Exhibit 10.06
SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT
BY AND BETWEEN
XXXXXX'X NEW ORLEANS MANAGEMENT COMPANY
AND
JAZZ CASINO COMPANY, L.L.C.
Dated: October 29, 1998
EXHIBITS
"A" - Legal Description of Real Property
"B" - Current Form of Operating Statement
"C" - Owner's Insurance Requirements
"D" - Memorandum of Management Agreement
"E" - Banking Resolution (Form)
"F" - Approved Program Plans
"G" - Pre-Opening Budget
TABLE OF CONTENTS
Page
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ARTICLE 1. DEFINITIONS.....................................................................................2
1.01. Definitions...............................................................................2
ARTICLE 2. SCOPE OF AGREEMENT.............................................................................18
2.01. Amendment and Restatement................................................................18
2.02. Subject Matter...........................................................................18
2.03. Development..............................................................................18
2.04. Grant and Acceptance of Management Responsibility........................................18
2.05. Funding..................................................................................19
2.06. Limitation on Expenditures...............................................................19
ARTICLE 3. TERM AND RENEWALS..............................................................................19
3.01. Initial Term.............................................................................19
3.02. Extension Term...........................................................................19
3.03. Early Termination; Termination of Authorized Lease.......................................19
ARTICLE 4. COVENANTS OF OWNER.............................................................................20
4.01. Licensing and Permitting.................................................................20
4.02. Title; Quiet Enjoyment...................................................................20
4.03. Manager Subordination Agreements; Mortgages..............................................21
ARTICLE 5. PRE-OPENING....................................................................................22
5.01. Pre-Opening Budget.......................................................................22
5.02. Payment of Pre-Opening Expenses..........................................................22
5.03. Pre-Opening Hiring and Training of Employees.............................................23
5.04. Pre-Opening Inspection...................................................................24
ARTICLE 6. STANDARDS AND MANAGER'S CONTROL................................................................24
6.01. Casino Operational Standards.............................................................24
6.02. Manager's Obligations....................................................................24
6.03. Owner's Obligations......................................................................28
6.04. Owner Self-Help..........................................................................32
6.05. Payments.................................................................................33
6.06. Manager's Control........................................................................33
ARTICLE 7. OPERATION OF THE CASINO........................................................................33
7.01. Permits..................................................................................33
7.02. Equipment and Supplies...................................................................33
7.03. Employees................................................................................34
7.04. Sales, Marketing and Advertising.........................................................38
7.05. Maintenance and Repairs..................................................................38
7.06. Capital Improvement and Replacements.....................................................38
7.07. Capital Replacement Fund for Capital Replacements
and Improvements.........................................................................38
7.08. Periodic Contributions to Capital Replacement Fund.......................................39
7.09. Use and Allocation of Capital Replacement Fund...........................................39
7.10. Emergency Expenditures...................................................................40
7.11. Compliance with Legal Requirements.......................................................40
7.12. Disbursement on Termination or Expiration................................................40
7.13. Occupancy Agreements.....................................................................41
7.14. Transactions with Affiliates.............................................................43
ARTICLE 8. FISCAL MATTERS.................................................................................43
8.01. Accounting Matters and Fiscal Periods....................................................43
8.02. Approved Budget..........................................................................45
8.03. Bank Account(s); House Bank..............................................................50
8.04. Internal Controls........................................................................51
ARTICLE 9. FEES TO MANAGER................................................................................52
9.01. Management Fee...........................................................................52
9.02. Accounting Fee...........................................................................55
9.03. Property Tax, Income Tax, Insurance, Benefit Plan
Administration and Other Services........................................................55
9.04. Proprietary Systems......................................................................56
ARTICLE 10. DISBURSEMENTS.................................................................................56
10.01. Disbursements of Net Revenues............................................................56
10.02. Adjustment to Bank Account(s)............................................................57
10.03. Payment of Ownership Costs...............................................................57
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10.04. Payment of Gaming, Sales and Other Operational
Payments and Taxes.......................................................................58
ARTICLE 11. XXXXXX'X SERVICES.............................................................................58
11.01. Nature of Services..........................................................................58
ARTICLE 12. SYSTEM XXXX SIGNS AND SYSTEM MARKS............................................................60
12.01. Signs.......................................................................................60
12.02. System Marks................................................................................60
12.03. Litigation..................................................................................62
ARTICLE 13. INSURANCE.....................................................................................63
13.01. Insurance Coverage..........................................................................63
ARTICLE 14. INDEMNIFICATION AND RELATED MATTERS...........................................................63
14.01. Scope....................................................................................63
14.02. Defense..................................................................................64
ARTICLE 15. DAMAGE TO AND DESTRUCTION OF THE CASINO.......................................................65
15.01. Obligation to Restore......................................................................65
15.02. Termination................................................................................65
ARTICLE 16. CONDEMNATION..................................................................................67
16.01. Termination................................................................................67
16.02. Restoration and Continuation...............................................................68
ARTICLE 17. DEFAULT AND TERMINATION.......................................................................69
17.01. Events of Default..........................................................................69
17.02. Termination; Termination Fee...............................................................71
ARTICLE 18. NOTICES ......................................................................................73
18.01. Procedure..................................................................................73
18.02. Landlord and LGCB Notice...................................................................74
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ARTICLE 19. RELATIONSHIP, AUTHORITY AND FURTHER
ACTIONS......................................................................................74
19.01. Relationship...............................................................................74
19.02. Contractual Authority......................................................................74
19.03. Further Actions............................................................................74
ARTICLE 20. APPLICABLE LAW AND ARBITRATION................................................................75
20.01. Scope......................................................................................75
20.02. Arbitration................................................................................75
ARTICLE 21. SUCCESSORS AND ASSIGNS........................................................................77
21.01. Assignment by Manager......................................................................77
21.02. Termination Rights Upon Certain Assignments or
Transfers by Owner......................................................................78
21.03. Manager's Termination Right...............................................................79
21.04. Binding Effect............................................................................80
ARTICLE 22. RECORDING OF MEMORANDUM.......................................................................80
22.01. Memorandum of Agreement...................................................................80
ARTICLE 23. FORCE MAJEURE.................................................................................80
23.01. Operation of Casino.......................................................................80
23.02. Extension of Time.........................................................................81
23.03. Extension of Completion Deadline and Opening Date.........................................81
ARTICLE 24. TERMINATION...................................................................................81
24.01. Surviving Obligations.....................................................................81
24.02. Termination; Expiration...................................................................82
ARTICLE 25. GENERAL PROVISIONS............................................................................85
25.01. Authorization.............................................................................85
25.02. Interest..................................................................................85
25.03. Formalities...............................................................................85
25.04. Documents.................................................................................85
25.05. Personal Service Contract.................................................................85
25.06. Exhibits..................................................................................85
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ARTICLE 26. RESTRICTIVE COVENANTS.........................................................................85
26.01. Other Use of Site or Building.............................................................85
26.02. Diversion of Business.....................................................................86
26.03. Competition...............................................................................86
ARTICLE 27. CONFLICTS BETWEEN AGREEMENTS,
JURISDICTION AND THIRD PARTY
BENEFICIARIES........................................................................87
27.01. Conflicts Between Agreements..............................................................87
27.02. Jurisdiction..............................................................................87
27.03. Third Party Beneficiaries.................................................................87
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SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED MANAGEMENT AGREEMENT (this
"Agreement") is entered into this 29th day of October, 1998, by and between JAZZ
CASINO COMPANY, L.L.C., a Louisiana limited liability company ("Owner"), and
XXXXXX'X NEW ORLEANS MANAGEMENT COMPANY, a Nevada corporation ("Manager").
RECITALS
X. Xxxxxx'x Jazz Company, a Louisiana general partnership ("HJC"),
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code on November 22, 1995, which is now pending in the United States
Bankruptcy Court for the Eastern District of Louisiana (the "Bankruptcy Court"),
Case No. 95-14545.
B. HJC and certain other parties have submitted, and the Bankruptcy
Court has confirmed, the Plan (as defined herein).
C. As contemplated by the Plan, Owner has succeeded to all the rights
and obligations of HJC under that certain Amended and Restated Management
Agreement between HJC and Manager dated as of March 14, 1994 (the "Prior
Management Agreement").
D. The Plan requires the amendment and restatement of the Prior
Management Agreement in its entirety in accordance with the terms hereof.
E. The parties desire to amend and restate the Prior Management
Agreement 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, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.01. Definitions. As used herein the following terms shall have the
respective meanings indicated below:
Accepted Auditor - as defined in Article 8.01(a).
Accountants - as defined in Article 20.02(b).
Accounting Fee - as defined in Article 9.02.
Adjustment Date - the date on which an applicable percentage
designated herein is adjusted to reflect a change in the CPI from the Opening
Date until the date of such adjustment.
Affiliate - as to any person the affiliates of whom are
relevant for purposes of any provisions of this Agreement, (i) any corporation,
partnership, limited liability company, joint venture, trust or individual
controlled by, under common control with, or which controls, directly or
indirectly, such person, (ii) a trust of which the person, or a direct or
indirect shareholder of such person, is a trustee, or which has as its principal
beneficiaries such person, or any direct or indirect shareholder of such person,
or members of the immediate family of such direct or indirect shareholder or
other person, and (iii) any members of such person's immediate family, or the
member of the immediate family of any direct or indirect shareholder of such
person. For purposes hereof, shares or other ownership interests held by a trust
shall be deemed to be owned pro-rata by the beneficiaries of such trust, and
members of the immediate family of any person shall include all collateral
relatives of such person having a common linear ancestor with such person, and
the spouse or any former spouse of such person or any such collateral relatives.
Agreement - this Second Amended and Restated Management
Agreement by and between Owner and Manager, as the same may be amended,
supplemented or otherwise modified from time to time.
Annual Plan - as defined in Article 8.02(a).
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Annual Report - any Annual Report filed by any person or
entity on Form 10-K with the United States Securities and Exchange Commission or
any successor thereof.
Approved Program Plans - the Approved Program Plans shall be
those described in Exhibit "F" to this Agreement for Casino - Phase I, together
with any modifications thereto proposed by Owner and approved by Manager in its
reasonable business judgment.
Architect - Xxxxx Xxxxx Xxxxxx/Modus, Inc., Suite 2250, 909
Poydras, New Orleans, Louisiana, or any other architect who is selected by Owner
and approved by Manager.
Authorized GDA - that certain General Development Agreement by
and among Celebration Park Casino, Inc., Landlord and the City of New Orleans,
as intervenor, dated April 27, 1993, as amended by that certain Amended General
Development Agreement by and among HJC, Landlord and the City of New Orleans, as
intervenor, dated March 15, 1994, and as further amended by that certain Amended
and Restated General Development Agreement by and among Owner, Landlord and the
City of New Orleans, as intervenor, entered into pursuant to the Plan.
Authorized Lease - that certain lease by and among Celebration
Park Casino, Inc., Landlord and the City of New Orleans, as intervenor, dated
April 27, 1993, as amended by that certain Amended Lease Agreement by and among
HJC, Landlord and the City of New Orleans, as intervenor, dated March 15, 1994,
including without limitation, the Open Access Program attached thereto, and as
further amended by that certain Amended and Restated Lease Agreement by and
among Owner, Landlord and the City of New Orleans, as intervenor, entered into
pursuant to the Plan.
Authorized Mortgage - (i) the Mortgage, and (ii) any other
mortgage(s), deed(s) of trust, security agreements, or other forms of agreements
securing payment of indebtedness, the proceeds of which are used solely to
construct, improve, restore, or repair the Casino, or to refinance any
indebtedness in connection with any Authorized Mortgage, with a lien or
equivalent security interest against the Casino, provided that the holder of any
Authorized Mortgage referred to in this clause (ii) has executed and delivered
to Manager and has agreed in writing to be bound by a Subordination,
Non-Disturbance and
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Attornment Agreement or such other similar document, in either case in such form
as may be negotiated between Manager and the holder of an Authorized Mortgage.
Bank Account(s) - as defined in Article 8.03(a).
Banking Resolution - as defined in Article 8.03(a).
Bank Loans - the loans and letters of credit to be made to or
for Owner pursuant to the Credit Agreement.
Bankruptcy Court - as defined in Recital A.
Base Fee - as defined in Article 9.01(a).
Budget - as defined in Article 8.02(a).
Building - all buildings, structures and improvements now
located or hereafter constructed on the Site and all fixtures, Furnishings and
Equipment attached to, forming a part of, or necessary for the operation of such
buildings, structures and improvements as a casino, or any non-gaming
development on the second floor of the building on the Casino premises as
described on Exhibit "A" to this Agreement or elsewhere at the Site, and all:
(i) restaurants, bars and other public areas, if any,
(ii) commercial space, including concessions and shops;
(iii) storage, parking and service areas;
(iv) permanently affixed signage; and
(v) other buildings, facilities and appurtenances, as may
now or hereafter, pursuant to this Agreement or with
Manager's advance written approval, replace, be
attached to and form a part of the Building.
Capital Improvements - any addition to the Building following
its initial construction, furnishing and equipping, the cost of which is
capitalized and depreciated, rather than being expensed, applying generally
accepted accounting principles.
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Capital Replacement - any alteration, rebuilding or renovation
of the Building, and any replacement of Furnishings and Equipment, the cost of
which is capitalized and depreciated, rather than being expensed, applying
generally accepted accounting principles.
Capital Replacement Fund - as defined in Article 7.07.
Casino - a collective term for the Site, the Building, the
Furnishings and Equipment, the Operating Equipment and the Operating Supplies,
including Casino - Phase I. The non-gaming development on the second floor of
the building on the Casino premises as described on Exhibit "A" to this
Agreement subleased pursuant to the Second Floor Non-Gaming Sublease shall not
be included in this definition of the Casino unless converted into Gaming Space
in accordance with the provisions of the Second Floor Non-Gaming Sublease.
Casino Employees - all employees retained to perform duties
required in the operation of the Casino or other related properties, including
Key Casino Personnel.
Casino Employment Policies - as defined in Article 7.03(g).
Casino Operating Contract - that certain Amended and
Renegotiated Casino Operating Contract among Owner, HJC and the State of
Louisiana by and through the LGCB authorizing and regulating activities at the
Casino, entered into pursuant to the Plan.
Casino Operational Standards - those standards and policies
described herein, all as may be amended or modified from time to time by
agreement between Owner and Manager. The standard by which the physical plant of
the Casino is gauged shall be its condition following Completion of its
construction and its furnishing and equipping, all as described by the Plans and
Specifications, together with any Capital Improvements required by Manager for
all casinos of similar market and type after such time, or, should there fail to
be such similar casinos, Xxxxxx'x Atlantic City Casino, or, if such casino
should cease to be operated by Manager's Affiliate as a Harrah's Casino, such
other casino operated as a Xxxxxx'x Casino by Manager's Affiliate as Manager may
reasonably designate, having regard to its similarity of physical character to
the Casino. The standard by which operational practices are gauged shall be the
operational practices applied at Xxxxxx'x Atlantic City Casino as of the Opening
Date, as
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hereafter supplemented, or, if such casino shall cease to be operated by
Manager's Affiliate as a Xxxxxx'x Casino, such other casino operated by Manager
or any Manager's Affiliate as Manager may reasonably designate, having regard
for its similarity in operational and market characteristics to the Casino.
Casino Operational Standards may include requirements that the Owner purchase,
lease or otherwise obtain, either through Manager or Manager's designated
suppliers, certain computer and other systems that Manager determines to be
necessary for Manager's operation of the Casino. Such systems may include, but
not be limited to, a slot data system, time and attendance system, scheduling
and forecasting system and a reservation and ticketing system. In addition,
Manager may incur on behalf of Owner certain fees and/or assessments in
connection with the shared or other use of certain of Manager's proprietary or
non-proprietary computer systems, including but not limited to, Manager's
computer-based Casino Management System and WINet, purchasing and inventory
control systems and accounting systems.
Casino - Phase I - the first phase of development and
construction of the Casino constructed in accordance with the Plans and
Specifications consisting of a minimum of one hundred thousand (100,000) square
feet of net Gaming Space, approximately fifteen thousand (15,000) square feet of
multi-function, special event, food service and meeting room space and a two
hundred fifty (250) seat buffet on the first floor of the building on the Casino
premises as described on Exhibit "A" to this Agreement and parking facilities.
Casino Standard Accounting Principles - generally accepted
principles of accounting for casinos set forth in the Audit and Accounting Guide
for Audits of Casinos, with conforming changes as of May 1, 1992 prepared by the
American Institute of Certified Public Accountants, as amended from time to
time, and as applied by and subject to such elections and variations consistent
therewith as may be adopted by Manager and Manager's Affiliates in accounting
for operations at casinos managed by Manager or Manager's Affiliates.
Claim - 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.
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Compensation - the direct salaries and wages paid to, or
accrued for the benefit of, any Casino Employee, including incentive
compensation, together with all fringe benefits payable to or accrued for the
benefit of such executive or other employee, including employer's contribution
under F.I.C.A., unemployment compensation or other employment taxes, pension
fund contributions, workers' compensation, group life, accident and health
insurance premiums and costs, and profit sharing, severance, retirement,
disability, relocation, housing and other similar benefits.
Completion - as defined in the Authorized GDA. "Complete" and
"Completed" have corresponding meanings.
Completion Deadline - twelve (12) months after the effective
date of the Plan under and as defined therein, subject to extension resulting
from Force Majeure (as defined in the Authorized GDA).
Confidential and Proprietary Information - as defined in
Article 12.02(c).
Consolidated EBITDA - as defined in the Indenture for the
Senior Subordinated Debentures.
Controlled Affiliate - has the meaning provided in that
certain Amended and Restated Certificate of Incorporation of JCC Holding as in
effect as of the date hereof.
Continuing Directors - the directors of JCC Holding on the
effective date of the Plan under and as defined therein and each other director,
if such other director's nomination for election to the Board of Directors of
JCC Holding is recommended by a majority of the then Continuing Directors.
CPI - the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics of the United States Department of
Labor, U.S. City Average, all items, (1982-84 = 100), or any successor or
replacement index thereto. If the CPI shall, after the date hereof, be converted
to a different standard reference base or shall otherwise be revised, any
determination hereunder which uses the CPI shall be made with the use of such
conversion factor, formula or table for converting the CPI as may be published
by the Bureau of Labor Statistics, or, if said Bureau shall not publish the
same, then with the use of such conversion factor, formula or table as may be
published by Prentice Hall, Inc., or, having such
7
publication, by any other nationally recognized publisher of similar statistical
information. If the CPI shall cease to be published, then for the purpose of
this Agreement there shall be substituted for the CPI such other similar index
as Manager shall reasonably determine which measures changes in the relative
purchasing power of United States currency over the term of this Agreement.
Credit Agreement - that certain Credit Agreement among Owner,
as borrower, JCC Holding, as a guarantor, various banks and Bankers Trust
Company, as administrative agent, entered into pursuant to the Plan.
Defaulting Party - as defined in Article 17.01.
Deferral Amount - as defined in Article 9.01(c)(ii).
Deficiencies - as defined in Article 5.04.
Department - those general divisional categories shown in the
Annual Plan (e.g. slot machines, table games, other games, beverages or food),
but not the subcategories (e.g. tax & license, labor) appearing in each such
divisional category.
Development Period - the period between the date hereof and
the Opening Date.
Ensuing Year - as defined in Article 7.09.
Extension Term - as defined in Article 3.02.
Event of Default - as defined in Article 17.01.
Fiscal Period, Fiscal Quarter, Fiscal Month, Fiscal Year - as
defined in Article 8.01(c).
Furnishings and Equipment - all furniture, furnishings and
equipment (except Operating Equipment) required for the operation of the Casino
in accordance with the standards set forth in this Agreement, including, without
limitation:
8
(i) cashier, money sorting and money counting
equipment, surveillance and communication
equipment, and security equipment;
(ii) slot machines, video games of chance, table games,
keno equipment and other gaming equipment;
(iii) office furnishings and equipment;
(iv) specialized equipment necessary for the operation of
any portion of the Casino for non-gaming or accessory
purposes, including equipment for kitchens,
laundries, dry cleaning, cocktail lounges,
restaurants, public rooms, commercial and parking
spaces, and recreational facilities; and
(v) all other furnishings and equipment hereafter located
and installed in or about the Casino which are used
in the operation of the Casino in accordance with the
standards set forth in this Agreement.
Gaming Act - the Louisiana Economic Development and Gaming
Corporation Act as set forth in LSA R.S. 27:201 et seq. (redesignated from LSA
R.S. 4:601 et seq. by Acts 1996, First Extraordinary Session), adopted by the
Legislature of the State of Louisiana as No. 384, Acts 1992, as amended, and the
regulations adopted thereunder, amendments and reenactments of LSA R.S.
36:801.1(A) and enactment of LSA R.S. 27:1 et seq., adopted by the Legislature
of the State of Louisiana as Act 7, First Extraordinary Session, 1996, as
amended, and the regulations adopted thereunder, the Local Option Gaming
Election set forth in LSA R.S. 18:1300.21, adopted by the Legislature of the
State of Louisiana as Act 57, First Extraordinary Session, 1996, and the act
adopted by the Legislature of the State of Louisiana as Act 98, First
Extraordinary Session, 1996.
Gaming Space - that area of the Casino in which gaming
activity takes place, not including support, storage, entertainment, service and
other such areas.
Gross Revenues - all revenues and income of any nature derived
directly or indirectly from the Casino or from the use or operation thereof,
including, without limitation, (i) Win (Gaming), (ii) food and beverage revenue,
(iii) telephone, telegraph, satellite or cable video and telex revenue,
9
(iv) entertainment revenue, (v) parking revenue, (vi) rental payment from any
lessees or concessionaires, and (vii) merchandise sales revenue, interest
income, and the actual cash proceeds of business interruption, increased cost of
operation, use, occupancy or similar insurance. Notwithstanding the foregoing,
Gross Revenues shall expressly exclude:
(i) proceeds from the sale or other disposition of the
Casino or other assets of Owner;
(ii) proceeds of property insurance payable in connection
with any damage to the Casino except for business
interruption, increased cost of operations, use,
occupancy or similar insurance proceeds;
(iii) condemnation awards other than awards for either
temporary takings (i.e. condemnations of twelve (12)
months or less) or regulatory takings;
(iv) proceeds of financing or refinancing of the Casino;
(v) sales taxes, excise taxes, use taxes, gross receipts
taxes, admission taxes, entertainment taxes, tourist
taxes or charges and similar charges required by law
to be collected from patrons or guests of the Casino
or as part of the sales price for goods, services or
entertainment at the Casino which must be remitted to
governmental authorities; and
(vi) any amounts or credits received for lost or damaged
Casino merchandise.
Xxxxxx'x Atlantic City Casino - the casino owned or managed by
Manager's Affiliate and located in the marina area of Atlantic City, New Jersey.
Harrah's Casinos - a collective term for the casinos owned or
managed by Manager or Manager's Affiliates or licensed to operate under the name
"Xxxxxx'x(C)" or System Marks.
Xxxxxx'x Services - as defined in Article 11.01(a).
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Xxxxxx'x System - a collective term for the casino services
provided to the public by Manager or Manager's Affiliates, or their successors
or assigns, through management or license of Xxxxxx'x Casinos.
HET - Xxxxxx'x Entertainment, Inc., a Delaware corporation.
HJC - as defined in Recital A.
HOCI - Xxxxxx'x Operating Company, Inc., a Delaware
corporation.
House Bank - the amount of cash, chips, tokens and plaques
that Manager from time to time determines necessary to have at the Casino daily
to meet the Casino's cash needs.
Impositions - shall mean and include:
(i) all ad valorem taxes, water and sewer use charges or
assessments, stand pipe charges and assessments, or
other charges or assessments imposed upon the real
and personal property comprising the Casino; and
(ii) annual consideration payable under the Casino
Operating Contract or other charge or assessment
imposed by governmental or quasi governmental
authority or by any other entity empowered by law to
assess charges against the Casino or the activities
conducted thereat, with or without lien rights for
the enforcement thereof.
Incentive Fee - as defined in Article 9.01(a).
Indenture - collectively, those certain indentures by and
among Owner, as issuer, JCC Holding, as guarantor, and Norwest Bank Minnesota,
National Association, as trustee for the benefit of the holders of the Senior
Subordinated Debentures, entered into pursuant to the Plan.
Initial Term - as defined in Article 3.01.
Interest Rate - as defined in Article 25.02.
11
JCC Holding - JCC Holding Company, a Delaware corporation and
the parent of Owner.
Key Casino Personnel - as defined in Article 5.03.
Landlord - as defined in the Authorized Lease.
Legal Requirements - as defined in Article 7.11.
LGCB - the Louisiana Gaming Control Board or any successor
entity.
Licenses and Permits - as defined in Article 4.01.
Management Fee - as defined in Article 9.01(a).
Manager's Affiliate - Manager's ultimate parent entity
(currently HET) and any of its Affiliates.
Manager Matters - as defined in Article 6.02.
Manager Subordination Agreements - as defined in Article 4.03.
Minimum Balance - as defined in Article 8.03(a).
Monetary Default - any failure of Owner to make any payment to
Manager or to a third party as required by this Agreement or to perform any
other obligation required of Owner by this Agreement which might be satisfied by
the payment of money. The amount of a Monetary Default shall be the amount of
the payment required, the liquidated amount of any liquidated obligation, or the
estimated amount of any unliquidated obligation determined by mutual agreement
of Owner and Manager or, if Owner and Manager do not agree upon the estimated
amount of any unliquidated obligation, arbitration pursuant to Article 20.02. An
obligation shall be deemed liquidated if the amount is fixed and determined
without further action of Manager or by Manager's incurring such cost.
Mortgage - the Borrower Mortgage (as defined in the Credit
Agreement) in favor of HET and HOCI (or any successor or substitute therefor
providing a Minimum Payment Guaranty under and as defined in the Casino
Operating Contract), the lenders under the Credit Agreement and the holders of
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the Senior Subordinated Debentures, subject to the terms of the Intercreditor
Agreement (as defined in the Credit Agreement).
Net Revenues - Gross Revenues less:
(i) the retail value of Promotional Allowances;
(ii) any gratuities or service charges added to a customer's
xxxx; and
(iii) any credits or refunds made to customers, guests or
patrons.
New Bonds, New Contingent Bonds - as defined in Article
9.01(b).
Non-Defaulting Party - as defined in Article 17.01.
Non-Qualified Person - any person or entity that would, if
associated with Owner, JCC Holding, Manager or any Affiliate of 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 any alcoholic beverage registration, permit, license,
right or entitlement held or applied for by Owner, Manager, JCC Holding or any
Affiliate of Manager.
Non-Qualified Purchaser - as defined in Article 21.02(c).
Occupancy Agreements - as defined in Article 7.13(a).
Open Access Program - as defined in the Authorized Lease.
Opening Date - the date upon which Manager first opens the
Casino to the public and commences business. The parties shall hereafter confirm
the date of the Opening Date in a separate addendum to this Agreement which is
incorporated herein by this reference.
Operating Agreements - all agreements for the delivery of
goods and/or services to the Casino and all Occupancy Agreements.
Operating Costs - the following costs and expenses incurred by
Manager in connection with the operation of the Casino:
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(i) the cost of replacement of Operating Supplies and
Operating Equipment in the ordinary course of Casino
operations (but not the cost of initial inventories
of such property);
(ii) the cost of Promotional Allowances;
(iii) the cost of Compensation;
(iv) the cost of advertising for the Casino;
(v) the cost of employee training programs;
(vi) the cost of utilities and energy;
(vii) the fees for Licenses and Permits required for the
operation of the Casino;
(viii) all expenditures made by Manager for maintenance and
repairs to keep the Casino in good condition and
repair pursuant to Article 7.05;
(ix) the Management Fee and Travel Fee;
(x) the Accounting Fee and, if elected by Owner, any one
or more of tax, insurance, employee benefit plan
administration or other service fees provided for in
Article 9.03;
(xi) System Fees;
(xii) uninsured liabilities for which Manager is entitled
to indemnity pursuant to Article 14 relating to
injury to persons or property incurred by Manager in
connection with the operation of the Casino;
(xiii) such other costs incurred by Manager in connection
with the operation of the Casino as are treated as
operating costs under Casino Standard Accounting
Principles and as Manager may elect to treat as
Operating Costs under this Agreement; and
(xiv) any other costs or expenses incurred in connection
with Manager Matters.
14
Operating Equipment - all equipment required for the operation
of a casino, including accessory gaming table equipment, chinaware, glassware,
linens, silverware, utensils, uniforms, and all other similar items.
Operating Supplies - food and beverages (alcoholic and
non-alcoholic) and other consumable items used in the operation of a casino,
such as playing cards, tokens, chips, plaques, dice, fuel, soap, cleaning
materials, matches, paper goods, stationery and all other similar items.
Owner Matters - as defined in Article 6.03.
Ownership Costs - the following costs and expenses incurred by
Owner in connection with the operation of the Casino:
(i) required contributions to the Capital Replacement Fund;
(ii) rent or other charges under the Authorized Lease;
(iii) Impositions affecting the Casino;
(iv) expenditures under Articles 7.06, 7.10, 7.11, 15 and
16.02, including costs for Capital Replacements;
(v) audit, legal and other professional or special fees with
respect to the Casino;
(vi) insurance premiums with respect to the Casino;
(vii) costs of leasing any Furnishings and Equipment or other
goods incorporated into or used in connection with the
Casino (whether pursuant to operating or capital
leases);
(viii) costs of amortization and depreciation with respect to
the Casino;
(ix) any gaming, sales and other operational payments and
taxes set forth in Article 10.04;
(x) such other Casino costs or expenses which are normally
treated as capital expenditures under Casino Standard
Accounting Principles; and
15
(xi) any other costs or expenses incurred in connection with
Owner Matters.
Permitted Exceptions - (i) the Authorized Lease; (ii) any
Authorized Mortgage; (iii) liens for Impositions not yet delinquent; (iv)
undetermined or inchoate liens or charges for labor or materials supplied to the
Casino in connection with the construction or operation thereof, which have not
been filed or recorded in the public records and the payment for which is not
yet delinquent; and (v) easements, restrictions, rights of way or other title
matters which do not, in the aggregate or individually, impair the use of the
Casino for its intended purpose or adversely affect the amount of fees payable
to Manager hereunder. Permitted Exceptions shall, without limiting the
foregoing, include all of those matters set forth as exceptions to the title
insurance policy or title commitment delivered on or prior to the effective date
of Plan with respect to the Site.
PIK Election - as defined in Article 9.01(c)(i).
Plan - the Third Amended Joint Plan of Reorganization, as
modified, under Chapter 11 of the United States Bankruptcy Code of HJC,
confirmed by the Bankruptcy Court on October 13, 1998 for that certain case
captioned In re Xxxxxx'x Jazz Company, Case No. 95-14545.
Plans and Specifications - as defined in the Authorized GDA.
Pre-Opening Budget - as defined in Article 5.01.
Pre-Opening Expenses - as defined in Article 5.01.
Prior Management Agreement - as defined in Recital C.
Project Account - as defined in Article 5.02.
Promotional Allowance - goods and services, such as
complimentary rooms, food, beverages, entertainment and parking, given to
customers of the Casino as an inducement to xxxxxx at the Casino.
Proprietary Systems - as defined in Article 6.02(n).
Qualified Purchaser - as defined in Article 21.02(c).
16
Second Floor Non-Gaming Sublease - the Second Floor Non-Gaming
Sublease entered into by and between Owner and JCC Development Company, L.L.C.,
a Louisiana limited liability company, pursuant to the Plan, pertaining to the
sublease of the second floor of the building on the Casino premises as described
on Exhibit "A" to this Agreement for non-gaming uses, a copy of which is
attached to the Authorized Lease.
Senior Subordinated Debentures - as defined in Article
9.01(b).
Site - the parcel(s) of land, together with all easements and
rights appurtenant thereto, more particularly described in Exhibit "A" to this
Agreement.
Six Month Period - as defined in Article 9.01(a)
Suitable Lender - has the meaning provided in the Casino
Operating Contract.
System Marks - as defined in Article 12.02(a).
System Fees - as defined in Article 11.01(a).
Term - a collective term for the Initial Term and the
Extension Term, if elected by Manager.
Termination Fee - as defined in Article 17.02(b).
Transition Date - as defined in that certain Amended and
Restated Certificate of Incorporation of JCC Holding as in effect on the date
hereof.
Travel Fee - as defined in Article 7.03(c).
Twelve Month Period - as defined in Article 9.01(a)
Win (Gaming) - the difference between gaming wins and losses
before deducting costs and expenses determined according to Casino Standard
Accounting Principles.
17
ARTICLE 2.
SCOPE OF AGREEMENT
2.01. Amendment and Restatement. This Agreement amends, restates and
supersedes the Prior Management Agreement in its entirety.
2.02. Subject Matter. The subject matter of this Agreement is the
Casino to be constructed, furnished and equipped by Owner on the Site known as
the Rivergate and numbered 0 Xxxxx Xxxxxx in the City of New Orleans, Orleans
Parish, Louisiana, subject to approval of the LGCB. The Casino may be operated
under the name and style "Xxxxxx'x New Orleans Casino." The non-gaming
development on the second floor of the building on the Casino premises as
described on Exhibit "A" to this Agreement and any space which is from time to
time included as demised premises pursuant to the Second Floor Non-Gaming
Sublease is expressly excluded from this Agreement.
2.03. Development. Owner agrees that it shall, at its sole cost,
acquire or lease, pursuant to the Authorized Lease, the Site and Building,
provide for and complete construction, furnishing and equipping of Casino -
Phase I, and achieve Completion of and deliver to Manager, for management and
operation, the Completed Casino - Phase I on or before the Completion Deadline.
Design of the Casino shall be proposed by Owner but subject to approval of
Manager. Construction, furnishing and equipping of Casino - Phase I shall be
diligently and continuously prosecuted to Completion on or before the Completion
Deadline. If Owner elects to construct any portion of the Casino in excess of
one hundred thousand (100,000) square feet in the aggregate of net Gaming Space
(which may include additional gaming space on either or both of the first and
second floors of the building on the Casino premises as described on Exhibit "A"
to this Agreement), Owner agrees, at its sole cost, that it shall provide for
and complete construction, furnishing and equipping of any such portion of the
Casino in excess of one hundred thousand (100,000) square feet in the aggregate
of net Gaming Space and deliver to Manager, for management and operation, the
Completed Casino with such additional net Gaming Space in accordance with the
Approved Program Plans for such additional net Gaming Space approved by Manager
in its reasonable business judgment.
2.04. Grant and Acceptance of Management Responsibility. Owner grants
to Manager the right to supervise and direct the Casino Employees regarding the
18
management and operation of the Casino for the account of Owner subject to the
terms of this Agreement. Manager accepts said grant and agrees that it will
supervise and direct the management and operation of the Casino subject to the
terms of this Agreement.
2.05. Funding. Owner agrees to provide all funds, both initially and
throughout the term of this Agreement, as shall be necessary to perform and
satisfy Owner's covenants and responsibilities under this Agreement.
Notwithstanding any provision of this Agreement to the contrary, under no
circumstance shall Manager be obligated to advance any of its funds to pay for
Ownership Costs or Operating Costs of the Casino, and Manager shall be excused
from performing any act under this Agreement for which Owner has failed to make
available or provide sufficient money.
2.06. Limitation on Expenditures. Notwithstanding anything to the
contrary set forth herein, any expenditure of funds by Manager pursuant to this
Agreement may only be made if and to the extent such expenditures are permitted
by the Pre-Opening Budget, the Budget or otherwise permitted pursuant to Article
8.02(c), (d) and (e).
ARTICLE 3.
TERM AND RENEWALS
3.01. Initial Term. The initial term ("Initial Term") of this Agreement
shall be deemed to have begun on the date hereof, and shall continue for a
period of twenty (20) years thereafter.
3.02. Extension Term. Manager shall have the option to extend the term
of this Agreement for four (4) consecutive extension terms of ten (10) years
each ("Extension Term") and the term of this Agreement shall be so extended,
provided Manager is not in default under this Agreement at the time any such
Extension Term is to commence. Manager shall be deemed to have exercised its
option to extend the term of this Agreement for each Extension Term unless it
shall have delivered to Owner written notice to the contrary at least one
hundred eighty (180) days prior to the date on which the respective Extension
Term is to commence.
3.03. Early Termination; Termination of Authorized Lease. This
Agreement may be terminated prior to the expiration of the Initial Term or any
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then current Extension Term as provided in Articles 15, 16 and 17. In addition,
this Agreement shall terminate without any further action of the parties hereto
immediately upon the occurrence of the termination of the Authorized Lease by
Landlord as a result of Owner's failure timely to Complete construction of the
Casino; provided that such termination shall not entitle Manager to any
Termination Fee.
ARTICLE 4.
COVENANTS OF OWNER
4.01. Licensing and Permitting
(a) Owner's Licenses and Permits. Owner represents and covenants that
it will, on or before the earlier of the Opening Date or the Completion
Deadline, have obtained, and throughout the Term will maintain, the Casino
Operating Contract and all federal, state and local decrees, acts, orders,
consents, licenses and permits, other than those described in Article 4.01(b)
but including without limitation, suitability for Casino Employees (including
Key Casino Personnel), gaming, restaurant and alcoholic beverage licenses,
required to enable Owner to own the Casino and to operate the Casino with
Manager's assistance (including without limitation, all casino facilities,
kitchens, laundry, restaurant, and alcoholic beverage facilities) (collectively,
the "Licenses and Permits"). If the Casino Operating Contract, once issued,
shall be revoked through no fault of the Owner, such event shall not be a
violation of this Article 4.01, but shall be treated as a condemnation under
Article 16.01.
(b) Manager's Licenses and Permits. Manager represents and covenants
that it will, on or before the earlier of the Opening Date or the Completion
Deadline, have obtained, and throughout the Term will maintain, all casino
gaming licenses or other licenses or permits (other than those described in
Article 4.01(a)) necessary or required to enable Manager to manage the Casino
and to perform its duties as Casino manager under this Agreement and will
cooperate with Owner for purposes of Owner obtaining any suitability
determination necessary for Casino Employees (including Key Casino Personnel).
4.02. Title; Quiet Enjoyment. Owner represents and covenants that it
has acquired, and throughout the Term will maintain, a valid and continuing
leasehold estate (pursuant to the Authorized Lease) to the Casino, subject only
to the
20
Permitted Exceptions and the provisions of Article 4.03. Owner covenants that
during the Term Manager shall and may peaceably possess and quietly enjoy the
Casino in accordance with the terms of this Agreement, free from molestation,
eviction and disturbance by Owner or by any other person or entity (other than
any person or entity claiming through Manager to the extent such claims relate
to Manager). Owner shall, at Owner's expense, undertake and prosecute all
actions, judicial or otherwise, required to assure such quiet enjoyment and
peaceable possession by Manager. Notwithstanding the foregoing, any termination
of the Authorized Lease that is not caused by any act or omission of Owner,
shall not be a violation of this Article 4.02 but shall be treated as a casualty
for purposes of Article 15.
4.03. Manager Subordination Agreements; Mortgages. A memorandum of this
Agreement sufficient to place the public on constructive notice of its terms,
and substantially in the form annexed as Exhibit "D" to this Agreement, shall be
recorded in the public records for the Parish of Orleans after the recording of
the Mortgage. Owner and Manager acknowledge that concurrently herewith, (i) the
trustee for, and acting on behalf of, the holders of the Senior Subordinated
Debentures, Manager, and Owner have entered into that certain Manager
Subordination Agreement (Senior Subordinated Notes), (ii) the administrative
agent for, and acting on behalf of, the lenders under the Credit Agreement, and
Manager have entered into that certain Manager Subordination Agreement
(Lenders), and (iii) Landlord, the City of New Orleans and Manager have entered
into that certain Manager Subordination Agreement (Landlord) (collectively, the
"Manager Subordination Agreements"). Any party (other than the holder of the
Mortgage) holding a mortgage, deed of trust, security agreement, assignment of
rents, revenues or profits, lease (including any sale leaseback or like
arrangement), or other form of security interest in or affecting the Casino
shall, as a condition to the effectiveness of such interest and/or qualification
thereof as an Authorized Mortgage, enter into a Subordination, Non-Disturbance
and Attornment Agreement, in such form as may be negotiated between Manager and
the holder of the Authorized Mortgage. Upon any foreclosure upon the Mortgage,
Manager's rights hereunder in relation to the holder of the Mortgage shall not
be disturbed or affected by any such foreclosure other than as set forth in the
Manager Subordination Agreements referred to in this Article 4.03.
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ARTICLE 5.
PRE-OPENING
5.01. Pre-Opening Budget. A pre-opening budget for the period after the
effective date of the Plan and prior to the Opening Date, including a
pre-opening budget for Casino - Phase I (as the same may be modified in
accordance with this Article 5.01, the "Pre-Opening Budget"), is attached to
this Agreement as Exhibit "G". Owner approves the Pre-Opening Budget attached as
Exhibit "G". The Pre-Opening Budget contains contingency line items which
Manager may allocate to any line items which are exceeded. Manager also shall be
entitled to reallocate amounts among line items of the Pre-Opening Budget
without further approval from Owner. If Casino - Phase I is not Completed and
the Opening Date does not occur by the Completion Deadline, Manager shall be
entitled to expend amounts in excess of the Pre-Opening Budget as necessary to
pay continuing Compensation of Casino Employees and continue performance under
existing contracts (the cost of which would not have exceeded the Pre-Opening
Budget but for such delay) without further approval from Owner. The Pre-Opening
Budget sets forth expenses (the "Pre-Opening Expenses") which Manager
anticipates to be necessary or desirable after the effective date of the Plan
and prior to the Opening Date in order to prepare for the Opening Date,
including without limitation, cash for disbursements, Furnishings and Equipment,
initial Operating Equipment and Operating Supplies, hiring, training, relocation
and temporary lodging of employees, advertising and promotion, office overhead
and office space (whether on- or off-Site) and travel and business entertainment
(including opening celebrations and ceremonies). Owner recognizes that the
Pre-Opening Budget has been prepared well in advance of the Opening Date and is
intended only to be a reasonable estimate, subject to variation due to a number
of factors, some of which will be outside of Manager's control (e.g. the time of
Completion, inflationary factors and varying conditions, in their respective
markets, for the goods and services required). Owner agrees that the Pre-Opening
Budget may be modified from time to time, subject to approval of Owner in
accordance with the procedure established by Article 8.02(e) for adjustments to
the Budget contained within any Annual Plan.
5.02. Payment of Pre-Opening Expenses. Owner agrees that any
Pre-Opening Expenses shall be promptly paid directly by Owner, with payment to
be made in accordance with the terms of each invoice approved by Manager and
delivered to Owner for payment. Owner shall establish a bank account for the
22
Project Account (as defined in the Credit Agreement) into which Owner shall
deposit funds to pay for the budgeted Pre-Opening Expenses for the Casino, which
shall be paid by Owner from the Project Account. Manager is authorized and shall
have the option to elect, in lieu of submitting third party invoices to Owner
for direct payment, to pay Pre-Opening Expenses from its own funds, on behalf of
Owner. Owner shall, in such case, reimburse the Manager on demand, for all
amounts paid from Manager's own funds (together with interest on any portion
thereof advanced by Manager from its funds at the Interest Rate from and
including the date of advancement until and including the date of repayment) to
pay such Pre-Opening Expenses, so long as such expenses are within the
Pre-Opening Budget. All Pre-Opening Expenses advanced or incurred by Manager
shall be itemized, scheduled and submitted to Owner along with each demand for
payment. Reimbursement shall be made by Owner to Manager within ten (10) days
after the date of submission of each such schedule. Owner shall increase the
amount in the Project Account, on request of Manager, to provide all funds
required to pay for Pre-Opening Expenses authorized by Article 5.01.
5.03. Pre-Opening Hiring and Training of Employees. Manager agrees, at
Owner's cost, and as employees of Owner, to recruit, hire on behalf of Owner and
train employees of Owner to manage and operate the Casino in accordance with
this Agreement. In hiring, Manager shall give preference and priority to
Louisiana residents, except where not reasonably possible to do so without added
expense, substantial inconvenience, or sacrifice in operational efficiency, and
shall comply with the provisions of Sections 5.1 (Open Access Program), 5.2
(Residency Requirements) and 5.3(b) (Open Access and Former Employees) of the
Authorized Lease. To the extent pre-Completion occupancy is permitted by
applicable insurance policies and Licenses and Permits for the Building,
pre-opening recruiting, relocation, hiring, and training may be conducted at the
Casino during the Development Period (unless and until Owner determines and
advises Manager in writing that such activities unreasonably interfere with the
Completion of the Casino) and employees involved in such recruiting, hiring and
training may be housed at the Casino. All costs of recruiting, hiring and
training (including any expenses of off Site training or temporary lodging)
shall be included as a Pre-Opening Expense. The General Manager, Vice President
of Operations, Vice President of Marketing, Vice President and General Counsel,
Vice President of Services, and Vice President - Controller and other full time
employees of the Casino involved in the management of the Casino who report
directly to the General Manager (collectively, "Key Casino Personnel"), may be
23
hired by Manager as employees of Manager and assigned to the Casino at such time
during the Development Period as Manager, in its discretion, deems necessary.
The salaries, temporary lodging, and other expenses of all Key Casino Personnel
and employees of Owner hired by Manager paid or incurred prior to the Opening
Date shall be Pre-Opening Expenses.
5.04. Pre-Opening Inspection. Prior to the Opening Date, a pre-opening
inspection shall be conducted jointly by Owner and Manager. Owner agrees to take
all measures necessary to remedy any Deficiencies indicated by Manager pursuant
to such pre-opening inspection. As used herein, the term "Deficiencies" shall
mean any failure of Casino - Phase I to be constructed, Furnished and Equipped
in substantial compliance with the Approved Program Plans. Should Manager elect,
it may accept the Completed portion of the Casino conditionally, subject to such
Deficiencies being promptly remedied by Owner. Any acceptance of the Casino by
Manager shall have no binding effect as to any latent or undiscovered
Deficiencies and may be rescinded by Manager if any Deficiencies in the manner
of constructing, furnishing or equipping of the Casino subsequently shall be
discovered and/or if Owner fails to satisfactorily remedy any Deficiencies.
ARTICLE 6.
STANDARDS AND MANAGER'S CONTROL
6.01. Casino Operational Standards. Manager shall operate the Casino,
including the performance of its obligations set forth in Article 6.02, at the
expense of Owner in accordance with Casino Operational Standards, applicable
Legal Requirements and applicable provisions of the Casino Operating Contract
and the Authorized Lease, but only if required funds are made available by Owner
and Owner cooperates in such compliance as to any matters within Owner's
responsibility or control. If any Casino Operational Standard is violative of
Legal Requirements, such Casino Operational Standard as applied to the Casino
shall be modified so as to comport with Legal Requirements.
6.02. Manager's Obligations. The items listed in clauses (a)-(v) below
shall be "Manager Matters." Manager shall have the obligation, and the sole and
exclusive authority, throughout the Term, with respect to:
(a) Employees - as more particularly provided in Article 7.03,
hiring of Casino Employees, supervision of Casino Employees,
24
establishing levels of Compensation for Casino Employees,
negotiating collective bargaining agreements (if applicable)
for Casino Employees, establishing labor policies with respect
to Casino Employees, paying Casino Employees from Casino funds
and discharge (as Manager deems appropriate) of Casino
Employees; administration of compliance with the requirements
of the Open Access Program and any open access plans adopted
pursuant thereto relating to hiring, purchasing and
contracting for goods and services with respect to the
operation of the Casino (specifically excluding any
construction-related compliance) and, at Owner's request,
reporting to Owner's designated open access representative(s)
with respect thereto for purposes of Owner's reporting
requirements to the applicable governmental or municipal
authority pursuant to Article 6.03(i);
(b) Gaming Policies - gaming and entertainment policies, food and
beverage menu prices and charges for the Casino;
(c) Security - security and internal control procedures for the
Casino and terms of guest admittance to the Casino;
(d) Advertising - policies relating to advertising and marketing
of the Casino, as more particularly provided in Article 7.04,
including determining, based on a best cost/time factor basis,
which entity shall provide advertising and market research and
certain national marketing functions and overseeing such
services;
(e) Promotions - policies regarding the granting of discounts,
complimentary goods or services, and other Promotional
Allowances with respect to the Casino;
(f) Suppliers - selection of suppliers of goods and services for
the Casino (except with respect to the initial construction,
furnishing and equipping of the Casino). In purchasing or
contracting for goods and services, Manager shall administer
and comply with the Open Access Program and any open access
plans adopted pursuant thereto and shall give preference
25
and priority to Louisiana residents, except where not
reasonably possible to do so without added expense,
substantial inconvenience, or sacrifice in operational
efficiency;
(g) Bank Accounts - control and management of the Bank Account(s)
established by Owner for the Casino, as more particularly
provided in Article 8.03;
(h) Capital Replacement Fund - management of the Capital
Replacement Fund established by Owner for the Casino, as more
particularly provided in Articles 7.07 and 7.08;
(i) Accounting - management or performance of casino level
accounting and annual budgeting (but not, unless elected and
paid for by Owner as part of the Accounting Fee, ownership
level accounting) for the Casino, as more particularly
provided in Article 8.01;
(j) Maintenance - supervision and effecting, or causing to be
effected, ordinary maintenance and repairs required to
maintain the Casino in compliance with Casino Operational
Standards, as determined by Manager or any successor
representatives of Manager, in their sole and absolute
discretion, as more particularly provided in Article 7.05;
(k) Necessary Contracts - negotiating and, pursuant to Article
19.02, entering into any contracts deemed by Manager to be
necessary or advisable in carrying out and placing in effect
the terms and conditions of this Agreement, the cost of which
for any Fiscal Year does not cause Manager to exceed the
fiscal limitations of this Agreement;
(l) Gross Revenue - collection and disbursement of Gross Revenues
on behalf of Owner in accordance with Article 10;
(m) Administrative Services - recommending, based on a best
cost/time factor basis, what entity shall provide certain
administrative systems and services for use in the Casino,
including point of sale systems, office systems, purchasing
and
26
inventory systems and financial and human resources systems,
and overseeing the use of such systems;
(n) Proprietary Systems; Customer-Related Services - determining
(i) the use of the Casino Management System and WINet and any
other operations and/or customer-related proprietary systems
owned by Manager or licensed to Manager by any of Manager's
Affiliates for use in the Casino and any data and information
thereon related to any casinos other than the Casino
("Proprietary Systems"), (ii) the use of the Slot Management
System and any other operations and/or customer-related
proprietary systems licensed from a third party and any data
and information thereon related to any casinos other than the
Casino, and (iii) the use of certain "Xxxxxx'x(C)" brand
customer-related services and promotions, including the
"Xxxxxx'x(C)" Gold Card services, the 1-800-"Xxxxxx'x(C)"
reservation center and distribution of "Xxxxxx'x(C)" World and
"Xxxxxx'x(C)" Gift Certificates; managing Owner's use of such
systems, services, promotions and data and information related
to any casinos other than the Casino and administering the
provision of accounting and the payment by and reimbursement
by Owner for the costs and benefits of such systems, services,
promotions, data and information;
(o) Regulatory Matters - assisting Owner with any matters set
forth in Article 6.03(g) to the extent requested by Owner and
accepted by Manager and managing any other regulatory matters
related to the operation of the Casino;
(p) Required Expenditures and Reimbursement - at Manager's
election, after providing written notice and opportunity to
cure as provided in Article 17.01(a), making any expenditures
required of Owner under this Agreement and recovering, as a
reimbursable expense, the cost thereof with interest from the
date of advancement to the date of repayment at the Interest
Rate from Owner, on demand;
27
(q) Litigation - subject to the oversight of the Owner pursuant to
Article 6.03(r), managing and assisting Owner in connection
with any litigation as may be requested by Owner and accepted
by Manager;
(r) Payment of Impositions - paying all Impositions assessed
against the Casino as same become due;
(s) Renovations - renovating, refurbishing, reconstructing and
improving the Casino from time to time as required by Article
7.06;
(t) Enforcement of Operating Agreements and Collective Bargaining
Agreements - enforcing or waiving enforcement of all Operating
Agreements and collective bargaining agreements, subject to
applicable Legal Requirements, provided that Manager shall not
waive application of the Gaming Act's licensing or suitability
requirements in effect with respect to the Casino;
(u) Licenses - obtaining and maintaining all licenses, permits,
authorizations and consents necessary or required to enable
Manager to manage the Casino and to perform its duties as
Casino manager under this Agreement, as more particularly
provided in Article 4.01(b); and
(v) Other Manager Matters - assisting Owner with respect to any
Owner Matters or any matters set forth in Article 9.03 if
requested in writing by Owner and accepted by Manager.
Notwithstanding the foregoing, performance of items (p) through and including
(v) above shall be undertaken on behalf of and as the obligation of the Owner
and shall not subject Manager to risk except as provided in Article 14.
6.03. Owner's Obligations. The items listed in clauses (a)-(t) below
shall be "Owner Matters." Owner shall have the sole responsibility and
obligation throughout the Term with respect to:
(a) Budgets; Casino Employment Policies - approving or
disapproving Budgets presented by Manager as part of the
28
Pre-Opening Budget and each Annual Plan or proposed revision
thereof, as more particularly provided in Articles 5.01 and
8.02, or other forecasting, budgeting or financial planning
matters; approving or disapproving Casino Employment Policies
proposed by Manager pursuant to Article 7.03(g);
(b) Operating Funds - providing all funds required by Manager for
the operation of the Casino, as and when required by this
Agreement;
(c) Title - maintaining Owner's leasehold estate in the Casino
pursuant to the Authorized Lease to the Casino and all legal
or beneficial interests therein, assuring Manager's quiet
enjoyment of the Casino free from all exceptions other than
Permitted Exceptions and free from interference by any party
having rights under any Permitted Exception, matters relating
to Permitted Exceptions, title insurance, the leasehold estate
for the Casino and title to the Building and Casino and
compliance with Article 4.02, or any other title-related
matters;
(d) Development Properties - the development and financing of, or
any other matters with respect to, the 3CP property, the
Xxxxxx Street Properties and any other non-Casino land or
assets owned by JCC Holding and its subsidiaries (other than
Owner);
(e) Dispositions - any sale, leasing or other disposition of the
Casino or any other land or assets of Owner or its affiliates;
(f) Development and Construction - developing and constructing, as
the case may be, or repairing, restoring, rebuilding,
replacing any damage to (or impairment or destruction of),
reconstructing or reconfiguring, furnishing and equipping the
Casino, as required by the terms of Articles 2.03, 15 and 16;
management of the development and construction of the Casino
and achievement of completion; implementation of the Approved
Program Plans; any other development or construction matters;
and hiring, supervision and other matters related to
Foxcor/Pearson PMG, LLC, an Arkansas limited liability
company, or any other program manager or construction
29
consultants, the Architect, Centex Xxxxxx Construction Co.,
Inc., Broadmoor, a Louisiana General Partnership, and any
construction-related contractors, consultants or
subcontractors;
(g) Licenses and Permits; Governmental Affairs - obtaining and
maintaining all Licenses and Permits required for Owner's
continued legal existence, authorization to conduct business,
ownership of the Casino, and continued operation of all
facilities at the Site, as more particularly provided in
Article 4.01(a), handling governmental affairs, including
without limitation acting as a liaison, negotiating,
participating in hearings, meetings and administrative
proceedings, and otherwise acting in respect of the Authorized
Lease, the Authorized GDA, Landlord, the City of New Orleans,
the State of Louisiana, the Casino Operating Contract,
compliance with the Gaming Act, conditional use proceedings,
suitability applications or any other licensing, permitting,
governmental or administrative matters;
(h) Second Floor - matters relating to the Second Floor Non-Gaming
Sublease and the development, leasing, financing, operation
and other matters relating to the second floor of the building
on the Casino premises as described on Exhibit "A" to this
Agreement;
(i) Open Access - matters relating to the Open Access Program,
including any open access plans adopted pursuant thereto;
governmental and municipal relations regarding Open Access
matters, including, without limitation, preparing and
submitting reports to the City of New Orleans, the New Orleans
City Council and/or the Office of the Mayor of the City of New
Orleans as required by the Open Access Program and any open
access plans adopted pursuant thereto; supervising
compliance-related efforts with respect to Open Access
matters, including, without limitation, efforts by Manager
relating to hiring, purchasing and contracting for goods and
services with respect to the operation of the Casino as
provided in Article 6.02(a)
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and by construction contractors, subcontractors and unions
relating to construction-related matters;
(j) Payment of Debts - paying all indebtedness from time to time
encumbering the Casino as and when such indebtedness becomes
due;
(k) Reorganization Financing - matters relating to the Indentures,
Senior Subordinated Debentures, Credit Agreement, Mortgage,
Bank Loans, and financing of the Casino or otherwise referred
to in Article 4.03;
(l) Plan - matters relating to the Plan (except as such matters
relate to Manager) or any other reorganization of Owner or JCC
Holding or its subsidiaries;
(m) Books and Records - maintaining the books and records and the
preparation of the audited and unaudited financial statements
for Owner based on the operating statements furnished by
Manager pursuant to Article 8.01(c) and for JCC Holding and
its subsidiaries (other than Owner);
(n) Securities Laws - preparation and filing of the Annual Report
and any other filings, proceedings or matters relating to the
United States Securities and Exchange Commission or Federal or
state securities laws;
(o) Investor Relations - investor relations and other matters
relating to the shareholders or ownership of JCC Holding;
(p) Community and Public Relations - handling Casino community and
public relations other than advertising, marketing and
promotions;
(q) Employee Benefits - establishing and administering employee
benefits and savings and retirement plans for Casino
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Employees, ensuring compliance with Sections 5.5 (Fringe
Benefit Plan; Salary Practices) and 19.3 (Savings and
Retirement Plan) of the Authorized Lease and other employee
benefit matters relating to Casino Employees;
(r) Counsel and Litigation - hiring, approving settlements and
supervision of counsel to represent Owner regarding any Owner
Matters and hiring counsel and overseeing Manager's management
of litigation pursuant to Article 6.02(q);
(s) Administrative Services - determining, based on
recommendations from Manager, what entity shall provide
certain administrative systems and services for use in the
Casino, including point of sale systems, office systems,
purchasing and inventory systems and financial and human
resource systems; provided that if Owner selects a party other
than Manager or its Affiliates to provide such systems and
services, any such third party provided systems and services
shall be obtained on a basis which shall not impair or
frustrate Manager's ability to (i) manage the Casino in
accordance with Casino Operational Standards, and (ii) provide
a customer casino experience and customer services consistent
with the such experience and services provided in other
casinos in the Xxxxxx'x System; and
(t) Other Owner Matters - assisting Manager with respect to any
Manager Matters if requested in writing by Manager and
accepted by Owner; all corporate, administrative and other
business activities of Owner and any other matters not
expressly set forth in Article 6.02.
6.04. Owner Self-Help. If Manager should fail to protect: (i) the
safety of the patrons or employees of the Casino from harm, or (ii) tangible
real or personal property at the Casino from destruction, following written
notice from Owner and opportunity to cure, as provided in Article 17.01(a),
delivery by Owner to Manager of all funds required to effect cure and giving by
Owner to Manager of all cooperation and assistance necessary to effect cure of
such circumstance,
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Owner may enter the Casino and take reasonable action necessary to provide the
needed protection; provided that such entry and action shall be undertaken in a
manner that does not unreasonably interfere with the operations conducted by
Manager at the Casino.
6.05. Payments. Manager shall have the right to pay from the Bank
Account(s) on a timely basis, in accordance with Article 10.01, all costs,
expenses, or charges incurred by Manager, Manager's Affiliates or Owner in
accordance with the terms of this Agreement.
6.06. Manager's Control. Manager will have uninterrupted control over
the operation of the Casino. Owner agrees not to interfere or involve itself in
any way with the day-to-day operation of the Casino; provided, however, nothing
contained in this Article 6.06 is intended to interfere with any rights of Owner
set forth in this Agreement.
ARTICLE 7.
OPERATION OF THE CASINO
7.01. Permits. Manager agrees to use all reasonable efforts within its
control to comply with any conditions or requirements set out in or imposed by
Legal Requirements or imposed by any Licenses and Permits, for so long as the
expense of such compliance shall be paid for by Owner; provided, however,
nothing contained in this Agreement shall be deemed or construed to require
Owner to pay for any cost or expense incurred by Manager in obtaining or
maintaining any licenses, permits, authorizations or consents described in
Article 4.01(b) required of Manager after the effective date of the Plan. In the
event such expense is not paid by Owner, Manager shall have the right to pay
such expenses from the Bank Account(s). To the extent Manager elects to pay such
expenses from the Bank Account(s), Owner shall replenish such amounts to the
Bank Account(s) immediately upon presentation of an invoice for such expenses.
7.02. Equipment and Supplies. Manager shall be responsible and
authorized to obtain, on behalf of Owner and at Owner's cost, subject to the
fiscal limitations of this Agreement, all replacement Operating Supplies and
Operating Equipment inventories necessary or advisable in connection with the
operation of the Casino. Owner shall be solely responsible to supply initial
Operating Supplies, Operating Equipment and Furnishings and Equipment, and such
Capital
33
Improvements as from time to time are required to comply with Casino Operational
Standards. In purchasing or contracting for goods and services, Manager shall
give preference and priority to Louisiana residents, except where not reasonably
possible to do so without added expense, substantial inconvenience, or sacrifice
in operational efficiency.
7.03. Employees
(a) Authority of Manager. Manager, as agent for Owner, but acting in
Manager's sole discretion within the financial parameters established in the
Annual Plan pursuant to Article 8.02(a) and consistent with the Casino
Employment Policies, will hire, supervise, direct, judge the fitness and
qualification of, and discharge and determine the Compensation and terms of
employment of all Casino Employees. In hiring, Manager (i) shall give preference
and priority to Louisiana residents, except where not reasonably possible to do
so without added expense, substantial inconvenience, or sacrifice in operational
efficiency and (ii) shall comply with the provisions of Sections 5.1 (Open
Access Program), 5.2 (Residency Requirements), 5.3(b) (Open Access and Former
Employees), 5.5 (Fringe Benefits; Salary Practices), 19.3 (Savings and
Retirement Plan), and Exhibit J (JCC Benefits Summary) of the Authorized Lease.
All Casino Employees other than Key Casino Personnel shall be employed by Owner.
At Owner's request, Manager shall advise and consult with Owner regarding
employee-related matters. Manager shall be Owner's bargaining agent with respect
to all collective bargaining agreements and other Casino Employee matters with
full power and authority to negotiate collective bargaining agreements (which
may extend beyond the Term and exceed the Compensation authorized by the
then-current Annual Plan) and to settle all employee grievances and claims.
Manager will keep Owner advised with respect to such negotiations and any
material grievances or claims and will obtain Owner's consent prior to entering
into any collective bargaining agreements or settlements of any such material
grievances or claims.
(b) Status as an Employer. Manager and Owner acknowledge and agree
that, for purposes of LSA R.S. 23:1021 et seq.:
(i) Owner shall be considered the immediate or general
employer, and Manager shall be the borrowing or
special employer, of all Casino Employees
34
(other than the Key Casino Personnel). In any event,
the services provided by the Casino Employees (other
than the Key Casino Personnel) are an integral part
of and are essential to the business, services and
operations of Owner. Alternative to any other status
as an employer pursuant to applicable worker's
compensation laws, Owner shall be considered the
statutory employer of any such Casino Employees;
(ii) Manager shall be the immediate or general employer of
the Key Casino Personnel. The services provided by
the Key Casino Personnel are an integral part of and
are essential to the business, services and
operations of Owner. Owner shall be considered the
statutory employer of the Key Casino Personnel; and
(iii) Owner and Manager agree that, notwithstanding any
characterization of Manager as the immediate,
general, borrowing, special or statutory employer of
the Casino Employees (including the Key Casino
Personnel), for purposes of this Agreement, including
the indemnification set forth in this Article
7.02(b)(iii) and as between Owner and Manager, Owner
shall be responsible for the payment of applicable
workers' compensation benefits to the Casino
Employees (including the Key Casino Personnel) and
shall indemnify and save Manager harmless for any
payments to the Casino Employees (including the Key
Casino Personnel) of worker's compensation benefits
or any other employee Claims in accordance with
Article 14.
(c) Travel. Owner shall pay Manager ONE HUNDRED THOUSAND AND 00/100
DOLLARS ($100,000) per Fiscal Year adjusted annually on each anniversary of the
Opening Date by the percentage increase in the CPI occurring between the Opening
Date and the Adjustment Date: (i) on or before the Opening Date, and (ii)
thereafter, on or before the first day of each Fiscal Year following the Opening
Date, as a fee (the "Travel Fee") for all travel expenses (including food,
beverages, temporary lodging, airfare, automobile rental or mileage, gasoline
and other necessary expenses) incurred following Completion and the Opening Date
by employees of Manager's Affiliates who are not full-time Casino Employees
relative to:
(i) supplying the Casino;
(ii) hiring and training Casino Employees and employment
matters concerning Casino Employees, including union
contract negotiations;
(iii) maintaining the physical condition and appearance of
the Casino;
(iv) maintaining and promoting proper operational
procedures and practices;
(v) maintaining books and records;
(vi) attending judicial or administrative hearings or
otherwise complying with any judicial or
administrative decree; and
(vii) otherwise performing duties undertaken by or rights
granted to Manager in this Agreement.
Manager shall have sole discretion to determine the necessity of such travel and
shall have no obligation to account for the expenditure of such Travel Fee or
return any unused portion of the Travel Fee to Owner. Correspondingly, any
excess cost of such travel expense shall be paid by Manager without
reimbursement by Owner. All such expenses for periods prior to Completion shall
be set forth in and paid pursuant to the approved Pre-Opening Budget.
(d) Employee Cost Indemnity. Except as otherwise provided in Article
14.01(c), Owner shall be solely responsible for and shall pay, reimburse,
indemnify, defend and hold Manager harmless from and against any and all
expenses, costs, liabilities and claims related or incidental to any Casino
Employee (including, by way of example only, all salaries, vacation, sick leave,
severance or termination benefits, pension plan liabilities, savings and
retirement plan contributions, workers' compensation benefits or claims, health,
disability or life insurance contributions, state, federal or local payroll or
other employer paid or collected taxes, injury, discrimination, back pay,
grievance or wrongful termination awards and any other costs and benefits for
Casino Employees however designated). To the extent Manager elects to disburse
such costs from the Bank Account(s), Owner shall replenish such amounts to the
Bank Account(s) immediately upon presentation of an invoice for such costs. If
Manager shall pay
36
or cause any such amounts to be paid other than from Casino funds, Owner shall
reimburse such amount to Manager, subject to the provisions of Article 10.01,
immediately upon presentation of an invoice for such services.
(e) Professional Consultants. The costs, fees, compensation or other
expenses of any persons engaged by Owner or by Manager (to the extent consistent
with the Annual Plan) to perform duties of a special nature, related to the
operation of the Casino, such as attorneys, engineers and the like, shall be a
direct expense of Owner and need not be paid by Manager. To the extent Manager
elects to disburse such costs from the Bank Account(s), Owner, immediately upon
presentation of an invoice for such costs, shall replenish such amounts to the
Bank Account(s). If Manager shall pay or cause any such amounts to be paid other
than from Casino funds, Owner shall reimburse such amounts to Manager
immediately upon presentation of an invoice for such services.
(f) Employee Fringe Benefit Program. Owner shall provide Casino
Employees a fringe benefit program that complies with the appropriate provisions
of the Authorized Lease and the Open Access Program. All costs and expenses
related to such employee fringe benefit program shall be paid by Owner.
(g) Casino Employment Policies. Manager shall propose to Owner, subject
to Owner's approval, policies and procedures with respect to the hiring,
promotion, training, retention and discharge of the Casino Employees which such
policies and procedures shall xxxxxx and encourage, and shall not impair or
frustrate, Manager's ability to (i) manage the Casino in accordance with Casino
Operational Standards, and (ii) provide a customer casino experience and
customer services consistent with the such experience and services provided in
other casinos in the Xxxxxx'x System (as revised from time to time by Manager
and approved by Owner, the "Casino Employment Policies"). Manager agrees that in
the exercise of its authority set forth in Article 7.03(a), Manager will comply
with (i) the Casino Employment Policies, and (ii) applicable Legal Requirements,
including, but not limited to, Title VII of the Civil Rights Act, as amended,
Americans with Disabilities Act of 1990, as amended, Age Discrimination in
Employment Act (42 U.S.C. Section 1981 et seq.), Occupational Safety and Health
Act, National Labor Relations Act, Labor Management Relations Act, Fair Labor
Standards Act, Worker Adjustment and Retraining Notification Act, Employee
Retirement Income Security Act, Family and Medical
37
Leave Act, the Louisiana Employment Discrimination Law and the Louisiana
Worker's Compensation Act.
7.04. Sales, Marketing and Advertising. Manager shall and is authorized
to advertise and promote the business of the Casino, institute and supervise a
sales and marketing program, and coordinate and cooperate with the marketing
programs of the Xxxxxx'x System and other casinos in the Xxxxxx'x System, and
tour programs marketed by airlines, travel agents and government tourist
departments, whenever Manager deems the same to be advisable. Manager may also
cause the Casino to participate in sales and promotional campaigns and
activities involving Promotional Allowances, provided such participation is
customary in the casino industry or Manager's or Manager's Affiliates'
practices. In purchasing or contracting for goods and services, Manager shall
give preference and priority to Louisiana residents, except where not reasonably
possible to do so without added expense, substantial inconvenience, or sacrifice
in operational efficiency.
7.05. Maintenance and Repairs. At Owner's expense, Manager shall make
or cause to be made all repairs and maintenance as shall be required to comply
with Casino Operational Standards and Legal Requirements. All work shall be
performed in a time and manner which will assure continuous compliance of the
Casino with Legal Requirements and Casino Operational Standards and minimize
interference with or disturbance of ongoing Casino operations.
7.06. Capital Improvement and Replacements. Manager shall effect all
Capital Improvements and Capital Replacements as shall be required to maintain
the Casino in compliance with all Legal Requirements and Casino Operational
Standards and to comply with Manager's recommended programs, approved in the
Annual Plan, for renovation, modernization and improvement intended to keep the
Casino competitive in its market.
7.07. Capital Replacement Fund for Capital Replacements and
Improvements. Beginning on the Opening Date, Manager shall establish a reserve
for Capital Replacements and Capital Improvements on the books of account of the
Casino, and the cash contributions required by Article 7.08 shall be placed into
a segregated account (the "Capital Replacement Fund") established in Owner's
name at a bank designated by Owner and subject to Manager's approval, which
approval shall not be unreasonably withheld or delayed, by execution of a
Banking Resolution. Subject to the terms of the Authorized Lease, designees of
38
Manager shall be the only signatories authorized to withdraw funds from the
Capital Replacement Fund. All amounts in the Capital Replacement Fund shall be
invested, to the extent that availability of funds, when required, is not
thereby impaired, in interest-bearing investments in securities issued or
guaranteed by the United States government or in securities issued by any state
or federally chartered bank and insured by the United States government or,
subject to Owner's consent, any other investment proposed by Manager. Interest
earned on amounts deposited in the Capital Replacement Fund shall be credited to
the Capital Replacement Fund and shall be available for payment of expenditures
for Capital Replacements or Capital Improvements to the Casino. This Capital
Replacement Fund shall be the "Capital Replacement Fund" specified in Article
19.8 of the Authorized Lease and Section 13.7(a) of the Casino Operating
Contract.
7.08. Periodic Contributions to Capital Replacement Fund. Manager on
behalf of Owner shall deposit into the Capital Replacement Fund (i) one-twelfth
(1/12th) of THREE MILLION AND 00/100 DOLLARS ($3,000,000) for each of the first
twelve (12) months following the Opening Date, (ii) one-twelfth (1/12th) of FOUR
MILLION AND 00/100 DOLLARS ($4,000,000) for each of the second twelve (12)
months following the Opening Date, (iii) one-twelfth (1/12th) of FIVE MILLION
AND 00/100 DOLLARS ($5,000,000) for each of the third twelve (12) months
following the Opening Date, and (iv) two percent (2%) of monthly Gross Revenues
for each Fiscal Month thereafter. The cash amounts required to be so deposited
shall be calculated and deposited into the Capital Replacement Fund, in arrears,
no later than the tenth (10th) day of the Fiscal Month immediately following the
Fiscal Month with respect to which a deposit is made. In addition, all proceeds
from the sale of capital items no longer needed for the operation of the Casino,
and the proceeds of any insurance received in reimbursement for any items
previously paid for from the Capital Replacement Fund, shall be deposited into
the Capital Replacement Fund upon receipt by Owner.
7.09. Use and Allocation of Capital Replacement Fund. Any expenditures
for Capital Replacements or Capital Improvements which have been budgeted in an
Annual Plan may be paid from the Capital Replacement Fund without further
approval from Owner. Any amounts remaining in the Capital Replacement Fund at
the close of any Fiscal Year shall be carried forward and retained in the
Capital Replacement Fund until fully used. If amounts in the Capital Replacement
Fund at the end of any Fiscal Year plus the anticipated contributions to the
Capital Replacement Fund for the year following the date of such contribution
(the
39
"Ensuing Year") are not sufficient to pay for Capital Replacements or Capital
Improvements authorized by the Annual Plan for such Ensuing Year, then Owner
shall supply additional funds, in the amount of the projected deficiency, at the
time the Annual Plan for such Ensuing Year is approved.
7.10. Emergency Expenditures. If a condition should exist of an
emergency nature which, in Manager's reasonable discretion, requires immediate
action to preserve and protect the Casino, assure its continued operation,
and/or protect the comfort, health, safety and/or welfare of Casino guests or
employees, Manager is authorized to take all steps and to make all expenditures
from the Bank Account(s), or the Capital Replacement Fund (in the case of
expenditures for Capital Replacements or Capital Improvements) as it deems
necessary to repair and correct any such condition, without regard to whether
provisions have been made in the Annual Plan for any such expenditures, and the
cost thereof shall be paid or reimbursed by Owner on demand.
7.11. Compliance with Legal Requirements. If, at any time, repairs to
or additions, changes or corrections in the Casino of any nature shall be
required by reason of any laws, ordinances, rules or regulations now or
hereafter in force, or by order of any governmental or municipal power,
department, agency, authority or officer ("Legal Requirements"), such repairs,
additions, changes or corrections may, whether or not provided for in the Annual
Plan, be made by or at the direction of Manager and paid for from the Bank
Account(s), the Capital Replacement Fund (in the case of expenditures for
Capital Replacements or Capital Improvements) or other sources if such Legal
Requirement was not known to Manager at the time of submission of the then
effective Annual Plan, and the cost thereof shall be paid by Owner, or Owner
shall replenish the Bank Account(s), the Capital Replacement Fund or such other
source, as the case may be, on demand.
7.12. Disbursement on Termination or Expiration. All amounts held in
the Capital Replacement Fund shall be distributed pursuant to the provisions in
the Authorized Lease and Casino Operating Contract regarding the Capital
Replacement Fund. Upon the expiration or termination of this Agreement, all
amounts then held in the Capital Replacement Fund shall be distributed pursuant
to the provisions in the Authorized Lease and Casino Operating Contract
regarding the Capital Replacement Fund and following such distribution, any sums
remaining may be applied to any amounts then due and payable to Manager
40
under this Agreement, and thereafter, any sums remaining shall be paid over to
Owner. If Manager receives any conflicting or adverse claims or demands made in
connection with the application of any or all of the amounts held in the Capital
Replacement Fund pursuant to this Agreement, the Casino Operating Contract or
the Authorized Lease, Manager shall be entitled, at its option, to refuse to
comply with any such claims or demands so long as the disagreement shall
continue and in so doing Manager shall not be liable for its failure or refusal
to comply with such conflicting or adverse claims or demands until the rights of
the claimants have been adjudicated finally or the differences adjusted among
the claimants and Manager shall have been notified thereof in writing signed by
all such claimants. Manager also shall have the right to bring an action in
interpleader to obtain the right to pay all or any such portion of the amount
then held in the Capital Replacement Fund to a court of competent jurisdiction,
deducting from said sum the costs incurred in bringing such an action.
7.13. Occupancy Agreements
(a) Terms of Occupancy Agreements. Manager shall have full authority to
enter into leases, concessions, licenses and other forms of agreement for the
occupancy (collectively and separately, "Occupancy Agreements") of commercial
areas of the Casino (including without limitation, restaurant, cocktail lounge,
retail shops, automobile parking and other accessory services) in the name of
and on behalf of Owner. Manager's authority with respect to the Occupancy
Agreements is subject to the following provisions, unless Owner otherwise
consents to a modification thereof:
(i) the term of such Occupancy Agreements shall not
extend beyond the scheduled expiration of this
Agreement;
(ii) such Occupancy Agreements may be terminated by Owner,
at Owner's option, without penalty or premium, upon
not more than ninety (90) days' notice in the case of
any termination of this Agreement prior to its
scheduled expiration;
(iii) such Occupancy Agreements shall require the occupant
to be solely responsible for all damage to persons or
property occurring within its premises and to waive
any claim against Owner with respect thereto;
41
(iv) such Occupancy Agreements shall require the occupant
to maintain commercial general liability insurance,
and, if alcoholic beverages are served on such
premises, liquor liability insurance in an amount not
less than FIVE MILLION AND 00/100 DOLLARS
($5,000,000), naming Owner, Landlord and the City of
New Orleans as additional insureds; and shall further
require that all insurance maintained by the occupant
be primary to any insurance maintained by Owner and
waive any right of subrogation against the Owner;
(v) such Occupancy Agreements shall require the occupant
to indemnify, defend and hold Owner harmless from and
against any and all claims, losses, liabilities and
damages resulting or arising in any manner, in whole
or in part, out of its use or occupancy of its
premises;
(vi) such Occupancy Agreements shall require the occupant
to recognize any and all prior rights granted by
Owner pursuant to any Authorized Mortgage, including
without limitation the Mortgage; and
(vii) such Occupancy Agreements shall require the occupant
to comply with all Legal Requirements applicable to
the conduct of its business at the Casino, and shall
be terminable by Owner or Manager if the occupant
breaches or fails to perform any material obligation
or undertaking to be performed by occupant thereunder
after reasonable opportunity to cure any such breach
or default.
(b) Effects of Occupancy Agreements on this Agreement. If any Occupancy
Agreements should be entered into by Manager on behalf of the Owner, then, for
so long as such Occupancy Agreements may remain in effect:
(i) only the rent paid by the occupant shall be deemed
Gross Revenues under this Agreement;
(ii) there shall be excluded from the definitions of
Operating Costs and Ownership Costs any such costs as
are paid by the occupant;
42
(iii) employees of the occupied premises shall not be
required to be employees of Manager or Owner; and
(iv) Owner agrees to look solely to the occupant, and any
insurance which may be maintained by the occupant, or
to Owner's own insurance, for any loss, cost or
damage relating to or arising out of the premises
thereby affected, and shall not hold Manager
responsible therefor in any respect.
7.14. Transactions with Affiliates. Subject to the restrictions in the
Indenture, Manager may enter into contracts or agreements for goods or services
to be provided to the Casino, including any Occupancy Agreements, with any
Affiliate of Manager on terms and conditions, and for such price or
consideration, which are no less favorable to Owner than could be obtained from
persons or entities that are not Affiliates of Manager.
ARTICLE 8.
FISCAL MATTERS
8.01. Accounting Matters and Fiscal Periods
(a) Books and Records. Books and records reflecting Casino operations
shall be kept by Manager at the Casino or at Manager's offices in New Orleans,
Louisiana in accordance with Casino Standard Accounting Principles and the
following:
(i) Manager recognizes the rights of Landlord's Accepted
Auditor pursuant to the Authorized Lease and the LGCB
and its authorized representatives pursuant to the
Casino Operating Contract to inspect such books and
records;
(ii) as a condition to Landlord and the City of New
Orleans being third party beneficiaries hereof
pursuant to Article 27.03, it shall be required that
Landlord and the City of New Orleans agree that, for
so long as such books and records are made available
to Landlord's Accepted Auditor as provided in the
Authorized Lease and the reasonable travel and
lodging expenses of the Accepted Auditor are paid by
Owner, such books and records, to the extent
permitted by the LGCB and
43
the Authorized Lease, may be kept or maintained at
the national or regional offices of Manager's
Affiliates;
(iii) Owner shall be solely responsible to maintain
ownership level books and accounts reflecting
Ownership Costs and Owner's tax and accounting
matters; provided, however, that if Owner elects or
consents to have Manager's Affiliate maintain such
books and accounts for an agreed Accounting Fee, such
books and accounts may, if and to the extent legally
permitted, be maintained at the offices of Manager's
Affiliate as provided above;
(iv) Owner's and Manager's respective independent
accounting firms shall each have the right and
privilege of examining said books and records (during
normal working hours (Monday-Friday) upon no less
than forty eight (48) hours advance written notice);
and
(b) Audit. A certified audit of Casino operations shall be performed
within ninety (90) days after the end of each Fiscal Year, and upon termination
or expiration of this Agreement. Additionally, a certified audit of Gross Gaming
Revenue (as defined in the Casino Operating Contract) shall be performed
quarterly within thirty (30) days after the end of each Fiscal Quarter. Such
audit of Gross Gaming Revenue shall be performed by Deloitte & Touche LLP, or
such other accounting firm as may be selected by Owner and approved by Manager
in writing, such approval not to be unreasonably withheld; provided that nothing
herein shall restrict Owner from hiring any other accounting firm or firms to
perform any accounting, audit or other services. During such audit and review
periods, Manager agrees that each of the LGCB and its authorized representatives
pursuant to the Casino Operating Contract and Landlord's Accepted Auditor shall
have the right to retain an independent auditor to participate with the selected
Accountant to examine, audit, inspect and transcribe the Casino's books and
records. The determination of such accounting shall, unless appealed to
arbitration, be conclusive and binding on the parties as to all matters properly
addressed thereby, and Owner and/or Manager shall, promptly upon receipt
thereof, adjust between them, any over or underpayment made or received by
either of them, as the case may be, during the audited period. The cost of
44
accounting services delivered by any Accountants selected by Manager shall be an
Ownership Cost.
(c) Fiscal Year. The fiscal year (the "Fiscal Year") of the Casino
shall be the calendar year; the fiscal quarter (the "Fiscal Quarter") of the
Casino shall be the calendar quarter; and the fiscal month (the "Fiscal Month")
of the Casino shall be the calendar month. On or before the twenty-fifth (25th)
day of each full calendar month following the Opening Date, Manager shall
furnish Owner with a detailed operating statement setting forth the results of
Casino operations. There is attached hereto as Exhibit "B" a form of the
operating statement currently utilized by Manager which reflects the results of
the prior month of operations as well as the cumulative year-to-date results of
operations. The form of the operating statement may be modified from time to
time by Manager at its discretion to reflect changes adopted by Manager's
Affiliates for accounting for casinos managed by Manager's Affiliates. The
fiscal periods adopted by Manager are referenced in this Agreement as "Fiscal
Month," "Fiscal Quarter," and "Fiscal Year," respectively. The term "Fiscal
Period" shall mean a Fiscal Year, Fiscal Quarter or Fiscal Month, as the context
requires.
8.02. Approved Budget
(a) Annual Plan. Manager annually shall prepare, for Owner's review and
approval, an annual plan (as proposed by Manager and approved by Owner, or
revised from time to time pursuant to Article 8.02, the "Annual Plan") for the
Casino. The Annual Plan for the first whole or partial Fiscal Year following the
Opening Date will be prepared by Manager and presented to Owner not less than
sixty (60) days before the Opening Date. The Annual Plan for each subsequent
Fiscal Year during the Term, shall be prepared and submitted to Owner not later
than sixty (60) days before the beginning of such Fiscal Year. The Annual Plan
for the Casino will consist of the following:
(i) a statement of the estimated income and expenses for
the coming Fiscal Year, including estimates as to
Gross Revenues and Operating Costs for such Fiscal
Year, such operating budget to reflect the estimated
results of the operation during each Fiscal Month of
the subject Fiscal Year;
45
(ii) either as part of the statement of the estimated
income and expenses referred to in the preceding
clause (i), or separately, budgets (and timetables
and requirements of Manager) for:
(A) repairs and maintenance;
(B) Capital Replacements;
(C) Operating Equipment;
(D) advertising and business promotion programs
for the Casino;
(E) the estimated cost of Promotional
Allowances;
(iii) a business and marketing plan for the subject Fiscal
Year; and
(iv) the Minimum Balance which must remain in the Bank
Account(s) and the House Bank as of the end of each
Fiscal Month during the Fiscal Year to assure
sufficient monies for working capital purposes, the
House Bank and other expenditures authorized under
the Annual Plan subject to adjustment pursuant to
Article 8.03(a).
References herein to the "Budget," or to budgeted items, contained in the Annual
Plan, refer to the budget and budgeted amounts contained in the Annual Plan.
(b) Review. In connection with the submission of the Annual Plan to
Owner, Owner will meet with Manager within twenty (20) days from the date the
proposed Annual Plan is delivered to Owner to have an in-depth review,
including, after the first full Fiscal Year, a comparison with the previous
Fiscal Year's performance of the Casino and a discussion of marketing strategy,
identification of markets and the proposed expenditures contained in the Annual
Plan. In addition, after the Annual Business Plan (as defined in the Authorized
Lease) has been submitted to Landlord, Owner and Manager will meet with Landlord
to discuss those items of the Annual Business Plan, as provided in the
Authorized Lease, addressing marketing, city revenues, and other relevant
issues.
(c) Owner's Approval. The Annual Plan will be subject to the approval
of Owner, which will not be unreasonably withheld or delayed. It is the
intention
46
of the parties to complete the review and approval of the proposed Annual Plan
no later than thirty (30) days prior to the Opening Date and commencement of
each Fiscal Year. Owner shall be required to approve or disapprove each proposed
Annual Plan within thirty (30) days after the date of delivery to Owner of each
such proposed Annual Plan by providing written notice to Manager. To be
effective, any notice which disapproves a proposed Annual Plan must contain
specific line item objections thereto in reasonable detail. If Owner fails to
provide such written notice to Manager of any specific objections to a proposed
Annual Plan within such thirty (30) day period, such Annual Plan shall be deemed
to have been approved as submitted. Owner shall review the Budgets contained in
the Annual Plan on a line-by-line basis. If Owner disapproves or raises any
objections to any line items contained in the proposed Annual Plan or any
revisions thereto, until otherwise mutually agreed, the undisputed portions
(and, in the case of the Annual Plan for the first full Fiscal Year only,
disputed portions, until such time as any disputed portion is resolved by
arbitration or joint agreement) of the proposed Annual Plan shall be deemed to
be adopted and approved. In the case of any Annual Plan after the Annual Plan
for the first full Fiscal Year, the item corresponding to the disputed item and
contained in the Annual Plan for the preceding Fiscal Year shall be substituted
in lieu of the disputed portions of the proposed Annual Plan. In each instance
where portions of the Annual Plan from the preceding Fiscal Year are deemed to
be the Annual Plan in effect until a new Annual Plan is approved, the Budget
items contained in the Annual Plan for the preceding Fiscal Year shall be
automatically increased or decreased by a percentage equal to the percent of
increase or decrease in the CPI during the preceding Fiscal Year. Calculation of
the percent of increase or decrease in the CPI shall be made by Manager based
upon the then most recently published CPI data at the time the calculation is
made. If, notwithstanding such CPI increase, Manager and Owner do not reach
agreement as to mutually acceptable Budgets within thirty (30) days after
delivery of objection by Owner, the line item(s) of the Annual Plan objected to
by Owner shall be submitted to and resolved by arbitration in accordance with
Article 20.02 and Manager shall provide Landlord with notice of the submission
to arbitration.
(d) Compliance. Manager shall be permitted to reallocate part or all of
the amount budgeted with respect to any line item to another line item in the
same Department, but may not reallocate from one Department to another
Department. Manager shall also be entitled to make expenditures on behalf of
Owner not
47
authorized under the then applicable Annual Plan, subject to reimbursement by
Owner on demand, only (unless otherwise approved by Owner):
(i) in case of emergencies;
(ii) to the extent necessary to comply with Legal
Requirements or Casino Operational Standards;
(iii) to pay for the actual cost of any utilities, fuel,
fees for Licenses or Permits, insurance or
Impositions;
(iv) to pay for uninsured liabilities, including without
limitation, uninsurable claims (such as employee
claims, environmental and civil rights claims), the
amount of any uninsured or deductible portion of any
insured claim, and any assessments relating to health
or other insurance programs having cost-plus or self
insurance features;
(v) to pay for additional Compensation paid pursuant to
any collective bargaining agreement negotiated with a
union or changes in Key Casino Personnel or Casino
employee Compensation levels;
(vi) to pay for Ownership Costs incurred after approval of
an Annual Plan;
(vii) to pay for any gaming, sales or use tax deficiencies
assessed by a taxing authority; and
(viii) to pay for additional costs permitted by Article
8.02(e).
(e) Adjustment to Annual Plan
(i) If Manager encounters circumstances which require
unbudgeted and unexpected expenditures not foreseen at the time of preparation
of the Annual Plan and which Manager deems reasonably necessary, in addition to
and without limiting the instances described in Article 8.02(d) and without
regard to the requirements of Article 8.02(c), Manager may, without Owner's
approval, make such expenditures for so long as the same do not, in any Fiscal
Quarter, exceed one hundred fifteen percent (115%) of the amount budgeted for
the
48
Department to which such expenditures relate or, if greater, with respect to
expenditures for the slot machines, table games, other games, food and/or
beverage Departments or non-gaming development, such expenditures will not
exceed an amount such that the ratio of the amount so expended to the revenues
of the affected Department exceeds the ratio (expressed as a percentage) of the
expenses budgeted to the revenues forecast, rounded up to the next full
percentage point. If Manager expects that such expenditures will in any future
Fiscal Quarter exceed the greater of (A) one hundred fifteen percent (115%) of
the amount budgeted for the Department to which such expenditures relate, or (B)
an amount such that the ratio of the amount so expended to the revenues of slot
machines, table games, other games, food and/or beverage Departments or
non-gaming development will exceed the ratio (expressed as a percentage) as
forecast, rounded up to the next full percentage point, Manager shall have the
right, from time to time during such Fiscal Year, to submit a revision to the
Annual Plan to Owner for approval, which approval shall not be unreasonably
withheld or delayed. Owner will review all proposed revisions to an Annual Plan
on a line-by-line basis in the same manner as the initial Annual Plan. If Owner
shall disapprove or raise any objections to any items contained in revisions to
an Annual Plan, Manager shall continue to use all reasonable efforts to comply
with the Annual Plan until a proposed revision has been approved or this
Agreement is terminated. If no revision is approved before the expiration of
thirty (30) days after any revision is submitted to Owner for approval, the
revision shall not be deemed approved, and any disagreement between Owner and
Manager with respect to the proposed revision shall be resolved by arbitration
in accordance with Article 20.02.
(ii) Manager shall not be deemed to have made any guarantee or
warranty of the fiscal estimations set forth in the Annual Plan. The parties
acknowledge that the Annual Plan is intended to set forth objectives and goals
based on Manager's best judgment of the facts and circumstances known by Manager
at the time of preparation.
(iii) Manager and Owner agree to meet monthly to discuss (A)
the then-existing Annual Plan, (B) any adverse variances of revenues or
expenditures from the Annual Plan, (C) Manager's recommendations for
modifications to the Annual Plan in view of any adverse variances of revenues or
expenditures from the Annual Plan, and (D) any other modifications to the Annual
Plan anticipated by Manager or Owner.
49
8.03. Bank Account(s); House Bank
(a) Bank Account(s). Pursuant to a Banking Resolution (the "Banking
Resolution") in the form attached hereto as Exhibit "E", Owner shall establish
an operating account(s) in its name at a bank (with retail offices in the
immediate geographic vicinity of the Casino) approved by Manager (the "Bank
Account(s)") as Manager determines to be necessary or convenient for the
operation of the Casino. Manager's designees shall be the only parties
authorized to draw upon the Bank Account(s). At the time of the Opening Date,
Owner shall have an aggregate amount of not less than TEN MILLION AND 00/100
DOLLARS ($10,000,000) (or such other amount as may be required by the Gaming Act
or any regulations or orders issued by the LGCB) on deposit in the Bank
Account(s) and/or available under its revolving credit facility pursuant to the
terms of the Credit Agreement which shall serve as working capital, excluding
the House Bank, for Casino operations. Owner shall establish, prior to Opening
Date, a House Bank which shall include at least FIVE MILLION AND 00/100 DOLLARS
($5,000,000) in cash on the Opening Date. Subject to the requirements of the
Gaming Act or any regulations or orders issued by the LGCB, (i) the TEN MILLION
AND 00/100 DOLLAR ($10,000,000) amount referred to above may be adjusted jointly
by Manager or Owner at any time (as so adjusted, the "Minimum Balance") and (ii)
the House Bank may be adjusted jointly by Manager and Owner at any time. Owner
shall furnish Manager immediately, upon demand, with sufficient funds to make up
any deficiency in the Minimum Balance and/or House Bank (as so adjusted) or to
pay any Ownership Costs or Operating Costs of the Casino then due to the extent
there are insufficient funds in the Bank Account(s). Manager acknowledges that
it is advantageous to Owner to have advance notice of funding needs so that
borrowings under the Credit Agreement may be arranged at lowest costs. Manager
agrees to use commercially reasonable efforts to provide advance notice to Owner
of anticipated needs for additional funds to be deposited in the Bank Account(s)
or House Bank not less than five (5) days prior to the actual need for such
funds.
(b) Control of Bank Account(s). Manager shall have absolute control of
the Bank Account(s). Manager shall have absolute control of the House Bank. All
Gross Revenues shall pass through the Bank Account(s). All amounts on deposit in
the Bank Account(s) shall be invested in interest-bearing investments, to the
extent that availability of funds, when required, is not thereby impaired, in
securities issued or guaranteed by the United States government or in securities
50
issued by any state or federally chartered bank and insured by the United States
government or, subject to Owner's consent, any other investment proposed by
Manager. Interest earned on amounts deposited in the Bank Account(s) shall be
credited to the Bank Account(s) and shall be for the benefit of Owner.
(c) No Commingling of Funds. Manager shall not commingle any funds in
the Bank Account(s), the Capital Replacement Fund, the House Bank, any payroll
accounts, xxxxx cash funds or other Casino funds with any funds of Manager or
any Affiliate of Manager.
(d) Reconciliation of Bank Account(s). Manager shall provide Owner
copies of bank statements with respect to the Bank Account(s) as and when
received by Manager from the applicable bank(s), and shall provide Owner a
reconciliation of such bank statements to the books and records reflecting
Casino operations within twenty (20) days of Manager's receipt of such bank
statements.
8.04. Internal Controls
(a) Manager shall establish a system of internal controls to perform
the administrative and accounting procedures required by Section 9.27 of the
Casino Operating Contract.
(b) Owner shall cause the Accountants to prepare an annual compliance
report addressing the adequacy of the design of such internal control system and
the effectiveness of the implementation thereof as required by Section 9.27 of
the Casino Operating Contract. Manager agrees to cooperate with Owner and the
Accountants in the preparation of such compliance report.
(c) Upon Owner's request, Manager shall assist Owner in (i) advising
the LGCB in writing as to the manner in which each material matter or material
item of non-compliance identified in the compliance report has been corrected or
is proposed to be corrected, and (ii) providing a timetable for completing each
material matter or material item of non-compliance not then corrected.
51
ARTICLE 9.
FEES TO MANAGER
9.01. Management Fee
(a) Base Fee and Incentive Fee. 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. The second
component (the "Incentive Fee") shall mean (i) for the six (6) month period
ending on each March 31 after the Opening Date (the "Six Month Period"), an
amount equal to seven percent (7.0%) of Consolidated EBITDA for such Six Month
Period in excess of FORTY MILLION AND 00/100 DOLLARS ($40,000,000) and (ii) for
the twelve (12) month period ending on each September 30 after the Opening Date
(the "Twelve Month Period"), an amount equal to (A) seven percent (7.0%) of the
aggregated Consolidated EBITDA for the Twelve Month Period in excess of
SEVENTY-FIVE MILLION AND 00/100 DOLLARS ($75,000,000), less an amount equal to
(B) the Incentive Fee, if any, paid to Manager with respect to the Six Month
Period which is included in such Twelve Month Period; provided, however, that in
no event shall the amount obtained by subtracting the amount in (B) from the
amount in (A) be less than zero. Manager will refund to Owner all fees paid by
Owner under clause (i) above for any Six Month Period if Consolidated EBITDA
does not exceed SEVENTY-FIVE MILLION AND 00/100 DOLLARS ($75,000,000) for the
Twelve Month Period which includes such Six Month Period. There shall be
appropriate proration of each such threshold for any partial year following the
Opening Date and preceding the termination of this Agreement, as the case may
be. For purposes of computing the Incentive Fee, any lump sum payments
(excluding Rent, Gross Gaming Revenues, Gross Non-Gaming Revenues, any
Contingent Payment and the Minimum Payments (as each such term is defined in the
Authorized Lease)) due under the Authorized Lease or the Casino Operating
Contract from and after the date hereof shall be regarded as capital
expenditures and amortized over the term of such Authorized Lease or Casino
Operating Contract, as the case may be, on the Owner's financial statements, and
shall not be deducted from Gross Revenues, or if deducted, shall be added back,
in determining Consolidated EBITDA. Subject to the priorities set forth in
Article 9.01(b), the Base Fee shall be paid monthly, in arrears, on the first
day of each Fiscal Month following the Opening Date. The Incentive Fee shall be
paid subject to the priorities set forth in Article 9.01(b). Manager shall be
authorized to pay the Management Fee (as well as the
52
Accounting Fee provided for in Article 9.02, Travel Fee provided for in Article
7.03(c), additional fees provided for in Article 9.03, System Fees provided for
in Article 11.01 and any other amounts payable to Manager pursuant to the terms
of this Agreement) to itself directly by withdrawal from the Bank Account(s) in
accordance with the terms of this Agreement. The Management Fee, Accounting Fee,
System Fees, and reimbursable amounts due for the final Fiscal Month of the Term
shall be paid on or before termination subject to the priorities set forth in
Article 9.01(b).
(b) Priorities of Payments. The Base Fee shall be payable to Manager
monthly. 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 payments, if any, on those certain Senior
Subordinated Notes due 2009 with Contingent Payments of Owner (the "New Bonds")
to be issued pursuant to the Plan in the aggregate non-contingent principal
amount of ONE HUNDRED EIGHTY-SEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($187,500,000) and those certain Senior Subordinated Contingent Notes
due 2009 of Owner to be issued pursuant to the Plan (the "New Contingent Bonds"
and, together with the New Bonds, the "Senior Subordinated Debentures"). No Base
Fee shall be paid, and no Incentive Fee shall accrue or be paid, during or with
respect to any period in which Owner is in default with respect to interest or
principal payments under the Senior Subordinated Debentures or the Bank Loans;
provided that any unpaid Base Fee so deferred shall be payable to Manager at
such time as any such default is cured.
(c) Deferral of Management Fees
(i) Owner and Manager acknowledge that the New Bonds provide
for six (6) elections by Owner to pay semiannual interest in kind rather than in
cash for the first three (3) year period of the term of the New Bonds and
further require Owner to pay semiannual interest in kind on any interest payment
date thereafter if Consolidated EBITDA for the twelve (12) month period ending
on the last day of the Semiannual Period (as defined in the Indenture for the
New Bonds) immediately preceding such interest payment date did not exceed
TWENTY-EIGHT MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($28,500,000)
(collectively, the "PIK Elections"). If Owner is required by the Indenture to
cause Base Fees to be deferred and/or disgorged as a result of a PIK
53
Election by Owner or is required by the Credit Agreement to defer Base Fees as a
result of a deferral of principal amortization, Manager hereby consents and
agrees to such deferrals and/or disgorgements of Base Fees.
(ii) Owner shall give written notice to Manager of each PIK
Election and specify in such notice the amount of Management Fees required to be
deferred and/or disgorged, if any, under the Indenture and/or the Credit
Agreement (the "Deferral Amount"). Such Deferral Amount shall first be applied
against any Base Fees then unpaid and thereafter accruing during the applicable
six (6) month period for such PIK Election. To the extent any such Deferral
Amount shall exceed the amount of any paid or unpaid and accrued Base Fees for
the applicable six (6) month period for such PIK Election, Manager shall refund
to Owner the amount of such Deferral Amount not to exceed the amount of any Base
Fees previously paid to Manager with respect to any portion of the applicable
six (6) month period for such PIK Election paid or accruing prior to Owner's PIK
Election. HET and HOCI shall enter into an agreement as of the date hereof
pursuant to which HET and HOCI will unconditionally guarantee Manager's
obligation to refund to Owner any deferred Management Fees to the extent Manager
is required to refund to Owner any deferred Management Fees pursuant to this
Article 9.01(c)(ii) or Article 9.01(a) hereof.
(iii) Owner and Manager acknowledge that the Indenture and the
Credit Agreement require Incentive Fees to be deferred during any corresponding
PIK Election. Manager hereby consents to such deferrals of Incentive Fees as may
be required by the Indenture and Credit Agreement.
(iv) Any Management Fees deferred pursuant to Article
9.01(c)(ii) or (iii) hereof shall bear interest at eight percent (8.0%), which
shall accrue until such deferred Management Fees are repaid. In the case of Base
Fees, interest shall accrue (A) if such deferred Base Fees are from previously
unpaid Base Fees pursuant to Article 9.01(c)(ii) hereof, from the date such Base
Fees were otherwise payable under this Agreement or (B) if such Base Fees were
refunded by Manager to Owner pursuant to Article 9.01(c)(ii) hereof, from the
date such Base Fees were refunded by Manager, as applicable.
(v) Following such time as Owner has achieved Consolidated
EBITDA of not less than SIXTY-FIVE MILLION AND 00/100 DOLLARS ($65,000,000) for
the preceding twelve (12) month period, any Base Fees deferred or refunded
pursuant to this Article 9.01(c) hereof together with interest thereon
54
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 AND 00/100 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 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); provided that if any
uncured payment default exists under the Indenture or any default occurs which
results in an acceleration under the Indenture, or if any uncured default exists
under Article 17.01(c), (d), (e), (f) or (g) hereof, any accrued but unpaid Base
Fees or Incentive Fees shall be subordinated to payments pursuant to the
Indenture in the following order:
(a) fixed interest pursuant to the Indenture;
(b) principal amounts pursuant to the Indenture;
(c) Base Fee;
(d) contingent payments pursuant to the Indenture;
(e) amounts advanced under the Completion Guarantees (as
defined in the Indenture); and
(f) Incentive Fee.
9.02. Accounting Fee. If accounting services for the Casino or Owner
shall be performed by employees of Manager other than Casino Employees, Owner
shall pay to Manager an annual accounting fee (the "Accounting Fee") for such
services to be established as part of the Annual Plan. The Accounting Fee shall
be payable in equal monthly installments, in arrears, at the time of each
payment of the Management Fee.
9.03. Property Tax, Income Tax, Insurance, Benefit Plan Administration
and Other Services. If Owner elects and Manager agrees to have Manager or any
55
of Manager's Affiliates (i) place insurance for the Casino, provide ownership
level accounting services through the accounting and tax accounting departments
of Manager's Affiliate, or administer insurance related services through the
risk management department of Manager's Affiliate, (ii) monitor and pay real
estate and tangible personal property tax assessments against the Casino through
the real estate tax department of Manager's Affiliate, (iii) administer any
employee benefit plan or savings and retirement plan established and maintained
by Owner through the employee benefits department of Manager's Affiliate, or
(iv) provide accounting and other services and related computer systems which
are not Manager Matters, then Owner shall pay the service fees from time to time
established for such services as and when billed. All such service fees shall be
on such terms and conditions and for such amounts as are mutually agreed to by
Owner and Manager.
9.04. Proprietary Systems.
The Proprietary Systems owned by Manager or licensed to Manager by
any of Manager's Affiliates, when used in the Casino, shall be provided by
Manager at cost, and Manager and/or any Manager's Affiliate shall not make a
profit on assessments for the use of such Proprietary Systems. This shall allow
Manager to recover past costs of systems that have been developed by Manager or
its Affiliates by assessment against the Casino of a charge for the use of such
system when used in connection with the Casino.
ARTICLE 10.
DISBURSEMENTS
10.01. Disbursements of Net Revenues. As and when received by Manager,
Gross Revenues, exclusive of any amount withheld to pay taxes, shall be
deposited in the Bank Account(s). Manager shall disburse on a monthly basis, for
and on behalf of Owner as invoices are received or amounts become due, funds
from the Bank Account(s) to pay:
(a) the following fees and expenses of Manager:
(i) the Management Fee in accordance with the provisions
of Article 9.01;
56
(ii) the Accounting Fee, Travel Fee and, if applicable,
tax, insurance, employee benefit plan administration
or other service fees or other expenses provided in
Article 9.03;
(iii) System Fees;
(iv) reimbursable expenses due Manager under this
Agreement; and
(v) any Termination Fee due to Manager under this
Agreement (if applicable);
(b) other Operating Costs;
(c) other Ownership Costs (as directed by Owner); and
(d) to Owner all amounts necessary to pay debt service (interest and
principal) relating to the Casino, whether unsecured or secured by any mortgage
or deed of trust encumbering the Casino.
10.02. Adjustment to Bank Account(s). After the disbursements pursuant
to Article 10.01 and establishment of any reasonable reserves for future
disbursements pursuant to Article 10.01 as Manager deems necessary, taking into
account anticipated cash flow and Operating Costs and Ownership Costs at the
Casino, any excess funds remaining in the Bank Account(s) over the Minimum
Balance (and such reserves) shall be disbursed to Owner on a periodic basis as
frequently as may be mutually agreed by Owner and Manager, but not less than
monthly. Correspondingly, and without limiting Owner's obligation to provide any
funds required by this Agreement at all times, if the Bank Account(s) do not
contain sufficient funds to pay all obligations of Owner under this Agreement
when and as due, Manager may pay any or all such obligations on behalf of Owner.
To the extent Manager elects to pay such expenses on behalf of the Owner, Owner
shall reimburse such amount to Manager immediately upon presentation of an
invoice for such expense.
10.03. Payment of Ownership Costs. Except when paid by Manager, Owner
shall pay for all Ownership Costs (and, should Net Revenues be insufficient to
pay for same, all Operating Costs) as same become due and payable and before any
interest or penalty may attach for non-payment thereof, or action be commenced
against the Manager for enforcement thereof, or foreclosure of any lien therefor
against the Casino. Owner shall be entitled to contest any Imposition
57
so long as no liability to Manager results therefrom, the costs of such contest
are not deducted from Net Revenue to determine Consolidated EBITDA, no lien
against the Casino is foreclosed, and no interest or penalty results.
10.04. Payment of Gaming, Sales and Other Operational Payments and
Taxes. Manager shall be responsible to file all necessary returns and remit from
Gross Revenues to the governmental authorities having jurisdiction over the
Casino all compensation owed to the LGCB under the Casino Operating Contract,
all sales taxes, excise taxes, use taxes, gross receipts taxes, admission taxes,
entertainment taxes, tourist taxes and similar taxes and charges required by law
to be collected from patrons or guests as part of the sales price for goods,
services or entertainment at the Casino. Manager reserves the right to contest
the amount of any such payments or taxes; provided that Owner shall be permitted
to participate in any such contest. Manager shall have no liability for the
payment of any fines, penalties, interest or other charges or assessments for
any underpayment or overpayment or miscalculation of such payments or taxes
unless caused by the gross negligence or willful misconduct of Manager's or
Manager's Affiliate's employees charged to administer such payments, recognizing
that the manner of calculating and reporting such taxes is often vague and
subject to broad administrative discretion. All costs of any contest and all
such fines, penalties, interest or other charges or assessments shall be
Ownership Costs. Owner shall pay to Manager any sales, gross receipts or similar
tax imposed upon Manager, calculated on any payment or payments required of
Owner under this Agreement, unless the tax is an alternative to an income tax
otherwise payable by Manager. Any such payment shall be made at the time of each
payment to Manager, or, if not so paid, within ten (10) days of any request by
Manager therefor.
ARTICLE 11.
XXXXXX'X SERVICES
11.01. Nature of Services
(a) System Fees. The services described in this Article 11.01
("Xxxxxx'x Services") shall be provided by Manager and accepted by Owner, with
individual charges ("System Fees") to accrue commencing as of the Opening Date
at the prevailing rates then being charged to domestic Xxxxxx'x Casinos. It is
understood
58
that the System Fees for Xxxxxx'x Services shall be due and payable monthly and
shall be subject to increase or decrease as hereinafter set forth.
(b) Marketing Contribution. The presently established System Fee for
the Casino shall be a marketing contribution of four-tenths of one percent
(0.4%) of monthly Net Revenues payable monthly, in arrears. The marketing
contribution may be used by Manager for advertising services and materials;
special promotions which may target particular casinos; public relations,
including without limitation, guest utilization and satisfaction surveys and
general or specific market research; 800 number telephone technology and
services; data base/direct marketing; and overhead incurred in the
administration of the foregoing (other than costs of maintaining Manager's
principal offices at 0000 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx), including without
limitation compensation, travel expense and costs of goods and services consumed
in marketing program administration. The treatment of the Casino with respect to
such marketing contribution will be no less favorable than is granted to other
participating casinos owned or managed by Manager's Affiliates or licensed to
operate under the System Marks. It is the intent of the foregoing sentence to
allow pooling of funds that would otherwise be expended as a marketing cost at
each casino, into a common fund for the benefit of all casinos operated under
the System Marks that will be used for the above described purposes.
(c) Limitations. System Fees charged under this Agreement will be the
same fees charged to all Xxxxxx'x Casinos and shall be charged on the same basis
as such fees are charged to Xxxxxx'x Casinos, provided that, owing to the
different characteristics of certain casinos (for example, casinos having hotel
rooms versus casinos not having such rooms; riverboat casinos versus land based
casinos) certain System Fees may not apply to all casinos. Increases, decreases,
additions or deletions in charges for Xxxxxx'x Services may be made from time to
time on a system-wide basis for casinos having similar characteristics. If
Manager extends other services to casinos on a system-wide basis and if a
uniform charge or charges for such services shall be applicable to other
Xxxxxx'x Casinos having characteristics similar to the Casino, then such other
services shall also be made available to the Casino.
(d) Accounting. Funds collected as System Fees shall, upon payment,
become the sole property of Manager, may be commingled with Manager's or
Manager's Affiliate's other funds, and shall not be segregated or subjected to
any
59
trust, fiduciary or other limitation, and Owner shall have no claim against
Manager whatsoever to require any particular application thereof. Owner shall be
provided annually, within ninety (90) days after the close of each Fiscal Year,
with an accounting of receipts and expenditures of the marketing contribution
for all participating casinos as a whole.
ARTICLE 12.
SYSTEM XXXX SIGNS AND SYSTEM MARKS
12.01. Signs. Owner agrees to maintain, in accordance with Legal
Requirements, all System Marks signs required by Manager. Owner is solely
responsible for all costs of purchasing, leasing, transporting, constructing
and/or installing the required System Marks signs, as well as for all costs of
dismantling and removing such signs at the end of the Term or earlier
termination hereof (if the Casino should cease to be authorized to use the
System Marks).
12.02. System Marks
(a) System Marks. It is understood that no rights or interests in the
names "Xxxxxx'x(C)," "Total Gold," "Xxxxxx'x Gold Card," "WINet" or any other
proprietary names or marks owned by Manager or any of Manager's Affiliates are
being granted by this Agreement. Owner agrees to recognize the exclusive right
of ownership of Manager in and to the Xxxxxx'x System and all service marks,
trademarks, copyrights, trade names, patents or similar rights or registrations
now or hereafter held or applied for in connection therewith, including all such
marks, rights, names, patents or registrations associated with Xxxxxx'x Casinos
(the "System Marks"). Manager agrees that the Casino will, from and after the
Opening Date, and subject to Owner's compliance with all of its obligations
under this Agreement, be operated by Manager under the "Xxxxxx'x(C)" brand name
utilizing the System Marks. Owner acknowledges and agrees that the use of the
System Marks in connection with the operation and management of the Casino is
vested solely in Manager. Owner disclaims any right or interest in the System
Marks, regardless of the legal protection afforded thereto. Owner covenants
that, in the event of expiration or termination of this Agreement, whether as a
result of default by Manager, Owner or otherwise, Owner shall not hold itself
out, or continue operation of the Casino, as a Xxxxxx'x Casino, without the
express prior written consent of Manager, and that, unless Manager shall have so
consented to the continued use thereof, Manager may enter the Casino and at,
Owner's expense,
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may remove all signs, furnishings, printed material, emblems, slogans or other
distinguishing characteristics which are now or may hereafter be connected or
identified with any Xxxxxx'x Casino. Upon the expiration or earlier termination
of this Agreement for any reason, Owner shall likewise discontinue the use of
any and all System Marks and remove any and all items of Operating Equipment
used in connection with Xxxxxx'x Services and any Operating Supplies that bear
any System Marks. Owner shall not convey such property to any person or entity
unless such person or entity is specifically authorized in writing by Manager
(whether under license from Manager or otherwise) to use property bearing any
System Marks.
(b) Use of Name. Owner shall not use the name "Xxxxxx'x(C)," any other
System Marks, or any variant thereof in the name of any partnership, corporation
or other business entity, nor allow the use thereof by others, without the
express prior written consent of Manager. Owner shall not make reference to the
name "Xxxxxx'x(C)," any other System Marks, or any variant thereof, directly or
indirectly, in connection with a public sale or private placement of securities
or other comparable means of financing without obtaining, in each instance the
prior written approval of Manager.
(c) Confidential and Proprietary Information. Owner agrees that Manager
has the sole and exclusive right, title and ownership to: (i) its techniques and
methods of operating gaming businesses; (ii) its techniques and methods of
designing games used in gaming businesses; (iii) its techniques and methods of
training employees in the gaming business; (iv) its techniques and methods of
marketing, advertising, promotion and its technology plans, strategies and
systems; and (v) the Proprietary Systems and the data and information thereon
related to any casinos other than the Casino and the "Xxxxxx'x(C)" Gold Card
services and other customer-related services and promotions (the "Confidential
and Proprietary Information"). The Confidential and Proprietary Information has
been developed and/or acquired over many years through the expenditure of time,
money and effort, and Manager and Manager's Affiliates maintain the Confidential
and Proprietary Information as confidential and as a trade secret(s). Manager
(or Manager's Affiliate) has, over time, identified systems, data and
information that Manager (or Manager's Affiliate) considers integral to the
management of casinos and such systems, data and information shall be
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incorporated into the Casino in accordance with standards established in other
Xxxxxx'x Casinos.
(d) Casino Customer Data; Confidentiality. Owner and Manager agree that
any Casino-related data and information on the Proprietary Systems or otherwise
concerning customers of the Casino shall be jointly owned by Owner and Manager,
and Owner and Manager agree to maintain the confidentiality of such data and
information during the term of this Agreement and following any termination of
this Agreement.
(e) Return of Confidential and Proprietary Information. Upon
termination of this Agreement, Owner agrees to discontinue use of, and maintain
the confidentiality of, the Confidential and Proprietary Information and to
return to Manager any documents, notes, memoranda, lists, computer programs,
summaries and data and information which is a part of such Confidential and
Proprietary Information. Any data and information from customers of the Casino
which is related to other casinos or otherwise not Casino-related, but obtained
by Manager through management of the Casino, shall be maintained as confidential
by Owner and Manager during the term of this Agreement and following any
termination of this Agreement.
12.03. Litigation. Owner and Manager agree that in the event Owner
and/or Manager is or are the subject of any litigation or action brought by any
party seeking to restrain the use by Owner or Manager, or either of them, of any
System Marks used by Manager for or on or in connection with the Casino, any
such litigation or action shall be defended entirely by and at the expense of
Manager, notwithstanding that Manager may not be named as a party thereto. Owner
shall not have the right to bring suit against any user of any of the System
Marks. In all cases, the conduct of any suit, whether brought by Manager or
instituted against Owner and/or Manager shall be under the absolute control of
counsel to be nominated and retained by Manager, notwithstanding that Manager
may not be a party to such suit. Manager agrees and covenants to defend and hold
Owner free and harmless from, and to indemnify Owner against, any judgments or
awards of any court or administrative agency of competent jurisdiction, whether
such awards be in the form of damages, costs or otherwise, imposed against Owner
and arising from the use by Manager of any System Marks or similar rights or
registrations for, on or in connection with the Casino in accordance with the
terms of this Agreement.
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ARTICLE 13.
INSURANCE
13.01. Insurance Coverage. Owner shall have the responsibility to
maintain, at Owner's expense and at all times during the Term, all insurance
coverage required by Exhibit "C" to this Agreement, and to comply with the
insurance provisions of the Authorized Lease.
ARTICLE 14.
INDEMNIFICATION AND RELATED MATTERS
14.01. Scope
(a) Owner's Indemnity. Owner agrees to indemnify and hold Manager free
and harmless from any and all Claims for injury to persons or damage to property
by reason of any cause whatsoever, either in and about the Casino or elsewhere,
including, without limitation, any such loss, cost or damage occurring as a
result of the performance of this Agreement by Manager, its agents, employees or
independent contractors, subject to the provisions of Article 14.01(c).
(b) Reimbursement of Indemnified Amounts. Subject to the provisions of
Article 14.01(c), Owner agrees to reimburse Manager, upon demand, for any money
or other property which Manager is required or authorized by this Agreement to
pay out for any reason whatsoever, whether the payment is for Operating Costs,
Ownership Costs or any other costs, charges or debts incurred or assumed by
Manager, or any other party, or for judgments, settlements or expenses in
defense of any Claim, civil or criminal action, proceeding, charge or
prosecution made, instituted or maintained against Manager or Owner, jointly or
severally, affecting or because of the condition or use of the Casino, or acts
or failure to act of Manager, employees, agents or independent contractors of
Manager, Owner, employees, agents or independent contractors of Owner, or
arising out of or based upon any Legal Requirement, contract or award (including
without limitation any such matter relating to the hours of employment, working
conditions, wages and/or compensation of Casino Employees or former Casino
Employees, or any severance or termination benefits of such Casino Employees),
or for any other cause in connection with the Casino; provided, however, any
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litigation or action of the type described in Article 12.03 shall be excluded
from this Article 14.01(b).
(c) Limitation on Owner's Indemnity. Notwithstanding the provisions of
Articles 14.01(a), 14.01(b) and 7.03(d), Owner shall not be liable to indemnify
and hold Manager free and harmless from any such Claim not covered by insurance
and which results solely from the proven gross negligence or willful misconduct
of any of the Key Casino Personnel or the Memphis, Tennessee-based corporate
officers of Manager or Manager's Affiliate (if and to the extent that their
gross negligence or willful misconduct involves the directing of the activity in
the operation of the Casino or in Manager's performance of its obligations under
this Agreement that results in such Claim and such Claim is proximately caused
by such direction).
(d) Manager's Indemnity. Manager shall indemnify and hold Owner free
and harmless from any and all Claims not covered by insurance and which results
solely from the proven gross negligence or willful misconduct of any of the Key
Casino Personnel or the Memphis, Tennessee-based corporate officers of Manager
or Manager's Affiliates (if and to the extent that their gross negligence or
willful misconduct involves the directing of the activity in the operation of
the Casino or in Manager's performance of its obligations under this Agreement
that results in such Claim and such Claim is proximately caused by such
direction).
14.02. Defense. Owner agrees to defend, promptly and diligently, at
Owner's expense, any Claim, action or proceeding brought against Manager or
Owner, jointly or severally, arising out of or connected with any of the matters
referred to in Article 14.01, and, to the extent required by Article 14.01(a),
(b) and (c), to hold harmless and fully indemnify Manager from any judgment,
liability, loss or settlement on account thereof. Defense of any such Claim
shall be accepted within ten (10) days after the date written notice is tendered
by Manager, or if sooner, when the first action in response to any such Claim is
required. Defense shall be with counsel approved by Manager. Failure to accept
any tender of a Claim in writing within such period shall entitle Manager to
conduct such defense at Owner's sole cost and expense. If Manager is defending a
Claim pursuant to this Article 14.02 and if Manager desires to settle such
Claim, Manager shall first make a written request to Owner for authority to
settle, specifying the proposed terms and conditions of such settlement. If
Owner fails to respond in writing within ten (10) days after such notice,
Manager shall have the
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right to enter into such settlement at Owner's cost and expense. The allegation
of facts which would excuse Owner's indemnification obligation pursuant to
Article 14.01(c) shall not excuse Owner's defense obligation, and such
obligation shall continue until gross negligence or willful misconduct of the
type described in Article 14.01(c) is proven by final unappealable judgment to
have been the sole cause of liability (in which case Owner shall be entitled to
reimbursement from Manager of, and Manager hereby undertakes to reimburse Owner
for, all reasonable attorneys' fees and costs incurred in such defense and
indemnification by Manager as provided in Article 14.01(d)).
ARTICLE 15.
DAMAGE TO AND DESTRUCTION OF THE CASINO
15.01. Obligation to Restore. At its sole cost and subject to the
provisions of this Article 15, Owner agrees to repair, restore, rebuild or
replace any damage to, or impairment or destruction of, the Casino from fire or
other casualty.
15.02. Termination
(a) Fully Insured Casualties. In the event during the Term the Building
shall be destroyed or substantially destroyed by fire or other casualty or title
to the Site or Building or the Authorized Lease shall be impaired by any matter
other than a Permitted Exception and:
(i) Owner shall have maintained insurance as required by
Article 13 and shall not have committed or omitted or
suffered any other person or entity to commit or omit
any act or omission resulting in any denial of
coverage or payment thereunder; and
(ii) the cost of repairing, restoring, rebuilding and
replacing the same, or curing such title impairment,
as the case may be, shall exceed an amount equal to
one hundred percent (100%) of the proceeds of the
insurance collectible by Owner with respect to such
fire, other casualty or title impairment, as the case
may be, plus the amount of any deductible provided
for in such insurance policies;
or if such fire, other casualty or title impairment, as the case may be, shall
cause the termination of the Authorized Lease, or proceeds of property insurance
shall
65
be applied to any indebtedness secured by an Authorized Mortgage, then, in any
of such events, Owner and Manager shall each have the right and option, upon
notice served upon the other within thirty (30) days after such fire, other
casualty or title impairment, as the case may be, to terminate this Agreement.
(b) Owner-Funded Reconstruction. Anything contained in the preceding
sentence to the contrary notwithstanding, in the case of Article 15.02(a)(i) and
(ii) above, Manager shall not have the right to terminate this Agreement if:
(i) within fifteen (15) days after Owner receives
Manager's notice of termination, Owner undertakes to
pay to the insurance trustee designated by the holder
of the Authorized Mortgage with the highest priority
among Authorized Mortgages an amount sufficient to
cover the deficiency between available insurance
proceeds and the cost of repairing, restoring,
rebuilding and replacing the Building and the Site;
and
(ii) within sixty (60) days after Owner receives Manager's
notice of termination, Owner deposits the amount
described in Article 15.02(b)(i) above or provides
other assurances acceptable to Manager and the
holders of any Authorized Mortgage.
(c) Consequences of Termination. In the event of any permitted
termination by Owner or Manager pursuant to Article 15.02(a), Manager shall be
entitled to receive from Owner any amounts due or owing with respect to events
occurring prior to or in connection with termination of this Agreement (and
Owner's obligations with regard thereto shall survive such termination) but
Manager shall not be entitled to receive any Termination Fee provided in Article
17.02.
(d) Other Than Fully Insured Casualties. If the cost of curing,
repairing, restoring, rebuilding or replacing the damage, impairment or
destruction resulting from such fire, other casualty or title impairment, as the
case may be, shall be less than one hundred percent (100%) of the proceeds of
the insurance collectible by Owner with respect to such fire, other casualty or
title impairment, as the case may be, plus the amount of any deductible, or
Owner has elected to and has in fact deposited an amount equal to the deficiency
or provided other assurances as described above, and the Authorized Lease is not
terminated, and property insurance proceeds are not applied to repay any
Authorized Mortgage; or such
66
cost is greater and neither party shall have served such notice within the time
aforesaid; or, in the case of Owner, if Owner shall not have maintained or
caused to be maintained adequate insurance as required by Article 13 or shall
have caused or suffered to occur any commission or omission resulting in any
denial of coverage or payment, Owner shall be obligated, at its cost, to repair,
restore, cure, rebuild or replace such damage, impairment or destruction.
(e) Failure to Complete Reconstruction. Subject to Article 23.02, if
Owner, at any time during any period commencing with the occurrence of a Flip
Event (as defined in that certain Amended and Restated Certificate of
Incorporation of JCC Holding in effect as of the date of this Agreement) and
ending with the occurrence of a Cure Event (as defined in that certain Amended
and Restated Certificate of Incorporation of JCC Holding in effect as of the
date of this Agreement) with respect to such Flip Event, for any reason, fails
to complete any obligatory cure, repair, restoration, rebuilding or replacement
as required by Article 15.02(d) within ten (10) months after the date of
occurrence of the fire, other casualty or title impairment, as the case may be,
Manager may, at its election, terminate this Agreement due to Owner's default by
delivery of written notice to Owner without any other notice or opportunity by
Owner to cure such default and shall be entitled to collect the Termination Fee
provided in Article 17.02.
ARTICLE 16.
CONDEMNATION
16.01. Termination
(a) Closing of Casino. If the whole of the Casino shall be taken or
condemned in any eminent domain, condemnation, compulsory acquisition or like
proceeding by any competent authority for any public or quasi-public use or
purpose, or if such a portion thereof shall be taken or condemned so as to cause
the termination of the Authorized Lease, result in the acceleration of any
Authorized Mortgage, or make it imprudent or unreasonable, in Owner's opinion
(provided to Manager in writing on or before the date of such taking or
condemnation), to use the remaining portion as a casino of the type and class as
the Casino immediately preceding such taking or condemnation, or if the Casino
Operating Contract is revoked through no fault of Owner, then, in any of such
events, this Agreement shall cease and terminate as of the date of such taking,
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condemnation or revocation, as the case may be. Manager, in any such event,
shall not be entitled to receive the Termination Fee provided in Article 17.02
following the condemnation of the Casino, but Manager shall be entitled (i) to
receive any amounts due or owing to Manager with respect to events occurring
prior to or in connection with termination of this Agreement (and Owner's
obligations with regard thereto shall survive termination) and (ii) to take any
and all actions it determines in its sole discretion to be necessary or
beneficial to obtain compensation from such condemning or revoking authority for
Manager's loss of property rights in respect of this Agreement resulting from
any such termination. Owner hereby agrees not to take any actions with the
purpose or effect of interfering with Manager's right to seek compensation in
respect of any condemnation of the Casino pursuant to this Article 16.01(a), and
Manager hereby agrees not to take any actions with the purpose or effect of
interfering with Owner's right to seek compensation in respect of any
condemnation of the Casino.
(b) Payments to Manager. To the extent not theretofore paid by Owner,
any amounts due and owing from Owner to Manager with respect to events occurring
prior to or in connection with the termination of this Agreement, shall be paid
from Owner's share of the proceeds of any award for such condemnation or
compensation for such revocation of the Casino Operating Contract, as the case
may be, (i) unless applied to indebtedness secured by an Authorized Mortgage or
to restore, rebuild, replace or repair the Casino and (ii) in all cases subject
to the priorities set forth in Article 9.01(b). Should any such award or
compensation be inadequate, applied to reduce any indebtedness secured by an
Authorized Mortgage, or otherwise applied to other purposes, Owner's obligation
to pay amounts due Manager from Owner shall continue unabated and shall not be
limited to the amount of the award or compensation made available to Owner.
16.02. Restoration and Continuation
(a) Partial Loss of Casino. If only a part of the Casino is taken or
condemned, and the taking or condemnation of such part does not result in
termination of the Authorized Lease or acceleration of any Authorized Mortgage
or make it unreasonable or imprudent in the opinion of Owner (noticed to Manager
in writing on or before the date of such condemnation) to operate the remaining
portion thereof as a casino of the type and class as the Casino immediately
preceding such taking or condemnation, this Agreement shall not terminate. An
amount as shall be reasonably necessary to reconstruct the Casino,
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or any part thereof, or to reconfigure the Casino, or any part thereof, so as to
render the Casino a complete and satisfactory architectural unit as a casino of
the same type and class as it was immediately preceding the taking or
condemnation, shall be made available out of any award to Owner for that
purpose. Owner shall promptly, and without awaiting recovery of such award, pay
any funds which are needed to accomplish such work. The balance of such award,
if any, after deduction of bona fide costs of restoration by Owner, and any sums
then due by Owner to Manager, shall be fairly and equitably apportioned between
Owner and Manager so as to compensate Owner and Manager for any loss of income
resulting or to result from the taking or condemnation.
(b) Failure to Complete Reconstruction. Subject to Article 23.02,
failure of Owner to effect repair and restoration of the Casino within ten (10)
months after the date of any partial condemnation which Owner has not deemed
sufficient to render further operation of the Casino unreasonable or imprudent,
shall be an Event of Default entitling Manager to terminate this Agreement
without further notice to Owner or opportunity by Owner to cure such default,
and Manager shall be entitled to collect the Termination Fee provided in Article
17.02.
ARTICLE 17.
DEFAULT AND TERMINATION
17.01. Events of Default. It shall be an event of default hereunder (an
"Event of Default") if any one or more of the following events shall occur:
(a) if there should occur a breach, default or non-compliance by a
party hereto with any covenants, obligations or agreements to be performed by
such party under this Agreement, followed by written notice of such breach,
default or non-compliance from the Non-Defaulting Party to such Defaulting Party
and failure of such Defaulting Party to remedy or correct such breach, default
or non-compliance within ten (10) days after receipt of such notice, provided
that, if such breach, default or non-compliance is other than a Monetary Default
or failure to insure, and is also of a nature such that it cannot reasonably be
cured within such ten (10) day period, then an Event of Default shall not be
deemed to have occurred for so long as the Defaulting Party commences the curing
of such default within such ten (10) day period, pursues the completion thereof
with diligence and continuity, and completes such cure within forty (40) days of
such notice;
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(b) if Owner should fail to effect any required reconstruction of the
Building following casualty or partial condemnation, as and within the time
provided in Articles 15 and 16;
(c) if a party shall voluntarily or involuntarily be dissolved; apply
for or consent to the appointment of a receiver, trustee or liquidator of all or
a substantial part of its assets; file a voluntary petition in bankruptcy (or
have filed against it any such petition which shall not have been dismissed
within sixty (60) days after filing) or otherwise seek protection of state laws
for the relief of debtors; admit in writing its inability to pay its debts as
they become due; make a general assignment for the benefit of creditors; file a
petition (or have filed against it any such petition which shall not have been
dismissed within sixty (60) days after filing) or an answer seeking to be
reorganized or arrangement with creditors or to take advantage of any insolvency
law or file an answer admitting the material allegations of any petition filed
against it in any bankruptcy, reorganization or insolvency proceeding; or
(d) if an order, judgment or decree shall be entered by any court of
competent jurisdiction, on the application of any one or more creditors of such
party, adjudicating such party a bankrupt or insolvent or approving a petition
seeking reorganization or appointing a receiver, trustee or liquidator of all or
a substantial part of its assets, and such order, judgment or decree shall
become final; or
(e) if a party shall be directly or indirectly owned or controlled by
another company or entity and an event described in Article 17.01(c) or (d)
shall occur with respect to any company or entity owning or controlling such
party; or
(f) if Owner passes title to the Casino or any part thereof in lieu of
foreclosure of any lien or other security interest in the Casino; or
(g) if an action to foreclose any mortgage, deed of trust or other
security interest in the Casino or any part thereof is instituted against Owner
and is not discharged or dismissed within thirty (30) days thereafter.
The party responsible for the occurrence of an Event of Default or on account of
whom an Event of Default shall have occurred shall be a "Defaulting Party." The
remaining party (so long as not a Defaulting Party), as to such Event of
Default, shall be a "Non-Defaulting Party." The waiver of any one Event of
Default shall
70
not be construed as the waiver of any other Event of Default. No waiver shall be
effective unless embodied in a writing signed by the Non-Defaulting Party.
17.02. Termination; Termination Fee
(a) Termination. If an Event of Default occurs and has not been cured
within any cure period provided in Article 17.01, this Agreement shall terminate
at the election of the Non-Defaulting Party. Notice of termination pursuant to
this Article 17.02 may be given at any time prior to the curing of such Event of
Default, and such termination shall be effective as of the date specified in
such notice of termination, which such date shall be not less than ten (10) and
not more than forty five (45) days after the date of such notice; provided, that
any such termination shall not be effective earlier than forty five (45) days
after the date of such notice unless a successor manager has been obtained to
manage the Casino and maintain continuous and uninterrupted operations of the
Casino.
(b) Termination Fee. Upon termination of this Agreement due to an Event
of Default by Owner and in those other circumstances provided in Articles
15.02(e), 16.02(b) and 21.03, Owner shall, in addition to all other amounts due
and payable hereunder, pay to Manager a fee (the "Termination Fee") as set forth
below as liquidated damages for its default. Owner's obligation to pay for all
indemnification and defense claims (subject to Articles 14.01(c) and 14.02), to
maintain insurance after termination (with respect to occurrences before
termination) and to pay for all costs of operating the Casino prior to
termination shall be in addition to and shall survive termination of this
Agreement and payment of the Termination Fee. The Termination Fee that shall be
payable by Owner to Manager in the event of, and at the time of, termination of
this Agreement due to any Event of Default by Owner and in certain other
circumstances provided for in this Agreement shall be an amount equal to three
(3) times the average amount of annual Management Fees earned in the twenty-four
(24) Fiscal Months preceding termination, but, until the end of the third full
Fiscal Year following the Opening Date, not less than FORTY-FOUR MILLION AND
00/100 DOLLARS ($44,000,000), increased by the percentage increase in the CPI
occurring between the Opening Date and the date of termination. Notwithstanding
the foregoing, if any default or event, action or omission by Owner giving rise
to a termination by Manager results solely from an action or omission of
Manager's Affiliate in its capacity as shareholder of Owner, or the action or
omission of the directors of Owner elected by Manager's Affiliate, Manager shall
not in any such
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event receive a Termination Fee in connection with such Event of Default or
resulting termination. OWNER RECOGNIZES AND AGREES THAT IF THIS AGREEMENT IS
TERMINATED FOR THE REASONS SPECIFIED HEREIN AS ENTITLING MANAGER TO RECEIVE A
TERMINATION FEE, MANAGER WOULD SUFFER AN ECONOMIC LOSS BY VIRTUE OF THE
RESULTING LOSS OF MANAGEMENT FEES WHICH WOULD OTHERWISE HAVE BEEN EARNED UNDER
THIS AGREEMENT. BECAUSE SUCH FEES VARY IN AMOUNT DEPENDING ON THE GROSS REVENUES
EARNED AT THE CASINO AND ACCORDINGLY WOULD BE EXTREMELY DIFFICULT AND
IMPRACTICAL TO ASCERTAIN WITH CERTAINTY, THE PARTIES AGREE THAT THE TERMINATION
FEE PROVIDED IN THIS AGREEMENT HAS BEEN DETERMINED TO CONSTITUTE A REASONABLE
ESTIMATE OF LIQUIDATED DAMAGES TO MANAGER. IT IS AGREED THAT MANAGER SHALL NOT
BE ENTITLED TO MAINTAIN A CAUSE OF ACTION AGAINST OWNER FOR SPECIFIC PERFORMANCE
OF THIS AGREEMENT OR ACTUAL DAMAGES IN EXCESS OF THE TERMINATION FEE IN ANY
CONTEXT WHERE THE TERMINATION FEE IS PROVIDED BY THIS AGREEMENT TO BE MANAGER'S
REMEDY, AND RECEIPT OF SUCH FEE TOGETHER WITH ALL OTHER AMOUNTS DUE AND PAYABLE
BY OWNER TO MANAGER WITH RESPECT TO EVENTS OCCURRING PRIOR TO OR IN CONNECTION
WITH THE TERMINATION OF THIS AGREEMENT AND MANAGER'S CONTINUING RIGHT TO
INSURANCE COVERAGE, INDEMNIFICATION FOR PRE- AND POST-TERMINATION OCCURRENCES,
AND PROTECTION OF ITS PROPRIETARY SYSTEM MARKS BY INJUNCTIVE AND OTHER
APPROPRIATE RELIEF SHALL BE MANAGER'S SOLE REMEDY AGAINST OWNER IN ANY SUCH
CASE.
(c) Reservation of Rights. In the event this Agreement is terminated
due to an Event of Default by Manager, Owner shall be free to pursue any remedy
available hereunder or at law or equity.
(d) Gaming Suitability of Manager. If Manager, or any Manager's
Affiliate that is a shareholder of Owner, is determined, by final unappealable
action of the LGCB and any court to which appeal may be taken, to be unsuitable
to conduct gaming operations at the Casino, Owner shall be entitled to terminate
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this Agreement by giving Manager thirty (30) days' advance written notice and
opportunity to cure.
(e) Termination by Owner. If the Authorized Lease or the Casino
Operating Contract are subject to the imminent risk of termination, or any
Authorized Mortgage is subject to the imminent risk of foreclosure, Owner shall
be entitled to terminate this Agreement by giving sixty (60) days' advance
written notice to Manager, without payment of the Termination Fee, but without
any other recourse against Manager or its Affiliates, if Manager should, by its
act or omission, after timely written notice from Owner and opportunity to
effect cure as provided in Article 17.01(a) and after Owner has provided all
funds, information, cooperation and assistance necessary to allow Manager to
effect such cure, fail to effect such cure; provided that this provision shall
be effective only as to terms and conditions of such agreements that are made
known to and approved in writing by Manager.
ARTICLE 18.
NOTICES
18.01. Procedure. All notices or other communications provided for in
this Agreement shall be in writing and shall be personally served, sent by
Federal Express or comparable express courier, or sent by postage prepaid
certified mail to the following addresses until such time as written notice, as
provided hereby, of a change of address with a new address to be used thereafter
is delivered to the other party:
Owner: Jazz Casino Company, L.L.C.
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxx 00000
Attn: President
Manager: Xxxxxx'x New Orleans Management Company
c/x Xxxxxx'x Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: General Manager
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Notices hereunder shall be deemed given upon receipt.
18.02. Landlord and LGCB Notice. All notices relating to an Event of
Default, arbitration or the exercise of any right or claim of termination of
this Agreement shall be given to Landlord at the address set forth in the
Authorized Lease and to the LGCB at the address set forth in the Casino
Operating Contract.
ARTICLE 19.
RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS
19.01. Relationship. Manager and Owner shall not, by virtue of this
Agreement, be construed as joint venturers or partners of each other and neither
shall have the power to bind or obligate the other except as set forth in this
Agreement.
19.02. Contractual Authority. Manager is authorized, subject to the
fiscal limitations of this Agreement, to make, enter into and perform in the
name of, for the account of, on behalf of and at the expense of Owner any
contracts and agreements deemed necessary or advisable by Manager, in its
commercially reasonable judgment, to carry out and place in effect the terms and
conditions of this Agreement. In hiring, purchasing or contracting for goods and
services, Manager shall administer and comply with the Open Access Program and
any open access plans adopted pursuant thereto with respect to the operation of
the Casino and shall give preference and priority to Louisiana residents, except
where not reasonably possible to do so without added expense, substantial
inconvenience, or sacrifice in operational efficiency. Contracts between Manager
and Manager's Affiliates for furnishing of goods and services to the Casino
shall not exceed the price for which goods and services of comparable quality
may be secured from other vendors. Contracts and agreements entered into
pursuant to this Article 19.02 shall include an express statement that such
contract or agreement is being entered into by Manager "as agent for Jazz Casino
Company, L.L.C." or words to that effect.
19.03. Further Actions. Owner agrees to execute all contracts,
agreements and documents and to take all actions necessary to comply with the
provisions of this Agreement and the intent hereof.
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ARTICLE 20.
APPLICABLE LAW AND ARBITRATION
20.01. Scope. The interpretation, validity and performance of this
Agreement shall be governed by the internal laws of the State of Nevada, except
as to mandatory provisions of the Gaming Act as to which the internal laws of
the State of Louisiana will apply, without regard to principles of conflicts of
law. If any court or appropriate judicial authority shall hold or declare that
the law of another jurisdiction is applicable, this Agreement shall remain
enforceable under the law of that jurisdiction. If any of the terms and
provisions hereof shall be held invalid or unenforceable for any reason, such
invalidity or unenforceability shall in no event affect any of the other terms
or provisions hereof, and all such other terms and provisions shall be valid and
enforceable to the fullest extent permitted by law; provided, however, if, in
any event any material part of Owner's obligations under this Agreement shall be
declared invalid or unenforceable, Manager shall have the option to terminate
this Agreement.
20.02. Arbitration
(a) Matters Subject to Arbitration. In case of a dispute with respect
to any of the following matters, either party may submit such matter to
arbitration which shall be conducted by the Accountants:
(i) computation of the Management Fee or System Fees;
(ii) results of any audit by Manager's selected
Accountant;
(iii) adjustment of any amounts required to be adjusted to
reflect changes in the CPI;
(iv) disputes concerning approval of the Pre-Opening
Budget or the Annual Plan, or any revisions thereto,
including any Budgets contained therein;
(v) equitable allocation of any award for partial
condemnation under Article 16.02; and/or
(vi) disputes as to the amount of any unliquidated
Monetary Default.
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The decision of the Accountants shall be binding on the parties.
(b) Accountants. The "Accountants" shall be one of three firms of
certified public accountants of recognized standing in the casino industry
selected by the Manager or by the parties pursuant to this Article 20.02(b).
Until otherwise agreed by the parties, the Accountants shall be KPMG Peat
Marwick, Deloitte & Touche LLP or Xxxxxx Xxxxxxxx & Co. The party desiring to
submit any matter to arbitration shall do so by written notice to the other
party, which notice shall set forth the items to be arbitrated and such party's
choice of one of the three designated firms. The party receiving such notice
shall, within fifteen (15) days after receipt of such notice, either approve
such choice or designate one of the remaining two firms by written notice back
to the first party, and the first party shall, within fifteen (15) days after
receipt of such notice, either approve such choice or disapprove the same. If
both parties shall have approved one of the three firms designated above, then
such firm shall be the Accountants for the purpose of arbitrating the dispute;
otherwise the third firm, which was not designated by either party shall be the
Accountants for such purpose. The Accountants shall be required to render a
decision in accordance with the procedures described in Article 20.02(c) within
thirty (30) days after being notified of their selection. The fees and expenses
of the Accountants with respect to an arbitration will be paid by the
non-prevailing party.
(c) Arbitration Procedures. In all arbitration proceedings submitted to
the Accountants, the Accountants shall be required to agree upon and approve the
substantive position advocated by Owner or Manager with respect to each disputed
item. Any decision rendered by the Accountants that does not adopt the
substantive position advocated by Owner or Manager shall be beyond the scope of
authority granted to the Accountants and consequently may be overturned by
either party. All proceedings by the Accountants shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the mutual agreement of the
parties. Unless otherwise agreed, all arbitration proceedings shall be conducted
at the Casino. In resolving any dispute as to the Budget contained in an Annual
Plan, the arbitrators shall adopt the substantive position that will most
likely: (i) assure the continued operation of the Casino in accordance with
Casino Operational Standards and Legal Requirements; or (ii) if no Casino
Operational Standard is applicable, assure
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the continued operation of the Casino as a viable and competitive economic
enterprise.
ARTICLE 21.
SUCCESSORS AND ASSIGNS
21.01. Assignment by Manager
(a) Assignment to Affiliates. Owner's consent shall not be required for
Manager to assign any of its obligations, rights or interests as Manager
hereunder to any Manager's Affiliate that is controlled by Manager's ultimate
parent, or pursuant to a transfer of all or substantially all of the gaming
business of Manager and Manager's Affiliates, or pursuant to a corporate
reorganization of Manager and Manager's Affiliates or in connection with the
transfer of publicly-held stock in Manager or any of Manager's Affiliates whose
stock is publicly traded.
(b) Assignment for Financing Purposes. At all times, without obtaining
any consent from Owner, Manager may assign, pledge, encumber and/or hypothecate
all of Manager's rights, fees (earned and unearned), interest in insurance,
condemnation awards, indemnities and other proceeds (but not Manager's
obligations, except as provided in Article 21.01(a)) as security for any loan,
and, in any such case, the assignee shall hold and be entitled to enforce such
rights and receive such fees and/or payments, and Owner agrees to look solely to
Manager and not to any such assignee in regard to any claim which it may have
under this Agreement. Notwithstanding the foregoing, Owner shall have no
obligation to assure the payment to any such assignee of any amounts received by
Manager from the Casino and Owner shall retain all rights under this Agreement
upon an Event of Default by Manager.
(c) Consent Requirements. Except as otherwise provided in Articles
21.01(a) or (b), or in connection with any sale, sublease, assignment, transfer
or other disposition of the Casino by Owner, in which case Manager may assign or
otherwise transfer its interest in this Agreement to the purchaser, sublessee,
transferee or other successor of Owner's interest therein, however designated,
or its selected manager, Manager shall not in any manner, voluntarily or
involuntarily, directly or indirectly, partition (or seek the partition of),
sell, assign or transfer any of its legal or beneficial interest in Manager or
this Agreement or delegate the performance of any of Manager's material
obligations hereunder
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without the prior written consent of Owner (which consent may be withheld for
any reason); provided that Manager may assign its rights and obligations
hereunder to an affiliate of Manager which is wholly-owned directly or
indirectly by HET, and upon any such assignment, Manager may only be relieved of
its obligations hereunder with the consent of Owner.
21.02. Termination Rights Upon Certain Assignments or Transfers by
Owner.
(a) Change of Control of Owner. Following the Transition Date, if any
entity (including any Controlled Affiliates of such entity and any entity of
which such entity is a Controlled Affiliate) which (i) controls or operates, or,
as of the 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 with HET which HET has disclosed in an Annual Report on
or prior to the date the Plan is consummated, or which HET would be required to
disclose in its next Annual Report 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 pursuant to Article 17.02.
(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 approved by Manager
pursuant to Article 21.02(d) who assumes and agrees to perform all obligations
of Owner under this Agreement, Manager shall be entitled to terminate this
Agreement upon the closing of such sale, assignment or transfer, but shall not
be entitled to receive a Termination Fee pursuant to Article 17.02.
(c) Definitions. As used herein, a "Qualified Purchaser" shall mean a
Suitable Lender or any person or entity that is duly licensed or otherwise
authorized to own and operate the Casino and that:
(i) does not control or operate, or, as of the date the
Plan is consummated, is not licensed or qualified to
control or operate
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in any of the states of Illinois, Indiana, Louisiana,
Mississippi, Missouri, Nevada or New Jersey, a casino
or casino hotel facility; and
(ii) has not been, within the five (5) years prior to the
date the Plan is consummated, involved in litigation
with HET which HET has disclosed in an Annual Report
on or prior to the date the Plan is consummated, or
which HET would be required to disclose in its next
Annual Report following the date the Plan is
consummated; and
(iii) would not, if Affiliated 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 Manager or any Affiliate of
Manager.
Any party other than a Qualified Purchaser is referred to herein as a
"Non-Qualified Purchaser."
(d) Approval. Any request for approval of a transferee as a Qualified
Purchaser shall be submitted to Manager in writing no less than thirty (30) days
prior to the anticipated date of transfer. Owner shall provide all documentation
that Manager may reasonably request to establish the identity, qualification,
reputation and creditworthiness of the transferee. Creditworthiness shall be
supported by audited financial statements for the three (3) years preceding any
request by Owner for approval of a transferee. Manager shall advise Owner of its
approval or rejection of a proposed transferee (as a Qualified Purchaser) within
thirty (30) days after Manager receives all information which it reasonably
requests to support its determination. Owner shall be prospectively released
from liability under this Agreement following a transfer to any transferee
approved by Manager pursuant to this Article 21.02(d).
21.03. Manager's Termination Right. Any transfer of any direct or
indirect legal or beneficial ownership in Owner or JCC Holding, or any
indebtedness of or other loan interest in Owner or JCC Holding, including
without limitation the Senior Subordinated Debentures and the Bank Loans, to a
Non-Qualified Person, that has not been cured within forty-five (45) days
following written notice to
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Owner by Manager of such transfer, or such shorter period as may be required by
any governmental entity with authority over the Casino, shall entitle Manager,
at its option, to terminate this Agreement and, inter alia, collect the
Termination Fee.
21.04. Binding Effect. The terms, provisions, covenants, undertakings,
agreements, obligations and conditions of this Agreement shall be binding upon
and shall inure to the benefit of the permitted successors in interest and the
permitted assigns of the parties hereto with the same effect as if mentioned in
each instance where the party hereto is named or referred to, except that no
assignment, transfer, sale, pledge, encumbrance, mortgage, lease or sublease by
or through Owner in violation of the provisions of this Agreement shall vest any
rights in the assignee, transferee, purchaser, secured party, mortgagee,
pledgee, lessee, sublessee or occupant.
ARTICLE 22.
RECORDING OF MEMORANDUM
22.01. Memorandum of Agreement. On the Opening Date, Owner and Manager
shall execute, acknowledge and deliver a memorandum of this Agreement in the
public records for the Parish of Orleans. This memorandum shall specifically
recite the provisions of Article 3, Article 21.01, Article 4.03, Article 21.02
and Article 21.03 and shall be recorded after the Mortgage, and prior to
execution and recordation of any other mortgage, deed of trust, lien,
encumbrance or security interest affecting title to the Casino or Owner's
interest therein other than the Authorized Lease.
ARTICLE 23.
FORCE MAJEURE
23.01. Operation of Casino. If (i) there shall occur any Excusable
Temporary Cessation of Operations (as defined in the Casino Operating Contract),
(ii) Owner shall not otherwise have appropriate legal or contractual authority
to operate the Casino, or (iii) the Casino shall not be in a condition suitable
for gaming operations, Manager may close and cease operation of all or part of
the Casino, reopening and commencing operation when Manager deems that such may
be done without jeopardy to the Casino, its guests and employees, provided that
the Term has not theretofore expired. Manager shall have no obligation to
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reopen the Casino if there shall be less than ninety (90) days remaining
unexpired in the Term at the time of such event.
23.02. Extension of Time. It is further understood and agreed that,
with respect to any obligation to be performed by a party during the Term
(except for defaults in the nature of failure to make any required payment or
maintain required insurance), and subject to the absolute time limitations
provided below, such party shall not be in default for failure so to do when and
only for so long as such performance is prevented by any force majeure cause
beyond the reasonable control of such party such as strike, lockout, breakdown,
accident, order or regulation of or by any governmental authority, failure of
supply or inability, by the exercise of reasonable diligence, to obtain
supplies, parts or employees necessary to perform such obligation, or war or
other emergency. Notwithstanding the foregoing, a failure by Owner to perform
Owner's obligations due to a lack of finances or due to a strike, lockout or
failure of supply caused by Owner shall not be deemed to be a cause beyond
Owner's reasonable control. The time within which such obligation shall be
performed may be extended only for a period equivalent to the delay caused by
such force majeure, and, in no event, more than sixty (60) days, except in the
case of construction delays due to the above causes in which case the extension
shall continue until the termination of the Authorized Lease.
23.03. Extension of Completion Deadline and Opening Date. Anything
contained in this Agreement to the contrary notwithstanding, in the event that
legal proceedings are pending which prevent Owner from Completing construction
or opening the Casino in accordance with the terms of this Agreement, any
Completion Deadline or any Opening Date, as the case may be, shall be extended
for as long as is necessary to resolve such legal proceedings; however, in no
event shall such extension continue beyond the termination of the Authorized
Lease.
ARTICLE 24.
TERMINATION
24.01. Surviving Obligations. In the event of any termination or
expiration of this Agreement, Owner shall remain liable to pay all fees and
other amounts due from Owner to Manager for periods through the termination
date, to maintain insurance for the benefit of and indemnify (subject to the
provisions of Articles
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14.01(c) and 14.02) Manager with respect to all occurrences before termination,
and to reimburse Manager for all expenses incurred by Manager before or in
connection with such termination or expiration.
24.02. Termination; Expiration. In connection with the expiration
and/or termination of this Agreement:
(a) Manager's Obligations. Manager shall:
(i) deliver possession of the Casino to Owner or Owner's
designated agents or employees subject to rights of
all parties in possession, in "as is" condition,
without recourse or any warranty whatsoever;
(ii) deliver to Owner correct and complete originals or
copies of all written Operating Agreements with
respect to the Casino which have not theretofore been
delivered to Owner;
(iii) deliver to Owner correct and complete originals or
copies of all agreements for or with respect to the
operation of the Casino (which have not theretofore
been furnished to Owner) that have terms extending
after such expiration or termination;
(iv) advise all Casino purveyors by mail of the expiration
or termination of this Agreement;
(v) permit Owner to have an observer at the Casino to
coordinate the turnover of Casino operations for a
period of seven (7) days prior to expiration or
termination, provided that such observer shall not
participate in the operation or management of the
Casino, give any direction to or contact any Casino
employee or otherwise interfere with Manager's
operation of the Casino, as determined by Manager's
general manager in his sole discretion. If such
observer shall be deemed by Manager's general manager
to interfere with Casino operations, then such
observer may be required to leave the Casino
immediately upon notice from the general manager;
(vi) deliver to Owner records of the Casino pertaining to:
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(A) accounts payable outstanding and unpaid at
termination or expiration, provided that
Manager shall, to the extent funds are made
available therefor by Owner and amounts due
are then known, pay all accounts payable
through and including the date of expiration
or termination;
(B) accounts receivable outstanding and
uncollected at termination or expiration,
all of which Owner agrees shall be accounted
for by Owner when collected by Owner or
Manager as Gross Revenues under this
Management Agreement; and
(C) Casino Employees who remain at the Casino
following termination or expiration of the
Management Agreement (to the extent the
information in the file is not deemed
confidential by Manager); and
(vii) after deducting therefrom any amounts due and payable
under this Agreement and not theretofore paid
(subject to the priorities set forth in Article
9.01(b)), Manager shall disburse the balance, if any,
remaining in the Bank Account(s) after termination or
expiration of this Agreement to Owner.
(b) Owner's Obligations. Owner shall be solely responsible for and
shall pay all costs of:
(i) cancelling any Operating Agreements which Owner does
not wish to continue after such termination or
expiration; or
(ii) assuming and continuing performance under any such
Operating Agreements which Owner desires to retain in
effect.
(c) Employee Severance Payments. Owner shall, without limiting Owner's
obligation as employer, be solely responsible and shall pay for all severance or
other termination benefits due any employee of Owner or Manager whose services
are terminated.
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(d) Change of Brand Identification. If the termination of this
Agreement involves a change of Casino brand identification or affiliation, as of
the date of termination or expiration, Owner shall:
(i) cooperate in the removal of all signage identifying
the casino as a Xxxxxx'x Casino or containing any
System Marks and, in the case of any such signage
supplied pursuant to an advertising contract (as in
the case of billboard advertisements) pay all costs
necessary to repaint or otherwise re-identify the
Casino and remove any System Marks from such
advertisement;
(ii) cease use of any trademark, logo, trade name,
patented or copyrighted design, name or pattern
belonging to or licensed for use by Manager or any
Affiliate of Manager at the Casino and destroy any
personal property bearing such designation unless
otherwise authorized in writing by Manager;
(iii) cause the telephone number, if it relates to the
System Marks, and all telephone advertisements for
the Casino to be changed to different telephone
numbers so as to preclude the identification of the
Casino as a Xxxxxx'x Casino; and
(iv) cause any proprietary personalty licensed for use by
Manager but not by Owner to be returned to Manager,
including any such personalty required to be at the
Casino pursuant to any Casino Operational Standard.
(e) Owner's Indemnity. Without limiting the foregoing, Owner shall
indemnify, defend and hold Manager free and harmless from and against all loss,
cost, claim or damage relating to the Casino or its operation or ownership after
termination or expiration of this Agreement unless the sole cause of the loss,
cost, claim or damage was the breach of this Agreement by Manager or an event
excluded from indemnification pursuant to Article 14.01(c).
(f) Enforceability of Covenants. The foregoing shall be covenants
running with the Casino, shall survive termination or expiration of this
Agreement, and shall be specifically enforceable by Manager and Owner.
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ARTICLE 25.
GENERAL PROVISIONS
25.01. Authorization. Owner represents that it has full power and
authority to execute this Agreement and to be bound by and perform the terms
hereof. Manager represents it has full power and authority to execute this
Agreement and to be bound by and perform the terms hereof. On request, each
party shall furnish the other evidence of such authority.
25.02. Interest. Unless otherwise provided for herein, any other
amounts payable to Manager or Owner not paid when due shall bear interest at the
lesser of: (a) the highest legal limit, or (b) two percent (2%) over the prime
rate of interest charged by Citibank, N.A. at its offices in New York, New York,
to borrowers on ninety (90) day unsecured commercial loans, as the same may be
changed from time to time (the "Interest Rate").
25.03. Formalities. Any change to or modification of this Agreement
must be in writing signed by both parties hereto. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original. The
captions for each Article are intended for convenience only.
25.04. Documents. Throughout the Term, Owner shall furnish Manager
copies of all paid property tax and insurance statements, all financing
documents (including notes and mortgages) relating to the Casino and such other
documents pertaining to the Casino as Manager shall request.
25.05. Personal Service Contract. This Agreement shall be construed as
a personal service contract which may not be assigned by Owner or Owner's
representatives in any bankruptcy, receivership, insolvency or similar
proceedings.
25.06. Exhibits. All Exhibits referred to in and attached to this
Agreement are, by such reference, intended to be incorporated within and made a
part of this Agreement.
ARTICLE 26.
RESTRICTIVE COVENANTS
26.01. Other Use of Site or Building. Owner shall not permit any use to
be made of the Site or Building other than that of the Casino provided for
herein or as permitted by the Second Floor Non-Gaming Sublease. In the event
that the use of
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the Building and Site as a Casino becomes prohibited by law, this Agreement
shall terminate as of the date that such prohibition becomes effective.
Notwithstanding the foregoing, if such prohibition shall be removed for any
reason prior to termination of the Authorized Lease, then Manager shall have the
option, at its election and its sole discretion, to reinstate this Agreement by
giving written notice to Owner specifying a date of reinstatement that is no
more than one hundred twenty (120) days following the date of such notice and,
in addition, Owner shall pay, as incurred, all costs incurred by Manager to
reinstate operations at the Casino.
26.02. Diversion of Business. Manager shall not knowingly and willfully
divert gaming business from the Casino to other Xxxxxx'x Casinos; provided,
however, that this restriction shall not limit Manager from advertising other
casinos in the Xxxxxx'x System by written, verbal, audio-visual or other
advertising or promotional techniques with the intent of promoting business
either at individual properties or at all properties in the Xxxxxx'x System,
regardless of the actual effect of such activity, and provided further, that
Owner's sole remedy for any alleged breach of this provision shall be to seek to
enjoin the practice objected to upon proof of violation of this provision.
26.03. Competition. Owner and Manager and their respective Affiliates
may engage and possess an interest in any other business venture of any nature,
kind or description, including, without limiting the generality of the
foregoing, any business venture engaged in the same type of business as the
Casino, even if such other business is competitive with that of the Casino, and
the development, ownership, financing and management of casino and other gaming
operations of any kind whatsoever; provided, however, that neither Manager nor
Owner nor any Affiliate of Manager or Owner that is controlled by Manager's
ultimate parent or Owner's ultimate parent, as the case may be, may be
associated with the development, ownership, financing or management of casino
and other gaming operations in Orleans, Plaquemines, St. Xxxxxxx, St. Tammany,
Jefferson, or St. Xxxxxxx Parishes, Louisiana, except for the Casino. Further,
Owner and Manager agree that except as otherwise agreed in writing by Owner and
Manager:
(a) neither Owner nor Manager nor any Affiliate of Manager or Owner
shall have the right in and to such other business venture or the income or
profits derived therefrom by any other party;
86
(b) neither Owner nor Manager, nor any of the owners of Owner or
Affiliates of Manager, nor any of relatives or Affiliates of any of the
foregoing, need disclose, to any other, any business venture in which they may
have an interest or any other business opportunity presented to them even if
such opportunity is of a character which, if presented, could be taken and each
shall have the right to take for its own account or to recommend to others any
such particular investment opportunity or business venture; and
(c) as a natural part of the consideration for the execution of this
Agreement by Manager, Owner hereby waives, relinquishes and renounces any right
or claim of participation in any other business venture of Manager or its
Affiliates.
ARTICLE 27.
CONFLICTS BETWEEN AGREEMENTS, JURISDICTION AND
THIRD PARTY BENEFICIARIES
27.01. Conflicts Between Agreements. Notwithstanding anything to the
contrary contained in this Agreement, as to any conflict between the terms and
provisions of the Authorized Lease and the obligations and responsibilities of
Owner or Manager under this Agreement, to the extent legally permissible, the
terms and provisions of the Authorized Lease shall control. Any consent or
approval of the Management Agreement by Landlord or the City of New Orleans
shall not be construed as a waiver of the provisions of the Authorized Lease,
nor shall such consent or approval require any additional actions or impose any
additional duties or obligations on Landlord or the City of New Orleans.
27.02. Jurisdiction. The parties hereto consent and agree to the
jurisdiction of the State of Louisiana and the courts thereof and the United
States District Court for the Southern District of New York, for the purpose of
any suit, action or other proceeding arising out of or relating to this
Agreement, and hereby agree not to assert by way of motion, as a defense or
otherwise, that such action is improper, or that the subject matter thereof may
not be enforced in or by such courts.
27.03. Third Party Beneficiaries. As to the provisions of Articles
7.07, 7.08, 7.09, 7.12, 8.01, and 10.01, Landlord, the City of New Orleans and
the LGCB are intended third party beneficiaries to this Agreement to the extent
that their interests under the Authorized Lease and the Casino Operating
Contract,
87
respectively, are affected as are any of their respective successors in interest
to the Authorized Lease and the Casino Operating Contract, respectively.
Manager's obligations to Landlord, the City of New Orleans, and the LGCB
hereunder shall survive the termination of this Agreement.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement effective as of the day and year first above written.
WITNESSES: OWNER:
JAZZ CASINO COMPANY, L.L.C., a
Louisiana limited liability company
/s/ S. Xxx Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
--------------------------- ---------------------------------
S. Xxx Xxxxxxxx
Name: Xxxx X. Xxxxxxx
-------------------------------
/s/ Xxxx Xxxx Xxxxx Title: President
--------------------------- ------------------------------
Xxxx Xxxx Hertz
MANAGER:
XXXXXX'X NEW ORLEANS
MANAGEMENT COMPANY, a
Nevada corporation
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx XX
--------------------------- ---------------------------------
Xxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxxx XX
-------------------------------
/s/ X. Xxxx Koerny Title: Asst Sec
--------------------------- ------------------------------
X. Xxxx Koerny
S-1
