
incremental amount between the contingent
payments actually earned for such year and
the maximum contingent payments for such
year will never be paid. Procedures to
address seasonality and tax considerations
in connection with semi-annual payments will
be developed. "EBITDA" means earnings before
interest, taxes, depreciation and
amortization but after payment of the Base
Management Fee; provided, however, that the
fee to HET under the HET/JCC Agreement will
be treated as an operating expense for
purposes of calculating EBITDA. For federal
income tax purposes, all contingent payments
will be recharacterized as principal and
interest using a 12% discount factor.
Collateral: The New Bonds will be secured by a lien
on all assets of JCC Holding, JCC, JCC
Development, CPD and FPD (excluding the
Amended and Renegotiated Casino Operating
Contract, the Casino's bankroll and the
Gross Revenue Share payments) junior to the
liens securing certain obligations of JCC
under the HET/JCC Agreement, the A Term
Loan, the Working Capital Facility and any
refinancings of the A Term Loan and the
Working Capital Facility which do not
increase the principal amount of
indebtedness outstanding and available
thereunder or decrease the weighted-average
maturity thereof (collectively, the "Senior
Permitted Refinancings"), and pari passu
with the liens securing the New Contingent
Bonds (described below), the B Term Loan and
any refinancings of the B Term Loan which do
not increase the principal amount of
indebtedness outstanding and available
thereunder or decrease the weighted-average
maturity thereof (collectively, the "Senior
Subordinated Permitted Refinancings").
Optional Redemption: The New Bonds will not be redeemable prior
to maturity.
</TABLE>
D-17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Mandatory Redemption: The New Bonds will not be subject to
mandatory prepayment prior to maturity.
Change of Control Put to be triggered by
changes in the manager or other similar
events.
Ranking: The New Bonds will be secured obligations of
JCC, subordinated in right of payment to
certain obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working
Capital Facility and the Senior Permitted
Refinancings, and pari passu with the New
Contingent Bonds, the B Term Loan and the
Senior Subordinated Permitted Refinancings.
With the exception of the certain
obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working
Capital Facility, the Senior Permitted
Refinancings, the New Contingent Bonds, the
B Term Loan, the Senior Subordinated
Permitted Refinancings and certain special
purpose indebtedness, any other indebtedness
for borrowed money of JCC must be
subordinated to the New Bonds.
Summary of Certain Covenants: Including, but not limited to: Limitation
on Restricted Payments; Limitation on
Dividends Affecting Subsidiaries; Limitation
on Indebtedness; Limitation on Payment of
Management Fees; Limitation on Asset Sales;
Limitation on Transactions with Affiliates
(except for affiliate transactions approved
by the board of directors of JCC Holding
within limitations to be established by the
board of directors of JCC Holding);
Limitation on Mergers and Consolidations;
Limitation on Liens; and Change of Control.
</TABLE>
D-18
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Make Whole Provisions: The provisions in the Indenture regarding
the Make-Whole Amount shall be revised as
follows:
- The Make-Whole Amount with respect to
the Notes shall consist of a Primary
Make-Whole Amount and a Secondary
Make-Whole Amount.
- The Primary Make-Whole Amount shall
mean, as of any date, the greater of
(a) zero and (b) the remainder of the
present value (using a discount rate
equal to the Formula Rate at such time)
of any unpaid scheduled payments of
principal and interest with respect to
any remaining periods (excluding
Maximum Contingent Payments) payable
in respect of the Notes minus the
principal amount of the Notes
outstanding on such date.
- Formula Rate and Maximum Contingent
Payments are as defined in the
previously circulated draft of the
Indenture.
- The Secondary Make-Whole Amount shall
mean, as of any date, the present value
(determined using a discount rate equal
to the Formula Rate at such time) of
any unpaid Maximum Contingent Payments
with respect to any remaining periods
less any negative amount determined
according to clause (b) of the
definition of the Primary Make-Whole
Amount.
- Upon acceleration of the Notes (i) all
principal and then accrued and unpaid
interest (including then accrued and
unpaid Contingent Payments) shall be
immediately due, (ii) the Primary
Make-Whole Amount and the Secondary
Make-Whole Amount shall be immediately
due, (iii) the Secondary Make-Whole
Amount shall be subordinate to all of
the bank debt including any bank debt
to which HET succeeds as guarantor, and
(iv) the Primary Make-Whole Amount
shall be pari passu with Tranche B of
the bank debt including any bank debt
to which HET succeeds as guarantor.
</TABLE>
D-19
<PAGE>
SUMMARY OF TERM SHEET
SENIOR SUBORDINATED CONTINGENT NOTES
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Issuer: Jazz Casino Company, L.L.C. ("JCC"), a
Louisiana limited liability company.
Issue: Senior Subordinated Contingent Notes (the
"New Contingent Bonds").
Final Contingent 2009 (11 years).
Payment:
Stated Interest: None.
Semi-Annual Payments: Subject to contingency described below, the
New Contingent Bonds will be self-amortizing
with semi-annual payments as described
below.
Contingent Payments: All payments will be contingent and will be
limited to 75% of EBITDA over $85 million
and under $109,425,380 calculated on a
fiscal year basis. If, and to the extent
that, JCC's EBITDA results for any year are
less than the amount required to cause
maximum contingent payments for such year to
become due, the incremental amount between
the contingent payments actually earned for
such year and the maximum contingent
payments for such year will never be paid.
Procedures to address seasonality and tax
considerations in connection with
semi-annual payments will be developed.
"EBITDA" means earnings before interest,
taxes, depreciation and amortization but
after payment of the Base Management Fee;
provided, however, that the fee to HET under
the HET/JCC Agreement will be treated as an
operating expense for purposes of
calculating EBITDA. For federal income tax
purposes, the contingent interest will be
recharacterized as principal and interest
using a 16% discount factor.
</TABLE>
D-20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Collateral: The New Contingent Bonds will be secured by
a lien on all assets of JCC Holding, JCC,
JCC Development, CPD and FPD (excluding the
Amended and Renegotiated Casino Operating
Contract, the Casino's bankroll and the
Gross Revenue Share Payments) junior to the
liens securing certain obligations of JCC
under the HET/JCC Agreement, the A Term
Loan, the Working Capital Facility and any
refinancings of the A Term Loan and the
Working Capital Facility which do not
increase the principal amount of
indebtedness outstanding and available
thereunder or decrease the weighted-average
maturity thereof (collectively, the "Senior
Permitted Refinancings"), and pari passu
with the liens securing the New Bonds, the B
Term Loan and any refinancings of the B Term
Loan which do not increase the principal
amount of indebtedness outstanding and
available thereunder or decrease the
weighted-average maturity thereof
(collectively, the "Senior Subordinated
Permitted Refinancings").
Optional Redemption: The New Contingent Bonds will not be
redeemable prior to maturity.
Mandatory Redemption: The New Contingent Bonds will not be subject
to mandatory prepayment prior to maturity.
Ranking: The New Contingent Bonds will be secured
obligations of JCC, subordinated in right of
payment to certain obligations of JCC under
the HET/JCC Agreement, the A Term Loan, the
Working Capital Facility and the Senior
Permitted Refinancings, and pari passu with
the New Bonds, the B Term Loan and the
Senior Subordinated Permitted Refinancings.
With the exception of the certain
obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working
Capital Facility, the Senior Permitted
Refinancings, the New Bonds, the B Term
Loan, the Senior Subordinated Permitted
Refinancings and certain special purpose
indebtedness, any other indebtedness for
borrowed money of JCC must be subordinated
to the New Contingent Bonds.
</TABLE>
D-21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Summary of Certain Covenants: Including, but not limited to: Limitation on
Restricted Payments; Limitation on Dividends
Affecting Subsidiaries; Limitation on
Indebtedness; Limitation on Payment of
Management Fees; Limitation on Asset Sales;
Limitation on Transactions with Affiliates
(except for affiliate transactions approved
by the board of directors of JCC Holding
within limitations to be established by the
board of directors of JCC Holding);
Limitation on Mergers and Consolidations;
Limitation on Liens.
Make Whole Provisions; The New Contingent Bonds will contain
Liquidated Damages: appropriate provisions so that in the event
of a payment default or bankruptcy, the New
Contingent Bondholders will be made whole
for any accelerated maturity (which shall
consist solely of Contingent Payments that
are due but have not yet been paid),
reduction in anticipated yield or any other
expenses or costs; provided that the amount
of future Contingent Payments shall be
subordinated to the bank claims including
bank claims to which HET as guarantor
succeeds.
</TABLE>
D-22
<PAGE>
Exhibit E
September 3, 1998
Form of City Release Agreement
<PAGE>
CITY RELEASE AGREEMENT
THIS CITY RELEASE AGREEMENT (the "Agreement") is entered into
this ____ day of __________, 1998 by and among RIVERGATE DEVELOPMENT
CORPORATION, a Louisiana public benefit corporation ("RDC"), CITY OF NEW
ORLEANS, LOUISIANA ("City"), HARRAH'S ENTERTAINMENT, INC., a Delaware
corporation ("HET"), HARRAH'S OPERATING COMPANY, INC., a Delaware corporation
("HOCI"), HARRAH'S NEW ORLEANS MANAGEMENT COMPANY, a Nevada corporation
("HNOMC"), HARRAH'S NEW ORLEANS INVESTMENT COMPANY, a Nevada corporation
("HNOIC"), HARRAH'S JAZZ COMPANY, a Louisiana general partnership ("HJC"), NEW
ORLEANS/LOUISIANA DEVELOPMENT CORPORATION, a Louisiana corporation ("NOLDC"),
GRAND PALAIS CASINO, INC., a Delaware corporation ("Grand Palais"), JAZZ CASINO
COMPANY, L.L.C. a Louisiana limited liability company ("JCC"), and HARRAH'S JAZZ
FINANCE CORPORATION, a Delaware corporation ("HJFC").
RECITALS
A. HJC and HJFC filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code on November 22, 1995. HNOIC
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code on December 22, 1995. The cases are now pending in the United
States Bankruptcy Court for the Eastern District of Louisiana (the "Bankruptcy
Court"), Case Nos. 95-14544, 95-14545 and 95-14871. The cases are being jointly
administered.
B. HJC, RDC and City entered into that certain Amended Lease
Agreement effective as of March 15, 1994 (the "Original Lease Agreement")
C. HJC and certain other parties (collectively, the
"Proponents") have submitted, and the Bankruptcy Court has entered an order
confirming, a plan of reorganization in the bankruptcy proceedings of HJC, HJFC
and HNOIC (the "Plan").
D. As provided by the Plan, JCC has succeeded to certain
rights and obligations of HJC under the Original Lease Agreement and the
Original Lease Agreement has been superseded by that certain Amended and
Restated Lease Agreement by and among RDC, City and JCC of even date herewith
and exhibits thereto (including, without limitation, the Casino Management
Agreement and Second Floor Sublease) (collectively, the "Amended and Restated
Lease"). In addition, JCC has assumed certain rights and obligations pursuant to
that certain Amended and Restated General Development Agreement by and among
RDC, City and JCC of even date herewith and exhibits thereto (including, without
limitation, the Completion Guarantee and Performance Bond) (the "Amended and
Restated GDA"), and that certain Amended and Restated Open Access Program
attached to the Amended and Restated Lease as Exhibit G (the "Amended and
Restated OAP").
<PAGE>
E. RDC, City and JCC have previously entered into that certain
Basin Street Casino Lease Termination Agreement and the exhibits thereto and an
Agreement dated January 15, 1997, in connection therewith (collectively, the
"Termination Agreement").
F. RDC, City, HET, HOCI, HNOMC, HNOIC, HJC, NOLDC, Grand
Palais, JCC and HJFC desire to enter into certain settlements and releases on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, RDC, City, HET, HOCI, HNOMC, HNOIC, HJC, NOLDC, Grand Palais, JCC
and HJFC agree as follows:
1. Effectiveness
(a) This Agreement shall be effective upon its execution by
all parties hereto and the occurrence of the Effective Date of the Plan. The
"Effective Date" shall have the meaning set forth in the Plan.
(b) The release by the City Releasors (as hereinafter defined)
set forth in Section 2(a) hereof shall not be effective or enforceable as to (i)
the NOLDC Releasees (as hereinafter defined) unless NOLDC and the other NOLDC
Releasees which are parties thereto execute and deliver (A) the NOLDC
Shareholders/HET Settlement Agreement (as defined in the Plan), executed by all
parties thereto, on or before the Effective Date and (B) this Agreement; (ii)
the Grand Palais Releasees (as hereinafter defined) unless Grand Palais and the
other Grand Palais Releasees which are parties thereto execute and deliver (A)
the Grand Palais/HET Settlement Agreement (as defined in the Plan), executed by
all parties thereto, on or before the Effective Date and (B) this Agreement;
(iii) the HET Releasees (as hereinafter defined) unless each of HET, HOCI, HNOIC
and HNOMC executes and delivers this Agreement; (iv) the HJC Releasees (as
hereinafter defined) unless each of JCC, HJC and HJFC executes and delivers this
Agreement; (v) each Participating Bank (as defined in the Plan) and each
Underwriter (as defined in the Plan) unless each such Participating Bank or
Underwriter enters into, executes and delivers its respective Bank/Underwriter
Release (as defined in the Plan), executed by all parties thereto, on or before
the Effective Date; or (vi) the FNBC Releasees, unless FNBC makes the FNBC
Settlement Election (as defined in the Plan) and executes and delivers the
Bank/Underwriter Release on or before the Effective Date.
(c) This Agreement and the releases set forth in this
Agreement shall be valid and enforceable as among the HET Releasees, the HJC
Releasees and the City Releasors, notwithstanding (i) the failure of NOLDC to
execute and deliver the NOLDC Shareholders/HET Settlement Agreement or this
Agreement, (ii) Grand Palais to execute and deliver the Grand Palais/HET
Settlement Agreement or this Agreement, (iii) the failure of each Participating
Bank
E-3
<PAGE>
and Underwriter to execute and deliver its respective Bank/Underwriter
Release, or (iv) the failure of FNBC to execute and deliver its Bank/Underwriter
Release.
(d) The releases set forth in this Agreement shall not affect
the validity and enforceability of the Amended and Restated Lease, the Amended
and Restated GDA, the Amended and Restated OAP, the Termination Agreement or any
other document executed and delivered pursuant to the Plan.
2. Release. Notwithstanding the foregoing, nothing contained in this
Agreement shall release or waive any rights or obligations of the parties
pursuant to the Amended and Restated Lease, the Amended and Restated GDA, the
Amended and Restated OAP and the Termination Agreement or any allowed claims or
administrative expenses of the City or the RDC in HJC's bankruptcy.
(a) City Release. Subject to the provisions of Sections 1(b)
and 2(f)(iii) hereof, the City Releasors, and each of them, hereby release and
forever discharge the HJC Releasees, the HET Releasees, the NOLDC Releasees, the
Grand Palais Releasees, the Bank/Underwriter Releasees, the FNBC Releasees, and
each of them, of and from any and all manner of Claims (as hereinafter defined)
which the City Releasors, or any of them, now have or may hereafter have against
the HJC Releasees, the HET Releasees, the NOLDC Releasees, the Grand Palais
Releasees, the Bank/Underwriter Releasees, the FNBC Releasees, or any of them,
by reason of any matter, cause or thing whatsoever to the extent such Claims
arose prior to the Effective Date, including, but not limited to, any breaches,
defaults, or events of default under the Original Amended Lease, the Original
Amended GDA, and the OAP occurring at any time on or before the Effective Date.
The foregoing release shall not apply to any Claims to the extent such Claims
arise from or are based on any acts, omissions, events, circumstances or other
matters occurring on or after the Effective Date.
(b) HJC Release. Subject to the provisions of Section
2(f)(iii) hereof, the HJC Releasors (as hereinafter defined), and each of them,
hereby release and forever discharge the City Releasees (as hereinafter
defined), and each of them, of and from any and all manner of Claims which the
HJC Releasors, or any of them, now have or may hereafter have against the City
Releasees or any of them, by reason of any matter, cause or thing whatsoever to
the extent such Claims arose prior to the Effective Date, including, but not
limited to, any breaches, defaults, or events of default under the Original
Amended Lease, the Original Amended GDA, and the OAP occurring at any time on or
before the Effective Date; provided, however, that the foregoing release shall
not apply to any Claims to the extent such Claims arise from or are based on any
acts, omissions, events, circumstances or other matters occurring on or after
the Effective Date.
(c) HET Release. Subject to the provisions of Section
2(f)(iii) hereof, the HET Releasors, and each of them, hereby release and
forever discharge the City Releasees, and each of them, of and from any and all
manner of Claims which the HET Releasors, or any of them, now have or may
hereafter have against the City Releasees or any of them, by reason of any
E-4
<PAGE>
matter, cause or thing whatsoever to the extent such Claims arose prior to the
Effective Date, including, but not limited to, any breaches, defaults, or events
of default under the Original Amended Lease, the Original Amended GDA, and the
OAP occurring at any time on or before the Effective Date. The foregoing release
shall not apply to any Claims to the extent such Claims arise from or are based
on any acts, omissions, events, circumstances or other matters occurring on or
after the Effective Date.
(d) NOLDC Release. Subject to the provisions of Section
2(f)(iii) hereof, the NOLDC Releasors (as hereinafter defined), and each of
them, hereby release and forever discharge the City Releasees, and each of them,
of and from any and all manner of Claims which the NOLDC Releasors, or any of
them, now have or may hereafter have against the City Releasees or any of them,
by reason of any matter, cause or thing whatsoever to the extent such Claims
arose prior to the Effective Date, including, but not limited to, any breaches,
defaults, or events of default under the Original Amended Lease, the Original
Amended GDA, and the OAP occurring at any time on or before the Effective Date.
The foregoing release shall not apply to any Claims to the extent such Claims
arise from or are based on any acts, omissions, events, circumstances or other
matters occurring on or after the Effective Date.
(e) Grand Palais Release. Subject to the provisions of Section
2(f)(iii) hereof, the Grand Palais Releasors (as hereinafter defined), and each
of them, hereby release and forever discharge the City Releasees, and each of
them, of and from any and all manner of Claims which the Grand Palais Releasors,
or any of them, now have or may hereafter have against the City Releasees or any
of them, by reason of any matter, cause or thing whatsoever to the extent such
Claims arose prior to the Effective Date, including, but not limited to, any
breaches, defaults, or events of default under the Original Amended Lease, the
Original Amended GDA, and the OAP occurring at any time on or before the
Effective Date. The foregoing release shall not apply to any Claims to the
extent such Claims arise from or are based on any acts, omissions, events,
circumstances or other matters occurring on or after the Effective Date.
(f) Scope of Releases
(i) The releases effectuated by this Agreement
are intended by the parties hereto to be as broad as the law allows with
respect to the released Claims and, subject to the provisions of Section 1(b)
hereof, are intended specifically to be a compromise and release generally of
all released Claims of the City Releasors against the HJC Releasees, the HET
Releasees, the NOLDC Releasees, the Grand Palais Releasees, the Bank/Underwriter
Releasees, and the FNBC Releasees and all released Claims of the HJC Releasors,
the HET Releasors, the NOLDC Releasors and the Grand Palais Releasors against
the City Releasees.
(ii) The releases effectuated by this Agreement are
intended by the parties hereto include the release of Claims as set forth
in Sections 9.2 and 9.4 of the Plan. To the extent there are inconsistencies
among the releases provided for herein and those set forth in the Plan, the
provisions of this Agreement shall control.
E-5
<PAGE>
(iii) The releases effectuated by this Agreement
shall not effect the release of any
Excluded Claims.
3. Definitions
(a) Bank/Underwriter Releasees. The "Bank/Underwriter
Releasees" shall mean any or all of the Participating Banks (as defined in the
Plan), which on or before the Effective Date execute and deliver their
respective Bank/Underwriter Releases (as defined in the Plan), and, in their
capacity as Participating Banks, any or all of their Affiliates, successors and
assigns and Salomon Brothers, Inc., Donaldson, Lufkin & Jenrette and BT
Securities Corporation in their capacity as underwriters of the Old Bonds (as
defined in the Plan), and any or all of their Affiliates, successors and assigns
in their capacity as underwriters of the Old Bonds, and the shareholders,
parents, subsidiaries, of each of the foregoing, and the officers, directors,
employees, attorneys, financial advisors, lenders, accountants, agents and other
representatives of each of the foregoing when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns, but in any event shall not include the FNBC
Releasees, the Excluded Grand Palais Parties, the Excluded HNOIC Parties or the
Excluded NOLDC Parties.
(b) City Releasees. The "City Releasees" shall mean RDC and
the City and any or all of their Affiliates (as defined in the Plan), successors
and assigns, and the shareholders, parents, subsidiaries, officers, directors,
council members, mayor, employees, attorneys, financial advisors, investment
bankers, lenders, accountants, agents (pursuant to a written agency agreement)
and other representatives of each of the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any and all of their successors and assigns, but in any event shall not include
the FNBC Releasees, the Excluded Grand Palais Parties, the Excluded HNOIC
Parties, the Excluded NOLDC Parties or the Bank/Underwriter Releasees.
(c) City Releasors. The "City Releasors" shall mean RDC and
City and any or all of their Affiliates, successors and assigns, and each of the
shareholders, parents, subsidiaries, officers, directors, council members,
mayor, employees and agents (pursuant to a written agency agreement) of each of
RDC and City, and any and all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing.
(d) Claims. "Claims" shall mean any action or actions, cause
or causes of action, in law or in equity, suits, debts, liens, liabilities,
claims, demands, damages, punitive damages, losses, costs or expenses, and
reasonable attorneys' fees of any nature whatsoever (including, without
limitation, claims based upon legal fault, negligence, offense, quasi-offense,
contract, quasi-contract, or any other theory) whether fixed or contingent and
including known or suspected claims and Unknown Claims (as hereinafter defined),
which in any way relate to HJC, HJFC and HNOIC, the business affairs or
operations of HJC, HJFC and HNOIC, the issuance by HJC and HJFC of any
securities, the Permanent Casino (as defined in the Original Lease
E-6
<PAGE>
Agreement), the Casino (as defined in the Amended and Restated Lease) or
the Temporary Casino (as defined in the Original Lease Agreement), including,
but not limited to, the licensing, leasing, financing, arranging, development,
construction, promotion, management, or operation thereof, or any matters
related to HJC, HJFC, HNOIC or any successor to any of them in connection with
the Permanent Casino, the Casino or the Temporary Casino, except to the extent
that any of the foregoing arises under any of the Plan Documents (as defined in
the Plan) on or after the Effective Date.
(e) Excluded Claims. "Excluded Claims" shall mean any Claims
related to or arising from (i) any obligations which have not been performed as
of the Effective Date pursuant to the Termination Agreement; (ii) any
obligations pursuant to Sections 5, 6, 7 and 8 of that certain Forbearance
Agreement dated as of ____________, 1997 by and among counsel for the City,
counsel for the RDC and counsel for HJC. Notwithstanding the foregoing, Excluded
Claims shall not include (i) any claim to revoke the Amended and Restated Lease,
the Amended and Restated GDA or the Amended and Restated OAP based on any
action, event or circumstance occurring prior to the Effective Date; (ii) any
claim affecting the rights of JCC under the Amended and Restated Lease, the
Amended and Restated GDA or the Amended and Restated OAP; or (iii) any claim
which is discharged, enjoined or otherwise released pursuant to Sections 5.7,
9.2 or 9.4 of the Plan.
(f) Excluded Grand Palais Parties. The "Excluded Grand Palais
Parties" shall mean any or all of Grand Palais and its successors and assigns,
and the shareholders, parents, subsidiaries (except the JCC Entities, HJC or
HJFC), officers, directors, employees, attorneys, financial advisors, investment
bankers, lenders, accountants, agents (pursuant to a written agency agreement)
and other representatives of each the foregoing when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns.
(g) Excluded HNOIC Parties. "Excluded HNOIC Parties" shall
mean any or all of HET, HOCI, HNOIC and HNOMC, and any or all of their
successors and assigns, and the shareholders, parents, subsidiaries (except the
JCC Entities, HJC or HJFC), officers, directors, employees, attorneys, financial
advisors, investment bankers, lenders, accountants, agents (pursuant to a
written agency agreement) and other representatives of each of the foregoing,
when acting in their respective representative capacities with respect to each
of the foregoing, and any or all of their successors and assigns.
(h) Excluded NOLDC Parties. The "Excluded NOLDC Parties" shall
mean NOLDC and any or all of its successors and assigns, and the shareholders,
parents, subsidiaries (except the JCC Entities, HJC, or HJFC) officers,
directors, employees, attorneys, financial advisors, investment bankers,
lenders, accountants, agents (pursuant to a written agency agreement) and other
representatives of each the foregoing, when acting in their respective
representative capacities with respect to each of the foregoing, and any or all
of their successors and assigns.
E-7
<PAGE>
(i) FNBC. "FNBC" shall mean the First National Bank of
Commerce and any or all of its successors and assigns.
(j) FNBC Releasees. "FNBC Releasees" shall mean FNBC and any
or all of its Affiliates, successors and assigns, and the shareholders, parents,
subsidiaries, officers, directors, employees, attorneys, financial advisors,
investment bankers, lenders, accountants, agents (pursuant to a written agency
agreement) and other representatives of each the foregoing when acting in their
respective representative capacities with respect to each of the foregoing, and
any or all of their successors and assigns, but in any event shall not include
any Excluded Grand Palais Party, Excluded HNOIC Party, Excluded NOLDC Party, or
the Bank/Underwriter Releasees.
(k) Grand Palais Releasees. The "Grand Palais Releasees" shall
mean Grand Palais and any or all of its Affiliates (except the JCC Entities, HJC
or HJFC), successors and assigns, and the shareholders, parents, subsidiaries
(except the JCC Entities, HJC or HJFC), officers, directors, employees,
attorneys, financial advisors, investment bankers, lenders, accountants, agents
(pursuant to a written agency agreement) and other representatives of each the
foregoing when acting in their respective representative capacities with respect
to each of the foregoing, and any or all of their successors and assigns, but in
any event shall not include any Excluded HNOIC Party, Excluded NOLDC Party, the
FNBC Releasees or the Bank/Underwriter Releasees.
(l) Grand Palais Releasors. The "Grand Palais Releasors" shall
mean Grand Palais and any or all of its Affiliates (except JCC, JCC Holding, HJC
or HJFC), successors and assigns, and each of the shareholders, parents,
subsidiaries (except JCC, JCC Holding, HJC or HJFC), officers, directors,
employees and agents (pursuant to a written agency agreement) of each of the
foregoing and any or all of their successors and assigns and all persons acting
or claiming through or under any or all of the foregoing, but shall not include
any Excluded HNOIC Party, Excluded NOLDC Party, the FNBC Releasees or the
Bank/Underwriter Releasees.
(m) HET Releasees. The "HET Releasees" shall mean any or all
of HET, HOCI, HNOIC and HNOMC and any or all of their Affiliates (except the JCC
Entities, HJC or HJFC), successors and assigns, and the shareholders, parents,
subsidiaries (except the JCC Entities, HJC or HJFC), officers, directors,
employees, attorneys, financial advisors, investment bankers, lenders,
accountants, agents (pursuant to a written agency agreement) and other
representatives of each the foregoing when acting in their respective
representative capacities with respect to the foregoing, and any or all of their
successors and assigns, but in any event shall not include any Excluded NOLDC
Party, Excluded Grand Palais Party, the FNBC Releasees or the Bank/Underwriter
Releasees.
(n) HET Releasors. The "HET Releasors" shall mean any or all
of HET, HOCI, HNOIC and HNOMC and any or all of their Affiliates (except JCC,
E-8
<PAGE>
JCC Holding, HJC or HJFC), successors and assigns, and each of the shareholders,
parents, subsidiaries (except JCC, JCC Holding, HJC or HJFC), officers,
directors, employees and agents (pursuant to a written agency agreement) of each
of the foregoing and any or all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing, but shall not
include any Excluded NOLDC Party, Excluded Grand Palais Party, the FNBC
Releasees or the Bank/Underwriter Releasees.
(o) HJC Releasees. The "HJC Releasees" shall mean any or all
of the JCC Entities, HJC, HJFC and any or all of their Affiliates, successors
and assigns, and the shareholders, parents, subsidiaries, of each of the
foregoing, and the officers, directors, employees, attorneys, financial
advisors, investment bankers, lenders, accountants, agents (pursuant to a
written agency agreement) and other representatives of each the foregoing when
acting in their respective representative capacities with respect to each of the
foregoing, and any or all of their successors and assigns, but in any event
shall not include any Excluded HNOIC Party, Excluded NOLDC Party, Excluded Grand
Palais Party, the FNBC Releasees or the Bank/Underwriter Releasees.
(p) HJC Releasors. The "HJC Releasors" shall mean any or all
of JCC, JCC Holding, HJC, HJFC and any or all of their Affiliates, successors
and assigns, and each of the shareholders, parents, subsidiaries, officers,
directors, employees and agents (pursuant to a written agency agreement) of each
of the foregoing and any or all of their successors and assigns and all persons
acting or claiming through or under any or all of the foregoing, but shall not
include any Excluded HNOIC Party, Excluded NOLDC Party, Excluded Grand Palais
Party, the FNBC Releasees or the Bank/Underwriter Releasees.
(q) JCC Entities. The "JCC Entities" shall mean JCC, JCC
Holding Company, a Delaware corporation, and any of all of their Affiliates,
successors and assigns, and each of the shareholders, parents, subsidiaries.
(r) NOLDC Releasees. The "NOLDC Releasees" shall mean NOLDC
and any or all of its Affiliates (except the JCC Entities, HJC or HJFC),
successors and assigns, and the shareholders, parents, subsidiaries (except the
JCC Entities, HJC or HJFC), officers, directors, employees, attorneys, financial
advisors, investment bankers, lenders, accountants, agents (pursuant to a
written agency agreement) and other representatives of each the foregoing when
acting in their respective representative capacities with respect to each of the
foregoing, and any or all of their successors and assigns, but in any event
shall not include any Excluded HNOIC Party, Excluded Grand Palais Party, the
FNBC Releasees or the Bank/Underwriter Releasees.
(s) NOLDC Releasors. The "NOLDC Releasors" shall mean NOLDC
and any or all of its Affiliates (except JCC, JCC Holding, HJC or HJFC),
successors and assigns, and each of the shareholders, parents, subsidiaries
(except the JCC Entities, HJC or HJFC), officers, directors, employees and
agents (pursuant to a written agency agreement) of each of the foregoing and any
or all of their successors and assigns and all persons acting or claiming
through
E-9
<PAGE>
or under any or all of the foregoing, but shall not include any Excluded
HNOIC Party, Excluded Grand Palais Party, the FNBC Releasees or the
Bank/Underwriter Releasees.
(t) Unknown Claims. "Unknown Claims" means any and all Claims
including, without limitation, any Claim which any of the parties hereto does
not know or even suspect to exist in his, her or its favor at the time of the
giving of the release which, if known by him, her or it might have affected his,
her or its decision regarding the releases. Each party hereto acknowledges that
he, she or it might hereafter discover facts in addition to or different from
those which he, she or it now knows or believes to be true with respect to the
subject matter of the matters released, but each such party shall be deemed to
have fully, finally and forever settled and released any and all Claims whether
known or unknown, suspected or unsuspected, contingent or non-contingent, which
now exist or heretofore have existed upon any theory of law or equity whether
such theory of law or equity now exists or comes into existence in the future.
Unknown Claims shall not include any Claim to the extent that such Claim arises
from or is based upon any act, omission, event, circumstance or other matter
occurring after the Effective Date.
4. Representations and Warranties. In connection herewith, the parties
hereto each represent and warrant that the following are true and correct:
(a) Such party has due power and authority to enter into this
Agreement and perform its obligations hereunder.
(b) Such party has taken the requisite action, corporate or
otherwise, necessary to authorize the execution and delivery of this Agreement,
and this Agreement has been duly executed and delivered by such party and
constitutes its valid and binding obligation, enforceable against such entity in
accordance with its terms.
(c) All consents, approvals and waivers from governmental
authorities and other parties necessary for such party to enter into this
Agreement have been obtained.
(d) To the best of such party's knowledge, no suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person or legal or administrative proceeding has been instituted or
threatened that questions the validity or legality of this Agreement.
(e) This Agreement does not conflict with any law or
regulation applicable to, or with any term or provision of any agreement binding
upon, such party.
(f) Such party has not currently assigned or transferred any
interest in any of the released Claims and such party will not in the future,
assign or transfer any interest in any such released Claim.
(g) Such party acknowledges that it (i) has been given the
opportunity to review all information and documents with respect to the Claims
released hereby prior to entering
E-10
<PAGE>
into this Agreement; (ii) has made an independent investigation in making
its decision to enter into this Agreement; and (iii) is not relying on any
statements or representations by any other party hereto in entering into this
Agreement other than as expressly set forth in the Plan or the Amended and
Restated Lease.
5. Amendments. Any amendment to this Agreement may only be made and
shall only be effective upon written approval of all parties hereto.
6. Entire Agreement. This Agreement, as written, contains all of the
terms and conditions agreed between the parties, relating to the transactions
covered by this Agreement, it being agreed that all understandings and
agreements heretofore and between the parties on the subject matter hereof are
merged in this Agreement which alone fully and completely expresses their
agreement and understanding with regard to the subject matter contained in this
Agreement.
7. Voluntary Agreement. The parties hereto have entered into this
Agreement freely and voluntarily, without coercion, duress, distress, or undue
influence by any other persons or such person's respective shareholders,
directors, officers, partners, agents or employees.
8. Advice From Counsel. The parties hereto understand that this
Agreement may affect legal rights. The parties hereto represent that they have
received legal advice from counsel of their choice in connection with the
negotiation and execution of this Agreement and are satisfied with their legal
counsel and the advice received.
9. Governing Law. This Agreement shall be governed and construed in
accordance with the internal substantive laws of the State of Louisiana,
regardless of the laws which might otherwise govern under Louisiana's or other
applicable concepts of conflicts of law.
10. Captions. The headings on the sections in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
11. Interpretation of Words. A masculine pronoun wherever used in this
Agreement shall be construed to include the feminine or neuter where
appropriate. The singular form wherever used in this Agreement shall be
construed to include the plural where appropriate.
12. No Admission of Wrongdoing. Nothing in this Agreement shall be
construed as an admission of liability or fault on the part of any HJC Releasee,
HET Releasee, NOLDC Releasee, Grand Palais Releasee, Bank/Underwriter Releasee,
the FNBC Releasees, or any City Releasee.
13. Successors and Assigns. Subject to the provisions of Section 1(b)
hereof, this Agreement shall be binding upon the City Releasors, HJC Releasors,
HET Releasors, NOLDC Releasors, Grand Palais Releasors, and each of their
respective successors and assigns and inure to the benefit of the City
Releasees, HJC Releasees, HET Releasees, NOLDC Releasees, Grand Palais
Releasees, Bank/Underwriter Releasees, the FNBC Releasees, and each of their
respective successors and assigns.
E-11
<PAGE>
14. Severability. If any provision of this Agreement or the application
of such provision to any person, entity or circumstance, shall be held invalid,
the remainder of this Agreement, or the application of such provision to
persons, entities or circumstances other than those to which it is held invalid,
shall not be affected thereby; provided that the parties shall attempt to
reformulate such invalid provision to give effect to such portions thereof as
may be valid without defeating the intent of such provision.
15. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, notwithstanding that all of the parties
hereto are not signatories to the original or the same counterpart. In addition,
this Agreement may contain more than one counterpart of the signature pages, and
this Agreement may be executed by the affixing of the signatures of each of the
parties hereto to one of such counterpart signature pages; all of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
16. Pending Litigation. On the Effective Date, the parties hereto
hereby agree to cause the dismissal with prejudice of the action styled City of
New Orleans and Rivergate Development Corporation v. Harrah's Entertainment,
Inc. (f/k/a The Promus Companies, Inc.), Grand Palais Casino, Inc., Embassy
Suites, Inc., First National Bank of Commerce and Ronald A. Lenczycki, Adversary
No. 96-1031, now pending in the Bankruptcy Court by signing and filing an
appropriate order to dismiss with prejudice as to the City and RDC. With respect
to the action styled Harrah's Jazz Company v. A&D Maintenance Service, et al.,
Adversary Proceeding No. 97-1174, pending in the United States Bankruptcy Court
for the Eastern District of Louisiana, the parties hereto hereby agree to cause
the dismissal with prejudice as to all defendants (including, without
limitation, the City and the RDC) except (i) the Non-Participating Banks, and
(ii) any Underwriter which fails to execute and deliver the Bank/Underwriter
Release (as such terms are defined in the Plan) (the defendants identified in
clauses "(i)" and "(ii)," together, the "Remaining Defendants"), as to which
Remaining Defendants there shall be an appropriate reservation of rights by JCC,
by signing and filing an appropriate order to dismiss with prejudice as to all
defendants (including, without limitation, the City and the RDC) except the
Remaining Defendants and by causing the aforesaid order to be entered as soon as
is reasonably practicable after the Effective Date. Such dismissal shall
encompass all claims, counterclaims, cross-claims, third party claims, motions
or other demands brought by the parties hereto with respect to all defendants
(including, without limitation, the City and the RDC) except the Remaining
Defendants. JCC shall defend, indemnify and hold harmless the City and the RDC
from any claims, counterclaims, cross-claims, third party claims, motions or
other demands brought by any of the Remaining Defendants in accordance with
section 5.9 of the Plan.
[SIGNATURE PAGE FOLLOWS]
E-12
<PAGE>
IN WITNESS WHEREOF, the undersigned hereto have duly executed
this Agreement as of the date first written above.
RIVERGATE DEVELOPMENT CORPORATION, a
Louisiana public benefit corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CITY OF NEW ORLEANS
By:
----------------------------------
Name: Marc H. Morial
Title: Mayor
HARRAH'S JAZZ COMPANY, a Louisiana general
partnership
By: HARRAH'S NEW ORLEANS
INVESTMENT COMPANY, a Nevada
corporation, General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By: NEW ORLEANS/LOUISIANA
DEVELOPMENT CORPORATION, a
Louisiana corporation, General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By: GRAND PALAIS CASINO, INC., a
Delaware corporation, General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
E-13
<PAGE>
JAZZ CASINO COMPANY, L.L.C., a Louisiana
limited liability company
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S OPERATING COMPANY, INC., a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
GRAND PALAIS CASINO, INC., a Delaware
corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
NEW ORLEANS/LOUISIANA DEVELOPMENT
CORPORATION, a Louisiana corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S JAZZ FINANCE CORPORATION, a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-14
<PAGE>
HARRAH'S NEW ORLEANS INVESTMENT
COMPANY, a Nevada corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S NEW ORLEANS MANAGEMENT
COMPANY, a Nevada corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRAH'S ENTERTAINMENT, INC., a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-15
<PAGE>
Exhibit F
September 3, 1998
Terms and Conditions of
Pre-Petition Bank Participation in Reorganization Financing
<PAGE>
Exhibit F
September 3, 1998
Harrah's Jazz Company
Jazz Casino Company, L.L.C.
Terms and Conditions of
Pre-petition Bank Participation in Reorganization Financing
I. Terms of Bank Financing As described in the attached Jazz Casino
Facility Company, L.L.C. Bank Financing Indicative
Term Sheet (the "Bank Financing").
II. Terms of Debtors' Chapter 11 The following shall be effectuated through
Plan (the "Plan") pre-solicitation modifications to the
proposed Plan satisfactory to the banks
participating in the Bank Financing
("Participating Banks"):
A. Allowance of Pre-Petition Claims of Participating Banks (the "Allowed
Claims of Participating Bank Claims") will be granted final
Banks allowance in the Plan in an amount equal to:
(i) with respect to any
Participating Bank which participated in the
pre-petition standby letter of credit issued
by Bankers Trust Company and previously
drawn by the beneficiary (Broadmoor), its
respective share of the amount drawn
($5,000,000) plus unpaid interest and fees
accrued through the effective date of the
Plan (the "Effective Date");
(ii) with respect to any
Participating Bank which participated in the
Standby LC S-10269, which remains undrawn by
the beneficiary (City of New Orleans), its
respective share of accrued unpaid fees
through the Effective Date;
(iii) with respect to Bankers Trust
Company as Administrative Agent, all unpaid
facing fees arising under the Old Bank
Credit Agreement through the Effective Date;
and
F-1
<PAGE>
(iv) with respect to any
Participating Bank which purchases on the
Effective Date additional Convertible Junior
Subordinated Debentures equal to the amount
allowed under this clause (iv), its share of
the fees and expenses of Wachtel, Lipton,
Rosen & Katz as restructuring counsel of the
Administrative Agent (but excluding any fees
and expenses incurred in connection with the
Bank Financing). On the Effective Date, the
Administrative Agent will pay the Allowed
Bank Claims from the Withheld Funds (as
defined in the Plan).
B. Purchase of Convertible On the Effective Date, each Participating
Junior Subordinated Bank will purchase Convertible Junior
Debentures Subordinated Debentures in a principal
amount equal to the sum of (x) its pro rata
share of $11,000,000 based on the ratio of
the fees and expenses paid to it in
connection with the existing credit facility
to the aggregate fees and expenses paid to
all Participating Banks in connection with
such credit facility, plus (y) with respect
to any Participating Bank which elects to
have the portion of its claim described in
Paragraph II. A (iv) above allowed and paid,
the amount of such allowed claim. Any
remaining withheld Funds will be paid over
to First National Bank of Commerce as Old
Bank Collateral Agent to be distributed
according to the Plan.
C. Waiver of all Claims of Except as set forth in paragraph A, all
Participating Banks Participating Banks and affiliated members
of the Bank/Underwriter Group shall waive
any Claims against any Debtor or partners of
Harrah's Jazz Company.
F-2
<PAGE>
D. Settlement and Releases Participating Banks shall exchange releases
with the estate of each Debtor, the Debtors
Group, the HET Group, the Bondholder
Committee Group, the City Group, the State
Group, the NOLDC Group and the Grand Palais
Group, FNBC and other parties receiving
releases from the Debtor on terms no less
favorable than those being granted under the
Plan to Harrah's Entertainment, Inc. ("HET")
or such other parties. Injunctive and other
protections granted to Released Parties (as
defined in the Plan) shall apply on the same
terms to Participating Banks. All of the
foregoing shall be effectuated to obtain the
broadest possible preclusive effect with
respect to all potential derivative or
direct claims.
Participating Banks shall be included in the
group of persons whose collective release is
being solicited from bondholders through the
separate consensual release mechanism.
Consideration for release of Participating
Banks will be, among other things, the
Release Pool stock to be contributed by
HET.)
Any claims against non-participating banks
or other non-settling parties will be
retained by the reorganized debtor, with a
judgment reduction and indemnity mechanism
for settled parties in respect of such
claims.
III. Reimbursement of Attorneys' JCC shall reimburse the Participating Banks
Fees and Expenses up to $750,000 in attorneys' fees plus
out-of-pocket expenses of White & Case,
including local counsel fees, incurred in
connection with the negotiation and
documentation of the Bank Financing.
F-3
<PAGE>
Exhibit A
(to Terms and Conditions of Pre-Petition Bank Participation in
Reorganization Financing)
F-A-1
<PAGE>
JAZZ CASINO COMPANY, L.L.C. - BANK FINANCING INDICATIVE TERM SHEET
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Bank Financing Indicative Term Sheet does not constitute (and shall not be
construed as) a commitment on the part of, or an engagement of, Bankers Trust
Company ("BTCo") or any of its affiliates and creates no obligation or liability
on the part of BTCo or any of its affiliates in connection therewith. If the
Credit Facility contemplated by this Bank Financing Indicative Term Sheet is
entered into, all terms and conditions not expressly (or to the extent not
expressly) described herein will be subject to the agreement of BTCo and the
respective other parties thereto.
I. Credit Facilities
A. Revolving Credit Facility
Amount: $25 million, with a $10 million letter of
credit sublimit.
Maturity Date: January 31, 2006
Scheduled Amortization: None.
Credit Support: Harrah's Entertainment, Inc. ("HET") and
Harrah's Operating Company, Inc. ("HOC")
shall provide a joint and several
unconditional payment guaranty and/or "put"
agreement. Such guaranty and/or put
agreement shall contain terms and conditions
satisfactory to Bankers Trust Company
("BTCo") and HET, including incorporating by
reference the covenants contained in HET's
existing senior bank credit facility.
F-A-2
<PAGE>
Security: To include a deed of trust and security
interest in the following collateral (the
"Collateral"): the real property comprising
the Casino Project, including improvements
hereafter completed; all personal property,
FF&E, contract rights, equipment leases,
intangibles and all other assets of the
Borrower and its subsidiaries now owned or
hereafter acquired, but excluding, in each
case to the extent not permitted to be
assigned pursuant to applicable law, the
Casino Operating Contract and gross revenue
share payments to the State of Louisiana.
Ranking: The Revolving Credit Facility will be a
senior secured obligation of the Borrower,
ranking junior (except for the right to
receive and retain payments pursuant to HET
and/or HOC guarantees and put agreements) to
the $60 million A Term Loans (as hereinafter
defined), having a senior lien priority to
the $151.5 million B Term Loans (as
hereinafter defined) and the $187.5 million
of Bonds due 2009, which bonds include
contingent payments and the related new
contingent bonds (collectively, the
"Bonds"), and having a senior lien priority
to all other existing and future
indebtedness of the Borrower. The Revolving
Credit Facility will also have a junior
priority to the lien in favor of HET and HOC
as guarantors of the Minimum Payment, as
described in Section II below in the
paragraph entitled "Prior Security."
F-A-3
<PAGE>
Interest Rate: Loans under the Revolving Credit Facility
will bear interest at a rate per annum which
is (i) so long as the "Carry Obligations"
under the Completion Guarantee referenced
below remain guaranteed pursuant to the
terms of such Completion Guarantee and in
accordance with the terms thereof (with the
first date upon which such Carry Obligations
are no longer so guaranteed being herein
called the "Carry Obligation Termination
Date"), at the applicable HET interest rate
and (ii) at all times from and after the
Carry Obligation Termination Date, at a rate
per annum equal to the sum of (a) Libor +
2.50%, plus, if applicable, (b) any
increase, not to exceed 1.0%, in the
applicable interest rate charged under HET's
existing senior bank credit facility ("HET
interest rate") above the HET interest rate
in effect on the Effective Date, except that
default interest rates will apply to
past-due amounts.
B. Senior Secured Term Loans
(the "A Term Loans")
Amount: $60.0 million; with Tranche A-1 comprising
$10 million (the "A-1 Term Loans"), Tranche
A-2 comprising $20 million (the "A-2 Term
Loans"), and Tranche A-3 comprising $30
million (the "A-3 Term Loans").
Maturity: Tranches A-1 and A-2 - January 31, 2006
Tranche A-3 - April 30, 2005
Scheduled Amortization: As shown on Annex I attached hereto. See the
paragraph entitled "Amortization" in Section
II below.
Credit Support: HET and HOC shall jointly and severally
provide an unconditional payment guaranty
of, and/or "put" agreement with respect to,
all amounts owing under Tranche A-2 of the A
Term Loan Facility. Such guarantee and/or
put agreement shall contain terms and
conditions satisfactory to BTCo and HET,
including incorporating by reference the
covenants contained in HET's existing senior
bank credit facility.
F-A-4
<PAGE>
Security: To include a deed of trust and security
interest in the Collateral.
Ranking: The A Term Loans will be senior secured
obligations of the Borrower, ranking senior
to all existing and future indebtedness of
the Borrower (including the Revolving Credit
Facility, the B Term Loans and the Bonds),
but ranking junior to the lien in favor of
HET and HOC as guarantors of the Minimum
Payment, as described in Section II below in
the paragraph entitled "Prior Security."
Interest Rate: Loans under Tranche A-1 and Tranche A-3 will
bear interest at Libor + 1.0%, and loans
under Tranche A-2 will bear interest at a
rate per annum equal to the sum or (i) Libor
+ 2.50%, plus, if applicable, (ii) any
increase, not to exceed 1.0%, in the
applicable HET interest rate above the HET
interest rate in effect on the Effective
Date, except that in all cases default
interest rates will apply to past due
amounts.
C. Secured Term Loans (the "B
Term Loans")
Amount: $151.5 million; with Tranche B-1 comprising
$30 million (the "B-1 Term Loans") and
Tranche B-2 comprising $121.5 million
(the "B-2 Term Loans").
Maturity: January 31, 2006
Scheduled Amortization: As shown on Annex I. See the paragraph
entitled "Amortization" in Section II below.
Credit Support: HET and HOC shall jointly and severally
provide an unconditional payment guaranty
of, and/or "put" agreement with respect to,
all of the amounts owing under Tranche B-2
of the B Term Loan Facility. Such guaranty
and/or put agreement shall contain terms and
conditions satisfactory to BTCo and HET,
including incorporating by reference the
covenants contained in HET's existing senior
bank credit facility.
F-A-5
<PAGE>
Security: To include a deed of trust and security
interest in the Collateral.
Ranking: The B Term Loan Facility will be
subordinated to the A Term Loan Facility
and, in lien priority, to the Revolving
Credit Facility, pari passu with the Bonds,
and senior in lien priority to all other
existing and future senior indebtedness of
the Borrower. The B Term Loan Facility will
also have a junior priority to the lien in
favor of HET and HOC as guarantors of the
Minimum Payment, as described in Section II
below in the paragraph entitled "Prior
Security."
Interest Rate: Loans under Tranche B-1 will bear interest
at Libor + 2.50%. The loans under Tranche
B-2 will bear interest at a rate per annum
equal to (i) Libor + 2.50%, plus, if
applicable, (ii) any increase, not to exceed
1.0%, in the applicable HET interest rate
above the HET interest rate in effect on the
Effective Date on the portion of the loans
under Tranche B-2 in excess of $10 million
and in the case of the first $10 million of
such loans at any time outstanding, the rate
will be the applicable HET interest rate,
except that in all cases default interest
rates will apply to past-due amounts.
II. Terms Applicable to All
Credit Facilities
Prior Security: The security interests in favor of the
Revolving Credit Facility, A Term Loans and
B Term Loans will be subject to a prior
security interest in favor of HET and HOC as
guarantors of the Minimum Payment, as
described in Exhibit B to the Plan of
Reorganization. Intercreditor arrangements
involving this prior security interest are
to be determined.
Borrower A newly formed company, Jazz Casino Company,
L.L.C., to operate the former Harrah's Jazz
Casino project in New Orleans (the "Company"
or the "Borrower")
F-A-6
<PAGE>
Amortization The maturity date for each Tranche of the
Credit Facilities, as well as the
amortization schedule on Annex I attached
hereto, were based on a projected Effective
Date of October 31, 1998 and a projected
casino opening date of October 31, 1999. The
Credit Agreement will set forth an
amortization schedule based on the actual
Effective Date and the projected casino
opening date as of the Effective Date.
The scheduled amortization payments shown on
Annex I attached hereto (x) with respect to
the A-1 and A-2 Term Loans, shall be applied
pro rata to the outstanding A-1 and A-2 Term
Loans (based upon the relative outstanding
principal amounts thereof) and (y) with
respect to the B Term Loans, shall be
applied, first, to the repayment of all then
outstanding Tranche B-1 Term Loans and,
after all Tranche B-1 Term Loans have been
repaid in full, to outstanding Tranche B-2
Term Loans.
Amortization payments with respect to the
B-2 Term Loans shall be applied first to the
portion of the B-2 Term Loans as to which a
credit support fee is payable until such
portion is fully repaid and thereafter to
the balance of the B-2 Term Loans as to
which no credit support fee is payable.
For the first six PIK periods, the scheduled
quarterly amortizations listed in Annex I
attached hereto shall be deferred for the
corresponding PIK period if (i) the
payment-in-kind feature applicable to the
Bonds is exercised such that payments in
kind have been made for the semi-annual
periods ending prior to such quarterly
amortization date, (ii) HNOMC has deferred
base management fees for the corresponding
PIK period, (iii) HNOMC has deferred
incentive management fees for the
corresponding PIK periods, and (iv) HET has
deferred its fees for providing a guaranty
to the LGCB for the corresponding PIK
period.
F-A-7
<PAGE>
If EBITDA is less than $28.5 million for the
twelve month period ending one month prior
to each semi-annual bond interest payment
date beginning with the fourth year after
the Effective Date, the bonds will receive
PIK interest, management fees will be
deferred, scheduled amortization of bank
principal will be deferred (in no case
beyond the scheduled maturity date) and the
HET guarantee fee will be deferred.
At such time as EBITDA exceeds $65 million,
any deferred base management fees and
deferred guaranty fees may be repaid pro
rata out of available cash flow remaining
after application of Excess Cash Flow as set
forth in the paragraph entitled "Priorities
within Credit Facilities and Application of
Excess Cash Flow" in Section II below, and
at such time as EBITDA exceeds $75 million,
after payment of any deferred base fees and
deferred guaranty fees, any deferred
incentive management fees may also be repaid
pro rata out of available cash flow
remaining after application of Excess Cash
Flow as set forth in the paragraph entitled
"Priorities within Credit Facilities and
Application of Excess Cash Flow" in Section
II below.
Use of Proceeds/Funding: To complete, in all material respects, the
Casino Project (the "Casino Project") to be
developed in accordance with the Plans and
Specifications, Budget and Timetable (to be
defined in the Credit Agreement), provided
that the timing of the availability of the
Revolving Credit Facility and limitations on
the uses of the proceeds thereof, in each
case satisfactory to BTCo, shall be
provided.
The A-1, A-3 and the B-1 Term Loans must be
drawn at closing, without subsequent funding
or disbursement conditions, and the proceeds
may be used for the project or held for
future use by Borrower. Any such proceeds
being held for future use will constitute
Collateral.
F-A-8
<PAGE>
After the funding of A-1, A-3 and B-1 Term
Loans, drawings of the B-2 and A-2 Term
Loans and extensions of credit pursuant to
the Revolving Credit Facility will be
subject to conditions precedent that there
exist no default under Section 10.01
(payment) or Section 10.06 (bankruptcy) or
under the Bank Completion Guarantee or the
HET/HOC Guaranty and Loan Purchase Agreement
and that all representations in the Bank
Completion Guarantee and the HET/HOC
Guaranty and Loan Purchase Agreement remain
true and correct in all material respects;
provided that HET shall have an irrevocable
and unconditional obligation to fund any
undrawn amounts under the Bank Completion
Guarantee, subject to its terms.
Tranche B-2 must be drawn prior to Tranche
A-2. If any of Tranche B-2 remains undrawn
on completion of the Casino Project, on such
completion it shall be drawn, to the extent
Tranche A-1 Loans are then outstanding, to
pay down Tranche A-1. If any of Tranche B-2
remains undrawn (or will remain undrawn)
after the actions required by the
immediately preceding sentence are taken,
outstanding Tranche B-1 Loans in an
aggregate amount equal to such undrawn
amount shall be converted into Tranche B-2
Loans.
Upfront Fee: None.
F-A-9
<PAGE>
Completion Guarantee: HET and HOC will also guarantee completion
of the Casino Project in conformity with the
Plans and Specifications, the Budget and the
Timetable. If the Company has insufficient
funds to complete the Casino Project in
accordance with the Plans, HET and HOC will
be jointly and severally obligated to
promptly contribute at the time of such
insufficiency, in the form of junior
subordinated debt maturing in not less than
11 years, all amounts, in cash, necessary to
permit completion of the Casino Project. The
Completion Guarantee will terminate on the
date on which the Casino Project is
completed in all material respects. The
Completion Guarantee shall contain terms and
provisions which are substantially the same
as the provisions of the other Completion
Guarantees furnished by HET or HOC, as the
case may be, in respect of the Casino
Project and, in any event, shall be required
to be satisfactory to BTCo and HET.
HET/JCC Agreement: The Credit Agreement shall contain waiver
and release provisions regarding any
non-renewal of any Guaranty to the LGCB by
HET and HOCI in accordance with the terms of
the HET/JCC Agreement or non-renewal by HET
and HOCI of the HET/JCC Agreement after
March 31, 2004.
Priorities within Credit For purposes of allocating payments among
Facilities and Application the holders of the Term Loans and the
of Excess Cash Flow: lenders pursuant to the Revolving Credit
Facility only, all Excess Cash Flow (to be
defined in the Credit Agreement) will first
be allocated to repayment of Tranches A-1
and A-2 on a pro rata basis until Tranches
A-1 and A-2 have been repaid in full.
Scheduled amortization and other payments
made in respect of the Term Loan Facilities
and Revolving Credit Facility (excluding
payments pursuant to the payment guarantees
and put agreements referenced above) will
first be allocated to any unpaid amounts
F-A-10
<PAGE>
which are then due and payable with respect
to Tranches A and B-1. Payments shall be
allocated to amounts then due and payable
pursuant to the Revolving Credit Facility
and Tranche B-2 only if all amounts then due
and payable with respect to Tranches A and
B-1 have been paid in full.
After Tranches A-1 and A-2 are repaid,
mandatory prepayments resulting from
application of Excess Cash Flow and other
proceeds (excluding scheduled amortization)
shall be applied:
(i) if any principal amortization has been
deferred as set forth above, 75% of Excess
Cash Flow and such other proceeds shall be
applied to first to Tranche B-1 and second
to Tranche A-3 to the extent of the total of
all of such deferred principal amortization
(i.e. the total of deferred amortization on
Tranches A-1, A-2, A-3, B-1, and B-2); and
(ii) otherwise, and after the application of
clause (i) above, 50% of Excess Cash Flow
and such other proceeds shall be applied pro
rata to Tranches A-3, B-1 and B-2 until an
agreed Threshold Amount (determined based on
projected cash flow) for the respective
fiscal year has been so applied to Tranche
B-2. At such time as an aggregate amount
equal to the agreed Threshold Amount has
been so applied in any fiscal year, Excess
Cash Flow shall be applied first to Tranche
B-1, second to Tranche A-3 and third to
Tranche B-2.
The B-1 Term Loans and the B-2 Term Loans
will be secured equally and ratably with the
Bonds, and if, as a result of any
distribution pursuant to the security
arrangements or pursuant to a bankruptcy or
other similar proceeding with respect to the
Borrower or in
F-A-11
<PAGE>
other similar circumstances, amounts are
distributed in respect of Tranche B-2 (other
than payments pursuant to the payment
guarantees and put agreements referenced
above), then the holders of the B-2 Term
Loans shall (and shall agree to) turn such
amounts over to the holders of the B-1 Term
Loans until all amounts owing with respect
to the B-1 Term Loans are repaid in full.
The Credit Agreement and the payment
guarantees and/or put agreements in respect
of the B-2 Term Loans shall contain
subrogation and other provisions
satisfactory to BTCo acknowledging and
agreeing to the foregoing.
Administrative Agent's Fee: $100,000 payable annually in arrears.
Credit Support Fee: So long as the Revolving Credit Facility,
A-2 Term Loans or B-2 Term Loans are
entitled to the respective payment
guarantees and/or put agreements provided by
HET and/or HOC as described above, the
respective Banks shall agree that, from
interest payments actually received by them
in respect of the Revolving Credit Facility,
A-2 Term Loans or B-2 Term Loans, as the
case may be, HET shall be paid a fee equal
to 2% per annum on the outstanding principal
amount of Loans and/or stated amount of
letters of credit outstanding from time to
time pursuant to the Revolving Credit
Facility and Tranche A-2 and B-2 Term Loans
(in the case of B-2 Term Loans, only to the
extent of the aggregate outstanding
principal amount thereof from time to time
is in excess of $10 million); provided,
however, that (i) the fee described above
with respect to the credit support provided
for the Revolving Credit Facility shall only
accrue from and after the occurrence of the
Carry Obligation Termination Date; (ii) for
any time period in which the HET applicable
margin increases by more than 1.0% per annum
above the HET applicable margin in effect on
the Effective Date, the credit support fee
paid by the
F-A-12
<PAGE>
Banks shall decrease by .01% for each such
.01% increase in the HET applicable margin
(in excess of 1.0% over the HET applicable
margin in effect on the Effective Date)
until such credit support fee is reduced to
zero; (iii) for any time period in which the
HET applicable margin decreases below the
HET applicable margin in effect on the
Effective Date, the credit support fee paid
by the Banks shall increase by .01% for each
such .01% decrease in HET applicable margin
(below the HET applicable margin in effect
on the Effective Date).
So long as the Revolving Credit Facility,
A-2 Term Loans or B-2 Term Loans are
entitled to the respective payment
guarantees and/or put agreements provided by
HET and/or HOC as described above, JCC shall
pay a credit support fee equal to .75% per
annum on the outstanding principal amount of
Loans and/or stated amount of letters of
credit outstanding from time to time
pursuant to the Revolving Credit Facility
and Tranche A-2 and B-2 Term Loans (in the
case of B-2 Term Loans, only to the extent
of the aggregate outstanding principal
amount thereof from time to time is in
excess of $10 million); provided, however,
that (i) the fee described above with
respect to the credit support provided for
the Revolving Credit Facility shall only
accrue from and after the occurrence of the
Carry Obligation Termination Date; (ii) for
any time period in which the HET applicable
margin increases by more than .25% per annum
above the HET applicable margin in effect on
the Effective Date, the credit support fee
paid by JCC shall decrease by .01% for each
such .01% increase in the HET applicable
margin (in excess of .25% over the HET
applicable margin in effect on the Effective
Date) until such credit support fee is
reduced to zero.
F-A-13
<PAGE>
Covenants: The Credit Facilities will contain covenants
(which will apply equally to each of the
Credit Facilities) usual and customary for a
financing of this nature.
Intercreditor Agreement: The Administrative Agent (on behalf of the
lenders) and the trustee for the Bonds shall
enter into an intercreditor agreement with a
collateral agent regarding the Collateral
and the rights and remedies of the various
classes of lenders with respect thereto (the
"Intercreditor Agreement"), which
Intercreditor Agreement shall be in form and
substance satisfactory to BTCo. The
Intercreditor Agreement will provide HET
certain limited secured creditor voting
rights if HET is called on its payment
guaranty.
F-A-14
<PAGE>
Miscellaneous: The Credit Facilities will be documented
pursuant to mutually acceptable definitive
loan and collateral documents, including a
Credit Agreement and a satisfactory
Intercreditor Agreement. The Credit
Agreement will contain customary
representations, warranties, covenants,
events of default and other provisions.
Conditions Precedent will include as
conditions precedent to the closing date,
among other things:
(i) BTCo's satisfaction with Harrah's Jazz
Company's Plan of Reorganization, including
without limitation the releases to be
provided in connection therewith.
(ii) All necessary governmental and third
party consents and approvals have been
obtained (including, without limitation, all
approvals of the Bankruptcy Court having
jurisdiction over Harrah's Jazz Company's
bankruptcy case, all approvals by the LGCB
or its successor agency and all necessary
approvals by the people of Louisiana and
Orleans Parish).
(iii) Lender's satisfaction with the Plans
and Specifications, Budget, Timetable and
other Casino Project documents.
The Credit Agreement will include provisions
for:
(i) Payment of any Libor breakage costs,
capital adequacy charges and any applicable
taxes by the Borrower;
(ii) Regular reports as to the progress of
construction of the Casino Project;
(iii) Regular furnishing of unaudited
quarterly and audited annual financial
statements of the Borrower, monthly detailed
operating reports and other reports;
F-A-15
<PAGE>
(iv) Furnishing of the same reports with
respect to HET and its subsidiaries as are
required under the HET Bank Facility;
(v) Indemnification of Lenders as to all
third-party claims relative to the Credit
Facilities (except as to matters involving
the gross negligence or willful misconduct
of Lenders) and environmental law matters;
(vi) Application of New York law (except
certain security documentation that the
lenders determine should be governed by
Louisiana law) and waiver of jury trial; and
(vii) Assignments to customary eligible
assignees permitted with consent of the
Borrower, the Administrative Agent and, in
the case of assignments of interests in the
Revolving Credit Facility and A-2 or B-2
Term Loans, HET (none of which consents
shall be unreasonably withheld), subject to
$5.0 million minimum. No consents will be
required for assignment to existing Lenders
or after an event of default. Participations
permitted without consent of the Borrower or
Administrative Agent, subject to customary
limitations.
(viii) An event of default due to a change
of control of HET as a result of the Board
of HET not consisting of a majority of
Continuing Directors.
(ix) The change of control event of default
in the bank credit agreement will also occur
if HET does not retain at least 51% of the
Class B stock prior to the Transition Date
and 20% of the JCC Holding stock after the
Transition Date.
F-A-16
<PAGE>
(x) The Continuing Director event of default
or the change in ownership of Class B Stock
Event of Default will be deemed cured in
respect of the debt acquired by HET as
guarantor if the guaranteed bank debt is
acquired by HET as guarantor; provided that
such deemed cure shall not affect the bank
debt guaranteed by HET unless and until HET
as guarantor acquires such bank debt and in
any event shall not affect the bank debt not
guaranteed by HET.
(xi) The change of the Casino Manager or
loss of the Harrah's name shall be an event
of default in the Bank Credit Agreement.
Requisite Lenders: Lenders comprising more than 50% of total
commitments under the Credit Facilities;
provided that commitments held by HET, HOC
or any other affiliate of the Borrower shall
be excluded.
Expense and Indemnity Provisions: JCC shall reimburse the Banks up to $750,000
in attorneys' fees plus out-of-pocket
expenses of White & Case, including local
counsel fees, incurred in connection with
the negotiation and documentation of the
Revolving Credit Facility, the A Term Loans
and the B Term Loans.
F-A-17
<PAGE>
ANNEX I TO JAZZ CASINO COMPANY, L.L.C. - BANK FINANCING INDICATIVE TERM SHEET
<TABLE>
<CAPTION>
$30 million $30 million $151.5 million
A-1 and A-2 A-3 Term Loan B Term Loans Total
Term Loans
<S> <C> <C> <C> <C>
July 31, 2000 $100,000 $1,000,000 $1,500,000 $ 2,600,000
October 31, 2000 $100,000 $1,000,000 $1,500,000 $ 2,600,000
January 31, 2001 $100,000 $1,000,000 $1,500,000 $ 2,600,000
April 30, 2001 $100,000 $1,000,000 $1,500,000 $ 2,600,000
July 31, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
October 31, 2001 $100,000 $1,500,000 $2,500,000 $ 4,100,000
January 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
April 30, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
July 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
October 31, 2002 $100,000 $1,500,000 $2,500,000 $ 4,100,000
January 31, 2003 $100,000 $1,500,000 $2,500,000 $ 4,100,000
April 30, 2003 $100,000 $1,500,000 $2,500,000 $ 4,100,000
July 31, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
October 31, 2003 $100,000 $1,750,000 $2,500,000 $ 4,350,000
January 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
April 30, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
July 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
October 31, 2004 $100,000 $1,750,000 $2,500,000 $ 4,350,000
January 31, 2005 $100,000 $1,750,000 $2,500,000 $ 4,350,000
April 30, 2005 $100,000 $1,750,000 $2,500,000 $ 4,350,000
July 31, 2005 $100,000 $0 $4,250,000 $ 4,350,000
October 31, 2005 $100,000 $0 $4,250,000 $ 4,350,000
January 31, 2006 $27,800,000 $0 $97,000,000 $124,800,000
Total $30,000,000 $30,000,000 $151,500,000 $211,500,000
</TABLE>
Note: See the paragraph entitled "Amortization" in Section II of the Bank
Financing Indicative Term Sheet to which this Annex I is attached.
F-A-18
<PAGE>
Exhibit G
September 3, 1998
Terms and Conditions of
Underwriters Participation in Reorganization Financing
<PAGE>
Exhibit G
September 3, 1998
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Harrah's New Orleans Investment Co.
Terms and Conditions of
Underwriters Participation in Reorganization Financing
I. Terms of Underwriters' Donaldson, Lufkin & Jenrette Securities
Financing: Corporation ("DLJ"), Salomon Brothers Inc.
("Salomon") and BT Securities Corporation
("BT Securities") (collectively in their
capacity as underwriters for HJC and HNOIC,
the "Underwriters") subject to the
conditions set forth below agree to purchase
approximately $15 million face value of
subordinated notes (the "Notes") on mutually
acceptable terms and conditions as set forth
in the attached term sheet. The aggregate
amount of the Notes to be purchased by the
Underwriters shall be equal to the aggregate
fees, and expenses paid or reimbursed to the
Underwriters.
II. Terms of the Debtors' The following shall be effectuated through
Chapter 11 Plan (the pre-solicitation modifications to the
"Plan"): proposed Plan satisfactory to the
Underwriters:
A. Waiver of Other The Underwriters agree to waive all of their
Claims: claims against any or all of the Debtors and
the HJC Partners.
G-1
<PAGE>
B. Settlement and The Underwriters shall exchange mutual
Releases: releases with the estate of each Debtor, the
Debtors Group, the HET Group, the Bondholder
Committee Group, the City Group, the State
Group, the NOLDC Group and the Grand Palais
Group, FNBC and other parties receiving
releases from the Debtors, on terms no less
favorable than those being granted under the
Plan to Harrah's Entertainment, Inc. ("HET")
and such other parties. Injunctive and other
protections granted to Released Parties (as
defined in the Plan) shall apply on the same
terms to the Underwriters. All of the
foregoing shall be effectuated to obtain the
broadest possible preclusive effect with
respect to all potential derivative or
direct claims.
The Underwriters shall be included in the
group of persons whose collective release is
being solicited from bondholders through the
separate consensual release mechanism.
(Note: consideration for release of the
Underwriters is, inter alia, the Release
Pool stock to be contributed by HET.) Any
claims against non-participating banks or
other non-settling parties will be retained
by the reorganized debtor, with a judgment
reduction and indemnity mechanism for
settled parties in respect of such claims.
III. No Reimbursement of Each Underwriter shall bear all fees and
Attorneys' Fees and expenses of attorneys acting on its behalf
Expenses related to the original financing, the Exit
Financing (through the closing) and these
bankruptcy cases.
G-2
<PAGE>
FOR DISCUSSION PURPOSES ONLY
Term Sheet for
Convertible Junior Subordinated Debentures (the "Debentures")
To Be Issued By
Jazz Casino Company, L.L.C.
Issuer Jazz Casino Company, L.L.C. ("Jazz")
Principal Amount Approximately $26.637 million
Approximately $15 million purchased by the
Underwriters or their affiliates and
approximately $11.0 million to be purchased
by Bankers Trust. The aggregate amount of
the Debentures to be purchased by the
Underwriters shall be equal to the aggregate
fees, and expenses paid or reimbursed to the
Underwriters.
Purchase Price Par.
Maturity 6 months following the scheduled maturity of
the $187.5 million of new contingent bonds
(the "Contingent Bonds") to be issued to
existing bondholders.
Interest 8.0% per annum payable semi-annually either
in cash, or at the option of Jazz, in whole
or in part, in additional Debentures (i) at
any time during the first five full years
following the issuance of the Debentures,
and (ii) at any time thereafter if during
the immediately preceding full interest
period on the Contingent Bonds, no
contingent interest was paid on the
Contingent Bonds.
Amortization None.
G-3
<PAGE>
Rank Subordinated to the A Term Loan, the B Term
Loan, the Working Capital Facility, the New
Bonds and the New Contingent Bonds, as well
as all debt which would constitute Senior
Debt to the foregoing. The Debentures will,
however, be senior to the repayment of
Jazz's obligations under the Completion Loan
and any other amounts advanced by Harrah's
Entertainment under its completion
obligations.
Collateral None.
Convertible At the Conversion Price in whole or in part,
at any time after October 1, 2002 at the
option of the holder into Class A Common
Stock of Jazz.
Conversion Price $25.00 per share of Class A Common Stock,
subject to anti-dilution and other
appropriate adjustments (which has been
calculated using the 10,000,000 shares of
Class A and Class B Common Stock which are
expected to be issued on the Effective Date,
and a target total market value of such
shares of Class A and Class B common stock
equal to $250.0 million).
Redeemable At the option of Jazz, (i) at any time at
par plus accrued interest in cash, or (ii)
at any time during the 12 months prior to
the maturity of the Debentures, at par in
whole or in part in shares of Class A Common
Stock at the Conversion Price per share if
the Conversion Price per share is greater
than the Current Market Price per share. The
"Current Market Price" of the Class A Common
Stock as of any date will be defined as the
volume-weighted average of the closing
trading or bid prices of the Class A common
stock for the 10 consecutive trading days
preceding such date, with customary
modification if the Class A common stock is
not then traded.
Amortization None required prior to maturity.
Credit Support None.
Purpose Construction financing and other corporate
purposes.
G-4
<PAGE>
Fees None, other than the payment of interest.
Covenants None, other than payment of interest.
Conditions, Representations and None other than basic legality and
Warranties enforceability of the Debentures.
Issuance The Debentures are to be purchased by the
Underwriters or their affiliates and the
banks on the Effective Date of the HJC
Bankruptcy. Jazz to provide demand
registration rights to permit one
underwritten secondary offering of these
Debentures if requested by the initial
holders of the restricted Debentures in an
amount no less than $5 million and no sooner
than October 1, 2002.
Jazz will file the reports required under
Section 13(a) or 15(d) of the 1934 Act and
the rules and regulations adopted by the SEC
thereunder. Upon the request of any holder
of Debentures, Jazz will (i) make publicly
available such information as is necessary
to permit sales pursuant to Rule 144 under
the 1933 Act, (ii) deliver such information
as is necessary to permit sales pursuant to
Rule 144A under the 1933 Act, and (iii) take
such further action as is reasonable under
the circumstances to enable such holder to
sell its Debentures without registration
under the 1933 Act. Upon the request of any
holder of Debentures, Jazz will deliver to
such holder a written statement as to
whether it has complied with such
requirements.
Acknowledgment The Indenture for the Convertible
Subordinated Debenture will contain certain
waiver and release provisions regarding any
non-renewal of the Guaranty (as defined in
the HET/JCC Agreement between HET, HOCI and
JCC in favor of the LGCB) in accordance with
the terms of the HET/JCC Agreement or
non-renewal of the HET/JCC Agreement after
March 31, 2004
G-5
<PAGE>
EXHIBIT H
FNBC SETTLEMENT AGREEMENT
<PAGE>
[LETTERHEAD]
WRITER'S DIRECT DIAL NO. (504) 556-4132
WRITER'S DIRECT E-MAIL NO. [email protected]
NEW ORLEANS, LOUISIANA
APRIL 24, 1997
<TABLE>
<S> <C>
William H. Patrick, III, Esq. Rudy J. Cerone, Esq.
A Professional Law Corporation McGlinchey, Stafford, Lang
365 Canal Street, Suite 2800 643 Magazine Street
New Orleans, LA 70130 New Orleans, LA 70130
Re: Harrah's Jazz Company
Docket No. 95-14545
United States Bankruptcy Court
Eastern District of Louisiana
</TABLE>
Dear Billy and Rudy:
This is to confirm the agreement of Harrah's Jazz Company ("HJC"), Harrah's
Entertainment, Inc. ("HET"), the Official Bondholders' Committee (the
"Committee"), Bankers Trust Company and First National Bank of Commerce
("FNBC"). The consent of these parties is reflected by the respective signatures
below. In reliance upon this agreement, FNBC will withdraw its pending
objections to the Third Amended Joint Plan of Reorganization under Chapter 11 of
the Bankruptcy Code (the "Plan") and will support its confirmation. All
capitalized terms used below have the meanings ascribed to them in the Plan. The
agreement is as follows:
1. FNBC shall purchase $757,150.00 of Convertible Junior Subordinated
Debentures on the Effective Date. Other than this purchase FNBC shall not be
required to participate in any loans or other forms of financing of Jazz
Casino Company;
2. FNBC shall be authorized to retain $100,000 plus accrued interest until the
later of (i) one year from the Effective Date or (ii) the resolution by
final unappealable judgment of any litigation filed against FNBC within one
year of the Effective Date to which FNBC is entitled to indemnity under the
Old Bank Credit Documents and/or Old Bond Documents, at which time the
principal and accrued interest shall be released to Jazz Casino Corporation.
These funds will be pledged to secure the indemnity obligations of HJC under
the Old Bank Credit Documents and/or Old Bond Documents which will be
assumed by Jazz Casino Company as an IN REM obligation limited solely to the
funds held by FNBC;
3. In addition, FNBC shall be entitled to the unsecured indemnity obligations
for costs of defense only as granted in Old Bond Documents and/or Old Bank
Credit Documents from Jazz Casino Company;
4. All services rendered by FNBC as Old Bank Collateral Agent, Old Indenture
Predecessor Trustee and Old Indenture Predecessor Collateral Agent to
consummate the Plan shall be for the account of Jazz Casino Company and
payable to FNBC pursuant to Section 6.18 of the Plan;
5. FNBC shall be included as a Released Party under the Plan;
6. All claims of FNBC for indemnity and the security interests which secure
them (including the charging lien against distributions to the Bondholders)
pursuant to the Old Bank Credit Documents and/or Old Bond Documents shall be
canceled and extinguished on the Effective Date except as provided in
paragraphs 2 and 3, above;
7. The undrawn Standby Letter of Credit S-10269 issued by Bankers Trust Company
in the amount of $1,500,000 in favor of the City of New Orleans shall be
canceled under the Plan as of the Effective Date.
<PAGE>
8. The Unsecured and Secured Claim of FNBC (I.E., Classes A.7 and A.3) shall be
allowed finally and shall be paid in accordance with the attached Exhibit A.
9. All reasonable attorney's fees and expenses of Liskow & Lewis up to
$275,000.00 through the date hereof and other costs (including expert
witness fees and expenses) up to $75,000 through the date hereof and all
reasonable attorney's fees and expenses of Phelps Dunbar, L.L.P. which FNBC
has incurred in connection with this bankruptcy case through the Effective
Date for which it has not received prior reimbursement from HJC shall be
paid by JCC upon approval by the Bankruptcy Court. With regard to these
attorney's fees and expenses and other costs which HJC acknowledges as being
an obligation to be paid, the "reasonableness" of the fees charged by FNBC's
attorneys shall be the only unresolved issue. Upon resolution of any such
dispute whether by agreement or otherwise, FNBC shall be paid by JCC on or
as soon as practicable after the Effective Date.
10. The parties agree to file mutually acceptable modifications to the Plan and
other pleadings as are necessary to effectuate this Agreement.
11. The FNBC shall receive the indemnity from HET in the form attached hereto as
Exhibit B.
12. This agreement may be executed in multiple counterparts, which when executed
by all the parties hereto shall constitute a single agreement.
<TABLE>
<S> <C>
Very truly yours,
Liskow & Lewis
By:
-----------------------------------------
Philip K. Jones, Jr.
Phelps, Dunbar
By:
-----------------------------------------
S. Ault Hootsell, III
Co-counsel for First National Bank of
Commerce
Agreed to:
HARRAH'S JAZZ COMPANY HARRAH'S ENTERTAINMENT INC.
By: By:
-------------------------------------- -----------------------------------------
OFFICIAL BONDHOLDERS' COMMITTEE BANKERS TRUST COMPANY
By: By:
-------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
(EXHIBIT "A")
EASTERN DISTRICT OF LOUISIANA
<TABLE>
<S> <C> <C>
IN RE: * CASE NO. 95-14545-TMB
HARRAH'S JAZZ COMPANY, * CHAPTER 11
DEBTOR *
* * * * * * * * * * * * * * * * * * * * * * * * *
IN RE: * CASE NO. 95-14544-TMB
HARRAH'S JAZZ FINANCE CORP., * CHAPTER 11
DEBTOR *
* * * * * * * * * * * * * * * * * * * * * * * * * *
</TABLE>
AGREED ORDER
BEFORE THIS COURT, on this 28th day of April, 1997, at 10:00 a.m., came on
for hearing the objections of Harrah's Jazz Company ("HJC") and Harrah's Jazz
Finance Corp. ("HJFC") to Proof of Claim No. 563 filed by First National Bank of
Commerce ("FNBC") in the HJC bankruptcy and Proof of Claim No. 66 filed by FNBC
in the HJFC bankruptcy (the "Proofs of Claim"), as set forth in HJC's Sixth Set
of Objections to Claims, as amended by the Debtors' Amended Objections to Claims
of First National Bank of Commerce or, in the Alternative, Motion for Estimation
and Valuation of Claims.
By Agreement, HJC, HJFC and the Official Bondholders Committee have agreed
to withdraw their objections to the Proofs of Claim;(1) the parties' stipulation
with regard to the treatment of FNBC's unsecured claims and secured letter of
credit claims is set forth below. (Defined terms below shall have the same
meaning ascribed to them under the Third Amended Joint Plan of Reorganization
and Chapter 11 of the Bankruptcy Code, as modified.)
It appearing to this Court that there exists just cause for the entry of the
Order, as presented:
IT IS ORDERED that the Unsecured Claim of FNBC be, and hereby is, Allowed
finally and shall not be subject to any further objections.
IT IS FURTHER ORDERED that FNBC's Unsecured Claim be, and is hereby,
established in the amount of $42,317.06, and shall be paid under the Plan in
accordance with Clause A7--General Unsecured Claims.
IT IS FURTHER ORDERED that the Secured Claims of FNBC under (i) the
prepetition standby letter of credit issued by Bankers Trust Company in the
amount of $5,000,000 and previously drawn in full by Broadmoor as the
beneficiary (the "$5mm L/C") and the (ii) undrawn Standby Letter of Credit
S-10269 issued by Bankers Trust Company in the amount of $1,500,000 in favor of
the City (the "$1.5mm L/C") shall be, and hereby is, Allowed finally and shall
not be subject to any further objection.
IT IS FURTHER ORDERED that FNBC's Allowed Secured Claims under the $5mm L/C
and $1.5mm L/C be, and hereby are, established in an amount equal to (A) FNBC's
participation interest (5.7142866%) in the $5mm L/C ($285,714.28), plus all
unpaid interest thereon (at the nondefault rate specified in the Old Bank Credit
Documents); and (B) FNBC's participation interest (5.714866%) in the unpaid fees
in respect of both the $5mm L/C and the $1.5mm L/C through the Effective Date.
- ------------------------
(1) The Official Bondholders Committee, which filed a response in support of
HJC's Objections to the Proofs of Claim, joins in this Agreed Order.
2
<PAGE>
IT IS FURTHER ORDERED that, in addition to the amounts established under the
preceding paragraph, to extent that the FNBC's obligations under the $1.5mm L/C
are not terminated and/or cancelled as a result of the occurrence of the
Effective Date, FNBC's allowed Secured Claims under the $1.5mm L/C shall also
include (i) FNBC's participation interest (5.7142866%) in any draws under the
$1.5mm L/C, (ii) interest thereon and (iii) any additional fees or other amounts
to which FNBC may be entitled under the $1.5mm L/C subsequent to the Effective
Date.
IT IS FURTHER ORDERED that FNBC's Secured Claims under the $5mm L/C and
$1.5mm L/C shall be paid on the Effective Date. Such payment shall be made first
from the Withheld Funds by the Administrative Agent, and second, if the Withheld
Funds are insufficient, by the payment of cash by JCC.
IT IS FURTHER ORDERED that FNBC's Proofs of Claim be, and hereby are,
amended to reflect the terms of, and are superseded by, this Agreed Order and
the April 24, 1997 Letter Agreement by and between FNBC, HJC, the Bondholders
Committee and Bankers Trust Company.
IT IS FURTHER ORDERED that HJC's, HJFC's and the Bondholders Committee's
objections to FNBC's Proofs of Claim, as so amended herein, be, and hereby are,
withdrawn.
NEW ORLEANS, LOUISIANA, this day of April, 1997.
--------------------------------------
UNITED STATES BANKRUPTCY JUDGE
3
<PAGE>
AGREED
- ---------------------------------------------
WILLIAM HARDY PATRICK III
A PROFESSIONAL CORPORATION
10636 Linkwood Court
Baton Rouge, LA 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
ATTORNEYS FOR HARRAH'S JAZZ COMPANY
AND HARRAH'S JAZZ FINANCE CORP.
- ---------------------------------------------
RUDY J. CERONE, ESQ.
FRANK MARTIN, ESQ.
MCGLINCHEY STAFFORD LANG
643 Magazine Street
New Orleans, LA 70130
Telephone: (504) 586-1200
ATTORNEYS FOR THE OFFICIAL
BONDHOLDERS COMMITTEE
PHELPS DUNBAR, L.L.P.
- ---------------------------------------------
S. AULT HOOTSELL III (#17630)
Thirtieth Floor, Texaco Center
400 Poydras Street
New Orleans, LA 70130-3245
Telephone: (504) 566-1311
ATTORNEYS FOR FIRST NATIONAL
BANK OF COMMERCE
4
<PAGE>
LATHAM & WATKINS
ATTORNEYS AT LAW
SEARS TOWER, SUITE 5800
CHICAGO, ILLINOIS 60606
TELEPHONE (312) 875-7700
FAX (312) 993-9767
APRIL 24, 1997
(EXHIBIT "B")
First National Bank of Commerce
c/o Philip K. Jones
Liskow & Lewis
One Shell Square, 50th Floor
New Orleans, LA 70139-5001
and
Mr. S. Ault Hootsell III
Phelps Dunbar, L.L.P.
Texaco Center, 30th Floor
400 Poydras Street
New Orleans, LA 70130-3245
Re: Harrah's Entertainment, Inc. Indemnity Agreement
Dear Kirk and Ault:
On behalf of my client, Harrah's Entertainment, Inc. ("HET"), I am writing
to confirm HET's agreement with regard to several matters for First National
Bank of Commerce ("FNBC").
First, HET hereby confirms that the Stipulation and Agreement of Settlement
executed on April 16, 1997 ("the Stipulation and Agreement of Settlement"),
resolving that certain action captioned IN RE HARRAH'S ENTERTAINMENT SECURITIES
LITIGATION, Master File No. 95-3925, pending before the United States District
Court for the Eastern District of Louisiana (the "Class Action") includes a
release of FNBC on the same terms as are provided for the release of HET.
Second, HET agrees that it will not seek to either eliminate or limit in any
way the release provided to FNBC in the Stipulation and Agreement of Settlement,
including any amendments or modifications thereof, before final approval by the
United States Distric Court.
Third, HET agrees that it shall assure that FNBC is included as a released
party under any amendments or modifications to the Stipulation and Agreement of
Settlement, or any other settlement of the Class Action, on the same terms
provided for the release of HET, without any consideration being paid by FNBC.
Fourth, HET agrees to indemnify and defend FNBC from and against any and all
losses suffered by FNBC if the Stipulation and Agreement of Settlement,
including any amendments or modifications thereof, or any other settlement of
the Class Action, is approved by the United States District Court (i) with the
inclusion of HET, but not FNBC, as a released party therein, or (ii) which
contains a release of HET which is broader than the release provided therein to
FNBC.
This Agreement shall be effective upon the occurence of the Effective Date
of (and as defined in) the debtor's Third Amended Joint Plan of Reorganization
under Chapter 11 of the Bankruptcy Code, as modified (the "Plan"), in the
consolidated bankruptcies captioned, "In the matter of Harrah's Jazz Company,"
Case No. 95-14544, before the United States Bankruptcy Court, Eastern District
of Louisiana. HET acknowledges and agrees that upon the occurrence of the
Effective Date, as defined in the Plan,
<PAGE>
HET shall be liable for any breach of this Agreement by HET that has occurred
after April 24, 1997, and for all damages sustained by FNBC.
Sincerely,
Richard A Levy
APPROVED AND AGREED:
Harrah's Entertainment, Inc.
By:
- --------------------------------------
Name:
Title:
Date:
- ------------------------------------
<PAGE>
Exhibit I
Term Sheet
September 3, 1998
Development Services Agreement
<PAGE>
Exhibit I
September 3, 1998
Term Sheet
Development Services Agreement
This term sheet outlines the principal terms proposed for inclusion in that
certain Development Services Agreement to be entered into by and between Jazz
Casino Company, L.L.C., a Louisiana limited liability company (the "Company"),
JCC Development Company, L.L.C., a Louisiana limited liability company ("JCC
Development"), CP Development, L.L.C., a Louisiana limited liability company
("CPD") and FP Development, L.L.C., a Louisiana limited liability company
("FPD") (the Company, JCC Development, CPD and FPD are referred to collectively
herein as the "Owners") and Harrah's Operating Company Inc. ("HOCI") (the
"Development Services Agreement"). This term sheet is attached to and
incorporated into that certain plan of reorganization in the bankruptcy
proceedings of Harrah's Jazz Company, a Louisiana general partnership (the
"Plan").
1. Documentation. This term sheet is not intended to be a legally binding
agreement but is intended to be the basis for negotiation of definitive
agreements related to the Development Services Agreement in connection with the
Plan. As set forth more fully in the Plan, if the Plan is not consummated within
the time period specified therein, the parties shall have no further obligations
to pursue the matters described herein.
2. Development Services. Under the Development Services Agreement, the Owners,
or any of them, may request that HOCI or an affiliate of HOCI perform any or all
of the following project development and management functions (the "Development
Services") with respect to the Casino, the second floor of the Casino, the
Fulton Street property and the 3CP property (the "Development Properties"):
(a) researching and investigating potential uses for the Development
Properties;
(b) identifying and exploring the professional qualifications of
individuals and companies who may be capable of performing services in
connection with designing, determining appropriate uses for and
developing the Development Properties;
(c) assisting in the evaluation of options as to the Development
Properties; or
(d) assisting in or coordinating activities involved in the development of
the Development Properties.
3. Payment For Development Services. If any Owner requests that HOCI or an
affiliate of HOCI perform any Development Services and HOCI accepts such
request, such Owner shall pay
I-1
<PAGE>
to HOCI or any affiliate of HOCI development
services fees or reimbursements of costs and expenses at market rates as agreed
between such Owner and HOCI prior to HOCI or its affiliate undertaking from time
to time any Development Services.
4. Indemnities
(a) The Owners agree to defend, indemnify and save HOCI and all affiliates
of HOCI completely harmless in respect to any action, cause of action,
suit, debt, cost, expense, claim, or demand whatsoever brought by any
third party at law or in equity, in connection with the performance by
HOCI or any affiliates of HOCI of any and all of its obligations under
the Development Services Agreement, including without limitation, any
damage or injury whatsoever to any employees or other persons,
entities or property arising out of the use, administration, or
control of the Development Properties during the term of the
Development Services Agreement, which defense, indemnity, and holding
harmless shall continue notwithstanding the termination of the
Development Services Agreement with respect to any act or occurrence
preceding such termination; provided, however, that in no event shall
the defense, indemnity and holding harmless extend to any action,
cause of action, suit, debt, cost, expense, claim, or demand caused by
the willful misconduct or gross negligence of HOCI or any affiliate of
HOCI, or to any action taken by HOCI or any affiliate of HOCI in
violation of or outside the provisions of the Development Services
Agreement.
(b) HOCI shall defend, indemnify and save the Owners completely harmless
in respect to any action, cause of action, suit, debt, cost, expense,
claim, or demand whatsoever brought or asserted by any third party, at
law or in equity, arising by way of the gross negligence or willful
misconduct of HOCI or any affiliate of HOCI in connection with the
performance by HOCI or any affiliate of HOCI of any and all of HOCI's
obligations under the Development Services Agreement, which indemnity
shall continue notwithstanding the termination of the Development
Services Agreement with respect to any act or occurrence preceding
such termination.
I-2
<PAGE>
Exhibit T.3E.23
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
- ------------------------------------ :
SUMMARY OF DEBTORS' SIXTH AMENDED JOINT DISCLOSURE STATEMENT
PURSUANT TO SECTIONS 1125 AND 1127 OF THE BANKRUPTCY CODE
Dated: September 3, 1998
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
WILLIAM HARDY PATRICK, III
A Professional Corporation
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
<PAGE>
HELLER, DRAPER, HAYDEN &
HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
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>
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 Summary of the Debtors' Sixth Amended Joint Disclosure Statement (the
"Summary 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. This Summary Disclosure Statement is
submitted in connection with (i) the solicitation of acceptances or rejections
of the Debtors' Third Amended Joint Plan of Reorganization, As Modified Through
September 3, 1998 (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.
1. Prior Versions of the Plan of Reorganization
This Summary Disclosure Statement describes modifications to prior
versions of the Plan which were formulated at earlier stages of these
proceedings, as follows:
- The Original Plan. On February 28, 1997, the Proponents filed their
Third Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code dated as of February 26, 1997. In March 1997, copies of
that plan and Debtors' Third Amended Joint Disclosure Statement
Pursuant to Section 1125 of the Bankruptcy Code were distributed to all
holders of Claims against the Debtors that voted on the Original Plan
(as defined below), and all holders of Claims against the Debtors were
sent ballots on which they could indicate their acceptance or rejection
of that plan. That plan received the requisite votes for acceptance by
creditors and, as voted upon by all affected parties entitled to vote
and as modified in connection with the hearing on confirmation, was
confirmed by the Bankruptcy Court on April 28, 1997. As so modified and
confirmed, it is referred to herein as the "Original Plan." The
effectiveness of the Original Plan was conditioned upon, among other
things, the execution and delivery of a modified casino operating
contract and all necessary approvals, if any, from the State of
Louisiana (the "State"). Although the Louisiana Gaming Control Board
("LGCB") approved a modified casino operating contract (the "April 29,
1997 Casino Operating Contract") and related documents in connection
with the Original Plan, the State took 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.
Consequently, the Original Plan did not take effect.
- The June 26, 1997 Plan. In light of the State legislature's adjournment
without action on the April 29, 1997 Casino Operating Contract, on June
26, 1997, the Proponents sought Bankruptcy Court approval to modify the
Original Plan to provide, among other things, for the assumption of
HJC's existing casino operating contract without any amendments
requiring the approval of the LGCB or the State legislature (the "June
26, 1997 Plan"). In July 1997, the Debtors' Fourth Amended Summary
Joint Disclosure Statement Pursuant to Sections 1125 and 1127 of the
Bankruptcy Code, was circulated to all parties entitled to vote on the
June 26, 1997 Plan. The State and the LGCB vigorously opposed the June
26, 1997 Plan. Negotiations ensued with the various parties in interest
in the reorganization, including the official committee of Bondholders
appointed in HJC's Chapter 11 case (the "Bondholders Committee") and a
syndicate of banks led by Bankers Trust Company, HJC's primary
<PAGE>
prepetition lenders. Because those negotiations ultimately proved
successful, the June 26, 1997 Plan was not presented to the Bankruptcy
Court for a final hearing on confirmation.
- The January 29, 1998 Plan. Negotiations among the various parties in
interest resulted in the preparation of revisions to the April 29, 1997
Casino Operating Contract, incorporating, among other things, a
guaranty of the annual minimum payments due under an amended casino
operating contract. On December 9, 1997, the LGCB unanimously approved
an amended version of the casino operating contract (as so modified,
the "December 9, 1997 Casino Operating Contract") for submission to the
Governor of the State with the request that he submit it to the State
legislature for its approval. Shortly thereafter, the Proponents
proposed a new set of modifications to the Original Plan which
abandoned the modifications proposed in the June 26, 1997 Plan. In
December 1997, copies of the Original Plan as so modified, the Debtors'
Fifth Amended Joint Disclosure Statement Pursuant to Sections 1125 and
1127 of the Bankruptcy Code (the "Fifth Disclosure Statement"), and
ballots affording creditors an opportunity to change votes previously
cast with respect to the Original Plan were distributed to all holders
of claims entitled to vote on such plan. With the requisite number of
votes for acceptance continuing to be received in support of the
Original Plan as so modified, the Bankruptcy Court entered an order on
January 29, 1998 approving those modifications, as well as certain
other immaterial modifications, and confirming the Third Amended Joint
Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, As
Modified Through January 29, 1998 (the "January 29, 1998 Plan").
- The Existing Plan. The effectiveness of the January 29, 1998 Plan, like
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. The Governor initially
indicated that he would call a special session of the State legislature
commencing in the latter part of March 1998 which would consider, among
other things, approval of the December 9, 1997 Casino Operating
Contract. However, after receiving an opinion from the State Attorney
General that the LGCB has independent authority (without the necessity
of any legislative approval) to renegotiate and execute a renegotiated
casino operating contract, the Governor did not include consideration
of the December 9, 1997 Casino Operating Contract in his call for the
special session. Instead, on March 20, 1998, the LGCB approved an
amended and renegotiated Casino Operating Contract among HJC, Jazz
Casino Company, L.L.C. ("JCC") and the State, by and through the LGCB,
with certain minor modifications (the "Amended and Renegotiated Casino
Operating Contract"), subject to, among other conditions, the condition
that the Louisiana Supreme Court render a final, non-appealable
judgment that the LGCB, acting on its own, is the proper party and has
the legal authority to enter into the Amended and Renegotiated Casino
Operating Contract with HJC or JCC on behalf of the State and the LGCB,
without the specific approval of the Governor or the State legislature.
On May 15, 1998, the Louisiana Supreme Court issued a decision
confirming that the LGCB has the independent authority to renegotiate
and execute the Amended and Renegotiated Casino Operating Contract
without seeking gubernatorial or legislative approval. Following the
LGCB's approval of the Amended and Renegotiated Casino Operating
Contract without the State legislature's approval, the Proponents filed
a motion to approve further modifications to the January 29, 1998 Plan
to take into account, among other things, the LGCB's approval of the
Amended and Renegotiated Casino Operating Contract without legislative
approval. These modifications were deemed by the Bankruptcy Court to be
immaterial in nature and therefore were not circulated for a vote. On
April 6, 1998, the Bankruptcy Court entered an order confirming the
Third Amended Joint Plan of
2
<PAGE>
Reorganization Under Chapter 11 of the Bankruptcy Code, As Modified
Through April 6, 1998 (the "Existing Plan").
2. The Third Amended Joint Plan of Reorganization, As Modified Through
September 3, 1998
The effectiveness of the Existing Plan, as with its predecessors, is
conditioned upon, among other things, the execution and delivery of an amended
casino operating contract and all necessary approvals, if any, from the State.
While the LGCB has given its approval to the Amended and Renegotiated Casino
Operating Contract, that approval will not become final, and the contract cannot
be executed, until, among other things, the LGCB makes a determination that
certain of the owners and operators of the land-based casino facility to be
located on the site of the former Rivergate Convention Center in New Orleans
(the "Casino") are suitable under applicable rules and regulations, and until
certain regulatory rulings and approvals are received. In order to make this
determination, the LGCB requires that the successors to the Debtors, the manager
of the Casino and certain of their respective shareholders, members, officers
and directors undergo extensive investigation and review by the LGCB and State
Police, including character and financial responsibility review, to be found
suitable and qualified under the Louisiana Economic Development and Gaming Act
and to obtain the requisite authorizations, permits and licenses. That process
has commenced. The Chairman of the LGCB has stated that the process is targeted
to conclude in October of 1998, although there can be no assurance that the
process will be completed by such time.
In the meantime, and in connection with preparations for consummation
of the Existing Plan, HJC commenced a review of the partially-constructed Casino
and adjoining parking lot structure to determine (i) what redesign of the Casino
interior will be necessitated by the dedication of the second floor of the
Casino building to non-gaming uses and by the other changes in the configuration
of the Casino contemplated by the Amended and Renegotiated Casino Operating
Contract, (ii) whether to upgrade the Casino design and gaming equipment to meet
more intense competition from other gaming facilities such as those located on
the Mississippi Gulf Coast, (iii) the extent of physical deterioration to the
Casino structure and adjoining parking facilities during the three year
reorganization process, and (iv) the extent to which increased costs resulting
from proposed modifications and additions might be offset by changes to the
Casino design. In addition, HJC obtained estimates for the costs of the various
modifications to the Casino project under consideration, and also determined
what costs have and will be occasioned by the delay in the reorganization
process resulting from the developments described above.
Upon determining what modifications and additions to the Casino project
are reasonably necessary to its success, what other changes to the Casino design
should be made to partially offset the increased costs occasioned by such
modifications and the delay in the reorganization process, and after
negotiations with the Bondholders Committee and Bankers Trust Company, HJC
revised its budget for completion and operation of the Casino. HJC's revised
budget for completion of the Casino project contemplates, among its components,
$25 million in additional new financing and the cancellation of all accrued
interest on the DIP Loan (as defined below). HJC also has determined that it is
desirable to modify the corporate structure of the reorganized entities emerging
from bankruptcy. Due to the above modifications, HJC proposes to modify the
Confirmed Plan as set forth in the proposed Third Amended Joint Plan of
Reorganization, As Modified Through September 3, 1998, (the "Plan"), a copy of
which, along with the exhibits thereto, is attached to this Summary Disclosure
Statement as Exhibit "A." A copy of the Financial Forecast is also attached to
this Summary Disclosure Statement as Exhibit "B." The Liquidation Analysis
(Exhibit "C" to prior disclosure statements) is not attached hereto as it has
not changed from that used in connection with prior versions of the Plan.
Specifically, since the time the Liquidation Analysis attached as Exhibit "C" to
the Original Plan was prepared, assets available for distribution have not
increased, while the
3
<PAGE>
DIP Lender's (as defined below) superpriority claim has increased. Thus, if the
analysis were updated, the only change in the distributions that would result
would be that a smaller portion of the DIP Lender's claim would be satisfied;
anticipated distributions with respect to the other claims would not change. In
light of the lack of effect on the results of the analysis with respect to all
creditors except the DIP Lender (which is an affiliate of HET, one of the
Proponents), and in the interest of preserving the assets of the Debtors'
estates, the Proponents have not commissioned the preparation of an updated
liquidation analysis.
3. Summary of Modifications Proposed in The Plan
The primary modifications made in the Existing Plan and contained in
the accompanying Plan are as follows:
- Modified Credit Facilities for the Reorganized Debtors. The Existing
Plan contemplates that the reorganized Debtors would obtain term loans
in the aggregate amount of up to $199 million; $60 million under the A
Term Loan and $139 million under the B Term Loan. (The Fifth Disclosure
Statement distributed in connection with the solicitation of votes on
the January 29, 1998 Plan contemplated $135 million (as opposed to $139
million) of availability under the B Term Loan. In connection with
confirmation of the January 29, 1998 Plan, the Bankruptcy Court
determined that the $4 million variance was immaterial and did not
require further disclosure to creditors at that time.)
Under the Plan, the B Term Loan will be increased by $12.5 million to a
total of $151.5 million, resulting in the availability of up to $211.5
million in term loans. In addition, the junior subordinated credit
facility provided by HET will be increased by $12.5 million, resulting
in a total of $22.5 million of availability under the junior
subordinated credit facility. The amount available to JCC under the
working capital facility will remain at $25 million.
- Cancellation of Claim For Accrued DIP Interest. The Plan provides that
the claim of Harrah's Operating Company, Inc., a Delaware corporation
and a wholly-owned subsidiary of HET ("HOCI"), or an affiliate thereof
(collectively, the "DIP Lender") for accrued interest on the
debtor-in-possession loans (the "DIP Loan"), which was to be paid under
the Existing Plan to the DIP Lender on the Effective Date, will be
cancelled on the Effective Date. The Proponents estimate that this will
provide JCC with in excess of $5 million in additional funds on the
Effective Date.
- Revised Corporate Structure. The Plan provides that except for certain
excess real property not needed for development and operation of the
Casino, all the assets of the Debtors will vest in JCC. Title to the
excess real property owned by the Debtors at 3 Canal Place in New
Orleans, adjacent to the Canal Place shopping center, will vest in CP
Development, L.L.C. ("CP Development"), a newly formed Louisiana
limited liability company, and title to the excess real property owned
by the Debtors on Fulton and Poydras Streets in New Orleans, adjacent
to the Casino parking facilities, will vest in FP Development, L.L.C.
("FP Development"), a newly formed Louisiana limited liability company.
CP Development and FP Development 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"). Pending the
resolution of certain structural considerations, JCC Intermediary may
be eliminated prior to the Effective Date. In such case, CP Development
and FP Development will be wholly-owned by JCC
4
<PAGE>
Holding.
Under the Plan, treatment of allowed Claims of general, unsecured
creditors and former employees at the Casino remain unchanged.
4. Voting Procedure
Because some or all of the modifications to the Existing Plan proposed
in the accompanying Plan might be regarded as material, the Proponents have
elected to re-solicit the holders of Claims that are entitled to vote to accept
or reject the Plan to determine whether they wish to change their votes on the
Existing Plan. The Plan continues to provide 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.
If you timely voted to accept or reject the Original Plan (or later
changed your vote in connection with the solicitation of votes on the January
29, 1998 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. Consequently, if you do not wish to change the vote you
previously cast, you need do nothing further. Similarly, 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 Original Plan for purposes of this Plan, unless such
Bondholders affirmatively change their release election in accordance with the
procedure set forth in the accompanying notice . 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 Summary
Disclosure Statement in support of the Plan, as modified. Accompanying the
copies of this Summary 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 following address, all in accordance with the
procedures set out in the accompanying notice:
Balloting Agent for In re Harrah's Jazz Company, et al.
c/o PricewaterhouseCoopers LLP
P.O. Box 81109
Chicago, Illinois 60681
5
<PAGE>
The Bankruptcy Court also has approved a more detailed Sixth Amended
Joint Disclosure Statement Pursuant to Section 1125 and 1127 of the Bankruptcy
Code, dated September 3, 1998 (the "Full Disclosure Statement"). If you wish to
obtain a copy of the Full Disclosure Statement, please contact in writing:
Vincent E. Lazar, Esq.
Jenner & Block
One IBM Plaza - Suite 3800
Chicago, Illinois 60611
THE PROPONENTS BELIEVE THAT ACCEPTANCE OF THE PROPOSED
PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND
THEIR CREDITORS AND URGE THAT CREDITORS CONTINUE TO
SUPPORT ACCEPTANCE OF 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.
6
<PAGE>
Dated: September 3, 1998
Respectfully submitted:
/S/ DANIEL R. MURRAY
--------------------------------------
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
/S/ WILLIAM H. PATRICK, III
--------------------------------------
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.
/S/ JAN M. HAYDEN
--------------------------------------
HELLER, DRAPER, HAYDEN & HORN, 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
/S/ ROBERT J. ROSENBERG
--------------------------------------
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's Entertainment, Inc.
7
<PAGE>
Exhibit A
Third Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as Modified Through September 3, 1998
(See Accompanying Document)
<PAGE>
Exhibit B
Forecasted Condensed Financial Statements
Summary of Significant Forecasted Assumptions
(See Exhibit B to Accompanying Sixth Amended Joint Disclosure Statement)
<PAGE>
Exhibit T.3E.24
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 (as
defined below) a properly executed and valid ballot changing a vote,
each ballot 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 (as modified and confirmed on April
26, 1997, the "Original Plan"), if modified (if applicable) by a
ballot changing a vote previously cast for or against the Original
Plan in connection with the solicitation of acceptances and
rejections of the Debtors' Third Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, as Modified
Through December 10, 1997 (as subsequently modified and confirmed by
the Bankruptcy Court on April 6, 1998, the "Existing 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 applicable to such plan.
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
September 3, 1998 (as it may be amended, modified, or
supplemented, the "Modified Plan"):
---------------
<PAGE>
1. Generally. To be counted, ballots changing votes must
---------
be: (a) received by the Balloting Agent before 5:00 p.m.
C.D.T. on October 7, 1998 (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.
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 or Existing Plan was not counted
because its ballot on the Original Plan or Existing Plan
was not received prior to the applicable voting deadline,
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
- ----------
* Each capitalized term used but not otherwise defined herein shall have
the meaning ascribed to such term in the Modified Plan.
2
<PAGE>
purposes shall be equal to the amount set forth in the ballot
for changing votes submitted by such creditor.
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.
----------------
(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 each of Class 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 ballot or
ballots of the original Bondholder(s) voting on the
Original Plan or Existing 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 each of Class 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 or Existing Plan, each
Bondholder which
3
<PAGE>
acquired such Claims shall be entitled to change the vote on
that portion of the Claim which it acquired, and the
Balloting Agent shall count the aggregate dollar amount of
all Bonds so acquired and owned by such Bondholder as one
vote in each of Class 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.
4
<PAGE>
Exhibit T3E.25
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' SIXTH AMENDED JOINT DISCLOSURE STATEMENT
PURSUANT TO SECTIONS 1125 AND 1127 OF THE BANKRUPTCY CODE
---------------------------------------------------------
September 3, 1998
<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' SIXTH AMENDED JOINT DISCLOSURE STATEMENT
PURSUANT TO SECTIONS 1125 AND 1127 OF THE BANKRUPTCY CODE
Dated: September 3, 1998
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
WILLIAM HARDY PATRICK, III
A Professional Corporation
10636 Linkwood Court
Baton Rouge, Louisiana 70810-2854
Telephone: (504) 767-1460
Fax: (504) 769-0010
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp.
<PAGE>
HELLER, DRAPER, HAYDEN &
HORN, L.L.C.
650 Poydras Street, Suite 2500
New Orleans, Louisiana 70130
Telephone: (504) 568-1888
Fax: (504) 522-0949
Attorneys for Harrah's New Orleans
Investment Company
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's
Entertainment, Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. INTRODUCTION..................................................................................................1
A. Overview of Sixth Disclosure Statement..........................................................1
1. Prior Versions of the Plan of Reorganization...........................................1
2. The Third Amended Joint Plan of Reorganization, As Modified Through
September 3, 1998......................................................................3
3. Summary of Modifications Proposed in The Plan .........................................4
B. Voting Procedure................................................................................5
II. OVERVIEW OF THE PLAN.........................................................................................8
III. GENERAL INFORMATION........................................................................................23
A. Description of HJC and Events Leading to Commencement of Chapter 11 Cases......................23
B. Description of the Casino......................................................................25
C. Construction...................................................................................27
D. Description of the Manager.....................................................................28
E. City Agreement.................................................................................28
F. Certain Prepetition Legal Proceedings..........................................................30
1. McCall Litigation.....................................................................30
2. Tucker Litigation.....................................................................32
3. Landmarks Litigation (Joan of Arc)....................................................33
4. Tucker Litigation (Joan of Arc).......................................................34
5. HNOIC/NOLDC Litigation................................................................34
G. Regulation.....................................................................................35
H. Employees......................................................................................40
IV. EVENTS DURING THE CHAPTER 11 CASES..........................................................................40
A. Filing of the Chapter 11 Petitions.............................................................40
B. Retention of Professionals by the Debtors......................................................40
C. Appointment of the Official Committees.........................................................41
D. Litigation With the City of New Orleans and the RDC............................................43
E. HJC's Use of Cash Collateral...................................................................48
F. Enclosure of the Casino Structure..............................................................48
G. Debtor In Possession Financing Provided by HET or Its Affiliates...............................48
H. Debtors' Exclusive Right to File Plan(s).......................................................51
I. Discovery of the Proponents and Others.........................................................51
J. Litigation with HJC's Prepetition Contractors..................................................51
1. Centex Lawsuit........................................................................51
2. Other Litigation With Centex..........................................................52
3. Broadmoor's Motion to Compel Assumption or Rejection..................................53
4. Broadmoor's Motions for Relief from the Automatic Stay................................53
K. Bondholders Committee's Application for Order Permitting Securities Trading in Certain
Circumstances..................................................................................53
L. WARN Act Litigation............................................................................54
M. Bondholder Class Actions.......................................................................55
N. Sapir Litigation...............................................................................57
O. Bar Date.......................................................................................58
P. Claims Analysis................................................................................58
Q. Negotiations With Other Parties................................................................59
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
R. Filing and Confirmation of Previous Plans......................................................60
S. United States Trustee's Motion to Convert or Dismiss...........................................61
T. Filing of Certain Lawsuits by Debtors and NOLDC................................................62
U. Bean and Jordan Litigation.....................................................................62
V. THE PLAN OF REORGANIZATION...................................................................................64
A. Classification and Treatment of Claims and Equity Interests....................................64
1. Administrative Expense Claims.........................................................64
2. Priority Tax Claims...................................................................65
3. Class A1 -- Other Priority Claims (Impaired)..........................................65
4. Class A2 -- Non-Bondholder Secured Claims (Impaired)..................................65
5. Class A3 -- Bank Claims and Old Bank Collateral Agent Claims (Impaired)...............66
6. Class A4 -- Bondholder Claims (Impaired)..............................................68
7. Class A5 -- Old Indenture Predecessor Trustee and Old Indenture Predecessor
Collateral Agent Claims (Impaired)....................................................69
8. Class A6 -- WARN Act Claims (Impaired)................................................70
9. Class A7 -- General Unsecured Claims (Impaired).......................................71
10. Class A8 -- Penalty Claims (Impaired).................................................71
11. Class A9 -- HJC Equity Interests (Impaired)...........................................71
12. Class B1 -- Other Priority Claims (Impaired)..........................................72
13. Class B2 -- Bank Claims (Impaired)....................................................72
14. Class B3 -- Bondholder Claims (Impaired)..............................................72
15. Class B4 -- WARN Act Claims (Impaired)................................................72
16. Class B5 -- General Unsecured Claims (Impaired).......................................73
17. Class B6 -- Penalty Claims (Impaired).................................................73
18. Class B7 -- Equity Interests (Impaired)...............................................73
19. Class C1 -- Other Priority Claims (Impaired)..........................................73
20. Class C2 -- Secured Claims (Impaired).................................................73
21. Class C3 -- WARN Act Claims (Impaired)................................................74
22. Class C4 -- Unsecured Claims (for which HJC is liable) (Impaired).....................74
23. Class C5 -- General Unsecured Claims (Impaired).......................................74
24. Class C6 -- NOLDC/Showboat Claim (Impaired)...........................................74
25. Class C7 -- Penalty Claims (Impaired).................................................75
26. Class C8 -- Equity Interests (Impaired)...............................................75
B. Settlement of Certain Claims and Prosecution and Assignment of Certain Claims..................75
1. NOLDC Shareholders/HET Settlement Agreement; GP Representative and
Hemmeter/HET Settlement Agreement; Froelich/HET Settlement Agreement;
NOLDC/Grand Palais Settlement Agreement...............................................86
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.................................................................................89
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.................................90
4. Release by Debtors of Causes of Action Against Bank/Underwriter Group.................91
5. Release by Debtors of Causes of Action Against the State Group........................92
6. Release by Debtors of Causes of Action Against the City and RDC.......................92
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................................................................92
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................................................................94
9. Assigned Litigation Claims............................................................94
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
10. Extinguishment of Certain Causes of Action Under the Avoiding Power
Provisions............................................................................95
11. Assignment and Prosecution of Assigned Litigation Claims, Judgment
Reduction Protection and Distribution of Recoveries from Assigned Litigation
Claims................................................................................95
12. Approval of Other Settlement Agreements...............................................97
C. Executory Contracts and Unexpired Leases.......................................................97
1. General Development Agreement.........................................................99
2. Canal Street Casino Lease............................................................100
3. Casino Operating Contract............................................................102
4. Management Agreement.................................................................104
5. Completion Guarantees................................................................105
6. Completion Loan Agreement............................................................108
7. Construction Lien Indemnity Obligation Agreement.....................................109
8. Basin Street Casino Lease Termination Agreement......................................109
9. Railroad Lease.......................................................................110
10. Title Insurance......................................................................110
11. Broadmoor Contract...................................................................110
12. Architect Contract...................................................................111
13. Audubon Contract.....................................................................111
14. Centex Contract......................................................................111
D. Means for Implementation and Execution of the Plan............................................111
1. General Corporate Matters............................................................111
2. Effective Date Transactions..........................................................112
3. Distributions Generally..............................................................121
4. Services of Old Indenture Trustee....................................................121
5. Distributions to be Made to Bondholders as of Distribution Record Date...............121
6. Cancellation and Surrender of Existing Securities and Agreements.....................121
7. Distributions of Cash................................................................122
8. Timing of Distributions..............................................................122
9. Hart-Scott-Rodino Compliance.........................................................122
10. Minimum Distributions; No Duplicative Distributions; No Interest.....................122
11. Fractional Distributions.............................................................122
12. Delivery of Distributions............................................................123
13. Fees and Expenses of Disbursing Agents...............................................123
14. Time Bar to Cash Payments............................................................123
15. Transfer of Release Pool Distributions...............................................123
16. Objection Deadline...................................................................124
17. Authority to Oppose Claims...........................................................124
18. No Distributions Pending Allowance...................................................124
19. Determination by Bankruptcy Court....................................................124
20. Treatment of Disputed Claims.........................................................124
E. Effect of Confirmation of Plan................................................................125
1. Revesting of Assets..................................................................125
2. Discharge of Debtors.................................................................126
3. Dissolution of Debtors...............................................................127
4. Exculpations.........................................................................127
F. Conditions Precedent to Confirmation and Effective Date.......................................127
1. Effective Date.......................................................................127
2. Condition Precedent to Confirmation of the Plan......................................127
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
3. Conditions Precedent to Effective Date...............................................128
4. Waiver of Conditions.................................................................130
5. Effect of Failure of Conditions......................................................130
6. Status of Satisfaction of Conditions.................................................131
G. Miscellaneous Provisions......................................................................132
1. Retention of Jurisdiction............................................................132
2. Exemption from Transfer Taxes........................................................132
3. Post-Confirmation Date Fees and Expenses of Professional Persons.....................132
4. Committees...........................................................................132
5. Amendment or Modification of the Plan; Severability..................................132
6. Revocation or Withdrawal of the Plan.................................................133
7. Existing Agreements..................................................................133
8. JCC Intermediary.....................................................................133
VI. CONFIRMATION AND CONSUMMATION PROCEDURE....................................................................133
A. Solicitation of Votes.........................................................................133
B. The Confirmation Hearing......................................................................134
C. Confirmation..................................................................................135
1. Acceptance...........................................................................135
2. Unfair Discrimination and Fair and Equitable Tests...................................136
3. Feasibility..........................................................................136
4. Best Interests Test..................................................................138
D. Consummation..................................................................................139
E. Term Loans and Working Capital Facility.......................................................139
F. Junior Subordinated Credit Facility...........................................................141
G. Convertible Junior Subordinated Debentures....................................................141
H. HET Warrant...................................................................................141
I. HET/JCC Agreement.............................................................................142
VII. MANAGEMENT OF THE REORGANIZED DEBTORS.....................................................................144
A. Entity Structure..............................................................................144
B. Board of Directors and Management.............................................................145
1. Composition of the Board of Directors................................................145
2. Identity, Affiliations, and Nature of Certain Compensation...........................147
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO THE SECURITIES
TO BE DISTRIBUTED UNDER THE PLAN.......................................................................147
IX. CERTAIN RISK FACTORS TO BE CONSIDERED......................................................................148
A. Overall Risks to Recovery by Holders of Claims................................................148
1. Uncertainty Regarding Gaming Regulation..............................................149
2. Anti-Gaming Legislation and Activities...............................................150
3. Ability to Commence Operations as Scheduled..........................................150
4. Suitability..........................................................................151
5. Litigation...........................................................................152
6. Conflicts of Interest................................................................152
7. Financial Forecast...................................................................152
8. No Operating History; Lack of Prior Gaming Experience................................152
9. Availability of Term Loans and Working Capital Facility .............................153
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
10. Execution of the Amended and Renegotiated Casino Operating Contract .................153
11. Competition..........................................................................153
12. Reliance on Single Market............................................................154
13. Lack of Experienced Personnel........................................................154
14. Repurchase of Securities Relating to Gaming Matters..................................154
15. Absence of Public Trading Market.....................................................155
16. Uncertainty Regarding Tax Treatment of the New Bonds, New Contingent
Bonds................................................................................155
17. Uncertainty Regarding Objections to Claims...........................................155
18. Uncertainty Regarding City and State Approvals.......................................155
19. Uncertainty Regarding Termination of City Agreement and Canal Street Casino
Lease................................................................................156
B. Hart-Scott-Rodino Act Requirements............................................................156
X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.........................................................157
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.........................................158
B. Tax Consequences to Holders of Claims in Classes A4 and B3 (Bondholders)......................158
1. Treatment of JCC Holding, JCC, CP Development, FP Development and JCC
Intermediary as a Single Taxable Entity..............................................159
2. Exchange of Old Bonds by Bondholders.................................................159
3. Classification of New Bonds and New Contingent Bonds as Equity Rather Than
Debt.................................................................................161
4. Tax Treatment of New Bonds and New Contingent Bonds..................................162
5. Tax Treatment of Receipt of Common Stock for Certain Releases........................168
6. Tax Treatment of Penalties for Failure to Register Class A New Common Stock,
New Bonds and New Contingent Bonds...................................................168
7. Backup Withholding and Reporting Requirements........................................168
C. Tax Consequences to JCC Holding...............................................................168
XI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN..................................................169
A. Liquidation Under Chapter 7...................................................................169
B. Alternative Plan or Plans of Reorganization...................................................170
XII. CONCLUSION AND RECOMMENDATION.............................................................................170
</TABLE>
v
<PAGE>
I. INTRODUCTION
A. Overview of Sixth Disclosure Statement
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 Sixth 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. The Disclosure Statement is submitted in connection with (i) the
solicitation of acceptances or rejections of the Debtors' Third Amended Joint
Plan of Reorganization, As Modified Through August 12, 1998 (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.
1. Prior Versions of the Plan of Reorganization
This Disclosure Statement describes modifications to prior
versions of the Plan which were formulated at earlier stages of these
proceedings, as follows:
- The Original Plan. On February 28, 1997, the Proponents filed
their Third Amended Joint Plan of Reorganization Under Chapter 11
of the Bankruptcy Code dated as of February 26, 1997. In March
1997, copies of that plan and Debtors' Third Amended Joint
Disclosure Statement Pursuant to Section 1125 of the Bankruptcy
Code were distributed to all holders of Claims against the Debtors
that voted on the Original Plan (as defined below), and all
holders of Claims against the Debtors were sent ballots on which
they could indicate their acceptance or rejection of that plan.
That plan received the requisite votes for acceptance by creditors
and, as voted upon by all affected parties entitled to vote and as
modified in connection with the hearing on confirmation, was
confirmed by the Bankruptcy Court on April 28, 1997. As so
modified and confirmed, it is referred to herein as the "Original
Plan." The effectiveness of the Original Plan was conditioned
upon, among other things, the execution and delivery of a modified
casino operating contract and all necessary approvals, if any,
from the State of Louisiana (the "State"). Although the Louisiana
Gaming Control Board ("LGCB") approved a modified casino operating
contract (the "April 29, 1997 Casino Operating Contract") and
related documents in connection with the Original Plan, the State
took 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. Consequently, the
Original Plan did not take effect.
- The June 26, 1997 Plan. In light of the State legislature's
adjournment without action on the April 29, 1997 Casino Operating
Contract, on June 26, 1997, the Proponents sought Bankruptcy Court
approval to modify the Original Plan to provide, among other
things, for the assumption of HJC's existing casino operating
contract without any amendments requiring the approval of the LGCB
or the State legislature (the "June 26, 1997 Plan"). In July 1997,
<PAGE>
the Debtors' Fourth Amended Summary Joint Disclosure Statement
Pursuant to Sections 1125 and 1127 of the Bankruptcy Code, was
circulated to all parties entitled to vote on the June 26, 1997
Plan. The State and the LGCB vigorously opposed the June 26, 1997
Plan. Negotiations ensued with the various parties in interest in
the reorganization, including the official committee of
Bondholders appointed in HJC's Chapter 11 case (the "Bondholders
Committee") and a syndicate of banks led by Bankers Trust Company,
HJC's primary pre-petition lenders (the "Bank Lenders"). Because
those negotiations ultimately proved successful, the June 26, 1997
Plan was not presented to the Bankruptcy Court for a final hearing
on confirmation.
- The January 29, 1998 Plan. Negotiations among the various parties
in interest resulted in the preparation of revisions to the April
29, 1997 Casino Operating Contract, incorporating, among other
things, a guaranty of the annual minimum payments due under an
amended casino operating contract. On December 9, 1997, the LGCB
unanimously approved an amended version of the casino operating
contract (as so modified, the "December 9, 1997 Casino Operating
Contract") for submission to the Governor of the State with the
request that he submit it to the State legislature for its
approval. Shortly thereafter, the Proponents proposed a new set of
modifications to the Original Plan which abandoned the
modifications proposed in the June 26, 1997 Plan. In December
1997, copies of the Original Plan as so modified, the Debtors'
Fifth Amended Joint Disclosure Statement Pursuant to Sections 1125
and 1127 of the Bankruptcy Code (the "Fifth Disclosure
Statement"), and ballots affording creditors an opportunity to
change votes previously cast with respect to the Original Plan
were distributed to all holders of claims entitled to vote on such
plan. With the requisite number of votes for acceptance continuing
to be received in support of the Original Plan as so modified, the
Bankruptcy Court entered an order on January 29, 1998 approving
those modifications, as well as certain other immaterial
modifications, and confirming the Third Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, As
Modified Through January 29, 1998 (the "January 29, 1998 Plan").
- The Existing Plan. The effectiveness of the January 29, 1998 Plan,
like 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. The Governor
initially indicated that he would call a special session of the
State legislature commencing in the latter part of March 1998
which would consider, among other things, approval of the December
9, 1997 Casino Operating Contract. However, after receiving an
opinion from the State Attorney General that the LGCB has
independent authority (without the necessity of any legislative
approval) to renegotiate and execute a renegotiated casino
operating contract, the Governor did not include consideration of
the December 9, 1997 Casino Operating Contract in his call for the
special session. Instead, on March 20, 1998, the LGCB approved an
amended and renegotiated Casino Operating Contract among HJC, Jazz
Casino Company, L.L.C. ("JCC") and the State, by and through the
LGCB, with certain minor modifications (the "Amended and
Renegotiated Casino Operating Contract"), subject to, among other
conditions, the condition that the Louisiana Supreme Court render
a final, non-appealable judgment that the LGCB, acting on its own,
is the proper party and has the legal authority to enter into the
Amended and Renegotiated Casino Operating Contract with HJC or JCC
on behalf of the State and the LGCB, without the specific approval
of the Governor or the State legislature. On May 15, 1998, the
Louisiana Supreme Court issued a decision confirming that the LGCB
has the independent authority to renegotiate and execute the
Amended and Renegotiated Casino Operating Contract without seeking
gubernatorial or legislative approval. See Section IV.U., "Events
During the Chapter 11 Cases--Bean and Jordan Litigation."
Following the LGCB's approval of the Amended and Renegotiated
Casino Operating Contract without the State legislature's
approval, the Proponents filed a motion to approve further
modifications to the January 29, 1998 Plan to take into account,
among other things, the LGCB's approval of the Amended and
2
<PAGE>
Renegotiated Casino Operating Contract without legislative
approval. These modifications were deemed by the Bankruptcy Court
to be immaterial in nature and therefore were not circulated for a
vote. On April 6, 1998, the Bankruptcy Court entered an order
confirming the Third Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code, As Modified Through April 6,
1998 (the "Existing Plan").
2. The Third Amended Joint Plan of Reorganization, As Modified
Through September 3, 1998
The effectiveness of the Existing Plan, as with its predecessors,
is conditioned upon, among other things, the execution and delivery of an
amended casino operating contract and all necessary approvals, if any, from the
State. While the LGCB has given its approval to the Amended and Renegotiated
Casino Operating Contract, that approval will not become final, and the contract
cannot be executed, until, among other things, the LGCB makes a determination
that certain of the owners and operators of the Casino (as defined below) are
suitable under applicable rules and regulations, and until certain regulatory
rulings and approvals are received. In order to make this determination, the
LGCB requires that the successors to the Debtors, the manager of the Casino and
certain of their respective shareholders, members, officers and directors
undergo extensive investigation and review by the LGCB and State Police,
including character and financial responsibility review, to be found suitable
and qualified under the Louisiana Economic Development and Gaming Act (the
"Gaming Act") and to obtain the requisite authorizations, permits and licenses.
That process has commenced. The Chairman of the LGCB has stated that the process
is targeted to conclude in October of 1998, although there can be no assurance
that the process will be completed by such time.
In the meantime, and in connection with preparations for
consummation of the Existing Plan, HJC commenced a review of the
partially-constructed Casino and adjoining parking lot structure to determine
(i) what redesign of the Casino interior will be necessitated by the dedication
of the second floor of the Casino building to non-gaming uses and by the other
changes in the configuration of the Casino contemplated by the Amended and
Renegotiated Casino Operating Contract, (ii) whether to upgrade the Casino
design and gaming equipment to meet more intense competition from other gaming
facilities such as those located on the Mississippi Gulf Coast, (iii) the extent
of physical deterioration to the Casino structure and adjoining parking
facilities during the three year reorganization process, and (iv) the extent to
which increased costs resulting from proposed modifications and additions might
be offset by changes to the Casino design. In addition, HJC obtained estimates
for the costs of the various modifications to the Casino project under
consideration, and also determined what costs have and will be occasioned by the
delay in the reorganization process resulting from the developments described
above.
Upon determining what modifications and additions to the Casino
project are reasonably necessary to its success, what other changes to the
Casino design should be made to partially offset the increased costs occasioned
by such modifications and the delay in the reorganization process, and after
negotiations with the Bondholders Committee and the Bank Lenders, HJC revised
its budget for completion and operation of the Casino. HJC's revised budget for
completion of the Casino project contemplates, among its components, $25 million
in additional new financing and the cancellation of all accrued interest on the
DIP
3
<PAGE>
Loan (as defined below). HJC also has determined that it is desirable to modify
the corporate structure of the reorganized entities emerging from bankruptcy.
Due to the above modifications, HJC proposes to modify the Existing Plan as set
forth in the proposed Third Amended Joint Plan of Reorganization, As Modified
Through September 3, 1998, (the "Plan"), a copy of which is filed as an exhibit
hereto.
3. Summary of Modifications Proposed in The Plan
The primary modifications made in the Existing Plan and contained
in the accompanying Plan are as follows:
- Modified Credit Facilities for the Reorganized Debtors. The
Existing Plan contemplates that the reorganized Debtors would
obtain term loans in the aggregate amount of up to $199 million;
$60 million under the A Term Loan and $139 million under the B
Term Loan. (The Fifth Disclosure Statement distributed in
connection with the solicitation of votes on the January 29, 1998
Plan contemplated $135 million (as opposed to $139 million) of
availability under the B Term Loan. In connection with
confirmation of the January 29, 1998 Plan, the Bankruptcy Court
determined that the $4 million variance was immaterial and did not
require further disclosure to creditors at that time.)
Under the Plan, the B Term Loan will be increased by $12.5 million
to a total of $151.5 million, resulting in the availability of up
to $211.5 million in term loans. In addition, the junior
subordinated credit facility provided by HET will be increased by
$12.5 million, resulting in a total of $22.5 million of
availability under the junior subordinated credit facility. The
amount available to Jazz Casino Company, L.L.C. ("JCC")under the
working capital facility will remain at $25 million. For more
information, see Section VI.E., "Confirmation and Consummation
Procedure Term Loans and Working Capital Facility" and Section
VI.F., " Junior Subordinated Credit Facility."
- Cancellation of Claim For Accrued DIP Interest. The Plan provides
that the claim of Harrah's Operating Company, Inc., a Delaware
corporation and a wholly-owned subsidiary of HET ("HOCI"), or an
affiliate thereof (collectively, the "DIP Lender") for accrued
interest on the debtor-in-possession loans (the "DIP Loan"), which
was to be paid under the Existing Plan to the DIP Lender on the
Effective Date, will be canceled on the Effective Date. The
Proponents estimate that this will provide JCC with in excess of
$5 million in additional funds on the Effective Date.
- Revised Corporate Structure. The Plan provides that except for
certain excess real property not needed for development and
operation of the Casino, all the assets of the Debtors will vest
in JCC. Title to the excess real property owned by the Debtors at
3 Canal Place in New Orleans, adjacent to the Canal Place shopping
center, will vest in CP Development, L.L.C. ("CP Development"), a
newly formed Louisiana limited liability company, and title to the
excess real property owned by the Debtors on Fulton and Poydras
Streets in New Orleans, adjacent to the Casino parking facilities,
will vest in FP Development, L.L.C. ("FP Development"), a newly
formed Louisiana limited liability company. CP Development and FP
Development 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"). Pending
the resolution of certain structural considerations, JCC
Intermediary may be eliminated prior to the Effective
4
<PAGE>
Date. In such case, CP Development and FP Development will be
wholly-owned by JCC Holding.
B. Voting Procedure
Because some or all of the modifications to the Existing Plan
proposed in the accompanying Plan might be regarded as material, the Proponents
have elected to re-solicit the holders of Claims that are entitled to vote to
accept or reject the Plan to determine whether they wish to change their votes
on the Existing Plan.
If you timely voted to accept or reject the Original Plan (or
later changed your vote in connection with the solicitation of votes on the
January 29, 1998 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. Consequently, if you do not wish to change the
vote you previously cast, you need do nothing further. Similarly, 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 Original Plan for purposes of this Plan,
unless such Bondholders affirmatively change their release election by the
procedure approved by the Bankruptcy Court.
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 Sixth 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.
ALL OF THE DEBTORS' CREDITORS THAT ARE ENTITLED TO VOTE TO ACCEPT
OR REJECT THE PLAN SHOULD READ THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR
ENTIRETY BEFORE DETERMINING WHETHER TO CHANGE THEIR VOTES ON THE PLAN AND, IN
THE CASE OF CERTAIN BONDHOLDERS, WHETHER TO CHANGE THEIR RELEASE ELECTIONS.
5
<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 which voted on the Original
Plan (or which later changed their votes in connection with the solicitation of
votes on the January 29, 1998 Plan) 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 1127 and 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 Section 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 September 3, 1998",
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.
THE PROPONENTS BELIEVE THAT ACCEPTANCE OF THE PLAN IS IN THE BEST
INTERESTS OF THE DEBTORS AND THEIR CREDITORS AND URGE THAT CREDITORS CONTINUE TO
SUPPORT ACCEPTANCE OF THE PLAN.
6
<PAGE>
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.
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 which desires to
change its vote should do so. If you voted to accept or reject the Original Plan
(or changed such vote in connection with the solicitation of votes on the
January 29, 1998 Plan) and desire to change the vote that you previously cast, a
ballot is enclosed for the purpose of changing your vote. 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 PricewaterhouseCoopers LLP
P.O. Box 81109
Chicago, Illinois 60681
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") desiring to change its vote or release election
must submit its own ballot. Bondholders should not return their Old Bonds with
their ballots.
TO BE COUNTED, YOUR BALLOT INDICATING A CHANGE IN YOUR PRIOR
ACCEPTANCE OR REJECTION OF THE ORIGINAL PLAN (OR, IF APPLICABLE, THE JANUARY 29,
1998 PLAN) MUST BE RECEIVED NO LATER THAN THE TIME AND DATE SET FORTH IN THE
ACCOMPANYING NOTICE.
IF YOU ALREADY TIMELY VOTED TO ACCEPT OR REJECT THE ORIGINAL PLAN
(OR CHANGED YOUR VOTE IN CONNECTION WITH THE SOLICITATION OF VOTES ON THE
JANUARY 29, 1998 PLAN), YOU WILL BE DEEMED TO HAVE ACCEPTED OR REJECTED, AS THE
CASE MAY BE, THE ACCOMPANYING PLAN UNLESS YOU AFFIRMATIVELY CHANGE YOUR VOTE
USING 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 in the
7
<PAGE>
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 the Amended and Renegotiated 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, except for certain excess real property not needed
for development and operation of the Casino, all the assets of the Debtors will
vest in JCC, a newly formed Louisiana limited liability company, on the
effective date of the Plan as defined in the Plan (the "Effective Date"). Title
to the excess real property owned by HJC at 3 Canal Place in New Orleans,
adjacent to the Canal Place shopping center (the "3CP Property"), will vest in
CP Development, a newly formed Louisiana limited liability company, and title to
the excess real property owned by HJC along Fulton and Poydras Streets in New
Orleans, adjacent to the Casino parking facilities (the "Fulton Property"), will
vest in FP Development, a newly formed Louisiana limited liability company. JCC,
CP Development and FP Development will be wholly-owned by JCC Intermediary,
which, in turn, will be wholly-owned by JCC Holding. JCC Development (as defined
below), CP Development and FP Development will each provide mortgages and
guarantees for the benefit of the Bank Lenders, Bondholders and HET and HOCI.
Pending resolution of certain structural considerations, JCC Intermediary may be
eliminated prior to the Effective Date and in such case JCC, CP Development and
FP Development will be wholly-owned by JCC Holding. The Plan provides that, for
federal income tax purposes, the vesting of assets in JCC, CP Development and FP
Development shall be deemed to have occurred as a
8
<PAGE>
deemed exchange by the Bondholders of the Old Bonds for such assets, and a
deemed exchange by the Bondholders of such assets 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.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 the Bondholders."
Following the Effective Date, JCC is expected to complete
construction of the land-based casino facility to be located on the site of the
former Rivergate Convention Center in New Orleans (the "Casino") and open for
business within 12 months of the Effective Date. JCC will fund completion of
construction of 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, as administrative agent ("BTCo"), (ii) a $151.5 million term loan from
a syndicate of lenders led by BTCo (the "B Term Loan" and, 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 Smith Barney ("Salomon"), Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") and BT Alex. Brown Incorporated
of approximately $27 million aggregate principal amount of Convertible Junior
Subordinated Debentures of JCC (the "Convertible Junior Subordinated
Debentures"), (iv) a credit facility pursuant to which HET has agreed to make
available up to $22.5 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 by the DIP Lender to
HJC, which will be converted to equity and contributed to JCC Holding on the
Effective Date (the "Harrah's New Equity Investment"). Upon, and subject to, the
occurrence of the Effective Date, the claim of the DIP Lender to any interest
which has theretofore accrued on the debtor-in-possession financing will be
canceled. The Junior Subordinated Credit Facility will 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 Holding, JCC, JCC Development, CP Development and FP Development (except
the Amended and Renegotiated 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. Among 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. 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 $121.5 million of availability ("Tranche B-2"). 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. 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.,
9
<PAGE>
"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.9.,
"Certain Risk Factors to be Considered--Overall Risks to Recovery by Holders of
Claims--Availability of Term Loans and Working Capital Facility."
JCC, JCC Development, CP Development and FP Development each will
be single member limited liability companies, wholly-owned by JCC Intermediary,
a Louisiana limited liability company which, in turn, will be a single member
limited liability company, wholly-owned by JCC Holding (JCC Holding, together
with JCC and JCC Intermediary, are collectively referred to herein as the "JCC
Entities", and the JCC Entities, together with JCC Development, CP Development
and FP Development, are collectively referred to herein as the "New Entities").
Pending the resolution of certain structural considerations, JCC Intermediary
may be eliminated prior to the Effective Date. In such case, JCC, JCC
Development, CP Development and FP Development will be wholly-owned by JCC
Holding. Upon consummation of the Plan, the outstanding capital stock of JCC
Holding will consist of shares of Class A common stock, par value $.01 per share
("Class A New Common 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 in the aggregate up to 3% of the New
Common Stock to each of the nine shareholders of New Orleans/Louisiana
Development Corporation ("NOLDC"), (ii) options to purchase a number of shares
of Class B New Common Stock constituting in the aggregate up to 1.5% of the New
Common Stock to First National Bank of Commerce (together with its successors
and assigns, "FNBC") (which shares will remain shares of Class B New Common
Stock upon receipt by FNBC), and (iii) a number of its shares constituting 3.5%
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, HET
and its subsidiaries, including Harrah's Investor, would own in the aggregate
50.0% of the New Common Stock, subject to certain adjustments. The number of
shares issuable upon exercise of the HET Warrant will be calculated and/or
adjusted as necessary to reflect, among other things, the transfer of shares
upon exercise of the options held by FNBC and the NOLDC shareholders to purchase
New Common Stock from HET or its subsidiaries and the issuance of shares of New
Common Stock upon conversion of any of the Convertible Junior Subordinated
Debentures. The HET Warrant will be exercisable at any time after the Transition
Date (as defined below)
10
<PAGE>
until the sixth anniversary of the opening of the Casino, in whole or in part at
a price of $15.00 per share of 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 HET and its subsidiaries, including Harrah's Investor, to own
in the aggregate 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. If (i) an election to redeem warrants is made by JCC
Holding, and (ii) Harrah's Investor exercises warrants with respect to that
number of shares which at the time of exercise would cause HET and its
subsidiaries, including Harrah's Investor, to own in the aggregate 50.0% of the
New Common Stock, then none of the then unexercised warrants which were called
for redemption shall be redeemed. See Section VI.E., "Confirmation and
Consummation Procedure--Term Loans and Working Capital Facility," and Section
VI.H., "--HET Warrant."
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 (a) 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 fourth and fifth years (as set forth in the Bondholder
Term Sheet Summary of Restructuring attached to the Plan as Exhibit D), and
increasing to 8% per annum after the first five years (collectively, "Fixed
Interest"), and (b) contingent payments based on a percentage of 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 rather than in cash; provided, however, that JCC must
pay the first four semi-annual payments of Fixed Interest in kind if Tranche A-1
and/or Tranche A-2 is outstanding when such payments are due. JCC will have the
option to pay the fifth and sixth semi-annual payments of Fixed Interest in kind
and may be required to do so under certain circumstances by the Credit Agreement
between BTCo and JCC (the "Credit Agreement"); provided, however, that JCC may
not pay the fifth and sixth semi-annual payments of Fixed Interest in kind if
(i) Tranches A-1 and A-2 have been fully repaid, (ii) there are no outstanding
drawings under the Working Capital Facility, and (iii) JCC has accumulated cash
availability of at least $20 million. If JCC pays Fixed Interest in kind on any
of the first four semi-annual interest payment dates, Harrah's New Orleans
Management Company ("HNOMC") will defer its Base Management Fees and HET and
HOCI will defer their guaranty 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 (as defined below) 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 the first three
years after the Effective Date 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
guaranty fees under the HET/JCC Agreement. After repayment of Tranche A-1 and
Tranche A-2, deferred Base Management Fees and deferred guaranty fees under the
HET/JCC Agreement shall be due and payable pro rata to HNOMC, HET and HOCI, as
applicable, 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
11
<PAGE>
guaranty fees under the HET/JCC Agreement 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 required 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 Management Fees and Incentive Management Fees will be
deferred, amortization under the Term Loans will be deferred and the guaranty
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 Holding, JCC Intermediary (if formed), JCC, JCC
Development, CP Development and FP Development (except the Amended and
Renegotiated Casino Operating Contract, the Casino's bankroll and 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 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."
Until the Transition Date, 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 New Entities,
except upon the occurrence of certain Flip Events (as defined below) relating to
bankruptcy filings by or against HNOMC, 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 New
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.
12
<PAGE>
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 of
New Orleans (the "City") and the Rivergate Development Corporation (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."
The Amended and Renegotiated Casino Operating Contract provides
that for each COC Fiscal Year (as defined below), 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 Amended and Renegotiated Casino Operating
Contract (a "Minimum Payment Guaranty"). The Plan provides that HET and HOCI
will provide a Minimum Payment Guaranty, which guarantees for the first 365 days
after the opening of the Initial Casino Facilities (as defined below), JCC's
annual minimum payment obligation of $100 million to the LGCB pursuant to the
Amended and Renegotiated Casino Operating Contract, which guaranty will be
renewable on a yearly basis (subject to certain non-renewal conditions and early
termination provisions) through the COC Fiscal Year ending March 31, 2004
pursuant to that certain HET/JCC Agreement among HET, HOCI and JCC (the "HET/JCC
Agreement"). In exchange for providing a Minimum Payment Guaranty pursuant to
the HET/JCC Agreement, HET and HOCI (and any substitute guarantor) will receive,
among other things, annual payments from JCC and a first lien on substantially
all the assets of JCC Holding, JCC, JCC Development, CP Development and FP
Development (except the Amended and Renegotiated Casino Operating Contract and
the Gross Revenue Share Payments), all as more fully set forth in the Plan and
the exhibits thereto, to secure JCC's obligations under the HET/JCC Agreement.
See Section VI.I., "Confirmation and Consummation Procedure--HET/JCC Agreement."
By entering into the HET/JCC Agreement and providing a Minimum
Payment Guaranty, HET and HOCI are not obligated to provide a Minimum Payment
Guaranty for the entire term of the Amended and Renegotiated Casino Operating
Contract, but rather have proposed only to provide it for the period and on
terms and conditions specified 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 COC 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
13
<PAGE>
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. In the event a non-renewal condition
under the HET/JCC Agreement has occurred or upon termination of the HET/JCC
Agreement on March 31, 2004, JCC will be required to secure a substitute
guarantor to provide a Minimum Payment Guaranty or the Casino will be unable to
remain open under the terms of the Amended and Renegotiated Casino Operating
Contract. Such substitute guarantor may or may not be HET and 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 Equity Interests and their treatment
under the Plan may be summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Administrative Claims (Unclassified) Each holder of an Allowed Administrative Expense
Claim against a Debtor will receive (i) the amount
Costs of the bankruptcy proceeding and expenses of of such holder's Allowed Claim in one cash payment
operating Debtors' businesses as specified in on, or as soon as practicable after, the later of
Section 503(b) of the Bankruptcy Code. the Effective Date and the day on which such Claim
becomes an Allowed Claim (but in no event later
than the 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.
- --------------------------------------------------------------------------------------------------------------
Priority Tax Claims (Unclassified) Except to the extent that the holder of an Allowed
Priority Tax Claim agrees to a different
Allowed Claims entitled to priority under Sections treatment, each holder of an Allowed Priority Tax
502(i) and 507(a)(8) of the Bankruptcy Code. Claim, at the sole option of JCC, will receive (i)
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 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 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.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Class A1: Other Priority Claims Against HJC Impaired: Each holder of an Allowed Class A1 Claim
will receive cash in an amount equal to such
Class A1 consists of all Allowed Other Priority Allowed Claim on the later of the Effective Date
Claims against HJC. and the date such Claim 15 becomes an Allowed
Claim, or as soon as practicable thereafter.
- --------------------------------------------------------------------------------------------------------------
Class A2: Non-Bondholder Secured Claims Against Impaired: Each Allowed Class A2 Claim, except as
HJC provided in the immediately following two
sentences, notwithstanding any contractual
Class A2 consists of all Allowed Secured Claims provision or applicable law that entitles the
against HJC other than the Secured Claims holder of an Allowed Claim in Class A2 to demand
specified in Class A3, A4 or A5. or receive payment of such Claim prior to the
stated maturity of such Claim from and 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.
- --------------------------------------------------------------------------------------------------------------
Class A3: Bank Claims and Old Bank Collateral Agent Impaired: The Claim of each holder in Class A3(a)
Claims Against HJC shall be allowed in an amount equal to: (i) with
respect to any holder that participated in the
Class A3 consists of two separate subclasses. Class pre-petition standby letter of credit issued by
A3(a) consists of all Allowed Secured Claims of the BTCo in the amount of $5,000,000 and previously
Participating Banks and Old Bank Collateral Agent drawn in full by Broadmoor as the beneficiary,
against HJC and Class A3(b) consists of all Allowed such holder's Pro Rata Share of the sum of
Secured Claims of the Non-Participating Banks $5,000,000 plus all unpaid interest thereon (at
against HJC. 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 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
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
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 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 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
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
(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.
- --------------------------------------------------------------------------------------------------------------
Class A4: Bondholder Claims Against HJC Impaired: Each record holder of an Allowed Class A4
Claim will receive (i) 8.529 shares of Class A New
Class A4 consists of all Allowed Secured and Common Stock for each $1,000 of the principal amount of
Unsecured Claims of the Bondholders against HJC. 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 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.
- --------------------------------------------------------------------------------------------------------------
Class A5: Old Indenture Predecessor Trustee and Impaired: All of FNBC's Claims as Old Indenture
Old Indenture Predecessor Collateral Agent Claims Predecessor Trustee and Old Indenture Predecessor
Against HJC Collateral Agent will be allowed and otherwise treated
in accordance with the provisions of the FNBC
Class A5 consists of all Allowed Secured Claims Settlement Agreement.
of the Old Indenture Predecessor Trustee and the
Old Indenture
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Predecessor Collateral Agent against HJC.
- --------------------------------------------------------------------------------------------------------------
Class A6: WARN Act Claims Impaired: On or as soon as practicable after the
Effective Date, JCC shall pay the sum of $2.265 million
Class A6 consists of all Allowed WARN Act Claims minus the fees and expenses of WARN Act Counsel
against HJC of holders who are part of the incurred in connection with its representation of the
Certified WARN Act Class and are bound by the holders of WARN Act Claims, and a portion of certain
WARN Act Settlement. taxes attributable to the WARN Act settlement (all as
more fully described in the February 20, 1997
Bankruptcy Court order approving the settlement of WARN
Act Claims), to holders of Allowed 11/95 WARN Act
Claims based on their respective Pro Rata Interests in
the balance of the $2.265 million payment, subject to
any tax or other withholdings required by law. The
Allowed amount of the WARN Act Claim of each 11/95 WARN
Act Claimant for purposes of determining his or her Pro
Rata Interest shall be determined by WARN Act Counsel
in its reasonable discretion pursuant to a set of
objective and nondiscriminatory criteria to be filed
with the Bankruptcy Court on or before the Effective
Date. In addition, to the extent such positions are or
become available, JCC shall offer each 11/95 WARN Act
Claimant re-employment to his or her former position
or, if his or her former position no longer exists or
is not then available, to a substantially equivalent
position, prior to offering employment to such position
to any other Person other than any 11/95 WARN Act
Claimant. As for the 8/95 WARN Act Claimants, JCC (A)
shall place each 8/95 WARN Act Claimant on a
preferential 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.
- --------------------------------------------------------------------------------------------------------------
Class A7: General Unsecured Claims Against HJC Impaired: JCC will pay to each holder of an Allowed
Class A7 Claim cash in an amount equal to such Allowed
Class A7 consists of all of Allowed Unsecured Claim on the later of the Effective Date and the date
Claims against HJC other than the Unsecured on which such Claim becomes an Allowed Claim, or as
Claims of the Bondholders and the Unsecured soon as practicable thereafter.
Claims in Class A6 or A8.
- --------------------------------------------------------------------------------------------------------------
Class A8: Penalty Claims Against HJC Impaired: Holders of Class A8 Claims will not receive
any distributions on account of such Claims, and on the
Class A8 consists of all Allowed Penalty Claims Effective Date, all Class A8 Claims will be
(as defined below) against HJC. extinguished; provided, 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.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Class A9: Equity Interests in HJC Impaired: Holders of Allowed HJC Equity Interests will
not receive any distributions on account of such Equity
Class A9 consists of all Allowed Equity Interests Interests; and on the Effective Date, all Equity
in HJC, and any option, warrant or other Interests in HJC will be extinguished.
agreement requiring the issuance of any such
Equity Interest.
- --------------------------------------------------------------------------------------------------------------
Class B1: Other Priority Claims Against Finance Impaired: Each holder of an Allowed Class B1 Claim will
Corp. receive cash in an amount equal to such Allowed Claim
on the later of the Effective Date and the date such
Class B1 consists of all Allowed Other Priority Claim becomes an Allowed Claim, or as soon as
Claims against Finance Corp. practicable thereafter.
- --------------------------------------------------------------------------------------------------------------
Class B2: Bank Claims Against Finance Corp. Impaired: Each holder of an Allowed Class B2 Claim will
receive, as soon as practicable after the later of the
Class B2 consists of all Allowed Secured Claims Effective Date and the date on which all of the Allowed
of the Banks and the Old Bank Collateral Agent Secured Claims in Class B2 have been allowed or
against Finance Corp. disallowed by Final Order, 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.
- --------------------------------------------------------------------------------------------------------------
Class B3: Bondholder Claims Against Finance Corp. Impaired: Each holder of an Allowed Class B3 Claim will
receive its Pro Rata Share of shares of Class A New
Class B3 consists of all Allowed Secured and Common Stock and New Bonds which, in the aggregate,
Unsecured Claims against Finance Corp. of the have a value equal to the product of (i) $1,000 and
Bondholders. (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.
- --------------------------------------------------------------------------------------------------------------
Class B4: WARN Act Claims Against Finance Corp. Impaired: Each holder of an Allowed Claim in Class B4
will be deemed to have received on account of his or
Class B4 consists of all Allowed WARN Act Claims her Class B4 Claims, and in full satisfaction thereof,
against Finance Corp. of holders who are part of the distribution and/or other treatment he or she
the Certified WARN Act Class and are bound by the receives as a holder of a Class A6 Claim pursuant to
WARN Act Settlement. Section 4.6 of the Plan, and no other distribution will
be provided to such holder on account of his or her
Class B4 Claims.
- --------------------------------------------------------------------------------------------------------------
Class B5: General Unsecured Claims Against Impaired: JCC will pay to each holder of an Allowed
Finance Corp. Claim in Class B5 cash in an amount equal to such
Allowed Claim on the later of the Effective Date and
Class B5 consists of all Allowed Unsecured the date on which such Claim becomes an Allowed Claim,
Claims against Finance Corp. other than the or as soon as practicable thereafter.
Unsecured Claims of the Bondholders.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Class B6: Penalty Claims Against Finance Corp. Impaired: Holders of Class B6 Claims will not receive
any
Class B6 consists of all Allowed Penalty Claims distributions on account of such Claims, and on the
against Finance Corp. Effective Date, all Class B6 Claims will 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 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.
- --------------------------------------------------------------------------------------------------------------
Class B7: Equity Interests in Finance Corp. Impaired: Holders of Allowed Finance Corp. Equity
Interests will not receive any distributions on account
Class B7 consists of all Allowed Equity Interests of such Equity Interests. On the Effective Date, all
in Finance Corp., and any option, warrant or other Equity Interests in Finance Corp. will be extinguished.
agreement requiring the issuance of any such
Equity Interest.
- --------------------------------------------------------------------------------------------------------------
Class C1: Other Priority Claims Against HNOIC Impaired: Each holder of an Allowed Class C1 Claim will
receive cash in an amount equal to such Allowed Claim on
Class C1 consists of all Allowed Other Priority the later of the Effective Date and the date such Claim
Claims against HNOIC. becomes an Allowed Claim, or as soon as practicable
thereafter.
- --------------------------------------------------------------------------------------------------------------
Class C2: Secured Claims Against HNOIC Impaired: Each Allowed Class C2 Claim, except as
provided in the immediately following two sentences,
Class C2 consists of all Allowed Secured Claims notwithstanding any contractual provision or applicable
against HNOIC. 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.
- --------------------------------------------------------------------------------------------------------------
Class C3: WARN Act Claims Against HNOIC Impaired: Each holder of an Allowed Claim in Class C3
will be deemed to have received on account of his or
Class C3 consists of all Allowed WARN Act Claims her Class C3 Claims, and in full satisfaction thereof,
against HNOIC of holders who are part of the the distribution and/or other treatment he or she
Certified WARN Act Class and are bound by the receives as a holder of a Class A6 Claim pursuant to
WARN Act Settlement. Section 4.6 of the Plan, and no other distribution will
be provided to such holder on account of his or her
Class C3 Claims.
- --------------------------------------------------------------------------------------------------------------
Class C4: Unsecured Claims Against HNOIC (for Impaired: Each holder of an Allowed Class C4 Claim will
which HJC is liable) be deemed to have received on account of its Class C4
Claim the distribution it receives as a holder of a
Class C4 consists of all Allowed Unsecured Claims Class A7 Claim pursuant to Section 4.7 of the Plan, and
against HNOIC for which HJC is also liable. no other distribution will be provided to such holder
on account of its Class C4 Claims.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
20
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Class Description Treatment Under the Plan
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Class C5: General Unsecured Claims Against HNOIC Impaired: Each holder of an Allowed Class C5 Claim will
receive the lesser of the amount of its Allowed Class
Class C5 consists of all Allowed Unsecured Claims C5 Claim or its Pro Rata Share of $1,000 in cash.
against HNOIC other than Unsecured Claims in Class
C3, C4, C6 or C7.
- --------------------------------------------------------------------------------------------------------------
Class C6: NOLDC/Showboat Claim Against HNOIC Impaired: In accordance with the terms of the NOLDC
Plan and the NOLDC Shareholders/HET Settlement
Class C6 consists of the Allowed Claim of NOLDC Agreement, consideration will be furnished directly to
against HNOIC for reimbursement of a portion of Showboat in exchange for a full release from Showboat
the amount owing by NOLDC to 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.
- --------------------------------------------------------------------------------------------------------------
Class C7: Penalty Claims Against HNOIC Impaired: Holders of Class C7 Claims will not receive
any distributions on account of such Claims, and on the
Class C7 consists of all Allowed Penalty Claims Effective Date, all Class C7 Claims will be
against HNOIC. 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.
- --------------------------------------------------------------------------------------------------------------
Class C8: Equity Interests in HNOIC Impaired: The holder of Allowed Equity Interests in
HNOIC will not receive any distributions on account of
Class C8 consists of all Allowed Equity Interests such Equity Interests. On the Effective Date, all
in HNOIC, and any option, warrant or other agreement Equity Interests in HNOIC will be extinguished.
requiring the issuance of any such Equity Interest.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
III. GENERAL INFORMATION
A. Description of HJC and Events Leading to Commencement of Chapter 11
Cases
21
<PAGE>
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 a long-term lease for the
Rivergate site (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 General Development Agreement ("GDA") governing the design, development
and construction of the Casino and related facilities, and the open access
program and open access plans adopted thereunder regarding hiring goals and
programs (collectively, the "Open Access Program and Plans"). Pursuant to a
Casino Management Agreement (the "Casino Management Agreement"), HJC engaged
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 defined below) 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.
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
22
<PAGE>
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 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 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.
23
<PAGE>
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, the
"Initial Casino Facilities").
Concurrent with the construction of the Initial Casino Facilities,
approximately 130,000 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"). Subject to entering into tenant
leases, the build-out of non-gaming tenant improvements on the second floor will
be completed following completion of Second Floor Shell Construction. Second
Floor Shell Construction is scheduled to be completed before or substantially
concurrently with the opening of the Initial Casino Facilities.
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 five
themed areas named The Jazz Court, The Mardi Gras Court, The Smuggler's Court,
The Court of the Mansion and The Court of Good Fortune. The remaining space will
be used for additional gaming activities, a food service area, casino support
facilities, and multi-function, special event and meeting-room space. The Jazz
Court will have a raised domed ceiling and occupy the center of the Casino. The
Casino'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. 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." A group consisting of representatives of the RDC, JCC and JCC
Development 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,
among other things, (i) leasing guidelines regarding rent, termination rights
and termination fees, tenant improvements and concessions, permissible uses and
brokerage fees, (ii) an initial capital improvement budget, and (iii) an initial
operating budget for the first year of second-floor operation.
24
<PAGE>
The second floor of the Casino is anticipated to be ready for leasing following
the completion of the Initial Casino Facilities and the Second Floor Shell
Construction. Subject to entering into tenant leases, tenant improvement
build-out and development is anticipated to begin during and be completed
following the completion of Second Floor Shell Construction. 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 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 Amended and Renegotiated Casino Operating Contract. If, however, such
conversion were to reduce the sublease revenue payable to the RDC, JCC would be
required to compensate the RDC for such reduction. See Section V.C.2., "The Plan
of Reorganization--Executory Contracts and Unexpired Leases--Canal Street Casino
Lease."
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, every day of the 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.G., "General
Information --Regulation."
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 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 on file with the
Bankruptcy Court attached as Exhibit "L" to the Original Plan). Negotiations to
revise the agreement with Centex to accommodate the construction schedule
currently contemplated by the Plan, the Amended and Renegotiated Casino
Operating Contract and the Canal Street Casino Lease are in process. There can
be no assurance that an agreement on acceptable modifications to the agreement
with Centex can be reached between Centex and HJC. HJC also reached an agreement
with Broadmoor, the primary contractor for the Casino's parking facilities, with
respect to construction of the Casino's parking facilities (which agreement is
on file with the Bankruptcy Court attached as Exhibit "H" to the Original Plan).
The settlement agreement with Broadmoor 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. Negotiations are in process to revise the settlement
agreement with Broadmoor to accommodate the construction schedule currently
contemplated by the Plan, the Amended and Renegotiated Casino Operating Contract
and the Amended Canal Street Casino Lease. There can be no assurance that an
agreement on acceptable modifications to the settlement agreement with Broadmoor
can be reached between Broadmoor and HJC.
25
<PAGE>
In connection with preparations for consummation of the Confirmed
Plan, HJC commenced a review of the partially-constructed Casino and adjoining
parking lot structure to determine (i) what redesign of the Casino interior will
be necessitated by the dedication of the second floor of the Casino building to
non-gaming uses and by the other changes in the configuration of the Casino
contemplated by the Amended and Renegotiated Casino Operating Contract, (ii)
whether to upgrade the Casino design and gaming equipment to meet more intense
competition from other gaming facilities such as those located on the
Mississippi Gulf Coast, (iii) the extent of physical deterioration to the Casino
structure and adjoining parking facilities during the three year reorganization
process, and (iv) the extent to which increased costs resulting from proposed
modifications and additions might be offset by changes to the Casino design. In
addition, HJC obtained estimates for the costs of the various modifications to
the Casino project under consideration, and also determined what costs have and
will be occasioned by the delay in the reorganization process resulting from the
developments described above.
Upon determining what modifications and additions to the Casino
project are reasonably necessary to its success, what other changes to the
Casino design should be made to partially offset the increased costs occasioned
by such modifications and the delay in the reorganization process, and after
negotiations with the Bondholders Committee and the Bank Lenders, HJC revised
its budget for completion and operation of the Casino. HJC's revised budget for
completion of the Casino project contemplates that $25 million in additional new
financing and the cancellation of all accrued interest on the DIP Loan will be
necessary to fund the costs of the redesign of the interior of the Casino, the
upgrade of the Casino design and gaming equipment, the remediation work to the
Casino and the extended reorganization process. Design and planning work has
already begun with respect to the interior of the Casino.
HJC has approximately 3,000 slot machines in inventory. A review
conducted in connection with preparation for consummation of the Plan suggests
that up to 1,000 of these owned machines may not meet customer expectations and
could require replacement. It is expected that after the Effective Date JCC, as
part of the process of adopting an annual operating plan, will evaluate the
extent to which the owned machines will meet customer expectations upon opening
of the Casino, and whether such machines will need to be replaced by other
machines to be owned or leased.
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 eleven states and Sydney,
Australia. Such facilities include: casino hotels in the five traditional U.S.
gaming markets of Reno, Lake Tahoe, Las Vegas and Laughlin, Nevada, and Atlantic
City, New Jersey; riverboat casinos in Joliet, Illinois, Vicksburg and Tunica,
Mississippi, Shreveport, Louisiana, North Kansas City and St. Louis, Missouri,
and East Chicago, Indiana; casinos on Indian lands near Phoenix, Arizona,
Seattle, Washington, Cherokee, North Carolina and Topeka, Kansas; and a
land-based casino in Sydney, Australia. On July 23, 1998, HET announced that it
would withdraw from management of the Indian Casino near Seattle, Washington,
before the end of 1998. The marketing strategy for such facilities is generally
designed to appeal primarily to the broad middle-market gaming customer segment.
As of July 1, 1998, HET, through its operating subsidiaries and other
affiliates, operated a total of approximately 1,102,000 square feet of casino
space, 27,100 slot machines, 1,187 table games, 9,017 hotel rooms or suites,
approximately 165,200 square feet of convention space, 76 restaurants, 9
showrooms and 4 cabarets.
26
<PAGE>
E. City Agreement
On March 6, 1996, HJC and the City and the RDC reached an
agreement (the "March 6 Agreement") with respect to amendments to (i) the Canal
Street Casino Lease, (ii) 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, the "City Agreement"), which in on file
with the Bankruptcy Court attached as Exhibit "A" to the Original 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.
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. Revised versions of the
amended Canal Street Casino Lease and amended General Development Agreement and
certain exhibits thereto were submitted to the City Counsel for first reading on
December 18, 1997. 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.
HJC has been making rent payments to the City and RDC at a rate of
$736,000 per month. The City and RDC contend that the City Agreement requires
HJC to pay rent at an escalated rate from November 1, 1997 through the opening
of the Casino, as a result of the delay in consummating an HJC plan of
reorganization and the resulting delay in opening the Casino within the time
periods set forth in the City Agreement. HJC believes there is no legal basis
for such contention. The City and RDC have not waived any claim to payment of
escalated rent, and have requested that HJC and JCC make specified payments to
the City
27
<PAGE>
and RDC in lieu of the escalated rent. The City, RDC and HJC are
currently negotiating these and related issues. There can be no assurance that
such negotiations will not result in additional payments to the City. See
Section IX.A.19. "Certain Risk Factors To Be Considered--Overall Risks to
Recovery by Holders of Claims--Uncertainty Regarding Termination of City
Agreement and Canal Street Casino Lease."
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.
F. Certain Prepetition Legal Proceedings
An immediate effect of the filing of the above-captioned
bankruptcy 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 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.
28
<PAGE>
The Bankruptcy Court modified the automatic stay to permit the McCall Litigation
to proceed and subsequently amended the order 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.
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 upon the
purported settlement that was the subject of the April 1994 motion in Civil
District Court. They also filed an adversary proceeding in the Bankruptcy Court
in late May of 1996 seeking to enforce the purported settlement agreement. HJC
filed an objection to the McCalls' claim on May 2, 1996. The Bankruptcy Court
ordered that HJC's objection to the proof of claim and the adversary proceeding
be consolidated for purposes of trial and discovery. At a hearing on September
16, 1996, the Bankruptcy Court ruled that Thomas Tucker, attorney for the
McCalls, could not be both a witness and attorney in the matter. The trial was
adjourned to give Mr. Tucker time to decide which role he would take. On
September 26, 1996, the McCalls filed a motion seeking an interlocutory appeal
on this decision of the Bankruptcy Court. At that time, the Bankruptcy Court
stayed the underlying action pending a decision on the appeal. On October 16,
1996, the District Court denied the motion for an interlocutory appeal. The
McCalls' motion for 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.
29
<PAGE>
(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 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. Although a considerable amount of time has passed since the terms of
the McCall Settlement Agreement were announced, counsel to the parties have
indicated a continued willingness to proceed with the settlement.
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 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
30
<PAGE>
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 litigation,
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. 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 United States Secretary of the Interior. The plaintiff also
alleged a pendent state law claim that the Place de France had been dedicated as
a park by the City and that the conversion of the Place de France to another use
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
31
<PAGE>
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.
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.
32
<PAGE>
G. Regulation
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 finding. 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 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
33
<PAGE>
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.
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
34
<PAGE>
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. That
law has been the subject of recent litigation. See Section IV.U. "Events During
Chapter 11 Cases--Bean and Jordan Litigation."
Under the Plan 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.
Post-Petition Date Legislative Events
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 Amended and Renegotiated 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 Local Option Election and by increasing the costs
related to the Plan. See Sections IX.A.1., IX.A.9., "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
35
<PAGE>
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 (subject to a
15,000 square foot limitation) at race tracks located in three parishes in the
State (but not Orleans Parish) subject to local elections in the parishes where
the race tracks are located. The voters in two of the three parishes approved
the use of slot machines at race tracks located in those parishes but the State
legislature's authorization is subject to further legislative action on the fees
and taxes to be imposed. Legislation to impose such fees and taxes was
introduced in the 1998 fiscal session of the State Legislature, but failed to
receive legislative approval. Future consideration of this issue is likely by
the State legislature. See Section IX.A.11., "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 the April 29, 1997 Casino Operating
Contract. Although the State legislature considered the approval of the April
29, 1997 Casino Operating Contract, the State legislature did not approve or
disapprove this contract during the 1997 Regular Session. On November 4, 1997,
the Governor of the State publicly
36
<PAGE>
expressed his support for the project with a rolling guaranty concept. On
December 9, 1997, the LGCB, among other things, unanimously approved the
December 9, 1997 Casino Operating Contract for submission to the Governor of the
State with the request that he submit the December 9, 1997 Casino Operating
Contract to the State legislature for its approval. The Governor indicated that
he would call a special session of the State legislature commencing in the
latter part of March 1998 which would consider, among other things, approval of
the December 9, 1997 Casino Operating Contract. However, after receiving an
opinion from the State Attorney General that the LGCB has independent authority
(without the necessity of any legislative approval) to renegotiate and execute a
renegotiated casino operating contract, the Governor did not include
consideration of the December 9, 1997 Casino Operating Contract in his call for
the special session. Instead, on March 20, 1998, the LGCB approved the Amended
and Renegotiated Casino Operating Contract subject to the condition that the
Louisiana Supreme Court render a final, non-appealable judgment that the LGCB,
acting on its own, is the proper party and has the legal authority to enter into
the Amended and Renegotiated Casino Operating Contract with HJC on behalf of the
State and the LGCB, without the specific approval of the Governor or the State
legislature. On May 15, 1998, the Louisiana Supreme Court issued a decision
confirming that the LGCB has the independent authority to renegotiate and
execute the Amended and Renegotiated Casino Operating Contract without seeking
gubernatorial or legislative approval. The decision of the Louisiana Supreme
Court has since become final and non-appealable. See Section IV.U., "Events
During the Chapter 11 Cases--Bean and Jordan Litigation."
Two bills have been pre-filed in the State House of
Representatives for consideration during the State legislature's 1999 regular
session which begins March 1999. If passed, the first bill would repeal the
Gaming Act in its entirety. The second would amend the Gaming Act to broaden the
food service restrictions applicable to the Casino and all parts of any
connecting structure or building. There can be no assurance that the JCC
Entities will be successful in preventing such legislative changes or that the
JCC Entities can recover damages as a result thereof.
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 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
37
<PAGE>
zoning ordinance in all material respects. See Section IX.A.3., "Certain Risk
Factors to be Considered--Ability to Commence Operations as Scheduled."
H. Employees
JCC, through HNOMC, will recruit and train employees to operate
the Casino. See Section IX.A.13., "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.
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 --
38
<PAGE>
400 Poydras Street
New Orleans, LA 70130
Accountants (for HJC only)
PricewaterhouseCoopers LLP
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
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:
Heller, Draper, Hayden & Horn, L.L.C.
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
39
<PAGE>
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
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
40
<PAGE>
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
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
On July 10, 1998, the Bankruptcy Court authorized the Bondholders
Committee to retain a consultant, Mr. Edwin Jacobson, and to expand the duties
of Mr. Seth Lemler, a principal of the Financial Advisor to the Bondholders
Committee. Pursuant to the July 10, 1998 order, Mr. Jacobson and Mr. Lemler have
been authorized to consult with the Bondholders Committee regarding preliminary
JCC Holding operational and management decisions in furtherance of consummation
of the Plan, and the Debtors have been authorized to indemnify Mr. Jacobson and
Mr. Lemler in their capacities as advisors to the Bondholders Committee.
D. Litigation With the City of New Orleans and the RDC
Pre-March 6 Agreement Litigation
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
NonResidential 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
41
<PAGE>
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.
The March 6 Agreement
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 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
42
<PAGE>
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 NonResidential 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 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 City Agreement
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 on file with the Bankruptcy Court attached as
Exhibit "A" to the Original 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;
43
<PAGE>
(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 October 3, 1996, the City Council
approved the amendments and agreements called for under the City Agreement.
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, which has been paid to the City) 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.
Orleans Parish School Board
HJC 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. 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 an order by the Bankruptcy Court dated March 18,
1996.
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
(as defined below), 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
44
<PAGE>
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 an order by the Bankruptcy Court dated March 18, 1996.
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 maintained
that HJC has failed to pay the sum of $1,036,000 for the year 1995. In addition,
the School Board maintained 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 disputed 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.
Administrative Expense Claims
In addition, the City 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 HJC negotiated a resolution to this motion by entering
into a stipulation which provides that the City is granted an administrative
expense claim for payment of certain real estate and personal property taxes,
that such amounts will be paid within 60 days of the Effective Date, and 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. The City and HJC are presently negotiating a further
resolution of both these administrative claims and additional administrative
claims asserted by the City on account of real estate and personal property
taxes, interest and penalties for 1997 and 1998. The proposed stipulation that
would memorialize this resolution (which has not yet been finalized or executed
by any of the parties thereto) contemplates filing the amount of and granting to
the City an administrative expense claim for payment of the 1996, 1997 and 1998
real estate and personal property taxes, plus interest and certain penalties,
and provides that if the Effective Date does not occur prior to October 31,
1998, the City will have the right to demand immediate payment of its
administrative claims.
45
<PAGE>
ZHA Litigation
On February 25, 1997, ZHA, Inc. commenced a lawsuit against the
City seeking payment of $932,777.75 allegedly owed by the City to ZHA for work
performed in connection with the development of the Casino. Thereafter, the City
filed a third-party complaint against HJC alleging, inter alia, that under the
GDA, HJC (and not the City) is responsible for payment of any amounts owed to
ZHA, which HJC denies. This litigation is now pending before the Bankruptcy
Court. Although the City and HJC are engaged in negotiations, to date no
settlement of this litigation has been reached.
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 in excess of $20 million
in accounts at FNBC and Hibernia National Bank. 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.
In order to ensure that it would have adequate funds available to
comply with orders of the Bankruptcy Court, in December 1995 HJC obtained from
the Bankruptcy Court an agreed order authorizing the immediate use of up to
$1.65 million in cash collateral, granting the Bondholders certain priority
claim and lien rights as "adequate protection," and preserving the parties'
rights with respect to characterization of the funds at issue as "cash
collateral" or not. Thereafter, the Bankruptcy Court entered a series of orders
ultimately authorizing HJC to use all but approximately $3 million of funds
which the Bondholders and the Indenture Trustee asserted constituted "cash
collateral," and granted the Bondholders "adequate protection" in the form of
priority claims and certain lien rights.
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.
Pre-Effective Date remediation work to repair the effects of deterioration
during the three-year reorganization process to the partially-constructed Casino
has commenced pursuant to a change order to the Close In Agreement.
46
<PAGE>
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 had to seek immediate
debtor-in-possession financing to supplement the purported cash collateral that
was then available for such payment. Accordingly, HJC sought, and the Bankruptcy
Court granted, authorization to obtain debtor-in-possession financing in the
principal amount of $2.5 million (the "First DIP Loan") from the DIP Lender. The
DIP Lender subsequently agreed to fund up to a total of $30 million in
debtor-in-possession financing pursuant to a Second, Third, Fourth and Fifth DIP
Loan.
In July 1997, following the State legislature's failure to approve
the April 29, 1997 Casino Operating Contract, HET notified HJC that it 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, and (ii) September 30, 1997.
Debtor-in-possession financing ceased for a time commencing on September 30,
1997. In November 1997, the DIP Lender agreed to resume debtor-in-possession
financing by providing HJC with up to an additional $9 million in
debtor-in-possession financing (for a cumulative total of up to $39 million)
(the "Sixth DIP Loan") as certain milestones were met or (under certain
circumstances) waived by the DIP Lender. The Bankruptcy Court approved up to
$4.5 million of this additional debtor-in-possession financing as part of the
Sixth DIP Loan (the "Sixth DIP Loan Order").
As of January 21, 1998, HJC had qualified for approximately $5.5
million in additional debtor-in-possession financing under the terms of the
Sixth DIP Loan Order. In January, 1998, the Governor announced that the State
legislature would consider the December 9, 1997 Casino Operating Contract during
a special session of the State legislature to commence in March, 1998, as a
result of which the Effective Date would not occur within the time period
anticipated when HJC filed its motion to approve the Sixth DIP Loan. It also
appeared that certain future financing "milestones" provided for in the Sixth
DIP Loan Order would not be met as a result of these delays, commencing with the
February 1, 1998 milestones. Therefore, on January 21, 1998, HJC filed a motion
seeking authorization to obtain debtor-in-possession financing from the DIP
Lender in the additional principal amount of $1 million (for a cumulative total
of up to $40 million in debtor-in-possession financing) (the "Seventh DIP
Loan"), and also to modify certain of the financing milestones that were
required to be met in order to obtain continuing DIP financing under the terms
of the Sixth DIP Loan Order. On February 17, 1998, the Bankruptcy Court approved
the Seventh DIP Loan and the modifications to the financing milestones provided
for in the Sixth DIP Loan Order.
On May 27, 1998, HJC filed a motion seeking authorization to
obtain debtor-in-possession financing from the DIP Lender in the additional
principal amount of $6 million (for a cumulative total of up to $46 million in
debtor-in-possession financing) (the "Eighth DIP Loan"). On June 17, 1998, the
Bankruptcy Court entered an order approving the Eighth DIP Loan. Thereafter, on
August 5, 1998, HJC filed a motion seeking an additional $14 million in
debtor-in-possession financing (for a cumulative total of up to $60 million in
debtor-in-possession financing) (the "Ninth DIP Loan and, together with the
earlier DIP Loans, the "Existing DIP Loans"). On August 25, 1998, the Bankruptcy
Court granted HJC's motion.
Under the terms of the final order approving the Ninth DIP Loan
(the "Ninth DIP Loan Order"), HJC is authorized to borrow from the DIP Lender,
in addition to the amounts it was qualified and authorized to borrow as of that
date, up to an additional $14 million. Under the terms of the Ninth DIP Loan
Order, the maturity of all Existing DIP Loans was extended to the earlier of:
(i) October 31, 1998, or such later date to which the DIP Lender consents; (ii)
the Effective Date of the Existing Plan (as it may be modified); (iii) the date
on which the Existing Plan (as it may be modified) is revoked or is otherwise no
longer in full force and effect; (iv) the dismissal of HJC's Chapter 11 case;
(v) the conversion of HJC's Chapter 11 case to a case under Chapter 7 of the
Bankruptcy Code; (vi) the appointment of a trustee for HJC; (vii) any stay,
reversal, modification or other amendment in any respect (except to the extent
acceptable to the DIP Lender)
47
<PAGE>
or termination or expiration of the Ninth DIP Loan Order or the order confirming
the Existing Plan (as it may be modified); or (viii) the date on which (a) the
State Legislature shall have passed an act or resolution having the effect of
suspending or materially and adversely impairing the legal authority or contract
for the Casino and (b) the time for a veto by the Governor of any such act shall
have passed without a veto by the Governor or the Governor shall have vetoed any
such act and the State Legislature shall have overridden any such veto by the
Governor.
The DIP Lender's claim for interest on all Existing DIP Loans,
which has been accruing at the rate of 8% per annum and is payable upon
maturity, will be canceled on the Effective Date. As security for the Existing
DIP Loans, the DIP Lender has been granted (i) administrative priority status
for all of the Existing DIP Loans, with priority equivalent to a claim under
Section 364(c)(1) of the Bankruptcy Code, and superior to all other costs and
expenses of administration of the kinds specified in Sections 105, 326, 503(b),
507(a) or 507(b) of the Bankruptcy Code; and (ii) a first priority,
non-avoidable, valid, enforceable and automatically perfected lien and security
interest on and in all of HJC's assets, subject only to (a) all non-avoidable,
valid, enforceable and perfected liens and security interests in HJC's property
that existed on the Petition Date other than the prepetition and postpetition
liens and security interests 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 (other than personal property, certain parcels of real estate and
cash and cash equivalents), (b) any and all non-avoidable, valid, enforceable
and perfected liens, security interests and/or rights of setoff in favor of the
Indenture Trustee and the predecessor Indenture Trustee on $1.5 million
previously deposited with them (subject to reduction for fees and expenses of
the predecessor Indenture Trustee), (c) any and all postpetition liens and
security interests in favor of any or all of the Bondholders and the Indenture
Trustee on any causes of action of HJC against any "insiders" (as defined in
Section 101(31) of the Bankruptcy Code) arising under Sections 544(b), 547, 548,
550 or 553 of the Bankruptcy Code, (d) certain allowed administrative expense
claims for the fees, expenses and costs of professionals retained by HJC and the
Committees, and (e) any existing or future rights of setoff, compensation and/or
recoupment in favor of the City, the RDC, the State and/or the LEDGC. The Ninth
DIP Loan Order further provides that no claims or liens of the DIP Lender are to
have priority over any amounts paid prior to the maturity of the Existing DIP
Loans to third parties pursuant to any budget approved by the DIP Lender.
The Proponents estimate that the amount of Existing DIP Loans will
be sufficient to fund HJC's needs up to the Effective Date.
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 (the "First HNOIC DIP Loan") 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 authorizing the loan (except to the extent acceptable to the lender). The
First HNOIC DIP Loan was to be used to fund administrative expenses, including
United States Trustee fees and filing fees required by various state taxing
48
<PAGE>
authorities. On November 13, 1996, the Bankruptcy Court granted HNOIC's motion
to obtain the First HNOIC DIP Loan.
In November 1997, HNOIC received authorization to borrow up to an
additional $50,000 from HET or an affiliate under substantially the same terms
and conditions, and for the same purposes, as the First HNOIC DIP Loan.
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 Original 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 Original 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
49
<PAGE>
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.
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 which
is on file with the Bankruptcy Court, attached as Exhibit "L" to the Original
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.14.
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. As set forth in Section V.C.14. 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.
50
<PAGE>
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 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" which is on file with the
Bankruptcy Court attached as Exhibit "H" to the Original 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.
In accordance with subsequent orders agreed to by HJC and
Broadmoor and entered by the Bankruptcy Court, HJC has been paying monthly rent
to these two subcontractors for the continued storage of these materials. Under
the most recent order entered by the Bankruptcy Court on May 8, 1998, if certain
of the materials (pre-fabricated slabs of concrete which form the walls of the
parking lot buildings) are not removed and transported by HJC prior to June 30,
1998, the supplier of those materials is authorized to sell the materials at a
public auction and/or to destroy the materials under certain circumstances.
Although no further orders extending this date have been entered by the
Bankruptcy Court, HJC has continued to pay monthly rent to these two Broadmoor
subcontractors, and HJC has not been notified of any intent to sell the building
materials at a public auction and/or to destroy the building materials (to the
extent authorized to do so by the Bankruptcy Court's orders). The sale and/or
destruction of these building materials could cause a material increase in the
cost of completing construction of the parking facilities for the Casino.
51
<PAGE>
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, 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
52
<PAGE>
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 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 rehire 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 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.,
53
<PAGE>
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. ss.ss. 77k and
77l(2); Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. ss.
78j(b); and Rule 10b-5 promulgated thereunder by the Securities and Exchange
Commission, 17 C.F.R. ss. 240.10b-5. The complaint asserts that the registration
statement and prospectus filed in connection with the offering of the Old Bonds
contained untrue statements of material fact and omitted to state material facts
necessary in order to make the statements 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
54
<PAGE>
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 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
Original 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' execution of the releases and
other agreements among Grand Palais, HET and others described in the Original
Plan, 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
55
<PAGE>
"steering committee" conferences and present objections to the Bankruptcy Court
with respect to any significant decision requiring the approval of HJC's general
partners. Thereafter, plaintiffs filed a motion to reconsider the Court's order
permitting HJC to intervene in the litigation. On October 6, 1997, the
Bankruptcy Court remanded the litigation to Civil District Court. On that date,
the Bankruptcy Court also reconsidered its order permitting HJC to intervene in
the litigation and rescinded without prejudice its order permitting HJC to
intervene.
On November 21, 1997, Eddie L. Sapir and the Eddie L. Sapir Inter
Vivos Trust filed a civil action captioned Eddie L. Sapir and the Eddie L. Sapir
Inter Vivos Trust v. Banker's Trust Company, Cezar M. Froelich, ABC Insurance
Company, First National Bank of Commerce, Harrah's Entertainment Incorporated,
Shefsky & Froelich, Ltd., DEF Insurance Company, GHI Insurance Company, JKL
Insurance Company, The Boatmen's National Bank of St. Louis, Merrill Lynch
Senior High Income Fund, Merrill Lynch Senior High Income II Fund, Merrill Lynch
Senior Strategic Fund, Prime Income Trust, and Van Kampen Meritt Prime Rate
Income Trust, No. 97-20643, in the Civil District Court (the "Sapir
Litigation"). 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. Plaintiffs have never
served the suit on any defendant, no answers have been filed by any defendant
and no discovery has been taken. HET has removed the case to the United States
District Court for the Eastern District of Louisiana. After several status
calls, that court put the matter on "administrative hold." HET has informed the
other Proponents that it intends to vigorously defend against this lawsuit if it
is ever served.
As a result of the litigation described above, it is unclear who
has the authority to take certain actions on behalf of Grand Palais and the
impact the litigation might have on the Debtors' reorganization efforts. In
addition, subsequent to commencement of this litigation, Hemmeter filed a
voluntary petition for relief under Chapter 7 of the Bankruptcy Code, and a
Chapter 7 trustee has been appointed in that bankruptcy case. Although HET, the
receiver, plaintiffs in the above-captioned cases, Hemmeter and Hemmeter's
Chapter 7 bankruptcy trustee are engaged in negotiations, to date no settlements
have been reached with any of these parties.
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
56
<PAGE>
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.)
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 Alex. Brown Incorporated 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.11 below), the Audubon Settlement Agreement (as defined in Section V.C.13
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 March 20, 1998, the LGCB approved the Amended and
Renegotiated Casino Operating Contract subject to the condition that the
Louisiana Supreme Court render a final, non-appealable judgment that the LGCB,
acting on its own, is the proper party and has the legal authority to enter into
the Amended and Renegotiated Casino Operating Contract with HJC on behalf of the
State and the LGCB, without the specific approval of the Governor or the State
legislature. On May 15, 1998, the Louisiana Supreme Court issued a decision
confirming that the LGCB has the independent authority to renegotiate and
execute the Amended and Renegotiated Casino Operating Contract without seeking
gubernatorial or legislative approval.
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
57
<PAGE>
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 and Confirmation of Previous Plans
On April 3, 1996, the Proponents filed the first version of the
plan, along with the first version of a disclosure statement. Thereafter, the
legislative developments (discussed above in Section IV.G.) as well as further
negotiations with key constituents in the Chapter 11 Cases necessitated certain
amendments in the plan and disclosure statement which 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 dated February 26, 1997. On April 28, 1997, the Bankruptcy
Court confirmed the Original Plan, which reflected agreements with all major
parties and constituencies except the State and was predicated upon receiving
all necessary approvals, if any, of an amended Casino Operating Contract by the
State and the LGCB.
Although the LGCB did approve the April 29, 1997 Casino Operating
Contract, the State took 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. Because the Original Plan was predicated on
receiving all necessary approvals, if any, of by the State and the LGCB of the
April 29, 1997 Casino Operating Contract, and the State legislature failed to
approve it prior to the legislature's adjournment, the Original Plan was not
consummated.
In light of the State legislature's adjournment without action on
the April 29, 1997 Casino Operating Contract, on June 26, 1997, the Proponents
filed a motion seeking Bankruptcy Court approval of the June 26, 1997 Plan which
provided, among other things, for the assumption of HJC's existing Casino
Operating Contract without any amendments requiring the approval of the LGCB or
the State legislature. In July 1997, the Debtors' Fourth Amended Summary Joint
Disclosure Statement Pursuant to Sections 1125 and 1127 of the Bankruptcy Code,
was circulated to all parties entitled to vote on the June 26, 1997 Plan. The
State and the LGCB vigorously opposed the June 26, 1997 Plan. While sufficient
acceptances of the June 26, 1997 Plan were obtained, a confirmation hearing on
the June 26, 1997 Plan was not held.
While the Proponents' motion to approve the June 26, 1997 Plan was
pending, negotiations among the various parties in interest resulted in the
preparation of revisions to the April 29, 1997 Casino Operating Contract,
incorporating, among other things, a guaranty of the annual minimum payments due
under an amended casino operating contract. On December 9, 1997, the LGCB
unanimously approved the December 9, 1997 Casino Operating Contract for
submission to the Governor of the State with the request that
58
<PAGE>
he submit it to the State legislature for its approval. Shortly thereafter, the
Proponents proposed a new set of modifications to the Original Plan which
abandoned the modifications proposed in the June 26, 1997 Plan. In December
1997, copies of the Original Plan as so modified, the Fifth Disclosure
Statement, and ballots affording an opportunity to change votes previously cast
with respect to the Original Plan were distributed all holders of claims
entitled to vote on such plan. With the requisite number of votes for acceptance
continuing to be received in support of the Original Plan as so modified, the
Bankruptcy Court entered an order on January 29, 1998 approving those
modifications, as well as certain other immaterial modifications, and confirming
the January 29, 1998 Plan.
The effectiveness of the January 29, 1998 Plan, like 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. The Governor indicated that he would call a special session of the State
legislature commencing in the latter part of March 1998 which would consider,
among other things, approval of the December 9, 1997 Casino Operating Contract.
However, after receiving an opinion from the State Attorney General that the
LGCB has independent authority (without the necessity of any legislative
approval) to renegotiate and execute a renegotiated casino operating contract,
the Governor did not include consideration of the December 9, 1997 Casino
Operating Contract in his call for the special session. Instead, on March 20,
1998, the LGCB approved the Amended and Renegotiated Casino Operating Contract,
subject to, among other conditions, the condition that the Louisiana Supreme
Court render a final, non-appealable judgment that the LGCB, acting on its own,
is the proper party and has the legal authority to enter into the Amended and
Renegotiated Casino Operating Contract with HJC or JCC on behalf of the State
and the LGCB, without the specific approval of the Governor or the State
legislature. On May 15, 1998, the Louisiana Supreme Court issued a decision
confirming that the LGCB has the independent authority to renegotiate and
execute the Amended and Renegotiated Casino Operating Contract without seeking
gubernatorial or legislative approval. See Section IV.U., "Events During the
Chapter 11 Cases--Bean and Jordan Litigation.
Following the LGCB's approval of the Amended and Renegotiated
Casino Operating Contract without the State legislature's approval, the
Proponents filed a motion to approve further modifications to the January 29,
1998 Plan to take into account, among other things, the LGCB's approval of the
Amended and Renegotiated Casino Operating Contract without legislative approval.
These modifications were deemed by the Bankruptcy Court to be immaterial in
nature and therefore were not circulated for a vote. Accordingly, on April 6,
1998, the Bankruptcy Court entered an order confirming the Existing Plan. Copies
of the Original Plan, the January 29, 1998 Plan, the Existing Plan and any
disclosure statements related thereto can be obtained by contacting Vincent E.
Lazar in writing at Jenner & Block.
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 Finance Corp. Chapter 11 cases to cases under Chapter 7 of
the Bankruptcy Code or to dismiss these cases. That motion was presented to the
Bankruptcy Court on November 5, 1997. On that date, after HJC informed the
Bankruptcy Court that an agreement in principle had been reached involving a
number of interested parties and that HJC would be filing a modified plan of
reorganization shortly, and with the agreement and consent of the United States
Trustee, the Bankruptcy Court continued the hearing on the United States
Trustee's motion until December 10, 1997, and by subsequent order further
continued the hearing on the United States Trustee's motion until May 5, 1998.
On May 5, 1998, after HJC informed the Bankruptcy Court that it was continuing
to make progress in the Chapter 11 cases, and that the Louisiana Supreme Court
was hearing oral argument in consolidated Bean and Jordan cases (each as defined
below) later that day, the Bankruptcy Court continued
59
<PAGE>
the hearing on the United States Trustee's motion until May 27, 1998, and
thereafter until June 18, 1998. On that date the motion was dismissed without
prejudice to its subsequent refiling.
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, HJC has filed 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 no valid
claims for avoidance as preferential or fraudulent transfers may exist because
the Debtors may not have been insolvent at the time such transfers were made
and, to the extent such avoidance claims may exist, there may be defenses such
as that the transfers were made in the ordinary course of business, other
parties in interest have expressed contrary views and contended that the Debtors
were or may have been insolvent at the time transfers to creditors were made and
that the transferees may not have valid defenses to avoidance actions.
HJC and Finance Corp. sought and obtained an order directing them
to abandon and not pursue recovery of charitable donations and small
preferences. As a result of said order, HJC is not required to pursue the
recovery or avoidance of charitable donations and small preferences (under
$5,000.00). However, the United States Trustee and the Bondholders Committee
recommended that as a matter of prudence, HJC should preserve for the estate in
the event the Plan is not consummated avoidance actions of $5,000.00 and more.
Because 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 requested and obtained orders excusing service of the complaints and
staying the adversary 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 reorganization" and upon occurrence
of these events "expects to waive, release or otherwise resolve" these claims.
U. Bean and Jordan Litigation
On March 16, 1998, the State Attorney General issued an opinion
that the LGCB has independent authority, without the necessity of any
legislative approval, to renegotiate and execute a renegotiated casino operating
contract. Thereafter, on March 20, 1998, the LGCB approved the Amended and
Renegotiated Casino Operating Contract, subject to the rendition of a final,
non-appealable judgment of the State Supreme Court that the LGCB, acting on its
own, is the proper party and has the legal authority to enter into the Amended
and Renegotiated Casino Operating Contract with HJC and JCC on behalf of the
State and the LGCB, without the specific approval of the Governor or the State
legislature.
On March 18, 1998, shortly after the issuance of the Attorney
General's opinion, two separate petitions were filed seeking a declaratory
judgment and injunctive relief to preclude the LGCB from executing
60
<PAGE>
a casino operating contract without the approval of the State legislature. In
a lawsuit captioned Jordan vs. Louisiana Gaming Control Board and Murphy J.
Foster (19th Judicial District Court, State of Louisiana, Parish of East
Baton Rouge) ("Jordan"), the plaintiff, a Louisiana State Senator, sought a
declaratory judgment and injunctive relief, among other things, to preclude
the LGCB from executinga casino operating contract without the approval of
the State legislature. In a lawsuit captioned Bean vs. Louisiana Gaming
Control Board and Rivergate Development Corporation (19th Judicial District
Court, State of Louisiana, Parish of East Baton Rouge) ("Bean"), the
plaintiff, also a member of the State Senate, sought declaratory and
injunctive relief, among other things, to preclude the LGCB from entering
into a casino operating contract with JCC without the approval of the State
legislature. HJC and the Bondholders Committee filed separate petitions of
intervention in that litigation.
The two cases were consolidated and HJC intervened in the Bean
litigation and the Bondholders Committee intervened in both the Bean and Jordan
litigation. After a trial, the district court on April 9, 1998 entered judgment
rejecting the plaintiffs' claims and declaring among other things, that the LGCB
has the independent authority to renegotiate and execute a casino operating
contract without seeking gubernatorial or legislative approval. In reaching its
decision, the district court made a number of written findings of fact and
conclusions of law, including the conclusion that insofar as the provisions of
La. R.S. 27:224(D) and La. R.S. 27:224(E) subject the acts of the LGCB or the
governor to legislative approval or authorize the State legislature to take
executive action, those provisions are unconstitutional as violative of Article
II, Section 2 of the Louisiana Constitution, which establishes the principle of
separation of powers between the branches of government.
The consolidated cases were heard by the First Circuit Court of
Appeal which issued a decision on April 22, 1998, affirming in part and
reversing in part the judgment of the district court. The court of appeal
affirmed the district court's determination that the LGCB had the authority
independently to renegotiate the casino operating contract, but reversed what it
perceived to be the district court's conclusion that the State legislature had
no right to participate in the process of renegotiating the casino operating
contract of a casino operator in bankruptcy and concluded the State legislature
may set aside or order the LGCB to renegotiate the provisions of the casino
operating contract of a casino operator in bankruptcy.
The parties filed applications for various writs for review in the
Louisiana Supreme Court, which were subsequently granted and on May 15, 1998 the
Louisiana Supreme Court issued a decision affirming in part and reversing in
part the judgment of the court of appeal. The opinion of the Louisiana Supreme
Court affirmed the court of appeal's determination that the LGCB has the
independent authority to renegotiate and execute the casino operating contract
without seeking gubernatorial or legislative approval, and reversed that portion
of the court of appeal's decision that purported to interpret the State
legislature's power under La. R.S. 27:224(D) to set aside or order the LGCB to
renegotiate the provisions of the casino operating contract of a casino operator
in bankruptcy on the basis that such holdings by the court of appeal and the
district court were impermissible advisory opinions. The decision of the
Louisiana Supreme Court has since become final and non-appealable.
61
<PAGE>
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.
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 or agreed to cancel any Administrative
Expense Claim other than, (i) any Administrative Expense Claim covered by any
insurance policy assumed pursuant to Section 8.1(c) 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 GP
Representative/HET Settlement Agreements (as defined below), as applicable) and
(ii) in the case of HET and its Affiliates, the principal amount of the DIP
Indebtedness outstanding on the Effective Date, which will be converted to
equity and contributed by the Harrah's Investor as part of the Harrah's New
Equity Investment or any Administrative Expense Claim for unreimbursed premiums
or other unreimbursed amounts paid for insurance coverage provided to any Debtor
under any insurance policy assumed pursuant to Section 8.1(c) of the Plan. The
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
62
<PAGE>
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 principal amount of the DIP Indebtedness outstanding on the Effective
Date, which will be converted to equity and contributed by the Harrah's Investor
as part of the Harrah's New Equity Investment. All accrued interest on the DIP
Indebtedness on the Effective Date will be cancelled.
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 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
63
<PAGE>
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 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 Plan as Exhibit H.
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
64
<PAGE>
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 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
65
<PAGE>
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
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 GP Representative/HET
Settlement Agreements). 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.
66
<PAGE>
"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 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 Original 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.
67
<PAGE>
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 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
68
<PAGE>
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 GP Representative/HET Settlement Agreements, as applicable), (ii)
in the case of HET and its Affiliates and Insiders, any Class A7 Claim for
unreimbursed premiums or other unreimbursed amounts paid for insurance coverage
provided to any Debtor under any insurance policy assumed pursuant to Section
8.1(c) of the Plan, and (iii) the Allowed Class A7 Claim of Deborah Sulzer in
the amount of $39,579.52 as reflected in Claim No. 490.
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.
69
<PAGE>
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
70
<PAGE>
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 pursuant
71
<PAGE>
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 in HNOIC will be extinguished.
72
<PAGE>
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) 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
73
<PAGE>
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)
savings to JCC 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 $60 million, which financing no
other lender has been willing to provide, (iii) the Harrah's New
Equity Investment of $75 million (including the principal amount
of the debtor in possession financing which will be converted to
equity and contributed to JCC Holding, 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 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
74
<PAGE>
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, an Amended and Renegotiated 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 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
75
<PAGE>
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-Landis Release*; the Broadmoor Release*; the
NOLDC Shareholders/HET Settlement Agreement; the GP Representative/HET
Settlement Agreements**; 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
- --------
* 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.
76
<PAGE>
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.
- ----------
*** 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.
77
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Plan Releases
- -------------------------------------------------------------------------------------------------------------
Releasing Parties Released Parties Consideration for Releases
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Debtors HET Group - HET Loan Guarantee, New
(Plan Section 5.1) Completion Guarantees and Surety
NOLDC Bond
Group****
- DIP Financing
Grand Palais
Group**** - Harrah's New Equity Investment
(including conversion of the
Debtors Group outstanding principal amount of the
DIP Indebtedness to equity and
Bondholders contribution of the same to JCC
Committee Group Holding)
- Pre-development and 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
- -------------------------------------------------------------------------------------------------------------
2. Releasing HET Group - Harrah's Investor's contribution of
Bondholders (Plan 200,000 shares of New Common
Section 5.2) NOLDC Group Stock to Release Pool
Grand Palais Group - JCC Holding's contribution of
1,300,000 shares of New Common
Debtors Group Stock to Release Pool, which, in
turn, is in consideration of, among
Bondholders other things, certain consideration
provided
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
**** 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 GP
Representative/HET Settlement Agreements, respectively. As previously
noted, however, the execution and delivery of the NOLDC
Shareholders/HET Agreement and the GP Representative/HET Settlement
Agreements is a condition to the Effective Date, which may be waived
pursuant to Section 10.3 of the Plan.
78
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Plan Releases
- -------------------------------------------------------------------------------------------------------------
Releasing Parties Released Parties Consideration for Releases
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Committee Group provided by HET and others
City Group - Value of New Bonds and New
Contingent Bonds enhanced by
State Group favorable terms of financing
provided by certain members of
Bank/Underwriter Bank/Underwriter Group (resulting
Group 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 - Amended and Renegotiated 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 JCC with
(Plan Section 5.5) Group terms more 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)
- -------------------------------------------------------------------------------------------------------------
6. Grand Palais HET Group - Grand Palais Settlement
Releasing Consideration (consisting of New
Bondholders (Plan NOLDC Group Common Stock otherwise
Section 5.6) distributable to Harrah's Investor)
Grand Palais Group
- HET Loan Guarantee, New
Debtors Group Completion Guarantees and Surety
Bond
Bondholders - DIP Financing
Committee Group
- Harrah's New Equity Investment
City Group (including conversion of the
outstanding principal amount of the
State Group DIP Indebtedness to equity and
contribution of the same to JCC
Bank/Underwriter Holding)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Plan Releases
- -------------------------------------------------------------------------------------------------------------
Releasing Parties Released Parties Consideration for Releases
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Group
- Pre-development and 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
- 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
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
80
<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 Related 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
New Entities Affiliates
HET Group
Bondholders
Committee Group
NOLDC Group
Grand Palais Group
- -------------------------------------------------------------------------------------------------------------
2. State/LGCB Release Debtors State Bank/Underwriter
Group
New Entities LGCB
HET Group Affiliates
Debtors Group
Bondholders Committee
Group
NOLDC Group
Grand Palais Group
- -------------------------------------------------------------------------------------------------------------
3. Centex-Landis Release Centex Debtors
Affiliates Debtors Group
HET Group
NOLDC Group
Grand Palais Group
- -------------------------------------------------------------------------------------------------------------
4. Broadmoor Release Broadmoor Debtors
Affiliates Debtors Group
HET Group
NOLDC Group
Grand Palais Group
5. NOLDC Shareholders/ HET NOLDC Bondholders
HET Settlement Committee Group
Agreement HOCI NOLDC
Shareholders Debtors Group
- -------------------------------------------------------------------------------------------------------------
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Plan Related Releases
- -------------------------------------------------------------------------------------------------------------
Mutual Releasing Releasing Party Additional Parties
Releases Party #1 #2 Released
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HNOIC
Affiliates City Group
HNOMC
State Group
Affiliates
Bank/Underwriter
Group
- -------------------------------------------------------------------------------------------------------------
6. GP Representative and HET Authorized Bondholders
Hemmeter/HET Representative Committee Group
Settlement Agreement HOCI of Grand Palais
Debtors Group
HNOIC Hemmeter
City Group
HNOMC Hemmeter's
Chapter 7 State Group
Affiliates Bankruptcy
Trustee Bank/Underwriter
Group
Affiliates
- -------------------------------------------------------------------------------------------------------------
7. Froelich/HET HET Froelich Bondholders
Settlement Agreement Committee Group
HOCI Affiliates
Debtors Group
HNOIC
City Group
HNOMC
State Group
Affiliates
Bank/Underwriter
Group
8. Sapir and Broadhurst/ HET Sapir Debtors
HET Settlement
Agreement HOCI Broadhurst Debtors Group
HNOIC Affiliates Bondholders
Committee Group
HNOMC
City Group
Affiliates
State Group
- -------------------------------------------------------------------------------------------------------------
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Plan Related Releases
- -------------------------------------------------------------------------------------------------------------
Mutual Releasing Releasing Party Additional Parties
Releases Party #1 #2 Released
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank/Underwriter
Group
9. NOLDC/Grand Palais NOLDC Grand Palais
Settlement Agreement
NOLDC Shareholders Affiliates
Affiliates
- -------------------------------------------------------------------------------------------------------------
10. Bank/Underwriter Participating Banks Debtors Debtors Group
Settlement Agreement
Underwriters Bondholders
Committee Group
HET Group
City Group
State Group
NOLDC Group
Grand Palais Group
- -------------------------------------------------------------------------------------------------------------
11. First American First American, HJC JCC Group
Settlement Agreement its reinsurers
and related parties Debtors Group
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
1. NOLDC Shareholders/HET Settlement Agreement; GP Representative and
Hemmeter/HET Settlement Agreement; Froelich/HET Settlement
Agreement; NOLDC/Grand Palais Settlement Agreement
The Plan contemplates the settlement agreements described below.
No such settlement agreement provides for any of the NOLDC Shareholders, Grand
Palais, its shareholders, its bondholders, Hemmeter or Froelich to have any
management position with any New 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, Grand Palais, its
shareholders, its bondholders, Hemmeter or Froelich, and the Debtors' estates
shall not have any obligation to any of the NOLDC Shareholders, Grand Palais,
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
83
<PAGE>
attached as exhibits to such settlement agreement, pursuant to
which the NOLDC, the NOLDC Shareholders and certain Affiliates
thereof, on the one hand, and HET, HOCI, HNOIC, HNOMC and certain
Affiliates thereof, on the other hand, release certain claims and
causes of action against each other, (iii) the releases provided
for in the settlement agreement in favor of the Bondholders
Committee Group, the Debtors Group, the Bank/Underwriter Group,
the State Group and the City Group, and (iv) all other agreements,
instruments or documents executed or to be executed in connection
with the settlement agreement. The NOLDC Shareholders/HET
Settlement Agreement 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 HET, HOCI, HNOIC, HNOMC 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 to acquire from HET shares of Class B New
Common Stock of JCC Holding equal to one third of one percent
(0.33%) of the stock of JCC Holding determined as of the Effective
Date for an aggregate of three percent (3.0%) of the New Common
Stock of JCC Holding. Such options shall be exercisable at any
time during the period beginning one (1) year after the Effective
Date and ending sixty-two (62) months following the Effective
Date. In addition, FNBC, an NOLDC creditor, will receive an option
and put agreement which shall entitle it to receive shares of
Class B New Common Stock of JCC Holding equal to 1.5% of the New
Common Stock of JCC Holding determined as of the Effective Date.
FNBC's option shall be exercisable at any time during the period
beginning the day after the Effective Date and ending 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 Dollars ($1,000,000) at any time during
the period beginning sixty (60) months following the Effective
Date and ending two (2) months thereafter (the "Put Term"). FNBC
shall be entitled to put its stock of JCC Holding to HET in
exchange for Four Million Five Hundred Thousand Dollars
($4,500,000), at any time during the Put Term; provided, that FNBC
shall only have the right to exercise its put right to the extent
it has received less than Seven Million Dollars ($7,000,000) from
HOCI pursuant to the terms of the NOLDC Shareholders/HET
Settlement Agreement. The NOLDC Shareholders and HET continue to
negotiate the terms of the NOLDC Shareholders/HET Settlement
Agreement.
b. The "GP Representative and Hemmeter/HET Settlement
Agreement" means, collectively, (i) the settlement agreement to be
executed on or before the Effective Date by person(s) authorized
under applicable law to act on behalf of Grand Palais, Hemmeter,
Hemmeter's Chapter 7 bankruptcy trustee and certain of their
Affiliates on one hand, and HET, HOCI and HNOMC, on the other
hand, (ii) the mutual releases, in the forms attached as exhibits
to such settlement agreement, pursuant to which authorized
representative(s) of Grand Palais, Hemmeter, Hemmeter's Chapter 7
bankruptcy trustee and certain Affiliates thereof, on the one
hand, and HET, HOCI, HNOIC, HNOMC and certain Affiliates thereof,
on the other hand, will release certain claims and causes of
action against each other, (iii) the releases provided for in the
settlement agreement in favor of the Bondholders Committee Group,
the Debtors Group, the Bank/Underwriter Group, the State Group and
the City Group, and (iv) all other agreements, instruments and
documents executed
84
<PAGE>
or to be executed in connection with such settlement agreement.
The GP Representative and Hemmeter/HET Settlement Agreement will
be in form and substance satisfactory to the authorized
representative(s) of Grand Palais and HET. Under the terms of this
settlement agreement, the Grand Palais bondholders and Hemmeter's
bankruptcy trustee (or creditors of Hemmeter's bankruptcy estate
designated by the trustee) will receive consideration from HET and
HOCI in the form of certain payments (in the case of Hemmeter,
Hemmeter's Chapter 7 bankruptcy trustee or the trustee's designee)
and stock (in the case of the Grand Palais bondholders), in
exchange for their release in favor of HET, HOCI, HNOIC, HNOMC 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 (3.5%) of the New Common Stock of JCC
Holding determined as of the Effective Date. HET, Hemmeter and
Hemmeter's Chapter 7 bankruptcy trustee continue to negotiate the
terms of the GP Representative and Hemmeter/HET Settlement
Agreement.
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 HET, HOCI, HNOIC, HNOMC
and certain Affiliates thereof, on the other hand, release certain
claims and causes of action against each other, (iii) the releases
provided for in the settlement agreement in favor of the
Bondholders Committee Group, the Debtors Group, the
Bank/Underwriter Group, the State Group and the City Group, and
(iv) all other agreements, instruments or documents executed or to
be executed in connection with the settlement agreement. The
Froelich/HET Settlement Agreement will be in form and substance
satisfactory to Froelich and HET. Under the terms of this
settlement agreement, Froelich will receive consideration in
exchange for his release in favor of HET, HOCI, HNOIC, HNOMC 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.
d. The "Sapir and Broadhurst/HET Settlement Agreement" means
collectively, (i) the settlement agreement to be executed on or
before the Effective Date by Eddie L. Sapir ("Sapir"), HET, HOCI
and HNOMC, (ii) the settlement agreement to be executed on or
before the Effective Date by William C. Broadhurst ("Broadhurst"),
HET, HOCI and HNOMC, (iii) the mutual releases, in the forms
attached as exhibits to such settlement agreements, pursuant to
which each of Sapir and Broadhurst and certain Affiliates thereof,
on the one hand, and HET, HOCI, HNOIC and HNOMC and certain
Affiliates thereof, on the other hand, release certain claims and
causes of action against each other (iv) the releases provided for
in the settlement agreement in favor of the Bondholders Committee
Group, the Debtors Group, the Bank/Underwriter Group, the State
Group and the City Group, and (v) all other agreements,
instruments or documents executed or to be executed in connection
with such settlement agreements. The Sapir and Broadhurst/HET
Settlement Agreement will be in form and substance satisfactory to
Sapir, Broadhurst and HET. Under the terms of the Sapir and
Broadhurst/HET Settlement Agreement, each of Sapir and Broadhurst
will receive consideration in exchange for their release in favor
of the HET, HOCI, HNOIC and HNOMC and certain Affiliates. Such
consideration shall be certain payments from HOCI to each of Sapir
and Broadhurst. Sapir, Broadhurst and HET continue
85
<PAGE>
to negotiate the terms of the Sapir and Broadhurst/HET Settlement
Agreement. (The GP Representative and Hemmeter/HET Settlement
Agreement, the Froelich/HET Settlement Agreement and the Sapir and
Broadhurst/HET Settlement Agreement are referred to collectively
herein and in the Plan as the "GP Representative/HET Settlement
Agreements.")
e. 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 DIP Lender's consent to
conversion of equity and contribution of the principal amount of the DIP
Indebtedness outstanding on the Effective Date as part of the Harrah's New
Equity Investment, (iii) the Harrah's New Equity Investment, (iv) the waiver by
Persons in the HET Group, the NOLDC Group 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 applicable GP Representative/HET
Settlement Agreements.
"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)
86
<PAGE>
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 occurring 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 GP Representative/HET Settlement
Agreements. 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 filled out its ballot with respect to the Original Plan or the
January 29, 1998 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
86
<PAGE>
connection with the Original 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 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,
88
<PAGE>
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 Alex. Brown Incorporated 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 Amended and Renegotiated 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 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) DIP
Lender's consent to conversion to equity and contribution of the principal
amount of the DIP Indebtedness outstanding on the Effective Date as part of the
Harrah's New Equity Investment, (iv) the Harrah's New Equity Investment, (v) the
waiver by Persons in the HET Group, the NOLDC Group and the Grand Palais Group
of any right to
89
<PAGE>
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 applicable GP
Representative/HET Settlement Agreements.
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
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
90
<PAGE>
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 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 applicable GP
Representative/HET Settlement Agreements, (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 GP Representative/HET
Settlement Agreements, the NOLDC/Grand Palais Settlement Agreement and
the Bank/Underwriter Release (each as defined herein or in the Plan).
91
<PAGE>
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.
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
92
<PAGE>
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 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
93
<PAGE>
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.
The Debtors believe that if all of the various settlements and
releases contemplated under the Plan become effective, the value of the
remaining non-released Assigned Litigation Claims will be de minimis.
12. Approval of Other Settlement Agreements
Except to the extent the Bankruptcy Court has entered a separate
order providing for such approval, the Confirmation Order shall constitute an
order (a) approving as a compromise and settlement pursuant to Section
1123(b)(3)(A) of the Bankruptcy Code, the Broadmoor Settlement Agreement, the
Broadmoor Release, the Centex Settlement Agreement, the Centex-Landis Release,
the First American Settlement Agreement, the NOLDC Shareholders/HET Settlement
Agreement, the NOLDC/Grand Palais Settlement Agreement, the GP
Representative/HET Settlement Agreements, the FNBC Settlement Agreement and all
other settlement agreements entered into or to be entered into by any Debtor 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 Settlement Agreement,
the Centex-Landis Release, the First American Settlement Agreement, the NOLDC
Shareholders/HET Settlement Agreement, the NOLDC/Grand Palais Settlement
Agreement, the GP Representative/HET Settlement Agreements, the FNBC Settlement
Agreement and all other settlement agreements entered into or to be entered into
by any Debtor 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) or, at JCC's
option by HJC and assigned to 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 and is pending on the
Confirmation Date, (iii) which has been entered into by HJC after the Petition
Date in the ordinary
94
<PAGE>
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 or assumed by HJC and assigned to 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,
among other things, 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, with an original effective date of March 16, 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 the approval of the Bankruptcy Court to enter into the First
American Settlement Agreement. The First American Settlement Agreement provides
that if it does not become effective by the date agreed to by the parties or has
become ineffective for any reason, then HJC or JCC (as HJC's successor), with
the consent of HET (in its sole discretion) on behalf of the Proponents, 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. The
parties have subsequently extended the date by which the First American
Settlement Agreement must become effective on a month to month basis with any
party thereto having the right to terminate any further extensions thereof upon
written notice to the other parties thereto ten calendar days prior to the
expiration of the month. 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 (as HJC's successor) 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.
95
<PAGE>
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 provides for the issuance of 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 predecessor entities of 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."
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 certain traffic signals and
intersection improvements in accordance with 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 RDC's project manager
and his or her staff. Project manager and staff reimbursement amounts vary
depending on the status of construction and certain other timing conditions.
The Amended GDA establishes scheduling parameters for the
construction and completion of the Casino Development. It also contains the
RDC's approval and acceptance of the preliminary schedule set forth therein for
the recommencement of construction and a recognition by the parties that the
preliminary schedule is subject to the preparation and submission of additional
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 Casino Development
which are the Casino, the Poydras Tunnel Area, the Poydras Street Support
Facility, the Employee and Bus Parking Support Facility,
96
<PAGE>
the Landscape Improvements (each as defined in the Amended GDA), and other
facilities that may be added as Components by amendments 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 required by the Amended GDA (the "Site Reactivation Date"). Work on
the Initial Casino Facilities and the Second Floor Shell Construction is
required to begin on the Site Reactivation Date, subject, under certain
circumstances, to the receipt of all necessary permits and other government
authorizations (the "Permits"). 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" is defined in the
Amended GDA as (a) strikes, lockouts, labor disputes, inability to procure
materials (for which there is no suitable substitute or alternative that can be
timely obtained on reasonable commercial terms), failure of power; (b) material
and adverse changes in governmental requirements applicable to the construction
of a Component or a phase of the Casino Development, first effective after the
Effective Date and after the submission to and approval by the LGCB of the
design thereof, and any material and adverse changes after the Effective Date in
any applicable orders of any governmental authority having jurisdiction over a
party, the project area, or the development (not including stop work orders due
to a building, safety or other code violation); (c) 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, or national or international calamities;
and (e) any judgment, directive, ruling or order is entered that restrains or
substantially interferes with substantial completion of the Initial Casino
Facilities and the Second Floor Shell Construction.
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, under certain circumstances, 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 any open access
plans adopted thereunder (the "Amended Open Access 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
the Amended Canal Street Casino Lease, which the parties expect will be
effective as of the Effective Date. The Amended
97
<PAGE>
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, with three consecutive
ten-year renewal options. If the initial term of the Amended and Renegotiated
Casino Operating Contract expires prior to the expiration of the initial term of
the Amended Canal Street Casino Lease or the Amended and Renegotiated 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 thereto will have no further rights
or obligations thereunder. If the 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 under the Amended Canal Street
Casino Lease, 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 Casino 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-opening day rent (the "Pre-Opening Date Rent"), although
the RDC, the City and HJC remain in negotiations as to whether any escalated
rent will be required. See Section IX.A.19. "Certain Risk Factors To Be
Considered--Overall Risks to Recovery by Holders of Claims--Uncertainty
Regarding Termination of City Agreement and Canal Street Casino Lease." 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 July 1998. Under the Amended Canal Street
Casino Lease, the Pre-Opening Date Rent will continue to be paid until the day
on which the Casino is open for business to the general public (the "Opening
Date"). After the Opening Date, the rent under the Amended Canal Street Casino
Lease 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
immediately preceding the rental adjustment date. If the adjusted rent would
exceed 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 under
the Amended Canal Street Casino Lease will also be made based upon a varying
percentage of Gross Gaming Revenue. This percentage has been modified from that
which was contained in the Canal Street Casino Lease and set forth in the City
Agreement which is on file with the Bankruptcy Court attached as Exhibit "A" to
the Original Plan.
JCC will also be obligated to pay additional sums pursuant to the
Amended Canal Street Casino Lease, including, but not limited to, an annual
contribution 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 under the Canal Street Casino Lease 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 under the
Canal Street Casino Lease including a one time payment, at a time elected by the
RDC, based upon the aggregate value of the stock of JCC
98
<PAGE>
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 all persons
employed at the Casino shall be employed by JCC or JCC Development (other than
certain key Casino management personnel to be employed by HNOMC). 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.
The Amended Canal Street Casino Lease permits JCC to enter into
the Second Floor Sublease to develop the second floor of the Casino for
non-gaming uses upon the completion of Second Floor Shell Construction. As rent,
JCC Development will pay 50% of net operating income from the second floor
development to the RDC. The remaining 50% of 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 will thereafter be subject to the
terms of the Amended Canal Street Casino Lease that apply to the first floor of
the Casino.
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, all of HJC's right, title and interest in and to the
Casino Operating Contract shall revest in HJC on the Effective Date, which
Casino Operating Contract shall then be modified by the Amended and Renegotiated
Casino Operating Contract and assigned to JCC in accordance with applicable
State law and the agreement of the parties thereto. The term of the Amended and
Renegotiated Casino Operating Contract will continue to be 20 years from July
15, 1994 with one 10 year renewal option.
99
<PAGE>
The Amended and Renegotiated 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. For purposes of JCC's Minimum
Payment obligations, the Amended and Renegotiated Casino Operating Contract uses
a fiscal year ending March 31 (a "COC Fiscal Year"). A failure by JCC to cause
to be provided a Minimum Payment Guaranty before the first day of a COC Fiscal
Year will result in a termination with no cure period of the Amended and
Renegotiated Casino Operating Contract.
For the partial COC Fiscal Year of operation ending March 31, 2000
and, subject to the terms and conditions set forth in the HET/JCC Agreement, for
the four (4) subsequent full COC Fiscal Years, HET and HOCI have proposed to
provide a Minimum Payment Guaranty. The obligations of JCC under the HET/JCC
Agreement will be secured by a first priority lien on substantially all the
assets of JCC Holding, JCC, JCC Development, CP Development and FP Development
(excluding the Amended and Renegotiated Casino Operating Contract and the Gross
Revenue Share Payments). Pursuant to the terms of the HET/JCC Agreement, after
the second full COC 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 COC Fiscal 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 COC Fiscal 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 COC 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 COC Fiscal
Year. In the event a non-renewal condition under the HET/JCC Agreement has
occurred or upon termination of the HET/JCC Agreement on March 31, 2004, JCC
will be required to secure a substitute guarantor to provide a Minimum Payment
Guaranty. Such guarantor may or may not be HET. In the Amended and Renegotiated
Casino Operating Contract, the State and the LGCB will acknowledge that HET and
HOCI have no legal obligation or duty, express or implied, to provide a Minimum
Payment Guaranty for any COC Fiscal Year following a COC 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 COC Fiscal Year after March 31,
2004, or if the HET/JCC Agreement has otherwise terminated pursuant to its
terms.
The Amended and Renegotiated Casino Operating Contract will
continue to be exclusive in Orleans Parish and will contain provisions affording
certain specified relief to JCC as described in the form
100
<PAGE>
of Amended and Renegotiated Casino Operating Contract approved (subject to
certain conditions) by the LGCB on March 20, 1998, with such changes as may be
agreed to by the LGCB and HJC. 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 Amended and Renegotiated Casino Operating Contract,
including construction and operation of the Casino. See Section IX.A.1.,
"Certain Risk Factors to be Considered--Overall Risks of Recovery by Holders of
Claims--Uncertainty Regarding Gaming Regulations."
The Amended and Renegotiated 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 Amended and Renegotiated 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 Amended and
Renegotiated 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) hiring, supervising, and
establishing labor policies, with respect to employees of the Casino; (b) gaming
and entertainment operations including security and internal control procedures;
(c) public relations and promotions; (d) retaining certain suppliers: (e) all
accounting, budgeting, financial and treasury functions at the Casino; (f)
performing certain system services generally performed at casinos owned or
operated by HET and its affiliates; and (g) 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, 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 the Initial Casino Facilities and each anniversary
of such date, and (ii) $75 million for the twelve month period ending on the
date which is twelve months after the opening of the Initial Casino Facilities
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 the Initial Casino Facilities 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
below) and the Incentive Management Fee, the proceeds, if any, from the exercise
of the HET Warrant). The Base Management Fee
101
<PAGE>
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 four
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.
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 below).
The "Completion Obligations" mean the obligations of JCC to
commence and complete the construction of and timely and fully pay for all costs
and expenses of completion when due for the Initial Casino Facilities and Second
Floor Shell Construction, to equip the Casino with the required furniture,
fixtures and equipment so that the Casino is ready to open to the public
(subject to any necessary regulatory approvals from the LGCB or any other State
regulatory agencies) 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 Initial Casino Facilities and Second Floor Shell 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
102
<PAGE>
the Initial Casino Facilities and Second Floor Shell Construction, and all
liens, charges and claims, other than permitted liens, arising from the
furnishing of labor, material, supplies or equipment for the Initial Casino
Facilities and Second Floor Shell 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 Initial Casino
Facilities and Second Floor Shell Construction, and all such liens, charges and
claims, other than permitted liens, arising from the furnishing of labor,
materials, supplies or equipment for the Initial Casino Facilities and Second
Floor Shell Construction.
The "Carry Obligations" mean the full and complete payment and
performance of all obligations of JCC to pay on a timely basis all amounts due
from or incurred by or otherwise payable by JCC to any person, including without
limitation, any rent, liquidated damages or other amounts payable to the City
and the RDC under the Amended Canal Street Casino Lease or the Amended GDA
(including but not limited to JCC Development's obligation, if any, to pay rent
directly to the City and the RDC under the Second Floor Sublease prior to the
completion of the Initial Casino Facilities and Second Floor Shell
Construction), and all project costs (other than any costs which are included as
a part of the Completion Obligations), including without limitation, the payment
of interest and scheduled principal payments (excluding principal on the New
Bonds and New Contingent Bonds), taxes (prior to delinquency), amounts owing to
the LGCB under the Amended and Restated 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 or amounts due pursuant to contracts
or agreements to be funded, paid and satisfied on or prior to the Termination of
Construction Date (as defined below); provided that the Completion Guarantors in
no event guarantee the payment of any minimum payments under the Amended and
Renegotiated Casino Operating Contract. 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 (which 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 up to $10.0
million to fund a certain Casino bank account on or before the Termination of
Construction Date.
The "Preservation Obligations" include the Completion Guarantors'
obligations, after notices of failure of JCC to fulfill the Completion
Obligations in a timely manner, to pay any of the Carry Obligations or to be the
subject of a voluntary or involuntary bankruptcy proceeding, to take all
necessary steps to maintain insurance coverage and to secure the Casino to
prevent deterioration and unauthorized access.
The "Termination of Construction Date" means that date by which
all of the following have occurred: (i) a temporary certificate of occupancy has
been issued for the Initial Casino Facilities by the building department and
other relevant agencies; (ii) all required permits with respect to the Initial
Casino Facilities and Second Floor Shell Construction have been received by JCC;
(iii) a notice of completion has been recorded with respect to the Initial
Casino Facilities and Second Floor Shell 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 Initial Casino Facilities and Second Floor Shell
Construction certifying that the Initial Casino Facilities and
103
<PAGE>
Second Floor Shell Construction has been substantially completed in accordance
with the plans and specifications therefor and all applicable building laws,
ordinances and regulations; and (vii) the Initial Casino Facilities 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, the Initial
Casino Facilities are 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
commence and complete the Initial Casino Facilities and Second Floor Shell
Construction, fails in any other manner to prosecute with diligence and
continuity the Completion Obligations, fails timely to pay any of the Carry
Obligations, or files or has filed against it a petition for bankruptcy or
similar relief. In addition, the Completion Obligations (but not the Carry
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 interests 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 by JCC; (ii) casino gaming
operations are no longer permitted to be conducted at the Casino or are
modified, restricted or limited in a manner that materially diminishes the
benefits afforded to JCC or the gaming activities permitted to be conducted at
the Casino pursuant to the Gaming Act by reason of a change of law or the
enactment of a new law or by reason of JCC's rights under the Amended and
Renegotiated Casino Operating Contract having been terminated in any material
respect, other than as a result of a breach by JCC or the Completion Guarantors;
provided that, upon the occurrence of any of the events described in this clause
(ii) prior to the Termination of Construction Date, the Completion Guarantors
are nevertheless obligated to complete the 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 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 Initial Casino Facilities and Second Floor Shell
Construction have expired and no liens or privileges arising from the furnishing
of labor, materials, supplies or equipment for the Initial Casino Facilities and
Second Floor Shell 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 the construction of the Initial
Casino Facilities and Second Floor Shell Construction.
The remedy of specific performance and the remedies described
below are not intended to be exclusive of remedies that Beneficiaries may have
against JCC under any other documents or agreements. If,
104
<PAGE>
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 any or all of the Carry Obligations after a Carry Obligation
Default, the Completion Obligations after a Completion Obligation Default and
the Preservation Obligations after a Preservation Obligation Default. After a
Completion Obligation Default or a Preservation Obligation Default, the
Beneficiaries, at their option, have the right, but have no obligation, to
require the surety to perform the Completion Obligations or the Preservation
Obligations pursuant to the Surety Bond. The Beneficiaries' election to require
the surety to perform the Completion Obligations will not release, diminish or
extinguish the liability of JCC or the Completion Guarantors to the extent the
surety fails to perform the Completion Obligations or the Preservation
Obligations. The Completion Guarantors will remain obligated to perform the
Carry Obligations notwithstanding any such election and notwithstanding the
surety's performance of the Completion Obligations or the Preservation
Obligations. In addition to the Beneficiaries' right to require specific
performance by the Completion Guarantors of any and/or all of the Completion
Obligations after a Completion Obligation Default, the Carry Obligations after a
Carry Obligation Default or the Preservation Obligations after a Preservation
Obligation Default, and whether or not the Beneficiaries have called on the
surety pursuant to the Surety Bond, (i) the Beneficiaries have the right to
recover from the Completion Guarantors all unreimbursed costs and expenses,
including but not limited to attorneys' fees, incurred by the Beneficiaries in
protecting, preserving, enforcing or defending their interests both as against
JCC and as against the Completion Guarantors under the 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.
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 which are not also expenditures
under the Construction Lien Indemnity Obligation Agreement (as defined below)
will be deemed loans ("Completion 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
105
<PAGE>
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, the Junior Subordinated Credit Facility,
or the proceeds from Convertible Junior Subordinated Debentures up to the total
amount available thereunder, 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 to be entered into by and between HOCI and JCC pursuant to
the Plan (the "Construction Lien Indemnity Obligation Agreement"), any
expenditures made by HOCI under any indemnity agreement as may be required to be
delivered to the title insurers regarding mechanic's liens claiming priority to
the Bank Loans, the New Bonds or the New Contingent Bonds, 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 Termination Agreement
On January 15, 1997, HJC entered into a Basin Street Casino Lease
Termination Agreement with the RDC and the City, as intervenor (the "Basin
Street Termination Agreement"). Under 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 or
certain restoration work described therein. The RDC and the City will have no
claim for damages 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.
Possession of the Basin Street Casino premises has been transferred to the City.
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
106
<PAGE>
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.
9. Railroad Lease
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 "Railroad 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 Railroad 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 Railroad Lot
Lease to the City and/or to the RDC. This motion was denied by the Bankruptcy
Court.
10. Title Insurance
As described above, under the Plan, JCC will seek to assume the
Existing Owner's Title Insurance Policy, unless the First American Settlement
Agreement becomes effective subject to certain conditions (in which case the
Existing Owner's Title Insurance Policy will be deemed rejected and terminated).
The form of the First American Settlement Agreement was approved by the
Bankruptcy Court 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. The Debtors currently are discussing the scope and
terms of the exceptions and endorsements to the new title insurance policies,
and also have requested that First American provide separate title insurance
policies insuring the interests in real property covered by the Existing Owner's
Title Insurance Policy that will be transferred to CP Development and FP
Development on the Effective Date.
11. Broadmoor Contract
Under the Plan, JCC will assume the Broadmoor Construction
Agreement, as modified by the settlement agreement between HJC and Broadmoor
which is on file with the Bankruptcy Court attached as Exhibit "H" to the
Original 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 Broadmoor 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
107
<PAGE>
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. Negotiations are in process to revise the Broadmoor Settlement
Agreement to accommodate the construction schedule currently contemplated by the
Plan, the Amended and Renegotiated Casino Operating Contract and the Amended
Canal Street Casino Lease.
12. 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.
13. 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 which is on file with the Bankruptcy Court attached as
Exhibit "I" to the Original Plan (the "Audubon Settlement Agreement"). Among
other things, the Audubon Settlement Agreement provides for the assumption of
the Audubon Ticket Agreement 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.
14. Centex Contract
Under the Plan, JCC will assume the Centex Construction Agreement,
as modified by the Centex Settlement Agreement, a copy of which is on file with
the Bankruptcy Court attached as Exhibit "L" to the Original 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 New Entity will take such
action as is necessary under the laws of the State of Louisiana, or in the cases
of JCC Holding under the laws of the State of Delaware, federal law and other
applicable law to effect the terms and provisions of the Plan. Among other
actions, on
108
<PAGE>
or before the Effective Date, each New Entity will (i) file their respective
organizational documents with the Secretary of State of Delaware (in the case of
JCC Holding), or the State of Louisiana (in the cases of all other New
Entities), in accordance with applicable law, and (ii) in the case of JCC, JCC
Intermediary, JCC Development, CP Development and FP Development enter into
their respective operating agreements.
2. Effective Date Transactions
a. Membership Interest(s). On the Effective Date, (i) if JCC
Intermediary is formed, JCC Intermediary will receive all the membership
interests of JCC, JCC Development, FP Development and CP Development, or (ii) if
JCC Intermediary is not formed, JCC Holding will receive all the membership
interests of JCC, JCC Development, FP Development and CP Development. See
Section V.G.8., " Miscellaneous Provisions--JCC Intermediary."
b. JCC Intermediary Member's Interest(s). If JCC Intermediary is
formed, on the Effective Date, JCC Holding will 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
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 fourth and fifth years (as set forth in the
Bondholder Term Sheet) and increasing to 8% per annum after the first five
years. Fixed Interest on the New Bonds will begin to accrue on the Effective
Date. 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 and may be required to do so
by the Credit Agreement under certain circumstances; provided, however, that
JCC may not pay the fifth and sixth semi-annual payments of Fixed Interest in
kind if (i) Tranches A-1 and A-2 have been fully repaid, (ii) there are no
outstanding drawings under the Working Capital Facility, other than letters
of credit as permitted pursuant to the Credit Agreement, and (iii) JCC has
accumulated cash availability of at least $20 million. If JCC pays Fixed
Interest in kind on any of the first four 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
109
<PAGE>
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 required 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
JCC's EBITDA results for any year are less than $65 million, no Contingent
Payments in respect of the New Bonds will be paid for such year. 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, 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
Holding, JCC Intermediary (if formed), JCC, JCC Development, CP Development and
FP Development (except the Amended and Renegotiated Casino Operating Contract,
the Casino's bankroll and the Gross Revenue Share Payments), junior to the liens
securing certain obligations of JCC under the HET/JCC Agreement, the A Term
Loan, the Working Capital Facility and any refinancings of the A Term Loan and
the Working Capital Facility which do not increase the principal amount of
indebtedness outstanding and available thereunder (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 be guaranteed by JCC
Holding, JCC Development, CP Development and FP Development. 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.
110
<PAGE>
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 JCC's EBITDA results for any year are
less than $85 million, no Contingent Payments in respect of the New Contingent
Bonds will be paid for such year. 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 X.B.4., "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 Holding, JCC Intermediary (if formed), JCC, JCC Development, CP
Development and FP Development (excluding the Amended and Renegotiated Casino
Operating Contract, the Casino's bankroll and the Gross Revenue Share Payments),
junior to the liens securing certain obligations of JCC under the HET/JCC
Agreement, the A Term Loan, the Working Capital Facility and 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 be guaranteed by JCC Holding, JCC Development, CP Development and FP
Development. 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
111
<PAGE>
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, including the conversion of the principal amount
of the Existing DIP Indebtedness then outstanding to equity and contribution of
the same to JCC Holding (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.
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 will have an option, on the terms set forth in the NOLDC
Shareholders/HET Settlement Agreement, to purchase .33% of the shares of New
Common Stock (for an aggregate of up to 3% of the shares of New Common Stock),
and FNBC will have the option to purchase 1.5% of the shares of New Common
Stock, which shares are to be initially distributed to Harrah's Investor
pursuant to Section 6.2(e) of the Plan. On the later of the Effective Date and
the date on which the GP Representative/HET Settlement Agreements are executed
and delivered by all of the parties thereto, JCC Holding will, in accordance
with the provisions of the GP Representative/HET Settlement Agreements, issue
directly to the Disbursing Agent on behalf of the Grand Palais Releasing
Bondholders a number of shares of Class A New Common Stock to be specified in
the GP Representative/HET Settlement Agreements (the "Grand Palais Settlement
Consideration"), which shares would otherwise be distributed to Harrah's
Investor pursuant to Section 6.2(e) of the Plan (summarized
112
<PAGE>
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, FNBC 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 DIP Lender's consent to conversion to
equity and contribution of the principal amount of the DIP Indebtedness
outstanding on the Effective Date as part of the Harrah's New Equity Investment,
(C) the Harrah's New Equity Investment, (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 Loan Guarantee,
(ii) the New Completion Guarantees, (iii) the Amended and Restated Construction
Lien Indemnity Obligation Agreement, (iv) the Amended and Restated Completion
Loan Documents and (v) a Minimum Payment Guaranty for the COC Fiscal Year ending
March 31, 2000. On the Effective Date, the Old Completion Guarantees will be
terminated and canceled to the extent any of such guarantees has not been
previously terminated and canceled. 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 "F" 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 COC Fiscal Years ending March 31,
2000 and 2001 and $5 million for the COC Fiscal Years ending March 31, 2002,
2003 and 2004, all payable quarterly; provided, however, that HET and HOCI will
be paid a pro rata fee based on an annual fee of $6 million for any partial COC
Fiscal Year ending March 31, 2000.
"HET Warrant" means warrants to purchase additional shares of New
Common Stock such that, upon exercise of the warrants in their
entirety, HET and its subsidiaries, including Harrah's Investor, would
own in the aggregate 50.0% of the New Common Stock issued on the
Effective Date, subject to certain adjustments. The number of shares
issuable upon exercise of the HET Warrant will be
113
<PAGE>
calculated and/or adjusted as necessary to reflect, among other things,
the transfer of shares upon exercise of the options held by FNBC and
the NOLDC Shareholders to purchase New Common Stock from HET or its
subsidiaries and the issuance of shares of New Common Stock upon
conversion of any of the Convertible Junior Subordinated Debentures.
The HET Warrant will be exercisable at any time in whole or in part at
a price of $15.00 per share of 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 HET and its subsidiaries, including
Harrah's Investor, to own in the aggregate 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. If (i) an election to
redeem warrants is made by JCC Holding, and (ii) Harrah's Investor
exercises warrants with respect to that number of shares which at the
time of exercise would cause HET and its subsidiaries, including
Harrah's Investor, to own in the aggregate 50.0% of the New Common
Stock, then none of the then unexercised warrants which were called for
redemption shall be redeemed. 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 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 "I"
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) the authorized representative of Grand Palais,
Hemmeter, Hemmeter's bankruptcy trustee, Froelich, Sapir, Broadhurst, HET, the
Debtors, JCC and the other parties thereto will execute and deliver the
applicable GP Representative/HET Settlement Agreements, and (iii) the authorized
representative of 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.
114
<PAGE>
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 New 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 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 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
115
<PAGE>
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 New 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 State Group. On the Effective Date, HJC shall
execute the Amended and Renegotiated Casino Operating Contract and shall
thereafter assign the Amended and Renegotiated Casino Operating Contract to JCC,
which assignment shall take place pursuant to and in accordance with applicable
State law and the agreement of the parties thereto. On the Effective Date, upon
the assignment of the Amended and Renegotiated Casino Operating Contract from
HJC to JCC, JCC shall undertake the obligations of HJC thereunder, and shall
execute the State/LGCB Release and all other agreements, instruments and
documents necessary or appropriate to evidence or consummate the transactions
contemplated therein.
o. Agreements with City and RDC. Provided that the City Council shall
have enacted the ordinance(s) approving the Lease Documentation (as defined in
the City Agreement), on the Effective Date, JCC, the City and RDC will enter
into the Amended Canal Street Casino Lease, the Amended GDA and all other
agreements, instruments and documents necessary or appropriate to evidence or
consummate the transactions contemplated therein. Unless earlier terminated in
accordance with the provisions thereof, the City Agreement 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
116
<PAGE>
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,
JCC Holding 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, 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 (the "Class B Registration Statement") relating to all
shares of Class B New Common Stock held by Harrah's Investor including any
shares of Class B New Common Stock obtained by Harrah's Investor pursuant to the
exercise of the HET Warrant; and
(ii) JCC Holding 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, JCC will file a registration statement (the "New Bonds 33 Act
Registration Statement") with respect to such resales promptly after the
Effective Date. If such New Bonds 33 Act Registration Statement is not effective
within 120 days after it is filed, then the JCC Entities 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. Plan Documents. 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). The forms of the
respective Bylaws, Certificates of Incorporation and other organizational
documents of the New Entities and any shareholders' agreements relating to any
New Entity will be filed with, and approved by, the Bankruptcy Court on or
before the Effective Date. In addition, the operative Plan Documents specified
in Sections 1.2, 1.11 - 1.12, 1.23, 1.79, 1.93, 1.132 - 1.133, 1.147 - 1.148,
1.152 - 1.153, 1.155, 1.164, 1.166, 1.170, 1.173 and 1.256 of the Plan shall be
filed with the Bankruptcy Court on or before the Effective Date.
117
<PAGE>
u. Continued DIP Financing. Through the later of October 31, 1998 and
such later date to which the DIP Lender may consent, and subject to any
necessary additional approval by the Bankruptcy Court, HJC will request, and the
DIP Lender will provide to HJC, debtor-in-possession financing in an aggregate
principal amount, together with all other outstanding Existing DIP Indebtedness,
of up to $60 million (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. ss. 364, And (3) Modifying The Automatic Stay entered by the
Bankruptcy Court on or about August 26, 1998. 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.
v. Dismissal of Litigation. Upon the earlier of (i) the date provided
in a release executed pursuant to this Plan, and (ii) 180 days following the
Confirmation Date, the Debtors will voluntarily dismiss with prejudice all
litigation (including any adversary proceedings) as to, and to the extent of,
Claims that are released pursuant to 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 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,
118
<PAGE>
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 or, in the case of the Old Bonds,
to the Old Indenture Successor Trustee. Any holder that fails within one year
after the date of entry of the Confirmation Order (i) to surrender or cause to
be surrendered such promissory note or instrument, (ii) to execute and deliver
an affidavit of loss and indemnity reasonably satisfactory to JCC and/or the Old
Indenture Successor Trustee, and (iii) if requested, to furnish a bond
reasonably satisfactory to JCC and/or the Old Indenture Successor Trustee, 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.
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 Distributions
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 and no New Contingent Bonds shall be issued in a nominal (face)
amount that contains any fraction of a dollar.
119
<PAGE>
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). In
the case of the Bondholders, such distributions may be made at the addresses of
the registered Bondholders contained in the records of the Registrar as of the
Distribution Record Date or, with respect to the Release Pool Distribution in
the manner specified in the proofs of ownership or other documentation delivered
by each Releasing Bondholder to the Balloting Agent. If any distribution to a
holder of an Allowed Claim is returned as undeliverable, no further
distributions to such holder 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 except for any unclaimed New Common Stock which will be revested in and
returned to JCC Holding, 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 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
120
<PAGE>
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 New Entities) shall have any
liability to a Release Pool Transferee in the event that a distribution of New
Common Stock from the Release Pool is for any reason whatsoever made to the
Releasing Bondholder instead of the Release Pool Transferee designated in such
Release Pool Transfer Form; provided, further, that any Release Pool Transfer
Form shall contain an acknowledgment by the Release Pool Transferee that it is
the 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.
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
121
<PAGE>
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. On the Effective Date, all of HJC's right, title and interest in
and to the Casino Operating Contract shall revest in HJC on the Effective Date,
which Casino Operating Contract shall then be modified by the Amended and
Renegotiated Casino Operating Contract and assigned to JCC in accordance with
applicable State law and the agreement of the parties thereto and the provisions
of Section 8.1(g) of the Plan. In addition, on the Effective Date, all right
title and interest of the Debtors in the Fulton Property will vest in FP
Development, and all right title and interest of the Debtors in the 3CP Property
will vest in CP Development. All other property of the estates (including,
without limitation, all present and future claims and causes of action) of the
Debtors 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 New 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 New Entities may operate
their business, and may use, acquire, and dispose of property free of any
restrictions of the Bankruptcy Code.
c. As of the Effective Date, all property of the Debtors 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
(i) those rights, causes of action and claims released or to be released under
the Plan, (ii) HJC's right, title and interest in and to the Casino Operating
Contract, which will revest in HJC on the Effective Date, (iii) as otherwise
provided in Section 5.9 of the Plan with respect to Assigned Litigation Claims,
and (iv) rights relating to the 3CP Property and Fulton Property which will be
transferred to CP Development and FP Development respectively, JCC, in its sole
discretion, and either in its own name or in the name, place and stead of the
Debtors and their estates, 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. CP Development, in its sole
discretion, and either in its own name or in the name, place and stead of the
Debtors and their estates, 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 Commencement
Date relating to the 3CP Property, and will be entitled to retain all proceeds
thereof. FP Development, in its sole discretion, and either in its own name or
in the name, place and stead of the Debtors and their estates, 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 Commencement Date relating to the Fulton Property, 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 claims are otherwise settled through the Plan. The
Plan reflects settlements of certain of such claims, including:
122
<PAGE>
- 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, the
vesting of HJC assets in the New Entities (other than JCC Development) shall be
deemed to have occurred as a deemed exchange by the Bondholders of the Old Bonds
for such assets of HJC and a deemed exchange by the Bondholders of such assets
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 Debtors
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 New Entity, or its successors, or their
respective assets or properties any other or further Claims or Equity Interests
based upon any act or omission, transaction, or other activity of any kind or
nature, whether known or unknown, that occurred prior to the Effective Date,
whether or not (i) a proof of claim or interest based upon such Claim or Equity
Interest is filed or deemed filed under Section 501 of the Bankruptcy Code, (ii)
such Claim or Equity Interest is allowed under Section 502 of the Bankruptcy
Code, or (iii) the holder of such Claim or Equity Interest has accepted the
Plan. Except as provided 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 New 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 action against any Debtor or any New
Entity, or the property of any of them, to the extent it relates to a Claim or
Equity Interest discharged. Nothing in the Plan shall be construed as or
constitute a release of any Claim against HJC arising under the Casino Operating
Contract, which Casino Operating Contract shall revest in HJC on the Effective
Date, be modified by the Amended and Renegotiated Casino Operating Contract, and
be assigned to JCC in accordance with applicable State law, the agreement of the
parties, and the provisions of the Plan.
123
<PAGE>
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 New Entities, the Committees, nor any of their respective members
(including, in the case of HJC, its executive committee members and
reorganization steering committee members), officers, directors, employees,
agents or professionals 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 October 31, 1998, which date may be extended by
HET (in its sole discretion) on behalf of the Proponents only with the written
consent of the Bondholders Committee (in its sole discretion), the LGCB (in its
sole discretion) and the City (in its sole discretion).
2. 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 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
124
<PAGE>
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 October 31, 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 or assigned to JCC as provided in Section 8.1
of the Plan shall have been assumed by or assigned to JCC. The Amended and
Renegotiated Casino Operating Contract, the State/LGCB Release, and all other
agreements, instruments and documents necessary to evidence or consummate the
transactions contemplated therein shall 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.
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.
125
<PAGE>
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 (i) made all suitability determinations and given all approvals
required by the Louisiana Economic Development and Gaming Control Act, the rules
and regulations of the LGCB (as said rules and regulations are in effect at such
time as the issuance of the approvals and making of suitability determinations)
and the Amended and Renegotiated Casino Operating Contract, and (ii) consented
to the assignment of the Amended and Renegotiated Casino Operating Contract to
JCC, in each case to the extent necessary to enter into the agreements
contemplated by 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 GP Representative/HET
Settlement Agreements shall have been executed and delivered by all of the
parties thereto, and the NOLDC Shareholders/HET Settlement Agreement shall have
been approved by the Bankruptcy Court in the Chapter 11 Case of NOLDC.
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).
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, JCC
Development, CP Development and FP Development 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
126
<PAGE>
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
(as said rules and regulations are in effect at the time of the suitability
determinations) at least one proposed officer of JCC Holding and at least two of
the proposed directors of JCC Holding (including at least one Bondholders
Director Nominee and one Harrah's Director Nominee).
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), (i) or (q) 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
of the Amended and Renegotiated 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 October 31, 1998 (which date
may be extended by HET (in its sole discretion) on behalf of the Proponents only
with the written consent of the Bondholders Committee (which consent may be
withheld in its sole discretion), the LGCB (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)
127
<PAGE>
the Debtors and all holders of Claims and Equity Interests will be restored
to the status quo ante as of the day immediately preceding confirmation of
the January 29, 1998 Plan as though such 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. On March 20, 1998, the LGCB approved the Amended and
Renegotiated Casino Operating Contract. The Proponents are also presently in
discussions with the LGCB regarding 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
New 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
Original 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 Original Plan. The Mayor has signed
these approved ordinances. Subsequently, on December 18, 1997, revised and
modified versions of the Amended Canal Street Casino Lease and exhibits thereto,
including the form of the Amended Management Agreement and the form of the
Second Floor Sublease, and the Amended GDA and exhibits thereto, including the
New Completion Guarantee in favor of the City and the RDC and related documents
contemplated by the Plan were submitted to the City Council for first reading.
However, ordinances approving the forms of Amended Canal Street Casino Lease and
exhibits, Amended GDA and exhibits and related documentation contemplated by the
Plan, as submitted to the City Council on December 18, 1997, have not been
adopted by the City Council and the Mayor has not signed such documents.
Proponents expect to submit further revisions to the Amended Canal Street Casino
Lease and exhibits, Amended GDA and exhibits and related documentation
contemplated by the Plan to the City Council for first reading and approval
prior to the Effective Date. There can be no assurance that the City Council and
the Mayor will provide the necessary approvals.
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 or purchase the approximately $15
million in Convertible Junior Subordinated Debentures to the extent the
Bank/Underwriter Release releases claims of the Underwriters against HET.
HET has received from certain of its lenders the consents necessary
for HET and its Affiliates to take the actions contemplated by the Plan.
128
<PAGE>
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 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.
129
<PAGE>
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 confirmation of the
January 29, 1998 Plan as though such 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. Existing Agreements
Unless otherwise ordered by the Bankruptcy Court or the context
clearly requires otherwise, all references in any settlement agreement,
agreement regarding the assumption or rejection of executory contracts, Plan
exhibits or other writings to the confirmation, consummation or Effective Date
of the Original Plan, the January 29, 1998 Plan and/or the April 6, 1998 Plan
shall be deemed to refer to the Plan.
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.
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
130
<PAGE>
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 Original Plan (or later changed its vote
in connection with the solicitation of votes on the January 29, 1998 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 Original Plan (or later changed its
vote in connection with the solicitation of votes on the January 29, 1998 Plan)
is also entitled to vote to accept or reject the Plan.
If you have already timely voted to accept or reject the Original
Plan, you will be deemed to have accepted or rejected, as the case may be, the
accompanying 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 Original Plan and who continue to hold such Old Bonds,
and (ii) holders 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.
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:
131
<PAGE>
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:
Heller, Draper, Hayden & Horn, L.L.C.
650 Poydras Street
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.
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
September 3, 1998" cannot be confirmed under the cramdown requirements of
Section 1129(b) of the Bankruptcy Code if Class A4 does not accept the Plan).
132
<PAGE>
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
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 October 31, 1999, October 31, 2000, October 31,
2001, and October 31, 2002 (the "Projection Period"). These projections, and the
assumptions on which they are based, are annexed hereto as Exhibit "B" (the
"Financial Forecast").
133
<PAGE>
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.
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 October 31, 1998. The estimated project costs set forth in the
Financial Forecast take into account the repayment of certain organizational
costs and expenses incurred by HET for the New Entities' benefit prior to the
Effective Date, including $2 million in professional fees and expenses to be
reimbursed by JCC to HET on the Effective Date, after Court approval prior to
the Effective Date. Unless previously reimbursed under the DIP Loan facility,
then subject to the approval of JCC Holding's Board of Directors and budgetary
constraints, HET also intends to seek reimbursement for certain additional
expenses related to management, administrative, legal and technical advisory
services and personnel provided or incurred by HET for the New Entities' benefit
prior to the Effective Date. The estimated project costs listed above do not
include costs associated with the build-out of the second floor of the Casino
beyond the Second Floor Shell Construction, any development of the second floor
of the Casino by JCC Development, and any development of the 3CP Property and
Fulton Property by CP Development and FP Development, respectively. The New
Entities likely will require additional financing to fund any such developments,
and their ability to obtain additional financing is uncertain.
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.7., "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
134
<PAGE>
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.
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.
135
<PAGE>
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."
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. 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 Holding, JCC, JCC
Development, CP Development and FP Development (except the Amended and
Renegotiated 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 $121.5 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
136
<PAGE>
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 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 Bank Term Sheet attached as Exhibit
"F" 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 $121.5 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 $22.5 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.9., "Certain Risk Factors to be
Considered--Overall Risks to Recovery by Holders of Claims--Availability of Term
Loans and Working Capital Facility."
137
<PAGE>
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 $22.5
million of subordinated indebtedness to fund project costs to the extent that
such costs exceed amounts available under the Term Loans (excluding Tranche A-1
and Tranche A-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 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 $27 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. 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 Alex. Brown
Incorporated, 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, HET and its subsidiaries, including Harrah's Investor, would own in
the aggregate 50.0% of the New Common Stock, subject to certain adjustments. The
number of shares issuable upon exercise of the HET Warrant will be calculated
and/or adjusted as necessary to reflect, among other things, the transfer of
shares upon exercise of the options held by FNBC and the NOLDC shareholders to
purchase New Common Stock from HET or its subsidiaries and the issuance of
shares of New Common Stock upon conversion of any of the Convertible Junior
Subordinated Debentures. The HET Warrant will be exercisable at any time after
the Transition Date until the sixth anniversary of the opening of the Casino, in
whole or in part at a price of $15.00 per share of 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 HET and its
138
<PAGE>
subsidiaries, including Harrah's Investor, to own in the aggregate 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. If (i) an election to redeem warrants is made by JCC Holding, and (ii)
Harrah's Investor exercises warrants with respect to that number of shares which
at the time of exercise would cause HET and its subsidiaries, including Harrah's
Investor, to own in the aggregate 50.0% of the New Common Stock, then none of
the then existing warrants which were called for redemption shall be redeemed.
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 COC Fiscal Year ending March 31, 2004; provided that a Minimum
Payment Guaranty shall not renew for any of the COC 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) there has been a Minimum Payment Default
(as defined in the Amended and Renegotiated Casino Operating Contract); (e) in
the case of the renewal of the Minimum Payment Guaranty for the COC Fiscal Year
beginning April 1, 2000, the project has failed to generate positive 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; (f) in the case of the renewal of
the Minimum Payment Guaranty for the COC Fiscal Years beginning April 1, 2001,
2002, and 2003, the project has failed to generate positive 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; (g) 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;
(h) the Amended and Renegotiated Casino Operating Contract has been terminated;
(i) JCC has breached any of the covenants of JCC set forth in Section 5 of the
HET/JCC Agreement; (j) an Excusable Temporary Cessation of Operations (as
defined below) has occurred and is continuing and has not been cured in
accordance with the Amended and Renegotiated Casino Operating Contract; or (k)
the Amended and Renegotiated Casino Operating Contract has been terminated. For
purposes of clauses (e) and (f) 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 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 renew the HET/JCC
Agreement 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 renew the
139
<PAGE>
HET/JCC Agreement for the COC 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
Amended and Renegotiated Casino Operating Contract and which does not result in
increased cost to JCC (after giving effect to payment to HET and HOCI of the
termination fee, if applicable), the Amended and Renegotiated Casino Operating
Contract no longer requires JCC to provide a guaranty or letter of credit, or
the LGCB waives the requirement that JCC provide a guaranty or letter of credit.
HET and HOCI, collectively, will receive a $6 million per annum
guaranty fee for the 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 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. 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 Fixed
Interest on the New Bonds will be paid in kind, 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 substantially all of
the assets of JCC Holding, JCC, JCC Development, CP Development and FP
Development (except the Amended and Renegotiated Casino Operating Contract and
the Gross Revenue Share Payments). 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.
With respect to clause (e) of the preceding paragraph regarding the
renewal of the Minimum Payment Guaranty for the COC Fiscal Year beginning April
1, 2000, if an Excusable Temporary Cessation of Operations occurs, the Minimum
Payment Guaranty will automatically renew if the Casino's failure to generate
positive EBITDA for the period of operations ending January 31, 2000 is solely
the result of an Excusable Temporary Cessation of Operations and but for the
Excusable Temporary Cessation of Operations the applicable EBITDA test would
have been met. To determine whether the Casino would have generated positive
EBITDA in the absence of an Excusable Temporary Cessation of Operations for the
period of operations ending January 31, 2000, it will be assumed that the Casino
would have generated EBITDA for each day of any period of time the Casino was
closed due to an Excusable Temporary Cessation of Operations in an amount equal
to the average daily EBITDA generated during the thirty days prior to such
period of time the Casino was closed due to an Excusable Temporary Cessation of
Operations.
With respect to clause (f) of the second preceding paragraph
regarding the renewal of the Minimum Payment Guaranty for COC Fiscal Years
beginning April 1, 2001, 2002, and 2003, if an Excusable Temporary Cessation of
Operations occurs, the Minimum Payment Guaranty will automatically renew if the
Casino's failure to generate EBITDA for the 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, is solely the result of an Excusable Temporary Cessation of
Operations; provided that (i) such $15 million, $20 million and $25 million,
EBITDA tests, respectively, will be reduced pro rata for any period of time the
Casino was closed due to an Excusable Temporary Cessation of Operations during
140
<PAGE>
the applicable twelve month period and (ii) the Minimum Payment Guaranty will
automatically expire and not renew if any such reduced EBITDA tests are not met.
An "Excusable Temporary Cessation of Operations" occurs if any of
-------------------------------------------
the following circumstances occurs, to the extent and only for such time that it
causes temporary closure or temporary cessation of operations of the Casino
beyond the reasonable control of JCC, and further provided that the Casino
Operator diligently and in good faith seeks to reopen the Casino and to
recommence Casino operations: (a) strikes, lockouts, inability to procure
materials or failure of power; (b) arbitrary or capricious State, local or
municipal governmental action (but in no event will an Excusable Temporary
Cessation of Operations pursuant to this clause (b) exceed a period of six
months); (c) acts of God, hurricanes, floods, sinkholes, fires and other
casualties, earthquakes, epidemics, or quarantines; (d) acts of a public enemy,
acts of war, terrorism, blockades, insurrections, riots, civil disturbances,
governmental preemption in connection with a national emergency, or national or
international calamities; (e) the entry of a judgment, order or ruling in
litigation not filed by JCC or any affiliates of JCC and which judgment, order
or ruling was not entered substantially as the result of the fault of JCC or any
affiliates of JCC and which judgment, order or ruling restrains or substantially
interferes with operations of the Casino; (f) any action by the legislature or
any governmental agency the result of which is that gaming as currently proposed
to be conducted at the Casino is materially diminished; (g) any other causes
related to or arising out of the causes stated in subsections (a) through (g)
above beyond the reasonable control of JCC (excluding any bankruptcy of JCC or
failure of JCC to obtain financing or to pay its financial obligations as they
come due) and not substantially the result of the fault of JCC; and (h) any
other cause which the LGCB in its sole discretion formally determines to be an
Excusable Temporary Cessation of Operations.
VII. MANAGEMENT OF THE REORGANIZED DEBTORS
A. Entity Structure
----------------
Pursuant to the Plan, on the Effective Date, except for certain
excess real property which will vest in CP Development and FP Development, the
assets 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 a deemed exchange by the Bondholders of such assets 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 initial member of
JCC Intermediary and (ii) JCC Intermediary will become the initial member of
JCC, JCC Development, CP Development and FP Development. Accordingly, JCC, JCC
Development, CP Development and FP Development 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
initial member of JCC, JCC Development, CP Development and FP Development. Upon
the Effective Date, 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.
141
<PAGE>
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 to the New 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 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 Event of Default is caused by HET or
HNOMC related events; (iv) (a) an Event of Default (as defined in the Amended
and Renegotiated Casino Operating Contract) in respect of payments due and owing
by JCC under the Amended and Renegotiated Casino Operating Contract, or any
other material Event of Default under the Amended and Renegotiated Casino
Operating Contract in response to which any other party to the Amended and
Renegotiated Casino Operating Contract would be entitled to terminate, rescind,
or otherwise deprive JCC of the benefits of, the Amended and Renegotiated 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) JCC
Holding is in violation of its corporate governance documents 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 New 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,
142
<PAGE>
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 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 New Entities 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
New Entity, (b) any merger, consolidation, lease or sale of a material portion
of their 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, (i) any repurchase of securities of a New Entity, (j)
any change in the independent auditors, and (k) approval of JCC's annual
operating plan and annual capital budget. 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 (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
143
<PAGE>
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.
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
144
<PAGE>
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 Holding shall pay to the Bondholders an amount
equal to $.05 per week for each $1,000 of securities to be registered, which
amount shall increase by $.05 every 45 days to a maximum of $.30 per week.
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, with respect to the Class A New
Common Stock, and the New Entities, with respect to the New Bonds or New
Contingent Bonds, 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 JCC Holding or the New
Entities, as applicable, 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.
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 October 31, 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
145
<PAGE>
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 Amended and Renegotiated 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.G.,
"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.9., "--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 payments will render the operator of the Casino unsuitable.
See Section III.G., "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.G., "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 and the impact of future rules and
regulations on the Plan.
146
<PAGE>
2. Anti-Gaming Legislation and Activities
Considerable opposition to gaming among a segment of the population
of Louisiana has meant that the enactment and implementation of gaming
legislation in Louisiana and the development of the Casino have been the subject
to numerous lawsuits, claims and delays brought about by various anti-gaming and
preservationist groups. To date, these lawsuits and claims have significantly
delayed development of the Casino. Additional lawsuits and the uncertain
political environment may result in further delays, all of which could have a
material adverse effect on the Debtors and the New Entities.
During the 1998 special session of the State legislature which
convened on March 23, 1998 and finally adjourned on April 17, 1998 and the 1998
regular session of the State legislature which convened on April 27, 1998 and
finally adjourned on June 10, 1998, members of the State legislature introduced,
or indicated that they intended to introduce, legislative instruments which, if
enacted, would repeal the law authorizing the Casino, purport to set aside the
Casino Operating Contract and/or Amended and Renegotiated Casino Operating
Contract, or otherwise have a detrimental impact on the Debtors' and the New
Entities' rights and obligations. Although no adverse legislation was enacted
during the 1998 special session or the 1998 regular session, two bills have been
pre-filed in the State House of Representatives for consideration during the
State legislature's 1999 regular session which begins March 1999. If passed, the
first bill would repeal the Gaming Act in its entirety. The second would amend
the Gaming Act to broaden the food service restrictions applicable to the Casino
and all parts of any connecting structure or building. There can be no assurance
that the New Entities will be successful in preventing such legislative changes
or that the New Entities will be able to recover damages as a result thereof.
The enactment into law of any such legislation or resolution could have a
material negative impact upon the Debtors and the New Entities. The Debtors
cannot accurately assess the likelihood that any legislation such as that
described above will be enacted by the State legislature in the future.
3. Ability to Commence Operations as Scheduled
The Initial Casino Facilities are scheduled to open and Second Floor
Shell Construction 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 eighteen months, HJC has
significantly increased its estimates of the cost to complete construction of
the Casino and the adjoining parking facilities, primarily as a result of (i)
increases in general construction costs in the region, (ii) physical
deterioration to the partially-completed Casino and parking lot structures
caused in large part by high humidity and moisture levels, and (iii) the need to
upgrade the interior of the Casino in order effectively to compete with casinos
in the Mississippi Gulf Coast. Depending on the cause of any delay, a failure to
complete construction of the Casino within 12 months after the Effective Date
may constitute an event of default under the Amended and Renegotiated Casino
Operating Contract and constitute a "deemed opening" resulting in liability for
the minimum daily payment due under the Amended and Renegotiated Casino
Operating Contract. Any such event of default would have a material adverse
effect on the New Entities.
In connection with preparations for consummation of the Confirmed
Plan, HJC commenced a review of the partially-constructed Casino and adjoining
parking lot structure to determine (i) what redesign
147
<PAGE>
of the Casino interior will be necessitated by the dedication of the second
floor of the Casino building to non-gaming uses and by the other changes in the
configuration of the Casino contemplated by the Amended and Renegotiated Casino
Operating Contract, (ii) whether to upgrade the Casino design and gaming
equipment to meet more intense competition from other gaming facilities such as
those located on the Mississippi Gulf Coast, (iii) the extent of physical
deterioration to the Casino structure and adjoining parking facilities during
the three year reorganization process, and (iv) the extent to which increased
costs resulting from proposed modifications and additions might be offset by
changes to the Casino design. In addition, HJC obtained estimates for the costs
of the various modifications to the Casino project under consideration, and also
determined what costs have and will be occasioned by the delay in the
reorganization process resulting from the developments described above.
Upon determining what modifications and additions to the Casino
project are reasonably necessary to its success, what other changes to the
Casino design should be made to partially offset the increased costs occasioned
by such modifications and the delay in the reorganization process, and after
negotiations with the Bondholders Committee and the Bank Lenders, HJC revised
its budget for completion and operation of the Casino. HJC's revised budget for
completion of the Casino project contemplates that $25 million in additional new
financing and the cancellation of all accrued interest on the DIP Loan will be
necessary to fund the costs of the redesign of the interior of the Casino, the
upgrade of the Casino design and gaming equipment, the remediation work to the
Casino and the extended reorganization process. Design and planning work has
already begun with respect to the interior of the Casino.
4. 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 and State Police, 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 Chairman of the LGCB has stated that the suitability
determination process is targeted to conclude in October of 1998, although there
can be no assurance that the process will be completed by such time. 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, and any required regulatory approvals are obtained from 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 Amended and Renegotiated
Casino Operating Contract. The failure of JCC or HNOMC to maintain its
suitability and other defaults under the Amended and Renegotiated Casino
Operating Contract could result in fines or the suspension or revocation of the
Amended and Renegotiated 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 Initial Casino
Facilities could delay the opening of the Initial Casino Facilities.
5. Litigation
For a summary of pending material litigation involving HJC, see
Section III.F., "General Information--Certain Prepetition Legal Proceedings" and
Section IV, "Events During the Chapter 11 Cases."
148
<PAGE>
6. 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.
7. Financial Forecast
The Financial Forecast attached as Exhibit "B" was prepared assuming
an Effective Date of October 31, 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 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."
8. No Operating History; Lack of Prior Gaming Experience
The success of gaming in a market that has never supported
significant land-based 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,
149
<PAGE>
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.
9. 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.
10. Execution of the Amended and Renegotiated Casino Operating Contract
The execution and delivery of the Amended and Renegotiated Casino
Operating Contract is a condition precedent to the Effective Date of the Plan.
The Amended and Renegotiated Casino Operating Contract will address the 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
March 20, 1998, the LGCB approved the Amended and Renegotiated Casino Operating
Contract subject to several conditions which include (i) that the JCC Entities,
HNOMC and certain of their respective shareholders, members officers, and
directors are found suitable and qualified under the Gaming Act, (ii) that the
LGCB approve, among other things, the financing of the JCC Entities, the
ownership of the JCC Entities and the management of the Casino, and (iii) that
the Louisiana Supreme Court render a final, non-appealable judgment that the
LGCB, acting on its own, is the proper party and has the legal authority to
enter into the Amended and Renegotiated Casino Operating Contract with HJC on
behalf of the State and the LGCB, without the specific approval of the Governor
or the State legislature. On May 15, 1998, the Louisiana Supreme Court issued a
decision confirming that the LGCB has the independent authority to renegotiate
and execute the Amended and Renegotiated Casino Operating Contract without
seeking gubernatorial or legislative approval. See Section IV.U., "Events During
the Chapter 11 Cases--Bean and Jordan Litigation." There can be no assurance
that all of the other conditions to the LGCB's approval of the Amended and
Renegotiated Casino Operating Contract will be met.
11. 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 (subject to a 15,000 square foot limitation)
at race tracks located in three parishes in the State (but
150
<PAGE>
not Orleans Parish) subject to local elections in the parishes where the race
tracks are located. The voters in two of the three parishes approved the use of
slot machines at the race tracks located in those parishes but the State
legislature's authorization is subject to further legislative action on the fees
and taxes to be imposed. Legislation to impose such fees and taxes was
introduced in the 1998 fiscal session of the State legislature, but failed to
receive legislative approval. Future consideration of this issue is likely by
the State legislature. There can be no assurance that this authorization will
not negatively impact JCC should slot machines ultimately be permitted at these
race tracks.
12. 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.
13. 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 they
will be able to do so. In addition, the Amended GDA and the Amended Canal Street
Casino Lease obligate the JCC Entities 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.
14. Repurchase of Securities Relating to Gaming Matters
The Gaming Act, the rules and regulations thereunder, and the
Amended and Renegotiated Casino Operating Contract impose certain suitability
requirements with respect to the holding of 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.
151
<PAGE>
15. 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.
16. 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.
17. 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.
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.3, "--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
152
<PAGE>
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 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.
HJC has been making rent payments to the City and RDC at a rate of
$736,000 per month. The City and RDC contend that the City Agreement requires
HJC to pay rent at an escalated rate from November 1, 1997 through the opening
of the Casino, as a result of the delay in consummating an HJC plan of
reorganization and the resulting delay in opening the Casino within the time
periods set forth in the City Agreement. HJC believes there is no legal basis
for such contention. The City and RDC have not waived any claim to payment of
escalated rent, and have requested that HJC and JCC make specified payments to
the City and RDC in lieu of the escalated rent. The City, RDC and HJC are
currently negotiating these and related issues. There can be no assurance that
such negotiations will not result in additional payments to the City which may
have a negative impact upon the Casino's profitability and may impact the
Financial Forecast attached hereto as Exhibit "B."
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.
153
<PAGE>
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)
(NonParticipating 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 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.
154
<PAGE>
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)
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 one
year. Capital losses generally may be used only to offset capital gains.
1. Treatment of JCC Holding, JCC, CP Development, FP Development and
JCC Intermediary as a Single Taxable Entity
Each of JCC, JCC Intermediary (if formed), CP Development and FP
Development will be organized as a single-member, limited liability company.
Accordingly, for federal income tax purposes, each such entity may be ignored,
with the result that 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.
155
<PAGE>
JCC Holding, JCC Intermediary (if formed), JCC, CP Development and FP
Development intend to file tax returns and elections consistent with such
treatment.
In the event that JCC affirmatively elects to be taxed as a
corporation for federal income tax purposes, the New Bonds and New Contingent
Bonds will be treated as indebtedness of JCC, and all of the assets of HJC
(except for those assets actually transferred to CP Development and FP
Development) will be considered to be assets of JCC for federal income tax
purposes. See Section X.B.3 below for a description of the circumstances in
which JCC will elect to be taxed as a corporation for federal income tax
purposes.
2. Exchange of Old Bonds by Bondholders
Under the Plan, except for certain real property which will vest in CP
Development and FP Development, 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, JCC, CP Development and FP
Development 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 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 anticipate commissioning a valuation of
HJC's assets as of the Effective Date and to treat the fair market value of such
assets as being equal to the amounts determined in the valuation. It is
anticipated that such valuation will be similar in nature to that performed for
purposes of the Liquidation Analysis. In this regard, the Liquidation Analysis
ascribes little or no value to certain intangible assets of HJC due to the
inherently speculative nature of valuing such assets. 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
156
<PAGE>
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 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.
157
<PAGE>
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
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 will file a
protective election with the IRS 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 provided that, prior to the Effective
Date, JCC 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
158
<PAGE>
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, 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.
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.
159
<PAGE>
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 October 31,
1998, (2) additional New 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
New Bonds, payments on 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>
4/30/99 6,548.61 424.53 7,075.47
10/31/99 6,777.33 825.03 6,674.97
4/30/00 7,014.03 1,202.86 6,297.14
10/31/00 7,259.01 1,559.30 5,940.70
4/30/01 7,512.53 1,895.56 5,604.44
10/31/01 7,774.92 2,212.80 5,287.20
4/30/02 8,046.46 2,512.07 4,987.93
10/31/02 8,084.43 2,794.41 4,705.59
4/30/03 8,123.73 3,060.76 4,439.24
10/31/03 8,164.40 3,312.04 4,187.96
4/30/04 8,206.49 3,549.09 3,950.91
10/31/04 8,180.20 3,772.73 3,727.27
4/30/05 8,152.99 3,983.71 3,516.29
10/31/05 8,124.83 4,182.74 3,317.26
4/30/06 8,095.69 4,370.51 3,129.49
10/31/06 8,065.53 4,547.65 2,952.35
4/30/07 8,034.32 4,714.77 2,785.23
10/31/07 8,002.01 4,872.42 2,627.58
4/30/08 7,968.58 5,021.15 2,478.85
10/31/08 7,933.98 5,161.46 2,338.54
4/30/09 7,898.17 5,293.83 2,206.17
10/31/09 7,861.11 5,418.71 2,081.29
---------- ---------- ----------
171,829.35 74,688.13 90,311.87
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
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 additional New 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.
- ----------
***** Under the New Bonds, the maximum aggregate contingent payment for the
first semi-annual period of each year
160
<PAGE>
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 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 October 31, 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):
161
<PAGE>
<TABLE>
<CAPTION>
Payment Semi-Annual Semi-Annual
Date Contingent Interest Contingent Principal
---- ------------------- --------------------
<S> <C> <C>
4/30/99 678.49 8,481.03
10/31/99 1,306.71 7,852.81
4/30/00 1,888.40 7,271.12
10/31/00 2,427.00 6,732.52
4/30/01 2,925.71 6,233.81
</TABLE>
- --------------------------------------------------------------------------------
****** 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.
<TABLE>
<CAPTION>
Payment Semi-Annual Semi-Annual
Date Contingent Interest Contingent Principal
---- ------------------- --------------------
<S> <C> <C>
10/31/01 3,387.47 5,772.05
4/30/02 3,815.03 5,344.49
10/31/02 4,210.92 4,948.60
4/30/03 4,577.48 4,582.04
10/31/03 4,916.89 4,242.63
4/30/04 5,231.16 3,928.36
10/31/04 5,522.15 3,637.37
4/30/05 5,791.58 3,367.94
10/31/05 6,041.06 3,118.46
4/30/06 6,272.06 2,887.46
10/31/06 6,485.94 2,673.58
4/30/07 6,683.99 2,475.53
10/31/07 6,867.36 2,292.16
4/30/08 7,037.15 2,122.37
10/31/08 7,194.36 1,965.16
4/30/09 7,339.93 1,819.59
10/31/09 7,474.71 1,684.81
---------- ----------
108,075.55 93,433.89
---------- ----------
---------- ----------
</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 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
162
<PAGE>
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 "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 (but only if, contrary to the approach
mandated by the Debt Regulations of treating the New Bonds as separate
non-contingent and contingent instruments, the New Bonds are viewed as a single
instrument) 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. Recently finalized Treasury regulations provide,
however, that debt instruments that provide for contingent payments are not
subject to the amortizable bond premium rules contained in such regulations.
Hence, the amortizable bond premium rules should not apply to the New Bonds or
New Contingent Bonds.
Even if the amortizable bond premium rules do not apply, 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 acquisition
premium rules should apply to them. However, the acquisition premium rules
potentially may apply to the New Bonds.
163
<PAGE>
A HOLDER ACQUIRING A NEW BOND OR NEW CONTINGENT BOND AT A PREMIUM OR
ACQUISITION PREMIUM IS URGED TO CONSULT ITS OWN TAX ADVISER AS TO THE
APPLICATION OF THE AMORTIZABLE BOND PREMIUM OR ACQUISITION PREMIUM RULES TO SUCH
BONDS.
g. Market Discount. Bondholders 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
acquisition premium), 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.
164
<PAGE>
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
debentures were
165
<PAGE>
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.
166
<PAGE>
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
who voted in favor of the Original Plan (or January 29, 1998 Plan, if
applicable) not to change their previous votes, thereby permitting their earlier
votes to continue to be counted as votes in favor of the Plan.
167
<PAGE>
Dated: September 3, 1998
Respectfully submitted:
/S/ DANIEL R. MURRAY
-----------------------------------------
JENNER & BLOCK
One IBM Plaza
Chicago, Illinois 60611
Telephone: (312) 222-9350
Fax: (312) 840-7353
/S/ WILLIAM H. PATRICK, III
-----------------------------------------
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.
/S/ JAN M. HAYDEN
-----------------------------------------
HELLER, DRAPER, HAYDEN & HORN, 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
/S/ ROBERT J. ROSENBERG
-----------------------------------------
LATHAM & WATKINS
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Fax: (212) 751-4864
Attorneys for Harrah's Entertainment,
Inc.
168
<PAGE>
Exhibit A
Third Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as Modified Through September 3, 1998
(See Accompanying Document)
<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 Harrah's Entertainment, Inc. ("HET") on behalf of the Proponents,
to show the estimated consolidated financial position, results of operations,
cash flows and capitalization of JCC Holding, JCC Intermediary and JCC
(collectively, the "Company") following October 31, 1998, which is assumed to
be the Effective Date of the Plan of Reorganization for this Financial
Forecast. This Financial Forecast does not include the financial position,
results of operations, cash flows or capitalization of any of CP Development,
FP Development or JCC Development.
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 the Disclosure Statement
(as defined below), 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 September 3, 1998, 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 Debtors' Sixth Amended Joint Disclosure
Statement Pursuant to Sections 1125 and 1127 of the Bankruptcy Code, dated
September 3, 1998 (the "Disclosure Statement"). All cross references
contained in this Exhibit "B" refer to the Disclosure Statement and not to
the summary of the Disclosure Statement to which this Exhibit "B" has also
been 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
October 31, 1998, based on the historical consolidated balance sheet as of
June 30, 1998, 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 October 31, 1999, October 31, 2000, October 31,
2001 and October 31, 2002.
Forecasted Condensed Consolidated Capitalization Tables of the
Company as of October 31, 1999, October 31, 2000, October 31, 2001 and
October 31, 2002.
Forecasted Condensed Consolidated Statements of Cash Flows of the
Company for the twelve months ending October 31, 1999, October 31, 2000,
October 31, 2001 and October 31, 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.
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
B-2
<PAGE>
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 October 31,
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 October 31,
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
fourth 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 and must pay the fifth and sixth semi-annual payments of
Fixed Interest in kind if Tranche A-1 and/or A-2 is outstanding and more than
$5 million of indebtedness is outstanding under the Working Capital Facility;
provided further, however, that JCC may not pay the fifth and sixth
semi-annual payments of Fixed Interest in kind if (i) Tranches A-1 and A-2
have been fully repaid, (ii) there are no outstanding drawings under the
Working Capital Facility, and (iii) JCC has accumulated cash availability of
at least $20 million. If the Company pays Fixed Interest in kind on any of
the first four 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
B-3
<PAGE>
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 required 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 Terms Loans will be deferred and the fees
due under the HET/JCC Agreement will be deferred. The Financial Forecast
assumes that the first six 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 October 31, 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 totalling $10 million, (ii) Tranche A-2 totalling $20 million, and
(iii) Tranche A-3 totalling 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 $151.5 million to construct the Casino. The B Term
Loan will consist of two tranches: (i) Tranche B-1 totalling $30 million, and
(ii) Tranche B-2 totalling $121.5 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 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
B-4
<PAGE>
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 Alex. Brown Incorporated and DLJ will purchase approximately
$16 million aggregate principal amount, of the Convertible Junior
Subordinated Debentures. The Financial Forecast assumes that the Convertible
Junior Subordinated Debentures will be due six months after the maturity of
the New Bonds.
The Financial Forecast assumes that the Company will enter into the
Junior Subordinated Credit Facility, that such facility will provide
$22.5 million of availability, and that the Company will incur the entire
$22.5 million of indebtedness available under the Junior Subordinated Credit
Facility.
On March 20, 1998, the LGCB approved the Amended and Renegotiated Casino
Operating Contract subject to a number of conditions, some of which have not
yet been fulfilled. Payments to the State are assumed to be substantially as
set forth in the summary of the Amended and Renegotiated Casino Operating
Contract in the Disclosure Statement. See Section V.C.3., "The Plan of
Reorganization -- Executory Contracts and Unexpired Leases -- Casino
Operating Contract." HJC is in the process of negotiating with the City of
New Orleans with regard to certain modifications to the Canal Street Casino
Lease. HJC has been making rent payments to the City and RDC at a rate of
$736,000 per month. The City and RDC contend that the City Agreement requires
HJC to pay rent at an escalated rate from November 1, 1997 through the
opening of the Casino, as a result of the delay in consummating an HJC plan
of reorganization and the resulting delay in opening the Casino within the
time periods set forth in the City Agreement. HJC believes there is
B-5
<PAGE>
no legal basis for such contention. City rent payments are assumed to be at a
rate of $736,000 per month until the opening of the Casino and thereafter
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" and "Certain Risk Factors To Be Considered -- Overall Risks to
Recovery by Holders of Claims -- Uncertainty Regarding Termination of City
Agreement and Canal Street Casino Lease."
The Financial Forecast assumes that the Harrah's New Equity Investment
made on the Effective Date will be in the cash amount of $15.0 million (the
difference between $75.0 million and the principal amount of $60.0 million of
debtor-in-possession financing assumed to have been provided by the DIP
Lender as of the Effective Date, which debtor-in-possession financing will be
converted into equity and contributed to JCC Holding on the Effective Date).
Upon, and subject to, the occurrence of the Effective Date, the claim of the
DIP Lender to any interest which has theretofore accrued on the
debtor-in-possession financing will be cancelled. 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 HJC and the Company will enter into
an exclusive contract to operate the sole land-based casino in Orleans
Parish, Louisiana (which HJC will assign to JCC pursuant to and in accordance
with applicable State law and the agreement of the parties thereto), and that
the Company 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
the initial Casino Facilities, 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) the Initial Casino Facilities will open, and the Second Floor Shell
Construction will be completed, on October 31, 1999;
B-6
<PAGE>
(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;
(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 Initial Casino Facilities and the Second Floor Shell
Construction are estimated as follows (in millions):
B-7
<PAGE>
<TABLE>
<S> <C>
Construction Costs
Total Construction Costs........................................... $140.7
------
Non-constructions Costs
Gaming Equipment & Supplies........................................ 23.8
Cash Loads, Preopening Expenses and Initial Working Capital........ 40.0
Organization Costs/Financing Fees and Other (1) ................... 34.7
------
Total Non-Construction Costs..................................... 98.5
Reorganization Expenses............................................ 71.8
Unsecured Creditors (2) ........................................... 16.5
Cure Payments in connection with Contract Assumptions.............. 40.4
Cash/Receivable Collections........................................ (32.9)
------
Total Costs...................................................... $335.0
------
------
</TABLE>
- ----------------------
(1) Other includes State payments, City payments, interest payments and
contingency.
(2) Excludes related parties.
The estimated project costs listed above take into account the
repayment of certain organizational costs and expenses incurred by HET for
the New Entities' benefit prior to the Effective Date, including $2 million
in professional fees and expenses to be reimbursed by the Company to HET on
the Effective Date, after Court approval prior to the Effective Date. Unless
previously reimbursed under the DIP Loan facility, then subject to the
approval of JCC Holding's Board of Directors and budgetary constraints, HET
also intends to seek reimbursement for certain additional expenses related to
management, administrative, legal and technical advisory services and
personnel provided or incurred by HET for the New Entities' benefit prior to
the Effective Date. The estimated project costs listed above do not include
costs associated with the build-out of the second floor of the Casino beyond
the Second Floor Shell Construction, any development of the second floor of
the Casino by JCC Development, and any development of the 3CP Property and
Fulton Property by CP Development and FP Development, respectively. The New
Entities likely will require additional financing to fund any such
developments, and their ability to obtain additional financing is uncertain.
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 resident living within a 50-mile radius of New Orleans,
as well as visitors coming from
B-8
<PAGE>
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 (greater than 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."
H. Income Taxes
The Financial Forecast assumes that JCC Holding is a corporation, that
JCC Intermediary, JCC, JCC Development, CP Development and FP Development are
limited liability companies, and that JCC Holding, JCC Intermediary, JCC, CP
Development and FP Development 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 OCTOBER 31, 1998
(in millions)
ASSETS
Current assets
Cash and cash equivalents ......................................... $ 75.8
Other ............................................................. 1.8
------
Total current assets .......................................... 77.6
------
Land, buildings and equipment
Property held for development ..................................... 13.2
Construction in progress .......................................... 148.3
Furniture, fixtures and equipment ................................. 15.6
------
Total land, buildings and equipment ........................... 177.1
------
Deferred operating contract costs ................................... 54.6
Lease prepayments ................................................... 13.5
Prepaid gaming tax .................................................. 4.8
Other ............................................................... 4.0
------
Total other assets ............................................ 76.9
------
Total assets ............................................... $331.6
------
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 ........................ 26.6
------
Total long-term debt .......................................... 210.5
------
Commitments and contingencies
Stockholders' equity
Common stock
Class A ......................................................... 75.3
Class B ......................................................... 75.0
Capital Surplus/(Deficit) ....................................... (29.2)
------
Total stockholders' equity .................................... 121.1
------
Total liabilities and stockholders' equity ................. $331.6
------
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
----------------------------------------------------------------------------
October 31, 1999 October 31, 2000 October 31, 2001 October 31, 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 18.7
Less: casino promotional
allowances ...................... -- (16.5) (18.4) (20.1)
------ ------ ------ ------
Net revenues ............... -- 367.8 408.9 445.9
------ ------ ------ ------
Operating Expenses
Direct
Casino
LGCB payments ................. -- 100.0 100.0 100.0
Other casino .................. -- 114.5 121.7 130.2
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 ..................... 1.0 1.7 1.6 1.5
Guaranty Fee ...................... -- 6.0 6.0 5.0
Depreciation and amortization ..... -- 28.7 24.7 25.3
Preopening ........................ 50.1 -- -- --
------ ------ ------ ------
Total operating expenses ... 51.1 355.7 366.4 382.6
------ ------ ------ ------
Operating income (loss) ............. (51.1) 12.1 42.5 63.3
Credit Support Fee .................. 1.1 1.0 0.9 0.8
Interest expense, net ............... 19.5 38.7 40.5 55.9
------ ------ ------ ------
Income (loss) before income taxes ... (71.7) (27.6) 1.1 6.6
Provision for income taxes .......... 27.6 7.6 (3.7) (6.0)
------ ------ ------ ------
Net income (loss) ................... $(44.1) $(20.0) $ (2.6) $ 0.6
------ ------ ------ ------
------ ------ ------ ------
</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
----------------------------------------------------------------------------
October 31, 1999 October 31, 2000 October 31, 2001 October 31, 2002
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Long-term debt
A Term Loan ....................... $ 60.0 $ 47.1 $ 22.7 $ 15.3
B Term Loan ....................... 151.5 149.9 134.0 116.6
Senior Subordinated Notes due
2009 with Contingent payments ... 128.6 144.9 163.3 169.9
Senior Subordinated
Contingent Notes ................ -- -- -- --
Junior Subordinated Credit
Facility ........................ 22.5 22.5 22.5 22.5
Convertible Junior
Subordinated Debentures ......... 26.6 26.6 26.6 26.6
------ ------ ------ ------
Total long-term debt ....... 389.2 391.0 369.1 350.9
Total stockholders' equity .......... 77.0 57.1 54.7 55.4
------ ------ ------ ------
Total capitalization ....... $466.2 $448.1 $423.8 $406.3
------ ------ ------ ------
------ ------ ------ ------
</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
----------------------------------------------------------------------------------
October 31, 1998 October 31, 1998 October 31, 1998 October 31, 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss). . . . . . . . . . . . . $ (44.1) $(20.0) $ (2.6) $ 0.6
Adjustments to reconcile net income
(loss) to net cash flows from
operating activities
Changes in deferred taxes. . . . . . . (27.6) (7.6) 3.7 6.0
Changes in prepaid gaming tax. . . . . -- -- 4.8 --
Depreciation and amortization. . . . . -- 28.7 24.7 25.3
Amortization of debt discount. . . . . 3.4 4.2 5.3 6.6
Expensed PIK interest. . . . . . . . . 11.2 12.1 13.1 --
Changes in working capital accounts. . -- -- -- --
------- ------ ------ ------
Cash flows provided by
operating activities. . . . . . . . (57.1) 17.4 49.0 38.5
------- ------ ------ ------
Cash flows used in investing activities
Land, buildings and equipment
additions. . . . . . . . . . . . . . . . (175.7) (3.0) (4.0) (5.0)
------- ------ ------ ------
Cash flows used in financing activities
Proceeds from Bank Loans and Junior
Subordinated Credit Facility . . . . . . 164.0 -- -- --
Debt retirements . . . . . . . . . . . . . -- (14.4) (40.4) (24.8)
------- ------ ------ ------
Cash Flows provided by (used in)
financing activities . . . . . . . . . . . 164.0 (14.4) (40.4) (24.8)
------- ------ ------ ------
Increase (Decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . (68.8) -- 4.6 8.7
Cash and cash equivalents, beginning of
period . . . . . . . . . . . . . . . . . . 75.8 7.0 7.0 11.6
------- ------ ------ ------
Cash and cash equivalents, end of
period . . . . . . . . . . . . . . . . . . $ 7.0 $ 7.0 $ 11.6 $ 20.3
------- ------ ------ ------
------- ------ ------ ------
</TABLE>
See accompanying Summary of Significant Forecasted Assumptions.
B-13
<PAGE>
Exhibit C
Liquidation Analysis under Chapter 7
<PAGE>
Exhibit C
Liquidation Analysis Under Chapter 7
Note that the analysis that follows is the same analysis that was annexed as
Exhibit "C" to the Third Amended Disclosure Statement dated February 26,
1997. Such analysis shows (at page C-9) that the only claims against HJC and
HJFC anticipated to recieve any distributions in a chapter 7 liquidation are
(i) the Bondholders' and Indenture Trustee's Cash Collateral Reserve, (ii)
certain Professional Fee claims and (iii) a portion of the DIP Lender's
superiority claim. (As shown in the analysis, no assets are anticipated to be
available to satisfy any claims against HNOIC.) Thus, under the liquidation
analysis, no distributions are anticipated to be made to Bondholders,
unsecured creditors or any other creditors (other than those listed above).
Since the time the liquidation analysis was prepared, assets available for
distribution have not increased, while the DIP Lender's superiority claim has
increased. Thus, if the analysis were updated, the only change in
distributions that would result would be that a smaller portion of the DIP
Lender's claim would be satisfied; anticipated distributions with respect to
other claims would not change. In light of the lack of effect on the results
of the analysis with respect to all creditors except the DIP Lender (which is
an affiliate of HET, one of the Proponents), and in the interest of
preserving the assets of the Debtors' estates, the Proponents have not
commissioned the preparation of an updated liquidation analysis.
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Harrah's New Orleans Investment Company
Liquidation Analysis under Chapter 7
As of May 1, 1997
The following Chapter 7 liquidation analyses ("Analyses") present
management's estimated net value of the consolidated assets of HJC and its
wholly-owned subsidiary, Finance Corp., and HNOIC (collectively, the
"Debtors"), assuming that the Debtors are liquidated under the provisions of
Chapter 7 of the United States Bankruptcy Code, and that the net proceeds
from the liquidation of each of the Debtors are applied among the creditors
of the respective Debtors' estates. (Note that HJC's and Finance Corp.'s
assets are treated as consolidated only for the purposes of these analyses;
their estates have not been substantively consolidated.) In order to confirm
a plan of reorganization, the Bankruptcy Court must independently determine
that the plan is in the best interest of all classes of creditors and equity
security holders impaired under that plan. The "best interest" test requires
that the Bankruptcy Court find that the plan provides to each member of each
impaired class of claims and interests (unless each member has accepted the
plan) a recovery which has a value at least equal to the value of the
distribution that each creditor or interest holder would receive if the
applicable Debtor were liquidated under Chapter 7 of the United States
Bankruptcy Code. The Analyses and this narrative summary were prepared to
assist the Bankruptcy Court in making this determination. This information
should not be used for any other purpose.
The Analyses contained herein are a representation of management of each of
the Debtors and are based upon a number of assumptions. The assumptions are
inherently subject to significant uncertainties and contingencies beyond the
control of management. Accordingly, there can be no
C-1
<PAGE>
assurance that the results shown would be realized if each of the Debtors
were liquidated, because the actual results could vary from those presented
herein. Should the ultimate net proceeds realized upon liquidation of the
assets of HJC and Finance Corp. be less than estimated herein, the resulting
distribution to the Bondholders from the estates of HJC and Finance Corp.
would be reduced accordingly. Based upon the assumptions utilized
in performing these liquidation analyses, there will be no net assets available
for distribution to unsecured creditors. The date of these analyses is
January 27, 1997. Events and circumstances occurring after January 27, 1997
may impact these analyses.
I. INTRODUCTION
------------
In conjunction with the development of the Plan of Reorganization (the
"Plan") and Disclosure Statement, management of each of the Debtors developed
the following Analyses to assist holders of claims and interests in
determining whether to accept or reject the Plan. These Analyses indicate the
estimated values which might be obtained by classes of claims and interests
if each of the Debtors' assets were sold pursuant to a Chapter 7 liquidation,
as an alternative to restarting operations of the business and the payments
under the Plan. Based on these Analyses, management of each of the Debtors
believes that a liquidation under Chapter 7 would produce substantially less
value for distribution to Bondholders than that recoverable under the Plan,
and would produce no value to unsecured creditors.
C-2
<PAGE>
II. APPROACH
Underlying the Analyses are a number of estimates and assumptions that are
inherently subject to significant competitive and operational uncertainties
and contingencies beyond the control of each of the Debtors or a Chapter 7
trustee. Additionally, various liquidation decisions upon which certain
assumptions are based are subject to change. Therefore, there can be no
assurance that the assumptions and estimates employed in determining the
liquidation value of each of the Debtors' assets will result in an accurate
estimate of the proceeds which would be realized should each of the Debtors
undergo actual liquidation. The actual amounts of claims against the estates
could vary significantly from each of the Debtors' estimates depending on the
claims asserted during the pendency of the bankruptcy proceedings and the
outcomes of the Debtors' claims objections. These Analyses do not include the
effect of any federal or state income tax liabilities which may arise as a
result of the conversion of these cases, if any. These Analyses also do not
include liabilities which may arise as a result of lease or contract
rejections, litigation, real estate or ad valorem tax assessments, changes in
gaming regulations or other potential claims unless expressly disclosed
herein, because the Analyses indicate no recovery by unsecured creditors even
before such liabilities are taken into account. Similarly, these Analyses do
not include potential recoveries from avoidance and other claims unless
expressly stated herein.
The accompanying Analyses have taken into consideration audited values of
each of the Debtors' balance sheets at December 31, 1995, subject to and
modified by transactions and events which have arisen subsequent to that date
or that are expected to occur prior to May 1, 1997.
C-3
<PAGE>
These Analyses are subject to any and all changes which may affect each of
the Debtors' property, including but not limited to, further legislative
efforts to limit or prohibit gaming in Louisiana.
III. ASSUMPTIONS
A Chapter 7 liquidation period is assumed to average one year following the
appointment of a Chapter 7 trustee. While some assets may be liquidated in
less than this period, other assets may be more difficult to realize or
collect, requiring a liquidation period substantially longer than 12 months.
Estimates were made of the cash balances of HJC which may exist as of the
assumed effective date (May 1, 1997) as further described in Exhibit A
attached.
Based on these Analyses, each class of creditors of each of the Debtors would
receive under the Plan not less than the distribution that each such class
would receive in a Chapter 7 liquidation. Under the Chapter 7 assumptions
used in these analyses, no funds would be available to pay any unsecured
claims.
The only asset of Finance Corp. is cash in the amount of $1,000 held in a
bank account. These funds are included in the cash balance presented on the
"Summary of Assets" schedule for the consolidated Debtors (HJC and Finance
Corp.) included herein. It should be noted that whether or not this cash
account represents cash collateral of the Bondholders, no portion of these
funds is expected to be available for distribution to unsecured creditors
after taking into consideration Chapter 7 and Chapter 11 administrative costs.
C-4
<PAGE>
As is reflected in the Summary of Assets of HNOIC included herein, the only
assets of this Debtor are cash balances in its bank accounts and a
partnership interest in HJC, (which for purposes of this analysis is assumed
to have no value). As is the case in the liquidation analysis of HJC and
Finance Corp., these cash balances are assumed to be utilized for Chapter 7
and Chapter 11 administrative costs in the event of a liquidation of HNOIC,
leaving no proceeds for distribution to the unsecured creditors.
Undersecured Creditors' Collateral -- The Bondholders have approximately $435
million in outstanding claims. HJC and Finance Corp. believe that the
Bondholders' claims are secured by substantially all of HJC's assets, other
than the Casino Operating contract. The Bondholders' loan documents and
security agreements reflect a security interest in HJC's accounts, leasehold
interests, fee simple interest and leasehold improvements, as well as a
priority security interest in all of HJC's personalty, tangibles and
intangibles, including the collateral assignment of all material agreements,
licenses and permits (excluding the Casino Operating Contract) entered into
by, or granted to, HJC and Finance Corp. Disposition of the assets of HJC,
excluding the Casino Operating Contract, would produce no benefit to
creditors other than the Bondholders (and the DIP lender, as described below).
In addition, the Bondholders have been granted adequate protection for the
use of all cash collateral during the bankruptcy case. Their adequate
protection rights are secured by a post-petition lien on all of HJC's
property and are entitled by court order to ranking as a "super priority"
administrative expense claim subordinate to the post-petition expenses set
forth in cash collateral budgets approved
C-5
<PAGE>
by the Bankruptcy Court. As of May 1, 1997, HJC estimates that it will have
spent at least $18 million of cash collateral during the case. Accordingly,
in the event of liquidation under Chapter 7, the Bondholders will have an
unpaid superpriority claim of at least $18 million secured by all property of
the estate, including any property not already subject to their security
interests.
HJC has also obtained post-petition loans of up to $17,677,125 from an
affiliate (the "DIP Lender") of Harrah's Entertainment, Inc. ("HET") for use
during the Chapter 11 case (and has obtained authorization to borrow up to an
aggregate of $25 million from such lender). By order of the Bankruptcy
Court, this loan constitutes a superpriority administrative claim secured by
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 as of the
filing of HJC's Chapter 11 case, other than the pre-petition and
post-petition liens and security interest in favor of the Bondholders, the
Bondholders' indenture trustee or predecessor trustee, HJC's pre-petition bank
lenders or their collateral agent, predecessor collateral agent or
administrative agent on any of HJC's property, (b) non-avoidable, valid,
enforceable and perfected liens, security interests and/or rights of setoff
in favor of the Bondholders' predecessor and successor indenture trustees on
$1.1 million currently held by the predecessor and successor trustees,
subject to reduction for fees and expenses of the predecessor trustee which
are paid by HJC, (c) any and all post-petition liens and security interests
in favor of any or all of the Bondholders and their indenture trustee or any
causes of action of HJC against any "insiders" (as defined in Section 101(31)
of the Bankruptcy Code) erising under Sections
C-6
<PAGE>
544(b), 547, 54B, 550 or 553 of the Bankruptcy Code, and (d) certain of the
allowed administrative expense claims for the fees, expenses and costs of
professionals retained by HJC and the official committees. All post-petition
claims, including those of the DIP Lender, the Bondholders and professionals,
which total over $45 million, and other administrative and priority claims of
the Chapter 7 and Chapter 11 cases, would have to be paid in full before any
distribution to the unsecured creditors.
Conversion - It is the belief of management of the Debtors that the most
likely scenario to occur should a Chapter 7 trustee be appointed is that (i)
the obligations owing to the DIP lender would immediately and automatically
become due and payable, and the DIP lender would seek satisfaction of its
claim, and (ii) the Bondholders would seek and obtain stay relief with
respect to the remaining property of the estates of HJC and Finance Corp.,
except the Casino Operating Contract. The value of any property obtained by
the Bondholders, assuming that the Bankruptcy Court grants stay relief, would
be subtracted from the amount of their claim to yield a deficiency claim.
The property which Bondholders would likely seek to recover would include the
Rivergate Casino Lease and improvements thereon, certain parcels of real
estate and personal property (to the extent any of such property had not
already been used to satisfy the claims of the DIP Lender). Material
uncertainties, including but not limited to transferability, assignment,
timing and other business issues, are such that management expresses no
opinion on the net value of the preceding property in the bands of the
Bondholders, but believes that value is considerably less than the value of
the reorganization consideration to received by Bondholders under the Plan.
C-7
<PAGE>
Administrative Insolvency - Management believes that upon the appointment of
a Chapter 7 trustee, pre-existing cash collateral orders will terminate and
the debtor in possession loans will immediately become due. Accordingly, all
superpriority claims and unpaid Chapter 11 administrative expenses (other
than Chapter 11 administrative expenses included in various cash collateral
budgets approved by the Bankruptcy Court) will most likely be without
unencumbered property for a source of repayment. Any property will be
subject to the post-petition liens of the DIP Lender and the Bondholders and
to the claims of professionals for over $45 million, in the aggregate. These
circumstances, taken in conjunction with the collateral position of the DIP
Lender and the Bondholders described above, will render the Chapter 7 estate
of HJC administratively insolvent. Any Chapter 7 administrative expenses and
unpaid Chapter 11 administrative expenses and superpriority claims would
require consent of the DIP Lender and the Bondholders to be paid from the
collateral, or in case of the Bondholders, otherwise subject to surcharge
pursuant to Bankruptcy Code Section 506(c). Any additional claims would not
affect distributions to unsecured creditors as the DIP Lender and the
Bondholders would be the only claimants to receive distributions from any of
the Debtors' estates in the event of a liquidation.
C-8
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Schedule of Distributions
As of May 1, 1997
<TABLE>
<CAPTION>
Estimated
Claim Distributions Balance
------------ ------------- -----------
<S> <C> <C> <C>
Total Assets Abandoned to Bondholders & DIP Lender
at Estimated Liquidation Value (1) $17,743,259
Less:
Bondholders' and Indenture Trustee's Cash Collateral Reserve (2) $ 950,000 950,000 16,793,259
Professional Fees (3) 2,500,000 2,500,000 14,293,259
DIP Lender's Priority DIP Loan (4) 23,528,000 14,293,259 0
Bondholders' Superpriority and Post-Petition Lien 18,000,000 0 0
Bondholders' Pre-Petition Lien 416,050,000 0 0
------------ ----------- -----------
Total Secured and Priority Claims 461,028,000 17,743,259 0
Remaining Assets to be Liquidated by Chapter 7 Trustee (1) 0
Less: Chapter 7 Administrative Claims: (5)
Trustee Fees (6) 0 0 0
Trustee's Professional Fees (7) 0 0 0
Liquidation Expenses (8) 0 0 0
------------ ----------- -----------
Remaining Assets Available for Administrative and
Unsecured Priority and Nonpriority Claimants (5) 0
Plus: Casino Operating Contract (9) 0
------------ ----------- -----------
Balance of Assets at Estimated Liquidation Value 0
Chapter 11 Administrative Claims: (5)
Post-Petition Accounts Payable (10) 11,977,288 0
Due to Manager (11) 7,462,350 0
------------ ----------- -----------
Total Chapter 11 Administrative Claims 19,439,638 0
Unsecured Claims:
Unsecured Priority Claims (12) 370,274 0 0
Unsecured Nonpriority Claims: (13)
Pre-Petition Accounts Payable 157,162,243 0 0
Due to Manager 20,102,490 0 0
Executory Contract Rejection Claims (14) Unknown 0 0
------------ ----------- -----------
Total Unsecured Claims 177,635,007 0 0
------------ ----------- -----------
Total Chapter 11 Administrative and Unsecured Claims 197,074,645 0 0
------------ ----------- -----------
Total Claims/Estimated Distributions $658,102,645 $17,743,259 $0
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
C-9
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Notes to Schedule of Distributions
As of May 1, 1997
1. Refer to Harrah's Jazz Company Liquidation Analysis Summary of Assets
Abandoned to Bondholders & DIP Lender.
2. Pursuant to the terms of orders of the Bankruptcy Court, at least
$950,000 of the Bondholders' cash collateral (which, for purposes of this
analysis, is assumed to be $950,000) is to be held in reserve by the
Bondholders' former indenture trustee and the successor indenture trustee.
3. Estimated professional fees (legal, accounting, etc.) represent
management's estimates of additional professional fees to be incurred by
professionals retained by HJC and Finance Corp., the Unsecured Creditors'
Committee and the Bondholders' Committee through May 1, 1997, as well as
any unpaid holdbacks as of May 1, 1997.
4. HJC has obtained post-petition loans of up to $17,677,125 from the DIP
Lender on a senior, secured, superpriority basis for use during the
Chapter 11 case. Additionally, HJC has obtained authorization to borrow
up to an aggregate of $25 million from such lender. For purposes of this
analysis, management has assumed that the entire $25,000,000 has been
funded as of May 1, 1997. A portion of the total DIP loan proceeds
($1,472,000), is anticipated to be held in escrow, but would be returned
to the DIP Lender (to the extent not previously paid to the Rivergate
Development Corporation) in the event of a liquidation. Therefore, the DIP
Lender's estimated loan balance as of May 1, 1997 has been reflected net
of this amount.
5. Management believes that upon the appointment of a trustee, pre-existing
cash collateral orders will terminate and the debtor in possession loans
will immediately become due. Accordingly, all earned or accrued Chapter 11
administrative expenses, which would otherwise be subordinated to
Chapter 7 administrative expenses, will be without unencumbered property
representing a source of payment. These circumstances, taken in conjunction
with the collateral position of the DIP Lender and the Bondholders, will
render the Chapter 7 estate administratively insolvent. Any Chapter 7
administrative expenses would require consent of the DIP Lender or the
Bondholders to be paid from their collateral or, in the case of the
Bondholders, otherwise subject to surcharge pursuant to Bankruptcy Code
Section 506(c).
6. Ordinarily, the statutory limit for trustee compensation is
approximately 5% of estimated amounts to be disbursed, plus out-of-pocket
expenses. No such estimates are included herein.
C-10
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Notes to Schedule of Distributions
As of May 1, 1997
(Page 2 of 3)
7. Ordinarily, trustee's professional fees would include the estimated
costs to represent the Chapter 7 trustee, preparing and filing tax returns
and other governmental reporting, and prosecuting and settling contested
matters and adversary proceedings. No such estimates are included herein.
8. Ordinarily, liquidation expenses would include the estimated costs of
operating the HJC and Finance Corp. estates during the expected liquidation
period, and would include costs such as salaries for a minimal number of
personnel and security staff, utilities for a limited period of time,
storage space for HJC and Finance Corp. records to be utilized in pursuing
contested matters and adversary proceedings, etc. No such estimates are
included herein.
9. In accordance with the terms of the Casino Operating Contract, HJC has
made payments to the LEDGC totaling $125 million. The initial term of the
operating contract is twenty years, with a ten-year extension option. The
Casino Operating Contract is collateral for the DIP Lender's claims and
the Bondholders' post-petition claims, but is not collateral for the
Bondholders' pre-petition claims. Accordingly, any amounts realized upon
liquidation of this asset, which are not currently susceptible to being
valued, but for purposes of this analysis are reflected as zero, would be
used to satisfy the DIP Lender's claims and the Bondholders' post-petition
claims, and the remainder, if any, would be available for distribution to
unsecured creditors, including the Bondholders' deficiency claim, but only
after payment in full of all Chapter 7 and Chapter 11 administrative,
superpriority and priority claims.
10. Post-petition accounts payable have been approximated by management
based upon, in part, estimated cash needs through May 1, 1997 which are
assumed to be accrued rather than paid as of May 1, 1997 of $11,977,288.
For purposes of this analysis, it has not been assumed that additional
debtor in possession financing has been sought or obtained for the purpose
of paying any such expenses.
11. The "due to manager" claim reflected herein is based upon the amount that
HJC is advised by Harrah's New Orleans Management Company that it is
owed by HJC for administrative expenses paid on behalf of HJC.
C-11
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Notes to Schedule of Distributions
As of May 1, 1997
(Page 3 of 3)
12. Unsecured priority claims are based on HJC's amended Statements and
Schedules. Disputed claims have not been included for purposes of this
analysis.
13. Unsecured nonpriority claim amounts are based on HJC's amended Statements
and Schedules.
14. No estimate of executory contract rejection claims is included herein.
C-12
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Summary of Assets Abandoned to Bandworkers & DIP Leases
As of May 1, 1997
<TABLE>
<CAPTION>
Amended Audited Estimated Estimated
Statements & Net Book Going-Concern Estimated Liquidation
Schedules Value Value Recalculation Value
11/22/95 12/31/95 5/1/97 Factor 5/1/97
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Cash(1) $21,470,694 $ 22,957,203 $ 950,000 100% $ 950,000
Trade Receivables (2) 5,783,297 1,829,606 0 0% 0
Market Receivables (3) 6,100,670 0 0 0% 0
Bank Credit Agreement Receivable (4) 1,500,000 0 0 0% 0
----------- ------------ ----------- ----------
Total Receivables $15,333,967 $ 1,829,606 $ 0 $ 0
Inventory (5) 575,461 86,787 73,678 0% 0
Prepaid Assets (6) 281,643 40,008 0 0% 0
Other Current Assets (7) 140,096 69,278 0 0% 0
Furniture, Fixtures & Equipment (8)
Gaming Equipment 27,893,779 19,569,979 19,569,979 17% 3,326,896
Vehicles 177,992 154,260 154,260 25% 38,565
Other Furniture, Fixtures and Equipment 6,856,994 6,856,994 40% 2,742,798
----------- ------------ ----------- ----------
Total Furniture, Fixtures and Equipment 28,071,771 $ 26,581,223 $26,581,333 $6,108,259
Construction in Progress (9) Unknown 144,634,288 0 0% 0
Rivergate Casino Lease (10) Unknown 30,262,501 0 0% 0
Basin Street Casino Lease (11) Unknown 0 0% 0
Property Acquired for Development (12) 13,200,000 13,200,000 13,200,000 80% 10,560,000
Chip and Token Inventory (13) 1,755,949 2,084,067 125,000 100% 125,000
Cause of Action (14) Unknown -- Unknown Unknown
----------- ------------ ----------- -----------
Total Actual/Estimated Liquidation Value $80,829,781 $241,744,971 $40,929,911 $17,743,259
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
C-13
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Notes to Summary of Assets Abandoned
To Bondholders & DIP Lender
As of May 1, 1997
1. Cash of HJC and Finance Corp. includes petty cash, cash on hand, cash
deposited in depository accounts and construction accounts and temporary
short term investments. See Exhibit A attached for analysis of HJC's
net cash available as of May 1, 1997. Cash balances reflected
herein also include the $1,000 cash balance of Finance Corp., although
as previously discussed, HJC's and Finance Corp.'s estates have not been
substantively consolidated. It should be noted that current orders of
the Court do not allow the Debtors to reduce the cash balances below
$950,000. The estimated realization factor for cash for purposes of this
analysis is 100%.
2. Trade receivables at audited net book value (December 31, 1995) include
outstanding junket accruals, deposits for furniture not yet received, a
use tax refund due from the City of New Orleans and a claim due from an
insurance provider for flood damages incurred during May 1995 reflected
net of a reserve for items determined to be uncollectable. Any trade
receivables not received as of May 1, 1997 are assumed to be of zero
value.
3. Marker receivables are based on the amended HJC Statements and
Schedules. Marker receivables not collected as of May 1, 1997 are assumed
for purposes of this analysis to have zero value in a liquidation.
4. Through November 21, 1995, $145 million was outstanding, although not
available to HJC, under the Bank Credit Agreement. On November 21, 1995,
Bankers Trust accelerated and terminated the Bank Loans and recovered $157
million of cash on deposit with First National Bank of Commerce to repay
the Bank Loans and for other purposes including letters of credit
(approximately $12 million). On August 26, 1996, the Bankruptcy Court
approved the return of $3.5 million of the funds recovered by Bankers
Trust. These funds were received by HJC on September 9, 1996.
5. Inventory per the amended Statements and Schedules includes beverage
inventory, gift shop inventory, and other miscellaneous inventory
including silverware, slot cups, bar glassware, marketing giveaways, bar
and restaurant supplies, uniforms and gold card stock. Management is
unable to determine what, if any, value may be realized in a commercial
liquidation context.
C-14
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Notes to Summary of Assets Abandoned
To Bondholders & DIP Lender
As of May 1, 1997
(Page 2 of 3)
6. Prepaid assets consist of prepaid junkets, prepaid insurance, prepaid
property taxes, prepaid training classes, office rent, school board
payments, daily payments to the LEDGC and tickets to miscellaneous civic
functions. For purposes of this analysis, these items are expected to have
no value at the time of liquidation.
7. Other current assets includes deposits paid for furniture and equipment,
utilities, office space and beverage distributors and other miscellaneous
rentals. For purposes of this analysis, these items are expected to have
no value at the time of liquidation.
8. Gaming equipment, fixtures, furniture, supplies, etc., reflected in a
single lump sum of $27,893,779, are based on HJC's amended Statements and
Schedules, which represents book value less accumulated depreciation.
Absent appraisals, estimated going concern values are assumed to equal net
book values on December 31, 1995. For purposes of the liquidation
analysis, furniture and gaming equipment have each been valued at 40%
(the industry standard) and 17% (based upon historical information),
respectively, of their December 31, 1995 net book values and vehicles
have been valued at 25% (the industry standard) of their December 31,
1995 net book value. Other furniture, fixtures and equipment consists
primarily of office equipment, courtroom equipment, computers, optical
disc equipment and kitchen equipment.
9. Construction in progress represents costs incurred through December 31,
1995 on the construction of "Harrah's Casino - New Orleans" located on the
site of the former Rivergate Convention Center. An additional $9.8 million
has been spent during March-December, 1996 related to the "Close-in
Agreement" to prevent, among other things, water infiltration into the
casino.
10. Rivergate Casino Lease payments represent required payments made by HJC
to the RDC related to HJC's lease for the Rivergate site. The initial term
of the lease, commencing March 15, 1994, is thirty years with three
ten-year renewal options.
C-15
<PAGE>
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Notes to Summary of Assets Abandoned
To Bondholders & DIP Lender
As of May 1, 1997
(Page 3 of 3)
11. The Basin Street Casino Lease represents a lease for use of the
Municipal Auditorium, which HJC leased for use as a temporary casino site
during the construction period of the Rivergate Casino. The initial term
commencing March 15, 1994 was two years with nine two-year extension
options, except that the lease would terminate on the date the Rivergate
Casino opens to the general public. HJC exercised one two-year extension
option during March 1996.
12. Property acquired for development consists of two parcels of improved
and unimproved real estate: 1) a parking lot adjacent to the Canal Place
shopping mall and 2) Square 16, a city block bounded by Poydras, Fulton,
S. Peters and Lafayette streets in the Warehouse District of New Orleans.
These parcels of land were originally purchased for $18.3 million, but were
written down to an estimated market value of $13.2 million during 1995
based on market quotes provided by New Orleans area commercial real estate
brokers. The estimated realization factor for these parcels of land is
80%, assuming the property is marketed over a period of one year or
longer, sold at a 15% discount from fair market value, net of a 6% sales
commission ((100%-15%)-6%=80%).
13. Chip and token inventory consists of both plastic and metal gaming
currency utilized in casino operations. At fair market and estimated
liquidation values, chips are assumed to have zero value and metal tokens
are assumed to be worth approximately $125,000 based upon estimated salvage
value of the metal contents in the tokens.
14. Potential causes of action, include but are not limited to, claims
against LEDGC, the Riverboat Gaming Commission, the State of Louisiana
and/or others for breach of exclusivity with respect to the right to
conduct land-based gaming in metropolitan New Orleans; claims against
LEDGC and the State, among others, with regard to the improper alteration
of the terms of the Casino Operating Contract granted to HJC; claims
against the City of New Orleans based upon, among other things, the
validity of the Rivergate Casino Lease and the enforcement of the Open
Access program; claims against FNBC and/or Bankers Trust for the excess
sweep of funds from HJC's accounts and/or other actions taken prior to the
commencement of the Debtors' chapter 11 proceedings, and claims against the
title insurance company in regard to, among other things, the Tucker v.
City and Louisiana Landmarks litigations. Management believes that these
claims cannot currently be valued.
C-16
<PAGE>
Exhibit A
Harrah's Jazz Company
Harrah's Jazz Finance Corp.
Liquidation Analysis
Estimated Cash
As of May 1, 1997
<TABLE>
<S> <C>
Cash Balance as of 11/22/95 per the Statements & Schedules $21,470,892 (1)
Plus: Estimated Collections through 5/1/97 8,577,029
Estimated Net DIP Loan Proceeds 23,528,000 (2)
Less: Estimated Cash Expenditures through 5/1/97 (52,625,921) (3)
-----------
Total Estimated Cash as of May 1, 1997 $ 950,000 (4)
-----------
-----------
</TABLE>
Notes:
- -----
(1) Includes $1,000 cash balance of Finance Corp.
(2) HJC has obtained post-petition loans of up to $17,677,125 from the DIP
Lender on a senior, secured, superpriority basis for use during the
Chapter 11 case. Additionally, HJC has obtained authorization to borrow
up to an aggregate of $25 million from such lender. For purposes of this
analysis, management has assumed that the entire $25,000,000 has been
funded as of May 1, 1997. A portion of the total DIP loan proceeds
($1,472,000), is anticipated to be held in escrow, but would be returned
to the DIP Lender in the event of a liquidation (to the extent not
already paid to the Rivergate Development Corporation). Therefore, the
estimated net DIP loan proceeds as of May 1, 1997 has been reflected net
of this amount.
(3) Gross estimated cash needs estimated by management through May 1, 1997
are $66,075,209. Estimated expenses of $11,977,288 are assumed for
purposes of this analysis to be accrued rather than paid prior to May 1,
1997 so as to not reduce the estimated cash as of May 1, 1997 below
$950,000 (see note 5) ($66,075,209 - 1,472,000 - 11,977,288 =
52,625,921). For purposes of this analysis, it has not been assumed that
additional debtor in possession financing has been sought or obtained
for the purpose of paying any such expenses.
(4) It should be noted that current orders of the Court do not allow HJC to
reduce the cash balances below $950,000.
C-17
<PAGE>
Harrah's New Orleans Investment Company
Liquidation Analysis
Schedule of Distributions
As of May 1, 1997
<TABLE>
<CAPTION>
ESTIMATED
CLAIM DISTRIBUTION BALANCE
----------- ------------ -------
<S> <C> <C> <C>
Total Assets at Estimated Liquidation Value(1) $0
Less:
DIP Lender's Priority DIP Loan(2) 25,000 $0 0
----------- ---- ----
Total Secured Claims
Remaining Assets to be Liquidated by Ch. 7 Trustee 0
Less Ch. 7 Administrative Claims:(3)
Trustee Fees(4) 0 0
Trustee's Professional Fees(5) 0 0
Liquidation Expenses(6) 0 0 0
----------- ---- ----
Remaining Assets Available for Administrative and Unsecured
Priority and Nonpriority Claimants(3) 0
Ch. 11 Administrative Claims:(3)
Professional Fees(7) 0 0
----------- ---- ----
Total Ch. 11 Administrative Claims 0 0 0
Unsecured Claims:
Unsecured Priority Claims 0 0 0
Unsecured Nonpriority Claims(8) 267,287,150 0 0
Executory Contracts Rejection Claims(9) 0 0 0
----------- ---- ----
Total Unsecured Claims 267,287,150 0 0
----------- ---- ----
Total Ch. 11 Administrative and Unsecured Claims 267,287,150 0 0
----------- ---- ----
Total Claims/Estimated Distributions $267,312,150 $0 $0
----------- ---- ----
----------- ---- ----
</TABLE>
C-18
<PAGE>
Harrah's New Orleans Investment Company
Liquidation Analysis
Notes to Schedule of Distributions
As of May 1, 1997
1. Refer to Harrah's New Orleans Investment Company Liquidation Analysis
Summary of Assets.
2. HNOIC has obtained post-petition loans of up to $25,000 from the DIP
Lender on a first priority secured basis for use during the Chapter
11 case. For purposes of this analysis, management has assumed that
the entire $25,000 has been funded as of May 1, 1997.
3. All earned or accrued Chapter 11 administrative expenses, which will
otherwise be subordinated to Chapter 7 administrative expenses, will
be without unencumbered property representing a source of payment.
These circumstances will render the Chapter 7 estate administratively
insolvent.
4. Ordinarily, the statutory limit for trustee compensation is
approximately 5% of estimated amounts to be disbursed, plus
out-of-pocket expenses. No such estimates are included herein.
5. Ordinarily, trustee's professional fees are based upon the estimated
costs to represent the Chapter 7 trustee, preparing and filing tax
returns and other governmental reporting and prosecuting and settling
contested matters and adversary proceedings. No such estimates are
included herein.
6. Ordinarily, liquidation expenses would include estimated costs of
operating the HNOIC estate during the expected liquidation period,
salaries for a minimal number of personnel and security staff,
utilities for a limited period of time, storage space for HNOIC
records to be utilized in pursuing contested matters and adversary
proceedings, etc. Actual expenses have not been estimated for purposes
of this analysis.
7. Estimated professional fees (legal, accounting, etc.) represents
management's estimates of additional professional fees to be incurred
but not paid on account of professionals retained by HNOIC as of May
1, 1997, as well as any unpaid holdbacks as of May 1, 1997. No such
estimates are included herein.
8. Unsecured nonpriority pre-petition claims are based on HNOIC's amended
Statements and Schedules and include claims against HIC which may be
asserted against HNOIC.
9. Executory contract rejection claims have not been valued for purposes
of this analysis.
C-19
<PAGE>
Harrah's New Orleans Investment Company
Liquidation Analysis
Summary of Assets
As of May 1, 1997
<TABLE>
<CAPTION>
Estimated Estimated
Statements & Net Book Fair Market Estimated Liquidation
Schedules Value Value Recalculation Value
11/22/95 12/31/95 5/1/97 Factor 5/1/97
------------ -------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Cash(1) $1,100 $1,100 50 100% 50
Partnership Income in Harrah's Jazz Company (2) Unknown Unknown Unknown 0% Unknown
Causes of Action (3) -- -- -- --
------------- -------- ------------ -----------
Total Assets Estimated Liquidation Value $1,000 $1,100 50 50
------------- -------- ------------ -----------
------------- -------- ------------ -----------
</TABLE>
C-20
<PAGE>
Harrah's New Orleans Investment Company
Liquidation Analysis
Notes to Summary of Assets
As of May 1, 1997
1. Cash of HNOIC represents aggregate cash maintained in bank accounts.
HNOIC's management estimates that the cash balance will be zero as of
May 1, 1997 based upon anticipated cash uses such as payment of quarterly
US Trustee fees and filing fees required by various state taxing
authorities. Any cash available, up to $25,000 plus interest, would be
used to satisfy the DIP Lender's claim.
2. The value of HNOIC's partnership interest in HJC is assumed to be zero
for purposes of this analysis.
3. Potential causes of action have not been valued by management for
purposes of this analysis.
C-21
<PAGE>
Exhibit T3E.26
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 OF ENTRY OF CONFIRMATION ORDER
AND HEARING ON APPROVAL OF PLAN DOCUMENTS
-----------------------------------------
NOTICE IS HEREBY GIVEN that on October 13, 1998, the United States
Bankruptcy Court for the Eastern District of Louisiana confirmed the Third
Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as
Modified Through October 13, 1998 ("Plan"), filed by above-captioned Debtors,
together with the plan proponent Harrah's Entertainment, Inc.
FURTHER NOTICE IS HEREBY GIVEN that on October 19, 1998, at 9:45 a.m.,
the Bankruptcy Court will conduct a hearing on approval of the Plan Documents
(as defined in the Plan) submitted to the Bankruptcy Court, at which time the
Debtors will request that the Bankruptcy Court determine the Plan Documents are
materially consistent with the Plan, approve the Plan Documents, and authorize
the Debtors to execute the Plan Documents.
Dated: October 13, 1998
JENNER & BLOCK HELLER, DRAPER, HAYDEN & HORN, L.L.C.
One IBM Plaza 650 Poydras Street, Suite 2500
Chicago, Illinois 60611 New Orleans, Louisiana 70130
Telephone: (312) 222-9350 Telephone: (504) 568-1888
WILLIAM HARDY PATRICK, III, Attorneys for Harrah's New Orleans
A Professional Law Corporation Investment Company
10636 Linkwood Court
Baton Rouge, Louisiana 70180 LATHAM & WATKINS
Telephone: (504) 767-1460 885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Attorneys for Harrah's Jazz Company
and Harrah's Jazz Finance Corp. Attorneys for Harrah's Entertainment, Inc.
