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EXHIBIT 4.12
JAZZ CASINO COMPANY, L.L.C.
November 1, 1999
Bankers Company, as Agent
Each of the Banks party to the
Credit Agreement referred to below
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of October 29, 1998,
(the "Credit Agreement") by and among JCC Holding Company, a Delaware
corporation, as a Guarantor ("JCC Holding"), Jazz Casino Company, L.L.C., a
Louisiana limited liability company (the "Borrower"), each of the Banks party
thereto and Bankers Trust Company, as Administrative Agent. Capitalized terms
used herein and not otherwise defined herein have the meanings given them in the
Credit Agreement.
The purpose of this letter is to request (1) waivers for certain
technical violations (described below) of the Credit Agreement, (2) prior
approval for a sale of 1,085 slot machines to HET coupled with a leaseback of
those slot machines (collectively, the "Transaction") in order to obtain the
funds necessary to load the Casino's slot machines with coin, (3) waiver of
certain conditions related to the opening of the Casino, and (4) prior approval
for a loan by HET to JCC Development in the amount of $2 million; in each case
subject to the conditions set forth herein.
I. TECHNICAL VIOLATIONS
The Borrower has made certain expenditures on behalf of JCC Development,
FPD and CPD, subsidiaries of JCC Holding. These expenditures were made in the
process of producing the master plan of the overall development of the Casino
(including the Second Floor, the CPD Mortgaged Property and the FPD Mortgaged
Property) and represent allocations of expenses incurred on a consolidated basis
to the appropriate consolidated subsidiaries. These expenditures aggregated
approximately $1.5 million through
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September 30, 1999, and the Borrower anticipates that up to $2 million in the
aggregate of such expenditures may be required prior to obtaining alternative
financing for the projects involving those subsidiaries. Since these
expenditures may be viewed as advances to the subsidiaries or as investments in
the subsidiaries, the Borrower, JCC Holding, JCC Development, CPD and FPD may
have violated Sections 9.04(x) and 9.05(viii). Moreover, these expenditures may
have been paid with moneys in the Project Account, in which case there would be
a violation of Section 8.17. To the extent such expenditures continue, they will
violate such section.
The Borrower has either failed to deliver or failed to deliver on a
timely basis reports required under Section 8.01(g) for the fiscal quarters of
the Borrower ended March 31 and June 30, 1999.
The Borrower hereby requests that the Required Banks waive any Default
or Event of Default which may exist as a result of, and to the extent of, the
above described violations, and further request that, notwithstanding the
limitations stated in Sections 9.04(x) and 9.05(viii) of the Credit Agreement,
the Banks consent to the making of loans and advances to and/or investments in
its Permitted Subsidiaries in an aggregate amount not to exceed at any time
outstanding (without regard to any write-down or write-offs thereof) $2,000,000;
provided that, promptly upon receipt by JCC Development of the proceeds of the
Loan (as defined in Section IV hereof), $1,050,465.47 of the proceeds thereof
shall be used by JCC Development to repay the advances made by the Borrower for
JCC Development's account and, thereafter, the express limitations of Sections
9.04(x) and 9.05(viii) shall govern the making and maintenance of all such
loans, advances and/or investments.
II. SALE/LEASEBACK OF SLOT MACHINES
Although the Borrower had initially intended to use tokens in its slot
machines, it subsequently decided that its patrons would prefer machines loaded
with actual coin. The amount required to load the machines with coin, however,
is approximately $5,000,000. In order to raise that sum, the Borrower decided to
enter into a sale/leaseback transaction (the "Transaction") with HET pursuant to
which, HET will buy the slot machines, subject to the Lien of the Collateral
Agent pursuant to the Security Agreement (and HET and the Borrower hereby agrees
to execute and deliver to the Collateral Agent promptly (and in any event within
60 days of the date hereof) such documentation (including without limitation, a
security agreement and Form UCC-1 and UCC-3 Financing Statements) as the
Collateral Agent may deem necessary in its reasonable opinion to continue such
security interest in favor of the Collateral Agent after giving effect to the
Transaction), for an aggregate purchase price of $6,000,000, an amount which
exceeds their fair market value. The Borrower will then lease the slot machines
back from HET pursuant to an operating lease, a copy of which is attached. The
Borrower has engaged Xxxxxxxxx & Company, Inc. to render its opinion on the
fairness of the Transaction from a financial
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point of view. The Borrower will use approximately $5,000,000 of the proceeds of
the sale to load its slot machines with coin (both those subject to the
Transaction and its other slot machines) and the balance will be applied to the
House Bank.
In order to accomplish the Transaction, the Borrower requests that the
Required Banks waive the following:
(a) With respect to the sale of the slot machines by the Borrower to
HET, waive the prohibition contained in Section 9.02; provided that HET shall
purchase such slot machines subject to the Lien of the Collateral Agent thereon
and HET shall comply with the provisions of the first parenthetical contained in
the first paragraph of this Section II, and the continuance of the waiver
granted hereby shall be subject to the continued effectiveness of such Liens of
the Collateral Agent on the slot machines subject to the Transaction.
(b) With respect to the Borrower's use of the proceeds received by it
in connection with the Transaction, waive the requirement contained in Section
4.02(f) that such proceeds be applied as a mandatory prepayment of outstanding
Term Loans to the extent such proceeds are otherwise applied in accordance with
the final sentence of the first paragraph of this Section II; and
(c) With respect to the Transaction, waive the prohibition contained in
Section 9.06 relating to the transactions with Affiliates; provided that such
waiver shall be conditioned upon receipt by the Borrower (a copy of which shall
be delivered to the Administrative Agent in case of clause (ii) below) of (i)
cash consideration from HET in an amount equal to the greater of (x) the fair
market value of the slot machines subject to the Transaction (as determined by
management of the Borrower in good faith) and (y) $6,000,000 and (ii) a fairness
opinion to be issued by Xxxxxxxxx and Company, Inc. concluding that such
Transaction is fair to the Borrower from a financial point of view.
III. CONDITIONS RELATING TO THE OPENING OF THE CASINO
The definition of the Termination of Construction Date contains several
requirements which the Borrower will be unable to fulfill. First, it requires
that Casino have "at last 2,800 new slot machines" of which "no more than 1,100
of such slot machines may be leased pursuant to arm's-length operating leases
. . .with HET." The definition also requires that except for the machines
permitted to be leased, all the machines are to be "owned by the Borrower and
not subject to financing." The Casino will contain more than the requisite
number of slot machines; however, only 1,065 will be new slot machines. The
balance will be reconditioned machines. Also, 1,878 of the slot machines will be
leased from HET pursuant to operating leases; 104 of the machines will be
so-called "Wide Area Linked Progressives" owned by IGT and 122 machines will be
installed on a trial basis, subject to a purchase order with their owner.
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The Borrower requests that the Required Banks waive the following: any
Default or Event of Default which may exist pursuant to the conditions described
in the first paragraph of this Section III to the extent of the description
provided therein; provided that the lease of the slot machines pursuant to the
Transaction described in Section II hereof shall comply with the terms of the
waiver provided with respect to such Transaction pursuant to clause (a) of
Section II hereof; and
IV. LOAN TO JCC DEVELOPMENT
The Borrower, JCC Holding and JCC Development all want JCC Development to
commence construction of certain improvements for the Second Floor of the Casino
prior to the Opening Date in order to minimize or eliminate the disruption on
the Casino Floor which will be occasioned by the development of the Second
Floor. At the time of this letter, financing for the full development of the
Second Floor has not been arranged; however, HET has agreed to advance $2
million to JCC Development (the "Loan") for the purpose of financing that part
of the development of the Second Floor which would cause the most disruption on
the Casino Floor. Proceeds of the Loan would also be used to reimburse the
Borrower for funds previously advanced to pay for activities involved in the
master planning process.
The proceeds of the Loan will be drawn by JCC Development as needed,
including, without limitation, as needed to meet the obligations of JCC
Development to repay any loans, advances and/or investments made by the Borrower
and its Subsidiaries to the extent required by the final paragraph of Section I
hereof. The Loan will bear interest at 9% per annum and will be capitalized
quarterly. Because JCC Development currently has no other funds, and because it
will not have any other funds until a subsequent loan for the full development
of the Second Floor is funded, the principal of the Loan will not be payable
except from the proceeds of the funding of such subsequent loan. The Loan will
be unguaranteed and unsecured.
In order to accomplish the Loan, JCC Development requests that the
Required Banks waive the following:
(a) With respect to the incurrence of Indebtedness represented by the
Loan to the extent described above in the first and second paragraphs of this
Section IV and the capitalization of accrued interest thereon, waive the
prohibition contained in Section 9.04; provided that (i) JCC Development and the
Borrower acknowledge that any payment of cash or other interest with respect to
the Loan shall constitute "Restricted Payments" under Section 9.03 of the Credit
Agreement and (ii) notwithstanding the provisions of Section 9.03 of the Credit
Agreement, the Banks hereby consent to the capitalization of interest on such
Loan as described in the second paragraph of this Section IV. Further,
notwithstanding the prohibitions of Section 9.03 of the Credit Agreement, the
Banks
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consent to the repayment of the Loan (including accrued and capitalized interest
thereon) with the proceeds of another loan to JCC Development incurred to fund
the full development of the Second Floor, provided that such loan is incurred in
compliance with the terms of the Credit Agreement.
(b) With respect to the Loan and the capitalization of interest thereon
to the extent described above in the first and second paragraphs of this Section
IV, waive the prohibition contained in Section 9.06 relating to transactions
with Affiliates.
V. COMPLETION DATE
The parties hereto hereby agree that the definition of "Completion
Date" appearing in Section 11 of the Credit Agreement is hereby amended to read
in its entirety as follows:
"Completion Date" shall mean November 2, 1999.
VI. CLEAN DOWN REQUIREMENT
The parties hereto hereby agree that the proviso appearing in Section
4.02(l) of the Credit Agreement is hereby amended to read in its entirety as
follows:
"provided that from and including October 28, 1999 to and including the
Termination of Construction Date, (x) the aggregate amount of Revolving
Loans outstanding shall not exceed $10 million and (y) the Borrower
shall have caused $10 million to be deposited on October 28, 1999 to
fund the Minimum Balance as defined in the Management Agreement, as in
effect on the date hereof."
VII. REPRESENTATIONS AND WARRANTIES
To induce the Required Banks to agree as requested above, the Borrower
makes the following representations and warranties subject to the technical
violations described above:
(i) immediately before and after the consummation of the
Transaction, no Event of Default has occurred and is
continuing:
(ii) the representations and warranties of Borrower contained in
the Credit Documents are true in all material respects except
to the extent (x) such representations or warranties
specifically relate to an earlier date, in which case such
representations and warranties were true and correct as of
such date or (y) such representations or warranties become
untrue by reason of events or conditions otherwise permitted
thereunder.
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VIII. CONDITIONS TO THE EFFECTIVENESS OF THIS WAIVER
As conditions to the effectiveness of this waiver (a) each of HET, HOC,
Holdings, the Borrower, JCC Development and the Required Banks shall have
executed a copy of this waiver and shall have delivered (including by way of
facsimile transmission) the same to the Administrative Agent at the Notice
Office, and (b) the Borrower shall have delivered to the Administrative Agent
the following:
(1) copies; of the executed agreements which embody the
Transaction;
(2) a copy of the draft fairness opinion of Xxxxxxxxx and Company
regarding the slot leases;
(3) confirmations of Subsidiaries Guaranty by each of the
Subsidiary Guarantors and of the JCC Holding Guaranty by JCC
Holding; and
(4) such other documents and instruments as the Agent may
reasonably request.
IX. MISCELLANEOUS
The foregoing waivers shall apply solely to any violations of the
provisions expressly referenced above under the Credit Agreement that otherwise
would result from consummation of the Transaction. This waiver letter from the
undersigned banks relates to the items specifically set forth herein and shall
not be deemed a waiver, consent or approval of any other terms or provisions of
the Credit Agreement or the Credit Documents. The Administrative Agent and Banks
expressly reserve any and all rights they may have under the Credit Agreement or
any other Credit Documents arising out of or in connection with any Default or
Event of Default thereunder and not specifically waived herein. The Borrower
confirms that this letter agreement is a Credit Document.
This letter agreement may be executed in counterparts and shall be
governed by and construed in accordance with the laws of the State of New York.
Very truly yours,
JCC HOLDING COMPANY,
as Guarantor
By: /s/ Xxxxxxxxx X. Xxxxxxx
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Name:
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Title:
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JCC DEVELOPMENT COMPANY, L.L.C.
as Guarantor
By: /s/ Xxxxxxxxx X. Xxxxxxx
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Name:
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Title:
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JAZZ CASINO COMPANY, L.L.C.
as Borrower
By: /s/ Xxxxxxxxx X. Xxxxxxx
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Name:
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Title:
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Agreed and accepted as of the date
first above written.
BANKERS TRUST COMPANY, individually and as the Administrative Agent
By: /s/ Xxxx Xxx Xxxxx
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Name: Xxxx Xxx Xxxxx
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Title: Managing Director
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XXXXXX XXXXXXX XXXX XXXXXX
PRIME INCOME TRUST
BY:
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Title:
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XXX XXXXXX AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
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Title: Vice President
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Acknowledged and Agreed to:
XXXXXX'X ENTERTAINMENT, INC.
By: /s/ Xxxxxxx Xxxxxxxx
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Name: Xxxxxxx Xxxxxxxx
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Title:
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XXXXXX'X OPERATING COMPANY, INC.
By: /s/ Xxxxxxx Xxxxxxxx
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Name: Xxxxxxx Xxxxxxxx
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Title:
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